Tuesday, January 03, 2017

Wednesday Watch

Evening Headlines
  • The Biggest Geopolitical Risks Facing Asia in 2017. (video) 
  • Asia’s Richest Families Are Abandoning ‘Complacent’ Hedge Funds. For Michael Preiss, whose firm oversees $1.9 billion mainly for wealthy Asian families, adding hedge funds to his clients’ portfolios was an easy sell some years ago. Not anymore. The executive director at the Singapore-based Taurus Wealth Advisors Pte multi-family office said his clients are disappointed with mediocre hedge fund returns and are balking at high fees, prompting them to shift to private equity.
  • A Hard Brexit Looms Large With Resignation of U.K. Envoy to EU. The chances that the U.K. will quit the single market and revert to a tariffs regime have grown more likely with the resignation of the British envoy to the European Union, an experienced Brussels insider who was reviled by the leading Brexit supporters. Backers of a clean break from the EU cheered the departure of Ivan Rogers as a sign the U.K. government is committed to regaining complete control of immigration, laws and budget even if that means fraying trade ties. His successor will play a leading role in Prime Minister Theresa May’s negotiations with the bloc and the choice will offer further clues on the direction of talks. “Britain’s partners will take this as a sign that May’s government is heading for a hard Brexit which puts sovereignty ahead of economic integration with the EU,” said Charles Grant, director of the Centre for European Reform.
  • Japanese Stocks Lead Asian Equity Gains, Oil Rises: Markets Wrap. Stocks in Asia climbed after data fueled confidence in the U.S. economy, and as equity traders in Tokyo returned from holidays with the yen nursing a three-day slump. Japanese equities led gains with the Topix index climbing more than 1 percent on its first trading day of 2017. The S&P 500 Index had its biggest gain in four weeks and the dollar extended gains as U.S. manufacturing expanded. Oil recovered some of Tuesday’s slump ahead of U.S. stockpile data. Australian and South Korean shares were flat. A global equity rally has extended into the new year as data from the U.S., China and Europe boosted optimism for global growth. Traders look to be shrugging off doom sayers such as former Treasury Secretary Lawrence Summers, who warned that President-elect Donald Trump’s policies might have unintended consequences for the world’s largest economy, and analysts at Eurasia Group who said that America’s 45th president could contribute to a level of global instability not seen since World War II. The MSCI Asia Pacific Index gains 0.7 percent as of 9:11 a.m. Tokyo time. New Zealand’s S&P/NZX 50 Index rises 0.8 percent, with Australia’s S&P/ASX 200 Index and South Korea’s Kospi index little changed.
  • Mnuchin Declines Reply to Brown’s Letter Before Panel Review. Treasury Secretary nominee Steven Mnuchin has declined to answer questions from a Democratic senator about his views on financial regulations, sanctions and his time as head of a bank accused of unfair foreclosure practices.
  • Mnuchin’s Bank Broke Foreclosure Rules, Leaked AG’s Memo Says. A bank run by Steven Mnuchin, President-Elect Donald Trump’s pick to be Treasury secretary, may have engaged in “widespread misconduct” while foreclosing on homeowners, according to a leaked 2013 memo written by lawyers in the California attorney general’s office.
Wall Street Journal:
Zero Hedge: 
  • Container ship fleet growth expected to accelerate in 2017. The global container ship fleet will grow around 3.1 percent in 2017, a level of growth faster than 2016, and one that may or may not increase the gap between container shipping demand and supply, according to shipowner association Bimco.
Night Trading 
  • Asian equity indices are +.25% to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 118.75 +4.5 basis points.
  • Asia Pacific Sovereign CDS Index 35.75 -.25 basis point.
  • Bloomberg Emerging Markets Currency Index 69.41 -.29%
  • S&P 500 futures +.08%. 
  • NASDAQ 100 futures +.14%.
Morning Preview Links

Earnings of Note

  • (RECN)/.19
  • (SONC)/.21
Economic Releases
2:00 pm EST
  • The FOMC Meeting Minutes from Dec. 14.     
  • Total Vehicle Sales for December are estimated to fall to 17.7m versus 17.75m in November.
Upcoming Splits 
  • None of note
Other Potential Market Movers
  • The Eurozone Services PMI, CES 2017, weekly MBA mortgage applications report and the (F) conference call could also impact trading today.
BOTTOM LINE:  Asian indices are higher, boosted by industrial and consumer shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

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