Sunday, February 05, 2017

Monday Watch

Today's Headlines
  • Trump Speaks of ‘Strong Support’ for NATO in Call With Leader. President Donald Trump pressed the North Atlantic Treaty Organization’s general secretary on how to encourage member nations to pay more for their defense while expressing “strong support” from the U.S. for the alliance, according to a readout of the call released by the White House. During a call on Sunday with Secretary General Jens Stoltenberg, Trump agreed to join in a meeting of NATO leaders in late May and discussed the potential for “a peaceful resolution of the conflict along the Ukranian border,” according to the readout. Intense fighting has taken place between government troops and pro-Russian separatists near Ukraine’s Russian border during the past week, the latest episode in a crisis that began when Russia annexed Crimea in March 2014.
  • Asian Stocks Advance as Banks Rally; Dollar Steady. Asian stocks gained as banks followed a rally in the U.S. sparked by the Trump administration’s plan to roll back financial regulations. The dollar was little changed as a Federal Reserve official’s support for higher rates contrasted with a jobs report showing weaker wage growth. Equities in Japan, Australia and South Korea climbed, with financial shares leading the way in each market, after the S&P 500 Index closed within a point of its all-time high on Friday. The Bloomberg Dollar Spot Index was steady after completing a sixth weekly decline for its longest stretch of losses since August 2010. Oil edged higher, after three straight weeks of gains. Japan’s Topix index rose 0.7 percent as of 9:25 a.m. in Tokyo, after its biggest weekly decline since November. Mitsubishi UFJ Financial Group Inc. jumped 4.3 percent to the highest level of the year after third-quarter profit unexpectedly rose 17 percent.
  • Investors Have Never Loved OPEC So Much as Cartel Sticks to Cuts. Investors are betting big that OPEC’s cuts are real. Money managers are the most bullish ever on West Texas Intermediate crude for a second week as signs show OPEC and other nations are slashing production. The group cut supply by 840,000 barrels a day last month, according to a Bloomberg survey, and Russia, the largest of the non-members taking part in the deal, reduced output by 117,000 barrels a day. WTI has traded above $50 a barrel for the past seven weeks, encouraging Wall Street investors to fund more drilling in U.S. shale fields. “The smart money is starting to realize that the OPEC production cuts are real,” Phil Flynn, senior market analyst at Price Futures Group in Chicago, said by telephone on Friday. “The oil story is beginning to look like the bust-end of the cycle is over.”
  • Trump Says Obamacare Replacement Could Take Until Next Year. President Donald Trump said the process for coming up with a replacement for the Affordable Care Act could stretch into 2018, a longer time frame than he previously indicated. Trump’s comments came in an interview with Fox News’ Bill O’Reilly that aired on Sunday during the Super Bowl pre-game show. O’Reilly asked the president whether he would introduce a health plan this year to replace Obamacare, which Trump has vowed to repeal. “Maybe it’ll take till some time into next year, but we are certainly going to be in the process,” Trump said in the interview. “I would like to say by the end of the year, at least the rudiments, but we should have something within the year and the following year.”
Wall Street Journal:
Zero Hedge: 
Night Trading
  • Asian indices are +.25% to +.5% on average.
  • Asia Ex-Japan Investment Grade CDS Index 110.0 -2.0 basis points.
  • Asia Pacific Sovereign CDS Index 31.0 -1.25 basis points.
  • Bloomberg Emerging Markets Currency Index 71.45 +.03%.
  • S&P 500 futures -.10%.
  • NASDAQ 100 futures -.13%.

Earnings of Note
  • (DO)/.11
  • (HAS)/1.29
  • (L)/.63
  • (SYY)/.54
  • (CBOE)/.60
  • (JLL)/3.96
  • (TSO)/.47
  • (YRCW)/-.07 
Economic Releases 
  • None of note
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Harker speaking, China Manufacturing & Services PMI, German Factory Orders report and the (FAST) January sales report could also impact trading today.
BOTTOM LINE: Asian indices are modestly higher, boosted by technology and industrial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the week.

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