Sunday, March 12, 2017

Monday Watch

Today's Headlines
  • Draghi Outlook Snaps Euro Interest-Rate Bears Out of Hibernation. Investors are betting that the European Central Bank will start raising rates before the end of its quantitative easing. Forward swaps based on the Euro Overnight Index Average are pricing 10 basis points of rate increase by April next year, compared with less than three at the end of last month. Investors are also betting that the ECB will exit from negative policy rates by January 2020. The ECB may taper its bond purchases further beyond the end of this year as it faces increasing limits on its bond-buying program.
  • Schwarzman Sees Donald Trump Dialing Back Criticisms of China. President Donald Trump will likely temper his criticisms of China, including his campaign claim that the country manipulates its currency, one of his top economic advisers said. “I don’t think that there’s going to be issues regarding China as a currency manipulator and some of the other things,” Steve Schwarzman, the chairman of Trump’s strategic and policy forum, said Sunday on CNN.
  • Turkey War of Words With Dutch Worsens With New Accusations. A diplomatic spat between Turkey and the Netherlands worsened on Sunday as foreign ministers from both countries exchanged more denunciations. Protests broke out in Rotterdam on Saturday night after Turkish Family Affairs Minister Fatma Kaya was denied entry into her consulate and escorted to the border with Germany. The Dutch say the minister put public order at risk by choosing to sneak into the country after talks on possible campaigning abroad by Turkish officials were abandoned. “An apology won’t suffice,” Foreign Minister Mevlut Cavusoglu said in televised comments from France. “There are steps we’ll take, we’re planning them.”
  • China Moves to Make $9 Trillion Domestic Bond Market More Global. The tide may slowly be turning for Chinese bonds. Citigroup Inc. said Tuesday it will include onshore Chinese debt in some of its gauges, while the central bank pledged to create a “more convenient and friendly environment” for foreign investors. This follows a recent measure to allow currency hedging for bonds, a move seen as one of many efforts needed to lower barriers.
  • Yen Gains as Central Bank Meetings, Elections Loom. The yen rose and most Asian equity indexes signaled a muted start to trading ahead of an important week for global monetary policy settings, with central banks in Japan, the U.S. and the U.K. all meeting. The euro nudged higher. A stronger yen may weigh on Japanese equities on Monday, while most other major stock gauges pointed to a mixed start. Traders betting on further gains in the dollar will be focusing on the Federal Reserve’s quarterly update on projections for future rate levels. The euro built on gains from Friday, when European Central Bank policy makers were said to have considered their ability to tighten before a bond-buying program comes to an end. The yen slipped 0.1 percent to 114.86 per dollar as of 9:13 a.m. in Tokyo, after gaining as much as 0.2 percent earlier. The euro added 0.2 percent to $1.0690, extending its 0.9 percent surge on Friday. Japan’s Topix was little changed. The gauge jumped 1.2 percent on Friday. Australia’s S&P/ASX 200 Index fell 0.4 percent and New Zealand’s S&P/NZX 50 Index rose 0.3 percent. South Korea’s Kospi advanced 0.5 percent.
  • New York Guides `Sanctuary' Cities After Trump Immigration Order. New York Attorney General Eric Schneiderman issued new legal guidance to cities weighing “sanctuary” policies to protect immigrants affected by President Donald Trump’s travel ban. Schneiderman, a Democrat, is seeking to help cities give local police direction on how to handle interactions with federal agents enforcing the “Draconian immigration policies” outlined by the Republican president, according to a statement on Sunday.
Wall Street Journal: 
Zero Hedge:
Night Trading
  • Asian indices are -.25% to +.5% on average.
  • Asia Ex-Japan Investment Grade CDS Index 95.0 -3.5 basis points.
  • Asia Pacific Sovereign CDS Index 28.0 -.5 basis point.
  • Bloomberg Emerging Markets Currency Index 70.95 +.03%.
  • S&P 500 futures -.06%.
  • NASDAQ 100 futures -.08%.

Earnings of Note
  • None of note
Economic Releases
10:00 am EST
  • The Labor Market Conditions Index for February is estimated to rise to 106.0 versus 105.9 in January.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Japan Machine Orders report, JPMorgan Aviation/Transportation/Industrials conference and the (SODA) shareholder meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and consumer shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the week.

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