Sunday, March 19, 2017

Monday Watch

Today's Headlines
  • Yellen's Shadow Looms Large Over Policy at China's Central Bank. Call it the Yellen effect. The Federal Reserve’s March 15 rate hike underscored a subtle shift at the People’s Bank of China: long reluctant to be influenced by global counterparts, it now appears to be in step with the U.S. That was displayed by the PBOC raising borrowing costs just hours after the Fed lifted interest rates last week. Observers see the objectives as supporting the yuan by keeping a lid on the interest rate differential and taming a surge in lending that’s fueled financial risk.
  • Deutsche Bank to Raise $8.6 Billion After Pricing Share Sale. Deutsche Bank AG said it will raise 8 billion euros ($8.6 billion) from a capital increase starting this week as the lender seeks to shore up its finances and boost growth. The Frankfurt-based company will issue 687.5 million new shares at 11.65 euros apiece, it said in a statement on Sunday, in-line with the bank’s March 5 announcement on the planned sale. The shares are priced at a discount of about 35 percent from Friday’s close and almost 41 percent since Bloomberg first reported that the bank was weighing a capital raising. Existing investors will be able to acquire one new share for each two shares they now hold.
  • Stocks Point to Mixed Start in Asia; Bonds Climb. A dearth of risk appetite greeted markets at the start of the week. Stock futures indicated a mixed open for the Asia Pacific region, with global equities trading just shy of an all-time high. Australian equity-index futures slipped and Hang Seng contracts were flat. Japan’s stock market is closed Monday for a holiday and New Zealand’s main index tumbled the most since November. The 10-year yield on Australian government bonds resumed a retreat after a rally Friday. The yen maintained its strength from last week. The yen traded at 112.70 per dollar as of 7:25 a.m. in Tokyo. That comes on the back of its strongest week since the start of February. New Zealand’s S&P/NZX 50 Index declined 1.2 percent. Futures on Australia’s S&P/ASX 200 Index lost 0.2 percent and contracts on the Hang Seng slid less than 0.1 percent.
  • Ezra Files for U.S. Bankruptcy as Marine Debt Crunch Spreads. Ezra Holdings Ltd., a Singapore-listed oilfield services group, filed for bankruptcy in the U.S. after weeks of facing hostile actions from creditors at home and abroad as it struggles to recover from a slump in oil prices over the past three years. Ezra and two affiliates, Ezra Marine Services Pte. Ltd. and EMAS IT Solutions Pte. Ltd., filed for Chapter 11 protection March 18 in U.S. Bankruptcy Court in White Plains, New York. Ezra listed consolidated long-term assets with a value of $1.3 billion and current assets of $623 million for the fiscal year ended August 31, 2016, according to court papers. Ezra’s 20 largest creditors without collateral securing their claims are owed about $607.6 million, according to court papers. Ezra’s three largest secured creditors are owed about $61.9 million.
  • Cerberus-Backed Albertsons Said to Consider Merger With Sprouts. Albertsons Cos., the grocery-chain operator backed by Cerberus Capital Management, has held preliminary talks to merge with Sprouts Farmers Market Inc., people with knowledge of the matter said. The discussions, which took place in recent weeks, are at an early stage and may not lead to a deal, said the people, who asked not to be named discussing private details. The talks have involved a plan to take organic grocer Sprouts private and add it to Albertsons’ portfolio, which includes eponymous grocery stores and the Safeway store brand.
  • Post-Fed Calm in Treasuries Masks a Raging Bulls-Bears Debate. The Federal Reserve’s rate hike is in the rear view mirror, Treasuries volatility is tumbling and the consensus on Wall Street is for 10-year yields to tread water through June. Yet beneath that apparent calm, the range of forecasts in the latest Bloomberg survey underscores that a debate is simmering over whether long-term yields are poised to enter a bear market or just keep bumping around in months-old ranges.
Wall Street Journal:
  • Had bullish commentary on (DIS), (JPM), (CME) and (HD)
  • Had bearish commentary on (GOOS), (TLT) and (GRUB).
  • China to Prevent Excessive Credit in the Property Market. Home price rises in some cities have pushed up costs of real economy, citing National Development and Reform Commission Chairman He Lifeng. He sees imbalance between China's property market and the real economy.
Night Trading
  • Asian indices are -.75% to -.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 86.25 -1.75 basis points.
  • Asia Pacific Sovereign CDS Index 25.25 -2.75 basis points.
  • Bloomberg Emerging Markets Currency Index 72.10 +.07%.
  • S&P 500 futures -.19%.
  • NASDAQ 100 futures -.13%.

Earnings of Note
  • (MOV)/.23
Economic Releases
8:30 am EST
  • The Chicago Fed National Activity Index for February.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Evans speaking, Germany PPI report and the (WFC) February update could also impact trading today.
BOTTOM LINE: Asian indices are modestly lower, weighed down by technology and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.

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