Monday, March 13, 2017

Tuesday Watch

Evening Headlines
  • Chinese Leaders Back Bankruptcies for Unwanted Zombie Companies. China is getting serious about dealing with so-called zombie companies through court-led bankruptcies as it seeks to cut overcapacity in industries and boost economic growth. The country’s Chief Justice Zhou Qiang said at the National People’s Congress Sunday that authorities will improve the country’s judicial system for dealing with bankruptcies in 2017 to support those goals. Chinese authorities are devoting more resources to tackle corporate restructurings and bankruptcies as bad debts at banks soared to an 11-year high in 2016 and bond defaults more than quadrupled in the period.
  • Australia Is 'Prepared to Do More' to Slow Housing, RBA Says. Australia could further curb mortgage lending to investors as the impact of earlier measures wanes and Sydney and Melbourne house prices keep surging, Reserve Bank Assistant Governor Michele Bullock said. “There is no doubt that the actions did address some of the risks,” she said in a Bloomberg Address in Sydney. “While the resilience of both borrowers and lenders has no doubt improved, the initial effects on credit and some other indicators we use to assess risk may fade over time. We are continuing to monitor their ongoing effects and are prepared to do more if needed.”
  • Asian Stocks Mixed Before Fed as Yen Fluctuates. Asian stocks began the session mixed with Treasuries trading near the highest level this year as investors anticipated a near-certain rate hike from the Federal Reserve this week. Japan’s Topix index slipped for the first time in four days as the yen fluctuated, while South Korean equities advanced. The yield on 10-year Treasuries remained at around 2.62 percent. The pound held steady after the U.K. parliament paved the way for Prime Minister Theresa May to begin two years of talks with the European Union over Britain’s exit. Oil extended its losing streak to a seventh straight session. The yen held at 114.82 per dollar as of 9:40 a.m. in Tokyo, after swinging between gains and losses of less than 0.1 percent. The Bloomberg Dollar Spot Index rose less than 0.1 percent. The euro was little changed at $1.0655, holding Monday’s 0.2 percent retreat. The Topix index fell 0.2 percent after closing Monday at the highest since December 2015. Australia’s S&P/ASX 200 Index was little changed and South Korea’s Kospi rose 0.4 percent after jumping 1 percent in the previous session. The yield on 10-year Australian government bonds rose one basis points to 2.94 percent.
  • Flights Grounded and Power Prices Soar Ahead of U.S. Northeast Storm. Grounded flights and soaring power prices roiled the Northeast U.S. as a late-winter storm prepared to spin up the Atlantic Coast, threatening New York with an overnight blizzard, postponing German Chancellor Angela Merkel’s trip to Washington and promising snow by the foot in Boston. As many as 19 inches (48 centimeters) could land in New York, the National Weather Service said, with the white stuff starting to fall after midnight and ramping up to rates of 2 to 4 inches per hour. New York and Boston shuttered public schools Tuesday in anticipation.
  • Regulator Proposes Walling Off Wall Street Investment Banks. President Donald Trump has worried Wall Street by promising to bring back a Depression-era law that separated investment banking from consumer lending, but he hasn’t offered details on what his modern version might look like. Now a key regulator may be filling the void.
Wall Street Journal:
Zero Hedge:
Business Insider:
Night Trading 
  • Asian equity indices are unch. to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 93.75 -1.25 basis points.
  • Asia Pacific Sovereign CDS Index 27.75 +.25 basis point
  • Bloomberg Emerging Markets Currency Index 70.93 -.01%
  • S&P 500 futures -.11%. 
  • NASDAQ 100 futures -.04%.
Morning Preview Links

Earnings of Note

  • (DSW)/.16
  • (HDS)/.43
Economic Releases 
6:00 am EST
  • The NFIB Small Business Optimism Index for February is estimated to fall to 105.6 versus 105.9 in January. 
8:30 am EST 
  • PPI Final Demand MoM for February is estimated to rise +.1% versus a +.6% gain in January.
  • PPI Ex Food and Energy MoM for February is estimated to rise +.2% versus a +.4% gain in January. 
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Angela Merkel/President Trump White House meeting, China Retail Sales/Industrial Production reports, Eurozone CPI/Industrial Production reports, weekly US retail sales reports, Barclays Healthcare Conference and the BofA Merrill Consumer/Retail Tech Conference could also impact trading today.
BOTTOM LINE:  Asian indices are mostly higher, boosted by technology and financial 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 day.

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