Tuesday, April 18, 2017

Wednesday Watch

Evening Headlines
  • China's $8.5 Trillion Shadow Bank Industry Is Back in Full Swing. China’s shadow banking is back in full swing, an unintended side effect of the government’s campaign against financial leverage, which has curbed traditional lending and squeezed bond financing. Data from the central bank Friday showed that off-balance sheet lending surged 754 billion yuan ($109 billion) in March, taking the first quarter’s total increase to a record 2.05 trillion yuan. Efforts by the People’s Bank of China to curb fresh lending may have prompted borrowers, especially real estate developers, to resort to alternative forms of financing, said Xu Gao, chief economist at Everbright Securities Co.
  • Beware the Rally in Emerging-Market Currencies. Beware the rally in emerging-market currencies: the best quarterly performance in almost seven years is about to reverse. That’s the message from the most-accurate forecaster of developing-nation Asian currencies last quarter: Wells Fargo & Co. “We don’t see continued appreciation through the rest of the year,” said Nicholas Bennenbroek, head of currency strategy at the U.S. bank in New York. “Federal Reserve interest-rate increases should continue at a steady pace, which should weigh on most foreign currencies, including Asian currencies.”
  • Japan 10-Year Yield Falls to Zero for First Time in Five Months. Japan’s benchmark 10-year bond yield fell to zero percent for the first time since November as U.S. Treasury yields plunged on weak economic data, while lingering tensions over North Korea and uncertainty over France’s presidential election keep haven demand intact. The 10-year Treasury yield fell eight basis points Tuesday to a five-month low of 2.17 percent. The Guardian reported the U.S. military is considering shooting down North Korean missile tests, citing two unidentified people briefed on the planning. The U.S. is closely monitoring the situation in North Korea, a White House spokesman said.
Wall Street Journal:
Zero Hedge:
Business Insider:
  • MARK CUBAN: Gary Cohn is leading a 'Democratic invasion' of Trump's White House. Billionaire business mogul Mark Cuban said Tuesday that Gary Cohn, head of President Donald Trump's National Economic Council, is leading a "Democratic invasion of the White House." Cuban, the owner of the NBA's Dallas Mavericks and star of ABC's "Shark Tank," told the Fox Business Network that was why Trump is becoming more centrist, according to Fox Business reporter Charlie Gasparino. "50% of non-military leadership are Democrats," Cuban said, pointing to Cohn, Treasury Secretary Steve Mnuchin, senior adviser Jared Kushner, and assistant to the president Ivanka Trump.

Night Trading 
  • Asian equity indices are -.5% to -.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 103.0 +1.75 basis points. 
  • Asia Pacific Sovereign CDS Index 24.25 +.5 basis point.
  • Bloomberg Emerging Markets Currency Index 72.35 +.01%.
  • S&P 500 futures +.12%
  • NASDAQ 100 futures +.13%.
Morning Preview Links

Earnings of Note

  • (ABT)/.43
  • (ASML)/.92
  • (BLK)/4.90
  • (MS)/.90
  • (AMTD)/.41
  • (TXT)/.45
  • (USB)/.80
  • (AXP)/1.27
  • (BMI)/.27
  • (CP)/2.49
  • (CSX)/.43
  • (EBAY)/.48
  • (KMI)/.18
  • (QCOM)/1.20
  • (SCSS)/.46
  • (STLD)/.79
  • (URI)/1.55
  • (VMI)/1.63
Economic Releases
10:30 am EST 
  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,033,330 barrels versus a -2,166,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,633,330 barrels versus a -2,973,000 barrel decline the prior week. Distillate inventories are estimated to fall by -788,890 barrels versus a -2,153,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.11% versus a +.2% gain the prior week.
2:00 pm EST
  • US Fed releases Beige Book report. 
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Rosengren speaking, Eurozone CPI/Trade Balance reports and the weekly MBA Mortgage Applications report could also impact trading today.
BOTTOM LINE:  Asian indices are modestly lower, weighed down by financial and commodity 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 day.

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