Sunday, May 07, 2017

Monday Watch

Today's Headlines
  • Macron Vows to Heal France’s Divisions After Victory Over Le Pen. (video) Emmanuel Macron pledged to unite France’s rifts after his victory over Marine Le Pen in the presidential election, saying that he’ll work to address the concerns that were exposed during one of the most divisive campaigns of recent history. The president-elect made his comments in a speech to supporters at his campaign headquarters in Paris less than an hour after Le Pen conceded the election. With counting still underway, projections by France’s four main pollsters put Macron on course to take about 65 percent of the vote in Sunday’s runoff to 35 percent for the far-right Le Pen.
  • China Reserves Rise a Third Month on Tighter Capital Control. China’s foreign-exchange reserves rose for a third month in April, beating estimates, as tighter capital controls kept money from flowing out of the country and the yuan was stable. Reserves climbed $20.45 billion to $3.03 trillion, the People’s Bank of China said Sunday, compared with a median estimate of $3.02 trillion in a Bloomberg survey of economists. “April’s reserve increase reflects a combination of valuation effects, tighter capital controls and a more stable yuan,” Tom Orlik, chief Asia economist at Bloomberg Intelligence in Beijing, wrote in a note. “At the start of the year, there were genuine concerns China faced another flood of capital outflows. That clearly hasn’t happened.”
  • China's Deleveraging Bill Tops $500 Billion. How much pain can Chinese leaders stomach? It’s becoming a key question for investors as the government’s stepped up campaign to rein in financial leverage ripples through markets. The clampdown has erased at least $453 billion from the value of Chinese stocks and bonds since mid-April, spurred $21 billion of canceled debt sales and compelled the People’s Bank of China to inject $48 billion into jittery money markets. Sales of asset-management products by lenders and trust companies have plunged by more than 30 percent, while domestic real estate transactions have slowed and metals prices have buckled.
  • Merkel Annoyed by Juncker Over Brexit Dinner With May: Spiegel. German Chancellor Angela Merkel is annoyed with European Commission President Jean-Claude Juncker over his behavior in negotiations over the U.K.’s departure from the European Union, Der Spiegel reported without saying where it got the information. Merkel’s annoyance is based on the leaking of details of Juncker’s April 26 dinner with U.K. Prime Minister Theresa May to Germany’s Frankfurter Allgemeine Sonntagszeitung newspaper. The chancellery assumes Juncker, or his cabinet leader Martin Selmayr, informed the paper about the tone of the conversation, and inflaming the atmosphere between the EU and the U.K. wouldn’t be considered helpful, Spiegel reported.
  • U.K. Accuses EU Chiefs of Meddling, Aggression to Skew Election. Prime Minister Theresa May’s U.K. government accused some European Union countries of wanting Britain to “fail” as her team stepped-up the attack on the bloc’s leaders in a push for votes in the British election. In the most outspoken comments so far, Home Secretary Amber Rudd claimed European Commission President Jean-Claude Juncker held “very hostile” briefings against May after an April 26 London dinner meeting deliberately to influence voters. She criticized the timing of reports -- that the EU wants to stop May from leading Brexit talks, and that Britain will face a 100 billion euro ($110 billion) exit bill -- in the weeks before the June 8 vote.
  • Asian Stocks Climb as Global Growth Seen Intact. Asian stocks climbed, with Japanese shares rallying after a three-day holiday, as investors looked beyond Emmanuel Macron’s expected victory as France’s next president and focused on improving global growth. Japan’s Topix index rose the most in three months, leading an advance across the region after U.S. stocks closed at a record Friday following better-than-forecast data on American jobs. The euro erased early gains to retreat, with investors having largely positioned for Macron’s victory in the run-up to Sunday’s vote. Oil extended a rebound while gold climbed. The euro fell 0.3 percent to $1.0967 as of 9:10 a.m. in Tokyo, after gaining as much as 0.2 percent earlier. The currency is still trading near the highest level since November. The yen rose 0.1 percent to 112.64 per dollar. The currency is near the lowest level in seven weeks. The Topix index rose 1.4 percent, the most since February. Australia’s S&P/ASX 200 Index gained 0.7 percent. South Korea’s Kospi index added 0.2 percent.
  • Hedge Funds Bail Just Before OPEC-Driven Oil Rally Evaporates. Hedge funds jumped out of the oil market just in time. Before West Texas Intermediate crude nosedived on Thursday, wiping out the rally driven by OPEC’s deal, money managers slashed bets on rising prices by 20 percent, according to U.S. Commodity Futures Trading Commission data. Now they may soon be well poised to start betting on the next rally.
  • Fed's Williams Stands by Hike Outlook as Unemployment Drops. Federal Reserve Bank of San Francisco President John Williams said his outlook for three or four rate increases in 2017 hasn’t shifted, as the labor market shows signs of expanding beyond its sustainable rate and the economy is operating above potential. “I haven’t changed, again, my views on what appropriate policy is” for the remainder of the year, Williams told reporters on Friday after a speech in New York, referring to his comments last month that three or four hikes would be required.
Wall Street Journal:
Zero Hedge:
Night Trading
  • Asian indices are +.25% to +1.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 91.50 -1.25 basis points.
  • Asia Pacific Sovereign CDS Index 21.0 -1.25 basis points.
  • Bloomberg Emerging Markets Currency Index 72.21 -.1%.
  • S&P 500 futures -.05%.
  • NASDAQ 100 futures -.08%.

Earnings of Note
  • (AES)/.20
  • (FDC)/.28
  • (ITT)/.60
  • (NWL)/.29
  • (HTZ)/-.84
  • (MAR)/.91
  • (RGR)/.98
  • (TSO)/.31
Economic Releases
10:00 am EST
  • The Labor Market Conditions Index for April.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Mester speaking, Morgan Stanley E&P/Oil Services Conference and the (VZ) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are 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 100% net long heading into the week.

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