Tuesday, May 23, 2017

Wednesday Watch

Evening Headlines
  • U.K.'s May Warns Further Terrorist Attacks Could Be Imminent. The British military will guard music and sports events in an unprecedented security operation as police hunt for potential accomplices of the suicide bomber who killed 22 people at a Manchester pop concert. After meeting with her top security officials, Prime Minister Theresa May announced intelligence analysts had raised the U.K. terrorism threat level from “severe” to “critical” -- the highest level -- for the first time in a decade. “This means that their assessment is not only that an attack remains highly likely but that a further attack may be imminent,” the premier said in a statement to media inside her official residence in London. Police asked for back up from the army, she said.
  • China Downgraded to A1 by Moody's on Worsening Debt Outlook. Moody’s Investors Service cut its rating on China’s debt, saying that the outlook for the country’s financial strength will worsen as debt rises and economic growth slows. Moody’s reduced the rating to A1 from Aa3 and changed the outlook to stable from negative, the company said in a statement on Wednesday. The offshore yuan extended losses after Moody’s downgrade, weakening 0.12 percent to 6.8889 per dollar as of 8:24 a.m. in Shanghai. President Xi Jinping and other top leaders are seeking to rein in credit risks in the financial system, while ensuring there’s enough lending to keep the economy humming above their target for economic growth of at least 6.5 percent this year. Total outstanding credit climbed to about 260 percent of GDP by the end of 2016, up from 160 percent in 2008, according to Bloomberg Intelligence.
  • China's Roaring Old Economy Spurs Sales Boom For Diggers, Steel. China’s economy may be slowing but construction is still booming. Sales of diggers at a five year high. The price of rebar, a steel product used to reinforce concrete, back at 2012 levels. Crude steel output surging to a record. China’s economy may be slowing down but the nation’s old economy is still booming.
  • Asia Stocks Gain, Yen Erases Loss on China Rating. Asian stocks climbed as data lent support to the argument that global economic growth remains intact, while the yen erased losses after Moody’s cut its rating on China. Equities in Tokyo and Seoul climbed after the S&P 500 Index’s fourth straight gain took it back toward 2,400. The yen erased losses and the Aussie fell as Moody’s cut the rating it gives to China’s debt, saying that the outlook for the country’s financial strength will worsen. British assets remain in focus after Tuesday’s suicide bombing, as Prime Minister Theresa May warned that further attacks could be imminent. 
Wall Street Journal:
Zero Hedge: 
Business Insider:
Night Trading 
  • Asian equity indices are -.25% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 90.5 +.75 basis point
  • Asia Pacific Sovereign CDS Index 20.0 unch.
  • Bloomberg Emerging Markets Currency Index 72.79 -.08%.
  • S&P 500 futures -.07%.
  • NASDAQ 100 futures -.06%.
Morning Preview Links

Earnings of Note

  • (AAP)/2.14
  • (CHS)/.29
  • (DY)/1.19
  • (EV)/.59
  • (LOW)/1.06
  • (TIF)/.70
  • (CPRT)/.36
  • (GES)/-.32
  • (HPQ)/.39
  • (NTAP)/.82
  • (PVH)/1.60
  • (SCVL)/.48
  • (WSM)/.49
Economic Releases 
9:00 am 
  • The FHFA House Price Index MoM for March is estimated to rise +.5% versus a +.8% gain in February.
10:00 am EST
  • Existing Home Sales for April are estimated to fall to 5.65M versus 5.71M in March.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,250,000 barrels versus a -1,753,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -594,710 barrels versus a -413,000 barrel decline the prior week. Distillate inventories are estimated to fall by -369,290 barrels versus a -1,944,000 barrel decline the prior week.
2:00 pm EST
  • FOMC Meeting Minutes.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Kashkari speaking, Eurozone Manufacturing PMI report, $35B 5Y T-Note auction, weekly MBA Mortgage Applications report and the (DV) investor day 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 modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 75% net long heading into the day.

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