Tuesday Watch

Evening Headlines

Bloomberg:

• Russia and China Are Bulking Up in the U.S.’s Backyard. Putin and Xi are working to win over small, poor countries with promises of aid, military support, and investment, even as Trump scales back. As supplies of crude from its old ally Venezuela dwindled last year, Cuba began turning out the lights in government offices and shuttering oil refineries. Then, Havana turned to an old friend for help: Russia. In early May the Kremlin sent a tanker full of fuel across the Atlantic as part of a deal to keep the communist island running for three months. It was the first such shipment Cuba had received in years from its former benefactor, but it wasn’t the only sign Russia has returned to a region it had all but abandoned after the Cold War. Moscow is building a satellite-tracking station in Managua and considering reopening Soviet-era military bases in the region, as well as expanding economic ties and doling out aid in countries across Central America and the Caribbean. President Vladimir Putin has even offered to restore the Capitol building in Havana, which bears a striking resemblance to the one in Washington.

• Chinese Banks Are Reshaping Asia's Sovereign Dollar-Bond Market. Chinese economic diplomacy is spurring a shake-up in the world of frontier-bond underwriting. When the tiny island nation of the Maldives prepared to make its dollar-debt debut last week, it looked beyond more veteran international arrangers to Bocom International Holdings Co., the securities arm of China’s fifth-biggest bank. The firm was sole lead on the $200 million, five-year bond, the latest in a slew of frontier-market dollar offerings this year.

• What to Watch For on U.K. Election Night: An Hour-by-Hour Guide. The U.K.’s general election is actually 650 separate votes in 650 individual districts. Most seats won’t change hands, and the outcome of only about 100 will determine the final tally for Theresa May’s Conservatives and Jeremy Corbyn’s Labour Party. Last time round, it was the result from Nuneaton in the English Midlands at 1:50 a.m. that set the stage for David Cameron’s eventual victory -- not only did Ed Miliband’s Labour fail to take a must-win bellwether seat, the Tories actually increased their share of the vote. The projected declaration times here are from a list compiled by the Press Association newswire and they’re only estimates. If the result is close in any given district, a recount could delay the announcement.

• Asian Stocks Slip Amid Cautious Tone; Oil Gains. Equity markets in Asia slipped in early trading, with investors opting for a note of caution following a stellar seven-week surge for global stocks. Oil resumed gains. Japanese and Australian shares declined after U.S. stocks posted small drops. American services and factory figures, along with first-quarter productivity and labor costs, stayed close to forecasts, indicating steady if unspectacular U.S. growth. Oil edged higher after sliding Monday as traders downplayed concerns that Qatar’s turmoil would hamper supply from the country. The yen and gold were steady. Japan’s Topix index fell 0.1 percent and Australia’s S&P/ASX 200 Index dropped 0.7 percent. South Korea is closed for a holiday.

• For OPEC, Saudi-Qatar Crisis Is Just the Latest Family Squabble. (video) The diplomatic clash between Qatar and three Arab allies flared regional tensions and caused oil prices to jump. For OPEC, it’s likely to remain business as usual. Saudi Arabia and three other Arab countries severed most diplomatic and economic ties to Qatar to punish the nation for its links with Iran and Islamist groups. Although most of the countries involved are members of the Organization of Petroleum Exporting Countries, the stand-off is seen posing little threat to the group’s initiative to re-balanceworld oil markets by cutting production.

• Drug Prices Become Target for FDA as Chief Expands Purview. The head of the U.S. Food and Drug Administration is considering using the agency’s powers to bring more price competition to the market for generic drugs, targeting high-priced products by prioritizing the approval of additional competing treatments. FDA Commissioner Scott Gottlieb said in an interview Monday that the agency is looking at how to push applications to the front of the line in cases where there are fewer than three competing generic manufacturers. The policy would target cases where there are few or no competing versions of drugs, which has led to high prices in some situations.

• Banker Robert Jones Said to Be on Trump List for Fed Governor.

Wall Street Journal:

• British Police Name Two of Three London Attackers as May Calls for Crackdown. Khuram Shazad Butt was known to security services, and neighbors say he had appeared in a documentary called “The Jihadis Next Door’.

• Exclusive Test Data: Many Colleges Fail to Improve Critical-Thinking Skills. Results of a standardized measure of reasoning ability show many students fail to improve over four years—even at some flagship schools, according to a Wall Street Journal analysis of nonpublic results.

Fox News: 

• NSA contractor accused of leaking top secret report on Russian hacking efforts. (video)

CNBC: 

• Gene Munster: Most people missed the most 'revolutionary' thing to come out of Apple's(AAPL) big event.

• Here are the six big announcements Apple(AAPL) just made.

• Trump's EPA hit with lawsuit over suspension of oil- and gas-drilling rules.

Zero Hedge:

• FBI Arrests NSA Contractor Who Leaked Top Secret "Russian Hacking" Document To The Intercept.

• NSA Leaker Called Trump A "Piece Of Shit", Is A Fan Of Bernie Sanders.

• Democrats Plot Debt Ceiling Fight And Government Shut Down To Thwart Trump Tax Cuts.

• The Last Time Hedge Funds Were This Short, Small Caps Plunged 30%. (graph)

• Bernie Sanders Made More Than $1 Million In 2016.

• Stocks & Bonds Slip As US Macro Slumps To 16-Month Lows. (graph)

Business Insider:

• The Senate GOP is reportedly closing in on its own version of a healthcare bill.

• China just went full-on Big Brother on its credit card system.

Telegraph:

• Italy faces borrowing shock when ECB removes support, warns Pimco.

Night Trading 

• Asian equity indices are -.5% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 87.25 -1.0 basis point. 

• Asia Pacific Sovereign CDS Index 19.0 -.25 basis point.

• Bloomberg Emerging Markets Currency Index 73.44 +.02%.

• S&P 500 futures -.07%.

• NASDAQ 100 futures -.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FRED)/-.02

• (GIII)/-.40

• (HDS)/.66

• (MIK)/.39

• (LE)/-.22

• (OXM)/1.04

Economic Releases 
10:00 am EST

• JOLTS Job Openings for April are estimated to rise to 5750 versus 5743 in March.
  

Upcoming Splits

• (DST) 2-for-1

Other Potential Market Movers

• The Eurozone Retail Sales report, Eurozone Manufacturing PMI report, weekly US retail sales reports, RBC Global Energy Conference, Stephens Investor Conference, Goldman Lodging/Gaming/Restaurant/Leisure Conference and the Jefferies Healthcare Conference, Baird Consumer/Tech/Services Conference, BofA Merrill Tech Conference, CSFB Energy Conference, Wells Fargo Financial Services Investor Forum, (GM) Annual Meeting, (FCX) Annual Meeting, (NBR) Annual Meeting and the (FAST) May Sales Report could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by commodity and industrial 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.