Wednesday Watch

Evening Headlines

Bloomberg:

• The Global Economy Is Rebounding, But There's One Big Problem. There’s a dark cloud building behind the world’s best period of synchronous growth among developed and emerging economies this decade -- one that in time could rain down volatility in global markets. The problem, identified by strategist and hedge fund manager Stephen Jen, is a deepening imbalance in the lack of new safe-haven assets as the world’s output expands. China and other developing nations are accumulating wealth, but failing to create sophisticated local markets that feature their own risk-free instruments. That’s left a dangerous reliance on U.S. Treasuries, according to Jen’s argument, perpetuating a bond bubble and pushing investors into riskier assets.

• Asia Stocks to Gain as U.S. Shares Hit Record High. Asian equities were poised to advance after U.S. stocks snapped a two-day slide to close at record highs as technology shares rebounded from the worst drop of the year. The dollar weakened and Treasuries were steady as the Federal Reserve policy meeting kicked off. Futures for share indexes in Japan, Australia, China, South Korea and Taiwan all rose after the Dow Jones Industrial Average and the S&P 500 Index ended at all-time highs, while European and emerging-market equities advanced. Sterling rose for the first time since the U.K. election. Ten-year Treasury yields held near 2.21 percent and the dollar slipped versus major peers before the Fed is projected to raise rates Wednesday. Nikkei 225 Average futures rose 0.6 percent in Chicago, while contracts on Australian equities rose 0.1 percent and those on South Korean shares advanced 0.3 percent.

• Five Things You Need to Know to Start Your Day. Get caught up on what’s moving markets in Asia.

• U.S. Government Reins in West Texas Shale Oil Exuberance: Chart.

Wall Street Journal:

• Administration Planning Rollback of U.S.-Cuba Normalization Efforts. Trump expected to detail likely changes Friday in Florida.

Fox News:

• Jeff Sessions denies Russia collusion, defends Comey firing. (video)

CNBC:

• Trump tells senators that health bill should be 'more generous' than ‘mean' House version.

• Death of the human investor: Just 10% of trading is regular stock picking, JPMorgan estimates.

Zero Hedge:

• Billionaire Chairman Of Chinese Conglomerate Anbang, Linked To Jared Kushner, Has Been Detained.

• RBC: Tomorrow's CPI Print Is More Important To The Market Than The Fed. (graph)

• AG Sessions Blasts Russian Collusion Accusations As "Appalling And Detestable Lie".

• China Says "Don't Panic" As Yield Curve Inversion Deepens Amid Liquidity Collapse. (graph)

• Lee Camp Explains How The New York Times Manufactures "Hit Piece Propaganda".

• Dramatic Images From 3 Months Of Deadly Anti-Government Protests In Venezuela.

• Goldman: The Fed Will Hike This Week, But Here Are "The Two Most Interesting Questions".

• WTI/RBOB Slump After Another Shocking Crude & Gasoline Inventory Build. (graph)

• Banks Are Becoming Less Safe... Again.

• 'Teflon' Tech Stocks Bounce Despite The Biggest Outflows Since 2007. (video)

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 84.5 -1.0 basis point. 

• Asia Pacific Sovereign CDS Index 17.5 -.25 basis point.

• Bloomberg Emerging Markets Currency Index 73.36 +.01%.

• S&P 500 futures -.08%.

• NASDAQ 100 futures -.12%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (JBL)/.29

Economic Releases 
8:30 am EST

• The CPI MoM for May is estimated unch. versus a +.2% gain in April.

• The CPI Ex Food and Energy MoM for May is estimated to rise +.2% versus a +.1% gain in April. 

• Real Avg. Weekly Earnings YoY for May.

• Retail Sales Advance MoM for May are estimated unch. versus a +.4% gain in April.

• Retail Sales Ex Auto MoM for May are estimated to rise +.2% versus a +.3% gain in April.

• Retail Sales Ex Autos and Gas for May are estimated to rise +.3% versus a +.3% gain in April.

10:00 am EST

• Business Inventories for April are estimated to fall -.2% versus a +.2% gain in March.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,228,570 barrels versus a +3,295,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -714,290 barrels versus a +3,324,000 barrel gain the prior week. Distillate inventories are estimated to rise by +342,860 barrels versus a +4,355,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise +.02% versus a -.9% decline prior.

2:00 pm EST

• The FOMC is expected to raise the benchmark Fed Funds Rate to 1.0-1.25% from .75-1.0%.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The FOMC Policy Update & Econ Projections, Eurozone Industrial Production report, German CPI report, China Retail Sales report, weekly MBA Mortgage Applications report, (MAT) investor day and the (CAT) annual meeting could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by financial and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher.  The Portfolio is 75% net long heading into the day.