Monday Watch

Today's Headlines

Bloomberg:

• Xi, Abe to Get Calls From Trump as North Asia Tensions Rise. North Korea’s nuclear ambitions are set to dominate phone calls from Donald Trump to the leaders of Japan and China, as the U.S. president’s tougher stance on Kim Jong Un and pressure on nations in North Asia over trade sparks renewed tensions. The separate chats with Japanese Prime Minister Shinzo Abe and Chinese President Xi Jinping -- scheduled for early Monday in Asia -- precede Trump’s expected meetings with the leaders of Asia’s two biggest economies at the Group of 20 nations summit in Germany this week. They come against the backdrop of a freshly strident tone from the Trump administration about China’s need to rein in Pyongyang, and on Japan and South Korea over trade imbalances with America.
• Merkel Urges G-20 to Seek `Win-Win' Policy For All Before Summit. Chancellor Angela Merkel urged Germany’s partners in the Group of 20 states to avoid deeper divisions in economic policy as these may become irreconcilable, and to seek inclusive “win-win” solutions that benefit all instead. Commenting in her weekly podcast, the German leader said the G-20 summit in Hamburg this week offers a good platform for states to air their “different interests” and is an opportunity to forge common policies that benefit the global economy.
• EU Interior Ministers Meet After Italy Seeks Help on Migrants. The interior ministers of France, Germany and Italy, as well as the European Union commissioner in charge of migration, will meet for dinner in Paris on Sunday after Italy said it could no longer cope alone with arrivals from across the Mediterranean. Italian Prime Minister Paolo Gentiloni said June 29 that Italy needed the help of the EU after 10,000 migrants were rescued off its southern coast in one week alone. Italian officials have threatened they may bar entry to Italian ports of non-Italian ships carrying migrants picked up at sea, and have suggested rescued migrants be taken straight to other EU countries.
• The EU’s New Presidency Is Already in Trouble. Days into Estonia’s rotating presidency of the European Union, the Baltic nation’s government is showing signs it may not see out the full six months.
• Total to Sign Milestone Iran Energy Deal Since Sanctions Eased. Iran plans Monday to sign a formal contract with Total SA and China National Petroleum Corp. to develop its share of the world’s biggest natural gas field -- the first investment in the country by an international energy company since sanctions were eased last year. Total and CNPC signed a “heads of agreement” with National Iranian Oil Co. in November to develop phase 11 of the South Pars offshore gas field, a deal that was valued then at $4.8 billion. Total Chief Executive Officer Patrick Pouyanne will be in Tehran for the signing of the formal agreement, Parastoo Younchi, the Iranian oil ministry official in charge of foreign media relations, said Sunday.
• China Robots Displace Workers as Wage Spiral Pressures Profits.
• Asia Stocks, Yen Swing After Tokyo Vote; Oil Gains. Asian stocks fluctuated with the yen in the wake of a crushing defeat of Japanese Prime Minister Shinzo Abe’s party in Tokyo elections. Oil climbed for an eighth day. Japan’s Topix index erased an earlier advance while the yen swung between gains and losses. South Korean equities were slightly higher while Australian shares edged lower. Futures on the S&P 500 Index climbed as trading gets under way in a shortened holiday week that culminates with Friday’s jobs report. Japan’s Topix index was flat after rising as much as 0.2 percent. South Korea’s Kospi index added less than 0.1 percent and Australia’s S&P/ASX 200 Index fell 0.2 percent.
• Libya's Crude Output Hits a New High Just as Oil Prices Rebound.
• Bets on Oil Rout Seen Peaking as Shale Boom Starts to Falter. Oil short-sellers have been on a roll, but their bets on declining prices may have begun to hit a wall. Hedge fund wagers on lower West Texas Intermediate crude reached the highest level since August in the week ended June 27, after more than doubling in two months, according to Commodities Futures Trading Commission data. The bearish bets increased at a much slower pace than in the previous two weeks, though.
• Five Things You Need to Know to Start Your Day.

Wall Street Journal:

• Republican Senators Face Pushback From Governors on the Health Bill. Some states that expanded Medicaid under the ACA are urging lawmakers to rethink funding cuts.
• With ISIS on the Run, an Unexpected Leader Emerges in Iraq. Prime Minister Haider al-Abadi, who generated few expectations, stitched together a military alliance and damped sectarianism.
• European Central Banks Face Added Political Constraints. The banks’ own rules, along with wider political trends and mixed economic signals complicate any move to tighten policy.
• Caterpillar(CAT) Faces New Questions in Probe. Missing export filings at the manufacturing giant could open a new avenue for U.S. tax investigators.
• The Senate’s Tax Panic. Republicans are now afraid to repeal ObamaCare’s taxes.

Fox News:

• White House battles backlash after Trump tweets 'slam' of CNN. (video)

CNBC: 

• S&P 500 could hit 2,500 this month amid soaring market sentiment: Strategist. (video)
• Seattle's minimum wage hike may have cut wages and jobs: Study author. (video)
• Qatar stock index sinks 3.1 pct before deadline in diplomatic crisis.

Zero Hedge: 

• Trump Tweets Mock Video Of Himself Pummeling "Fraud News CNN" In A Wrestling Match. (video)
• The Real Threat Of Artificial Intelligence - Keynesian Dystopia.
• China Sends Warships, Fighter Jets To Intercept US Destroyer In South China Sea.
• Abe "Plunges Into Crisis" After LDP Suffers "Historic Defeat" In Tokyo Elections, USDJPY Slides.
• Illinois Taxoholics Wear Down Rauner: Massive Tax Hikes In The Works.
• Germany Passes "Orwellian" Anti-Free-Speech "Facebook Law".

Night Trading

• Asian indices are -.25% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 87.0 +.25 basis point.
• Asia Pacific Sovereign CDS Index 21.5 +1.75 basis points.
• Bloomberg Emerging Markets Currency Index 72.98 +.01%.
• S&P 500 futures +.21%.
• NASDAQ 100 futures +.24%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (ISCA)/.32

Economic Releases 
10:00 am EST

• ISM Manufacturing for June is estimated to rise to 55.0 versus 54.9 in May.
• ISM Prices Paid for June is estimated to fall to 58.5 versus 60.5 in May.
• Construction Spending MoM for May is estimated to rise +.2% versus a -1.4% decline in April.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Eurozone Manufacturing PMI report, Australia Retail Sales report and the (F) June Sales Conference Call could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.