Sunday, July 23, 2017

Monday Watch

Today's Headlines
Bloomberg:
  • Macron's Approval Rating Slides Two Months After French Election. President Emmanuel Macron’s approval rating fell sharply in the past month as French voters were either confused by plans for the tax system, shocked by a dispute with the head of the army or unsettled by upcoming labor laws reform, an Ifop pollster told Journal du Dimanche. The rating for Macron, elected in early May, fell 10 percentage points to 54 percent this month, the second-biggest decline for a French president so soon after election. Jacques Chirac dropped 15 points from his May 1995 election to July, the Paris-based pollster said.
  • German President Says Need to Send Erdogan ‘Stop Signals’. German President Frank-Walter Steinmeier said Chancellor Angela Merkel’s government is right to act against what he called unacceptable Turkish policies under President Recep Tayyip Erdogan, who he said seeks to quench the country’s opposition. “Many who have worked cooperatively with him and his party in the last few years are now being persecuted, are thrown in jail, are being silenced. We can’t accept that,” Steinmeier said in excerpts of an interview with ZDF public television released before broadcast Sunday evening. “It’s a question of the self-esteem of our country to send clear stop signals.”
  • Bank of Japan Dot Plot Paints a Pessimistic Picture of Inflation. Almost all board members see greater downside risks for prices. Even a quick glance at the Bank of Japan’s latest inflation forecasts makes for disappointing reading. The BOJ pushed back its timetable for hitting 2 percent price gains for a sixth time since Governor Haruhiko Kuroda took over. And it cut its estimates for core CPI for this fiscal year and the next two. A close look at the individual projections of the board’s nine members released after its July 19-20 policy meeting is cause for even more pessimism. Eight of them see risks “tilted to downside” for their price forecast for fiscal 2019 -- the year when the BOJ currently hopes to reach its inflation goal. Put another way, the chances of prices dropping below forecast are way higher than beating it.
  • Stocks to Edge Lower Before Earnings Flurry, Fed. Stocks in Asia were set for a small drop ahead of a week packed with earnings results and a Federal Reserve interest-rate decision. The dollar remains near a 14-month low and the euro is holding on to recent gains with the greenback near to a technical level that some say will precede more losses. Equity-index future
    s in Japan, Hong Kong and South Korea were all lower and oil extended declines before an OPEC meeting on Monday. Japan’s Topix index slid 0.7 percent. Australia’s S&P/ASX 200 Index lost 0.3 percent and South Korea’s Kospi index was little changed. The yen climbed 0.2 percent to 110.96 per dollar as of 9:01 a.m. in Tokyo, a fifth day of gains. The euro bought $1.1680. WTI crude lost 0.1 percent in early Monday trading to $45.72 a barrel.
  • OPEC Says More Libya, Nigeria Oil Needed as Demand Picks Up. The oil market will need more crude from Libya and Nigeria as it re-balances at a faster rate in the second half after a slow start, OPEC Secretary-General Mohammad Barkindo said. Compliance with production cuts by members of the Organization of Petroleum Exporting Countries is “excellent,” Barkindo told reporters in St. Petersburg, Russia. Libya and Nigeria are exempt from the cuts and have been boosting production, leading to speculation about whether OPEC will seek to cap their output to help reduce a global glut.
  • Steelmakers Are Worth the Most in Years And It's Thanks to China. Steel stocks are trading at the highest since 2011 and it’s mostly thanks the industry’s biggest menace in recent years: China. Demand in China, which produces half the world’s steel, has been surprisingly strong this year and the country closed some plants to ease a glut that had spread across the globe. That’s led to a steep drop in exports, helping steel prices extend a recovery and pushing a Bloomberg gauge of global steel stocks up 45 percent in the past year. That’s triple the advance in the Bloomberg World Mining Index.
Wall Street Journal:
MarketWatch.com: 
CNBC:
Zero Hedge:
  • Don't Show President Trump This Chart! This won't help US-China relations... Despite international sanctions aimed at curbing the country’s nuclear activities, North Korea’s economy grew by 3.9 percent in 2016, which is the highest growth rate since 1999 (6.1 percent).
Business Insider:
Welt am Sonntag:
  • Semiconductor Pricing Power Returns, Siltronic CEO Says. After lean years the semiconductor industry is returning to pricing power, the CEO of German wafer producer Siltronic said in an interview. After price hikes in 1Q and 2Q new increases in the fall are negotiated, Christioph von Plotho said. "The pricing power is now with us. Demand has been growing in the past years, overcapacity doesn't exist anymore and we have full utilization since the third quarter of 2016", he said.
Night Trading
  • Asian indices are -.75% to -.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 84.75 +.25 basis point.
  • Asia Pacific Sovereign CDS Index 21.0 unch.
  • Bloomberg Emerging Markets Currency Index 73.81 -.01%.
  • S&P 500 futures -.12%.
  • NASDAQ 100 futures -.07%.

Earnings of Note
Company/Estimate
  • (CALM)/-.15
  • (HAL)/.18
  • (HAS)/.45
  • (ITW)/1.64
  • (MAN)/1.76
  • (PETS)/.38
  • (SWK)/1.97
  • (VFC)/.29
  • (GOOG)/8.28
  • (APC)/-.35
  • (SANM)/.74
  • (SWFT)/.20
  • (WERN)/.27
Economic Releases 
9:45 am EST
  • The Preliminary Markit US Manufacturing PMI for July is estimated to rise to 52.2 versus 52.0 in June.
  • The Preliminary Markit US Services PMI for July is estimated to fall to 54.0 versus 54.2 in June.
10:00 am EST
  • Existing Home Sales for June are estimated to fall to 5.57M versus 5.62M in May.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The BoJ minutes could also impact trading today.
BOTTOM LINE: Asian indices are modestly lower, weighed down by automaker and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the week.

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