Wednesday, July 26, 2017

Thursday Watch

Evening Headlines
  • Crisis-Plagued Europe Sees a New Dawn After Greek Market Return. (video) Five years after the sovereign debt crisis nearly tore the euro area apart, Europe’s biggest problem child appears on the road to recovery as the region continues to tick off boxes underscoring its revival. Greece sold 3 billion euros ($3.5 billion) of bonds this week for the first time since 2014, when the prospect of Alexis Tsipras’s election catapulted borrowing costs to unsustainable levels. The country’s return from the wilderness comes as a new French president has raised expectations about deeper economic integration following successive defeats of europhobic parties.
  • South Korean Economy Slows From Fastest Expansion Since 2015. South Korea’s economic growth slowed in the second quarter as expansion in construction investment eased and export volumes fell from the previous three months. Economists said the slowdown is mostly due to a base effect from a solid first-quarter performance and that it shouldn’t be seen as a negative sign for the outlook.
  • Japan Recommends Nationwide 3 Percent Minimum Wage Hike for 2017. The Bloomberg Dollar Spot Index held at the lowest in more than a year, while the 10-year Treasury yield extended losses after the Fed held rates steady and indicated it would start unwinding its balance sheet “relatively soon.” The MSCI Asia Pacific Index rose to the highest since December 2007 after earnings from Samsung Electronics Co. and Nintendo Co. beat analysts’ estimates, and the Dow Jones Industrial Average closed at a record high. Japan’s Topix index rose 0.3 percent, while Australia’s S&P/ASX 200 Index added 0.3 percent. South Korea’s Kospi index climbed 0.2 percent. In Hong Kong, the Hang Seng Index added 0.2 percent, while the Shanghai Composite Index dropped 0.4 percent.
  • The Fed May Not Be the Master of Its Balance-Sheet Fate. (video) The Federal Reserve signaled on Wednesday that it intends to kick off the long-awaited reduction in its $4.5 trillion balance sheet in September, although a final decision to go ahead may not be entirely its to make. A looming deadline for raising the government’s debt ceiling could end up complicating the Fed’s plans if it significantly disrupts financial markets, particularly for U.S. Treasury securities. “September is the most likely outcome” for the launch of the balance-sheet drawdown, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. “But I can’t rule out the idea that they would wait until November if the debt ceiling really looks messy.”
  • Trump Pick for Fed's Wall Street Watchdog Plans to Ease Rules. President Donald Trump’s pick to be the Federal Reserve’s top Wall Street watchdog said it’s time to reconsider the restrictions imposed on banks in recent years, even as he credited regulations with helping stabilize the financial system after the 2008 crisis. “As with any complex undertaking, after the first wave of reform, and with the benefit of experience and reflection, some refinements will undoubtedly be in order,” said Randal Quarles, Trump’s nominee to be the Fed’s first vice chairman of supervision.
Wall Street Journal:
Zero Hedge:
Night Trading 
  • Asian equity indices are +.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 82.0 -2.0 basis points. 
  • Asia Pacific Sovereign CDS Index 20.25 -.5 basis point.
  • Bloomberg Emerging Markets Currency Index 74.03 +.07%.
  • S&P 500 futures +.16%.
  • NASDAQ 100 futures +.50%.
Morning Preview Links

Earnings of Note

  • (AGCO)/1.05
  • (ALXN)/1.26
  • (AB)/.47
  • (MO)/.86
  • (AMT)/1.51
  • (BUD)/1.00
  • (MT)/1.05
  • (AZN)/.82
  • (ADP)/.67
  • (BWA)/.89
  • (BSX)/.31
  • (BMY)/.73
  • (BC)/1.33
  • (CBG)/.53
  • (CELG)/1.78
  • (CLF)/.17
  • (CMCSA)/.49
  • (COP)/-.03
  • (DOW)/1.00
  • (DPS)/1.28
  • (FCAU)/.52
  • (HTLD)/.18
  • (IP)/.65
  • (JCI)/.71
  • (LLL)/2.02
  • (MA)/1.04
  • (MCK)/2.83
  • (MGM)/.30
  • (POT)/.17
  • (PG)/.78
  • (RTN)/1.76
  • (LUV)/1.20
  • (TWTR)/.05
  • (UPS)/1.47
  • (VLO)/1.13
  • (VZ)/.96
  • (ZBH)/2.10
  • (AFL)/1.63
  • (AMZN)/1.39
  • (BIDU)/1.44
  • (CERN)/.61
  • (CY)/.16
  • (DECK)/-1.67
  • (EA)/.27
  • (EXPE)/.93
  • (FSLR)/.04
  • (INTC)/.68
  • (KLAC)/1.59
  • (MHK)/3.59
  • (SBUX)/.55
  • (WDC)/2.86
Economic Releases  
8:30 am EST
  • Initial Jobless Claims are estimated to rise to 240K versus 233K the prior week.
  • Continuing Claims are estimated to fall to 1960K versus 1977K prior.
  • Preliminary Durable Goods Orders for June are estimated to rise +3.5% versus a -.8% gain in May.
  • Preliminary Durables Ex Transports for June are estimated to rise +.4% versus a +.3% gain in May.
  • Preliminary Cap Goods Orders Non-Defense Ex-Air for June are estimated to rise +.3% versus a +.2% gain in May.
  • Advance Goods Trade Balance for June is estimated at -$65.5B versus -$66.3B in May.
  • Preliminary Wholesale Inventories MoM for June are estimated to rise +.3% versus a +.4% gain in May.
  • Chicago Fed National Activity Index for June is estimated to rise to .35 versus -.26 in May.
11:00 am EST
  • Kansas City Fed Manufacturing Activity for July is estimated at 11.0 versus 11.0 in June.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Japan Inflation Data report, $28B 7Y T-Note auction, weekly Bloomberg Consumer Comfort Index and the EIA weekly natural gas inventory report could also impact trading today.
BOTTOM LINE:  Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon.  The Portfolio is 100% net long heading into the day.

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