Monday, July 10, 2017

Tuesday Watch

Evening Headlines
  • The $68 Billion Reason Why China May Start Injecting Cash Again. An onslaught of maturing funds may see China’s central bank reaching for the fire hose. The People’s Bank of China hasn’t pumped cash into the financial system via open-market operations for 15 days, the longest drought since March. A combination of curbs on loan issuance, a stronger yuan and seasonality factors meant they didn’t have to, with a rush of liquidity spurring policy makers to do the opposite, and drain funds. But that situation could reverse as soon as this week, when a total of 459.5 billion yuan ($67.6 billion) of funds issued via reverse-repurchase agreements and the PBOC’s medium-term lending facility comes due -- the most since the week ending June 5. Further mopping up funds, government issuers and policy banks will sell at least 483 billion yuan of bonds by Friday. And then there’s tax payments, which may see companies hoard cash into the end of July.
  • In China, Shoppers Can Buy Bad Loans Online With Their Groceries. It’s not the only bad debt for sale on Taobao, which translates roughly as digging for treasure. Used by millions of Chinese to buy everything from clothes to food and electronics, the platform, known for its bargains, typically markets more than 1 billion yuan of soured assets a day, according to Bloomberg calculations. Recent listings include a portfolio of 118 non-performing loans from some companies in Yunnan province, a villa seized by a bank in the southern canal city of Shaoxing, and a property in central Beijing that’s also in default.
  • Stocks in Asia Face Mixed Start as Bonds Steady. Stocks in Asia were poised for a muted start as investors awaited the U.S. earnings season to kick off, potentially a new catalyst to spur further moves. Trading volume was light in the U.S. and European equity sessions with the S&P 500 Index eking out a small gain. The dollar edged higher against most major currencies and bonds stemmed their recent slump that was triggered by more hawkish rhetoric emanating from central banks. Equity-index futures in Japan pointed to a moderate decline, while contracts in Hong Kong climbed. Crude oil held above $44.50 a barrel. Futures on the Nikkei 225 Stock Average lost 0.3 percent in Singapore trading. Contracts on Australia’s S&P/ASX 200 Index declined less than 0.1 percent, while futures on Hong Kong’s Hang Seng Index rose 0.2 percent.
  • Seattle Approves New Income Tax for Wealthy Residents. Seattle's wealthiest would become the only Washington state residents to pay an income tax under legislation approved by the City Council, a measure designed as much to raise revenue as to open a broader discussion about whether the wealthy pay their fair share.
Wall Street Journal:
Zero Hedge:
Night Trading 
  • Asian equity indices are +.25% to +.5% on average.
  • Asia Ex-Japan Investment Grade CDS Index 88.0 -1.25 basis points. 
  • Asia Pacific Sovereign CDS Index 22.25 -.75 basis point.
  • Bloomberg Emerging Markets Currency Index 72.52 +.05%.
  • S&P 500 futures +.01%.
  • NASDAQ 100 futures +.05%.
Morning Preview Links

Earnings of Note

  • (PEP)/1.40
  • (AIR)/.43
  • (HCSG)/.29
Economic Releases 
6:00 am EST
  • The NFIB Small Business Optimism Index for June is estimated to fall to 104.4 versus 104.5 in May.
10:00 am EST
  • JOLTS Job Openings for May is estimated to fall to 5925 versus 6044 in April.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Brainard speaking, Fed's Kashkari speaking, $24B 3Y T-Note auction, weekly US retail sales reports, Australia home loans report, (AMZN) Prime Day and SEMICON West could also impact trading today.
BOTTOM LINE:  Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 100% net long heading into the day.

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