Monday, September 04, 2017

Tuesday Watch

Today's Headlines
Bloomberg:
  • China’s Oil Lifeline to North Korea Targeted After Nuclear Blast. (videoEven before North Korea detonated its most powerful nuclear bomb yet, Japan was calling for moves to cut off its oil supply. Afterward, U.S. President Donald Trump threatened to halt all trade with any country that does business with Kim Jong Un’s regime. China, which supplies most of its food and fuel, on Monday called the warning “unacceptable.” Some sort of oil embargo is likely to come up as the international community discusses a response to the nuclear test, with the United Nations Security Council meeting overnight. China has resisted such a move in the past over fears that North Korea might collapse, but has grown increasingly frustrated with its rogue ally.
  • U.K. Retail Sales Tick Up as Food Prices Drive Faster Inflation. Shoppers are spending more, but retailers shouldn’t get too excited just yet. Retail sales climbed in August at the fastest rate since Easter, with the like-for-like gain increasing to 1.3 percent from a year earlier, the British Retail Consortium and KPMG said Tuesday. While that’s the third consecutive month of rising sales, growth has been mainly driven by higher food prices rather than because shoppers are buying more goods, according to the BRC. Purchases of non-food items picked up in the three months to August after a spell of weakness.
  • Stocks Fall as Korea Tensions Flare; Dollar Drops. S&P 500 Index futures retreated and the Stoxx Europe 600 Index declined after a report that Pyongyang is preparing to launch an intercontinental ballistic missile. Most European government bonds advanced and the yen and Swiss franc led currency gains. Gold rose to an 11-month high. Gasoline declined to the lowest in more than a week as some U.S. Gulf Coast refineries said they plan to resume operations following shutdowns forced by flooding from Hurricane Harvey. The MSCI All-Country World Index retreated 0.2 percent, the largest dip in more than two weeks.
  • Aramco Raises Oil Pricing to Asia in Sign of Greater Demand. Saudi Arabia raised oil pricing for October sales to Asia, increasing its lighter grades for a second consecutive month, in an indication the world’s largest crude exporter sees strengthening demand in its biggest market. State-owned Saudi Arabian Oil Co., known as Saudi Aramco, increased its official pricing for Arab Light crude to Asia by 55 cents to 30 cents a barrel more than the regional benchmark, it said Monday in an emailed statement. The company had been expected to raise pricing by less than that, according to a Bloomberg survey.
  • Five Things You Need to Know to Start Your Day.
  • United Technologies(UTX) Agrees to Buy Rockwell Collins(COL). United Technologies Corp. agreed to buy Rockwell Collins Inc. for about $23 billion, creating an aerospace behemoth that can outfit jetliners and warplanes from tip to tail. Rockwell Collins shareholders will receive $140 a share in cash and stock, the companies said in a statement Monday. Including net debt, the total deal value is about $30 billion.
Wall Street Journal:
MarketWatch.com:
Zero Hedge: 
Night Trading
  • Asian indices are -.25% to +.5% on average.
  • Asia Ex-Japan Investment Grade CDS Index 77.50 +1.5 basis points.
  • Asia Pacific Sovereign CDS Index 18.5 +.25 basis point.
  • Bloomberg Emerging Markets Currency Index 74.60 +.02%.
  • S&P 500 futures -.27%.
  • NASDAQ 100 futures -.22%.

Earnings of Note
Company/Estimate
  • (CASY)/1.45
  • (PLAY)/.55
  • (HPE)/.26
Economic Releases
10:00 am EST
  • Factory Orders for July are estimated to fall -3.2% versus a +3.0% gain in June. 
  • Final Durable Goods Orders for July are estimated to rise +1.0% versus a prior estimate of a -6.8% decline.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Kaplan speaking, Eurozone Retail Sales report, (MXIM) update call, (FLIR) update call, Citi Healthcare Conference, Piper Select Tech Conference, Barclays Consumer Staples Conference, Barclays Energy/Power conference and the Barclays Media/Telecom Forum could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.

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