Monday Watch

Today's Headlines

Bloomberg:

• Tillerson Pledges Diplomacy With North Korea 'Until the First Bomb Drops'. Secretary of State Rex Tillerson says President Donald Trump wants him to push forward on diplomacy with North Korea “until the first bomb drops.” Until? Tillerson’s comments on CNN’s “State of the Union” program on Sunday apparently weren’t meant literally as a timeline for war, as he preceded that quote by saying, “He has made it clear to me to continue my diplomatic efforts,” and that those efforts “will continue until the first bomb drops.”

• China's Zhou Warns Corporate Debt Too High, Urges Fiscal Reform. People’s Bank of China Governor Zhou Xiaochuan warned that Chinese companies have taken on too much debt, and argued for less financial leverage as well as fiscal reforms to constrain local government borrowing. “The main problem is that the corporate debt is too high,” Zhou said Sunday during a panel discussion at a Group of 30 seminar in Washington held in conjunction with the International Monetary Fund and World Bank annual meetings. While debt servicing costs remain low, “we need to pay further effort to deleveraging and strengthen policy for financial stability,” Zhou said. He appeared alongside policy makers including Federal Reserve Chair Janet Yellen and Bank of Japan Governor Haruhiko Kuroda.

• China Plots What’s Next as Influence on Global Markets Grows.

• Bond Traders Face Inflation Gamble That Will Last a Generation. If you’re a bond trader and agree with the Federal Reserve that low inflation is only transitory, then the Treasury has quite a deal for you. The U.S. will offer $5 billion of 30-year Treasury Inflation Protected Securities on Thursday, the third and final opportunity to buy them at auction this year. For those concerned that accelerating price growth will erode fixed-income returns, they’re a must-have hedge. The problem is that the latest inflation readings disappointed yet again. The core consumer price index rose 1.7 percent in September from a year earlier, missing estimates for 1.8 percent growth, according to the data released Oct. 13. That sent the 30-year breakeven rate, a market gauge of inflation expectations, down from its highest close since May, to about 1.93 percentage points.

• What Global Finance Chiefs Are Saying About the Economy. (video)

• Stocks in Asia Advance as U.S. Inflation Slows. (video) Stocks in Asia advanced with bonds after inflation data in the U.S. added to evidence that global growth is continuing steadily with limited price pressures in the American economy. Equity indexes climbed in Japan, Australia and South Korea with a gauge of Asian stocks trading at the highest level since 2007. Friday’s data bolstered the view that U.S. inflation below the Federal Reserve’s target may be structural rather than transitory, prompting traders to slightly reduce the odds of another interest-rate increase in December. China’s producer prices jumped more than expected last month and consumer prices also increased in one of the remaining data points ahead of the start of the Party Congress later this week. The MSCI Asia Pacific Index rose 0.4 percent to touch its highest level since November 2007.

• Five Things You Need to Know to Start Your Day. (video)

• Gary Cohn Calls Clearinghouses 'a New Systemic Problem'.

Wall Street Journal:

• Your Next Home Could Run on Batteries. A combination of solar power and the rise of residential energy storage paves the way for a new kind of cable cutting.

• Pentagon Turns to High-Speed Traders to Fortify Markets Against Cyberattack. Experts attend brainstorming sessions to identify how hackers might wreak havoc.

• Central Bankers Cling to Stimulus Amid Weak Inflation. Officials at Washington conference say low wages and consumer prices make it tough to remove measures quickly, despite global economic upturn.

• Health Care Back on Congress’s Front Burner. Trump’s move to stop subsidy payments ratchets up pressure for a bipartisan deal.

Fox News:

• Trump slams 'failing' New York Times reporter for ignoring successes on trade, climate. (video)

• Chelsea Clinton avoids questions about Harvey Weinstein's donations to Clinton Foundation.

CNBC: 

• China's producer price index crushes expectations.

• NAFTA talks set to be extended as time runs out, Reuters sources say.

• Yellen sounds upbeat on economy, signaling likely rate hike.

• Haley says US will stay in Iran nuclear deal 'right now'.

• Sen. Susan Collins, who helped to sink Obamacare repeal, is a likely 'yes' vote to advance tax reform.

• Leuthold's Jim Paulsen explains why stocks are being saved by constant rotation. (video)

Zero Hedge: 

• In Historic Result, 31-Year-Old Wins Austrian Elections, Worst Result For Establishment Party Since Hitler Rule.

• Casualties Reported After Iraqi Troops Enter Oil Rich Kurdish City Of Kirkuk; Oil Spikes.

• Trumpfusion? 'Record Low Approval Ratings But Record High Consumer Confidence' Explained. (graph)

• "China's Big Reshuffle": A Preview Of The Year's Biggest Political Event, China's 19th Party Congress.

• With Just Hours Until Spain's Ultimatum Runs Out, Catalonia Proposes Its Own Central Bank.

• China's Mortgage Debt Bubble Raises Spectre Of 2007 US Crisis.

• How Socialism Ruined Venezuela.

• Mike Rowe: It's Time To Make Hard Work Cool Again.

• The Endgame Of Financialization: Stealth Nationalization.

• Forget Catalonia, Flanders Is The Real Test Case Of EU Separatism!

• Trump And McConnell Make A "Truce Of Necessity" To Save Tax Reform.

• Wildfires Force More Evacuations As Death Toll Climbs To 40; Nearly 6,000 Buildings Destroyed.

Business Insider:

• At least 189 dead from powerful bomb blast in Somalia's capital in deadliest single attack ever.

• Puerto Rico stands 'on the brink of a massive liquidity crisis that will intensify'.

Night Trading

• Asian indices are unch. to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 77.5 unch.

• Asia Pacific Sovereign CDS Index 16.0 unch.

• Bloomberg Emerging Markets Currency Index 73.87 -.03%.

• S&P 500 futures +.11%.

• NASDAQ 100 futures +.21%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (SCHW)/.41

• (BMI)/.35

• (BRO)/.49

• (CE)/1.92

• (IEX)/1.06

• (NFLX)/.32

• (SONC)/.43

Economic Releases 
8:30 am EST

• Empire Manufacturing for October is estimated to fall to 20.0 versus 24.4 in September.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Kahkari speaking, Japan Industrial Production report and the China Inflation Data report could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity 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 week.