Wednesday Watch

Evening Headlines

Bloomberg:         

• China Says ‘Stay Tuned’ for Retaliation Over U.S. Tech Blacklist.

• The U.S.-China Relationship Is Swiftly Deteriorating by the Day.    

• Chinese AI Project Is Under Review at MIT After U.S. Blacklists Company.  

• Trouble Is Brewing in the Darkest Corner of China’s Shadow Banking.

• Stocks Drop as Trade Tensions Ramp Up Before Talks. Asian stocks dropped Wednesday after a slump on Wall Street spurred by escalating U.S.-China trade tensions, though declines were more modest than in the U.S. Japan’s benchmark Topix in early trading was down by about half the 1.6% drop in the S&P 500 Index overnight, continuing the pattern of outperformance seen last month. U.S. futures were little changed, as was the dollar. Ten-year Treasury yields were flat, not far from their lowest levels in a month. Crude oil dipped toward $52 a barrel in New York. Japan’s Topix index dropped 0.7% as of 9:21 a.m. in Tokyo. Australia’s S&P/ASX 200 Index declined 0.8%. Futures on the S&P 500 Index rose 0.2%.  

• Five Things You Need to Know to Start Your Day.

• Repo Rout Didn’t Have to Happen. Powell Is Trying to Avoid Rerun.

Wall Street Journal:

• FBI Use of Surveillance Database Violated Privacy Rights, Court Ruled.

• Impeachment in Secret.

• J&J Hit With $8 Billion Jury Award Over Antipsychotic Drug.

• U.S. to Restrict Visas for Chinese Officials Linked to Abuse of Muslim Minorities .

• In Syria, Kurdish Fighters Prepare to Battle Turkey as Residents Fret.

• California Governor Signs Rent Law Amid Rising Housing Costs, Homelessness.

• Sleepovers Have Parents Worried About Gadget Use.

Fox News:

• WH hits Dems with bombshell letter refusing to comply with 'illegitimate' impeachment inquiry.

MarketWatch.com:   

• California utilities may cut power to 800,000 customers due to fire risk.

CNBC:

• China ‘strongly urges’ US to remove sanctions and stop accusing it of human rights violations.

• China’s heavy-handed reaction to the NBA is just the wake-up call the world needed.

• US puts visa restrictions on Chinese officials over abuses of Muslims in Xinjiang.

• Powell says the Fed will start expanding its balance sheet ‘soon’ in response to funding issues.

Zero Hedge:   

• Full Turkish Assault On NE Syria Coming "Next 24 Hours" As Kurds Make Late Night Appeal.

• Chinese Citizens Will Be Required To Scan Their Faces To Use The Internet.

• 800,000 Californians To Lose Power After Midnight.

• Fed Announces QE4 One Day After BIS Warns QE Has Broken The Market.

• CIA Whistleblower 'Professionally Tied' To 2020 Candidate.

• Trudeau Rumored To Be In Talks To Suppress Potentially Career-Ending Sex Scandal.

• Extinction Rebellion: Climate Change Protests Aim To Crash Global Economy To Usher In MMT.

• Trump Demands Vote As White House Rejects Democrats' "Constitutionally Invalid" Impeachment 'Inquiry'.

• SoftBank Damaged After WeWork Implosion, Losses Could Exceed $5 Billion.

• Death Toll In Iraq Soars As Pro-Iran Gunmen Start 'Shooting Protesters'.

• WTI Rebounds After Earlier Flash-Crash On Major Product Inventory Draws.

• Stocks Drop, Gold Pops As Powell Promises (Not)QE & Trump Dumps On Xi.

Night Trading 

• Asian equity indices are -.75% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 79.5 +1.0 basis point.

• China Sovereign CDS 49.5 -.75 basis point.

• Bloomberg Emerging Markets Currency Index  65.19 -.02%.

• FTSE 100 futures -.06%.

• S&P 500 futures +.22%.

• NASDAQ 100 futures +.23%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• None of note

After the Close:

• None of note

Economic Releases
10:00 am EST

• JOLTS Job Openings for Aug. are estimated to rise to 7250 versus 7217 in July.

• Wholesale Trade Sales MoM for Aug.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +1,438,300 barrels versus a +3,104,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -418,000 barrels versus a -228,000 barrel decline the prior week. Distillate inventories are estimated to fall by -2,031,500 barrels versus a -2,418,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise +.16% versus a -3.4% decline prior.
  

2:00 pm EST

• FOMC Meeting Minutes for Sept. 18.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Powell speaking, $24B 10Y T-Note auction and the weekly MBA Mortgage Applications report could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by technology and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.