Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +.6% 2) Utilities +.5% 3) Foods +.3%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
- 1) LNG 2) YHOO 3) HUM 4) RRC 5) PEP
Stocks With Most Positive News Mentions:
- 1) CME 2) ABX 3) ARRS 4) CRUS 5) FLR
Charts:
Today's Headlines
Bloomberg:
- U.K. Business Expectations Fall ‘Off a Cliff’ After Brexit Vote. U.K.
business confidence dropped and pessimism about the economic outlook
almost doubled in the week after Britain voted to leave the European
Union, according to a survey. An index published by YouGov Plc and the
Centre for Economics and Business Research on Tuesday tumbled to 105
from 112.6 in the three days ended June 23, the referendum date. The
survey, which was carried out between June 28 and July 1, also found
the proportion of businesses that are pessimistic about the economic
outlook climbed to 49 percent from 25 percent. “These figures show what
is happening on the ground and they suggest a significant shock
reaction,” said Cebr Director Scott Corfe. “Not only are businesses
feeling much more pessimistic in general about the state of the economy,
but their own expectations for domestic sales, exports and investments
over the next 12 months have gone off a cliff.”
- PBOC Panel Says Don’t Underestimate Complexity of Economic Risks. China’s
central bank said it’s closely monitoring domestic and external risks
to the economy and that the complexity of the situation shouldn’t be
underestimated. The People’s Bank of China cited market volatility
spurred by the U.K.’s decision to leave the European Union, according to
a statement released late Monday after a quarterly monetary policy
committee meeting. Domestic economic and financial performance
remains stable overall, the advisory panel led by PBOC Governor Zhou
Xiaochuan said. The central bank, which has kept its main interest rate
at a record low since October, was more upbeat on the U.S. economy,
which it said is "recovering moderately." The PBOC repeated that risks
in global financial markets have risen and that it will maintain prudent
monetary policy and keep the yuan stable at a reasonable level.
- Yen Advances on Fresh Concerns Over U.K. Politics, Italian Banks. The
yen rose, approaching its strongest level in more than two years
against the dollar, as focus turned back to political uncertainty in the
U.K. and worries over the health of Italian banks. Japan’s currency
advanced against all 16 of its major peers as a gauge of Asian equities
fell for the first time in five days, adding to demand for haven assets.
One of the leading proponents for Brexit, Nigel Farage, quit on Monday
as the leader of the U.K. Independence Party. Regulators are pressing
Italian banks to clean up their balance sheets and build up buffers
against losses after the British vote to leave the European Union
exacerbated a selloff in the lenders. “Markets are concerned about
what’s going on in the U.K. and there’s more uncertainty about Italian
banks,” said Vishnu Varathan, a senior economist at Mizuho Bank Ltd. “Those
who wanted to exit don’t have a game plan and they’re leaving the
stage. It just highlights the parlous state of political affairs that
the U.K. risks descending into. There’s a check on the market rally we
saw last week.”
- Asian Shares Retreat With Commodities as Yen Gains; Won Weakens.
Asian stocks dropped for the first time in a week and commodities
slumped as the possibility of bank bailouts in Italy gives investors
another reason to exercise caution in the wake of the U.K.’s vote to
leave the European Union. Haven assets including the yen and sovereign
bonds rose. The MSCI Asia Pacific Index retreated from a three-week
high, with banks and energy stocks leading losses. Brent crude dropped
below $50 a barrel as nickel slid from an eight-week high, while gold
and silver fell for the first time in a week or more. Japan’s yen
strengthened against all 31 major peers and a gauge of dollar strength
snapped a five-day losing streak. Australia’s dollar led losses among
the currencies of commodity-exporting nations before a central bank policy review. The nation’s bonds advanced with U.S. Treasuries. The
MSCI Asia Pacific Index lost 0.5 percent as of 11:33 a.m. Tokyo time.
Benchmark stock indexes fell in Hong Kong and Japan, while the Shanghai
Composite Index gained 0.3 percent.
- Brent Oil Falls Below $50 After Nigeria Boosts Crude Production. Brent
crude sunk below $50 a barrel as estimates showed Nigerian production
rose last month following repairs to infrastructure that had been
damaged by militant attacks. Futures
in London dropped as much as 1 percent after slipping 0.5 percent
Monday. Nigeria pumped an average of 1.53 million barrels a day last
month, an increase of about 90,000 a day from May, according to a
Bloomberg survey. U.S. East Coast gasoline supplies rose to a record as
the Energy Information Administration said consumption of the fuel in
April was less than estimated in weekly reports. Crude has risen this
year, with Brent gaining more than 75 percent from a 12-year low in
January, amid supply disruptions and falling U.S. output. American shale
drillers have brought back the most oil rigs of any week this year amid
expectations of a stabilizing market.
Reuters:
- Japan firms' price expectations slide, keep BOJ under pressure. Japanese
companies' inflation expectations fell slightly in June from three
months ago, the Bank of Japan's tankan survey showed, adding to growing
doubts over its argument that aggressive money printing will accelerate
price growth to its 2 percent goal. The data on inflation
expectations came after Friday's tankan sentiment survey showed business
confidence was subdued in the second quarter, heightening pressure on
the BOJ to roll out yet more stimulus to ease the pain from a strong
yen. Companies expect consumer prices to rise an average 0.7 percent a
year from now, down 0.1 percentage point from three months ago and some
way off the BOJ's 2 percent target, the tankan survey on price
expectations showed on Monday.
Night Trading
- Asian indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 138.0 -1.5 basis points.
- Asia Pacific Sovereign CDS Index 53.25 +.5 basis point.
- Bloomberg Emerging Markets Currency Index 72.47 -.16%.
- S&P 500 futures -.24%.
- NASDAQ 100 futures -.24%.
Earnings of Note
Company/Estimate
- (AZZ)/.85
- (ISCA)/.32
- (ITRI)/.34
Economic Releases
9:45 am EST
10:00 am EST
- IBD/TIPP Economic Optimism for July is estimated to rise to 48.3 versus 48.2 in June.
- Factory Orders for May are estimated to fall -.9% versus a +1.9% gain in April.
- Durable Goods Orders for May are estimated to fall -2.2% versus a prior estimate of a -2.2% decline.
Upcoming Splits
Other Potential Market Movers
- The Fed's Dudley speaking and the Eurozone Manufacturing/Services PMI could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and commodity 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 week.
Bloomberg:
- Carney Set to Extend BOE Crisis-Management Mode Using New Tools. As
Britain stares at the prospect of another financial crisis, Mark Carney
is breaking open an emergency toolkit that was created after the last
one. The Bank of England governor has been in full flow since the U.K.’s
shock vote to leave the European Union and is set to make his third
appearance in 12 days on Tuesday to address the threats facing the
financial system. He’ll outline the macroprudential tools
available to support the economy, boost business lending and encourage
investment -- and may ease capital requirements for lenders.
Britain’s decision to split with its biggest trading partner has roiled
markets, rattled investors and left a political vacuum that made Carney a
beacon of stability. After signaling a willingness to cut interest
rates and offering funds to banks, the governor last week pledged to
take any further action needed to support financial stability as he
warned of high uncertainty and a deteriorating economic outlook.
- Brexit Has Euro Outsiders Fearing Banking Fallout, Denmark Says. Britain’s
decision to leave the European Union will weaken the ability of the
remaining non-euro members to shape financial regulation, according to
Denmark’s bank watchdog. “We’ve lost a heavyweight in our camp,” said Jesper Berg, director general of the Financial Supervisory Authority in Copenhagen. “They’ve
always provided intellectual leadership, and they have close contact
with a huge financial market, which helps them provide that leadership.
That will be something that we’ll miss.”
- Germany’s Schaeuble Urges Post-Brexit Push to Curb Brussels. Finance
Minister Wolfgang Schaeuble signaled that Germany wants national
governments to set the pace for future cooperation within the European
Union, saying they should sidestep the European Commission in Brussels
if needed. Schaeuble’s comments in Sunday media interviews outline
the emerging response by Chancellor Angela Merkel’s government to last
month’s U.K. referendum to leave the EU. It signals a looming clash with
advocates of EU integration such as European Commission President
Jean-Claude Juncker and those governments that view German-led budget
rigor in the euro area as holding back growth and jobs.
- French Claim Euro-Clearing Business as Brexit Spoils Sought. French
executives and politicians are circling the U.K. for spoils after last
month’s shock referendum result as leaders in the rest of Europe urge
caution, saying the vote to leave the bloc should be viewed as a
“wake-up call” for the region. French
Economy Minister Emmanuel Macron, speaking Sunday in an interview, said
he wants to take the euro-clearing business from the U.K. and move it
to Paris. Michelin & Cie. Chief Executive Officer Jean-Dominique
Senard and Veolia CEO Antoine Frerot, two of the many executives at a
weekend conference in Aix-en-Provence, France, said they saw opportunity
in the U.K.’s decision. While the ultimate implications of the U.K.
vote to quit the European Union will take months, or years, to be
understood, business leaders are positioning themselves to profit. It
may herald growth for euro zone-based market places and players, stock
exchange operator Euronext NV Chief Executive Officer Stephane Boujnah
said Saturday.
- China Bank Bailout Calls Grow Louder as Markets Seen Vulnerable. Predictions
of a Chinese banking system bailout are going mainstream. What was once
the fringe view of permabears and short sellers is now increasingly
being adopted by economists at some of the world’s biggest banks and
brokerages. Nine of 15 respondents in a Bloomberg survey at the end of
last month, including Standard Chartered Plc and Commonwealth Bank of
Australia, predicted a government-funded recapitalization will take
place within two years. Among those who provided estimates of the
cost, a majority said it will exceed $500 billion. While a bailout of
that size would be a far cry from the $10 trillion forecast of U.S.
hedge fund manager Kyle Bass in February, the responses reflect
widespread concern that Chinese lenders will struggle to cope as bad
loans surge. Even as some analysts said a state recapitalization would
put the banking system on a stronger footing, 80 percent of
respondents predicted news of a rescue would weigh on Chinese markets --
dragging down bank stocks and the yuan while pushing up government
borrowing costs and credit risk.
- Yen's stunning 17% surge in 2016 threatens to wipe out 3 years of stimulus.
What was the extreme bullish scenario among yen forecasters at the
start of 2016 is now close to the base case - and even that may turn
out to be too cautious. The boldest forecasts for gains
underestimated the Japanese currency's strength in the first half of
2016 by at least 10 per cent. The yen exceeded all estimates
as investors sought it as a haven after events that most considered
unlikely came to pass - from Britain's decision to quit the European
Union to Donald Trump's emergence as the presumptive US Republican
presidential nominee. Strategists are still catching up, with June
seeing the biggest monthly boost in year-end predictions since 2008.
- Aussie Drops as AAA Rating Seen Threatened by Unclear Election. Australia’s
dollar fell after a national election Saturday left neither major party
with enough seats to form a majority government, potentially increasing
risks to the country’s top credit rating. Investors have been left
in limbo by the unclear result, with Prime Minister Malcolm Turnbull’s
Liberal-National coalition and the opposition Labor party both currently
short of the 76 seats needed for a majority in the 150-member House of
Representatives. Vote counting resumes Tuesday, and Turnbull said the
result may be known by the end of the week.
- Asian Stocks Retreat After Weekly Gain as Japan Shares Decline. Asian
stocks slipped, with the regional benchmark index retreating from its
biggest weekly advance in more than two months, as Japanese shares fell
amid a stronger yen. The MSCI Asia Pacific Index fell 0.2 percent to 129.36 as of 9:03 a.m. in Tokyo.
- Oil Rally Threatened as Gasoline Supply Surge Swamps U.S. Demand. American
drivers’ seemingly insatiable thirst for gasoline is running into a
flood of supply. Refineries across the nation are operating full-out and
imports are pouring into the East Coast, boosting gasoline supplies to a
record. At the same time, consumption has turned out to be less robust
than thought. That’s weighed on prices, threatening to stem oil’s
rebound from a 12-year low. "Earlier this year there was a lot of hope
that gasoline would lead crude higher," said John Kilduff, partner at
Again Capital LLC, a New York hedge fund focused on energy. "That’s not
turned out to be the case and gasoline will soon be a weight on the
market."
- Russian Oil Exports Set for Record as Europe Competition Grows. Russian
crude exports are on track to set a record this year, which is
intensifying competition in Europe as Iran boosts shipments to the
region.
Exports rose 4.9 percent to 5.55 million barrels a day in the first
half of the year from the same period in 2015. Russia’s output in June
climbed 1.14 percent from a year earlier to 10.843 million barrels a
day, with increases every month since July 2014, according to data
from the Energy Ministry. “If production remains steady, then it will
likely be a record year for exports,” said Christopher Haines, head of
oil and gas at BMI Research. “This should mean competition is strong,
especially with Iran sending more oil into southern Europe.”
- Clouds Hang Over U.S. Auto Outlook. (video)
Wall Street Journal:
- Death Toll Tops 120 from Blast in Baghdad Shopping District. Islamic State claims responsibility for the car bombing; prime minister heckled at blast site.
A massive car bomb exploded overnight in the heart of one of Baghdad’s
busiest commercial areas, killing at least 121 people and wounding many
others, security officials said. Islamic State claimed responsibility
for the bombing, the extremist group’s first major attack on the Iraqi
capital since losing the nearby city of Fallujah to Iraqi forces late
last month. A series of defeats in Syria and Iraq since last fall has
prompted the militants to revert to more guerrilla-style tactics such as
suicide attacks on civilians in urban areas.
Bloomberg:
- Closed Shorts, Good Defense Carry S&P 500 to Best Week Since ’15. Every
precaution taken against disaster by U.S. investors in 2016 was on
display in the stock market this week. Short sales that earlier reached
the highest level since the financial crisis were covered, while bearish
options bets were closed. Meanwhile defensive industries such as
consumer staples and utilities powered the S&P 500 Index to its
best week in seven months. When it was over, the two-day trauma that
followed U.K. voters’ decision to secede from the European Union was all
but erased. The S&P 500 surged 3.2 percent to 2,102.95,
including three consecutive daily gains of more than one percent,
something that’s happened only two other times since October 2011. At
Friday’s close, the index was less than half a percent from its level
before the U.K. referendum.
- 20 Hostages Killed, 13 Saved in Bangladesh Restaurant Attack. The hostages were given a test: recite verses from the Quran, or be
punished, according to a witness. Those who passed were allowed to eat.
Those who failed were tortured and slain. The dramatic, 10-hour hostage crisis that gripped Bangladesh's
diplomatic zone ended Saturday morning with at least 28 dead, including
six of the attackers, as commandos raided the popular restaurant where
heavily armed attackers were holding dozens of foreigners and
Bangladeshis prisoner while hurling bombs and engaging in a gunbattle
with security forces. The victims included 20 hostages, mostly
foreigners, and two Bangladeshi police officers.
- Australia Sinks Into Limbo as Voters Erase Turnbull Majority. Australia’s Prime Minister Malcolm Turnbull said he was confident of
forming a majority government, even as a national election failed to
deliver a clear winner and counting won’t be completed until later this
week. “This is a time where we must come together,” Turnbull told
cheering supporters in central Sydney early Sunday, as the outcome hung
on a handful of marginal seats. “We can succeed, because without that,
my friends, there is a road to debt, to deficit, higher taxes and
stagnation.”
- Clinton Says Knows of No Timeline to Wrap Up FBI E-Mail Inquiry.
Barron's:
- Had bullish commentary on (GS), (MS), (C) and (LUV).
Business Insider:
Financial Times:
