BETWEEN THE HEDGES

Wednesday, August 23, 2017

Thursday Watch

Posted by Gary .....at 9:02 PM

Evening Headlines

Bloomberg:

U.K. to Plan ‘Unprecedented Alignment’ With EU Over Data Sharing. The U.K. government is set to reveal plans that show it will adhere to European data-sharing rules, to minimize disruption for U.K.-based companies conducting business with the bloc. The paper, to be released Thursday, will outline how data will be protected and exchanged with the EU, and which “reflects the unprecedented alignment between British and European law,” according to the Department for Exiting the European Union.

The No. 1 China Equities Fund Bought Only Three Stocks This Year. In a market where swings are notoriously large and gains can be dominated by a handful of companies, it helps to double down on your picks and sit tight. Two of Cederberg’s new investments this year were Tencent Holdings Ltd. and Alibaba Group Holding Ltd., which have both treated the fund well, jumping more than 70 percent.

Midea's Bold Plan for Beer-Pouring Robots, People-Less Factories. China’s Midea Group Co. has a vision to put consumer robots in homes globally -- and it’s doubling down in Silicon Valley to get there. The world’s biggest consumer appliance maker sees its 3.7 billion-euro ($4.4 billion) purchase of German robot maker Kuka AG as the linchpin to its expansion plans, from making robots capable of pouring beer to installing droids in factories without a single worker. Increasing the number of research engineers in the U.S. and adding a Kuka factory in China is just the start, Midea Vice President Hu Ziqiang said in an interview.

This Robot Ship Experiment Could Disrupt the Global Shipping Industry. Japan’s largest container line plans to test a remote-controlled vessel across the Pacific Ocean in 2019 as it pursues fully autonomous technology that could disrupt the global shipping industry.

Trump Shutdown Talk Weighs on Asia Stocks, Yields. (video) Benchmarks fell in Tokyo and Sydney, and rose in South Korea in a mixed start to trading as U.S. equity-index futures declined. All major American equity benchmarks retreated and the 10-year Treasury yield hit the lowest since June after Donald Trump’s threat to shut down the U.S. government triggered concerns Congress won’t easily raise the debt ceiling and deliver on tax reform. That prompted Fitch Ratings to warn the country risks a review of its sovereign rating. The dollar held onto losses following July data on U.S. home sales that highlighted patchy U.S. growth. Japan’s Topix index fell 0.1 percent and Korea’s Kospi index rose 0.2 percent. Australia’s S&P/ASX 200 Index was down 0.3 percent. Hong Kong reopens after Wednesday’s trading session was canceled as Typhoon Hato slammed into the city.

Five Things You Need to Know to Start Your Day.

Wall Street Journal:

U.S. Gets Easier Path to Insider-Trading Convictions. Judges reject former SAC Capital Advisors manager Mathew Martoma’s request for new trial.

Apparel Retailers Pushing Discounts to Win Customers. Express, American Eagle Outfitters, Guess and PVH all beat profit and revenue expectations.

Test Scores Don’t Lie: Charter Schools Are Transformative. Our black and Hispanic students in Central Harlem outperform the city’s white pupils by double digits.

MarketWatch.com:

Gundlach’s favored gauge says the 10-year Treasury yield is due for a breakout.

CNBC:

Storm springs back to life in the Gulf, now threatens one-third of U.S. refining capacity.

Financial experts shrug off Trump's 'red meat' threat to shut down the government. (video)

Google(GOOGL) throws lifeline to desperate retail industry besieged by Amazon(AMZN).

"Activists Seek Peace Through Violence": CNN Quickly Scrubs Title Of Antifa Puff Peace.

Guess(GES) shares soar after earnings beat.

Here's a taste of how much smarter your iPhone will be in September. (video)

A government shutdown wouldn't be a huge market or economic event: Analyst. (video)

US becoming a 'swing producer' after oil crash woke 'sleeping giant,' says Pioneer CEO. (video)

Zero Hedge:

CNN Gets Steamrolled By Their Own Charlottesville Panel: "The Media Is Not Being Honest". (video)

McConnell Responds To NYT "Trump Feud" Article: "We Are Working To Prevent A U.S. Default".

Japanese Bond Market Volume Collapses To Record Low. (graph)

Autos Expose Economy's Fragility As Credit-Compelled Car Sales Continue To Collapse.

Shutdown Shivers Sink Stocks But Bonds, Bullion, & Black Gold Bounce. (graph)

Business Insider:

Hedge funds can't stop betting on the stock market's secret weapon.

Uber's sales more than doubled to $1.75 billion in the second quarter, despite all its drama.

Night Trading

Asian equity indices are unch. to +.5% on average.

Asia Ex-Japan Investment Grade CDS Index 81.75 +.75 basis point.

Asia Pacific Sovereign CDS Index 21.0 unch.

Bloomberg Emerging Markets Currency Index 74.04 +.03%.

S&P 500 futures -.11%.

NASDAQ 100 futures -.13%.

Morning Preview Links

Earnings of Note
Company/Estimate

(ANF)/-.33

(DLTR)/.87

(HRL)/.37

(SJM)/1.63

(MIK)/.16

(PDCO)/.44

(SAFM)/3.89

(SHLD)/-2.48

(SIG)/1.09

(SPLS)/.12

(TIF)/.86

(TUES)/-.29

(ADSK)/-.16

(AVGO)/4.03

(GME)/.16

(MRVL)/.28

(SPLK)/.06

(ULTA)/1.78

(VMW)/1.15

Economic Releases
8:30 am EST

Initial Jobless Claims for last week are estimated to rise to 238K versus 232K the prior week.

Continuing Claims are estimated to fall to 1950K versus 1953K prior.

10:00 am EST

2Q MBA Mortgage Foreclosures/Delinquencies.

Existing Home Sales MoM for July are estimated to rise +.5% versus a -1.8% decline in June.

Upcoming Splits

None of note

Other Potential Market Movers

The Jackson Hole Fed Conference, Japan CPI report, UK GDP report, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory report could also impact trading today.

BOTTOM LINE: Asian indices are slightly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

Stocks Modestly Lower into Final Hour on Tax Reform Worries, Less Economic Optimism, Yen Strength, Medical/Transport Sector Weakness

Posted by Gary .....at 3:30 PM

Broad Equity Market Tone:

Advance/Decline Line: Around Even

Sector Performance: Mixed

Volume: Below Average

Market Leading Stocks: Performing In Line

Equity Investor Angst:

Volatility(VIX) 11.97 +5.46%

Euro/Yen Carry Return Index 134.40 unch.

Emerging Markets Currency Volatility(VXY) 7.22 -.82%

S&P 500 Implied Correlation 35.46 +7.98%

ISE Sentiment Index 69.0 -39.5%

Total Put/Call .93 -8.82%

NYSE Arms .66 -22.82%

Credit Investor Angst:

North American Investment Grade CDS Index 60.97 -.25%

America Energy Sector High-Yield CDS Index 470.0 -.50%

European Financial Sector CDS Index 56.77 +2.45%

Western Europe Sovereign Debt CDS Index 5.75 -.43%

Asia Pacific Sovereign Debt CDS Index 20.99 -.40%

Emerging Market CDS Index 189.36 -.16%

iBoxx Offshore RMB China Corporate High Yield Index 141.08 +.02%

2-Year Swap Spread 24.75 -.75 basis point

TED Spread 31.0 -.75 basis point

3-Month EUR/USD Cross-Currency Basis Swap -25.75 +.25 basis point

Economic Gauges:

Bloomberg Emerging Markets Currency Index 74.06 +.22%
3-Month T-Bill Yield 1.0% unch.

Yield Curve 86.0 -3.0 basis points

China Import Iron Ore Spot $79.65/Metric Tonne n/a

Citi US Economic Surprise Index -37.20 -9.8 points

Citi Eurozone Economic Surprise Index 18.50 +11.9 points

Citi Emerging Markets Economic Surprise Index 17.60 -2.0 basis points

10-Year TIPS Spread 1.76 -1.0 basis point
15.6% chance of Fed rate hike at Nov. 1 meeting, 39.1% chance at Dec. 13 meeting

Overseas Futures:

Nikkei 225 Futures: Indicating -60 open in Japan
China A50 Futures: Indicating +9 open in China

DAX Futures: Indicating +7 open in Germany

Portfolio:

Slightly Lower: On losses in my medical sector longs

Disclosed Trades: None

Market Exposure: 100% Net Long

Today's Headlines

Posted by Gary .....at 2:42 PM

Bloomberg:

Russian Official Says U.S. and Russia Aren't in New Cold War. (video) Russia and the United States aren't in a new Cold War despite spiraling tensions, a senior Russian diplomat said in remarks released Wednesday. Deputy Foreign Minister Sergei Ryabkov denounced U.S. sanctions against Russia, but emphasized that the current tension "isn't equivalent to confrontation that may spill into open conflict." He added, however, that Russia and the U.S. need to refresh their agreements on preventing incidents at sea and in the air. Speaking to Japanese and Chinese media in remarks released by his ministry, Ryabkov said: "I don't think that such confrontation is possible." He added that decades of experience have taught Moscow and Washington caution.

Euro-Area Factories Feed Best Growth Spell for Economy in Years. Surging demand for ‘Made in the Euro Area’ goods is feeding an economy that is creating jobs and finally also seeing price growth accelerate. A Purchasing Managers’ Index for manufacturing rose to 57.4 in August from 56.6 in July, according to IHS Markit. That’s the highest reading in two months and compares with a median estimate for a slowdown in activity. Momentum in services unexpectedly cooled to a seven-month low.

Your Evening Briefing.

Trump Shutdown Threat Barely Registers in Treasury Bill Market. (video) In a survey to clients, BMO strategists Ian Lyngen and Aaron Kohli said respondents assigned roughly 27 percent odds of a government shutdown, while 77 percent said the event would be bullish for Treasuries, with an estimated drop of 13 basis points in 10-year yields.

What to Expect From Draghi at Jackson Hole. (video)

Wall Street Journal:

Global Economies Grow in Sync. Low interest rates help spur a rare expansion in all 45 countries tracked by the OECD.

Wal-Mart(WMT) and Google(GOOGL) Partner to Challenge Amazon(AMZN). The retail giant will join Google Express, adding hundreds of thousands of items to the online-shopping marketplace.

Stocks Are Crawling, Not Jumping, to New Records. The Dow Jones Industrial Average hasn't closed up 1% or more since April.

States Watch Iowa’s Push to Reshape Health Law. Officials seek waiver to revamp rules, including subsidies; Ohio, Oklahoma, others consider changes.

WPP Sounds a Warning Signal on Consumer-Ad Spending; Shares Sink. World’s No. 1 advertising company is being hit by belt tightening at consumer-goods companies.

The Great Nazi Scare of 2017. Fear the majoritarian mob, whatever its ideological predisposition.

MarketWatch.com:

European stocks end lower amid strong factory activity.

Fox News:

Republicans line up to challenge Elizabeth Warren for Senate. (video)

Trump turns up heat on Senate Republican foes. (video)

CNBC:

Watch Paul Ryan talk tax reform at Intel facility in Oregon. (video)

The hot stock that one market bear is buying. (video) "The semiconductor ETF (SMH)] is hanging inside of this little range here that we've seen for the summer, and it's possible that we're going to break higher," Gordon said Tuesday on CNBC's "Trading Nation." "The vehicle of choice in the chips, no surprise here, is going to be Nvidia."

Alphabet(GOOGL) trains self-driving cars in a virtual world and a 'fake city' in rural California.

Wall Street believes these stocks can survive Amazon's(AMZN) retail apocalypse.

This one surging metal could see an even bigger rally ahead. (video)

The best mega-cap technology stock may not be in the US. MKM Partners raised its return expectations for Alibaba(BABA) over the next year, declaring that the Chinese e-commerce company has the "best fundamentals of the mega-caps."

Zero Hedge: