Monday, December 14, 2015

Tuesday Watch

Evening Headlines
  • Emerging-Market Turmoil Enters New Phase as Fed Takes Back Seat. Impeachments, ministerial sackings and warplanes. As if emerging-market investors didn’t have enough to worry about with the Federal Reserve poised to end a seven-year era of near-zero interest rates, political turmoil has buffeted developing economies more than normal in the past few weeks. South Africa’s rand whipsawed after President Jacob Zuma named a second finance minister in four days and Polish stocks slumped to a six-year low amid a policy shakeup by the new government. Brazil was on the brink of impeaching the president, while Turkey’s standoff with Russia over a downed warplane triggered a selloff in lira assets. “We’ve seen political risks come to the fore,” said William Jackson, a senior emerging-markets economist at Capital Economics Ltd. in London. “The timing couldn’t be worse. Those countries where political risks are excessive are likely to suffer a double whammy” if there’s more turbulence following the Fed rate increase, he said.
  • Abe Deflation Fight Has Foes on Nearly Every Street Corner. Japan's ubiquitous vending machines locked in a price war. They stand resolutely on street corners around Japan, proclaiming that deflation has not been vanquished, much as the Abe administration and the central bank have tried. They are the country’s 5 million vending machines, and as anyone who has visited can attest, they are seemingly everywhere: from the capital’s vast network of train and subway stations, to Kyoto’s historic shrines and temples, to Okinawa’s remotest islands, and even on Mount Fuji. At about one for every 25 people, Japan has the most vending machines per capita in the world -- double the rate of the U.S. 
  • Rio CEO Says Iron Ore Rivals `Hanging on by Their Fingernails'. The iron ore collapse has pushed producers to the brink of survival, according to the head of the world’s second-biggest mining company. “There are a lot of producers that we believed would leave the market that are hanging on by their fingernails,” Sam Walsh, chief executive officer of Rio Tinto Group, said in an interview with Bloomberg Television in London. “They are burning up cash reserves of their shareholders.” 
  • Asian Stocks Decline as Fed Rate Concern Offsets Energy Gains. Asian stocks fell amid concern over turbulence in the credit markets as the Federal Reserve prepares to raise U.S. interest rates. Energy shares rose for the first time in 10 days after crude oil rebounded. The MSCI Asia Pacific Index fell 0.2 percent to 127.85 as of 9:11 a.m. in Tokyo, extending declines for a sixth day.
  • Will the High-Yield Credit Rout Spark a Recession? (video)
  • Creditors Bawl: How Investors Ignored Risk of Junk-Bond Rout. You had to see this one coming. Warnings of a high-yield bloodbath were plentiful: The shale driller that missed its first payment. The clothing manufacturer and the software maker among the many companies that issued debt, payable in more debt, earmarked to reward managers who’d already loaded them up with debt.
Wall Street Journal:
Fox News:
Zero Hedge:
Evening Recommendations 
  • None of note
Night Trading 
  • Asian equity indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 144.0 +2.0 basis points.
  • Asia Pacific Sovereign CDS Index 76.0 -2.25 basis points.
  • Bloomberg Emerging Markets Currency Index 69.20 +.03%.
  • S&P 500 futures +.27%.
  • NASDAQ 100 futures +.26%.
Morning Preview Links 

Earnings of Note 
  • None of note
Economic Releases
8:30 am EST
  • Empire Manufacturing for Dec. is estimated to rise to -7.0 versus -10.74 in November.
  • The CPI for November is estimated unch. versus a +.2% gain in October.
  • The CPI Ex Food and Energy for November is estimated to rise +.2% versus a +.2% gain in October.
  • Real Avg. Weekly Earnings YoY for November.  
10:00 am EST
  • The NAHB Housing Market Index for December is estimated to rise to 63.0 versus 62.0 in November. 
4:00 pm EST
  • Net Long-Term TIC Flows for October.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The German ZEW Index, UK inflation report, weekly US retail sales reports, (AGCO) analyst meeting, (SCTY) analyst day, (MMM) outlook meeting and the (DOV) investor dinner could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

No comments: