Sunday, December 20, 2015

Monday Watch

Today's Headlines 
  • Spain's Socialists Say Rajoy Has First Chance to Form Government. Spain’s Socialist Party handed Prime Minister Mariano Rajoy the first chance to form a coalition after an indecisive election that saw voters shift allegiance to new political blocs at the expense of the two main parties. While Rajoy’s People’s Party placed first in Sunday’s election to earn the right to try and forge a government, it did so with the loss of more than a third of its parliamentary members. The PP returned 123 lawmakers to 90 for the Socialists, as anti-austerity party Podemos placed third on 69 seats. The liberal Ciudadanos party, a potential coalition ally for Rajoy, took 40 seats, leaving the prime minister with limited options to forge a majority in the 350-member parliament. “We are heading for very long negotiations since the two blocs are virtually tied,” said Pablo Simon, a political science professor at Carlos III University in Madrid. “The field is really open.”
  • Yuan Crunch Spurs Banks to Hoard Abroad as China Curbs Outflows. Chinese banks from Hong Kong to London are selling a record amount of yuan-denominated certificates of deposit as China takes steps to curb outflows of the currency. Sales jumped to an unprecedented 66.1 billion yuan ($10.2 billion) this month, data compiled by Bloomberg show. That comes after Hong Kong’s pool of offshore yuan savings, the world’s largest, shrank to the smallest in two years, and Deutsche Bank AG said the currency’s depreciation pressures are weighing on deposits. 
  • Alibaba(BABA) Heads Into 2016 Struggling With Knock-Off Reputation. Cash-strapped Star Wars fans can pick up Darth Vader figurines and light sabers for as little as $4.59. Tom Brady jerseys go for about a 10th of those on the National Football League’s store. A pair of red Beats Solo headphones can be had for just $107 -- about half its official price.
  • IMF Changes Give China and India More Say. (video)
  • Toshiba Plunges on Reports It Will Post $4 Billion 2015 Loss. Toshiba Corp. slumped the most in seven months after reports it would post a record 500 billion yen ($4 billion) loss in the current fiscal year on costs related to an accounting scandal, layoffs and sales of business units. Shares of the industrial conglomerate fellas much as 9.5 percent, the most since May 11, as of 9:06 a.m. in Tokyo trading. Toshiba will discuss the impact on earnings of plans it will announce as early as Monday, it said in a statement after media including the Nikkei newspaper reported it would post a loss that includes 200 billion yen in restructuring costs.   
  • Hyundai Set to Miss Sales Target for First Time Since 2008. Hyundai Motor Co. is poised to sell fewer vehicles than it projected for the first time since the global financial crisis, after an economic slowdown sapped demand in China and emerging-market earnings slumped due to unfavorable exchange rates. South Korea’s largest automaker will have to sell at least 50 percent more than its monthly average this year in December to reach its full-year target of 5.05 million vehicles. Such a feat is unlikely, according to five analysts surveyed by Bloomberg. They also predict that Hyundai’s 2016 sales will be lower than the target set for this year given the absence of new best-selling models and continued weakness in Russia and Brazil.
  • Rupiah Set to Reclaim Worst Asian Currency Mantle From Ringgit. Indonesia’s rupiah is forecast to reclaim its position as Asia’s worst-performing currency on shrinking foreign-exchange reserves and the risk of capital outflows. After two years in which Malaysia’s ringgit weakened the most out of the region’s major currencies, the rupiah is seen dropping 6.2 percent against the dollar from Nov. 30 to the end of 2016, twice as much as the ringgit, according to a Bloomberg survey of strategists. Indonesia’s currency declined the most among Asian emerging markets in 2012 and 2013, weakening 5.9 percent and 21 percent respectively, as commodity prices fell and tighter U.S. monetary policy triggered a flight from developing nations.
  • Mideast Stocks Decline After Oil Sinks to Seven-Year Low. Almost every Middle Eastern stock index declined after oil, the region’s main source of income, sank to the lowest in seven years, damping the outlook for government spending. Dubai’s DFM General Index ended its longest winning streak in almost three months, sliding 1.5 percent, the most in a week, to close at 3,026.05. Emirates NBD PJSC’s 4 percent retreat was the biggest contributor. The Tadawul All Share Index in Saudi Arabia lost 1.6 percent, also the most in seven days.
  • Asian Stocks Retreat as Yen Weighs on Japan, Toshiba Tumbles. Asian stocks fell as a stronger yen weighed on Japanese exporters and Toshiba Corp. tumbled on reports it would post a record loss. The MSCI Asia Pacific Index declined 0.4 percent to 129.24 as of 9:21 a.m. in Tokyo. Japan’s Topix index dropped 0.9 percent after the yen strengthened 1.1 percent against the dollar on Friday. The regional benchmark gauge is down 6.3 percent this year, on course for its first back-to-back annual declines since 2002, as a commodity rout deepened and investors speculated Chinese authorities will need to increase stimulus to support economic growth. The loss would be more than twice that for the Standard & Poor’s 500 Index, which has dropped 2.6 percent in 2015.
  • Brent Trades Near 7-Year Low as U.S. Drillers Boost Rig Count. Brent oil traded near the lowest level in almost seven years as a rebound in U.S. drilling added to signs producers will keep pumping crude amid a global glut. Futures fell as much as 1.5 percent in London, extending declines for a fourth day after dropping 2.8 percent last week. Drillers put the most rigs back to work since July, adding 17 machines, according to data from Baker Hughes Inc. Saudi Arabia boosted crude exports in October to the highest level in four months, the latest figures from the Joint Organisations Data Initiative showed.
  • Bad Energy: the Implications of Oil's Slide. (video)
  • Fiorina Says Clinton Dying for Beatable Trump as Republican Pick. Republican Donald Trump is “a big Christmas gift wrapped up under the tree” for Hillary Clinton because he couldn’t beat the 2016 Democratic presidential front-runner in a general election, Carly Fiorina said on Sunday. “I am the lump of coal in Mrs. Clinton’s stocking,” Fiorina, said in an interview on “Fox News Sunday.” “She can beat Donald Trump. Donald Trump can’t beat Hillary Clinton.” Clinton desperately hopes she can run against Trump, Fiorina said, because “I will reveal to the American people again and again the ‘Clinton way.’ ”
Wall Street Journal:
  • Gas Windfall Fails to Stoke Consumers. Stronger savings, global worries curtail outlays​despite cheaper fuel. American consumers are getting a windfall of billions of dollars a week thanks to low fuel prices. The U.S. economy has little to show for it.
  • Cheer Up, Obama’s Legacy Can Be Erased. The White House rammed through an agenda that could be quickly undone by a Republican president.
  • Cuba One Year After Obama’s Overtures. Thousands of political arrests, migrants flee, and Russia wants in. Sound familiar? This month marks the first anniversary of President Obama’s unilateral rapprochement with Cuba. Upon making the Dec. 17 announcement, the Obama administration immediately moved to ease restrictions on American travel to the island and, by extension, boost revenues for the owners of its tourist industry: the Cuban military.
Fox News:
  • Paul slams Congress over trillion-dollar spending bill he claims no one read. A fired-up Sen. Rand Paul said Sunday he voted against the massive $1.1 trillion spending bill because not only was it rushed through Congress -- but no one had a chance to read it. “It was over a trillion dollars, it was all lumped together, 2,242 pages, nobody read it, so frankly my biggest complaint is that I have no idea what kind of things they stuck in that bill in the middle of the night,” Paul, R-Ky., said on “The Cats Roundtable,” a New York-based radio talk show.
Zero Hedge:
Financial Times:
Night Trading
  • Asian indices are -.75% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 142.25 +3.5 basis points.
  • Asia Pacific Sovereign CDS Index 74.5 +1.0 basis point.
  • Bloomberg Emerging Markets Currency Index 69.28 +.02%.  
  • S&P 500 futures +.36%.
  • NASDAQ 100 futures +.37%.
Morning Preview Links 

Earnings of Note
  • (CTAS)/1.00
  • (SCS)/.33
  • (NEOG)/.26
Economic Releases 
8:30 am EST
  • Chicago Fed National Activity Index for November is estimated to rise to .1 versus -.04 in October.
Upcoming Splits
  • (NKE) 2-for-1
  • (ENSG) 2-for-1
Other Potential Market Movers
  • The BoJ inflation report could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the week.

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