Wednesday, December 23, 2015

Thursday Watch

Evening Headlines
Bloomberg:
  • U.S. Embassy in Beijing Warns of Threat Against Foreigners. The U.S. Embassy in Beijing said Thursday it received information of possible threats against Westerners visiting a popular shopping district in the Chinese capital on or around Christmas Day. In a message sent to U.S. citizens, the embassy urged heightened vigilance and said that it had issued the same guidance to American government personnel. The Sanlitun district of Beijing, for which the warning was issued, is home to numerous bars and restaurants and is also where Apple Inc. opened its first store in China in 2008.
  • Dollar to Strengthen Versus All Major Peers Except Pound, Loonie. The dollar will strengthen against all its Group-of-10 peers except the pound and Canadian currency in the first quarter while New Zealand’s kiwi will be the worst performer, according to analyst forecasts. The greenback has advanced against eight of its G-10 counterparts since the end of September as the Federal Reserve raised interest rates for the first time in almost a decade and futures signal another increase will take place as early as April. The kiwi and Aussie have shrugged of weakness in commodities to lead gains. The pound dropped to the lowest since April this week amid concern a slowing economy make it less likely the Bank of England will follow the Fed next year by tightening policy.
  • Asian Stocks Advance as Crude Oil Futures Rise for Fourth Day. The MSCI Asia Pacific Index gained 0.6 percent as of 11:03 a.m. in Tokyo. Japan’s Topix index and South Korea’s Kospi both advanced 0.3 percent. Hong Kong’s Hang Seng Index gained 0.7 percent, while indexes in Taiwan and Singapore climbed 0.6 percent. New Zealand’s S&P/NZX 50 Index rose 0.5 percent, closing at a record high. Australia’s S&P/ASX 200 Index rallied 1.3 percent with volume about half its 30-day average for the time of day. BHP Billiton Ltd., the world’s biggest miner, surged 5.2 percent, paring this year’s slump to 33 percent.
  • China's Stocks Drop for Second Day on Property, Drug Shares. China’s stocks fell for a second day, dragged down by health-care and property companies, with turnover dwindling as most regional markets shut for the holidays. The Shanghai Composite Index dropped 0.4 percent to 3,621.05 at 9:53 a.m., Beijing Tongrentang Co. fell 6.2 percent, paring a month-long rally to 45 percent.
  • With Just Days Left, Grinch Is Stealing Retail Christmas: Chart. (graph) It may not be a very merry year for retail profit margins, Bloomberg Intelligence analysts Chen Grazutis and Mariam Sherzard find. Month-to-date sales rose 1.8% from 2014, less than Johnson Redbook’s 2.3% December target. Warmer temperatures probably deterred purchases of seasonal gear, pushing retailers to deepen discounts. That’s on top of holiday promotions, which will pressure margins and profits. 
  • Investors Pull Out of Mutual Funds at the Fastest Rate in Two Years. Investors pulled more money from U.S. mutual funds last week than they have in any seven-day period in the past two and a half years. Net redemptions reached $28.6 billion in the week ended Dec. 16, according to a statement from the Investment Company Institute, a trade group. It was the biggest weekly outflow since June 2013, ICI data show. 
Wall Street Journal:
  • U.S. Pursued Secret Contacts With Assad Regime for Years. Effort to limit violence and get president to relinquish power failed. The Obama administration pursued secret communications with elements of Syria’s regime over several years in a failed attempt to limit violence and get President Bashar al-Assad to relinquish power, according to U.S. and Arab officials. Early on, the U.S. looked for cracks in the regime it could exploit to encourage a military coup, but found few. The efforts reflect how President Barack Obama’s administration has grappled to understand and interact with an opaque Middle East dictatorship run for 45 years by the Assad family. 
  • Junk Investors Evade the Trade. Money managers are hesitant to dive into the riskiest debt as the sector remains volatile
  • U.S. Firms Prepare for End to Iran Sanctions. Apple(AAPL), GE(GE), HP(HPQ) gear up for potential opening of markets in Islamic Republic. Ahead of an expected lifting of sanctions, several U.S. corporate giants including personal-computer seller HP Inc. and General Electric Inc.’s oil-services unit are actively exploring a market entry.
  • Malls Reel as Web Roars With Holiday Shopping. Stampede of online shoppers tests limits of delivery services, retailers.
  • The Year Christmas Died. New York’s Fifth Avenue is a celebration of pretty much nothing—or worse. As we moved into December and what for some time has been called “the holiday season,” the Office of Diversity and Inclusion at the University of Tennessee issued a “best practices” directive for the campus to “ensure your holiday party is not a Christmas party in disguise.” 
  • Mele Kalik-Baracka. President Obama jets to a Hawaiian holiday, while the world unravels. Before leaving for his annual Hawaiian Christmas vacation, President Obama found an odd way to wish Americans “Mele Kalikimaka!” In an interview with National Public Radio, he discussed Islamic State, also known as ISIS. While admitting that “they can hurt our people and our families,” the president once again played down the terrorist threat.
Fox News:
MarketWatch.com:
Zero Hedge:
Financial Times:
  • US banks hit by cheap oil as Opec warns of long-term low. US banks face the prospect of tougher stress tests next year because of their exposure to oil in a sign of how the falling price of crude is transforming the outlook not just for energy companies but the financial sector. The Organisation of the Petroleum Exporting Countries on Wednesday lowered its long-term estimates for oil demand and said the price of crude would not return to the level it reached last year, at $100 a barrel, until 2040 at the earliest.
Telegraph:
Evening Recommendations 
  • None of note
Night Trading 
  • Asian equity indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 139.0 -1.25 basis points.
  • Asia Pacific Sovereign CDS Index 73.75 -.75 basis point.
  • Bloomberg Emerging Markets Currency Index 69.71 +.06%.
  • S&P 500 futures -.06%.
  • NASDAQ 100 futures +.05%.
Morning Preview Links 

Earnings of Note 
Company/Estimate
  • None of note
Economic Releases
8:30 am EST
  • Initial Jobless Claims for last week are estimated to fall to 270K versus 271K the prior week.
  • Continuing Claims are estimated to fall to 2200K versus 2238K prior.  
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The BoJ Minutes and Bloomberg weekly Consumer Comfort Index could also impact trading(equity markets close at 1pm est) today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and consumer 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.

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