Wednesday, December 30, 2015

Thursday Watch

Evening Headlines
  • China Fires a Warning Shot at Yuan Speculators With Bank Bans. China has a message for currency speculators: the free lunch is over. The People’s Bank of China has suspended at least two foreign banks from conducting some cross-border yuan business until late March, according to people with direct knowledge of the matter. The clampdown comes as the growing offshore-onshore spread makes it profitable for those who skirt capital controls to buy the currency at a discount in Hong Kong and sell it in Shanghai.
  • China Outlook: Yuan to Weaken Further in 2016? (video)
  • Perpetual Faith in China. Hong Kong's aging billionaires have been reducing investments in China as the economy's prospects dim. The latest sale, by New World Development's Cheng Yu-tung, has a whiff of desperation. 
  • Australian Investor Mortgage Growth Slows to 17-Month Low. Home loans to Australian landlords grew at the slowest pace in 17 months as a regulatory crackdown forces lenders to raise interest rates and tighten lending standards. Investor housing credit expanded 9.1 percent in the 12 months to Nov. 30, the weakest pace since June 2014, according to data from the Reserve Bank of Australia. Growth has slowed for the fifth consecutive month, the data show. 
  • Asian Stocks Poised for Second Year of Decline on Commodity Rout. Asia-Pacific stocks fell in light trading on the final day of the year, with the regional benchmark index heading for its first back-to-back annual decline since 2002, as energy shares followed crude oil lower. The MSCI Asia Pacific Index excluding Japan slipped 0.1 percent to 410.54 as of 8:10 a.m. in Hong Kong, with raw-material companies leading declines. The MSCI gauge that includes Japan headed for a 4.5 percent drop this year amid decelerating Chinese growth and a rout in commodities. That compares with a 0.2 percent advance for the Standard & Poor’s 500 Index and a 7.4 percent increase for the Stoxx Europe 600 Index.
  • Capital Economics Sees a Wild Ride for Iron Ore as $20s Loom. Iron ore may be in for a roller-coaster ride next year as prices swoon into the $20s, then rally to end higher after three annual losses, according to Capital Economics Ltd. The ore may initially drop as low-cost supplies rise further, helping the top producers to expand market share, according to Caroline Bain, the forecaster’s London-based senior commodities economist, who correctly predicted in June that prices would sink into the $30s this half.
  • Clinton's New Drug-Price Attack. After shaking the pharmaceutical industry earlier this year with a tweet, Hillary Clinton is back on the drug-price warpath.
Wall Street Journal: 
  • Obama Administration Preparing Fresh Iran Sanctions. Nearly a dozen companies and individuals targeted over ballistic-missile program. The Obama administration is preparing to impose its first financial sanctions on Iran since it forged a landmark nuclear agreement in July, presenting a major test for whether Tehran will stay committed to the deal. The planned action by the Treasury Department, U.S. officials told The Wall Street Journal, is directed at nearly a dozen companies and individuals in Iran, Hong Kong and the United Arab Emirates for their alleged role...
  • New Year’s Terror Threats Spur Responses in Turkey and Belgium. Citing Islamic State holiday plots, Ankara authorities arrest two suspects and Brussels cancels fireworks event. Turkish authorities arrested two suspected Islamic State extremists allegedly planning to kill revelers during New Year’s Eve celebrations in Ankara, and Belgium canceled the main fireworks display in Brussels, amid a heightened state of alert over possible Islamic State attacks around the holidays. 
  • Ten Years After Blowup, Amaranth Investors Waiting to Get Money Back. Hedge fund collapsed in 2006 after bad bets on natural gas.
  • Speaking Fees Meet Politics for Clintons. Former president spoke to groups with issues before State Department. At Hillary Clinton’s confirmation hearing for secretary of state, she promised she would take “extraordinary steps…to avoid even the appearance of a conflict of interest.”
  • Fannie and Freddie Forever. The mortgage giants are once again claiming their paper has no risk for taxpayers. Yeah, right. Washington is a place where bad ideas go to live forever. How else to explain the latest innovation from federal regulators to keep Fannie Mae and Freddie Mac dominating the market for mortgage finance?
Fox News:
  • Highly provocative’: Iran rocket launch near US ship latest challenge for Washington. (video) Despite the Obama administration touting its Iran nuclear deal as a triumph of diplomacy that finally thaws a four-decade freeze, Tehran appears to be doing all it can to keep the flames of confrontation burning. The latest challenge was a missile launch over the weekend less than a mile from a U.S. aircraft carrier -- which came on the heels of two other similar incidents, two ballistic missile tests, and the harsh treatment of American prisoners including a Washington Post journalist.
Zero Hedge:
Evening Recommendations 
  • None of note
Night Trading 
  • Asian equity indices are -.50% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 137.5 -.75 basis point.
  • Asia Pacific Sovereign CDS Index 71.5 -.5 basis point.
  • Bloomberg Emerging Markets Currency Index 69.17 -.04%.
  • S&P 500 futures +.07%.
  • NASDAQ 100 futures +.06%.
Morning Preview Links 

Earnings of Note 
  • None of note
Economic Releases
8:30 am EST
  • Initial Jobless Claims for last week are estimated to rise to 270K versus 267K the prior week.
  • Continuing Claims are estimated to fall to 2190K versus 2195K prior.  
9:00 am EST
  • ISM Milwaukee for December is estimated to rise to 48.5 versus 45.34 in November.
9:45 am EST
  • Chicago Purchasing Manager for December is estimated to rise to 50.0 versus 48.7 in November.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed balance sheet update could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by commodity and industrial shares in the region. I expect US stocks to open modestly lower and to strengthen into the afternoon, finishing mixed. The Portfolio is 25% net long heading into the day.

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