Tuesday, December 22, 2015

Wednesday Watch

Evening Headlines
  • MSCI Emerging Markets Index Down 17% YTD. (video)
  • Why China's Banks May Face Thinner Profit Margins in 2016. (video)
  • China Pollution: Shanghai Warns People to Stay Indoors. (video)
  • Investors Wary of `Brutal' Truth Skirt Europe's Banks in Flux. Across European banks, new chief executive officers have rolled out overhauls, pledging to fire thousands, exit businesses and cut assets to boost profit. For now, investors aren’t convinced the plans will pay off soon. Shares of Deutsche Bank AG, Credit Suisse Group AG and Standard Chartered Plc have dropped more than most peers since the CEOs unveiled their restructuring plans over recent months. Their complex reorganizations are largely trying to make the best of banks’ relative strengths, while working around models that are proving to be broken. At the same time, ever stricter capital rules, cooling emerging markets and record-low interest rates may complicate efforts. 
  • Asia Stocks Rise as U.S. Consumer Spending Buoys Economic Growth. Asian stocks rose after a report showed American consumer spending supported growth in the world’s largest economy and gains in crude oil boosted energy shares. The MSCI Asia Pacific Index gained 0.1 percent to 130.61 as of 8:01 a.m. in Hong Kong
  • Is a Devaluation of the Riyal the Biggest Threat to Oil? (video)  
  • Oil Slump to 11-Year Low Just a Taste of Pain Felt by Producers. If oil’s slump to an 11-year low stung traders, it’s just a taste of the hardship felt by the industry. Brent’s plunge to $35.98 a barrel on Tuesday, its weakest intraday level since 2004, was probably painful enough for any remaining oil bulls. But that move was just playing catch-up with the annual average price, already at the lowest in 11 years -- a measure more important than intraday fluctuations to those that pump crude from the ground.
  • U.S. Calls for 256% Tariff on Steel Imports From China. Corrosion-resistant steel imports from China were sold at unfairly low prices and will be taxed at 256 percent, according to a preliminary finding of the U.S. Department of Commerce.
  • Get Used to Chinese Steel as Macquarie Sees It Getting Cheaper. (video) The world needs to get used to cheap Chinese steel, with export prices poised to fall again next year as the world’s biggest producer adjusts to demand that’s dropping for the first time in a generation. The price of hot-rolled coil, used in everything from fridges to freight containers, may decline about 13 percent next year, Colin Hamilton, Macquarie Group Ltd.’s head of commodities research, said by phone from London. The nation’s steel exports, which have ballooned to more than 100 million metric tons this year, may stay at those levels for the rest of the decade as infrastructure and construction demand continues to falter.
  • Baosteel's Iron Ore Project Is Latest Casualty of Price Collapse. China’s second-largest steelmaker and its partners are mothballing a proposed iron ore project in Australia, the latest casualty of the market collapse that’s seen prices hit a record low this month. A partner meeting in Hong Kong on Monday decided to stop work on the feasibility study for the West Pilbara project, citing market conditions and uncertainty about future supply and demand, according to the venture’s railroad partner Aurizon Holdings Ltd.
  • How Donald Trump May Be Helping Hillary Clinton. (video) Attacks tend to make the Democratic front-runner stronger. 
Wall Street Journal:
  • Amazon(AMZN) Seeks to Ease Ties With UPS. Rising costs have Amazon seeking alternative delivery routes, straining relations with its longtime shipping ally.
  • Coal Downturn Hammers Budgets in West Virginia and Wyoming. Steep drop in tax revenue leads to hiring freezes, widespread cuts; ‘Everything here is depressed'.
  • Hillary Has Her Running Mate: Obama. The president is free to be Clinton’s designated partisan attack dog. The 2016 presidential race will be defined by the relationship between two titans of American politics: Barack Obama and Hillary Clinton. For the first time in more than two decades—since President Reagan campaigned with then-Vice President George H.W. Bush—an incumbent two-term president will be an active player in the campaign and possibly even an active presence at events.
Fox News:
  • Parents of 9/11 victims dying without seeing justice. (video) The wait for justice in the 9/11 court case has gone on for so long that the mothers and fathers who lost children in the terror attacks are dying without ever seeing a trial, according to family members contacted by Fox News.
  • Bed Bath & Beyond(BBBY) lowers 3Q guidance, warns on 4Q. Home furnishings retailer Bed Bath & Beyond warned that its comparable sales will come in at about 1 percent for the fiscal fourth quarter through Christmas. Additionally, its preliminary findings for the third fiscal quarter showed a same-store-sales decrease of 0.4 percent, or relatively flat on a constant currency basis, according to a Tuesday statement. It expects third-quarter net sales to hit $3 billion, a 0.3 percent increase from a year ago. The company had previously guided toward a net sales increase of between 1.8 percent and 4 percent. BBBY shares fell about 5 percent in after-hours trading.
Zero Hedge:
Evening Recommendations 
  • None of note
Night Trading 
  • Asian equity indices are +.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 140.25 -1.25 basis points.
  • Asia Pacific Sovereign CDS Index 74.5 unch.
  • Bloomberg Emerging Markets Currency Index 69.40 -.03%.
  • S&P 500 futures -.15%.
  • NASDAQ 100 futures -.11%.
Morning Preview Links 

Earnings of Note 
  • (LNN)/55
  • (CALM)/2.40
Economic Releases
8:30 am EST
  • Personal Income for November is estimated to rise +.2% versus a +.4% gain in October.
  • Personal Spending for November is estimated to rise +.3% versus a +.1% gain in October.
  • The PCE Core MoM for November is estimated to rise +.1% versus unch. in October.
  • Durable Goods Orders for November are estimated to fall -.6% versus a +2.9% gain in October.
  • Durables Ex Tranports for November are estimated unch. versus a +.5% gain in October.
  • Cap Goods Orders Non-Defense Ex Air for November are estimated to fall -.2% versus a +1.3% gain in October.  
10:00 am EST
  • New Home Sales for November are estimated to rise to 505K versus 495K in October.
  • Final Univ. of Mich. Consumer Sentiment for December is estimated to rise to 92.0 versus 91.8 in November.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,363,640 barrels versus a +4,801,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +1,336,360 barrels versus a +1,731,000 barrel gain the prior week. Distillate supplies are estimated to rise by +2,009,090 barrels versus a +2,563,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.31% versus a -1.2% decline prior.
Upcoming Splits
  • (NKE) 2-for-1
  • (ENSG) 2-for-1
Other Potential Market Movers
  • The Canadian GDP report and the weekly MBA Mortgage Applications report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and real estate shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

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