Monday Watch

Today's Headlines

Bloomberg: 

• China April Slowdown Shows Debt Addiction Will Be Tough to Shake. China’s run of disappointing April data underscore the bind facing policy makers seeking to cut capacity from the worst-performing sectors and curb credit excesses in recovering ones without stalling the economy. Bloomberg’s monthly gross domestic product tracker shows growth slowed to 6.88 percent in April, from 7.11 percent in March. Weak steel and coal output dragged on industrial production, which increased 6 percent from a year earlier versus economists’ forecasts of 6.5 percent, while retail and investment readings also disappointed, according to reports released on Saturday. A day earlier, data showed a slump in new credit last month.
• U.S. Bears Pile on Large-Cap China ETF as Stimulus Wanes: Chart.
• Australia 10-Year Yield Drops to Record Low as China Sags: Chart.
• Johnson Invokes Hitler as Brexit Debate Rhetoric Intensifies. Boris Johnson capped a weekend of intensified campaigning over the Brexit debate with an interview invoking Napoleon Bonaparte and Adolf Hitler, saying that attempts to unify Europe have tended to end “tragically.” “The truth is that the history of the last couple of thousand years has been broadly repeated attempts by various people or institutions -- in a Freudian way -- to rediscover the lost childhood of Europe, this golden age of peace and prosperity under the Romans, by trying to unify it,” the former London mayor told the Sunday Telegraph. “Napoleon, Hitler, various people tried this out, and it ends tragically.”
• JPM's Chatain: We Downgraded Japan on Stronger Yen. (video) 
• Aussie Hits 10-Week Low as China Reports Show Growth Slowdown. Australia’s dollar fell to the lowest in 10 weeks and New Zealand’s currency declined following reports from China pointing to slowing growth in the Asian nation that both countries count as their biggest export market. The Aussie held a decline from last week against most major peers before the release Tuesday of minutes from the central bank’s May meeting when it surprised some by lowering its benchmark rate. China’s retail sales, industrial production and fixed-asset investment data released at the weekend missed economists’ estimates. A gauge of the dollar closed at a six-week high Friday after data showed U.S. consumer purchases in April increased by the most in a year. Traders will look to minutes of the Federal Reserve’s last meeting, due May 18, for signs of when officials plan to resume raising the nation’s key rate. “The weaker Chinese data and the delayed reaction to U.S. data should keep currencies like the Aussie and kiwi on the back foot,” said Sam Tuck, a senior currency strategist at ANZ Bank New Zealand in Auckland. A Fed repricing should mean a stronger dollar, though “it obviously won’t be as strong as it was before because markets will be much more hesitant to go ahead of the Fed this time.”Australia’s dollar slid to 72.37 U.S. cents, the weakest since March 2, and bought 72.75 as of 9:12 a.m. in Tokyo, little changed from Friday.
• Asian Stocks Outside Japan Fall After China Data Disappoints. Asian stocks outside Japan fell, heading for its lowest level in two and a half months, after China reported a string of disappointing economic data. The MSCI Asia Pacific Index excluding Japan slipped 0.2 percent to 397.3300 as of 9:10 a.m. in Tokyo, heading for its lowest close since March 3. Chinese retail sales, industrial production and fixed-asset investment data released on Saturday missed economist estimates, while the biggest gain in U.S. retail sales in a year reignited speculation the Federal Reserve may raise interest rates as early as June. “Weak economic data, disappointing earnings reports and constant debate about central bank armory and efficacy have investors wanting to avoid downside risk,” Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about $21 billion, said by e-mail. “This produces plenty of cross currents and market volatility for markets to navigate.”
• Oil Drillers Betting Three-Month Crude Rally Is Nearing the End. Oil producers are taking advantage of the rebound in crude markets to lock in protection against another slump. They increased their bets on falling prices to the highest level in 4 1/2 years as U.S. inventories of stored oil remained near an 87-year high, while a natural disaster in Canada and militant attacks in Africa curtailed output. Negative sentiment among the group expanded for a third consecutive week, the longest streak since February. Energy companies from EOG Resources Corp. to Chesapeake Energy Corp. used financial instruments such as futures, swaps and collars to guard against another fall in prices. West Texas Intermediate oil, the benchmark U.S. crude, has gained more than 75 percent since hitting a 12-year low in mid-February. “They’ve been getting more and more active in hedging ever since the first initial jump,” said John Kilduff, a partner at Again Capital LLC in New York. Oil producers “appear to be drawn to this market as everyone tries to stay alive through the downturn,” he said.
• China’s Record Daily Steel Output Bodes Ill for Export Rivals. China’s record daily steel output in April bodes ill for an embattled global steel industry already reeling from a deluge of exports from the world’s top producer. Crude steel output over the month rose 0.5 percent to 69.42 million metric tons from a year earlier, the National Bureau of Statistics said on Saturday. The gains came after mills ramped up production to take advantage of a spurt higher in prices that has given them the best profits this decade. While below March’s record monthly figure of 70.65 million tons, the daily rate of 2.314 million tons was higher due to fewer producing days and surpassed the previous best set in June 2014. “Given how high margins went, we’ve been expecting to see a supply response like this,” Ian Roper, Singapore-based analyst at Macquarie Group Ltd., said in a WeChat message. “Chinese mills will likely look back to the export market as domestic oversupply reappears.”
• Top Currency Traders Warn White House Race May Echo Brexit Chaos. Traders wanting to know what November’s U.S. presidential election will mean for the dollar need look no further than the U.K. The pound plunged to a seven-year low and volatility soared, exceeding all other Group-of-10 nations, on risks created by a referendum on European Union membership. Given the tough talk on dollar strength from candidates vying for the White House, the greenback is just as vulnerable to politics, according to Deutsche Bank AG, JPMorgan Chase & Co., and Standard Bank Group Ltd.

Wall Street Journal:

• Insurance Options Dwindle in Some Rural Regions. Some health insurers quit unprofitable markets; ACA exchanges in some areas will have one insurer.
• Amazon(AMZN) to Expand Private-Label Offerings—From Food to Diapers. The first of the brands could appear on the company’s website in coming weeks.
• Treasury’s Teamsters Bailout Ploy. By rejecting a pension rescue plan, Obama sets taxpayers up for a hit. Congress passed legislation in 2014 to help insolvent multi-employer pension plans save themselves. But now the Obama Administration and Teamsters are enabling a giant taxpayer bailout that Congress sought to prevent.

Fox News:

• Nevada Democratic Convention becomes 'unruly and unpredictable' amid rules disputes over delegates. (video) The Nevada State Democratic Convention on Saturday night devolved into an “unruly and unpredictable” environment following several disputes over rules governing delegates for Democratic presidential candidates Hillary Clinton and Bernie Sanders, leading to law enforcement officials being called to keep the peace.
• 'Life is horrible': Syria's Christians fear total genocide. (video) Only a handful of mostly sick or elderly Christians remain in the ISIS stronghold of Raqqa, and Syrian Christians fear the forces that have brought that city’s population of Gospel followers to the brink of extinction could do the same for the entire nation.

CNBC: 

• News Analysis: Sorry, We Don’t Take Obamacare. "Anytime one of us needs a doctor," she continued, "we send out an alert: 'Does anyone have anyone on an exchange plan that does mammography or colonoscopy? Who takes our insurance?' It's really a problem."

Zero Hedge:

• Former Attorney General Holds Hillary Clinton Fundraiser Despite Ongoing FBI Criminal Probe.
• Goldman Cuts 2017 Oil Price Forecast Due To Slower Market Rebalancing.
• Barbara Boxer Meltdown Exposes Deep Divisions In Democratic Party.
• Zuckerberg To Meet Conservative Media Figureheads As Facebook(FB) Censorship Scandal Escalates.
• "The Global Negative Feedback Loop" - Why Investors Are Fleeing Capital Markets.
• "What Will Happen When Robots Take Our Jobs".
• Goldman(GS): The Median Stock Has Never Been More Overvalued.
• What Is Troubling Morgan Stanley: "We Haven’t Done Well Enough To Pack It In And Head Off To The Beach".
• Fed Worries About Deflation But Pays Banks Billions Not To Lend QE Proceeds!?
• What's Next For Apple(AAPL) And The S&P: This Is What The Charts Say. (graph)
• The Mouths Of Madness - The Grand Delusion Of Central Bankers.
• After An Abysmal First Quarter, Second Quarter Earnings Expectations Are Already Tumbling. (graph)
• Waves Not Solid Cycles - Echoes Of 2008 Warrant Worries.
• IceCap Asset Management: "The Trend Continues".
• A Premier League football match has been abandoned after a 'suspect package' was found in the stadium.

Business Insider:

• There's a major problem with the idea that Apple(AAPL) should buy Tesla(TSLA).
• Donald Trump rages at New York Times after extensive report about his treatment of women.
• America's former top spy is worried about Donald Trump.
• Ryan says there's no timeline for unifying behind Trump.
• OPEC is dead.
• Netanyahu: Iran is 'preparing another Holocaust'.
• Miami is starting to feel Brazil's political crisis.
• The ECB has become too powerful.
• The M&A bubble is bursting.

Reuters:

• China goes cold on platinum jewelry, crimping world demand. China's penchant for luxury platinum jewelry is fading despite lower global prices, leaving world demand for the metal exposed to sharper decline. China is by far the biggest market for platinum jewelry, making up more than 60 percent of global manufacturing use for the white metal in 2015. A close to double-digit drop in Chinese platinum jewelry demand is expected this year, GFMS analysts said ahead of the industry gathering London Platinum Week, which starts on Monday.
• China April economic activity data disappoints, hiking recovery doubts.

Telegraph: 

• Household debt binge could compound downturn, warns Carney. Mark Carney has warned that the scale of Britain’s household debt threatens to compound an economic downturn, saying that financial conditions are as uncertain as during the debt-fuelled recession of the early 1990s.
• Over 300 Business Leaders Call for Brexit in Letter.

Night Trading

• Asian indices are -.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 144.75 +1.0 basis point.
• Asia Pacific Sovereign CDS Index 53.75 +.75 basis point.
• Bloomberg Emerging Markets Currency Index 71.57 +.32%.
• S&P 500 futures -.01%.
• NASDAQ 100 futures -.02%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (A)/.39 

Economic Releases

8:30 am EST

• Empire Manufacturing for May is estimated to fall to 6.35 versus 9.56 in April. 

10:00 am EST

• The NAHB Housing Market Index for May is estimated to rise to 59.0 versus 58.0 in April.

4:00 pm EST

• Net Long-Term TIC Flows for March.  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Kashkari speaking, Japan Industrial Production report and the (TASR) analyst day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly mixed. The Portfolio is 25% net long heading into the week.