Tuesday Watch

Evening Headlines

Bloomberg:

• China's Best Bank Called 'Mirage' of Shadow Lending. Case of Bank of Tangshan highlights opaque financial risks across the nation. The bank is the most prominent example of the off-loan-book wizardry that’s turbo-charging some of China’s small and mid-sized banks, creating opaque risks that could lead to failures, bailouts or liquidity shocks that jolt the nation and global markets in the years ahead.
• The Risks From China's Shadow Banking Industry. (video)
• Merkel Says Brexit Is U.K.’s Loss While Pledging Results for EU. German Chancellor Angela Merkel said the European Union needs to show it can prosper without the U.K. as she and the leaders of France and Italy sought to chart a way forward for Europe. “We respect Britain’s decision but naturally also want to make it clear that the other 27 are working for a prosperous, safe Europe,” said Merkel, standing alongside President Francois Hollande and Prime Minister Matteo Renzi on an Italian aircraft carrier to show resolve in mastering the continent’s crises. “We need results,” she said.
• Asia Stocks Swing as Investors Await Yellen, Energy Shares Fall. Asian stocks swung between gains and losses as energy producers declined after crude oil futures slumped and investors weighed the chances of higher U.S. interest rates this year. The MSCI Asia Pacific Index rose less than 0.1 percent to 139.07 as of 9:11 a.m. in Tokyo, after falling as much as 0.1 percent. Investors are awaiting a speech by Federal Reserve Chair Janet Yellen later this week at Jackson Hole, Wyoming, following hawkish comments from Fed Vice Chairman Stanley Fischer and New York Fed President William Dudley. The odds the Fed will raise borrowing costs in December climbed to 51 percent, while traders are betting there’s a 24 percent chance of tightening next month, data compiled by Bloomberg show.
• Oil Faces Dark Clouds as China Chases Blue Skies for G-20 Summit. China is throwing the world’s leaders a party, and oil bulls may be hit with the hangover. Authorities in the Asian nation have ordered hundreds of factories to curb activity ahead of the Group of 20 summit in Hangzhou in early September, in a bid to ensure blue skies when the red carpet is rolled out. The curtailments, along with flooding earlier this summer, may cut petroleum demand in the world’s second-biggest oil consumer by 250,000 barrels a day in the third quarter, according to industry consultant Energy Aspects Ltd.

Fox News:

• Clinton Foundation executive left 148 phone messages for Hillary Clinton's top aide. (video) 

CNBC:

• Monetary policy has nationalized the Japan stock market: CLSA.
• Zika could spread to other Gulf Coast states, health official warns. (video)

Zero Hedge: 

• Meet The Hedge Fund Puppetmaster Behind The US Presidential Election.
• Jeffrey Miller: "I Don’t Know How Dumb Things Will Get Before Central Banks Finally Stop".
• Trump Demands Special Prosecutor To Investigate Clinton's "Email Crimes". (video)
• "Selling Puts" - Latest Pension Strategy Is Truly 2006 All Over Again.
• Bill Gates Net Worth Tops $90 Billion For First Time: 0.5% Of US GDP. (graph)
• As Predicted, Obamacare Is Absolutely Killing The Middle Class.
• Merkel Accused Of "Fearmongering" After Telling Germans To Stockpile Food "In Case Of Catastrophe".
• One Trader's Advice If The "Ultimate Breakdown Is Likely To Be Sudden, Intense And Large".
• Jim Grant: "This Will Turn Out To Be Very Bad For Many People".
• Congress Demand An Explanation For Epipen Price Increases; Mylan Slides.
• Fed Admits Another $4 Trillion In QE Will Be Needed To Offset An "Economic Shock".
• "Orchestrated Chaos" - Stocks Rollercoaster Despite Oil, Dollar, Bond Yield Tumble. (graph)

Business Insider:

• The oil rally isn't here to stay.

Telegraph:

• China caught in 'dead money' trap as central bank pleads for fiscal stimulus.

Night Trading 

• Asian equity indices are -.25% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 112.0 +.5 basis point.
• Asia Pacific Sovereign CDS Index 42.50 -.5 basis point.
• Bloomberg Emerging Markets Currency Index 73.38 +.03%. 
• S&P 500 futures +.01%. 
• NASDAQ 100 futures +.04%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (BBY)/.43
• (SJM)/1.73
• (TOL)/.61
• (TSL)/.32
• (INTU)/-.02 

Economic Releases  
9:45 am

• Preliminary Markit US Manufacturing PMI for August is estimated to fall to 52.6 versus 52.9 in July.

10:00 am EST

• Richmond Fed Manufacturing Index for August is estimated to fall to 6.0 versus 10.0 in July.
• New Home Sales for July are estimated to fall to 580K versus 592K in June.

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Japan Manufacturing PMI 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 mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.