Friday Watch

Evening Headlines

Bloomberg:

• PBOC Seen Switching to Broad Monetary Tightening as Soon as 2017. With China’s economy stable for now and home prices in major cities soaring, analysts are dialing back forecasts for additional monetary stimulus, with some betting on a switch to tightening mode. And as its policy framework evolves, The People’s Bank of China will make its next broad move by guiding interest rates through a corridor, rather than the traditional approach of changes to benchmark lending and deposit rates, according to a Bloomberg survey of 18 economists from Sept. 19 to 26. Here’s a snapshot of the main findings:
• China Homes Beat Stocks, Wine as Buying Frenzy Stokes Bubble. Even amid the slowest economic growth in a quarter century, China’s homeowners are enjoying returns that put other asset classes to shame - on paper, anyway. Home prices rose the most in six years last month, defying new policies to curb excessive speculation in big cities and government warnings about asset bubbles. While gains have been most pronounced in big cities like Shenzhen, where home prices are up about 60 percent in the past year, smaller cities such as Xiamen have also seen runaway growth, where prices have risen more than 38 percent.
• Japan’s Consumer Prices Fall for Sixth Straight Month in August. (video) Japan’s consumer prices fell for a sixth straight month in August, underscoring the challenge Bank that Japan Governor Haruhiko Kuroda faces as he tries to spur 2 percent inflation and reflate the nation’s economy. Industrial production made a modest gain, while household spending slumped and the jobless rate held near the lowest since 1995.
• The U.K. Economy Is Flying Blind 100 Days After the Brexit Vote. Pubs, retailers, airlines. Name the business and it’s likely they’re looking for an answer to what Brexit will actually mean.
• Asian Stocks Fall as Banks Are Dragged Lower by Global Concerns. What’s set to be the best quarter for Asian stocks since 2012 is ending on a sour note as concern about the financial health of Germany’s biggest lender unnerves investors. The dollar strengthened versus most peers after U.S. data bolstered the case for an interest-rate hike this year. Financial shares were the biggest drag on the MSCI Asia Pacific Index after Deutsche Bank AG slid to a record low in the U.S. as Bloomberg News reported that some hedge funds have cut their exposure to the lender. S&P 500 Index futures also fell along with contracts on the U.K.’s FTSE 100. The MSCI Asia Pacific Index dropped 0.8 percent as of 9:20 a.m. Tokyo time, trimming its quarterly advanced to 8.7 percent. Financial stocks accounted for about a quarter of the decline in the benchmark. Japan’s Topix index slid 1.8 percent as key stock measures lost ground across markets open for trading. Markets in mainland China are shut next week for National Day holidays.
• Republicans Slam Clinton for Deutsche Speeches as Firm Slumps. The Republican National Committee reignited calls for Hillary Clinton to release details surrounding her paid private speeches to Deutsche Bank on Thursday just as the firm's New York-listed shares fell to a record low. Officials from the German-bank, which U.S. regulators slapped with a massive $14 billion fine earlier this month, paid the Clintons $955,000 between 2012 and 2014 for a total of four speeches, according to financial disclosure records. Hillary Clinton was paid $225,000 for an April 24, 2013 speech and $260,000 for an Oct. 7, 2014 speech. Her husband was paid $200,000 for an Oct. 10, 2012 speech and $270,000 for a speech he gave on Aug. 27, 2014.
• Specialty Pharma Stocks Tumble in Fear of California's Drug Price Referendum. Big Pharma has more to worry about than just Hillary Clinton.

Wall Street Journal:

• Hackers Infect Army of Cameras, DVRs for Massive Internet Attacks. Hacking shows vulnerability of internet devices, security experts say.
• Iraq Quarrel on Production Number Could Sink OPEC Deal. Iraq disagrees with the output numbers that underpin an OPEC plan to boost oil prices

Fox News:

• AGs file suit in last-ditch bid to stop hand-off of internet control. (video) Republican attorneys general are making a last-ditch bid to block the Obama administration from ceding U.S. oversight of the internet’s domain name system, filing suit in federal court ahead of an imminent deadline for the hand-off. The AGs from Texas, Arizona, Oklahoma and Nevada asked a judge late Wednesday to step in and stop the transition to an international oversight body, after GOP lawmakers failed to stall the move as part of a short-term spending bill.

MarketWatch:

• Deutsche Bank(DB) crisis threatens to roil global markets.

CNBC:

• Here's why a single report on Deutsche Bank can hit the markets. (video) The markets were fairly quiet midday, with traders focused on the public flaying of Wells Fargo CEO John Stumpf in Congress, when a report from Bloomberg on Deutsche Bank dropped the markets.

Zero Hedge:

• The Run Begins: Deutsche Bank Hedge Fund Clients Withdraw Excess Cash++.
• Trump's Right - Morgan Stanley Warns "Big, Fat, Ugly Bubble" Is "An Illusion" Driven By The Fed.
• Yellen Says Fed Buying Stocks Is "A Good Thing To Think About" And Could Help In A Downturn.
• Just Spotted In Front Of The New York Fed. (pic)
• Gundlach: "The Market Will Keep Pushing Deutsche Bank(DB) Lower Until It Is Bailed Out". (graph)
• Just 3 Things. (graph)
• BofA Stunned By Record VIX Roundtrip; Fears "Fragile Market". (graph)
• Stocks Dump As Deutsche Doubts Drum Up 2008 Dread. (graph)

Business Insider:

• Microsoft(MSFT) to Salesforce(CRM): Game on.

Telegraph:

• German bank woes will dash Frankfurt’s great dream.

21st Century Business Herald:

• China Should Curb Home Price Rises With Taxes, Land Policy. China should impose property taxes and adjust its land auction system to curb rapid home price rises, Yin Zhongli, researcher with the Chinese Academy of Social Sciences, writes in an article.

Night Trading 

• Asian equity indices are -1.25% to -.5% on average.
• Asia Ex-Japan Investment Grade CDS Index 118.25 +5.75 basis points. 
• Asia Pacific Sovereign CDS Index 32.75 +1.5 basis points.
• Bloomberg Emerging Markets Currency Index 72.76 -.10%. 
• S&P 500 futures -.30%. 
• NASDAQ 100 futures -.37%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (MKC)/.94

Economic Releases
8:30 am EST

• Personal Income for August is estimated to rise +.2% versus a +.4% gain in July.
• Personal Spending for August is estimated to rise +.1% versus a +.3% gain in July. 
• The PCE Core MoM for August is estimated to rise +.2% versus a +.1% gain in July. 

9:45 am EST

• The Chicago Purchasing Manager for September is estimated to rise to 52.0 versus 51.5 in August. 

10:00 am EST

• Final Univ. of Mich. Consumer Sentiment  for September is estimated to rise to 90.0 versus a prior estimate of 89.8. 
  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The China Manufacturing PMI report and the Canadian GDP report could also impact trading today.

BOTTOM LINE:  Asian indices are lower, weighed down by financial 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 25% net long heading into the day.