Thursday, December 15, 2016

Friday Watch

Evening Headlines
  • Guess Which Huge Asian Country Is Afraid of Capital Flight? After years of encouraging foreign deals, China gets worried. For years, China has encouraged its companies to make acquisitions overseas to gain access to new technology, brands, and management expertise. Under its “Go Abroad” policy, or zou chuqu, Beijing has loosened approval requirements for international deals and eased capital controls. In the first 10 months of 2016, outbound direct investment by Chinese enterprises reached $146 billion, up 53.3 percent from the same period a year ago, according to China’s Ministry of Commerce. That push may stall as Chinese regulators redouble efforts to clamp down on capital flight amid concern that a weakening currency could further spur outflows
  • Singapore Dollar Likely to Slide to Levels Seen After 2008 Crisis, Says Policy Sage. The Singapore dollar is likely to slide to levels seen in the aftermath of the global financial crisis as the Monetary Authority of Singapore resumes easing policy in April. So says an analyst who’s correctly predicted the last three central bank decisions. The authority, which uses the currency as a tool to manage the economy rather than interest rates, is set to lower the center of the band within which it steers the local dollar as Singapore’s export-driven economy feels more pain from China’s slowdown in 2017, according to Vaninder Singh, an economist at NatWest Markets, part of Royal Bank of Scotland Group Plc. The currency is set to weaken past S$1.45 against the greenback within the next six months, Singh said, a level last seen in August 2009.
  • Dollar Solidifies Its Climb on Fed Outlook as Japan Stocks Rise. The dollar is cementing its domination of the currency market, trading near an almost 14-year high versus the euro as the Federal Reserve’s more hawkish outlook invigorates its post-election rally. Japanese stocks advanced as bonds extended their drop. The greenback headed for its best week in a month against major peers, after surging to its strongest point since 2003 versus the euro and to a 10-month high against the yen. The yen’s losses helped the Topix index extend gains at its highest level this year as Korea’s won extended its drop. Yields on Japanese debt due in a decade touched their highest level since January after the Fed’s only interest-rate hike of 2016 came with a boost to the number of increases expected next year. Oil attempted a rebound as copper rose. The MSCI Asia Pacific Index added .3% as of 10:07 a.m. Tokyo time, reducing its decline in the week to 1.7%, still the worst weekly performance since October.
  • OPEC Threatened by Tiny Oklahoma Town With Soaring Supplies. For OPEC, there are few enemies more fearsome than the tiny Oklahoma town of Cushing. With oil inventories at Cushing creeping near an all-time high, U.S. benchmark futures prices are struggling to advance despite the promised production cuts agreed to by OPEC, Russia and other producers. And the storage tanks are likely to stay full as refiners park crude in Oklahoma to lower their tax bills. Cushing, which prides itself as the “pipeline crossroads of the world,” is the delivery point for the West Texas Intermediate crude contract. With tanks that can hold 77 million barrels of crude, enough to supply France for two months, it’s the biggest storage hub in the U.S. The last high point there came in May. Now, after a brief hiatus, the tanks are filling up once again. For the OPEC-led efforts to boost prices, that’s a major problem.
Wall Street Journal: 
Zero Hedge: 
Economic Information Daily:
  • Economist Sees Fed Hike to Add to Yuan Downward Pressure. The Fed rate hike may also lead to capital outflows from China, which will have big impact on China's stock and property markets, Yi Xianrong, a former researcher at Chinese Academy of Social Sciences, writes in a commentary.
Night Trading 
  • Asian equity indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 123.75 +1.0 basis point.
  • Asia Pacific Sovereign CDS Index 37.25 +1.0 basis point.
  • Bloomberg Emerging Markets Currency Index 69.46 -.06%
  • S&P 500 futures +.03%. 
  • NASDAQ 100 futures +.04%.
Morning Preview Links

Earnings of Note

  • None of note
Economic Releases 
8:30 am EST
  • Housing Starts for November are estimated to fall to 1230K versus 1323K in October.  
  • Building Permits for November are estimated to rise to 1240K versus 1229K in October. 
9:45 am EST
  • Preliminary Markit US Services PMI. 
Upcoming Splits 
  • None of note
Other Potential Market Movers
  • The Eurozone CPI, (HON) conference call, (AGCO) analyst briefing and the (MET) conference call could also impact trading today.
BOTTOM LINE:  Asian indices are mostly higher, boosted 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 50% net long heading into the day.

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