Tuesday Watch

Today's Headlines

Bloomberg:

• Draghi Says Euro Area Still Requires ECB Monetary Support. (video) The euro area still needs expansive monetary stimulus to restore stable inflation even as its economy accelerates, European Central Bank President Mario Draghi said. “We remain firmly convinced that an extraordinary amount of monetary policy support, including through our forward guidance, is still necessary,” Draghi told lawmakers on Monday in Brussels. “Domestic cost pressures, notably from wages, are still insufficient to support a durable and self-sustaining convergence of inflation toward our medium-term objective.”

• Merkel Says U.S. Ties Shouldn't Deter Europe From Own Path. German Chancellor Angela Merkel said she remains a “committed trans-Atlanticist” who wants strong ties with the U.S., even as she renewed her warning that reliable relations with her country’s closest post-World War II ally may be a thing of the past. Following global reaction to comments she made Sunday, Merkel stood her ground for a second day, saying it was good that last week’s Group of Seven summit “didn’t paper over” a clash on climate change that pitted President Donald Trump against the other six leaders.

• Japan’s Unemployment Rate Holds at Two-Decade Low in April.

• Luxury Spending to Rebound in 2017 on Europe, China, Bain Says. Tourism in Spain and the U.K. will lead a rebound in European luxury spending this year, while Chinese domestic consumption also increases, Bain & Co. said, raising its forecast for global growth in 2017. Sales of items such as designer handbags and fine jewelry will rise 2 percent to 4 percent to as much as 259 billion euros ($290 billion), Bain said in a report Monday. The consultancy had predicted growth of 1 percent to 2 percent in December, and the forecasts exclude currency swings.

• Robots May Help Defuse Demographic Time Bomb in Japan, Germany. Manufacturing powerhouses will find it easier to adapt. Japan and Germany may be sitting on a ticking demographic time bomb where aging populations begin to drag down economic growth. Good thing they’re also prime candidates for robot revolutions. Increased automation and more use of robotic technology in these manufacturing powerhouses could help cushion the impact, according to Moody’s Investors Service.

• A Quick Guide to How Brazil's New Political Crisis May Play Out.

• Stocks Meander in Holiday-Hit Trading; Pound Rises. Global stocks were mixed and the dollar and euro traded sideways amid thin trading as investors weighed the latest comments from a Federal Reserve official on the path of U.S. borrowing costs and Mario Draghi’s dovish message to the European Parliament. With markets in the U.K., U.S. and China closed for holidays, volumes were depressed, limiting price movements. Sterling led gains among G-10 currencies as it recouped some of Friday’s retreat, and Italian assets fell as former Prime Minister Matteo Renzi raised the prospect of an early election. Brazil’s real dropped in the wake of Friday’s decision by Moody’s Investors Service to lower the country’s credit outlook, while Mexico’s peso was little changed even after bullish wagers fell. South Africa’s rand dropped after President Jacob Zuma survived a bid by some members of his party to oust him. The Stoxx Europe 600 Index fell by less than 0.1 percent as of 12:57 p.m. in New York.
  Futures on the S&P 500 Index rose by less than 0.1 percent after the underlying gauge closed at a record high on Friday.

Wall Street Journal:

• GOP’s Proposed Tax Changes Are No Match for Status Quo. Republicans’ boldest ideas for changes are on political life support as plans collide with the tax system’s reality.

• Robert Mueller Gets Off to Fast Start as Special Counsel in Russia Probe. Former FBI head builds staff, budget for investigation into meddling in 2016 election.

• Credit Scores Hit Record High as Recession Wounds Heal. More than six million U.S. adults will have personal bankruptcies disappear over the next five years, according to a recent report. 

• Apple(AAPL): Supercycle Hopes Drive Super-sized Bets. Ahead of developers’ conference, investors are stacking bets on Apple’s next iPhone.

• For Hotels, There’s No Room Left for Online Travel Agencies. Major chains launch marketing campaigns to woo customers away from Expedia, Priceline. 

• What We Remember on Memorial Day. From the Civil War to Vietnam and beyond, Americans have struggled to reconcile the duty to honor the war dead with the need to pass historical judgment.

Fox News:

• President Trump gives Memorial Day Address at Arlington National Cemetery. (video)

CNBC:

• Bitcoin correction sees nearly $4 billion wiped off value of the cryptocurrency as price falls 19%.

• San Francisco Fed's Williams: US economy doesn't need a fiscal package.

• Digital video game sales hit $7.7 billion in April, easing from record high.

Zero Hedge: 

• Three Leakers Of Classified White House Information Said To Be Identified, Expected To Be Fired.

• "We Have Told Each Other Everything" - Highlights From Macron's First Meeting With Putin.

• Hong Kong's Housing Market Has Become "A Sea Of Madness" Central Bank Warns.

• A Problem Emerges With Europe's "Recovery": Companies Crippled By Soaring Payment Delays.

• Euro Slides After Greece Hints At Default. (graph)

• Remembering A Still Falling Hero: Small Business.

• Economists Puzzled By Unexpected Plunge In Saudi Foreign Reserves.

• Sperry: How Team Obama Tried To Hack The Election.

• Ignore OPEC, It's China That Dictates Oil Prices.

• Will The Crazy Global Debt Bubble Ever End?

• Simple (Economic) Math - Businesses Are No Longer Willing To Afford Labor.

• Italian Stocks Tumble, Yields Jump On Sudden Fears Of Early Elections.

• Markets Wrap: Stocks Flat In Quiet Session With US, UK And China Closed For Holiday.

Business Insider:

• TRUMP: North Korea shows 'great disrespect' to China 'by shooting off yet another ballistic missile'.

Night Trading

• Asian indices are -.25% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 90.75 +.25 basis point.

• Asia Pacific Sovereign CDS Index 19.25 unch.

• Bloomberg Emerging Markets Currency Index 72.91 -.11%.

• S&P 500 futures +.03%.

• NASDAQ 100 futures +.04%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (AMWD)/1.01

• (PRGO)/1.01

• (NX)/.05

Economic Releases
8:30 am EST

• Personal Income for April is estimated to rise +.4% versus a +.2% gain in March. 

• Personal Spending for April is estimated to rise +.4% versus unch. in March.

• The PCE Core MoM for April is estimated to rise +.1% versus a -.1% decline in March.

9:00 am EST

• The S&P CoreLogic CS 20-City MoM for March is estimated to rise +.8% versus a +.69% gain in February.

10:00 am EST

• The Conference Board Consumer Confidence Index for May is estimated to fall to 119.9 versus 120.3 in April.
  

10:30 am EST

• Dallas Fed Manufacturing Activity for May is estimated to fall to 15.5 versus 16.8 in April.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Eurozone CPI report, Deutsche Bank Financial Services Conference and the KeyBanc Industrial/Automotive/Transports Conference could also impact trading today.

BOTTOM LINE: Asian indices are slightly lower, weighed down by commodity and financial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the week.