Tuesday, May 30, 2017

Wednesday Watch

Evening Headlines
  • China Manufacturing Gauge Exceeds Estimates as Growth Holds Up. China’s official factory gauge held up and exceeded estimates, adding to signs the world’s second-largest economy has maintained some of its first-quarter momentum. The manufacturing purchasing managers index remained at 51.2 for a second straight month in May, compared with a median estimate of 51 in a Bloomberg survey of economists. The non-manufacturing PMI rose to 54.5 after matching a six-month low of 54 a month earlier. Numbers higher than 50 indicate improving conditions.
  • Zhou Says China's Investment Growth Likely to Moderate. (video)
  • Japan's Industrial Production Hits Highest Level Since 2008. Japan’s industrial output rebounded in April, hitting the highest level since 2008, as overseas demand continued to support the nation’s economic recovery.
  • Asian Stocks Retreat; Pound Drops After U.K. Poll. Asian equities slipped as investors assessed the strength of global economic growth and the path for U.S. monetary policy. The British pound dropped amid election concerns. Stocks in Japan led declines in Asia as energy shares retreated with oil prices. The British pound dropped for the first time this week as a poll showed Theresa May’s Conservative Party may miss a majority. The yen was steady after three days of gains. The yield on 10-year Treasuries edged higher after Tuesday’s declines. Japan’s Topix fell 0.3 percent, after two days of gains. Australia’s S&P/ASX 200 was little changed, while South Korea’s Kospi swung between gains and losses.
  • Once Costly Deep-Sea Oil Turns Cheap, to OPEC's Dismay. Reports of deep-sea drilling’s demise in a world of sub-$100 oil may have been greatly exaggerated, much to OPEC’s dismay. Pumping crude from seabeds thousands of feet below water is turning cheaper as producers streamline operations and prioritize drilling in core wells, according to Wood Mackenzie Ltd. That means oil at $50 a barrel could sustain some of these projects by next year, down from an average break-even price of about $62 in the first quarter and $75 in 2014, the energy consultancy estimates.
  • Another Warning Sign Flashes for Subprime Auto Loans. Fewer subprime borrowers are paying off their auto loans early, a possible sign that consumers with weaker credit scores are struggling more, according to a report by Wells Fargo & Co. researchers.
Wall Street Journal:
Zero Hedge:
Business Insider: 
Night Trading 
  • Asian equity indices are unch. to +.25% 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 72.93 unch.
  • S&P 500 futures +.03%.
  • NASDAQ 100 futures +.09%.
Morning Preview Links

Earnings of Note

  • (ADI)/.84
  • (KORS)/.70
  • (VRA)/-.13
  • (PANW)/.55
  • (SMTC)/.41
Economic Releases 
9:45 am 
  • The Chicago Purchasing Manager for May is estimated to fall to 57.0 versus 58.3 in April.
10:00 am EST
  • Pending Home Sales MoM for April are estimated to rise +.5% versus a -.8% decline in March.
2:00 pm EST
  • US Fed Beige Book Report.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Williams speaking, China Manufacturing PMI report, German Unemployment Rate, weekly MBA mortgage applications report, weekly US retail sales reports, Bernstein Strategic Decisions Conference, RBC Consumer/Retail Conference, Cowen Tech/Media/Telecom Conference, (HTZ) annual meeting, (MRO) annual meeting and the (CVX) annual meeting could also impact trading today.
BOTTOM LINE:  Asian indices are mostly higher, weighed down by commodity and industrial 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 day.

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