Tuesday, June 27, 2017

Wednesday Watch

Evening Headlines
Bloomberg: 
  • Cyberattack Reaches Asia as New Targets Hit by Ransomware Demand. (video) A new cyberattack similar to WannaCry has reached Asia after spreading from Europe to the U.S. overnight, hitting businesses, port operators and government systems. The Jawaharlal Nehru Port Trust, the facility near Mumbai which is operated by A.P. Moller-Maersk and is India’s largest container operation, was affected, according to a report by the Press Trust of India. One of the three terminals is now at a standstill because the computer systems were disabled. The attack is being carried out by the Petya virus, with users being told to pay $300 in cryptocurrency per infected computer to unlock their systems.
  • Higher Pay Could Mean 'Made in China' Equals 'Made By Robots'. In the Pearl River Delta, factory owners are being forced to invest for the future. The heartland of Chinese manufacturing is currently facing surging wages and labor shortages, two things that threaten its role as workshop to the world. Rather than succumbing to cheaper competitors though, factory owners in the Pearl River Delta are rising to the challenge.
  • Stocks Flat, Bonds Drop Amid Central Bank Comments. Stocks in Japan and Australia fluctuated after the S&P 500 Index posted its biggest loss in more than a month. Yields on 10-year debt in Australia soared the most since November. The euro held at the highest level in 10 months as ECB chief Mario Draghi offered upbeat remarks. That weighed on the dollar, while Yellen did little to support the U.S. currency. Chinese markets remain in focus after the yuan surged both onshore and overseas on Tuesday amid speculation of central bank intervention. Oil resumed its decline on signs of a supply glut. Japan’s Topix index was little changed, with a rally in banks offset by declines in technology companies. Australia’s S&P/ASX 200 index was flat. South Korea’s Kospi index lost 0.2 percent, with Samsung Electronics Co. down 1 percent.
  • UPS(UPS) to Freeze Pensions for 70,000 Workers to Reduce Costs. United Parcel Service Inc. will freeze a pension plan for about 70,000 nonunion U.S. employees because of escalating costs and volatility in determining future payments, replacing it with a different retirement benefit. UPS joins companies including DuPont Co. and Lockheed Martin Corp. in freezing pensions, which means that some or all participants may stop accumulating benefits. UPS’s retirement obligations are on top of a $1 billion jump in capital spending being planned for this year to handle a surge in e-commerce shipments.
  • Yellen Fed Ramps Up Attention Over `Somewhat Rich' Asset Prices. It’s not an alarm bell, but Federal Reserve officials are suddenly talking more about rising asset prices. Fed Chair Janet Yellen, Vice Chair Stanley Fischer and San Francisco Fed President John Williams on Tuesday all acknowledged that valuations in equity and other asset markets had risen noticeably in recent weeks. “Financial arguments are starting to take more life,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. “While you will never hear the Fed say they have lifted rates because of this, it is certainly weighing on the decision calculus in a way it wasn’t six or nine months ago.”
Wall Street Journal:
Zero Hedge:
Night Trading 
  • Asian equity indices are -.50% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 86.0 +1.0 basis point. 
  • Asia Pacific Sovereign CDS Index 19.25 +.25 basis point.
  • Bloomberg Emerging Markets Currency Index 72.88 +.02%.
  • S&P 500 futures -.04%.
  • NASDAQ 100 futures -.18%.
Morning Preview Links

Earnings of Note
Company/Estimate

  • (GIS)/.71
  • (MON)/1.74
  • (PAYX)/.53
  • (PIR)/-.05
  • (PRGS)/.37
  • (WOR)/.80
Economic Releases 
8:30 am EST
  • Advance Goods Trade Balance for May is estimated at -$66.0B versus -$67.1B in April.
  • Preliminary Wholesale Inventories MoM for May is estimated to rise +.2% versus a -.5% decline in April.
10:00 am EST
  • Pending Home Sales MoM for May is estimated to rise +1.0% versus a -1.3% decline in April.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,154,600 barrels versus a -2,451,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -288,600 barrels versus a -578,000 barrel decline the prior week. Distillate inventories are estimated to rise by +595,200 barrels versus a +1,079,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.07% versus a -.4% decline prior.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Williams speaking, Japan Retail Trade report, $28B 7Y T-Note auction, banks releasing of CCAR results, weekly MBA Mortgage Applications report and the (MCK) investor day 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.

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