First Call - Hedge Fund Telemetry

S&P futures up 0.3% after US equities finished mostly lower on Monday. Asian markets mixed overnight. China lagged. Hong Kong and South Korea closed for public holidays. European markets higher with Italy a standout. Treasuries weaker across the curve with 10-year yields closing in on the mid-May highs for 2018. Dollar index little changed. Gold unchanged. WTI crude up 0.5% after rallying on the back of the favorable OPEC/Russia developments yesterday.
Pretty quiet from a headline perspective. Bond yield backup in focus ahead of tomorrow’s widely expected Fed rate hike, though nothing specific behind the move. Higher rate backup really has not been an issue for equities from a relative valuation or multiple compression perspective, though it has been cited as a factor in the recent rotation out of growth/momentum and defensive plays and into value/cyclical pockets of the market.
The FOMC decision on Wed could place temporary upside pressure on the dollar (removing "accommodative" from the statement is largely expected at this point and thus may not be as dovish as it would have been w/the DXY up near ~96, esp. with the dots likely to stay approximately unchanged).
Nothing particularly incremental in the latest batch of trade headlines. Some focus on US efforts to secure trade deals with allies in Asia and Europe, while continuing to ratchet up the pressure on China. However, a couple of reports today also discussed how quitting China will be hard to do. Italy the other big macro story with both stocks and bonds rallying on reports that the government will keep the budget deficit below 2% of GDP next year.
While Trump is pushing forward w/new trade deals on some fronts, there still isn’t any sign of a détente w/China. Trump seems likely to soon authorize Lighthizer to proceed w/consideration of tariffing the remaining ~$250B worth of Chinese imports – WSJ
NAFTA talks hit a rough patch – negotiations w/Canada broke down last week and no new high-level talks are on the schedule – WSJ
A senior Chinese official said it is difficult to proceed w/trade negotiations w/the US given Washington is "putting a knife to China’s neck" Reuters
Not much corporate news. Co-founders of Instagram leaving Facebook. Micheal Kors confirmed acquisition of Versace for just over $2.1B. FT discussed how global M&A is running 40% higher than the year-earlier period and ahead of record pace set in 2007.

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