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08Apr2015 Pre-Market Commentary: Markets Flat Ahead Of FMOC Meeting Today, Oil Trading Sideways, U.S. Dollar Off Yesterday's Highs

Written by Gary

U.S. stock index futures are fractionally higher and the markets are expected to open flat and trend down marginally until the FMOC meeting this afternoon. I would not look for much action before the 2 pm meeting.

Oil is trading sideways and the U.S. Dollar is trending down fractionally while Wall Street is greeting what is expected to be the worst earnings season since 2009 with a gigantic shrug.


Here is the current market situation from CNN Money

European markets are mixed. The FTSE 100 is higher by 0.35%, while the DAX is leading the CAC 40 lower. They are down 0.37% and 0.04% respectively.

What Is Moving the Markets

Here are the headlines moving the markets.

Royal Dutch Shell to Buy BG Group for Nearly $70 Billion

The BG Group is a major player in liquefied natural gas, and if the deal is completed, the sale would be a rare bright spot for energy deal makers.

Shell challenges Exxon dominance with $70 billion bid for BG

LONDON (Reuters) - Royal Dutch Shell agreed to buy smaller rival BG Group for 47 billion pounds ($70.2 billion) in the first major energy industry merger in more than a decade, closing the gap on market leader U.S. ExxonMobil after a plunge in prices.

One $70 billion deal, just three advisers for Shell and BG

LONDON (Reuters) - Royal Dutch Shell's $70 billion takeover of British energy firm BG stands out because only two investment banks and a boutique firm were selected for the advisory work.

Powell, citing crisis damage, says rate hikes to proceed gradually after liftoff

WASHINGTON (Reuters) - The effects of the financial crisis are making it hard for the Federal Reserve to measure the level of slack in the U.S. economy, so upcoming rate hikes should proceed at a slow pace as the central bank feels its way back to normal, Fed governor Jerome Powell said on Wednesday.

Swiss Government Becomes First Ever To Issue 10Y Debt At A Negative Yield

It had to happen sooner or later... in the new normal of yield-reaching, collateral-shortage-ing, money-printing economalypse, the Swiss government has become the first ever to issue a 10Y sovereign bond at a negative yield. As WSJ notes, while several European countries have sold government debt at negative yields up to five years of maturity - which means investors effectively pay for the privilege of buying it - no other country has previously stretched this out as long as 10 years. Mission Accomplished Central Bankers?

As The Wall Street Journal reports,

The Alpine country sold a total of 377.9 million Swiss francs (about $391 million) of bonds maturing in 2025 and 2049. On the 10-year slice, the yield was -0.055%, compared with 0.011% on its most recent similar bond two months ago.

In the post-issuance secondary market, Swiss bonds maturing up to 11 years in the future already trade with yields under 0%. But such low yields at the initial point of sale "illustrate well the world we live in," said Jan von Gerich, chief strategist at Nordea, referring to collapsing yields on debt amid widespread stimulus from central banks around the world.

Futures flat ahead of Fed minutes; M&A eyed

NEW YORK (Reuters) - U.S. stock index futures were little changed on Wednesday, with traders eyeing a $70 billion mega-deal in the energy space and ahead of minutes from the most recent meeting of the Federal Reserve's policy-setting committee.

Oil & gas mega-merger keeps global stocks fizzing

LONDON (Reuters) - Global stocks remained upbeat on Wednesday as a $70 billion mega-deal in the European oil and gas sector stoked the merger and acquisition fever that has gripped investors this week.

Frontrunning: April 8


Shell Will Buy BG Group for $70 Billion in Cash and Shares (BBG)

IMF warns of long period of lower growth (FT)

Wall Street sanguine as it heads into worst earnings season in six years (Reuters)

Switzerland First With 10-Year Bond at Negative Yield (WSJ)

U.S. Dot-Com Bubble Was Nothing Compared to Today's China Prices (BBG)

Rahm Emanuel Re-Elected as Mayor of Fiscally Ravaged Chicago (BBG)

Oil falls on U.S. stock build, record Saudi output (Reuters)

White South Carolina policeman charged with murdering black man (Reuters)

German Factory Orders Drop for Second Month (BBG)

U.S. mortgage applications rise in latest week : MBA

NEW YORK, (Reuters) - Applications for U.S. home mortgages rose last week as interest rates declined, an industry group said on Wednesday.

Futures Flat On Minutes Day; Chinese Bubble Spills Into Hong Kong; Biggest Energy M&A Deal In Over A Decade

While US equity futures are largely unchanged, if only ahead of the now daily pre-open market-wide ramp, things in Asia have continued on their bubbly flurry, where China's Shanghai Composite briefly rose above 4000 for the first time since 2008, but it was the surge in the Hong Kong stock market that showed the Chinese bubble is finally spilling over, in the form of a blistering rally on the Hang Seng which rose nearly 4% on immense volume which at 250 billion Hong Kong dollars ($32 billion) was three times the average daily volume over the past year and nearly 20% more than the previous record volume day in October 2007, at the height of the pre-financial crisis bubble.

According to the WSJ, there were several causes for the surge in cash leaving the mainland for Hong Kong: "China's securities regulator announced at the end of March that mutual funds could access the Stock Connect, which was previously limited to wealthy individual investors. More broadly, mainland investors may suddenly see Hong Kong's stocks as bargains now that their hometown shares have risen so high. Before Wednesday, shares of the exact same company that are dual listed in Hong Kong and Shanghai were trading at an average premium of nearly 35% in Shanghai. Winners Wednesday included companies that trade at a big discount in Hong Kong, such as the major Chinese banks."

The other main event that comes hours after Saudi Arabia announced it would play hardball and instead of leaving its own production flat, it is boosting production quite sharply to claw back market share, leading to an announcement overnight that Shell would agree UK energy producer BP Group PLC in a whopping $70 billion deal, the 14th largest ever corporate takeover. The deal is the the latest sign of how tumbling energy prices are shaking up the global oil-and-gas industry, and shows that even further production surges are likely on the horizon as overheads are cut to allow for lower breakeven prices, m ...

Oil falls on U.S. stock build, record Saudi output

LONDON (Reuters) - Oil prices fell towards $58 a barrel on Wednesday as industry data showed a larger-than-expected weekly increase in U.S. stockpiles and as Saudi Arabia reported record output in March.

Shanghai-Hong Kong stock connect sees record turnover

SHANGHAI/HONG KONG (Reuters) - Chinese investors, for the first time, used the entire 10.5 billion yuan ($1.7 billion) daily quota in a cross-border program buying Hong Kong stocks, boosting turnover under the Shanghai-Hong Kong Stock Connect to a record.

Greece has not asked Russia for aid, Greek official says

MOSCOW (Reuters) - Greece has not asked Russia for money to help cope with its debt and financial problems and wants to resolve them within the European Union, a Greek government official said on Wednesday.

Cubans Eager for More Clarity on Doing Business With U.S.

More than three months after a thaw with the United States was announced, supplies remain short in Cuba, and weak technology impedes progress.

Explaining the Greek Debt Crisis

The weak link in the euro zone is struggling to tame its debt as its people and its creditors grow more restive.

Motorola Solutions Fails To Find A Buyer, What Next?

Motorola Solutions has failed to find a buyer, according to a recent report by Bloomberg. Several unconfirmed reports had surfaced last month about Motorola Solutions putting itself up for sale. It was reportedly in talks with certain private equity funds and large industrial companies such as Honeywell International and Tyco International, but failed to reach an agreement. There could be several reasons for this, including doubts over the company's technological advantage in the long run, recent lackluster top-line performance, and seemingly limited opportunities for growth. Owing to the niche market in which it operates and dependence on broader government spending for growth, there seems to be limited meaningful upside potential for the company's earnings per share, which declined by 33% (adjusted EPS) last year, in the current scenario. In addition to the limited earnings potential, the fact that there are likely to be very little synergies between any industrial conglomerate and Motorola must be weighing against the latter. The only companies that could show an interest in its acquisition are perhaps defense companies or telecom providers, although the benefits in such cases also are not too obvious.

SAP's Worst of Worst Cases Arise in Our Downside Scenarios Analysis

SAP spent 2 years and considerable resources on the development of S/4HANA, and its success is crucial for the company's future. This is because S/4HANA is SAP's answer to rising competition from rivals Oracle and Salesforce. So far, even in the face of heavy competition from the two biggest cloud computing companies in the world, SAP has managed to maintain largely stable revenues and margins. Whether it is able to hold its ground in the future also to protect its top and bottom lines, will determine the course of the company.

German Factory Orders Tumble By Most In 9 Months, Spanish Bond Yields Turn Negative

Bad news is even better news in Europe. "Core" Germany saw its powerhouse economy suffer the biggest drop in Factory Orders since June (-1.3% YoY) missing expectations for the 2nd month in a row - the first consecutive drop since may 2013 (despite German business confidence rising for the 5th month in a row) as apparently devaluing the EU's currency is not encouraging business. The result... DAX futures surging, bond yields tumbling and Spanish bond yields to 6 months are now negative...

Not pretty...

But that's great news for stocks...

And now Spanish bond yields are negative to 6 months... (3month has been negative for a week)

Charts: Bloomberg

Royal Dutch Shell to Buy BG Group for $70 Billion

The BG Group, a British company, is a major player in the market for liquefied natural gas. Shell has invested heavily in the L.N.G. business.

European Derivatives Market Breaks... And Futures Surge

Because nothing says "liquid and efficient" market like yet another broken market. Just as we saw yesterday afternoon as US equities collapsed into the close, Euronext has broken in the pre-open European markets...

*EURONEXT SAYS EXPERIENCING SOME TECHNICAL ISSUES

*EURONEXT DERIVATIVES MKT STATUS - SYSTEMS AFFECTED: CCG ISSUE

*EURONEXT: CCG NUMBER 10, 11, 12 MAY SEE CONNECTIVITY ISSUE

and sure enough, DAX stock futures surge...

And so did US equity futures...

Charts: Bloomberg

Wall Street sanguine as it heads into worst earnings season in six years

NEW YORK (Reuters) - Wall Street is greeting what is expected to be the worst earnings season since 2009 with a gigantic shrug.

Earnings Summary for Today

Earnings Calendar provided by Investing.com.

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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