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20Apr2015 Market Update: Markets Gap Up And Trend Slowly Upwards, Volume Falls To Anemic Levels And Expected Market Volatility Never Appears

Written by Gary

Markets gap up at the opening and then trend slowly up as volume trails off to anemic levels. Oil rises again as concerns over tension in the Middle East and a drop in the number of U.S. rigs drilling for crude offset comments from Saudi Arabia's oil minister that Saudi production would stay near record levels.

Where is the market volatility analysts were expecting? Are we seeing bearish signs that the markets are going to fall again?


Here is the current market situation from CNN Money

North and South American markets are broadly higher today with shares in U.S. leading the region. The S&P 500 is up 1.01% while Mexico's IPC is up 0.25% and Brazil's Bovespa is up 0.04%.

The big movers this morning and afternoon.

The nation's second-largest investment bank unveiled adjusted first-quarter earnings per share of 85 cents, topping analysts' expectations for 78 cents. Revenue, meanwhile, came in at $9.78 billion, also beating forecasts for $9.17 billion. Morgan Stanley shares were 1.28% higher in pre-market trade.

The focus will remain on Greece this week ahead of yet another deadline this Friday for the seemingly never ending negotiations. For today there's little in the way of major economic data releases but attention should be given to a speech from the RBA Governor later, in particular to see what attention he gives to the recent rebound in AUDUSD.

Oil prices eased from early highs this morning after Saudi Oil Minister Ali al-Naimi said production in the world's biggest crude exporter would stay near record peaks of around 10M bpd in April. "I have said many times we will always be happy to supply to our customers with what they want. Now they want 10 million," Naimi told Reuters. Brent crude fell to $63.76 a barrel, down from an intraday peak of $64.34, while U.S. crude dropped to $56.03/bbl, from an earlier high of $56.65.

What Is Moving the Markets

Here are the headlines moving the markets.

Wall St. bounces back with eyes on earnings, China

NEW YORK (Reuters) - U.S. stocks rose on Monday, cutting into the previous session's sharp decline, as China's steps to stimulate its slowing economy and as earnings, including those from Morgan Stanley, lured money back into equities.

ECB's Nowotny says impact of any Greek exit less now than before: TV

FRANKFURT (Reuters) - Were Greece to leave the euro, it would not have the same impact on the euro zone as it would have had two years ago, an ECB policymaker said on Monday, urging the Greek government to provide "numbers" to qualify for further aid.

As Petrobras scandal spreads, economic toll mounts for Brazil

ITABORAÃ, Brazil (Reuters) - For the 20 men hanging on at the Pousada do Trabalhador, a 600-bed boarding house on the dusty outskirts of this boom town northeast of Rio de Janeiro, the dream that Brazil's oil wealth would bring a better life was over.

Disrupt Or Be Disrupted

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Either join the disruptors or prepare to be disrupted.

Disruptive technology is a tiresome cliche, as every Twitter/ AirBnB/ Uber/ Skype/etc. wannabe start-up declares itself disruptive. That the vast majority of self-congratulatory start-ups are over-hyped and derivative should not distract us from the larger reality that some technologies do in fact disrupt how things are done.

Fossil-fueled mechanization, for example, turned an overwhelmingly rural farming society into a highly urbanized services-dominated economy.
In the more recent past, CraigsList single-handedly turned the newspaper industry from an immensely profitable license to print money (via costly classified ads) to a struggling sector with an unclear future.
Digital file-sharing turned the $14 billion music industry into a $7 billion industry.
And now driverless vehicles are poised to disrupt the taxi and trucking sectors in ways few predicted.
The core idea of Disrupt or be Disrupted is that every sector and industry that avoids being disrupted just becomes a fatter target for disruption.
Higher education is a prime example. The industry has successfully staved off disruption by maintaining a lock on credentialing/accreditation--the famous signaling value of a college diploma, which verifies nothing about what the student learned or knows.
Now that student loan debt is $1.3 trillion and the administrative bloat of higher education can no longer be obscured, the industry is ...

Raytheon to Buy Cybersecurity Firm Websense in $1.9 Billion Deal

U.S. arms maker Raytheon Co is buying network security provider Websense Inc from private equity firm Vista Equity Partners LLC in a $1.9 billion deal, the latest in the fast-growing cybersecurity market.

Oil prices rise towards $64 on Middle East tension

LONDON (Reuters) - Oil prices rose in a volatile day of trading on Monday as concerns over tension in the Middle East and a drop in the number of U.S. rigs drilling for crude offset comments from Saudi Arabia's oil minister that Saudi production would stay near record levels in April.

The Other 4/20: Peeking Through The Smoke Of America's Pot Industry

On Sunday, we suggested that the increase in traveling escorts combined with a concurrent drop in spending on alcohol and gambling bodes poorly for consumer spending in the US. Retail sales have missed expectations for four months in a row for the first time since Lehman and if you believe trends in all-cash industries are a good leading indicator for spending in the "real" economy, than you have to think that falling spending on what Vice Index creator Andrew Zatlin calls "the fun stuff" is bad news for an economy that's traditionally driven by the consumer (who, you're reminded, is buried under nonexistent wage growth at low paying jobs).

What we did not mention is that there's still one area in the vice economy that's seeing robust gains: marijuana sales. Here's Zatlin:

Colorado has hit another new â€'high' in tax revenues from retail (recreational) pot sales.

Where other vices are slowing, pot sales continue to hit new highs. That's because it's a growing business. Between new services and products and distribution channels, ther ...

Chinese tourists' luxury spending soars - Global Blue

PARIS (Reuters) - Chinese tourists spent a record amount on luxury goods last month, helped by shopping sprees in Europe as the weak euro made items cheaper than at home, VAT refund company Global Blue said.

Wall St. Opens Higher as Earnings Impress

Hasbro and Morgan Stanley turned in solid quarterly reports, and markets were higher across the board.

Morgan Stanley posts highest profit since financial crisis

(Reuters) - Wall Street investment bank Morgan Stanley reported its most profitable quarter since the financial crisis on Monday, boosted by higher revenue from trading bonds and equities.

US Equity Open Sparks Panic Buying In Crude & Stocks

Because... fun-durr-mentals...

Seriously!! Again?

Charts: bloomberg

Supreme Court rejects Rajat Gupta's insider trading appeal

WASHINGTON (Reuters) - The U.S. Supreme Court on Monday left intact the 2012 insider trading conviction of former Goldman Sachs Group Inc director Rajat Gupta.

Did Greece Just Launch Capital Controls: "Mandatory Cash Transfer" Decreed Due To "Extremely Urgent Need"

We warned last week that capital controls were inevitable and it apears the first steps have been taken (very quietly):


GREECE ISSUES DECREE: LOCAL GOVTS OBLIGED TO TRANSFER DEPOSIT RESERVES AT CENTRAL BANK

So, following the pension fund raid, the Greek government is now centralizing all Greek cash citing an "extremely urgent and unforeseen need.".

One wonders if this is per Krugman's advice?

As Bloomberg reports:

Govt decree issued today forces local govts, general govt sector entities to transfer cash reserves to the Bank of Greece.

*DECREE ON MANDATORY CASH TRANSFER POSTED IN GOVT GAZETTE

But fear not: you are being "fairly compensated" for this forced capital reallocation:


GREEK CASH RESERVES INTEREST AT BANK OF GREECE 2.5%: OFFICIAL

From Reuters:

Greece issued a ...

Greek Debt Crisis Coming To Head - Contagion?

Greek Debt Crisis Coming To Head - Contagion?

- Greece Rapidly Running Out Of Cash - Soon Must Fold To Troika Or Default
- IMF Rebuff Greek Suggestion To Delay Repayments
- ECB's Draghi Warns Potential "Grexit" Puts EU In "Uncharted Waters"
- Despite Threats, Greece Remains Defiant, Won't "Budge On Red Lines"
- ECB Considering A "Second Currency" For Greece

The Greek government and its "partners" appear to be reaching the end of the road in their negotiations to release the final €7.2 billion of its €240 billion bailout deal.

Greek drachmas Greek drachmas

Eurozone countries are demanding that the new Greek government produce a list of reforms that prove its credibility before releasing euros to them. However, Finance Minister Varoufakis is suggesting that Greece will not retreat from its red lines and did not rule out a referendum or early polls if talks remain deadlocked.

Greece is rapidly running out of cash with which to pay public sector wages, pensions and welfare payments. At the same time Greece is expected to pay €930 million which is due over the next few weeks.

It would appear as though the moment of reckoning is fast approaching.

Nomad Holdings to buy UK frozen foods maker Iglo for $2.8 billion

(Reuters) - Nomad Holdings Ltd said it would buy Iglo Foods Holdings Ltd, Europe's biggest frozen foods business and the company behind the Birds Eye brand, for about 2.6 billion euros ($2.8 billion) from a company backed by private equity group Permira.

Halliburton warns of weakness in North America, international operations

(Reuters) - Halliburton Co warned of pricing pressure for its oilfield services in North America, its largest market, and challenges in its international operations, as an extended slump in oil prices continues to force drillers to slash spending.

These Are The Biggest "Pain Trades" Right Now

By definition, "pain trades" are those which could (and usually will) inflict the most pain on the largest number of speculators. They also tend to happen increasingly more often in a time when momentum ignition algos seek to punish the weakest hands who simply immitate the large money managers.

Add an illiquid, whipsawing market, and soon in addition to a short squeeze ETF there will be a "PAIN" ETF - one which takes positions counter to whatever is the prevailing conventional wisdom.

So what are the prevailing pain trades at this moment? According to BofA's latest fund manager survey, investors are positioned for i) more asset reflation, ii) stronger US$ and iii) rising rates. "So weak US growth, a rise in EU rates & stronger Chinese production would be painful in coming weeks."

Fed's Dudley hopeful on rate hike this year

NEW YORK (Reuters) - Economic performance will determine when the Federal Reserve finally raises U.S. interest rates from near zero, an influential Fed official said on Monday, adding he hopes to tighten policy later this year.

Oscar, a Health Insurance Start-Up, Valued at $1.5 Billion

The company has raised $145 million, drawing fans among investors with its approach built on technology and friendlier customer service.

BP says taking more oil from Iraq as payment

ABU DHABI (Reuters) - BP has been lifting more crude oil cargoes in the past couple of months as payment for its work in southern Iraq, and is comfortable with that level of shipments, a senior executive of the oil company said on Monday.

Oil Slips On Saudi Record Production Promise, Specs Pile In But Blackstone Skeptical

For the 2nd day in a row, WTI crude prices are falling (back below $55) after Saudi Arabian Oil Minister Ali al-Naimi said production in the world's biggest crude exporter would stay near record peaks around 10 million barrels per day in April. The investment community remains divided over the future (perhaps more a reflection of time horizons): BofA notes Large Speculators bought crude contracts for the 3rd consecutive week - the longest streak since June 2014; but Blackstone (among other private equity firms) have stayed on the sidelines (despite plenty of cash to put to work) as public markets have exuberantly filled the void so far this year: Oil producers have been able to "raise a lot of debt and, in some cases, equity publicly at values that we wouldn't touch."

Oil prices have risen over the last few week prompting excitement that the 'slump' is over - but the last 2 days have seen notable selling pressure...

After Saudi Oil Minister Ali Al-Naimi noted:

"We will always be happy to supply to our customers with what they want. Now they want 10 million,"

But that hasn't stopped speculators piling in en masse... (as BofA notes)

Large specs bought Crude contracts for a third week increasing net long positioning. This is the longest crude buying stretch since the selloff began ...

Chinese Developer Kaisa Officially Defaults, Restructures Debt

In January when we first brought news of one of China's largest developer's inability to cover interest payments on its debt, we raised the question of who's next. Now that it is official - China's first major developer to default on its US currency debt - and property prices are falling at a record rate, we suspect the likes of Wanda and Agile will also start to collapse once again (after being bid up incredibly amid China's latest exuberant bubble).

As one analyst noted, now that Kaisa has officially defaulted, "You never know where the skeletons in the closet are or what company will be next."



*KAISA DEFAULTS AFTER CHINA DEVELOPER SAYS CAN'T PAY DOLLAR DEBT

*KAISA TO CONTINUE TRYING TO REACH CONSENSUAL RESTRUCTURING

*KAISA SAYS DIDN'T PAY INTEREST DUE MARCH 19 ON 2018 NOTES

*KAISA SAYS FOCUSING ON RELEASING 2014 AUDITED RESULTS

Kaisa 2018 bonds have ripped back from 25c on the dollar to over 70 since the default fears began in January...

As the NY Times reported:

Kaisa's debt problems underscore the slump in China's property sector, which has been hit by the slowing economy and a series of cooling measures instituted by Beijing to avoid a bubble in what had been an overheated housing market. < ...

HSBC to look at best place for HQ when 'mist lifts' on regulation

LONDON (Reuters) - HSBC Holdings Plc will look at whether to move its headquarters from London once the regulatory environment becomes clearer, the chairman of Europe's biggest bank said on Monday.

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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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