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24Apr2015 Pre-Market Commentary: Possible Quiet Session Ahead, Markets Expected To Open Fractionally Higher, New SP500 Highs Possible

Written by Gary

The all important US Durable Goods Orders (MAR) came in this morning much higher than expected (4% Vs. 0.6% expected) and the US futures yawned, hit the snooze button and went back to sleep.

Without any earth shaking World news to confront the U.S. Markets this morning, it appears the markets will open fractionally higher and possibly push the SP500 to another all-time high.

This not to say there are some surprises lurking in the shadows - read on.

Here is the current market situation from CNN Money

European markets are higher today with shares in France leading the region. The CAC 40 is up 0.25% while London's FTSE 100 is up 0.25% and Germany's DAX is up 0.25%.

When Friday markets appear to start off quiet, there are sometimes quirky events that suddenly reverse what was a quiet melt-up to a surprising down-turn. This could very well be on of those days where you shouldn't go home early.

What Is Moving the Markets

Here are the headlines moving the markets. xxxxxxxxxxx

Xerox cuts 2015 profit forecast due to strong dollar

(Reuters) - Xerox Corp, cut its 2015 profit forecast, blaming a strong dollar, and reported quarterly revenue below Wall Street's expectations, hurt mainly by lower printer sales and higher costs.

Comcast abandons $45 billion Time Warner Cable merger

(Reuters) - Comcast Corp abandoned its proposed $45 billion merger with Time Warner Cable Inc on Friday, saying the deal had been structured in a way that if the U.S. government didn't agree, the companies could walk away.

Euro zone warns Greece no cash till full reform deal

RIGA (Reuters) - Euro zone finance ministers delivered a stark warning to Greece on Friday that its leftist government will get no more aid until it agrees a complete economic reform plan, as Athens lurches closer to bankruptcy.

HSBC says looking into moving headquarters from Britain

LONDON (Reuters) - HSBC Holdings , Europe's biggest bank, will review whether to move its headquarters out of Britain, potentially dealing a blow to a country trying to balance tighter regulation with the importance of the financial industry to its economy.

Volvo to make new generation of small cars in Belgium and China: CEO

SHANGHAI (Reuters) - Sweden's Volvo Cars will produce at its Belgian factory a small car based on a common platform and engine technology developed with Chinese parent Zhejiang Geely Holding Group [GEELY.UL], Volvo's chief said.

American Airlines first-quarter profit tops expectations

(Reuters) - American Airlines Group Inc on Friday reported first-quarter profit above analysts' expectations and declared a $0.10 dividend as cheap fuel continued to help its bottom line.

Volkswagen's Piech asked Porsche CEO to be ready to take VW helm: Spiegel

BERLIN (Reuters) - Volkswagen Chairman Ferdinand Piech asked Porsche Chief Executive Matthias Mueller at the start of this week to be prepared to take the helm at VW, Spiegel Online reported on Friday without citing the source of the information.

'Smaller and simpler' mantra rings through banking boardrooms

LONDON (Reuters) - Deutsche Bank's expected move to sell much of its retail banking business will see it join a growing list of banks choosing to shrink and simplify to survive.

Election 'Chaos' In UK Could Trigger 'Lehman Moment' For Pound

Election 'Chaos' In UK Could Trigger 'Lehman Moment' For Pound

- UK economy a ‏'timebomb' and will explode after election - Albert Edwards
- Telegraph warns of "Lehman Moment" stemming from possible election chaos
- Currency traders view pound as being particularly vulnerable
- Latest data shows UK poised to slip into deflation for the first time since 1960
- Polls place Labour and Tories neck and neck as election looms
- Hung parliament may force either side to enter coalition with potentially disliked partners
- Outright majority for either side would also lead to further uncertainty
- Political uncertainty may impact sterling and UK assets
- UK has massive debt and vulnerable to Eurozone debt crisis

With the British general election due in just under two weeks on May 7, concerns are growing about the outlook for the UK pound after the election and the long term outlook of the UK economy due to the extremely high levels of debt - particularly in the private sector in the UK.

UK debt has continued to rise throughout the recovery and has soared to an eye-watering £1.48 trillion. In recent days, a slew of foreign exchange analysts have warned that the pound is vulnerable to falling in value.

London's Telegraph warned last week that election â€'chaos' ...

"Crash Boys" - Michael Lewis Slays The Regulators In The Sarao Scapegoating Debacle

By Michael Lewis, originally posted in Bloomberg

Crash Boys

The first question that arises from the Commodity Futures Trading Commission's case against Navinder Singh Sarao is: Why did it take them five years to bring it?

A guy living with his parents next to London's Heathrow Airport enters a lot of big, phony orders to sell U.S. stock market futures; the market promptly collapses on May 6, 2010; it takes five years for the army of U.S. financial regulators to work out that there might be some connection between the two events. It makes no sense.

A bunch of news reports have suggested that the CFTC didn't have the information available to it to make the case. After the flash crash, the commission focused exclusively on trades that had occurred that day, rather than orders designed not to trade -- at least until some mysterious whistle-blower came forward to explain how the futures market actually worked. But this can't be true.

Immediately after the flash crash, Eric Hunsader, founder of the Chicago-based market data company Nanex, which has access to all stock and futures market orders, detected lots of socially dubious trading activity that May day: high-frequency trading firms sending 5,000 quotes per second in a single stock without ever intending to trade that stock, for instance. On June 18, 2010, Nanex published a report of its findings.

The following Wednesday, June 23, the website Zero Hedge

Equities at all-time high after Nasdaq record

LONDON (Reuters) - Global equity markets rode to new all-time highs on Friday, with positive corporate updates in Europe and a post-dotcom-boom peak for the U.S. Nasdaq stoking investor optimism.

Futures up on tech earnings, Nasdaq to extend record

(Reuters) - U.S. stock index futures rose on Friday as strong results from tech behemoths Google, Amazon and Microsoft set the Nasdaq Composite on track to set a record closing high for the second straight day.

Biogen quarter-one results disappoint Wall Street as Tecfidera sales slow

(Reuters) - Biogen Inc posted lower-then-expected quarterly profit and revenue as its key oral multiple sclerosis (MS) drug Tecfidera showed signs of slowing growth, sending the company's shares down 3 percent in premarket trading on Friday.

Frontrunning: April 24

Obama's Drone-Strike Rules to Be Reviewed (WSJ)

Hostage locations difficult to track - and may be getting harder (Reuters)

Varoufakis Said to Take Hammering From Riled EU Ministers (BBG)

EU Frustration Mounts as Greeks Try to Bypass Aid Process (BBG)

Kleiner Perkins seeks almost $1 million in costs in Pao case (Reuters)

Google Misses, Caps Costs as Growth Slows (WSJ)... stock surges

Oil prices trade near 2015 highs on Yemen worries (Reuters)

Pentagon Announces New Strategy for Cyberwarfare (NYT)

Bloomberg Oil at $65 Seen Freeing 500,000 Barrels From Shale Fracklog (BBG)

'Flash Crash' Trader Navinder Sarao: It Was Wits, Not Bits (

Futures Fizzle After Greece "Hammered" In Riga, Varoufakis Accused Of Being "A Time-Waster, Gambler, Amateur"

Even though no rational person expected that the Greek situation would be resolved at today's talks in Riga, Latvia, apparently the algos were so caught up in spoofing each other to new record highs that futures, after surging once more overnight following the latest Google miss which sent the company and the Nasdaq soaring, actually dipped modestly into the red following headlines that the latest Greek talks have broken down after a "hostile" Troika "hammered" the Greek finmin, who was accused by European finmins of "being a time-waster, a gambler and an amateur."

It appears Europe is not a fan of game theory.

Bloomberg has the best summary of the latest Greek "negotiation" farce, all of which at this point serves only to kick the can not by months but by weeks until Greece runs out of confiscated money and is forced to either fold completely to Troika demands, leading to new elections or a referendum or conclude its pivot to Russia, setting off the next phase of the second cold war:

Greek Finance Minister Yanis Varoufakis was heavily criticized by his euro-area colleagues amid mounting frustration at his refusal to deliver measures to fix his country's economy and release financial aid, according to three people familiar with the talks.

Euro-area finance chiefs said Varoufakis's handling of the talks was irresponsible and accused him of being a time-waster, a gambler and an amateur, one of the people said ...

Exclusive: China plans greater yuan convertibility inside and outside FTZs

BEIJING (Reuters) - China plans to take a giant step toward making the yuan more convertible by extending a pilot scheme allowing the currency to be traded with few restrictions to all its free trade zones, before taking the scheme nationwide later this year.

Oil prices trade near 2015 highs on Yemen worries

LONDON (Reuters) - Brent crude looked set to finish the week near 2015 highs on Friday as air strikes in Yemen stoked concerns over the security of Middle East oil shipments.

Low-key launch as Apple Watch finally goes on sale

TOKYO (Reuters) - The Apple Watch launched globally on Friday with a small queue of Japanese tech-addicts lining up in Tokyo for Apple Inc's first wearable gadget, but there was no sign of the excitement usually attached to the company's product rollouts.

The Private Equity Firm That Grew Too Fast

Flush with cash, Providence Equity Partners made a series of risky, and disastrous, bets during the private equity boom. Now its chief executive is aiming for redemption.

Battle for Claridge's Ends in Sale to Qatari Group

After a four-year legal battle for control of Claridge's and its two sister landmark hotels in London, two British billionaires have sold their shares to the Constellation Hotels Group of Qatar.

Asian central banks to ease further, but effects may be muted: Reuters poll

BENGALURU (Reuters) - Emerging Asian central banks are expected to cut interest rates again in the coming months, but economists polled by Reuters are doubtful the moves will significantly boost growth or inflation.

China says employment resilient despite slower economic growth

BEIJING (Reuters) - China said on Friday that urban employment held up in the first quarter even as economic growth slowed to a 6-year low, but the labor ministry warned that authorities cannot be "blindly optimistic" as the pace of job creation is slowing.

UBS Wealth cuts allocation to U.S., UK stocks

LONDON (Reuters) - UBS Wealth Management, the world's biggest wealth manager, has cut its positions in U.S. and UK stocks, betting that euro zone shares offer the best value and growth prospects, the firm's chief investment officer said in a note to clients.

Why The Fed Won't Raise Rates Soon

All eyes on are on the Fed as it considers raising interest rates. Two top economists do some eagle eye Fed watching.

France's 'economic patriotism' is not what it seems

PARIS (Reuters) - Foreigners are set to take over several French blue chip firms this year and will largely do what they want with their prizes - showing the limits of new laws passed in the name of "economic patriotism".

This Is How Junk-Bond Investors Are Now Getting Whacked

Wolf Richter

"In extreme overvaluation" â€" that's how bond guru Marty Fridson characterizes the current junk-bond market. Junk bonds are supposed to offer high yields to entice investors to take on the risks. They're still â€" somewhat quaintly â€" called "high yield" in polite society. But it has become a misnomer in this era when investors are scrambling to buy just about anything to get even a teeny-weeny bit of yield, regardless of the risks.

And now the risks are becoming apparent.

It's been tough out there. In a daily drumbeat of bad news from the energy sector, Sabine Oil & Gas said it would skip a $15.3 million interest payment. It's looking for strategic alternatives. It needs to restructure its balance sheet. Stockholders have already been wiped out. It now has a 30-day grace period before a default would be triggered. Its debt took a hit. According to S&P Capital IQ/LCD, its 9.75% notes due 2017 traded at 15 cents on the dollar.

But even as old money is getting wiped out, yield-starved investors keep pouring new money into the sector.

The same day, Halcon Resources, a fracking stalwart that has been drilling cash into the ground at dizzying rates, sold $700 million of second-lien junk bonds. So they didn't come cheap, with a yield of 8.625%, according to LCD ...

Largest Bank In America Joins War On Cash

The war on cash is escalating. Just a week ago, the infamous Willem Buiter, along with Ken Rogoff, voiced their support for a restriction (or ban altogether) on the use of cash (something that was already been implemented in Louisiana in 2011 for used goods). Today, as Mises' Jo Salerno reports, the war has acquired a powerful new ally in Chase, the largest bank in the U.S., which has enacted a policy restricting the use of cash in selected markets; bans cash payments for credit cards, mortgages, and auto loans; and disallows the storage of "any cash or coins" in safe deposit boxes.

Buiter defended his "controversial" call for a ban on cash, as Bloomberg reports:

"The world's central banks have a problem. When economic conditions worsen, they react by reducing interest rates in order to stimulate the economy. But, as has happened across the world in recent years, there comes a point where those central banks run out of room to cut — they can bring interest rates to zero, but reducing them further below that is fraught with problems, the biggest of which is cash in the economy.

In a new piece, Citi's Willem Buiter looks at this problem, which is known as the effective lower bound (ELB) on nominal interest rates. Fundamentally, the ELB problem comes down to cash.

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