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20May2015 Pre-Market Commentary: U.S. Futures Flat After DOW Sets New Highs, Markets Expected To Open Unchanged

Written by Gary

U.S. stock futures were little changed this morning, indicating a pause for the Dow industrials following two sessions of all-time highs and ahead of the release of minutes from last month's Federal Reserve meeting.

Greece is still in the spotlight; UBS reveals rigging settlement; inventory surge grows Japan GDP; all of which may put pressure on the markets to gain any new highs today. Markets are expected to open flat.

Here is the current market situation from CNN Money

European markets are mixed to lower. Shares in Germany are off as the DAX drops 0.51%. The CAC 40 is down 0.16% while the FTSE 100 in London is unchanged.

What Is Moving the Markets

Here are the headlines moving the markets.

Target first quarter profit tops estimates on healthy sales growth

(Reuters) - Target Corp on Wednesday reported a larger-than-expected increase in first-quarter profit as revenues got a boost from online sales and a program to narrow its product focus.

U.S. Stock Futures Little Changed

U.S. stock futures were little changed Wednesday, indicating a pause for the Dow industrials following two sessions of all-time highs.

Chinese Bubble Stock Instacrash Wipes Out Half Of China's Second Richest Man's Net Worth

Li Hejun began the day as China's second-richest man with a fortune worth more than $30 billion, according to a Forbes estimate. By 11am, his net worth was amazingly cut by half, and he was almost $14 billion "poorer" as shares in Li's flagship Hanergy Thin Film plunged by 47% in Hong Kong before trading was suspended - due to Li's absence at the company's annual meeting.

While four months of supercharged stock gains were eviscerated in minutes, it was not a surprise to everyone, as one analysts called Hanergy "a disaster waiting to happen," noting that the company is working with "unproven" technology and has disclosed few details about the work that underpins its valuation.

It was all going so well...

As Forbes reports, shares in Li's flagship Hanergy Thin Film plunged by 47% in Hong Kong before trading was suspended at the request of the Hong Kong Stock Exchange...

Li's absence at the company's annual meeting in the former British colony this morning was behind the decline in prices, according to some reports, but there was no reason given by the company for the drop. Hanergy said in a statement it would make an ann ...

Takata doubling U.S. recall for defective air bags to 34 mln vehicles

WASHINGTON/DETROIT (Reuters) - Japanese air bag manufacturer Takata Corp is doubling a recall of potentially deadly air bags to nearly 34 million vehicles, making it the largest automotive recall in American history, U.S. safety regulators said on Tuesday.

Goldman "Solves" The Lack Of Cheap Gas Consumption "Puzzle" - Spending Set To Rise... Just As Gas Prices Surge

Goldman, as well as everyone else, was dead wrong when it predicted that the tumbling gas prices are "unambiguously good" and would unleash a wave of spending unseen since the Lehman collapse - because all those "gas savings" had to go somewhere, right? Instead, what happened was that retail sales disappointed 5 months in a row, and personal spending data that has consistently missed expectations.

So now that the plunge in oil, and gas prices, is history, what does Goldman do? Instead of admitting that like every other economist, it was wrong in expecting a surge in spending, it take a deep look at the "consumption puzzle" and concludes that the spending boost is merely deferred.

But before we dig into the humor, we should note that Goldman isn't entirely wrong. It does observe that "the puzzling lack of impact so far is likely explained in part by consumers' initial skepticism that low gasoline prices would last. As Exhibit 2 shows, only over the last couple of months have consumers come to believe that lower prices are here to stay."

Then Goldman does the "economist" thing: it goes full retard.

How puzzled should we be by the absence of a boost from cheap gas prices so far? To answer this question, we use a range of models to estimate the usual time pattern of the consumption response to changes in energy prices. We find that low gas prices should have b ...

Target Profit Rises as Product Revamps Start to Pay Off

Target is reporting a 52 percent increase in its first-quarter profit on solid sales of fashion and baby items, offering evidence that its efforts to spruce up its merchandise are paying off.

Central Banks Make Waves on Liquidity Risk

Investors must learn to live with and charge for lower levels of liquidity in markets.

UBS Hit With $545 Million in Fines

UBS is the latest global bank to plead guilty to crimes in the U.S. and was slapped with $545 million in fines.

Lowe's profit misses as homebuilding material sales growth slows

(Reuters) - Lowe's Cos Inc , the No.2 U.S. home improvement chain by sales, reported lower-than-expected quarterly profit and sales as growth in its kitchen, flooring and lumber and building material businesses was not as strong as the company expected.

Euro's Slide Continues

The euro slipped against the dollar a day after European Central Bank officials reaffirmed the bank's resolve to meet its stimulus goals.

UBS Gets Probation For Rigging $5 Trillion-A-Day FX Market

UBS was "confounded" last week when the Justice Department decided to void a 2012 agreement under which the bank would escape prosecution for its role in manipulating the world's most important benchmark rate in exchange for ratting out its FX rigging co-conspirators.

As a reminder, the DoJ is set to extract guilty pleas from a number of TBTF bank logos sometime in the supposedly near future (reportedly later today). The settlements were supposed to have been announced last week but because that didn't give banks enough time to negotiate all of the fine print and SEC waivers that will serve to strip the agreements of any and all meaning, the announcements had to be postponed.

As we've outlined on several occasions this month, JP Morgan, Citi, Barclays, and RBS will almost certainly be allowed to skirt punishments that should by law accompany their guilty pleas including provisions that make it more cumbersome to raise capital and limit participation in private placements. Those inconveniences, the banks say, would pose a systemic risk and so must be avoided at all costs if they agree to admit to rigging forex markets.

For UBS, whose assistance was supposedly key to the FX rigging investigation, the squealing rat reputation isn't completely for naught after all because as you can see from the below, the bank will pay just $342 million to the Fed for rigging FX markets "engaging in unsound business practices" (and nothing to the DoJ), $203 million to the Justice Department in connection with rigging LIBOR, ...

Theft of Debit-Card Data From ATMs Soars

Criminals are stealing card data from U.S. automated teller machines at the highest rate in two decades.

Hanergy's Aerial Routine Ends in a Crash

Hanergy Thin Film Power saw more than $18 billion in market capitalization evaporate before it stopped trading mid-morning Wednesday. The swan dive comes from a very high cliff.

Frontrunning: May 20

Clinton aides sometimes blocked release of documents requested under public-records law (WSJ)

House Benghazi panel subpoenas former Clinton White House aide (Reuters)

Cash Crunch, for Many, Is a Monthly Woe (WSJ)

Doubts over Greece add to euro's ECB-driven frailty (Reuters)

For Many American States, It's Like the Recession Never Ended (BBG)

Japan debt plan needs BOJ to keep rates low for years (Reuters)

Euro Continues to Fall; European Bonds, Stocks Broadly Steady (WSJ)

Los Angeles gives preliminary approval to $15 minimum wage (Reuters)

Theft of Debit-Card Data From ATMs Soars (WSJ)

Altice enters U.S. cable market with Suddenlink move

PARIS/FRANKFURT (Reuters) - European telecoms group Altice has agreed to buy U.S. regional cable company Suddenlink Communications in a $9.1 billion deal, marking its first move across the Atlantic where it is also interested in buying Time Warner Cable.

U.S. Regulators Point to Risks From Rapid Trading

U.S. regulators highlighted risks from electronic trading and clearinghouses in their annual report on threats to the nation's financial stability.

Doubts over Greece add to euro's ECB-driven frailty

LONDON (Reuters) - The euro slid to a two-week low and a rally in European shares stalled on Wednesday after a Greek official said the country may not make an upcoming repayment to the International Monetary Fund.

Lowe's Profit Rises, but Falls Short of Estimates

Lowe's Companies, the home improvement chain, reported a 7.9 percent rise in quarterly profit as an improving job market encouraged Americans to spend on renovations.

Futures Flat With Greece In Spotlight; UBS Reveals Rigging Settlement; Inventory Surge Grows Japan GDP

The only remarkable macroeconomic news overnight was out of Japan where we got the Q1 GDP print of 2.4% coming in well above consensus of 1.6%, and higher than the 1.1% in Q4. Did it not snow in Japan this winter? Does Japan already used double, and maybe triple, "seasonally-adjusted" data? We don't know, but we do know that both Japan and Europe have grown far faster than the US in the first quarter.

And yet after briefly sliding on this "better than expected" news, the USDJPY ramped up to a multi-month high as the algos seemingly smelled a rat. And indeed, even a cursory look behind the numbers revealed that just like in the US, well over 80% of the "growth" was as a result of a massive inventory restocking, which contributed to 2.0% of the final 2.4% print, suggesting that Q2 GDP may once again be negative if imports continue to be a substantial detractor to growth.

Aside from Japan, it has been a quiet session, with an odd plunge in the EURUSD right around the time the ECB released its delayed press release from the Coeure private meeting with hedge funds the day before. One wonders what the ECB may have leaked to asset managers this time. We will never know, of course, until the "people's" central bank decides to advise its non-hedge fund clients.

Volumes remain depressingly low which as even the dumbest algo by now know is a green light to resume levitation, and sure enough, after treading water overnight, the ES is now starting its gradual, daily climb higher.

On the key news front, we finally got the terms of the latest and greatest UBS as a "recidivist" settlement with the US government, over

The Hidden Strength of Japanese Exports

An unsung hero of Japan's economy may be exports after all.

McDonald's, other fast-food workers, protest ahead of annual meeting

CHICAGO (Reuters) - Thousands of McDonald's workers seeking a minimum wage of $15 per hour and the right to unionize are expected to swarm the fast-food giant's headquarters for two days of protests that will coincide with the fast-food chain's annual meeting on Thursday.

SAP chief sees no takers for software rival Salesforce

MANNHEIM, Germany (Reuters) - German software company SAP's chief executive once again ruled out any move to acquire, then went further by saying that its richly valued rival is unlikely to be acquired by any other player in the industry.

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