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29May2015 Pre-Market Commentary: U.S. GDP Sinks Lower, Oil Up, U.S. Dollar Down, U.S. Futures Off Fractionally

Written by Gary

Several data releases, including revised growth data for the first quarter, which provides another gauge of U.S. economic health, with revisions downward, was expected after a brutal winter, underscores the American economy's seeming inability to generate much momentum.

Crude oil prices rose more than 1 percent on Friday after U.S. inventories fell for a fourth straight week, although prices were set for a weekly drop on a stronger dollar. Markets expected to open sharply lower.

Here is the current market situation from CNN Money

European markets are mixed. The FTSE 100 is higher by 0.02%, while the DAX is leading the CAC 40 lower. They are down 1.08% and 1.06% respectively.

The most prominent market event overnight was once again the action in China's penny-index, which after tumbling at the open and briefly entering a 10% correction from the highs hit just two days ago

A second reading from the Commerce Department on U.S. first-quarter gross domestic product shows the economy contracted at an annualized pace of 0.7% in the quarter, down from an earlier reading of 0.2% growth. The reading, meanwhile, came in better than expectations for a downward revision to -0.8%.

The first column is what was reported this morning. The second column is what was expected and the third is the last report.

What Is Moving the Markets

Here are the headlines moving the markets.

How Japan's Unemployment Rate Dropped Even As 280,000 People Lost Their Jobs

Back in August 2010, Zero Hedge was ostracized for daring to first point out the massive distortion to the US unemployment rate as a result of the collapse in the labor force participation, and the far less realistic modeling of the US labor force. We said that while the US unemployment rate was shown to be steadily declining, the real unemployment rate when one factors in a realistic participation rate is well above 10%. It still is.

Since then not only tenured Wall Street weathermen but Janet Yellen herself has admitted the unemployment rate is no longer a meaningful estimation of slack in the US economy, in other words it is a purely propaganda data point that serves a political purpose (look how strong the economy is) to restore confidence, and no other.

Well, now that Japan has decided to follow in US footsteps and aggressively devalue its way to prosperity and a Keynesian utopia, Abe will need to adopt every trick in the BLS book to survive even as the Japanese economy is crashing and burning, courtesy of the plunging Yen which however is boosting the "wealth effect" for a small but powerful and wealthy portion of the population, and is thus tolerated.

And so it has.

Yesterday Japan amazed everyone when it reported that its unemployment rate had dropped yet again, this time to 3.3%, the lowest since April 1997.

The paradox is that while the number of Japan's unemployed dropped by 20,000, the number of those employed plunged by 280,000! Or as Goldman calls, it "growth in jobholders looks to have peaked amid a lack of recovery momentum in the economy"

But how can that result in a lower unemployment rate? Simple. The answ ...

Oil up over 1 percent after U.S. inventory drop

LONDON (Reuters) - Crude oil prices rose more than 1 percent on Friday after U.S. inventories fell for a fourth straight week, although prices were set for a weekly drop on a stronger dollar.

Greece Slides Back Into Recession As Deposits Hit 11-Year Low

On Wednesday, Greek PM Alexis Tsipras posted a statement on his official government website that contained the following passage:

I am optimistic that we will soon have positive results. We all, however, need to turn a deaf ear to those spreading doom, the alarmists. There is absolutely no danger to salaries and pensions or to the banks and people's savings. And I believe that very soon we will be able to look ahead with greater optimism. However, we need composure and determination in this final stretch.

We would eventually learn that Tsipras had in fact been prompted by aides to say something â€" anything â€" to avert a bank run because according to some reports, €300 million in deposits were withdrawn on Tuesday alone after Yanis Varoufakis suggested the country may consider a levy on ATM visits in order to encourage Greeks to rely on their credit cards.

Today, we got the latest read on the Greek banking sector and, sure enough, deposits fell by another €5 billion and now stand at just €133.7 billion, the lowest level since September of 2004. Greek banks have now lost €32 billion in deposits since November and are losing another €167 million every day, on average. As a reminder, Greek banks are relying on ELA to stay solvent and a missed IMF payment risks a showdown with the ECB which could decide to effectively break the banks overnight if it raises haircuts on ELA collateral or continues to refuse to lift the ELA ceiling. Here's the situation visually:

Futures down as Greece weighs; GDP data awaited

(Reuters) - U.S. stock index futures were lower on Friday amid worries about Greece's ability to strike a deal with its euro zone partners by Sunday and ahead of U.S. gross domestic product (GDP) data.

Frontrunning: May 29

Former House Speaker Hastert indicted on federal charges (Reuters)

Blatter expected to win re-election despite soccer corruption scandal (Reuters)

NYSE Looks to Ease Late-Day Pileup (WSJ)

What Will Happen to a Generation of Wall Street Traders Who Have Never Seen a Rate Hike? (BBG)

Japan spending slump casts doubt on central bank optimism (Reuters)

Unclear rules, market volatility take toll on bank capital (Reuters)

Greece Told Budget a Red Line for Creditors Venting at G-7 (BBG)

The Economist Who Realized How Crazy We Are (Michael Lewis)

Pimco Said to Have Considered Goldman's Cohn for Top Job (BBG)

Reading Beijing's mind leaves investors living on their nerves (

U.S. dealmaking at record year-to-date high

LONDON (Reuters) - Dealmaking in the United States has made its strongest start to a year since Reuters records began in 1980, climbing 52 percent year on year to $746.9 billion in the Jan. 1 to May 28 period.

Euronext Breaks: All Derivative, Currency Future Trading Halted

Usually the market breaks don't take place until after the selling begins. Today, someone in Europe got triggerhappy, and as a result moments ago the Euronext broke. Or perhaps this is just another drill for the "big one".

The details:

SERVICES IMPACTED: Market Data, Trading

MARKET: Euronext Derivatives Markets

PRODUCT: Commodity Futures, Commodity Options, Currency Futures, Currency Options, Individual Equity Options Brussels, BEL20 Futures, PSI Futures, BEL20 Options, Index Dividend Futures, Single Stock Dividend Futures, Belgian Single Stock Futures

CATEGORY: Data issue

Due to a market data issue, trading has been halted on the BO,BF,FF,FO,MF,YF,YO,RF,ZF,ZO,SF exchanges until further notice.

As a consequence, all orders other than GTC's were removed from these products.

We are working to resolve this issue and we will provide an update as soon as possible regarding the expected pre-opening time and resumption of trading.

For your information, before any trading resumption, there will be a pre-opening phase of at least 15 minutes.

Trading on all Cash instruments is taking place as normal.

China's Nauseating Volatility Continues, US Futures Flat Ahead Of Disastrous GDP Report

The most prominent market event overnight was once again the action in China's penny-index, which after tumbling at the open and briefly entering a 10% correction from the highs hit just two days ago, promptly saw the BTFDers rush in, whether retail, institutional or central bankers, and after rebounding strongly from the -3% lows, the SHCOMP closed practically unchanged following a 2% jump to complete yet another 5% intraday swing on absolutely no news, but merely concerns what the PBOC is doing with liquidity, reverse repos, margin debt, etc. Needless to say, this is one of the world's largest stock markets, not the Pink Sheets.

Just to put thing in perspective again:

Elsewhere, European equities opened firmly in the red after Greece stated yet again they are expecting a deal to be agreed on Sunday ahead of their IMF payment due on June 5th, thereby seeing markets using the excuse of month-end to take risk of the table ahead of this key risk event, with Greek banks among the worst performers. Over the last few minutes the selling ceased and Europe has rebounded on a bout of buying, which has pushed both the EUR lower and US equity futures into the green.

And just to complete the confusion, it also sent the yield on the German 5Y bond negative once agagin for the first time since April, as NIRP is back once again. Whether this was a consequence of month-end demand or uncertainty surrounding Greece is unclear, but should the entire German curve go subzero again, expect the ECB to instill another panic selling episode as the more negative German yields go, the less purchasing capacity the ECB has in an already collateral constrained market.

High spirits battle: Asia tycoons vie for cognac maker Louis Royer

HONG KONG/BANGKOK (Reuters) - Thai billionaire Charoen Sirivadhanabhakdi is considering buying cognac maker Louis Royer, people familiar with the matter said, potentially locking horns with a Philippine tycoon for the French firm amid a forecast rebound in Asian demand for luxury spirits.

U.S. economy likely shrank in first quarter, but fundamentals strong

WASHINGTON (Reuters) - The U.S. economy likely contracted in the first quarter as it buckled under the weight of unusually heavy snowfalls and a resurgent dollar, but activity since has rebounded modestly.

Japan's Skymark submits bankruptcy plan despite creditor opposition

TOKYO (Reuters) - Japan's failed budget carrier Skymark Airlines Inc submitted a restructuring plan for court approval on Friday despite opposition from the two main creditors owed about two-thirds of its roughly 300 billion yen ($2.4 billion) debt.

Dollar, Chinese shares steady as Europe wobbles

LONDON (Reuters) - The dollar inched higher on Friday, putting it on track for a monthly rise in May, while Chinese shares steadied after a plunge a day earlier that stoked concerns about the financial health of the world's second largest economy.

Unrepentant Lehman ex-CEO Fuld says firm 'was not bankrupt'

NEW YORK (Reuters) - Six years, seven months and 13 days after Lehman Brothers Holdings Inc filed for bankruptcy, its former chief executive, Richard Fuld Jr., is still insisting it did not go broke.

Greek Austerity And Economic Religion

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

There are many things going on in the Greece vs Institutions+Germany negotiations, and many more on the fringe of the talks, with opinions being vented left and right, not least of all in the media, often driven more by a particular agenda than by facts or know-how.

What most fail to acknowledge is to what extent the position of the creditor institutions is powered by economic religion, and that is a shame, because it makes it very difficult for the average reader and viewer to understand what happens, and why.

Greek FinMin Yanis Varoufakis has often complained that he can't get the finance ministers and others to discuss economics. As our mutual friend Steve Keen put it:

Steve Keen said the finance minister was frustrated with the progress of Greece's talks with the euro zone, adding Varoufakis had compared the talks to dealing with "divorce lawyers". Keen said the finance ministers of Europe refused to discuss certain euro policies, according to Varoufakis. [..] When asked what [Varoufakis and he] mainly discuss at the moment, Keen said, "Mainly his frustration, the fact that the one thing that he can't discuss with the finance ministers of Europe is economics.."

"He goes inside, he is expected to be discussing what the economic impact of the policies of the euro are and how to get a better set of policies, living within the confines of the euro and the entire European Union system, and he said th ...

Intel nears $15 billion deal to buy Altera: NY Post

(Reuters) - Intel Corp is close to a deal to buy smaller chip maker Altera Corp for about $15 billion, the New York Post reported.

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