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28Jul2015 Pre-Market Commentary: U.S. Futures Up, Oil Remains Down, Chinese Markets End In Red, U.S. Dollar Rising, FMOC Meeting Starts Today

Written by Gary

U.S. stock futures were up over a half percentage point earlier on hopes that the Chinese Central planers are back in control, but appeared to be trending down fractionally prior to the opening. Investors are not looking for the Fed's to signal an increase in rates in the FOMC meeting today as investors are refocusing on corporate earnings.

Markets are expected to open higher.

Here is the current market situation from CNN Money

European markets are broadly higher today with shares in Germany leading the region. The DAX is up 1.46% while France's CAC 40 is up 1.36% and London's FTSE 100 is up 0.75%.

What Is Moving the Markets

Here are the headlines moving the markets.

UPS second-quarter profit rises, tops estimate, despite lower revenue

CHICAGO (Reuters) - Package delivery company United Parcel Service Inc on Tuesday reported higher second-quarter net profit as improved margins offset a drop in revenue.

Sirius XM raises 2015 forecast on strong U.S. auto sales

(Reuters) - Sirius XM Holdings Inc raised its full-year forecast for revenue and subscriber additions for the second time in a row, citing strong U.S. auto sales.

FOMC Not Expected to Rock the Boat

The two day FOMC meeting starts today, but it seems a long shot to expect the Fed to signal an increase in rates at the subsequent meeting in September.

Market pricing for a September move has decreased vs. where we were earlier in the month and the past few sessions have seen more doubt creep into the market. This reflected in the weakening of the dollar over the past few sessions with volatility continuing overnight, even though the main Shanghai composite index has ended the session little changed.

For European stocks, this has seen the better tone gained in the wake of the Greece deal partially eroded, but the currency has performed relatively well. Underlying interest rate dynamics have helped here, but so has the greater focus on capital positions as investors become more nervous regarding the risks in China and surrounding the Fed this year.

This can also been seen in the continued underperformance of emerging market currencies, down a further 3% this month (JP Morgan index) and down 8% so far this year. Overall, whilst stocks and China would suggest we are in a risk averse environment, the performance of major currencies via a weaker CHF, stronger Aussie and limited yen weakness continues to suggest otherwise.

For today, GDP data in the UK is seen at 08:30 GMT, where 0.7% QoQ gain in the headline index is anticipated. We also seen house price data in the US at 13:00 GMT, together with consumer confidence at 14:00 GMT. Sterling would naturally be disappointed should growth fall short of this number, undermining BoE Governor Carney's recent indications that rates could rise around the turn of the year.

Read the rest of the article FOMC Not Expected to Rock the Boat

Honeywell to buy Melrose's Elster business for $5.1 billion

(Reuters) - Honeywell International Inc , a maker of aircraft parts and climate control systems, has agreed to buy the utility consumption meter business of Britain's Melrose Industries Plc for 3.3 billion pounds ($5.1 billion).

Has The E&P Industry Lost Touch With Reality?

Submitted by Arthur Berman via,

The U.S. rig count increased by 19 this week as oil prices dropped below $48 per barrel - the latest sign that the E&P industry is out of touch with reality.

Getty Images from The New York Times (July 26, 2015)

The last time the rig count increased this much was the week ending August 8, 2014 when WTI was $98 and Brent was $103 per barrel.

What are they thinking?

In fairness, the contracts to add more rigs were probably signed in May and June when WTI prices were around $60 per barrel (Figure 1) and some felt that a bottom had been found, left behind in January through March, and that prices would continue to increase.

Figure 1. Daily WTI crude oil prices, January 2-July 24, 2015. Source: EIA and NYMEX futures prices (July 21-24).

(click image to enlarge)

Even then, however, the fundamentals of supply, demand and inventories pointed toward lower prices-and still, companies decided to add rigs.

In mid-May, I wrote in a post called "Oil Prices Will Fall: A Lesson in Gravity",
"The data so far says that the problem that moved prices to almost $40 per barrel in January has only gotten worse. That means that recent gains may vanish and old lows might be replaced b ...

Ford easily tops expectations on 2nd-qtr profit

DETROIT (Reuters) - Ford Motor Co on Tuesday reported second-quarter earnings that handily beat expectations, based on the continued strength of North American sales, led by its popular F-150 pickup truck.

Pfizer's revenue, profit beat as vaccine sales rise

(Reuters) - Pfizer Inc reported better-than-expected quarterly profit and revenue, helped by strong demand for its pneumonia vaccine Prevnar 13 and sales of its breast cancer drug, Ibrance.

Greece awaiting ECB consent to reopen stock market

ATHENS (Reuters) - Greece is waiting for the green light from the European Central Bank on plans it has submitted to reopen the Athens stock market after a month-long shutdown, two regulatory sources said on Tuesday.

Ford Surprises in 2Q With Record North American Profit

Ford Motor Co.'s net income jumped 44 percent to $1.9 billion in the second quarter as global sales rose and the company was able to charge more for new trucks and SUVs with premium features.

German Economic Council Backs Exit For "Uncooperative" Eurozone Members

Now more than ever, the world is raising serious concerns about the long-term viability of the EMU. The crisis in Greece and the deep divisions between Athens and its creditors regarding the viability of fiscal "adjustments" have laid bare the currency bloc's weaknesses and have underscored the difficulties inherent in managing a common currency in the absence of political and fiscal unity.

Reservations about the "experiment" recently caused the likes of Poland and the Czech Republic to express their reluctance to adopt the common currency with Polish central bank chief Marek Belka hilariously characterizing the EMU as a "burning building." "You shouldn't rush when there is still smoke coming from a house that was burning. It is simply not safe to do so. As long as the eurozone has problems with some of its own members, don't expect us to be enthusiastic about joining," he said.


Of course once the house burns down and the former occupants (those that made it out anyway) are standing around outside surveying the still-smoldering ashes, no one wants to be labeled an arsonist, which is presumably why Germany's five economic "wisemen" decided that now might be a good time to pen a "special report" (press release, executive summary) on crisis response in the euro area.

Unsurprisingly, the "independent" assessment of the German Council of Economic Experts concludes austerity pro ...

RBS eyes $2.2 billion Citizens share sale to cut stake to below 25 percent

LONDON (Reuters) - State-backed Royal Bank of Scotland said it intends to sell up to $2.2 billion more shares in its former U.S. arm Citizens , which would cut its stake in the business to less than a quarter.

Cessna jets maker Textron's revenue falls on fewer deliveries

(Reuters) - Textron Inc , the maker of Beechcraft and Cessna planes, reported lower-than-expected quarterly revenue as it delivered fewer King Air Turboprops and Bell helicopters.

U.S. stock futures rise as investors refocus on earnings

(Reuters) - U.S. stock index futures rose on Tuesday as investors refocused on corporate earnings a day after a tumble in the Chinese stock market sent global markets lower.

Frontrunning: July 28

Fed Officials May Offer More Clarity on Rates (WSJ)

Stocks rebound, shrugging off volatile and weak China (Reuters)

Three-Day Selloff Knocks 11% From China Shares (WSJ)

China shares fall again as Beijing scrambles to calm markets (Reuters)

VAT hikes to make Greek destination less popular (Kathimerini)

Varoufakis - Something is rotten with the eurozone's hideous restrictions on sovereignty (FT)

EU denies Varoufakis 'tax control' claims (FT)

Allergan signals appetite for new mega deal after $41bn disposal (FT)

Heta Law Wiping Out Junior Debt Declared Unconstitutional (BBG)

NATO backs Turkey's fight against Islamic State (

Merck Beats Forecasts With Profit of $687 Million

Merck & Co. (MRK) on Tuesday reported second-quarter profit of $687 million.

Brokers Are Trusted Less Than Uber Drivers, Survey Finds

More Americans seem to trust the drivers they hail on the popular car-service app than brokers, according to Personal Capital Corp., a Redwood City, Calif.-based registered investment adviser that manages more than $1.5 billion.

Futures Soar On Hope Central Planners Are Back In Control, China Rollercoaster Ends In The Red

For the first half an hour after China opened, things looked bleak: after opening down 5%, the Shanghai Composite staged a quick relief rally, then tumbled again. And then, just around 10pm Eastern, we saw a coordinated central bank intervention stepping in to give the flailing PBOC a helping hand, driven by the BOJ but also involving NY Fed members, that sent the USDJPY soaring which in turn dragged ES and most risk assets up with it. And while Shanghai did end up closing down -1.7%, with Shenzhen 2.2% lower at the close, the final outcome was far better than what could have been, with the result being that S&P futures have gone back to doing their thing, and have wiped out all of yesterday's losses in the levitating, zero volume, overnight session which has long become a favorite setting for central banks buying E-Minis.

As Bloomberg's Richard Breslow comments, the majority of Asian equity indexes finished with losses but on an upbeat note, helping most European markets to start with modest gains that have increased with the morning, thanks to the aforementioned domestic and global mood stabilization. S&P futures have been positive all day other than a brief dip negative at the worst of the day's China levels. Chinese equities opened quite weak and were down another 5% before the authorities assured the market that speculation they would withdraw from market supportive measures was misguided. This began a rally of over 6% before a mid-afternoon swoon.

There was the usual propaganda out of Chin ...

BP profits slump after huge oil spill charge

LONDON (Reuters) - BP's second-quarter profit slumped by nearly two thirds from a year ago as it grappled with lower crude prices and took a huge $10.8 billion charge related to the 2010 Gulf of Mexico oil spill.

Quantum Geopolitics


-- this post authored by Reva Bhalla

Forecasting the shape the world will take in several years or decades is an audacious undertaking. There are no images to observe or precise data points to anchor us. We can only create a picture, and a fuzzy one at best. This is, after all, our basic human empirical instinct: to draw effortlessly from the vivid imagery of our present world and past experiences while we squint and hesitate before faint, blobby images of the future.

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