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06Aug2015 Pre-Market Commentary: Futures Quiet Ahead Of Friday's Jobs Report, Oil Set To Fall Further, Shanghai Composite Closed Down Again

Written by Gary

U.S, stock futures index is up fractionally, oil is resting on support and the U.S. dollar is actively testing its resistance. Monthly job cuts shot up to the highest level in nearly four years, as U.S. employers announced plans to shed 105,696 workers from their payrolls in July.

Continuing Claims came in higher at 2255K vs 2249K estimate move the futures down fractionally. The markets are expected to open flat and move lower by mid-morning.


Here is the current market situation from CNN Money

European markets are mixed today. The CAC 40 is up 1.89% while the DAX gains 0.01%. The FTSE 100 is off 0.09%.

What Is Moving the Markets

Here are the headlines moving the markets.

British Pound Extends Losses After BOE

The British pound slipped after the Bank of England indicated it remains on course to begin slowly lifting interest rates early next year.

New York Times Co. Reports $16 Million Profit

Revenue was slightly lower as print advertising fell, but the decline was offset by growth in digital advertising and cost cuts.

Lone Bank of England official votes to raise rates, others unrushed

LONDON (Reuters) - The Bank of England appeared in no rush to start raising interest rates on Thursday, with minutes showing just one top policymaker voted to do so this week while the bank forecasts only a slow pick-up in inflation, which sits at zero.

Activist Ackman Takes $5.5 Billion Stake in Snacks Giant Mondelez

Activist investor William Ackman has built a $5.5 billion stake in Mondelez and will argue the maker of Oreo cookies and Ritz crackers needs to cut costs and grow revenue, or sell to a rival like Kraft Heinz.

China Crackdown on Citadel Shines Light on Foreign Firms

Chicago-based Citadel is one of few foreign firms to have penetrated massive mainland markets with a local trading operation.

Job Cuts Soar To Highest Since September 2011 After Mass Army Terminations, Highest YTD Layoffs Since 2009

While we await for the BLS to report another seasonally adjusted Initial Claims report which will be near multi-decade lows, a far more disturbing report was released moments ago by outplacement consultancy Challenger Gray, which has done a far better job of compiling true layoff data, and which reported that in July there was a whopping 105,696, up 136% from the 44,842 job cuts in June, and the highest in nearly four years, or since September 2011, which the last time there were more than more than 100,000 layoffs.

Worse, the July surge brings the year-to-date job cut total to 393,368, which is 34 percent higher than the 292,921 cuts announced in the first seven months of 2014. This represents the highest seven-month total since 2009, when 978,048 job cuts were announced amid the worst recession since the Great Depression.

Finally, this was the worst July for layoffs in over a decade.

And while we expect energy-sector terminations to take center stage in the coming months following the resumed plunge in energy prices, the July surge in layoffs came from an unexpected source: the US Army.

According to Challenger, more than half of the July job cuts were the result of massive troop and civilian workforce reductions announced by the United States Army. The cutbacks will eliminate 57,000 from government payrolls over the next two years.

EU Commission: Third bailout deal with Greece possible before August 20

BRUSSELS (Reuters) - Talks with Greece on a third bailout are moving ahead in a satisfactory way and reaching an agreement is possible before August 20, the European Commission said on Thursday.

Bad Debt Soars 35% In China As Government Set To Fabricate Dismal Loan Data

Back in March, we noted that decelerating economic growth and bad debt are taking a toll on profitability at China's largest banks, leading them to slash payouts to shareholders.

"Particularly hard hit is ABC, which saw its non-performing loans jump 25bps Q/Q," we observed, adding that "NPLs for loans made to manufacturers more than doubled that number, rising 54bps sequentially." That figure underscores the degree to which China's transition from an investment-led, smokestack economy to a model driven by consumption and services is weighing heavily on industry and in turn, on banks that lend to the manufacturing sector.

Although NPLs have been rising for some time in China, determining the true extent of the problem is largely impossible due to Beijing's "management" of bad loans. As we outlined in "How China's Banks Hide Trillions In Credit Risk," there's no way to know how pervasive Beijing's practice of forcing banks to roll-over problem loans truly is, meaning that even if we ignore the fact that quite a bit of credit risk is obscured by the practice of shifting it around, moving it off balance sheet, and reclassifying it, (i.e. if we just look at traditional loans) it's still difficult to know what percentage of loans are actually impaired because it's entirely possible that a non-trivial percentage of sour debt is forcibly restructured and thus never makes it into the official NPL figures.

Indeed, the fact that NPLs are remarkably similar across banks suggests the numbers are, much like China's GDP data, "smoothed out." That said, a look at "special mention" loans and overdue loans can help to paint a more accurat ...

Japan's Trading Houses Hit by Commodity Price Plunge

Lower prices for oil and other resources are hitting Japan's top trading companies hard, partially undercutting the benefits of cheaper imports for this resource-poor nation.

Viacom's revenue misses on lower income from films business

(Reuters) - Viacom Inc reported weaker-than-expected quarterly revenue, hurt by lower revenue from its films business as there were no major movie releases in the third quarter.

Gold Bullion Demand In 'Chindia' Heading Over 2,000 Metric Tonnes Again

Gold Bullion Demand In 'Chindia' Heading Over 2,000 Metric Tonnes Again

Shanghai Gold Exchange deliveries at 73.289 tonnes last week

3rd largest week of gold withdrawals ever on SGE

Both China and India heading for over 1,000 metric tonnes in 2015 … again

India imports 96.1 tonnes in May alone

'Chindia' imports 296.55 tonnes in May - 14% greater than global production

South Korean gold demand surges in wake of Chinese crash

Asian and global gold demand robust contrary to anti-gold narrative

China India Gold Demand Chindia Gold Demand

The recent lower prices in gold have not deterred investors internationally from buying gold coins and bars in large volumes again. Indeed the Perth Mint and the US Mint are struggling to fulfill demand for gold coins and bars.

This is particularly the case in the eastern hemisphere - especially in India and China - where demand has again increased significantly on price weakness.

Between them, these two countries are on-track to import 2,000 tonnes of gold this year - that is more than two thirds of the total annual global gold mine production, which is set to be about 2,800 tonnes this year.

The Shanghai Gold Exchange, which deals exclusively in physical bullion, saw buyers take delivery of over ...

Bank Of England Post Mortem: Rate Hike On Hold Due To Crashing Commodities, Strong GBP

From CA's Valentin Marinov

BoE inflation report - strong GBP made all the difference it seems

Reading through the August inflation report two things seem to stand out:

1/ The MPC is more optimistic on (domestic demand-driven) GDP growth â€" supported by growing wages, cheaper bank funding and growing house prices. Indeed, they revised their growth projections slightly to the upside compared to May.

2/ The MPC has turned more cautious on inflation because of persistent commodity price weakness and, indeed, FX appreciation. This is reflected in their lower inflation projections.

The message is: yes, we will hike but not before we are certain that the negative impact from lower commodity prices and stronger GBP have abated. The above also means that to a certain degree the decision to hike or not is not really in BoE's hands, at least for now. This is different from the Fed, where we do see clear signals that hikes will be needed fairly soon.

This also means that verbal intervention in GBP by Carney is now a distinct risk going into the press conference at 12:45

Frontrunning: August 6


Trump at center stage as Republicans square off in first debate (Reuters)

Cleveland Debate Offers GOP Hopefuls a Chance to Break Away from the Pack (WSJ)

Bank of England Keeps Key Interest Rate at 0.5% in 8-1 Vote (BBG)

Emerging stocks submerged, UK gears up for 'Super Thursday' (Reuters)

No IMF decision on Greek bailout until autumn, Swedish rep tells paper (Reuters)

Japan Heads Toward Nuclear Unknown With Post-Fukushima Restarts (BBG)

Activist Ackman Takes $5.5 Billion Stake in Snacks Giant Mondelez (WSJ)

From Frat Brothers to FBI Suspects (BBG)

China growth probably half reported rate or less, say sceptics (Reuters)

Obama Challenges â€'Mindset' of Force (

Activist investor Ackman takes $5.5 billion stake in Mondelez

(Reuters) - Activist investor William Ackman's hedge fund has built a stake worth about $5.5 billion in Mondelez International Inc , the maker of Cadbury chocolate and Oreo cookies, in what is seen as an attempt to push the company to grow faster or sell itself.

July 2015 Job Cuts Surge on Army Cuts

from Challenger Gray and Christmas

Monthly job cuts rocketed to the highest level in nearly four years, as U.S. employers announced plans to shed 105,696 workers from their payrolls in July.

Stock futures little changed ahead of Friday's key jobs data

(Reuters) - U.S. stock index futures were little changed on Thursday as investors took to the sidelines ahead of Friday's crucial jobs data that is likely to give clues regarding the timing of a rate increase by the U.S. Federal Reserve.

Emerging stocks submerged, UK gears up for 'Super Thursday'

LONDON (Reuters) - Emerging market stocks slipped to their lowest in over two years on Thursday as nervousness about an end to record low U.S. and global interest rates and continued weakness in commodity markets took their toll.

Futures Flat, China Slides Again, Oil Tumbles Near 2015 Lows

It has been more of the same in the latest quiet overnight session where many await tomorrow's NFP data for much needed guidance, and where Chinese markets opened weaker, rose during the day, then went through a mini rollercoaster, then sold off in the afternoon. The Shanghai Composite and HS China Enterprises indices finished down .9% and .3%, respectively. Trading volume continued to be very subdued, running at half the thirty day average as some 20 million "investors" have pulled out of the market to be replaced with HFTs such as Virtu.

Despite what some have estimate is as much as a trillion in Chinese "plunge protection" allocation, the Shanghai Composite is now near the lows hit on July 8 when China openly threatened sellers and shorters with arrest. If that low is taken out, China will have a big headache on its hands.

Other Asian equities traded mixed following the positive close on Wall Street where sentiment was supported by strong US data and comments by Fed's Powell which contradicted recent hawkish remarks from Fed's Lockhart. Nikkei 225 (+0.2%) was bolstered by a slew of strong earnings, while gains where further underpinned by JPY weakening to a 2-month low against the greenback. The ASX 200 (-1.1%) was led lower by broad losses in large banks. Finally, JGBs fell following the EU and US counterpart, with losses exacerbated by a weak enhanced liquidity auction drawing the lowest b/c on record.

European shares are lower, for the moment halting a rally that has been on-going since July 28. The Stoxx 600 index is up about 18% YTD. There has been no discernable difference between core and peripheral performance. Despite the loomi ...

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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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