U.S. housing data this morning was dismal and the already depressed U.S. stock futures index actually rose a small amount. I guess bad news is good news for the markets. Chinese shares dove deep into the red today as Shanghai closed down -6.1%; Shenzhen closed down -6.6% raising concerns of whether recent government rescue efforts are even effective or will succeed.
Oil has slipped further with data showing speculators have taken huge bets on further declines while weak global demand and high production fuel concerns about oversupply.
Markets are expected to open fractionally lower and may deepen its decent as the mid morning approaches with some volatility to boot.
Here is the current market situation from CNN Money
European markets are lower today with shares in London off the most. The FTSE 100 is down 0.54% while France's CAC 40 is off 0.44% and Germany's DAX is lower by 0.24%.
After 3 months of exploding building permits - driven almost exclusively by the Northeast region (due to expiration of property tax breaks in NYC) - reality bit in July as permits plunged 16.3% to the lowest since March. This was the biggest miss on record for permits. Housing Starts rose less than expected but thanks to a dramatic upward revision are stable at around 1.2 million units SAAR (driven by a rise in single-family units trumping multi-family units).
The 3 month surge into the NYC property tax break expiration has ended...
Multi-family Starts faded as Single-family picked back up...
Looks like we are going to need some more tax break expirations to keep the housing recovery dream alive.
One week ago, we warned that after once again bottom-ticking the 10Y like a true professional, Dennis Gartman was about to be stopped out of his Treasury short which he had "put" on on August 6:
It is time to be shot of the long end of the US bond market and we wish this morning to sell the September T-note future at or near to 126 3/4. We can imagine the front month future trading to 118-119 over the course of the next several months while at the same time we shall be willing to risk only 1 1/2 points to the upside. The top has been formed over the course of the last several months and we are willing to be short even ahead of tomorrow's Employment Situation Report."
We assessed this very simply: "time to buy."
Then, on August 12 we reported that Gartman was about to be stopped out:
We were convinced that a top has been formed over the course of the last several months and we were willing to be short but the Chinese devaluation has wrought havoc upon us, catching us and everyone else out. As we write, the September t-note future is trading 128 Â¼ and that is Â¼ point above our "close only" stop.
Sure enough, this happened this morning:
THE TEN YEAR US T-NOTE FUTURE: We Were Shortâ€¦ Now We Are Not!: The trend since mid-June is upward and today's collapse in the Chinese stoc ...
LONDON (Reuters) - U.S. oil prices fell towards six-year lows on Tuesday after stock markets tumbled in China, the world's largest energy consumer, adding to worries about global fuel demand at a time of heavy oversupply.
(Reuters) - Wal-Mart Stores Inc reported weaker-than-expected quarterly earnings and lowered its full-year forecast on Tuesday, citing investments in staffing and weaker margins in its U.S. pharmacy business.
On Monday we laid out the rather dire road ahead for the world's emerging economies in the face of China's entry into the global currency wars. The path ahead is riddled with exported deflation and decreased trade competitiveness for a whole host of emerging economies [and] all of this is set against a backdrop of declining global growth and trade, a trend which many had assumed was merely cyclical, but which in fact may prove to be structural and endemic."
Well don't look now, but trade just collapsed for Indonesia as exports and imports plunged 19.2% and 28.4% (more than double to consensus estimate), respectively in July.
Imports of raw materials dove 24%. Manufacturing and palm oil exports fell 7.1% and 2.4%, respectively, nearly tripling June's declines. Oil and gas exports fell nearly 8%.
Meanwhile, Bank of Indonesia kept its policy rate on hold at 7.5% and indeed the bank looks to be stuck in a dilemma similar to what we described earlier this month when we noted that "EM central bankers are grappling with slumping exports and FX-pass through inflation or, more simply, bankers are caught between a 'can't cut to boost the economy' rock and a 'can't hike to tame inflation' hard place. The rupiah, like the Malaysian ringgit, is trading near multi-decade lows and hit its weakest level since August 1998 earlier in the session. Depressed commodity prices and slumping demand from China aren't helping. ...
BERLIN (Reuters) - German lawmakers broke off their holidays on Tuesday to debate Greece's third bailout plan before approving it, though Chancellor Angela Merkel faces a rebellion in a vote shaping up as her last chance to keep Athens in the euro zone.
It may not rely on such tech bubble (ver 1.0 and 2.0) buzzwords as eyeballs, clicks, "story", "sharing", "hyperxxxx, "non-GAAP" and so on, in fact with 2.2 million worldwide employees Wal-Mart is as old-school as it gets, which is why the fact that what was once the world's most valuable retailer (until Amazon dethroned it a month ago) just reported not only a miss, on tumbling operating earnings, but slashed its guidance by 7%, should be very troubling to anyone who still looks as such trivial things as "fundamentals" and how these reflect the even more trivial "economy."
This is what happened:
Despite reporting revenue of $120.2 billion, or virtually unchanged from a year ago, and above the $119.7 billion expected, WMT reported EPS of $1.08, below the exp. $1.12. WMT promptly blamed exchange rates as the culprit for the $0.04 miss. Needless to say, when the dollar is weak no company ever says "EPS beat by $X.XX because of a favorable exchange rate."
The first problem emerged when looking at operating income, which dropped by -10.0% consolidated, and tumbled by a whopping -14.2% in the firm's international stores.
What was even more problematic is that while Wal-Mart reported a 4.8% increase in Net Sales in the US, rising to $74 billion, domestic Operating Income also tumbled by 8.2% to $4.8 suggesting there is a significant margin compression going on. Expect mass layoffs next as the company realizes that boosting minimum wages always has a profit trade off.
Then there was the most important factor: free cash flow. "Free cash flow was $5.1 billion for the six months ended July 31, 2015, compared to $6.8 billion in the prior year. The decrease in free cash flow was due to lower income from continuing operations and the timing of payments."
But the worst news for WMT shareholders, and the reason why the stock is down 3% pre-market is becaus ...
LONDON (Reuters) - A 6 percent fall in Chinese shares on Tuesday hit Asian stocks and left European equities struggling for gains while emerging market currencies and oil prices touched multi-year lows.
China's central bank injected the largest amount of cash into the financial system on a single day in almost 19 months, signaling Beijing's growing concerns about capital outflows following the recent weakening of its currency.
Fresh anxieties about China's commitment to steadying the stock market sparked heavy losses in Shanghai Tuesday, despite signals of a housing recovery and the central bank's latest steps to keep cash from fleeing.
(Reuters) - Home Depot Inc , the world's No.1 home improvement retailer, reported a better-than-expected rise in quarterly same-store sales, helped by increased home remodeling activity in the United States and a recovery in the housing market.
-- this post authored by Ernst Schaumburg and Ron Yang
Second in a five part series. "Flash events," extremely large price moves and reversals over just a few minutes, have occurred in some of the world's most liquid markets in recent years. What's made these events remarkable is that they seem to have been unrelated to any discernable fundamental economic news that may have taken place during the events. In this post, we consider a few of the important similarities and differences among three major flash events in the U.S. equities, euro - dollar foreign exchange (FX), and U.S. Treasury markets that occurred between May 2010 and March 2015. All three flash events involved high trading volumes and long-term impacts on depth, but the U.S. Treasury event stands out in terms of both price volatility and price continuity.
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