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19Aug2015 Pre-Market Commentary: Futures Down, Oil Steady, U.S. Dollar Volatile, Investors Waiting Fed FOMC Report This Afternoon

Written by Gary

U.S. stock index futures have fallen this morning as Chinese stocks had another very volatile session and as investors await the minutes for clues on when interest rates will be increased. Oil remains at its lows, but steady and the U.S. dollar has started the day with volatility.

The financial reports this morning are mixed, but mostly on the negative side as consumer price inflation rose 0.1% in July. Markets are expected to open lower and volatility is expected throughout the session as the Fed announce it thoughts at 2 pm.


Here is the current market situation from CNN Money

The Fed is thought to raise its benchmark interest rate as soon as its next meeting in September, but some officials are remain unconvinced. The report will be published at 2 p.m. ET today, is likely to describe the extent of those concerns.

What Is Moving the Markets

Here are the headlines moving the markets.

Target raises 2015 earnings forecast after profit jumps

CHICAGO (Reuters) - Target Corp on Wednesday reported a larger-than-expected rise in quarterly earnings as revenue got a boost from online sales and a program to narrow its product focus.

July 2015 CPI Annual Inflation Rate Is Now 0.2%

by Doug Short and Steven Hansen

According to the BLS, the Consumer Price Index (CPI-U) year-over-year inflation rate rose from 0.1% to 0.2%. The year-over-year core inflation (excludes energy and food) rate remained unchanged at 1.8%, and continues to be under the targets set by the Federal Reserve.

Consumer prices rise modestly; shelter costs up solidly

WASHINGTON, (Reuters) - U.S. consumer prices rose slightly in July as gasoline and food prices increased

Craft brewers tap down resistance to Wall Street investors

NEW YORK (Reuters) - Brooklyn Brewery, the craft beer maker operating from New York City's most populous borough, resisted taking money from investment firms for almost three decades, according to co-founder and Chairman Steve Hindy. Now the brewer of Brooklyn Lager is having second thoughts.

Target Boosts Annual Profit Outlook as Sales Rise

Target raised its annual profit outlook as the discounter's efforts to spruce up fashions and other merchandise are resonating with shoppers.

German lawmakers back third Greek bailout

BERLIN (Reuters) - German lawmakers overwhelmingly voted in favor of a third Greek bailout on Wednesday, heeding a call from Finance Minister Wolfgang Schaeuble to give Greece the chance for a new start, despite his own concerns it might not work.

Emerging markets rocky, dollar dips before Fed minutes

LONDON (Reuters) - Fears about China's economy kept emerging markets under heavy pressure on Wednesday, while the dollar eased as traders awaited minutes from last month's Federal Reserve meeting for any hints on U.S. rate hike plans.

Frontrunning: August 19



$1 trillion in Emerging Market outflows in the past 13 months (FT)

German lawmakers back third Greek bailout (Reuters)

Dutch government faces test in "junkie" Greece debate (Reuters)

China c.bank offers selected banks medium term lending facility (Reuters)

Another "expert network" busted: Promontory settles over StanChart probe (FT)

Angola to Ship Most Crude in Four Years to Meet Asian Demand (BBG)

Hackers dump data online from cheating website Ashley Madison (Reuters)

Yuan's Devaluation Brings Losses for Some (WSJ)

Grad-School Loan Binge Fans Debt Worries (WSJ)

How the Worst Performing Oil Companies Are Making More Than Exxon (

High-Frequency Cross-Market Trading In U.S. Treasury Markets

by Liberty Street Economics

-- this post authored by Dobrislav Dobrev and Ernst Schaumburg

Third in a five-part series. The U.S. Treasury market is one of the deepest and most liquid markets in the world, with significant trading in both Treasury futures and benchmark securities. In this post, we examine the pattern of trading activity in these instruments and document the substantial increase in cross-market trading (simultaneous order placement and execution in multiple markets) in recent years, highlighting the impact of technological advancements that allow nearly instantaneous trading across assets and trading platforms. Identifying the growing role played by high-frequency trading in U.S. Treasury markets is important for understanding the price discovery process. Our findings suggest that price discovery takes place on both futures and cash markets and that cross-market trading helps maintain the tight link between the two.

Stock futures fall as China weighs; Fed minutes awaited

(Reuters) - U.S. stock index futures fell on Wednesday as Chinese stocks had another roller coaster ride and as investors await the minutes from last month's Federal Reserve meeting for clues on when interest rates will be increased.

Lowe's sales beat on demand for appliances, outdoor equipment

(Reuters) - Lowe's Cos Inc , the No.2 U.S. home improvement chain, reported stronger-than-expected growth in its quarterly same-store sales, helped by higher demand for items such as appliances and outdoor power equipment.

After 6 Years Of QE, And A $4.5 Trillion Balance Sheet, St. Louis Fed Admits QE Was A Mistake

As you're no doubt aware, the Fed is fond of using the research departments at its various branches to validate policy and analyze away bad economic outcomes. For instance, earlier this year, the San Francisco Fed came up with an academic justification for the now infamous double seasonally adjusted GDP print - they call it "residual seasonality." Then there's the NY Fed, where researchers recently took to the bank's blog to explain why, despite all evidence to the contrary, Treasury liquidity is "fairly favorable."

Be that as it may, someone will occasionally say something really inconvenient - like when, back in April, the St. Louis Fed warned that the American Middle Class was "under more pressure than you think," a situation the bank blamed on the diverging fortunes (literally) of the haves and the have nots in the post-crisis world. The implication - made clear in the accompanying graphics - was that QE was effectively eliminating the Middle Class.

Now, the very same St. Louis Fed (this time in the form of a white paper by the bank's vice president Stephen D. Williamson), is out questioning the efficacy of QE when it comes to stoking inflation and boosting economic activity.

Williamson says the theory behind QE is "not well-developed", and calls the evidence in support of Ben Bernanke's views on the transmission mechanisms whereby asset purchases affect outcomes "mixed at best."

"All of [the] research is problematic," Williamson continues, as "th ...

Mortgage applications up in latest week: MBA

NEW YORK (Reuters) - Applications for U.S. home mortgages rose last week as refinancing applications jumped, an industry group said on Wednesday.

July 2015 Sea Container Counts Improved But Still Showing a Weak Economy

Written by Steven Hansen

The data for this series continues to be less than spectacular - but improved this month. The year-to-date volumes contracting for both imports and exports. This continues to indicate weak economic conditions domestically and globally.

Rise of new banks helps Kremlin keep Russia's economy afloat

MOSCOW (Reuters) - Four private banks with friendly ties with the Kremlin are emerging as big winners from Russia's economic crisis, helping out dollar-starved companies at a time when large state lenders are hampered by Western sanctions.

Chinese Intervention Rescues Market From 2-Day Plunge, Futures Red Ahead Of Inflation Data, FOMC Minutes

With China's currency devaluation having shifted to the backburner if only for the time being, all attention was once again on the Chinese stock market roller coaster, which did not disappoint: starting off with yesterday's dramatic 6.2% plunge, the Shanghai Composite crashed in early trading, plunging as much as 5% in early trading and bringing the two-day drop to a correction-inducing 11%, and just 51.2 points away from the July 8 low (when China unleashed the biggest ad hoc market bailout in capital markets history) . And then the cavalry came in, and virtually the entire afternoon session was one big BTFD orgy, leading to a 1.2% gain in the Shanghai Composite closing price, while Shenzhen and ChiNext closed up 2.2% and 2.7%, respectively.

According to the WSJ, the U-turn came after a handful of companies disclosed their biggest shareholders, some of which included state-backed firms. Analysts say that gave investors a sense of security in Beijing's market role. As a reminder, one of the reasons given for yesterday's tumble in Chinese stocks was that "investors" did not get a bailout: "At 2 p.m. it started to turn south again at a very fast rate," said Steve Wang, a research director at Reorient Group. "People questioned why the government hadn't yet stepped in" at a time of the day that it usually would, he added.

Today it did and as Reuters notes, "state-backed b ...

August 2015 Thumbtack Small Business Sentiment Shows Frustration With Bureaucratic Obstacles

by Thumbtack

Thumbtack has released the results from the fourth annual Thumbtack.com Small Business Friendliness Survey. The study, drawing upon data from nearly 18,000 small business owners, provides new insights into state and local business environments across the nation.

Alibaba Joins Forces With Chinese Arms Maker

Norinco, a state-owned arms and machinery maker that has been under sanction by Washington, will work with Alibaba in a satellite navigation project.

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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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