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24Aug2015 Pre-Market Commentary: Markets To Gap Down On Opening Bell, Oil In 38's, U.S. Dollar Continues To Melt Down, Tech Stocks Taking Early Morning Hit

Written by Gary

U.S. equity markets are set for a precipitous gap down at the opening bell today as global financial fears that have rattled traders across the world for the past several sessions continue. U.S. stock futures indexes were down over 3% at one point, but not close to China's 8.49% fall last night.

We are approaching support levels on many important indexes that would be the imaginary line of a 10% correction that would allow traders to grab bargains and see the markets rise again. (On that note, we will soon see.)

Here is the current market situation from CNN Money

European markets are sharply lower today with shares in France off the most. The CAC 40 is down 4.72% while London's FTSE 100 is off 4.22% and Germany's DAX is lower by 3.98%.

Oil is still melting down along with the U.S. dollar dipping into the high 93's.

Oil continues to rue the global markets: when oil falls, so do the markets. We have reached the 39 level that some analysts said we would go to and now we are in the 38's and falling. With the driving season behind us and refineries looking to refurbish existing plants (partial shut downs), crude is more than likely to build into the already stored glut and send crude prices even lower.

Tech stocks in the U.S. are sharply lower in early action after the sector fell just as hard as broad market averages in China and Japan. Tech heavyweights aren't getting spared amid the carnage.

What Is Moving the Markets

Here are the headlines moving the markets.

How the Market Rout Is Turning Wall Street Upside Down

Market turmoil has investors flocking to the safety of U.S. treasurys, as many on Wall Street rip up their playbooks for what will work for the rest of 2015.

Junior miners jump into medical marijuana, food service amid slump

TORONTO/VANCOUVER/SYDNEY (Reuters) - Many of the world's junior miners are laying down their picks and shovels to start new ventures ranging from egg exporting to medical marijuana farming, as they as try to survive a crash in metals prices by shifting away from exploration.

Great fall of China sinks world stocks, dollar tumbles

LONDON (Reuters) - Alarm bells rang across world markets on Monday as a near 9 percent dive in China shares and a sharp drop in the dollar and major commodities panicked investors.

Mid-East Meltdown Continues: Stocks Sell-Off Across Petrodollar States

On Sunday, we saw a Gulf market meltdown with stocks falling 7% in Saudi Arabia and 5% or more in the United Arab Emirates and Qatar. The steep declines came on the heels of Friday's horrific selloff in US markets and presaged the carnage that would begin to unfold hours later when Asian bourses opened for trading for the week.

As Brent continued to slide, the selloff in Mid-East markets continued unabated on Monday with Saudi Arabia's Tadawul All Share Index dipping more than 6%, hitting levels last seen in May of 2013.


Saudi Arabia:



"Oil just can't stop sliding and local investors are very worried about where the bottom is and how long regional economies can take the battering," one asset manager in Abu Dhabi told Bloomberg, who reminds us that "Middle Eastern stocks had their worst day of the year on Sunday after Saudi Arabia's index of equities sank more than 20 percent from a peak in April."


Futures Just Crashed To New Overnight Lows, S&P Down 3%

It just went from bad to worse.



Someone wake up the Fed: "They have no idea how bad it is... They know nothing." Etc.

Frontrunning: August 24

Deutsche Bank Says Rout â€'Very Serious' as Growth Outlook Dims (BBG)

Great fall of China sinks world stocks, dollar tumbles (Reuters)

Global Stocks Fall Sharply Amid Concerns About the Chinese Economy (WSJ)

Stock Rout Spreads Through Europe After China Plunge (BBG)

China stocks give up year's gains as 'national team' stays on bench (Reuters)

The Fed Is Looking at a Very Different Dollar Than Wall Street (BBG)

French train gunman 'dumbfounded' by terrorist tag (Reuters)

How the Market Rout Is Turning Wall Street Upside Down (WSJ)

Joe Biden Is Leaning Toward a 2016 Run (WSJ)

Uber Unleashes Lobbyists in California to Reshape Driver Rules (

Rethinking Mortgage Design

by Liberty Street Economics

-- this post authored by Because mortgages make up the majority of household debt in most developed countries, mortgage design has important implications for macroeconomic policy and household welfare. As one example, most U.S. mortgages have fixed interest rates - if interest rates fall, existing borrowers need to refinance to lower their interest payments. In practice, households are often slow to refinance, or may not be able to do so.

Stock futures slump as Chinese stock rout deepens

(Reuters) - U.S. stock index futures fell sharply on Monday as alarm bells rang across world markets following a more-than 8 percent drop in Chinese shares and a steep fall in commodity prices.

China fears wipe quarter of a trillion euros off Europe's blue-chips

LONDON (Reuters) - European stocks slumped on Monday after a rout in Chinese markets, wiping hundreds of billions of euros off leading shares and sending one benchmark index to a seven-month low.

China stocks give up year's gains as 'national team' stays on bench

SHANGHAI (Reuters) - China stock markets slumped again on Monday, giving up all their gains for the year on a massive selloff that dragged down regional markets, with even some state media saying the government rescue attempt had now failed.

This Wasn't Supposed To Happen: Crashing Inflation Expectations Suggest Imminent Launch Of QE4

The wind up for the most telegraphed rate hike in history was supposed to achieve one thing: generate benign inflation in the form of a rising short end and a broadly steeper yield curve, or in short: boost inflation expectations without crashing the market (recall after 7 years of ZIRP and QE all the media is blasting is that "rate hikes are good for stocks") - after all why else would the Fed be hiking rates if not to offset the market's inflationary expectations and to have "dry policy powder" ahead of the next recession, even if said powder was a meager 25 basis points.

It was most certainly not supposed to achieve this:

This is how Nomura summarizes the chart above:

"with deflation fears in the air and oil getting floored, inflation products have already become an unloved asset class. If the Fed surprises the market with a September hike, we expect all BEIs to fall under pressure but likely led by the <5yr sector as risk markets also crater. Just like currently, BEIs are held hostage to commodities and credit markets even as the Fed probabilities are being revised down."

Here is a better way of summarizing it: the last three times inflation expectations tumbled this low, the Fed was about to launch QE1, QE2, Operation Twist and QE3.

And the Fed is now expected to hike rates in less than a month even as inflation expectations are the lowest since Lehman?

Good luck. The Fed - which is damned if it hikes rates (and crushes financial conditions by tighten ...

Carnage Continues Across European Stocks; EURUSD Surges Above 1.1500 As WTI Crude Tumbles To $38 Handle

Germany's DAX is now down 15% since the "China doesn't matter" devaluation began with most European borses down 3-5% from Friday's close as the day started off with a modest bounce only to test new lows. EURUSD is now up 500 pips in 4 days back to 7 month highs. European bond risk is surging with Portugal up 50bps since China's debacle began. And finally crude continues to get battered, now testing the $38 handle for the first time since Feb 09.

As the massive EURCNH carry trade contonues to be unwound, EUR surges higher to 7 month highs...not what Draghi ordered...

And as carry goes, so goes risk... European stocks are being battered...

And crude has collapsed through another big figure to the $38 handle...

And finally do not forget this is not money that will rotate from 'stocks' to 'bonds' this is credit-created positions via carry/repo that when liquidated simply disappear - there is no cash to move to another asset. That's the whole point - the asset inflation has been created by levera ...

China fears, global growth doubts grip markets

MADRID (Reuters) - Markets are watching for China's next move as signs of a slowdown in the world's second-largest economy stack up, raising expectations it will act to stoke growth.

China's Richest Suffered In Today's Stock Rout, Too

China's worst stock plunge in eight years today - a 9% drop on Shanghai's main index -- wiped out plenty of wealth among small investors smarting badly from what has turned into a 38% drop since mid-June on worries about economic growth and high valuations.

The Exquisite Market Setup, 23 Aug

There is an exquisite setup building once again. Tight fundamentals in the gold market apply upwards pressure on the price. For quite a while, we have been saying gold's fundamental price was around a hundred bucks above the market price. Well, the market price moved up $46 this week. What happened to the fundamental price? You'll have to read on to see (no cheating and reading ahead!) but suffice to say it's quite a bit higher than the market.

At the same time, the fundamental price of silver is below the market price. We included a graph last week, showing that gold is being sold at a discount and silver at a premium to their fundamental prices. The price of silver moved up this week, though it didn't move like gold. It was up, then down, then up, then back down, ending a mere nine cents higher than last week. In fact, on Friday, the price of gold went up about 0.8% but the price of silver dropped 1.7%.

And this is the crux. According to popular belief, the prices of the metals are supposed to move together. Silver is supposed to go up when gold goes up, only more. This is due to money printing, inflation, economic fear, anticipation of further policy madness from the Fed, or whatever. It's much clearer when you price everything in gold.

The fundamentals for si ...

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