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25Aug2015 Pre-Market Commentary: U.S. Futures And EU Stocks Surge In Spite Of Chinese 7.6% Drop Earlier, Oil And Dollar Up And Steady, Markets Expected To Open Higher

Written by Gary

U.S. stock futures indexes were up at 8 am, SPY was up 2.5% and oil and the U.S. dollar were also up fractionally.

China took fresh moves earlier to free up money for its slowing economy which outweighs every country in the world save the U.S. The global market rout showed signs of easing, as U.S. stock futures and European stocks surged despite another sharp drop (-7.63%) in Chinese stocks.

Wall Street is expected to open higher, slip in early trading and close near the unchanged line. All of this depends on the U.S. financial reports coming out at 9 am. which could send the markets tumbling downward again.


Here is the current market situation from CNN Money

European markets are mixed today. The DAX is up 4.39% while the FTSE 100 gains 2.88%. The CAC 40 is off 1.18%.

China's economy outweighs every country in the world save the U.S. But on transparency, it remains distinctly an emerging market, with murky politics, unreliable data and opaque decision making. But on transparency, China remains distinctly an emerging market, with murky politics, unreliable data and opaque decision making.

What Is Moving the Markets

Here are the headlines moving the markets.

All 30 Dow stocks rally in premarket, following 3-straight sessions that they all fell

Shares of all 30 Dow Jones Industrial Average are surging in premarket trade Tuesday, which should snap the three-session streak that all 30 components closed lower. Among the best early performers, shares of Apple Inc. climbed 5.8%, J.P. Morgan Chase & Co. rose 4.1...

Full Story

China cuts interest rates for fifth time in 9 months to spur slowing economy

BEIJING (AP) — China cut interest rates Tuesday for a fifth time in nine months in a new effort to shore up slowing economic growth. The benchmark rate for a one-year loan will be cut by 0.25 percentage point to 4.6 percent and the one-year rate for deposits will fall by a similar margin to 1.75 percent, the central bank announced.

It also increased the amount of money available for lending by reducing the minimum reserves banks are required to hold by 0.5 percentage point. The moves had been anticipated by financial analysts after exports, manufacturing and other economic indicators weakened by larger margins than expected.

Beijing reported economic growth held steady at 7 percent in the latest quarter but that was due to a stock market boom that pushed up the contribution from financial industries while other sectors weakened.

Global markets rebound after China cuts interest rates to support weakening economy

BEIJING (AP) — Global markets rebounded Tuesday after China's central bank cut its key interest rate to support growth in the world's second-largest economy. Earlier, China's main stock index closed sharply lower for a fourth day.

European markets recovered almost all their losses from Monday, with most rising at least 4 percent, while U.S. stocks were expected to open higher and oil prices traded higher. Hours after China's Shanghai stock index slumped to close 7.6 percent lower — adding to Monday's 8.5 percent loss and taking the benchmark to its lowest level since Dec. 15 — the central bank swung into action.

It cut its interest rates for the fifth time in nine months in a renewed effort to shore up economic growth. The central bank lowered the benchmark rate for a one-year loan by 0.25 percentage points to 4.6 percent and the one-year rate for deposits by a similar margin to 1.75 percent.

China cuts rates, reserve ratio after stocks plummet again

SHANGHAI (Reuters) - China's central bank cut interest rates and lowered the amount of reserves banks must hold for the second time in two months on Tuesday, ratcheting up support for a stuttering economy and a plunging stock market that has sent shockwaves around the globe.
...

Global stocks, oil, dollar extend gains after China cuts rates

LONDON (Reuters) - Shares, oil and core bond yields extended gains in midsession European trade on Tuesday as a tentative market rebound picked up pace after China cut interest rates and banks' reserve requirements to kick-start its wavering economy.

Best Buy posts surprise increase in quarterly sales

(Reuters) - Best Buy Co Inc , owner of the biggest U.S. electronics chain, reported an unexpected increase in quarterly sales, helped by demand for appliances, TVs and mobile phones.

With Stocks In Free Fall, China Ditches Plunge Protection For Desperation Rate Cuts

Over the weekend, the PBoC was radio silent on a highly anticipated RRR cut and the results, to say the least, were not favorable.

Gulf markets set the tone on Sunday and then from the word "go" in Shanghai on Monday morning until, well, until now, it's been unabated selling. Selling which spilled over onto Wall Street yesterday and left the Dow down nearly 600 points at the close.

With Chinese stocks still reeling, we got a dual policy rate cut out of the PBoC first thing this morning which is interesting considering that, as Bloomberg reports, the plunge protection national team operating through China Securities Finance has apparently given up on trying to support stocks directly. Here's what Bloomberg said earlier today:

China has halted intervention in the stock market so far this week as policy makers debate the merits of an unprecedented government campaign to prop up share prices, according to people familiar with the situation.

Some officials argue that falling stocks will have a limited impact on the world's second-largest economy and that the costs of supporting the market are too high, said one of the people, who asked not to be identified because the deliberations are private. Officials who back intervention say tumbling shares pose a risk to the banking system, the people said.

The Shanghai Composite Index sank 15 percent over the past two days, extending a $4.5 trillion rout since mid-June that has shaken ...

Frontrunning: August 25


China's Central Bank Cuts Interest Rates (WSJ)

Chinese Stocks Crash Again to Extend Biggest Plunge Since 1996 (BBG)

China cuts rates, reserve ratio to aid economy as stocks sink (Reuters)

Wall St. suffers worst day in four years, S&P confirms correction (Reuters)

Europe's Stocks Head for Best Day Since 2011 (BBG)

Market turmoil clouds Fed rate outlook (FT)

For All Its Heft, China's Economy Is a Black Box (WSJ)

Apple leads technology stock recovery amid China fallout (FT)

How Trump plans to turn gawkers into hardcore supporters (Reuters)

FCC Crushes Dish's Dreams of Becoming a Wireless Carrier, For Now (

Incentive Pay And Gender Compensation Gaps For Top Executives

by Liberty Street Economics

-- this post authored by Stefania Albanesi, Claudia Olivetti, and Maria Prados

The persistence of a gender gap in wages is shaping the debate over women's equality in the workplace and underscores the challenge facing policymakers as they consider their potential role in closing it. While the disparity affects females at all income levels, women in professional and managerial occupations tend to experience greater gender-pay differences than those in working-class jobs. The rise in the use of incentive pay, which has been linked to the growth of income inequality (Lemieux, MacLeod, and Parent), might have contributed to the gender gap in earnings (Albanesi and Olivetti). In this post, which is based on our related New York Fed staff report, we document three new facts about gender differences in the structure of executive compensation.

Stock futures rise sharply as China cuts interest rates

(Reuters) - U.S. stock index futures rose sharply on Tuesday in anticipation of bargain hunting a day after Wall Street turned in its worst performance in four years and as China cut interest rates for the second time in two months.

Israel: The Case Against Attacking Iran

by STRATFOR

this post authored by George Friedman

On Aug. 21, Israeli Channel 2 Television aired a recording of Ehud Barak, Israel's former defense minister and former prime minister, saying that on three separate occasions, Israel had planned to attack Iran's nuclear facilities but canceled the attacks. According to Barak, in 2010 Israel's chief of staff at the time, Gabi Ashkenazi, refused to approve an attack plan. Israeli Cabinet members Moshe Yaalon and Yuval Steinitz backed out of another plan, and in 2012 an attack was canceled because it coincided with planned U.S.-Israeli military exercises and a visit from then-U.S. Defense Secretary Leon Panetta.

China stocks plummet again as Beijing sits on sidelines

SHANGHAI (Reuters) - Chinese stocks tumbled again on Tuesday, despite a rebound in markets elsewhere in Asia, as investors despaired at the lack of policy action from Beijing in response to recent data suggesting the downturn in the world's second-largest economy is deepening.

GE will seek compensation for FX loan conversion in Poland

WARSAW (Reuters) - U.S. General Electric (GE) will seek compensation for any losses incurred by its Polish arm Bank BPH because of the planned conversion of Swiss-franc denominated mortgages into zlotys, which is being decided by the Polish parliament.

Boeing raises China 20-year aircraft demand, says outlook rosy

BEIJING (Reuters) - Boeing Co on Tuesday raised its forecast for China's aircraft demand over the next 20 years, saying it was optimistic about the long-term outlook for the world's second largest aviation market despite a slowing economy and weak stock market.

Toyota says testing potential alternatives to Takata air-bag inflators

TOKYO (Reuters) - Toyota Motor Corp said on Tuesday it is testing air-bag inflators made by Autoliv and Nippon Kayaku Co as possible alternatives to potentially lethal parts supplied by Takata Corp.

How Exposed Is Europe To A Chinese Economic Slowdown?

European stock markets posted their worst day since the 2008 crisis yesterday with the FTSE 100 closing down 4.7%, the German DAX 4.7%, France's CAC 5.4%, Spain's IBEX 5% and Italy's FTSE MIB 6% off the back of huge falls in Asian markets. Much of this has been linked back to huge falls in Chinese and emerging market equities. While this link should not be overdone - China was likely a catalyst if not the cause of such a huge market shift (after all how much actually changed over the weekend) - it provides an opportunity to ask the question, just how exposed is Europe to a slowdown in China?

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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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