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27Aug2015 Pre-Market Commentary: Futures Up One Percent, Oil Up And Steady, Investors Cautious About Continued Skyrocketing Markets

Written by Gary

U.S. stock futures index is up fractionally, WTI oil is in the 40's and investors are wondering if the Great Deflation Scare of 2015 over? Markets across the globe are skyrocketing after Wall Street broke a six-day losing streak with its best rally in nearly four years.

While it is still too early to break out the celebratory adult beverages, savvy investors are watching global events, especially oil as revived claims of lower prices are just around the corner.

Markets are expected to open higher and may experience the morning slide before melting up and trading sideways.

Here is the current market situation from CNN Money

European markets are sharply higher today with shares in Germany leading the region. The DAX is up 3.08% while France's CAC 40 is up 2.73% and London's FTSE 100 is up 2.49%.

What Is Moving the Markets

Here are the headlines moving the markets.

Oil Outlook: Brent $40 floor, $35 written all over WTI Crude

Chris 'oil' Williams, City Investor and City Financial Writer, joined Zak Mir and Mike Ingram, to discuss his views on the current oil market and his future predictions.

Williams noted the situation surrounding Saudi Arabia, with the conclusion that its economy can't maintain this looking forward, and that with it facing a budget deficit of 20% of its GDP, it cannot continue on the course of lower prices for much longer. In contrast, he added how OPEC countries are decreasing their production as a result of maintenance or political issues, with Venezuela facing the second type of problem.

When concerning Iran, it will be opening up at the end of the year, but Williams believes that the market has already priced this in. US shale forecast shows a reduction from 9.6 to 9 million barrels a day, with the majority of shale being hedged about $70-80 a barrel.

However, he also commented that with hedges coming off in September-October time, production will have to stop or be significantly reduced.

Read the rest of the article Oil Outlook: Brent $40 floor, $35 written all over WTI Crude

Initial Jobless Claims Ends Losing Streak, Unchanged Since January

After four weeks of rising - the longest streak since Feb 2009 - initial claims dropped very modestly to 271k this week. This means initial jobless claims has gone nowhere since January 23rd.

Charts: Bloomberg

Why Gold Was The Best Buy in 2008-9 Crash and Will Be This Time Too

Today's Gold Prices: USD 1128.50, EUR 728.91 and GBP 990.38 per ounce
Yesterday's Gold Prices: USD 1134.40, EUR 724.63 and GBP 990.05 per ounce.

Gold in USD - 5 Year

Assessing the Technical Damage to Markets

by Barry Ritholtz

Bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the time to sell. -John Templeton

Now that the Standard & Poor's 500 Index has had its first decline of more than 10 percent since 2011, it is time to assess the technical damage.

There is little doubt the past week has bruised the bull market. Since the run began in March 2009, we have had similar or bigger sell-offs. Quite a few pundits and commentators, though, have said that this one "feels different." That sort of squishy analysis leaves us too dependent on subjective, unquantifiable emotions. Rather than rely on anyone's gut feel, let's spend some time today looking at quantifiable data — market internals, trends, supply and valuations.

I am no longer a trader, and don't look at internals or technicals much. Instead, I rely on the smartest people I know in the trenches to share their insights. The key take away? The past week has done some serious damage, and whatever recovery we see may be a slog.

Let's start out with the present, oversold conditions. Jeffrey Saut, chief strategist at Raymond James, points out how unusual the past few weeks have been:
continues here: How Badly Was the Stock Market Damaged?

Tiffany forecasts surprise decline in full-year profit

(Reuters) - Luxury jeweler Tiffany & Co forecast a surprise decline in full-year profit and reported an unexpected fall in second-quarter sales as a strong dollar discouraged tourist spending in the United States and reduced the value of overseas sales.

Stocks fly after Fed official cools September rate hike talk

LONDON (Reuters) - Stocks surged on Thursday, following the biggest gains on Wall Street in four years, after a U.S. Federal Reserve policymaker said the case for an interest rate increase next month "seems less compelling" than it was a few weeks ago.

Emerging-Market Currency Risk Shifts to Lenders

Heavy debt loads and falling currencies have long been a recipe for disaster in emerging markets. This time, though, many countries did most of their borrowing in their own currencies, shifting much of the risk onto their lenders.

Tiffany Stock Tumbles After Revenue And Profit Drops, EPS Slide 16%; Forecast Cut; Strong Dollar Blamed

Even the rich are starting to feel the pinch, at least according to the favorite jeweler of the upwardly mobile middle-to-upper class (especially in China and Japan), Tiffany & Co., which earlier today reported Q2 EPS of $0.86, below the $0.91 expected, with GAAP EPS of $0.81 some 16% below the $0.96 record last year.

Like other retailers, TIF was quick to blame the surging dollar (which isn't going anywhere if the Fed indeed proceeds with a rate hike), blaming it for lowering the value of the Tiffany's sales overseas, where the company gets most of its revenue. Currency fluctuations also have kept tourists from making purchases at U.S. stores, dealing a second blow to revenue.

Per the release, "higher sales to U.S. customers contrasted with lower foreign tourist spending in the U.S. which management attributes to the strong U.S. dollar."

However, the slowdown in USD-purchases were offset by tourists purchasing TIF wares in Europe: "higher sales to U.S. customers contrasted with lower foreign tourist spending in the U.S. which management attributes to the strong U.S. dollar, and there was healthy comparable store sales growth in Canada and Latin America."

In other words, Tiffany is rapidly becoming a global FX arb, with tourists from countries with overvalued currencies purchasing TIF jewelery in countries with devalued FX rates. Still, we are confident Tiffany's speaks for everyone when, as its newly appointed (on April 1) CEO Fred Cumenal said, "The adverse effects from the strong dollar have been even more significant than initially expected."

Topline weakness was met with increased labor and wage spending: SG&A expenses rose 9% in the second quarter and 7% in the first half, due to higher marketing expenses and increased costs related to store occupancy and depreciation, as well as increased labor expenses. Don't expect Tiffany to be hiking wages any time soon.

Whether as a result of the g ...

The euro is irreversible despite its faults: ECB's Coeure

FRANKFURT (Reuters) - The euro is an irreversible project even though the people of Europe lack confidence in the currency union's ability to deliver all promised benefits, European Central Bank executive board member Benoit Coeure said on Thursday.

Stock futures rise as Sept rate hike seems less likely

(Reuters) - U.S. stock index futures rose sharply on Thursday, a day after Wall Street posted its biggest one-day gain in four years.

Exporters run for high ground as China growth story unravels

FRANKFURT (Reuters) - The alarming scale of China's economic slowdown is pushing European exporters to accelerate a move into premium goods and services, sacrificing volumes if necessary to sustain margins.

It's Official: China Confirms It Has Begun Liquidating Treasuries, Warns Washington

On Tuesday evening, we asked what would happen if emerging markets joined China in dumping US Treasurys. For months we've documented the PBoC's liquidation of its vast stack of US paper. Back in July for instance, we noted that China had dumped a record $143 billion in US Treasurys in three months via Belgium, leaving Goldman speechless for once.

We followed all of this up this week by noting that thanks to the new FX regime (which, in theory anyway, should have required less intervention), China has likely sold somewhere on the order of $100 billion in US Treasurys in the past two weeks alone in open FX ops to steady the yuan. Put simply, as part of China's devaluation and subsequent attempts to contain said devaluation, China has been purging an epic amount of Treasurys.

But even as the cat was out of the bag for Zero Hedge readers and even as, to mix colorful escape metaphors, the genie has been out of the bottle since mid-August for China which, thanks to a steadfast refusal to just float the yuan and be done with it, will have to continue selling USTs by the hundreds of billions, the world at large was slow to wake up to what China's FX interventions actually implied until Wednesday when two things happened: i) Bloomberg, citing fixed income desks in New York, noted "substantial selling pressure" in long-term USTs em ...

Frontrunning: August 27

Virginia TV journalists killed by suspect with 'powder keg' of anger (Reuters)

Policeman shot to death and three women stabbed, one fatally, in Louisiana (Reuters)

China Intervened Today to Shore Up Stocks Ahead of Military Parade (Reuters)

Margin Calls Bite Investors, Banks (WSJ)

"Computer glitch" is preventing dozens of mutual funds, ETFs from promptly pricing their securities (WSJ)

Oil prices rise more than 4 percent as equities rally (Reuters)

Oil Industry Needs Half a Trillion Dollars to Endure Price Slump (BBG)

The New Orleans Economy 10 Years After Katrina (WSJ)

Jihadi Trails: The Circuitous Routes Foreigners Take to Syria and Iraq (WSJ)

Wal-Mart to stop selling AR-15, other semi-automatic rifles (

From The Vault: Supplementing A Monetary Policy Syllabus

by Liberty Street Economics

-- this post authored by Anna Snider

The San Francisco Fed's John Williams gave an interesting speech awhile back on the challenge of teaching economics after the financial crisis, since the Federal Reserve had deployed new monetary policy and lending tools that "were not found in any textbook."

How China's Currency Policies Will Change The World


The recent fluctuations in China's currency typify the best and worst of a globalized world, where developments in one place can instantly change the political and financial calculations of governments in others. For most of human history, the communities, cultures and economies of the world existed independently of one another, separated as they were by vast distances and difficult terrain.

Aggressive Chinese Intervention Prevents Another Rout, Sends Stocks Soaring 5% In Last Trading Hour; US Futures Jump

After a 5 day tumbling streak, which saw Chinese stock plunge well over 20% and 17% in just the first three days of this week, overnight the Shanghai Composite was hanging by a thread (and threat) until the last hour of trading. In fact, this is what the SHCOMP looked like until the very end: Up 2.6%, up 1.2%, up 2.8%, up 0.6%, up 2%... down 0.2%. And then the cavalry came in: "Heavyweight stocks like banks and insurance companies helped pull up the index, and it's possibly China Securities Finance entering the market again to shore up stocks," Central China Sec. strategist Zhang Gang told Bloomberg by phone. Net result: the Composite, having been red just shortly before the close, soared higher by 156 points or 5.4%, showing the US stock market just how it's down.

Then again, today's move was telegraphed a mile away: in fact as we said just yesterday when comparing Chinese stocks to the Nasdaq circa 1999-2001, we said "If past is indeed prologue, now may be a good time to buy some Shanghai Composite calls, especially with China's desperation getting more profound with each passing day."

End result, if only for now:

Ukraine won't give Russia better debt deal than other creditors: PM

KIEV (Reuters) - Ukraine will not offer a better debt deal to Russia than to other creditors, Ukrainian Prime Minister Arseny Yatseniuk said on Thursday, after the country reached a restructuring agreement on $18 billion of its debt.

ESM's Regling says threat of Grexit is still there

BERLIN (Reuters) - A Greek exit from the euro zone was a possibility and remains a threat if Athens does not fulfill the conditions of its third bailout agreement, the head of the European Stability Mechanism said on Thursday.

Syngenta shares rebound as management seen under pressure to act

FRANKFURT (Reuters) - Shares in pesticides maker Syngenta bounced back on Thursday from their worst ever slump in the previous session as the market speculated on management being pressured into quickly boosting the shares after suitor Monsanto walked away.

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