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02Sep2015 Pre-Market Commentary: Pre-Market Up, Oil Down But Trading Sideways, Markets Expected To Put In Another Negative Day If WTI Oil Falls

Written by Gary

U.S. stock Futures indexes are up 1%, Oil is down in the 44's and the U.S. dollar is melting higher. Asian Markets closed fractionally in the red and the European markets are fractionally in the green as investors continue to worry about Global Financial issues.

Global stock markets have steadied, but deepening worries about China are keeping investors on edge. U.S. private employers only added 190,000 jobs in August, short of economists' expectations. If oil falls so will the markets.

Here is the current market situation from CNN Money

European markets are higher today with shares in London leading the region. The FTSE 100 is up 0.25% while Germany's DAX is up 0.15% and France's CAC 40 is up 0.07%.

What Is Moving the Markets

Here are the headlines moving the markets.

2Q2015 (Revised): Headline Productivity Improves, Costs Down.

Written by Steven Hansen

A simple summary of the headlines for this release is that the growth of productivity exceeded the growth of costs (headline quarter-over-quarter analysis). The year-over-year analysis says the opposite. I personally do not understand why anyone would look at the data in this series as the trends are changed from release to release - and significantly between the preliminary and final release..

August 2015 ADP Job Growth at 190,000 - Below Consensus Expectations

Written by Steven Hansen

ADP reported non-farm private jobs growth at 190,000. The rolling averages of year-over-year jobs growth rate remains strong but the rate of growth continues in a downtrend.

U.S. private sector adds 190,000 jobs in August: ADP

NEW YORK (Reuters) - U.S. private employers added 190,000 jobs in August, short of economists' expectations, a report by a payrolls processor showed on Wednesday.

Bill Gross: Fed tightening cycle could create self-inflicted financial instability

NEW YORK (Reuters) - Bond guru Bill Gross, who has long called for the Federal Reserve to raise interest rates, said on Wednesday that U.S. central bankers may have missed their window of opportunity to hike rates earlier this year and normalizing them now could create "self-inflicted financial instability."

"The Biggest Problems We Face Is That We're All Flying Blind To A Large Degree" Warns Deutsche Bank

For everyone confused about the current state of the global financial situation, you are not alone. To help, here is DB's Jim Reid with a pretty good summary of where we all currently stand.

From DB's Jim Reid

One of the biggest problems we face is that there is no historical template for current global market conditions so we're all flying blind to a large degree. Never before have so many of the most important countries in the world printed so much money and left base rates at near zero for so long. Also never before has the largest economy in the world tried to start a slow process of reversing said extraordinary policy. So there is no road map for this journey, only educated (hopefully) predictions.

We continue to be bullish Euro and GBP credit mostly due to the fact that the global financial system is so fragile and the global economy so lethargic and asset prices generally so high (with exceptions) that it near forces central banks into a continuation of exceptionally easy monetary conditions. So we don't think this high liquidity era is over yet. Given the recent widening, in the three main currency blocks, only EUR BBBs have been tighter (just) than current levels for more than half the time through history.

So we still think very easy money is still going to be the dominant theme in financial markets. However our FX colleagues wrote an interesting report yesterday exploring their recent QT (quantitative tightening) theme. They think 2015 will mark the peak in global FX reserve accumulation following two decades of 'unremitting growth'. This is due to three cyclical drivers: China's economic slowdown, impending US monetary tightening, and the collapse in the oil price.

They would argue that the implications of their conclusions are profound. Central banks have accumulated 10 trillion USD of assets since the start of the century, heavily c ...

GM expects India business to be profitable in five years

NEW DELHI (Reuters) - General Motors Co expects to be profitable in India in five years as it cuts costs and works towards increasing locally produced content for its cars, the automaker's country chief told Reuters.

What Declining Global Reserves Mean For Bond Yields: Goldman's Take

Don't look now, but suddenly, the dynamic we began warning about last November is the talk of the financial universe and it only took one earth-shattering currency devaluation and the liquidation of a few hundred billion in US paper in the space of just two weeks to wake everyone up.

We have, as Deutsche Bank put it on Tuesday, reached the end of the "Great Accumulation" as slumping Chinese growth, plunging crude, and an imminent Fed hike have put enormous pressure on emerging economies' accumulated stash of FX reserves and that means that buyers of USD assets are becoming sellers at the expense of global liquidity and the perpetual bid for some core paper.

Of course this didn't just happen in the last two weeks as (almost) everyone would have you believe. This began quite some time ago and the death of the petrodollar was in many ways the starting pistol for what Deutsche Bank has correctly identified as an epochal shift.

Well, for anyone who's lost sleep wondering what Goldman thinks, you can relax, because the "smartest" guys in the room - whose former employee at the ECB will be watched closely this week for any possible response to the China turmoil - is out with their take, excerpts from which you can find below (note the multiple nods to the fact that this began with the dying petrodollar).

* * *

From Goldman

Falling FX Reserves and Rising Bond Yields: Some Macro Considerations

There is increasing focus among investors on the decline in FX reserves across Emerging Markets, and in China in particu ...

Oil extends losses on weak economic outlook

LONDON (Reuters) - Oil prices fell on Wednesday as concerns about the global economy exacerbated worries that an oversupply of crude could last longer than expected.

Futures up as China fears ease; U.S. private jobs data eyed

(Reuters) - U.S. stock index futures rose on Wednesday after fresh intervention from China to support its markets helped calm jittery investors, and ahead of U.S. private employment data.

VW's CEO Martin Winterkorn set to stay on for three more years

FRANKFURT (Reuters) - The executive committee of Volkswagen's supervisory board has proposed extending Martin Winterkorn's contract as chief executive until the end of 2018, the company said on Tuesday, opening the door to the appointment of an outsider as chairman.

Frontrunning: September 2

Markets on edge as policymakers flex muscles (Reuters)

European shares recover from rough ride (Reuters)

For Stock Markets, the Moment When Humans Matter (WSJ)

Puerto Rico's PREPA, bondholders have framework for deal (Reuters)

Hundreds of migrants protest at Budapest station, want to go to Germany (Reuters)

New Whale Seen Moving Tokyo Markets (BBG)

Putin's Got a New Problem With China (BBG)

Judge gives go-ahead to Uber lawsuit (FT)

Morgan Stanley issues 'full house' buy alert for stocks (Telegraph)

Older, Heavier Americans Fuel a $4 Billion Knee Replacement Market (

Searching For Higher Wages

from Liberty Street Economics

-- this post authored by Luis Armona, Samuel Kapon, Laura Pilossoph, Aysegul Sahin, and Giorgio Topa

Since the peak of the recession, the unemployment rate has fallen by almost 5 percentage points, and observers continue to focus on whether and when this decline will lead to robust wage growth. Typically, in the wake of such a decline, real wages grow since there is more competition for workers among potential employers. While this relationship has historically been quite informative, real wage growth more recently has not been commensurate with observed declines in the unemployment rate.

China Stocks Fail To Close Green Ahead Of National Holiday Despite Constant Intervention, US Futures Rebound

Since today was the last day of trading for Chinese stocks this week ahead of the 4-day extended September 3 military parade holiday to mark the 70th anniversary of the allied victory over Japan, and since Chinese stocks opened to yet another early -4.7% rout coupled with the PBOC's biggest Yuan strengthening since 2010 as we observed earlier, there was only one thing that was certain: massive intervention by the Chinese "National Team" to get stocks as close to green as possible.

CHINEXT INDEX FALLS 4.8%, HEADING FOR LOWEST CLOSE SINCE FEB. today's 2pm ramp will be a hulk smash special ahead of the parade

â€" zerohedge (@zerohedge) September 2, 2015

Sure enough they tried, and tried so hard the "hulk's" green color almost came through in the last hour of trading ...

Large banks most loved again as Shanghai shares erase losses before start of patriotic holidays.

â€" Richard Frost (@frostyhk) September 2, 2015

.... yet, despite the symbolic importance of having a green close at least one day this week ahead of China's victory over a World War II foe, Beijing was unable to defeat the market even once in the latest week...

China stock probes send shivers through investment community

SHANGHAI (Reuters) - Investigations by Chinese authorities into wild stock market swings are spreading fear among China-based investors, with some unsure if they are simply helping with inquiries or actually under suspicion, executives in the financial community said.

Markets on edge as policymakers flex muscles

LONDON (Reuters) - Fresh government intervention to support China's jittery markets and bets on a more dovish stance from central bankers provided limited respite from a stock market sell-off on Wednesday as oil resumed its fall.

Pilots' union threatens renewed strikes at Lufthansa

FRANKFURT (Reuters) - Pilots union Vereinigung Cockpit (VC) threatened renewed strike action at Lufthansa, saying the German flag carrier had rejected its offer of concessions in a long-running dispute that has cost the airline hundreds of millions of euros.

Japan lawmakers urge bourse, regulators to be tough on Toshiba

TOKYO (Reuters) - Japanese lawmakers on Wednesday called for a tough regulatory response to Toshiba Corp's second postponement of its annual results over accounting woes, saying the scandal could erode foreign investor confidence.

Citi sells Hungary consumer banking business to Erste Group

(Reuters) - Citigroup Inc agreed to sell its consumer banking business in Hungary to Austria's Erste Group Bank AG as the third-biggest U.S. bank by assets continues to divest non-core operating businesses.

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