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04Sep2015 Pre-Market Commentary: Global Markets Deeply In The Red, U.S. Futures Down Sharply, Volatility Expected

Written by Gary

U.S. stock futures indexes are down over one percent, Asian markets closed again deeply in the red and the EU is down over 2%. The unemployment rate tumbled to a seven-year low this morning apparently complicating the Fed's decision whether to raise rates or not.


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 2.08% while Germany's DAX is off 1.79% and London's FTSE 100 is lower by 1.60%.

What Is Moving the Markets

Here are the headlines moving the markets.

Futures extend losses after jobs data

(Reuters) - U.S. stock index futures extended their losses on Friday after data showed job growth slowed in August.

U.S. job growth slows, unemployment rate falls to 5.1 percent

WASHINGTON (Reuters) - U.S. job growth rose less than expected in August, which could dim prospects of a Federal Reserve interest rate hike later this month, even as the unemployment rate dropped to a near 7-1/2- year low of 5.1 percent and wages accelerated.

Fed's Lacker Says "Strong Case For Rate Hike... August Jobs Data Won't Change Decision"

With just 20 minutes to go until the latest most important jobs report ever in the history of man, Richmond Fed Chief Lacker just explained why "the case for raising rates is still strong"...



LACKER: BOTH MANDATE CONDITIONS 'APPEAR TO HAVE BEEN MET'

LACKER: EXCEPTIONALLY LOW RATES NO LONGER WARRANTED BY JOB MKT

*LACKER: AUG. JOBS REPORT UNLIKELY TO `MATERIALLY ALTER' PICTURE

But perhaps most crucially, Lacker explains "recent financial market volatility is unlikely to affect economic fundamentals in the United States and thus has limited implications for monetary policy," removing the one last leg for permabulls to rely on (that is if you velieve The Fed is not Dow-Data-Dependent).

While "there is always a chance that this morning's report is unexpectedly weak," Lacker said, refering to the Labor Department's release of non-farm payrolls at 8:30 a.m. ET, but "it's quite unlikely that a one-month blip would materially alter the labor market picture or, for that matter, the monetary policy outlook."

Full Speech below:

Highlights:

Economic data suggest that an increase in the Fed's target interest rate from near zero is warranted sooner rather than later.

With nominal short-term interest rates close to zero and inflation of at least one percent, real interest rates have been negative for the better part of the past six years. But with rising growth in personal consumption an ...

Fed's Lacker argues Fed should raise rates soon

RICHMOND, Va. (Reuters) - A top Federal Reserve official said on Friday he had seen enough healing in the U.S. labor market to warrant raising interest rates soon.

What Happens After A Crash?

Via Dana Lyons' Tumblr,

Our posts this week have dealt with analyzing the aftermath of the recent historic events that have unfolded in the stock market. However, of all the worthy topics that we have addressed, we have not directly addressed the most important one: the "post-crash" environment. Seeing as though the dramatic market decline in the latter half of August was the tremor from which all other price action has resulted, it stands to reason that we take a good look at it directly. In other words, how has the market historically behaved following similar "crashes".

We put quotation marks around the word crash as the term is obviously open for interpretation. Certainly anyone who experienced the October 1987 events would be hard pressed to call anything since then a "crash". However, for the sake of this study we are going to call the recent decline, and any similar such historical selloff, a "crash". Specifically, we looked at all times in the S&P 500 since 1950 in which the index dropped at least 10% within 10 days (credit to fellow advisor and friend, Paul Schatz [@Paul_Schatz on Twitter] for the concept).

As it turns out, we identified 11 prior unique crash occurrences. By unique, I mean we eliminated any successive crashes and any crashes that were within the confines of a retest of a prior crash. Among the 11, 2 of them - July 1974 and September 2008 - continued to cascade lower, nearly unabated, for several more months. The other 9 resulted in an initial low in relatively short order. By initial low, we mean the first step within a market bottoming process. Those 9 are the subject of today's Chart Of The Day, and this post. These are the months containing the 9 dates:

Frontrunning: September 4



Jobs Report Could Seal the Deal on Rates (WSJ)

The Jobs Report and the August Curse: Jobs Day Guide (BBG)

Migrants hold out on Hungarian 'freedom train'; Orban says millions coming (Reuters)

Migrant Crisis Divides Europe (WSJ)

German industry orders fall in July on weak foreign demand (Reuters)

Alibaba's Jack Ma, Joe Tsai to Borrow $2 Billion Against Shares (WSJ)

U.K. Retailers Post Worst Sales Decline Since Financial Crisis (BBG)

Pimco Sees Bernanke-Style Saver Glut Capping 10-Year Yield at 3% (BBG)

The Oil-Sands Glut Is About to Get a Lot Bigger (BBG)

Private-Equity Firms Plunge Back Into the Oil Patch (

Brent crude oil slips towards $50 on demand concerns

LONDON (Reuters) - Oil prices fell on Friday, pushing benchmark North Sea Brent crude down towards $50 a barrel, after a cut in European growth forecasts heightened worries over the outlook for demand at a time of huge oversupply.

No BOJ easing needed in October if inflation expectations anchored: IMF

TOKYO (Reuters) - The Bank of Japan does not need to expand monetary policy in October even if it cuts its growth and price forecasts, as long as inflation expectations are well anchored, the IMF's mission chief for Japan said on Friday.

Japanese banks among bidders for GE's local finance unit: sources

(Reuters) - Japanese banks are among bidders for General Electric Co's local commercial lending and leasing operation, sources told Reuters on Friday.

Investor flight from U.S. stocks fails to lift bond market

NEW YORK (Reuters) - The "flight to safety" into bonds many expected when U.S. stocks slumped last week never took off, making big losers out of prominent fund managers and further confusing investors at a volatile time in the market.

G20 weighs Fed hike, Chinese turmoil but unlikely to rock boat

ANKARA (Reuters) - The U.S. Federal Reserve is coming under pressure from emerging markets not to raise rates too soon as turmoil in China threatens global growth, but the G20 will not publicly call for any delay, delegates meeting in Turkey said on Friday.

Rail Week Ending 29 August 2015: Shows a Decline for the Month of August

Week 34 of 2015 shows same week total rail traffic (from same week one year ago) declined according to the Association of American Railroads (AAR) traffic data. Intermodal traffic expanded year-over-year, which accounts for approximately half of movements. but weekly railcar counts continued in contraction. Total rail traffic for the month of August declined 0.8 %.

Fed's Balance Sheet 02 September 2015 Essentially Unchanged

Total Fed Balance Sheet:

Fed's Balance Sheet week ending balance sheet was $4,437 trillion..

Airbus orders reach 754 jets after August surge

PARIS (Reuters) - European planemaker Airbus said on Friday that it won 754 orders in the first eight months of the year, boosted by an order surge last month that included one worth $26.55 billion at list prices from Indian carrier IndiGo.

Global stocks slide ahead of U.S. jobs data

LONDON (Reuters) - World shares slid towards their fourth weekly loss in the last five on Friday, as a boost from a supportive-sounding European Central Bank gave way to caution ahead of closely watched U.S. jobs data.

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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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