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29Sep2015 Pre-Market Commentary: Futures Point To Higher Open, Global Growth Worries Stall Quick Rebound, Carl Icahn Says Markets Way Overpriced

Written by Gary

U.S. stock futures indexes are up, Asian markets closed over 2% down and the EU markets are mixed. Global growth 'issues' remain single investor concern compounded by daily China financial struggles hitting the news.

Markets are expected to open higher, but could very well sink to test yesterday's session lows during the morning session.


Here is the current market situation from CNN Money

European markets finished sharply lower today with shares in France leading the region. The CAC 40 is down 2.76% while London's FTSE 100 is off 2.46% and Germany's DAX is lower by 2.12%.

What Is Moving the Markets

Here are the headlines moving the markets.

Oil rises as tighter U.S. market offsets Asia woes

LONDON (Reuters) - Oil prices rose on Tuesday after evidence of tightening supplies in the United States, the world's biggest oil consumer, outweighed concerns over the health of the Chinese economy.

India "Surprises" 51 Out Of 52 "Experts", Slashes Rates More Than Expected As Easing Bonanza Continues

Late last month, we asked how long it would be before the RBI hit back in the wake of China's yuan deval.

The Indian government's chief economic advisor Arvind Subramanian had just told ET Now television that India may need to "respond" to China's monetary policy stance, and also hinted at further export weakness. It wasn't hard to read between the lines: more shots were about to the be fired in the ongoing global currency wars.

Reinforcing that contention was the following from Deutsche Bank:

India's export sector continues to be under pressure, with merchandise exports contracting yet again in July by 10.3%yoy. The weakness in India's exports is striking (this is the eighth consecutive month of decline), not only in terms of past trend, but also from a cross country perspective. Indeed, India's exports performance has been the weakest in the region thus far in 2015. In the first quarter of the current fiscal year (April-June'15), Indian exports have contracted by 17%yoy, one of the sharpest declines on record. The main reason for such a weak Indian export performance can be attributed to the sharp decline in oil exports (down 51%yoy between April-June'15), which constitute 18% of total exports.

Another factor that could likely explain the weak performance of exports is the probable overvaluation of the rupee. As per RBI's 36-country trade based real effective exchange rate, rupee remains overvalued at this juncture and this could be impacting exports to some extent, in our view.

Reynolds to sell some brand rights to Japan Tobacco for $5 billion

(Reuters) - Japan Tobacco Inc said it would buy Reynolds American Inc's Santa Fe Natural Tobacco units outside the United States for about $5 billion, giving it the rights to the Natural American Spirit brand.

Frontrunning: September 29



Commodities in crisis as Asian shares tumble and shipper files for bankruptcy (Reuters)

Global Rout Eases as S&P 500 Futures Advance With Oil, Glencore (BBG)

Chinese Stocks Decline Most in a Month in Hong Kong on Economy (BBG)

India cuts interest rates by more than expected (BBC)

Glencore Rebounds as $50 Billion Plunge Is Seen as Excessive (BBG)

Glencore Shares Plunge as Debt Fears Rattle Investors (WSJ)

How Congress May Have Saved Goldman Sachs From Itself (BBG)

Investors Fall Out of Love With Deals (WSJ)

Volkswagen to refit cars affected by emissions scandal (Reuters)

So much for the recovery miracle: Spanish inflation dives, falls to -1.2% (

Debt-Market Tumult Hits Corporate-Bond Sales

Bond-market turmoil mounted Monday, as three companies reduced or put off planned bond sales in response to soft investor demand, damped by concerns that a global economic slowdown is taking shape.

Volkswagen to refit cars affected by emissions scandal

BERLIN (Reuters) - Volkswagen announced plans on Tuesday to refit up to 11 million vehicles and overhaul its namesake brand to try to move on from the scandal over its cheating on diesel emissions tests.

Futures point to higher opening after selloff

(Reuters) - U.S. stock index futures were up on Tuesday, a day after concerns about waning demand from China and a selloff in health care shares rattled investors and added to the uncertainty around the timing of a U.S. interest rate increase.

Goldman Capitulates, Cuts S&P 500 Earnings Forecast And Price Target; Sees Market At 2,000 By Year End

With three months left in the year, we were wondering how long it would take before Goldman's equity strategist would throw in the towel on his increasingly improbable (unless of course the Fed launches QE4, NIRP and/or helicopter money in the coming months) year-end S&P500 price target of 2100. The answer: not very long, as this is precisely what Goldman did overnight, when it cut both its 2015 and 2016 EPS forecasts (to $109 and $120 from $114 and $126), with a corresponding cut in Goldman's 2015 year-end price target from 2100 to 2,000, rising to a nice round 2,100 the year following.

The catalyst for the cut: precisely the two things Goldman had been - incorrectly - banging the table on for months and years, namely that US growth is accelerating, and that low oil prices are good for the economy.

Oops.

Here is David Kostin's mea culpa:

Slower economic growth in the US and China and a lower oil price than we previously assumed translate into a reduced profit forecast and a lower trajectory for US stocks. Our revised top-down 2015 S&P 500 EPS forecast of $109 (from $114) represents a 3% year/year decline. Our new 2016 EPS estimate of $120 (from $126) reflects annual growth of 10%. We expect S&P 500 will rise by 6% to our lowered year-end target of 2000. We expect S&P 500 will climb by 5% to 2100 in 2016. Focus on stocks with high US sales, firms returning cash to shareholders, and high quality stocks.

Some details:

We have lowered both our S&P 500 earnings estimates and price targets. The impetus for these reductions is that our models now incorporate a slower pace of economic activity in the US and China and a lower oil price than we had been ...

Carl Icahn Says Market "Way Overpriced", Warns "God Knows Where This Is Going"

To be sure, no one ever accused Carl Icahn of being shy and earlier this year he had a very candid sitdown with Larry Fink at whom Icahn leveled quite a bit of sharp (if good natured) criticism related to BlackRock's role in creating the conditions that could end up conspiring to cause a meltdown in illiquid corporate credit markets. Still, talking one's book speaking one's mind is one thing, while making a video that might as well be called "The Sky Is Falling" is another and amusingly that is precisely what Carl Icahn has done.

Over the course of 15 minutes, Icahn lays out his concerns about many of the issues we've been warning about for years and while none of what he says will come as a surprise (especially to those who frequent these pages), the video, called "Danger Ahead", is probably worth your time as it does a fairly good job of summarizing how the various risk factors work to reinforce one another on the way to setting the stage for a meltdown. Here's a list of Icahn's concerns:

Low rates and asset bubbles: Fed policy in the wake of the dot com collapse helped fuel the housing bubble and given what we know about how monetary policy is affecting the financial cycle (i.e. creating larger and larger booms and busts) we might fairly say that the Fed has become the bubble blower extraordinaire. See the price tag attached to Picasso's Women of Algiers (Version O) for proof of this.< ...

Asian Equities Tumble On Commodity Fears; US Futures Rebound After India "Unexpectedly" Eases More Than Expected

It was a tale of two markets overnight: Asia first - where all commodity hell broke loose - and then Europe (and the US), where central banks did everything they could to stabilize the already terrible sentiment.

Asian markets were a bloodbath as we covered previously, with China's Shanghai Composite sliding 2%, even as some big-cap marquee names plunged, but the one stock everyone was focusing on was Singapore-listed Noble Group (SGX:N21), which as we explained previously is Asia's largest commodity trader and thus the continent's "Glencore", whose CDS blew out overnight, its 2020 bonds crashed to record lows and stock plunged as much as 15% before closing down 10% on Glencore - and commodity - counterparty risks and general liquidation concerns. This was broadly in line with the mauling of Australian miners which as we showed previously, also plunged overnight as the commodity liquidation ripple effects are starting to be felt virtually everywhere.

Another market that was not spared was Japan, whose Nikkei225, trading at nearly 21,000 just one month ago, crashed by over 4%, to close below 17,000 for the first time in 2015. In fact, despite persistent Japanese liquidity injections, the Ni ...

The Next Phase Of European Power Politics

from STRATFOR

this post authored by Adriano Bosoni

The recent battle over a plan to relocate asylum seekers across the European Union did little to appease the already deep fault lines among member states. The proposal was eventually approved, but only after a succession of threats, unilateral moves and violations of EU rules.During the negotiations Berlin was unusually uncompromising - an attitude it also showed during the discussions over Greece's third bailout program.

Icahn urges Fed to get off zero, says 'treacherous path' undertaken

NEW YORK (Reuters) - Billionaire investor activist Carl Icahn ramped up criticism of the U.S. Federal Reserve, warning about the unintended consequences of ultra low interest rates on the economy and financial markets.

Commodities in crisis as Asian shares tumble and shipper files for bankruptcy

SINGAPORE/HONG KONG (Reuters) - A Japanese shipper filed for bankruptcy on Tuesday and global trading firm Louis Dreyfus posted lower profits, the latest victims of tumbling energy and raw material prices.

Cargolux may buy five Boeing jets, says iPhone shipments strong

LUXEMBOURG (Reuters) - Cargolux is in talks with Boeing to buy five more 747-8F freighter jets, the chief executive of Europe's largest all-freight carrier said on Tuesday.

Commodity rout hits traders, emerging markets

LONDON (Reuters) - Shares in commodity trading firms took another tumble on Tuesday, driving global stocks to their lowest in more than two years as pressure built on raw materials prices and emerging markets.

Wizz Air raises forecast on strong summer demand

(Reuters) - Low-cost airline operator Wizz Air Holdings Plc raised its profit forecast for the year, citing strong performance during the European summer and an expanded network.

Energy Transfer to buy Williams for $33 billion after long quest

(Reuters) - Pipeline giant Energy Transfer Equity LP will buy rival Williams Cos Inc in a deal valued around $33 billion, nearly a third less than the same offer Williams had rejected in June for being too small.

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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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