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14Oct2015 Pre-Market Commentary: Global Economy Investors Main Concern, US Futures Flat, US Retail Sales Down, Oil Trades Near Support

Written by Gary

U.S. stock futures indexes are flat after US Retail Sales prints out red this morning. European and Asian markets are lower after China inflation data fuels growth worries, adding to the list of concerns surrounding the world's second-largest economy.

The markets are expected to open fractionally and the SP500 may test the 2020 resistance again.

Here is the current market situation from CNN Money

European markets are mixed to lower. Shares in London are off as the FTSE 100 drops 0.45%. The DAX is down 0.30% while the CAC 40 in France is unchanged.

China's producer price index fell 5.9%, clocking its 43rd straight month of decline and recording its biggest drop since the depths of the global financial crisis.

Britain falls back into deflation as tumbling fuel prices take effect. Consumer prices slip to their lowest level since April at -0.1pc on the back of falling energy costs and sluggish growth in clothes prices.

What Is Moving the Markets

Here are the headlines moving the markets.

At least 30 involved in Volkswagen diesel cheat: Spiegel

FRANKFURT (Reuters) - At least 30 managers were involved in Volkswagen's emissions test cheating, German magazine Spiegel reported on Wednesday, citing internal and external investigations.

Jarden to buy school products maker Jostens for $1.5 billion

(Reuters) - Jarden Corp - owner of Sunbeam kitchen appliances and Coleman outdoor gear - said it would buy Jostens Inc, a maker of class rings and yearbooks, in a deal worth $1.5 billion.

Wells Fargo profit inches up, helped by GE loan book

(Reuters) - Wells Fargo & Co , the biggest U.S. residential mortgage lender, reported a rise in quarterly profit for the first time in three quarters on Wednesday, helped by its purchase of commercial loans from General Electric Co .

Bosch sees diesel market so far unharmed by Volkswagen scandal

RENNINGEN, Germany (Reuters) - German automotive supplier Robert Bosch [ROBG.UL] has not seen any change so far in the diesel car market as a result of an emissions scandal that has rocked Volkswagen , its chief executive said on Wednesday.

Bank of America posts quarterly profit as cost-cutting pays off

(Reuters) - Bank of America Corp reported a quarterly profit, compared with a year-earlier loss, as Chief Executive Brian Moynihan's cost-cutting efforts helped the bank put the problems stemming from the financial crisis further behind it.

Delta Air beats third-quarter profit estimate, expects unit revenue drop

(Reuters) - Delta Air Lines Inc on Wednesday reported third-quarter profit that topped analysts' expectations, and it forecast that passenger unit revenue would decline in the fourth quarter year-over-year, although less than it has dropped in the prior two quarters.

U.S. stock futures fall on fresh China woes; bank results in focus

(Reuters) - U.S. stock index futures fell slightly on Wednesday as fresh economic data from China caused a selloff in commodities and investors awaited a raft of earnings reports.

BlackRock's profit falls 8 percent

(Reuters) - BlackRock Inc , the world's largest asset manager, said its third-quarter profit fell 8 percent even as the firm rebounded from its first outflow in nearly three years.

Frontrunning: October 14

Democratic rivals back Clinton on emails, but little else in scrappy debate (Reuters)

Hillary Clinton Shows Relentless Efficiency in First Democratic Debate (WSJ)

U.S. Examines Goldman Sachs Role in 1MDB Transactions (WSJ)

JPMorgan Says Trading Pain Isn't Over After Third-Quarter Slump (BBG)

Islamic State battles insurgents near Aleppo as army prepares assault (Reuters)

Oil Slide Means `Almost Everything' for Sale as Deals Accelerate (BBG)

$50 Oil for 15 Years Isn't What Scares Bank of Russia Governor (BBG)

Brazil's Next Big Crisis Is Scaring Bankers and Wiping Out Jobs (BBG)

Revealed at last - Berlusconi's notorious 'bunga bunga' room (Telegraph)

Hope Is a Traffic Jam as Detroit Shakes Off Record Bankruptcy (

Bank of America Net Interest Margin Drops To All Time Low, FICC Revenues Tumble 11%

While yesterday's JPM results missed from the top to the bottom, coupled with a surprising and aggressive deleveraging of the bank's balance sheet which has shrunk by over $150 billion in 2015 mostly on the back of a decline in deposits, Bank of America reported numbers which were largely the opposite when it printed a modest beat on both the top line with $20.9 billion in revenues (adjusted sales of $20.6Bn vs Exp. $20.5Bn), down $500 million from a year ago, and the bottom line: generating $0.35 in adjusted earnings in the quarter, 2 cents better than the $0.33 consensus estimate.

As shown in the chart above, the company's official EPS was $0.37 but this contained the following adjustments:

($0.03) per share after-tax from negative market-related NII adjustments 1 ($0.6B pre-tax)

$0.02 per share after-tax from positive net debit valuation adjustments ($0.3B pre-tax)

$0.02 per share after-tax net positive impact from gain on sales of consumer real estate loans ($0.4B pre-tax), chargefor UK payment protection insurance ($0.3B pre-tax), and income tax benefits related to certain non-U.S. subsidiaryrestructurings

As to where that all important 2 "beating" cents came from, why the usual place of course:

"The net reserve release was $126 million in the third quarter of 2015, compared to a net reserve release of $407 million in the third quarter of 2014."

Which is odd considering this takes place in a quarter when everyone else (coughjefferiescough) is provisioning for deep credit losses.

The reason for the improvement on the expense side wa ...

Iran Sends "Thousands" Of Troops To Syria For Russian-Backed Assault On Key City

As those who follow Mid-East affairs are acutely aware, the regime in Syria has enjoyed both military and financial support from Iran for the duration of the country’s civil war.

Syria cannot fall to the West if Tehran intends to preserve the regional balance of power and an Iran-friendly Damascus ensures the supply lines remain open between the IRGC and Hezbollah. Lose Syria, and suddenly, the Mid-East tide turns in favor of the Saudis and Qatar and that, clearly, is an unacceptable outcome.

That said, Iran’s role on the ground in Syria has taken some off guard of late. Perhaps it’s the fact that Tehran’s participation on the ground has become more overt even as one would imagine that Iran would be keen to not antagonize the West on the heels of the nuclear deal which has the potential to facilitate the lifting of crippling economic sanctions. The key seems to be Russia’s involvement, which effectively gives Iran’s Syrian ground operations the superpower stamp of approval.

The strategy, as we’ve noted on several occasions of late, is that Russia clears the way with aggressive aerial bombardments and then Iran, operating through either Hezbollah, Iraqi Shiite militias, and/or the IRGC sweeps in on the ground and takes care of whatever anti-regime forces may be left in the wake of the Russian airstrikes.

This has worked well thus far and now apparently, Iran has sent “thousands†of troops to Syria in preparation for an assault on Aleppo. Here’s Reuters:

A delegation of Iranian lawmakers arrived in Damascus on Wednesday in the build-up to a joint operation against insurgents in northwest Syria, and said U.S.-led efforts to fight rebels had failed.

Futures Continue Slide On Latest Chinese Economic Disappointments, Gold Hammered

When China was closed for one week at the end of September, something which helped catalyze the biggest weekly surge in US stocks in years, out of sight meant out of mind, and many (mostly algos) were hoping that China's problems would miraculously just go away. Alas after yesterday's latest trade data disappointment, it was once again China which confirmed that nothing is getting better with its economy in fact quite the contrary, and one quick look at the chart of wholesale, or factory-gate deflation, below shows that China is rapidly collapsing to a level last seen in 2009 because Chinese PPI plunged by 5.9% Y/Y, its 43rd consecutive drop - a swoon which is almost as bad as Caterpillar retail sales data.

Consumer price inflation wasn't much better (aside from food prices which jumped, but as the Fed has repeatedly acknowledged, nobody cares about rising food prices), and at 1.6%, it came below the 1.8% expected, resulting in the first slowdown in 4 months.

The result of this latest Chinese economic rout dragged Asian equity markets traded lower as risk sentiment remained weak following yesterday's release of soft Chinese import figures. Nikkei 225 (-1.9%) underperformed and fell below 18,000 amid broad based losses, while the ASX 200 (-0.1 %) was weighed on by the energy sector as crude prices remained near lows. Shanghai Comp. (-0.9%) pared its lacklustre CPI and PPI inspired losses following ga ...

Bank of America Beats as Legal Bills Plummet, Trading Hangs On

Bank of America said it swung to a larger-than-expected third-quarter profit, after big legal expenses last year pushed the bank into the red.

Wells Fargo Tops Estimates as Loan Growth Remains Robust

Wells Fargo said its third-quarter profit and revenue rose more than expected, though the nation’s fourth-largest bank by assets continued to deal with a low interest-rate environment.

Why General Electric Is Unwinding Its Finance Arm

Stricter regulation curbed GE Capital’s freewheeling ways, crimping profits and spurring the company’s exit from financial services.

The Hierarchy Of The European Mind


-- this post authored by Mark Fleming-Williams

Europe is in crisis. It has been in crisis for seven years, and while its inhabitants continue to calmly go about their daily lives it is sometimes easy to lose sight of the fact that behind the scenes, the joints and hinges that hold the Continent together are under great stress. In 2008, the global financial crisis put an end to the dream of everlasting prosperity, and 2011 saw the arrival of financial panic on Europe's shores - a panic that has continued its disruptive work in Greece for much of this year.

Early Headlines: Global Stocks Decline, China Disinflation, VW Electric Cars, U.S. Deflation, GE Divesting Finance, Oil Slide To Continue, Financial Crisis Is Back And More

Written by John Lounsbury

Early Bird Headlines 14 October 2015

Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.


Capitol Report: Why Dell may have got a bargain with EMC

When M&A parties like Dell and EMC share an auditor research says target prices often suffer

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