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23Oct2015 Pre-Market Commentary: Markets Seem To Be Too High To Buy And Too Strong To Sell, Futures Up 1% Oil Prices Dropping, U.S. Dollar Rising

Written by Gary

Interesting morning as the PBOC makes a surprise rate cut in the middle of the night on a Friday well after Chinese equity markets are closed? The U.S. futures are up over one percentage point and the markets are a bit unclear right now, investors have the feeling of 'too high to buy, but too strong to sell'.

Markets are expected to open higher and may fall sharply. The operative word here is 'may'.


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 2.94% while France's CAC 40 is up 2.48% and London's FTSE 100 is up 1.22%.

We feel that the markets won't retrace too far back into the thick of recent price action, but once trading is sustained under the 2020 level we soon should see the 2000 area challenged shortly thereafter.

What Is Moving the Markets

Here are the headlines moving the markets.

China's central bank cuts rates for sixth time since November

BEIJING (Reuters) - China's central bank cut interest rates for the sixth time since November on Friday, and it again lowered the amount of cash that banks must hold as reserves in another attempt to jumpstart a slowing economy.

Alphabet set to open at record high; mobile ads drive revenue

(Reuters) - New revenue streams such as mobile and video advertising should continue to propel earnings of Google parent Alphabet Inc , whose shares were set to open at a record high on Friday following better-than-expected results, analysts said.

American Air third-quarter profit tops estimates; buying back more shares

(Reuters) - American Airlines Group Inc , the world's largest carrier, said on Friday its third-quarter profit jumped, beating analysts' expectations.

P&G sees organic sales recovering from current quarter

(Reuters) - Procter & Gamble Co reported a better-than-expected quarterly profit and said it expected growth in organic sales in the current quarter as its turnaround efforts begin to pay off.

Global stocks hit two-month high on dovish Draghi message

LONDON (Reuters) - The prospect of yet more European Central Bank stimulus pushed world stocks to a two-month high, the euro to a two-month low and left investors paying for the privilege of owning short-term Italian and Spanish bonds.

Whirlpool revises 2015 outlook as quarterly profit rises

(Reuters) - Whirlpool Corp on Friday revised its expectations for 2015 earnings per share and lowered its planned capital spending, but posted higher-than-expected third quarter earnings.

Thomson Reuters third-quarter profit tops forecasts

(Reuters) - Thomson Reuters Corp on Friday reported higher-than-expected quarterly profit even as revenue dipped, hurt by foreign currency, and the news and information company reaffirmed its full-year forecast.

Stock futures rise after Alphabet, Microsoft, Amazon impress

(Reuters) - U.S. stock index futures were higher on Friday after strong quarterly results from Alphabet, Microsoft and Amazon fueled a broad rally across the technology sector.

Reactions To China Rate Cut Trickle In: "China Is Getting More And More Desperate"

To say that China, which a few days ago reported GDP of 6.9% which "beat" expectations and which a few hours ago reported Chinese home prices rose in more than half of tracked cities for the first time in 17 months, stunned everyone with its rate cut on Friday night, meant clearly for the benefit of US stocks, as well as the global commodity market, is an understatement: nobody expected this.

As a result strategists have been scrambling to put China's 6th rate cut in the past year (one taking place just ahead of this weekend's Fifth plenum) in context. Here are the first responses we have seen this morning.

First, from Vikas Gupta, executive vice president at Mumbai-based Arthveda Fund Management Pvt., who told Bloomberg that "China rate cut will spur fund flows to EMs." He adds that "the move rules out U.S. rate increase this yr; Fed’s “hands are getting tied" concluding that "easing shows China is “getting more and more desperate†and that “things are really bad there."

While there is no debate on just how bad things in China are, one can disagree that the Fed's hands are tied - after all the Fed's biggest "global" concern was China. The PBOC should have just taken that concern off the table.

The second reaction comes from Citi's Richard Cochinos:

Bottom line: Impacts of China rate announcements on the G10 are falling. Investors remain cautious ahead of this weekend’s announcements, and what policy cuts imply for the region.

One day after a dovish ECB, China cuts interest rates by 25bp and RRR cut by 50bps. Accommodative policy begets accommodative policy it seems. Our economics team has been expecting further policy accommodation out of China, the issue was just a matter of timing. Unlike other major central banks, the PBOC doesn’ ...

China Rate Cut Reaction - Bullion Best, Bonds Bruised, Exuberance Everywhere Else

For now, the biggest loser is Treasury bonds - which are up 2-4bps in yields post-China. As for everything else - buy it with both hands and feet. US equities are extending tech gains (Nasdaq up 3% post-cash close), Gold has surged back above its 200DMA, Commodities are all loving it and the USD is bid...

The last two days have been quite impresive...

US Equities are exuberant...

As VXX tumbles over 3% in the pre-market (heralding 13 handle VIX today)

But bonds are suffering as gold leads the reaction

With gold breaking back above its 200-day moving-average...

Frontrunning: October 23



China's central bank cuts rates for sixth time since November (Reuters)

Global stocks hit two-month high on dovish Draghi message (Reuters)

$6.5 Billion in Energy Writedowns and We're Just Getting Started (BBG)

Alphabet, formerly Google, sets share buyback, shares jump (Reuters)

Hurricane Patricia, Stronger Than Katrina, Nears Mexico (BBG)

TVA Cleared to Start First New U.S. Nuclear Power Plant in Nearly 20 Years (WSJ)

U.S. Attorney Aims to Dismiss Insider Trading Charges in SAC Capital Advisors Case (WSJ)

Clinton deflects Republican criticism in marathon Benghazi hearing (Reuters)

Why Miners Keep Expanding, as Prices Collapse (WSJ)

Tax Collectors Are Going After Netflix, Airbnb, and Burning Man (BBG)

The â€'Short’ Who Sank Valeant Stock (

Breaking: China Cuts Interest Rate By 25 bps, Cuts RRR by 50 bps; Futures Soar; Fed December Rate Hike Back In Play

Just two days ago, we noted that according to Citi's Willem Buiter, there would be "Imminent Easing From Central Banks Of China, Australia, Japan And Europe." Fast forward 48 hours when he is already half right - not only did Europe confirm it is about to cut, but moments ago none other than China joined the global easing orgy when in a completely unexpected development as it happened on a Friday (we are scouring various databases to find the last time, if ever this happened) China announced it has cut not only its 1 year lending rate and 1 year deposit rate by 25 bps, but also its reserve requirement ratio by 50 bps.


CHINA CUTS BANKS' RESERVE REQUIREMENT RATIO

CHINA CUTS INTEREST RATES

CHINA CUTS 1-YEAR LENDING RATE BY 0.25 PPT

CHINA CUTS 1-YEAR DEPOSIT RATE BY 0.25 PPT

CHINA REMOVES DEPOSIT RATE CEILING FOR BANKS

CHINA CUTS RESERVE RATIO BY 0.5 PPT

CHINA INTEREST RATE CUT EFFECTIVE FROM OCT. 24

The PBOC's statement in its google-translated entirety:

People's Bank of China, from October 24, 2015, down financial institutions RMB benchmark lending and deposit interest rates, in order to further reduce the social cost of financing. Among them, one-year benchmark lending rate by 0.25 percentage point to 4.35%; year benchmark deposit rate by 0.25 percentage point to 1.5%; adjusted for each other grade benchmark interest rate loans and deposits, the People's Bank lending rates of financial institutions ; per ...

China's Central Bank Cuts Rates

China’s central bank late Friday cut both interest rates and the reserve-requirement ratio for banks, in a bid to revive slowing economic growth.

Global Stocks Extend Rally; China Cuts Rates

The prospect of further stimulus from global central banks continued to drive stocks higher globally Friday. U.S. futures and European shares extended gains after China cut benchmark interest rates.

Rail Week Ending 17 October 2015: Contraction Continues

Week 41 of 2015 shows same week total rail traffic (from same week one year ago) and monthly total rail traffic (from same month one year ago) declined according to the Association of American Railroads (AAR) traffic data. Intermodal traffic modestly expanded year-over-year, which accounts for approximately half of movements. but weekly railcar counts continued in contraction.

The Coming Age Of Cyberterrorism

from STRATFOR

-- this post authored by Scott Stewart

The Islamic State is trying to hack U.S. power companies, U.S. officials told a gathering of American energy firms Oct. 15, CNNMoney reported. The story quoted John Riggi, a section chief at the FBI's cyber division, as saying the Islamic State has, "Strong intent. Thankfully, low capability ... But the concern is that they'll buy that capability."

London Markets: FTSE 100 jolted higher after China cuts interest rates

U.K. stocks rally Friday, beefing up their potential gain for the week, after China’s central bank made another cut of interest rates.

The Wall Street Journal: Tesla plans to produce electric vehicles in China within two years

Tesla Motors CEO Elon Musk said the company plans to produce electric vehicles in China within two years, which he said would help cut sales prices in the country by a third.

Deep Dive: ’Tis the season for companies to lay off workers and buy back shares

Dow Chemical, 3M and other companies ought to spend money on boosting sales instead of share repurchases, says Phil van Doorn.

Earnings Summary for Today

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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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