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26Oct2015 Pre-Market Commentary: Markets Quiet Ahead Of The Opening Bell, Oil Prices Slipping, FOMC Meeting This Week Has Investors Concerned On Outcome

Written by Gary

U.S. stock future indexes are down fractionally this Monday morning and generally quiet ahead of the opening bell. Investors would be well advised not to press their luck ahead of the FOMC meeting this week that has a potential for a sizable impact. Oil is falling to the low 44's and the US dollar is trading up in the low 97's.


Here is the current market situation from CNN Money

European markets are mixed. The DAX is higher by 0.16%, while the CAC 40 is leading the FTSE 100 lower. They are down 0.59% and 0.04% respectively.

What Is Moving the Markets

Here are the headlines moving the markets.

Xerox revenue misses Street; says to review operations

(Reuters) - Xerox Corp , best known as a maker of printers and copiers, reported quarterly revenue below analysts' average estimate and said it would undertake a "comprehensive review of structural options".

Stock futures lower as hopes of monetary easing fade

(Reuters) - U.S. stock index futures were slightly lower on Monday as investor optimism about central bank easing faded ahead of a Federal Reserve policy meeting this week.

Starwood Capital to buy apartment units worth $5.37 billion

(Reuters) - Private investment firm Starwood Capital Group has agreed to buy 72 properties from U.S. real estate company Equity Residential for about $5.37 billion.

Some U.S. bond funds bet on high-yield survivors of oil carnage

NEW YORK (Reuters) - High-yield energy bonds are on track for their worst year since the global financial crisis yet some funds are holding on, convinced that markets underestimate the ability of many oil companies to ride out the crude price slump.

European shares slip as easing expectations fade

LONDON (Reuters) - European shares fell in early trading on Monday as euphoria about the prospect of further central bank policy easing faded, with investors warning against over-confidence ahead of another week of interest rate decisions.

New York probes broadband speeds

(Reuters) - The New York attorney general is probing whether three major Internet providers could be short-changing consumers by charging them for faster broadband speeds and failing to deliver the speeds being advertised, according to documents seen by Reuters.

U.S. union, GM reach tentative agreement on labor contract

DETROIT (Reuters) - Negotiators for the United Auto Workers and General Motors Co reached a tentative agreement on undisclosed terms for a new four-year labor contract, averting a threatened strike, the union said late on Sunday night.

Will This Manic Stock Market Rally End In Tears?

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Can the stock market completely ignore these changes and keep powering higher on the fumes of Mario Draghi's promises?

Judging by October's rocket launch, the stock market is back to where it should be, i.e. in rally mode. Yee-haw! All it took to keep the party going was another rate cut in China, another "whatever it takes" assurance from Mario Draghi and blowout earnings from a few tech giants.

So we seem to be right back we we've been for seven years: more central bank easing triggers more stock market mania, and stock buybacks and "earnings surprises" push stock valuations ever higher.

But a couple of things have changed recently:

1. China's expansion has ground to a halt. China's insatiable demand for commodities and capital has pulled the global economy's cart for seven long years. Now that this demand is faltering, there is no equivalent economic/financial engine of demand to replace it.

2. Income for the bottom 90% in the developed world is stagnant/declining. The most basic assumption of central bank monetary policies since 2008 (QE, etc.) was that household income would rise as the economy recovered, enabling more household consumption/debt.

This has not turned out to be true: for a variety of structural reasons, income of the bottom 90% of households has actually declined since 2000 when adjusted for official inflation.

3. The "wealth effect" from boosting global stock and junk-bond markets has been very limited. The second basic assumption of central bank monetary policies since 2008 wa ...

"Our Data Is Not Good" - US Companies Warn That A Recession Is Coming

Earlier this month, we highlighted comments from new Fastenal CEO (and former CFO) Dan Florness who, on the company’s Q3 call, took homage to one analyst’s suggestion that we’re currently in a “non-recessionary environment.†Here, as reminder, is the exchange:

William Blair’s Ryan Merkel: Then just lastly, Fastenal growing zero percent here in September and in a non-recessionary environment, it’s pretty surprising, I think, for a lot of us.

Florness: The industrial environment is in a recession - I don’t care what anybody says, because nobody knows that market better than we do. You know, we touch 250,000 active customers a month.

There you go. No ambiguity there. Nor was there anything ambiguous about some of the numbers Fastenal reported. For instance, in September, the company saw its first Y/Y sales decline since 2009.

And the nuts and bolts manufacturer isn’t alone.

As we’ve been keen on documenting, bellwether Caterpillar is in the midst of a truly historic sales slump that’s now entering its 35th month.

Frontrunning: October 26



European shares slip as easing expectations fade (Reuters)

Valeant and Pharmacy More Intertwined Than Thought (WSJ)

The Pawn Isolated: Valeant, Philidor and the Annals of Fraud (WSJ)

Strongest Afghan Quake Since 1949 Triggers Search for Survivors (BBG)

EU Agrees To Tighten Border Controls And Slow Migrant Arrival (AP)

Volkswagen Suspends More Employees (WSJ)

Volkswagen Loses Global Sales Lead to Toyota Amid Diesel Scandal (BBG)

Greek Minister Rejects Criticism Over Allowing Transit of Migrants (WSJ)

IMF set for green light on China's yuan joining currency basket (Reuters)

China banks come back for more capital as bad loans pile up (Reuters)

Wal-Mart Shrinks the Big Box, Vexing Vendors (WSJ)

Valeant CEO's Outsider Roots Spun Market Gold, Until They Didn't (

As More Facts Emerge, Valeant Stock Plummets Again Ahead Of "Defense" Conference Call

If Valeant had hoped today's previously announced 8:00 am conference call, which is supposed to explain its relationship with Philidor and its network of pharmacies in general or, as the company put it, "to lay out the facts including allegations made against our company regarding our relationship with Philidor and R&O, our accounting practices, and channel stuffing that contain numerous errors, unsupported speculation and incorrect interpretations of facts and circumstances", would come and go and the price of VRX stock would promptly surge right back to $200, it was due for a very rude awakening when not one but two pieces came out once again slamming the company's business practices, and leading to even more questions about potential fraud at the increasingly more Tyco-esque roll-up.

But while the topic of Philidor ownership, one which Valeant has not address directly yet and which is at the heart of the issue of potential criminal impropriety, will clearly be a sticking point in today's call, a just as relevant topic is how much of Valeant's "organic" revenue is a result of Valeant's "ghost" pharmacy network.

Last night, the Southern Investigative Reporting Foundation (or SIRF), whose previous reporting served as the basis for Citron's latest research report, released a follow up piece in which it calculated just how relevant to Valeant's top (and bottom) line is the Philidor specialty Pharma channel. In a word: very. From SIRF:

Betting Against a Fed Rate Rise

The global economy’s troubles are casting a long shadow over this week’s Fed policy meeting. Investors see a growing likelihood that there will be no rate increase this year.

U.S. Oil Imports Rise Again

U.S. imports of foreign oil are rising again after a long decline, as the oil bust forces domestic producers to scale back.

Citi Found Itself Briefly Exposed to $400 Million Hit

A small London hedge-fund firm and a lapse in bank-risk controls caused a panic inside Citigroup in July, adding to a series of technology snafus at global banks.

Early Headlines: China Eases Again, Bad Week For Stocks?, More Help For EU Refugees, Guaranteed Income Proposed UK, Conservatives Win Poland, Runoff In Argentina, Comedian Landslide Guatemala And More

Written by Econintersect

Early Bird Headlines 26 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.

early-bird-301-180

QE Hopes In A Seasonally Strong Period

by Lance Roberts, StreetTalk Live

X-Factor Report 25 October 2015

"Great news... US equity market investors (judging by the S&P 500) have now lost no money this year (and have made no money). All it took to get stocks "back to even" for 2015 was... no Fed hike, more ECB QE and more negative rates, China rate cuts, and negative EPS growth. What more do you need?"

Economic Preview: Fed set to remain on pause as GDP data expected to show slowdown

Gross domestic product is expected to slow down in the third quarter and the Fed will stay on hold to see if it is temporary.

Craig Stephen's This Week in China: Will China end up with quantitative easing, just like everyone else?

China’s rate cuts are supposed to kick start growth, but the cuts undermine themselves by fueling capital flight. Craig Stephen wonders if China will end up with quantitative easing, just like every other major central bank.

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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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