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29Oct2015 Pre-Market Commentary: U.S. Futures Down,Unemployment Rose, GDP At 1.5% Down From 3.9%

Written by Gary

U.S. stock future indexes are down fractionally after first-time unemployment benefits rose and the third-quarter gross domestic product showed the U.S. economy grew at an annualized pace of 1.5%, down from 3.9% in the second quarter.

European markets are down and the US markets are expected to open lower and may end the day seriously in the red.


Here is the current market situation from CNN Money

What Is Moving the Markets

Here are the headlines moving the markets.

Deutsche Bank's new chief warns of two tough years in strategy shift

FRANKFURT (Reuters) - Deutsche Bank has warned of two tough years of dividend cuts, pay restraint and thousands of job cuts as new chief John Cryan admitted to grave problems in implementing strategic and cultural change at Germany's biggest lender.

MasterCard beats profit estimates as customers spend more

(Reuters) - Payments network operator MasterCard Inc reported a bigger-than-expected quarterly profit as the value of transactions processed on its cards jumped 13 percent.

U.S. jobless claims rise, four-week average lowest since 1973

WASHINGTON (Reuters) - The number of Americans filing new applications for unemployment benefits rose marginally and the underlying trend continued to point to a fairly healthy labor market.

Inventories hurt U.S. third-quarter GDP, domestic demand strong

WASHINGTON (Reuters) - U.S. economic growth braked sharply in the third quarter as businesses cut back on restocking warehouses to work off an inventory glut, but solid domestic demand could encourage the Federal Reserve to raise interest rates in December.

Ally Financial profit slumps on fewer auto loans

(Reuters) - Ally Financial Inc , the largest U.S. auto loan company, reported a 37 percent fall in quarterly profit as it made less money from its automotive and dealer financing businesses.

Conoco posts quarterly loss, cuts 2015 spending target

(Reuters) - ConocoPhillips reported a quarterly loss that met Wall Street expectations on Thursday and the largest U.S. independent oil company lowered its 2015 spending target in response to the lingering slump in crude prices.

Pfizer said to be in talks with Allergan to forge $330 billion drugs giant

(Reuters) - Pharmaceutical giant Pfizer Inc has held early talks with Botox-maker Allergan Plc to discuss what could be the biggest takeover deal this year, the Wall Street Journal and Financial Times reported.

Stock futures lower as December rate hike back on the table

(Reuters) - U.S. stock index futures were lower on Thursday, a day after the Federal Reserve revived expectations of an increase in interest rates in December.

European stocks firm, dollar rises as Fed revives Dec hike talk

LONDON (Reuters) - European shares rose, while the U.S. dollar stood near 2 1/2 month highs against the euro on Thursday, after the Federal Reserve gave a vote of confidence to the U.S. economy and revived expectations it may raise interest rates by year-end.

"Policy Mistake"

When it comes to the Fed's current "data dependent" thinking and what it may or may not do in the coming months, there is absolutely no agreement among the experts: it may or may not hike in December, or it may or may not hike in the 2016 election year.

There is, however, agreement on two things: its recent "communication policy" has been a total disaster as Pedro da Costa explained recently from his new perch at Foreign Policy magazine; and when looking at the corner the Fed has painted itself into, the consensus is summarized with two simple words: "policy mistake", as the following chart showing the appearance of these two words in Bloomberg news stories confirms.

And here is BNP with the best explanation why:

The market took the FOMC statement as hawkish. There were two key reasons:


  1. The first was removing “recent global and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near termâ€.

    The second was saying, “in determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress â€" both realized and expected â€" towards its objective of maximum employment and 2 percent inflation.â€


The way we read the first change is that Chair Yellen overplayed the China card in the last press conference and that the events referred to in September are no longer â€'recentâ€, not that glob ...

A "Hawkish" Fed Is Bad For Stocks After All

That didn't last long. You can fool all of the algos, and some some of the people some of the time.

And Crude has also given it all back (along with bonds going red)

Charts: Bloomberg

Deutsche Bank Reports Massive Loss, Will Cut 35,000 Jobs, Exit 10 Countries In Sweeping Overhaul

As we put it a few days ago while mocking Saudi Arabia’s attitude toward “collateral damage†from its bombing runs in Yemen, “you can’t make an omelette without breaking a few eggs.†Well, over at Deutsche Bank, John Cryan has been busy crushing whole cartons worth.

From sweeping job cuts, to reorganizations, to eliminating the dividend, Cryan has been a veritable wrecking ball since taking the helm from co-CEOs Anshu Jain (who is gone) and Jürgen Fitschen (who is leaving).

Just yesterday, Europe’s largest bank announced that the dividend would be scrapped as part of “Strategy 2020.†Here are some other key points from Cryan’s “planâ€:


  • CET 1 ratio: at least 12.5% from the end of 2018

    Leverage ratio: at least 4.5% at the end of 2018 and at least 5.0% at the end of 2020

    Return on Tangible Equity (RoTE): greater than 10% by 2018

    Adjusted Costs (total noninterest expenses excluding restructuring and severance, litigation, impairment of goodwill and intangibles and policyholder benefits and claims) of less than EUR 22.0 billion by 2018

    Cost/income ratio (CIR) of approximately 70% in 2018 and of approximately 65% in 2020

    Risk Weighted Assets (RWA) (excluding regulatory inflation following regulatory changes expected to be at least EUR 100 billion by 2019/2020) of approximately EUR 320 ...

Frontrunning: October 29



Fed puts December rate hike firmly on the agenda (Reuters)

Charting the Markets: A More Hawkish Fed Rattles Investors (BBG)

China to modernize and improve fiscal and tax systems (Reuters)

Deutsche Bank to Cut 35,000 Jobs in Overhaul (WSJ)

Deutsche Bank Said to Near $200 Million Sanctions Settlement (BBG)

Barclays profits drop as it abandons cost-cutting targets (FT)

Noisy GOP Debate Leaves Republican Race Unsettled (WSJ)

European stocks firm, dollar rises as Fed revives Dec hike talk (Reuters)

Shell Has Biggest Loss in More Than a Decade on Price Slump (BBG)

Republicans pick Ryan for speaker; House passes budget deal (Reuters)

The Tiny Pharmacy at the Center of Valeant's Money Mystery (BBG)
...

Deutsche Bank to Cut 35,000 Jobs in Broad Revamp

Deutsche Bank announced plans to cut 35,000 jobs over the next two years as part of a sweeping overhaul under new co-Chief Executive John Cryan.

Global Stocks Decline

Global stock markets turned lower as investors considered the prospect of a rise in U.S. interest rates later this year.

Oil Will Struggle to Break Past $60 a Barrel in 2016

Oil price slump will be extended into next year on continued worries over a global crude glut, major investment banks say.

The Anatomy Of Anti-Corruption

from STRATFOR

--this post authored by Reva Bhalla

The tradition of abusing political power for personal gain goes back to antiquity, as does the debate over whether corruption is a necessary cultural vice in a country's development or a cancer that must be obliterated for a society to progress. A topic less covered, however, is what is behind the counter-corruption current.

Gold Prices: A Bit Too Quiet For Comfort

by Daily Reckoning, Daily Reckoning

-- this post authored by Ben Traynor

U.K. inflation dropped below zero last month.

Though below the market's consensus forecast (which was for flat zero), it's hardly earth-shattering news.

Economic Report: Jobless claims stick near 1970s-era lows

The number of Americans who applied for unemployment benefits in late October remained near the lowest level in decades, reflecting the small number of layoffs taking place in the economy.

Economic Report: Third-quarter GDP lands with thud: just 1.5% growth

The U.S. economy cooled off in the third quarter as companies cut back production to prevent a dangerous buildup in inventories, particularly of goods destined for foreign markets. Gross domestic product â€" the value of everything a nation produces â€" rose at a 1.5% annual pace.

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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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