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12Nov2015 Pre-Market Commentary: U.S. Markets Slated To Open Sharply Lower, WTI Oil Below Support, Investors Clearly Cautious Awaiting Ms. Yellen Speech

Written by Gary

U.S. stock future indexes are lower as the Euroasian markets are generally trading in the red, but Hang Seng closed up 2.4%. The BIG thing investors are watching this morning is WTI oil which is clearly below its 42.57 support, but not far enough to wonder if this is a fake-out. Jobless and claims numbers are in the red which should be enough for the markets to open lower and have the potential to descend over one percentage point if oil inventories (at 10 am) rises.


Here is the current market situation from CNN Money

What Is Moving the Markets

Here are the headlines moving the markets.

U.S. jobless claims unchanged last week

WASHINGTON (Reuters) - New U.S. applications for unemployment benefits last week held steady at levels consistent with sustained labor market strength that could encourage the Federal Reserve to raise interest rates next month.

Exclusive: Morgan Stanley turns to stodgy bank accounts to boost profit

NEW YORK (Reuters) - Morgan Stanley, better known for underwriting bonds than for retail banking, plans to offer savings accounts and certificates of deposits next year to wring more profit from its wealth management clients, executives told Reuters.

Draghi stimulus hint knocks euro, commodities buckle

LONDON (Reuters) - A signal from European Central Bank president Mario Draghi that further policy easing is coming next month pushed the euro and government bond yields lower on Thursday but failed to lift stocks, which buckled under the weight of gloomy corporate news.

Kohl's beats estimates on strong back-to-school season

(Reuters) - Department store operator Kohl's Corp reported better-than-expected quarterly net sales and profit, helped by strong back-to-school sales, sending its shares up as much as 11 percent in premarket trading on Thursday.

Liberty Media to reclassify shares into three tracking stocks

(Reuters) - John Malone's Liberty Media Corp said it would reclassify its shares into three new tracking stock groups.

Pricey beers lift SABMiller's quarterly underlying sales

LONDON (Reuters) - Demand for higher-priced beers helped SABMiller to report a pick-up in quarterly underlying sales despite currency headwinds, a day after it formally received a $100-billion-plus takeover bid from industry leader Anheuser-Busch InBev .

Viacom revenue misses on lack of movie hits, lower U.S. ad sales

(Reuters) - Viacom Inc , the owner of MTV, Comedy Central and Nickelodeon, reported weaker-than-expected quarterly revenue as a lack of hit movie releases hurt revenue from its films unit and ad sales fell in its U.S. cable TV business.

Macy's cuts full-year forecast, sends shivers through retail

(In Nov. 11 story, corrects spelling of Michael in paragraph 4)

Housing Bubble - Part Deux

Submitted by Jim Quinn via The Burning Platform blog,

The housing recovery without mortgage originations is coming to its inevitable conclusion. The Fed, Wall Street bankers and the US Treasury have been able to increase national home prices by 30%, with 50% to 100% in some bubble markets, using 0% interest rates, a massive buy and rent scheme, withholding foreclosures from the market, encouraging foreign cash buying, and allowing flippers back into the market. In a real free market would home prices go up by 30% while mortgage originations remained flat for the last four years?

Thirty year mortgage rates have been falling for the last 30 years. They bottomed at 3.35% in late 2012. Since then they rose as high as 4.4% in early 2014. They fell to 3.6% by early 2015 and are now hovering in the 3.8% range. Everyone who had a high interest mortgage loan, including those with underwater mortgages, have refinanced to a lower rate. The economic boost to the economy from the lower mortgage payments is over. The Obamacare costs have spent the mortgage payment savings. The combination of declining real household income, overpriced homes, millennials with massive levels of student loan debt, and now rising mortgage rates are putting a halt to this fake Fed recovery scheme.


Chart of the Day

The Fed believes they must increase rates by .25% in December to regain a semblance of credibility. Mortgage rates w ...

How OPEC Just Crushed Oil With One Chart

Just when you thought it couldn't get any worse - amid supply gluts, production surges, market share scrambles, and demand disappointment - it does. OPEC this morning confirmed not only no change in the already weak global demand picture but the current oil inventrory surplus is the largest in at least a decade. This has driven WTI prices down close to a $41 handle this morning (from over $48 a week ago) as simply put, there's too much oil and OPEC's grand strategy for solving this imbalance - pray for a colder winter...

Crude is down 7 of the last 9 days...

As Bloomberg reports, OPEC's new statement does not bode well for the short- or medium-term future...

Surplus oil inventories at highest level in at least a decade on increased global production, OPEC says in Monthly Oil Market report.

Stockpiles in developed economies 210m bbl higher than their 5-yr avg

Compares w/ 180m bbl overhang in 1Q 2009, which is only other occasion in past 10 yrs when inventory surplus has surpassed 150m bbl

Excess supply may be pared in coming mos on slowing non-OPEC supply, rising demand for winter fuels

Non-OPEC supply to contract next yr for 1st time since 2007; down 130k b/d to 57.11m b/d

OPEC keeps 2015, 2016 fcasts for global oil demand unch.

And so here, in one simple chart, is why this will not end well... T ...

Copper Plunges To Fresh 6 Years Low After Goldman Warns More Pain Ahead, Glencore Slides Back Under 100p

One month ago, when Glencore announced it latest copper production cut initiatives and mine mothballing efforts, we said that aside from the brief price spike, it would have absolutely no impact on the longer-term price dynamics of the metal which has achieved "doctor" status. The main reason we offered is that while Glencore was reducing supply, others such as Rio Tinto would gladly step in to fill the supply void. To wit:

Rio Tinto, warned that it will not cut copper production, saying it would be illogical to hold back output and leave space in the market for higher-cost rivals.

And just like that Glencore's assumption that others in the space will act rationally, and "cooperate" with the attempt by Glencore to impose a new game theoretical equilibrium by reducing supply, and thus boosting prices, has crashed and burned.

According to the FT, Jean-Sebastien Jacques, head of copper and coal at Rio, said the Anglo-Australian mining group would not reduce output even though current prices of the industrial metal did not reflect “fundamentalsâ€.

Rio's CEO summarized his philosophy quite simply: "Why should I make cuts?†Mr Jacques said, in an interview ahead of LME Week, the biggest annual gathering of the metals and mining industry. "If you have marginal assets and marginal projects and you have a pretty weak balance sheet I think you may be in trouble pretty soon,†he said.

One month later, and just moments ago, we got confirmation of this prediction courtesy of the following two Bloomberg headlines:

...

NCR Confirms $820 Million Blackstone Investment

ATM maker NCR confirmed that Blackstone Group will invest $820 million into the company after its effort to sell itself foundered.

Global Stocks Slip as Investors Study Central Bank Clues

Global stock markets slipped Thursday as investors considered clues on the next moves by major central banks.

Rail Week Ending 07 November 2015: Now 52 Week Rolling Average Is In Contraction

Week 44 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 contracted year-over-year, which accounts for approximately half of movements. and weekly railcar counts continued in contraction. October 2015 is down 4.3% over October 2014. Now the year-over-year rolling average is below than the year-over-year rolling average of one year ago

Need to Know: Why this market won't crash even after stuffing itself

Stocks have “overindulged†and “now appear to be digesting the price-recovery feast enjoyed in October,†one strategist says.

Deep Dive: The high-flying health-care sector is now slowing dramatically

Only telecom-services companies are projected to accelerate profit growth in the current quarter, says Phil van Doorn.

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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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