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04Dec2015 Pre-Market Commentary: NFP UP, Fed Rate Hike 100% Locked In For Dec 16th, US Futures Up, EU Stocks Down

Written by Gary

U.S. stock future indexes are up 0.5% while European stocks are trading lower for a second day after Asian shares tumbled as disappointment with the ECB's weak stimulus decision that disappointed investors across the global markets.

Non-farm Payrolls for November was 211k actual vs 200k estimate, prior revised up to 298k signaling the end to an era of easy lending implementing a 100% lock for an interest rate hike on December 16 by the US Fed.


Here is the current market situation from CNN Money

European markets are lower today with shares in France off the most. The CAC 40 is down 0.59% while Germany's DAX is off 0.50% and London's FTSE 100 is lower by 0.13%.

What Is Moving the Markets

Here are the headlines moving the markets.

U.S. trade deficit widens as exports hit three-year low

WASHINGTON, Dec 4 (Reuters) - - The U.S. trade deficit widened unexpectedly in October as exports fell to a three-year low, suggesting that trade could again weigh on economic growth in the fourth quarter.

Futures extend gains after jobs data

(Reuters) - U.S. stock futures extended gains on Friday after stronger-than-expected November jobs data showed the economy was gaining strength, building the case for an interest rate hike this month.

Solid U.S. employment report a green light for Dec rate hike

WASHINGTON (Reuters) - U.S. job growth increased solidly in November in a show of the economy's resilience, which most likely paves the way for the Federal Reserve to raise interest rates this month for the first time in nearly a decade.

Global business growth accelerated in Nov: PMI

LONDON (Reuters) - Global business growth accelerated last month as new orders picked up despite firms raising prices at the steepest rate since July, a survey showed.

EU scraps derivatives case vs 13 banks, continues Markit, ISDA probe

BRUSSELS (Reuters) - EU antitrust regulators have dropped charges against 13 banks including Citigroup and Deutsche Bank for blocking exchanges from derivatives markets, but will continue their case against data company Markit and trade body ISDA.

China's premier says will ruthlessly deal with zombie firms

BEIJING (Reuters) - China plans to spend around two years to tackle serious overcapacity in some industries and will ruthlessly deal with so-called zombie firms, Premier Li Keqiang said in remarks seen on Friday.

OPEC set to maintain output levels as oil glut worsens

VIENNA (Reuters) - OPEC looked unlikely to take steps to cut oil production to lift languishing prices at a meeting on Friday, potentially worsening one of the worst crude gluts in history.

Foreigners drawn in as fear and loathing grip China's finance industry

SHANGHAI/HONG KONG (Reuters) - A widening regulatory probe into some of China's biggest brokerages has set nerves jangling in a financial industry still recovering from a summer of turmoil, with fear of becoming entangled in investigations spreading among foreign investors.

Activist investor renews call for Yahoo to sell core business

SAN FRANCISCO/BENGALURU (Reuters) - An activist investor on Thursday renewed its push for Yahoo Inc to abandon its plans to spin off its valuable stake in Chinese e-commerce giant Alibaba Group Holding Ltd and instead sell its core business "at the highest price possible."

No, Bank Bailouts HAVEN'T Ended

CNN headlines, "Fed Ends 'Too Big to Fail' Lending to Collapsing Banks".

Sounds good ...

But CNN quickly backtracks:

"There are still loopholes that the Fed could exploit to provide another back-door bailout to giant financial institutions," [Congresswoman Elizabeth] Warren, a Democrat, told CNNMoney.

***

It's important to note that the new rule allows the Fed to judge by its own measures whether a firm qualifies for its emergency aid.

The idea is the Fed can still lend to banks during times of emergency, but the bank must be able to pay it back. Yet the true health of a bank in turmoil can be very difficult to assess.

"It's very hard to judge in real time whether a firm is insolvent or just having liquidity problems because it becomes impossible to price assets," says Paul Ashworth, chief U.S. economist at Capital Economics, a research firm.

That's why Warren wants clearer guidelines.

"It's up to Congress to close those loopholes and ensure that Fed emergency lending is limited to protecting the economy and not to saving a few favored banks," Warren says.

***

The Fed performs "stress tests" on banks to see how ...

11 "Alarm Bells" That Show The Global Economic Crisis Is Getting Deeper

Submitted by Michael Snyder via The Economic Collapse blog,

Economic activity is slowing down all over the planet, and a whole host of signs are indicating that we are essentially exactly where we were just prior to the great stock market crash of 2008. Yesterday, I explained that the economies of Japan, Brazil, Canada and Russia are all in recession. Today, I am mainly going to focus on the United States. We are seeing so many things happen right now that we have not seen since 2008 and 2009.

In so many ways, it is almost as if we are watching an eerie replay of what happened the last time around, and yet most of the "experts" still appear to be oblivious to what is going on. If you were to make up a checklist of all of the things that you would expect to see just before a major stock market crash, virtually all of them are happening right now. The following are 11 critical indicators that are absolutely screaming that the global economic crisis is getting deeper...

#1 On Tuesday, the price of oil closed below 40 dollars a barrel. Back in 2008, the price of oil crashed below 40 dollars a barrel just before the stock market collapsed, and now it has happened again.

"But It's Just A 0.25% Rate Hike, What's The Big Deal?" - Here Is The Stunning Answer

After today's market plunge, the result of what even Goldman admitted may have been a major policy error by the ECB, suddenly the Fed's determination to hike rates in two weeks lies reeling on the ropes. After all, what the ECB did was an implicit tightening of reverse QE1 proportions (it is no accident that the EURUSD is soaring as much as it did in March 2009 when the Fed unleashed QE).

But assuming the Fed is still intent on hiking at all costs, and does just that in two weeks time, a question many are asking is where will General Collateral repo trade in case the Fed does decided to push rates higher by 0.25%: after all the Reverse Repo-IOER corridor is the most important component of the Fed's rate hike strategy, one which better work or otherwise the Fed will be helpless to raise rates with some $3 trillion in excess liquidity sloshing around, and what little credibility it has will be gone for good.

And much more importantly, what are the liquidity implications from such a move.

For the answer we go to the repo market expert, Wedbush's E.D. Skyrm. Here are his thoughts:

Where will General Collateral trade when the fed funds target range is moved 25 basis points higher to .25% to .50%? In the most simple method, GC has averaged about .15% for the past month, which implies a GC rate around .40% after the Fed move.

However, given the unprecedented amount of liquidity in the financial system, there's a beli ...

Money Is Becoming Unmanageable

Submitted by John Rubino via DollarCollapse.com,

Some of the money managers who made names (and billions of dollars) for themselves in the past decade are suddenly failing:

Hedge Funds Brace for Redemptions

(Bloomberg) - When BlueCrest Capital Management told investors Tuesday it would no longer oversee money for outsiders, one thing founder Michael Platt didn't mention was that clients had already pulled billions of dollars this year.

Platt, who cited client demands and pressure on fees as a reason for his decision, isn't alone in feeling the heat from investors. Firms including Och-Ziff Capital Management Group LLC and Mason Capital Management have seen cash flee this year, and others such as Fortress Investment Group LLC's macro funds business shut down after redemptions and losses.

Hedge fund investors are losing patience even with marquee firms as many of them struggle this year, especially those that offer macro strategies or stock funds heavily weighted to rising shares. Some managers have lost money for two years running, while others such as David Einhorn's Greenlight Capital are suffering declines that rival their worst year. After the weakest third-quarter inflows in six years, the industry could see outflows in the fourth quarter, said investors and bankers who watch the ebb and flow of hedge fund assets.

"The fourth quarter will be flat and possibly negative," said Peter Laurelli, head of research at Eves ...

Stock Futures Extend Gains as Jobs Report Bolsters Case for Rate Hike

U.S. stock futures extended gains Friday after data showed the U.S. added more jobs than expected last month.

Goldman Tries a New Commodities Play

Goldman Sachs and other Wall Street banks are providing more short-term loans to refiners and others in the energy industry, a low-risk, low-return business that is gaining prominence as tough rules prompt banks to cut back on big commodities-market wagers.

OPEC Meeting Begins Amid Debate Over Production

The energy ministers of the OPEC nations gathered for the cartel's policy meeting amid warnings from its staff that oil prices will likely remain low.

Median Household Income Improved in October 2015.

from Sentier Research

According to new estimates derived from the monthly Current Population Survey (CPS) median annual household income in October 2015 was $56,671 compared to $56,392 for September. The Sentier Household Income Index stands at 98.8 (January 2000 = 100.0) indicating that median household income in October 2015 was 1.2 percent lower than January 2000.

Rail Week Ending 28 November 2015: Contraction Growing Faster. Rail Traffic in November Down 10.4%.

Week 47 of 2015 shows same week total rail traffic (from same week 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. The 52 week rolling average contraction is continuing to grow. Rail counts for the month of Novembers showed a significant contraction.

Market Snapshot: Wall Street poised to battle back as jobs data swing into focus

Wall Street showed signs of a slightly stronger open for Friday, rebounding from a sharp selloff, as investors were expected to take some cheer from jobs data later that may confirm a recovery story for the U.S. economy.

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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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