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01Feb2016 Pre-Market Commentary: Futures Down Fractionally, Europe Markets In The Red, WTI Oil Volatile In Mid 32's

Written by Gary

U.S. stock future indexes are sliding along with European markets this morning. China's official factory activity skidded to a three-year low in January, adding to further gloom about the state of the world's second-largest economy and concerned investors. US markets are expected to open lower in what may be a reaction to slightly oversold conditions.

Here is the current market situation from CNN Money

European markets are sharply lower today with shares in London off the most. The FTSE 100 is down 1.24% while Germany's DAX is off 1.19% and France's CAC 40 is lower by 1.13%.

What Is Moving the Markets

Here are the headlines moving the markets.

MetLife's agricultural loans fall to $3.2 billion in 2015

(Reuters) - MetLife Inc's agricultural loans totaled $3.2 billion in 2015, down from a record $3.6 billion in 2014 as commodity prices hit a five-year low and a drought gripped California, the company said in a statement on Monday.

Cheap oil won't juice the U.S. economy this time: Reuters poll

WASHINGTON(Reuters) - U.S. consumers are cautious about spending their windfall from cheap gasoline and are saving more, according to a Reuters/Ipsos poll and official data, suggesting low oil prices are less of a boon for the U.S. economy than in the past.

Oil falls on China data and fading prospects of OPEC action

LONDON (Reuters) - Oil fell nearly four percent on Monday as weak economic data from China, the world's largest energy consumer, weighed on prices and an OPEC source played down talk of an emergency meeting to stem the decline.

Futures begin February on a dour note after weak Chinese data

(Reuters) - U.S. stock index futures were lower on Monday, starting February on a dour note after the worst January for the S&P 500 since 2009.

China shares fall as economic pulse slows

SHANGHAI (Reuters) - Chinese shares stumbled lower on Monday after an official measure of activity in the giant factory sector fell to its lowest since mid-2012, offering no respite for markets from the country's economic drift.

No decision yet on any OPEC, non-OPEC meeting: sources

LONDON/DUBAI (Reuters) - OPEC and non-OPEC countries have not yet agreed to hold a meeting to discuss action to support oil prices, two OPEC delegates said on Monday, nearly a week after Russian officials said Moscow should talk to OPEC.

Global factories parched for demand, need stimulus

LONDON/SYDNEY (Reuters) - January surveys of global factory activity released on Monday showed the new year began much as the old one ended - with too much capacity chasing too little demand.

Alphabet to give first peek at cost of 'moonshot' bets

(Reuters) - How much is Google-parent Alphabet Inc spending on "moonshots" " self-driving cars, glucose-monitoring contact lenses, Internet balloons and other ambitious projects?

Stocks cautious after rocky China data, bonds fly high

LONDON (Reuters) - Markets got February off to a cautious start on Monday after a rocky January, as expectations of more cheap money from some of the world's top central banks were validated by fresh signs of weak global growth.

Key Events In The Coming "Payrolls" Week

After last week's relatively quiet, on macro data if not central bank news, week the newsflow picks up with the usual global PMI survey to start, and end the week with the US January payrolls report.

Here is a closer look at what to expect via DB:

We've got a busy day of data kicking off on Monday in Europe with the final revisions to the manufacturing PMI's (January) for the Euro area, Germany and France. UK money supply and credit aggregates data is also due this morning. Over in the US we'll get the December core and deflator PCE data along with personal income and spending, manufacturing PMI, construction spending and the important ISM manufacturing and prices paid.

It's a quieter session on Tuesday with just Euro area PPI and German unemployment data in the morning, before we get vehicle sales data and the IBD/TIPP economic optimism print in the US.

Wednesday starts in China where we'll get the Caixin services and composite PMI prints. We'll also get the non-official readings for Japan before we get the final revisions for the services and composite prints for the Euro area, Germany and France along with readings for UK, Italy and Spain. Euro area retail sales is also due. Over in the US on Wednesday the ADP employment change print for last month will be closely followed for clues ahead of Friday. The ISM non-manufacturing print is the other big release along with the final services and composite PMI's.

The main focus during the morning session on Thursday will be on the UK where the BoE rate decision is due. Over in the US we'll get final revisions to those soft December durable and capital goods orders data, along with initial jobless claims, nonfarm productivity, unit labour costs and December factory orders.

The only data of note on Friday in Europe will be German factory orders. Over in the US the main event will of course be the January employment report where we'll g ...

Rates Are "Screaming" That Investors Are In Panic Mode, Trader Warns

Haruhiko Kuroda's move to NIRP and Mario Draghi's implicit promise to ramp up PSPP in March underscore the extent to which Janet Yellen has made a policy mistake by hiking at a time when the US economy (not to mention the global economy) looks to be decelerating and the disinflationary impulse looks to be gathering steam.

January marked a rather inauspicious start to the new year with wild swings in Chinese markets fueling volatility across the globe and crude carnage taking its toll on investors' collective psyche. Oil managed to ramp but China is still a (big) problem, as we explained this morning in the overnight wrap.

With Beijing set to export its deflation to the rest of the world and with central bankers in panic mode, investors are piling into core paper like there's no tomorrow. Below, find some insightful commentary from former FX trader Mark Cudmore.

From Bloomberg
For all the January focus on oil and China, and both have certainly provided much of the volatility, the largest asset shift so far in 2016 has been in core sovereign bonds.

Friday's surprise move to negative rates by Japan may have provided the ceremonial flourish, sending Japanese yields to record lows. But that's far less noteable than moves elsewhere. Japan's two-year rate has dropped 14 basis points this year, which is dwarfed by other sovereigns

Mario Draghi's commitment that the European Central Bank will soon ease further has seen German two-year yields also hit record negative levels; the drop there has been 14 basis points as well

However, both pale in comparison to what is happening in the equivalent paper in the U.S. and U.K. The former has seen a 28 basis point pl ...

Crude Sinks To Day Lows After Goldman Explains Why No Oil Production Cuts Are Coming

Moments ago, following last week's torrid crude oil price rebound driven entirely by now-denied hopes of some production cut consensus between oil suppliers, namely Russia and Saudi Arabia, oil halted its four-day rally as weak Chinese manufacturing data added to economic demand concern.

œThe risk seems to be the greatest on the downside again and speculation of OPEC production cuts has œfaded fast, says Saxo Bank head of commodity strategy Ole Hansen. œChina and South Korea are both helping the market return to fundamental focus where it is worried about demand."

But the biggest downward catalyst overnight as noted previously, was not demand concerns but a return of oversupply fears following a note by Goldman's Damien Courvalin who warned quite explicitly that "cuts are unlikely" in what Goldman dubs the New Oil Order, and that in the current rebalancing phase, oil prices will "remain between $40/bbl (financial stress) and $20/bbl (operational stress) until 2H16. This phase will be characterized by a highly volatile and trend-less market with the price lows likely still to be set." But most importantly Goldman writes that "given the likely time necessary to enact such cuts, the continued large builds in US and global inventories and the fast pace at which US Gulf Coast spare storage capacity is filling, it may already be too late for OPEC producers to be able to prevent another large decline in prices." Here's why:

The past week featured headlines suggesting that OPEC producers and Russia would meet in February to discuss a potential coordinated cut in production. Despite the sharp bounce in oil prices that these headlines generated, we do not expect such a cut will occur unless global growth weakens sharply from current levels, which is not our economists' forec ...

U.S. Hedge Funds Mount New Attacks on China's Yuan

Some of the biggest names in the hedge-fund industry are piling up bets against China's currency, setting up a showdown between Wall Street and the leaders of the world's second-largest economy.

Global Stocks Rally Fades After Weak China Data

A rally in global stocks faded as fresh signs of weakness in China's manufacturing sector added to concerns about slowing growth.

Credit Suisse, Barclays Settle 'Dark Pool' Investigations

Credit Suisse Group and Barclays agreed to pay $154.3 million combined to settle investigations by regulators into their œdark pool trading venues.

Standard Elements Of A Monetary Policy Implementation Framework - Part One Of Four

from Liberty Street Economics

-- this post authored by Emily Eisner, Antoine Martin, and Ylva Sovik

In the minutes of the July 2015 Federal Open Market Committee (FOMC) meeting, the chair indicated that Federal Reserve staff would undertake an extended effort to evaluate potential long-run monetary policy implementation frameworks. But what is a central bank's monetary policy implementation framework? In a series of four posts, we provide an overview of the key elements that typically constitute such a framework.

Economic Report: Consumer spending goes nowhere in December

Consumer spending was flat in December as Americans mostly pocketed their income gains.

Capitol Report: SEC, industry to dig into Aug. 24 volatility that hit ETFs, big-cap stocks

The Securities and Exchange Commission's go-to-group of industry professionals on the stock market will meet to discuss a single day of trading last summer that raised questions over the operation of exchange-traded funds and equities more generally .

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