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26Feb2016 Pre-Market Commentary: SP500 Opening Higher At Major Resistance, Shale Oil Producers Shutter Wells, WTI Crude Creeps Up To Low $34's

Written by Gary

US stock future indexes are higher this morning helped somewhat after the revised estimate of fourth-quarter gross domestic product (annualized) came in at 1.0, up from 0.7. Crude prices are shaking off some losses after top global producers agreed to discuss fresh efforts to stabilize the market. The Spooz is expected to open higher, but at its major resistance.


Here is the current market situation from CNN Money

European markets are sharply higher today with shares in Germany leading the region. The DAX is up 1.91% while France's CAC 40 is up 1.56% and London's FTSE 100 is up 1.30%.

What Is Moving the Markets

Here are the headlines moving the markets.

Big verdict doesn't assure more wins for plaintiffs in talc-cancer cases

NEW YORK(Reuters) - The $72 million verdict this week against Johnson & Johnson in a U.S. case alleging links between talc-based powder and ovarian cancer has prompted global headlines, social media buzz and calls to lawyers from would-be plaintiffs.

Alibaba in talks with several banks for up to $4 billion loan: WSJ

(Reuters) - Chinese e-commerce giant Alibaba Group Holding Ltd is in talks with several banks to borrow up to $4 billion to fund expansion plans, including acquisitions, the Wall Street Journal reported on Friday, citing people familiar with the matter.

China talks up growth agenda at G20 amid lack of wider policy unity

SHANGHAI (Reuters) - China sought to restore confidence in its economy as financial leaders from G20 nations gathered in Shanghai on Friday, and Premier Li Keqiang urged greater global coordination and consideration of policy spillovers.

Exclusive: Pratt & Whitney A320neo engine suffers new test snag

PARIS (Reuters) - Pratt & Whitney has suffered a fresh problem during testing of new aircraft engines for the Airbus A320neo, but flight trials of the latest version of Europe's best-selling airliner are continuing, people familiar with the matter said.

Futures rise ahead of GDP data; G20 meeting in focus

(Reuters) - U.S. stock index futures were higher on Friday ahead of the release of U.S. gross domestic product numbers and as China reiterated that it would not devalue its currency again but look at other means to support its economy.

Foxconn says in talks with Sharp over deal hitch; hopes for agreement

TOKYO/TAIPEI (Reuters) - Foxconn, a major supplier to Apple Inc , said on Friday it was in talks with Sharp Corp to clarify a late hitch to its takeover of the Japanese firm, worth an estimated near-$6 billion. It said it hopes for a "satisfactory agreement".

BASF boss says don't look to us for 'big and fancy' deals

FRANKFURT (Reuters) - The chief executive of the world's largest chemicals group BASF dismissed any suggestion he needs to pursue larger deals to transform its diversified chemicals and oil business.

J.C. Penney results bright spot amid retail gloom

(Reuters) - Department store operator J.C. Penney Co Inc reported a higher-than-expected quarterly profit, helped by strong holiday sales and fewer discounts, sending its shares up 10 percent in premarket trading on Friday.

Oil set for weekly rise as gasoline buoys prices

LONDON (Reuters) - Crude oil prices reversed early losses on Friday, with Brent on track for its first weekly gain in a month, as strong U.S. gasoline demand and hopes of OPEC action outweighed concerns over fundamental oversupply.

About That "Oil Freeze": Russian Crude Production Sets New Post-Soviet Record In February

As noted earlier, among the catalysts for the overnight leg higher in oil was a statement by Venezuelan Oil Minister Eulogio Del Pino who triggered the headline-scanning algos yesterday when he said, during a television broadcast on TeleSur, that oil producing countries were discussing a March meeting site (which apparently is sufficient to instill confidence in future cuts), and that Venezuela, Russia, Qatar and Saudi Arabia are planning to meet in July. He added that "There's no capacity to continue putting oil on the market. If this situation continues we'll have a collapse in oil prices" which is quite clear to everyone and certainly the Saudi oil-minister who a week ago explicitly said that Saudi Arabia would not cut production.

Recall that Ali Al-Naimi threw down the gauntlet at IHS CERAWeek by ruling out production cuts and challenging many of those very same leaders in Houston to "lower costs, borrow money or liquidate."

Which brings us to the topic of the production freeze, the catalyst that pushed oil off its 13 year low hit early last week.

What is surprising here is that according to calculations by Bloomberg's Julian Lee, released moments ago, Russian crude and condensate production just set new post-Soviet daily record of 10.92m bbl yesterday.

He notes that the monthly estimate is based on daily data from Energy Ministry's CDU-TEK for 1st 25 days, and applies the average rate over last week for final 4 days. And since this compares with a revised 10.91m b/d for January, it means that Russia took the production "freeze" seriously: by freezing at a new record high level of production.

He adds that total January output was revised up by 32k b/d, and also notes that February output has risen by 205k b/d compared to a year ago.

Lee quotes Russian DPM Arkady Dvorkovich who said that "no extra measures needed for Russian companies to meet proposed output-freeze deal." Well ...

Frontrunning: February 26



Fight night: Rubio, Cruz gang up on Trump in debate ploy (Reuters)

Laid Bare in Shanghai: G-20 Tensions Over How to Spur Growth (BBG)

China Flags Scope for Policy Stimulus, Tweaks Monetary Stance (BBG)

Global Stocks Rise With Commodities as China Sees Room to Ease (BBG)

Greece seeks to stem migrant flow as thousands trapped by border limits (Reuters)

SocGen Swings From Biggest Bull on Europe Stocks to Most Bearish (BBG)

How the Fed's Cold War With Congress Could Harm the U.S. Economy (BBG)

Sharp Races to Save Foxconn Deal, as Share Price Plummets (WSJ)

Bond Vigilantes Slap Oil CEOs With Junk Tag on $258 Billion Debt (BBG)

Big turnout as Iran votes to shape post-sanctions era (Reuters)

'Big Short' Professor's Fund Swells in Past Year (BBG)

Indonesia Weighs Forcing Foreign Res ...

Bailed Out RBS Faces Shareholder Revolt As Capital Return Plans Delayed Indefinitely

œI haven't found any nuggets of good news.

That's from Investec's Ian Gordon, who isn't particularly enamored with RBS, which on Friday reported its eighth consecutive annual loss.

The bank - which was bailed out to the tune of $64 billion by British taxpayers during the depths of the crisis - lost $2.77 billion last year, which was actually a marked improvement from 2014. Pre-tax profit which strips away all of the bad things like litigation plunged by nearly a third to £4.4 billion, just shy of consensus.

Nearly three quarters of the bank is still owned British taxpayers and it exists in a sort of limbo as CEO Ross McEwan dumps assets and retreats from foreign markets. As FT reminds us, RBS is œshrinking the investment bank and exiting 25 of the 38 countries it operates in, to focus on UK retail and commercial banking.

Net interest income (so, income from how banks used to make money in a bygone era) was down 5% Y/Y but the real story here is charge-offs. Last year's abysmal results were attributable to nearly £3 billion in restructuring charges and £3.5 billion in charges for bad œconduct which includes FX rigging and the sale of shoddy mortgage bonds. As The Guardian reports, œthe legal warnings attached to the bank's accounts also include warnings about an ongoing court case in the UK from investors who backed a cash call before its 2008 taxpayer bailout, court cases in the US involving Libor rigging and cases accusing the bank of funding terr ...

Global Stocks, Oil Continue Streamrolling Shorts On Last Minute Hopes For G-20 Stimulus Announcement

Whether this week's market surge was catalyzed by two consecutive "technical problems" in the bond market, first the unexpected failure of the Fed's MBS POMO on Wednesday and then the 7 Year Treasury auction's last minute cancellations yesterday, and quite clearly it was...

... is irrelevant as the short squeeze has not only returned with a vengeance...

... but the critical 1,950 resistance and 50 DMA in the S&P500 was taken out...

... with the final push yesterday, opening the way for the market to surge even higher on ever lower volume in the latest market-wide stop-hunt attempt, one which based on collapsing forward earnings may just see the S&P retest a 20x forward GAAP P/E multiple before the selling resumes.

As a resu ...

Market Turmoil Eases, but Investors Remain Wary

Poor earnings, persistent volatility and turbulence in the market for lower-rated corporate bonds have investors fearful the newfound resilience may be short-lived.

RBS Shares Plunge on £2 Billion Loss, Delayed Dividend

Royal Bank of Scotland Group's shares plunged after the bank delayed the prospect of any dividend payouts and posted its eighth consecutive annual loss battered by huge restructuring and conduct charges.

Why Oil Prices Will Leave a Mark at Warren Buffett's Berkshire Hathaway

Berkshire Hathaway's annual results Saturday will give investors a closer look at how Warren Buffett is coping with what could be the market's biggest problem: oil.

Economic Report: U.S. growth in fourth quarter raised to 1% from 0.7%

The annual pace of economic growth in the U.S. was marked up in the fourth quarter to 1% from 0.7%, mostly because of a bigger stockpiling of inventories.

Deep Dive: Income investors are leaving money on the table if they don't use this easy options strategy

Covered call options provide additional income up front plus downside protection, says Phil van Doorn.

The Wall Street Journal: Perdue to remove antibiotics from chicken nuggets sold in supermarkets

Perdue will eliminate antibiotics from chicken nuggets and strips sold in grocery stores.

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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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