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04Mar2016 Pre-Market Commentary: Unemployment Remains At 4.9%, WTI Crude Testing $35 Resistance, US Futures Flat After Jobs Report, Markets To Open Flat With Volatility

Written by Gary

US stock future indexes were fractionally higher this morning while WTI crude made another attempt to penetrate the $35 (and stay there). Gold prices topped out this morning at 1276 and then retreated to the 1255 level (support @ $1251.74) while the US dollar is becoming very volatile in the high 97 level. Watch for volatility this morning as futures are headed back to the unchanged line.


Here is the current market situation from CNN Money

European markets are broadly higher today with shares in Germany leading the region. The DAX is up 1.39% while London's FTSE 100 is up 1.10% and France's CAC 40 is up 0.82%.

The first column is what was reported this morning. The second column is what was predicted and the third is the last report.

What Is Moving the Markets

Here are the headlines moving the markets.

Dunkin' Donuts to target Starbucks customers after loyalty scheme shake-up

FRANKFURT (Reuters) - Dunkin' Donuts is on a drive to win customers from Starbucks after the rival coffee and snacks chain changed its loyalty scheme to favor higher spending customers over frequent buyers.

RBC targets market share gains in U.S. investment banking

NEW YORK (Reuters) - Royal Bank of Canada plans to boost its share in the U.S. investment banking market by tapping opportunities with existing mid-sized and large clients and filling gaps left by European banks that are scaling back, one of its key executives said.

Renault-Nissan aims for 5.5 billion euros in synergies in 2018

PARIS (Reuters) - The Renault-Nissan carmaking alliance expects to generate 5.5 billion euros ($6 billion) of synergies in 2018 by integrating more divisions and sharing resources better within the partnership, the companies said on Friday.

Facebook to ditch tax-reducing UK sales structure

LONDON (Reuters) - Facebook said it would stop booking sales to UK clients via Ireland, a practice which reduced its taxes, following the British government's introduction of a new tax on profits shifted offshore.

Employment gains seen accelerating in February

WASHINGTON (Reuters) - U.S. employers likely stepped up hiring in February, in a sign of labor market strength that could further ease fears the economy is heading into recession and allow the Federal Reserve to gradually raise interest rates this year.

Facing record oversupply, U.S. oil looks for a home in Europe

LONDON (Reuters) - As U.S. oil inventories reach all-time highs, cargoes of crude are increasingly flowing towards Europe, where higher prices and lower shipping costs have made the region an attractive hunting ground for those selling light sweet oil.

Mercedes-Benz has best-ever February on strong China, Europe

FRANKFURT (Reuters) - Daimler's sales of its Mercedes-Benz passenger cars rose 11.2 percent in February to 133,752 vehicles, the most it ever sold that month, the carmaker said on Friday.

Why The Bulls Are Hoping For A Weak Jobs Number

In half an hour, the BLS will report the February unemployment rate and payrolls number which is expected to print as follows:


February jobs exp. 195K (Low 70K, High 245K), Prey. 151K, Dec. 262K

Unemployment Rate (Feb) M/M Exp. 4.9% (Low 4.8%, High 5.0%), Prey. 4.9%, Dec. 5.0%

Average Hourly Earnings (Feb) M/M Exp. 0.2% (Low 0.0%, High 0.4%), Prey. 0.5%, Dec. 0.0%

As we reported previously when looking at coincident withheld income and payroll taxes, which have dipped in recent months, we noted that according to research shop TrimTabs, the actual number is likely far lower: it estimates job growth in February was 55,000 to 85,000 - call it 70,000 - the lowest number in two years.

Ironically, a weaker jobs number may be precisely what the bulls are hoping for now that Fed rate hikes are back again on the horizon. Here is Bloomberg's Mark Cudmore explaining why a match or a beat to expectations may be the worst case scenario for stocks, which have surged over the past few weeks on hopes of more stimulus, whether from the G-20, the ECB, China or Japan. In this environment, a repricing of rate hike odds could be just the catalyst that ends the short squeeze.

Here is Cudmore explaining why "A Hike Could Be on the Horizon"

Futures markets price only a 35% probability of the Federal Reserve hiking by June. If today's labor data doesn't disappoint, that likelihood could easily double within the next two weeks.

Despite market distractions, the statutory objectives of the Fed are maximum employment, stable prices and moderate long- term interest rates.

According to the FOMC's December 'Summary of Economic Projections' report, œCommittee participants' estimates of the longer-run normal rate of unemployment ranged f ...

Real Soars To 6-Month Highs After Former Brazilian President Lula Detained

The Brazilian Real has soared over 2.5% this morning after the shocking news that former President Luiz Inacio Lula da Silva (Lula) has been detained by the federal police. The long-running inquiry, known as Operation Car Wash, stems from accusations of corruption and money-laundering at Petrobras and police, who raided Lula's home near Sao Paulo, say they now have evidence that he received illicit benefits from the kick-back scheme with Petrobras "enriching himself and the treasury of his political group."

The real is surging to six month highs on the news...

As Reuters reports,

Brazil's federal police detained former president Luiz Inacio Lula da Silva for questioning on Friday in an anti-corruption and money laundering operation and said that illegal gains had financed campaigns and expenses of the ruling Workers Party.

Police said they had evidence that Lula received illicit benefits from the kick-back scheme at state oil firm Petroleo Brasileiro SA (Petrobras) (PETR4.SA) in the form of payments and luxury real estate.

"Ex-president Lula, besides being party leader, was the one ultimately responsible for the decision on who would be the directors at Petrobras and was one of the main beneficiaries of these crimes," a police statement said.

"There is evidence that the crimes enriched him and financed electoral campaigns and the tr ...

What Is Driving All Currencies Lower Against Gold?

Gold has surged another 4% this week to bring year to date gains to 20% in dollar terms, 19% in euro terms and 24% in sterling terms. We were interviewed by PickingAlpha.com yesterday afternoon and looked at what is currently driving gold prices higher in all currencies.

The sudden rise of gold prices and whether it is sustainable was considered. As was the British economy in the run up to Brexit referendum and the vulnerability of sterling due to the second largest current account deficit in the UK's post war history and London's property bubble.

The impact of the Chinese slowdown and the 1% rise of the Indian Duty tax, followed by country's numerous jewelers's strike and the outlook for Chinese and Indian demand were also looked at.

Frontrunning: March 4



Rivals rip Trump but promise support if he is the nominee (Reuters)

Employment gains seen accelerating in February (Reuters)

Brazil's Lula Targeted in Police Raid Into Corruption Scandal (BBG)

Economist: For The ECB, It's No Longer About Oil (BBG)

China's premier says economy faces greater difficulties in 2016 (Reuters)

Copper Stockpiles in China Surge to Record as Metal Flows East (BBG)

Turkish court jails two Syrians over drowning of toddler Aylan (Reuters)

Inside China's Plan for a Military That Can Counter U.S. Muscle (BBG)

China Begins to Tackle Its 'Zombie' Factory Problem (WSJ)

Facing record oversupply, U.S. oil looks for a home in Europe (Reuters)

Bank of America revs up auto loans business despite warning signs (Reuters)

Why Wall Street's Iconic Steakhouses Are E ...

Brokers Brace for Tighter Standard on Retirement Accounts

Thousands of small brokerages are bracing for a tighter rule governing investments they recommend to retirement savers, a change they say will drive up compliance costs and could force them to drop middle-class clients.

Mutual-Fund Pullback Sends Ominous Sign for Silicon Valley

Fidelity and other giants are cutting the value of their investments in young companies at an accelerating pace.

Fed's Balance Sheet 02 March 2016 Shrinks A Little

Total Fed Balance Sheet:

Fed's Balance Sheet week ending balance sheet was $4,440 trillion. Over the last 4 weeks, changes have been very minor.

Economic Report: U.S. exports fall to lowest level since mid-2011

U.S. exports fell in January for the fourth month in a row and hit the lowest level since mid-2011, acting as a weight on the economy that's unlikely to fade soon.

Economic Report: U.S. gains 242,000 jobs in February

The U.S. added 242,000 new jobs in February, recovering from a hiccup in January that raised questions about whether the pace of hiring was tapering off.

Need to Know: Why it's good for investors to get paranoid right now

This market wants to go higher. And there doesn't seem to be much in its way. Our call of the day says it's a great jumping-off point.

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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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