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14Mar2016 Pre-Market Commentary: US Futures Fractionally Lower, WTI Crude Slipping, Global Markets Higher For Now, Investors Skeptical Regarding Crude Production Freeze

Written by Gary

US stock future indexes are down fractionally while Global markets are trading higher across the board, buoyed by last week's gains on Wall Street. WTI crude is falling as investors have become jaded with the prospects of an OPEC crude production freeze becoming a reality. US markets are expected to open lower amid skepticism over the ECB's latest stimulus package and proceed to melt higher during the session.


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 1.51% while France's CAC 40 is up 0.49% and London's FTSE 100 is up 0.34%.

What Is Moving the Markets

Here are the headlines moving the markets.

Starwood Hotels gets unsolicited buyout proposal

(Reuters) - U.S. hotel operator Starwood Hotels & Resorts Worldwide Inc said it received a non-binding buyout offer from a consortium of companies, valuing the company at $12.84 billion.

Shares, dollar rise, with eyes on central bank decisions

LONDON (Reuters) - European shares followed Asian stocks higher on Monday, adding to gains chalked up after last week's stimulus package from the European Central Bank, while oil prices fell as Iran dashed prospects of a quick deal to freeze output.

Oil back below $40 as Iran dashes hopes for quick deal on output

LONDON (Reuters) - Oil fell around 3 percent on Monday after Iran dashed hopes of a coordinated production freeze any time soon, returning bearish sentiment to the market over a supply glut that has sent prices crashing.

Grand Marnier says Campari to buy its distribution unit

PARIS (Reuters) - Grand Marnier said on Monday that Italy's Campari , the world's sixth-largest premium spirits maker, was set to acquire the global distribution business of the French cognac maker, confirming a report by Bloomberg.

Futures slightly lower as focus turns to Fed meeting

(Reuters) - U.S. stock index futures were slightly lower on Monday, heading into a busy week that includes the release of a slew of economic data and the U.S. Federal Reserve's monetary policy meeting.

Activist investors question United Airlines CEO's board role, pay

NEW YORK (Reuters) - The two hedge funds that launched a boardroom fight with United Continental Holdings Inc last week oppose the airline's plans to give Chief Executive Oscar Munoz the additional role of chairman and have concerns about his compensation, according to a person familiar with the matter.

Goldman revamps electronic stock trading to catch rival

NEW YORK (Reuters) - Raj Mahajan achieved a rare when he rejoined Goldman Sachs Group Inc last year with the coveted title of partner, the Wall Street bank's highest rank. Then he got to work on fixing the pipes.

India's codeine cough syrup ban hits Pfizer, Abbott units

MUMBAI/NEW DELHI (Reuters) - Pfizer Inc and Abbott Laboratories on Monday said they would comply with a ban on a popular cough syrup in India after it was added to a local list of prohibited drugs, sending shares in the U.S. firms' Indian subsidiaries tumbling.

Fed to sit tight on rates at March meet, hint at hikes to come

SAN FRANCISCO (Reuters) - The Federal Reserve won't raise interest rates this week, but will likely make clear that as long as U.S. inflation and jobs continue to strengthen, economic weakness overseas won't stop rates from rising fairly soon.

Oil Plunges Back To Draghi Lows

Just as we saw with the stock market following Draghi's December disappointment dead-cat-bounce, WTI Crude has collapsed back topost-Draghi lows, erasing all the WTF bounce from Friday. The driver - aside from the fact that there was no driver of the ramp - appears to be comments from Emirates Bank on the resilience of US shale (and the surprising lack of production drops for now).

US shale-oil producers could decide to stay in the game with prices currently hovering around $40/barrel, according to Edward Bell at Dubai-based bank Emirates NBD.

Market participants expected some shale producers to be pushed out as they struggled to compete in the low-price environment, and while US production is falling, it's not been happening at a rapid rate. With prices well off their recent lows, shale producers could decide to weather the storm and try to keep output high. US production has dropped around 120K/day so far this year, but still remains above 9M barrels.

Well that didn't last long...

Finally, given the total lies that were spewed about a March meeting of OPEC/NOPEC, it appears April is the new March...

OPEC and non-OPEC producers are likely to hold their next meeting on a plan to freeze output levels in a bid to support prices in mid-April in Doha, three OPEC sources said on Monday.

An earlier plan was to meet on March 20 in Russia, but sources f ...

Bloomberg Stumbles On The "Only One Buyer Keeping The Bull Market Alive"

Last week, when Bloomberg was celebrating the 7 year anniversary of the third longest, most central bank-supported, and thus "most hated" bull market in history, it said that "investors are awash in angst, showing little faith the run can continue. They worry about contracting corporate earnings, slowing Chinese growth and uncertainty over interest rates. And they're walking the talk by pulling cash from stocks at almost the fastest rate on record. It's not unwarranted - the S&P 500 has gained just 0.5 percent in the last 18 months."

While confused by this unprecedented equity outflow, it then promptly spun the "bullish angle"and noted that just because the rally is the "most hated in history", it probably will continue:

[W]hen people withdraw money, stocks inversely tend to rise later, according to data since 1984. In the 12 instances when funds experienced monthly outflows that were at least 2 standard deviations from the historic mean, the S&P 500 rose an average 7.1 percent six months later, compared with a normal return of 3.9 percent, data compiled by Bloomberg and Investment Company Institute show.

[Once] things start to turn around, bears will be forced to buy. From Feb. 11 through Monday, a Goldman Sachs Group Inc. index

of the most-shorted companies outperformed the S&P 500 by almost 16 percentage points, the most in data going back to 2008.

What Bloomber ...

Oil will be over $100 a Barrel in 3 Years (Video)

By EconMatters

Here is the Oil Equation: Existing Supply minus Shale Destruction, minus Cap Ex Reductions, minus Depletion Rates Globally, minus Demand Growth versus Iranian New Supply. Oil will be above $45 a barrel by April, above $70 a barrel in fifteen months, and over $100 a barrel in 3 years once you start plugging in the numbers in the aforementioned oil equation. The scary thing is we now know what Russia, Saudi Arabia and OPEC have in terms of Spare Capacity - and it is much less than we thought five years ago.

© EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest |

"We're One Hawkish Fed Statement Away" From A "Sharp Re-Pricing," Deutsche Bank Warns

On Sunday evening we brought you the latest from Goldman's chief equity strategist David Kostin who explained that sharp swings in crude prices have created pronounced (and in fact historic) momentum swings, catching those who had piled into œpopular investment themes to be caught flat-footed. Here's what Kostin said:

The correlation between major macro trends has caught many popular investment themes in the momentum spin cycle. In 2015 and the first weeks of this year, lower oil prices were accompanied by lower Treasury yields and downward revisions to US growth expectations, boosting the performance of popular growth stocks and defensive equities while weighing on banks. At the same time, the US dollar, which carries a strong negative correlation with oil, strengthened by nearly 15% and presented another headwind to the US economy. The combination of growth concerns and low oil prices widened credit spreads to recessionary levels and benefitted the performance of stocks with strong balance sheets. All of these trends have reversed sharply in recent weeks.

But as we wrote, Kostin is far from bullish. Instead, he says the market may be underestimating (or else just plain ignoring) the œlargest current macro risk : a hawkish Fed and consequently, a stronger USD. The result, another sharp reversal as stocks with strong balance sheets are once again in vogue versus momo plays, energy, and anything with nosebleed leverage.

Well now Deutsche Bank is falling in line, suggesting that European equity investors are missing the very same risks (i.e. a hawkish Fed, resultant strong USD, and weaker commodities).

œOur European credit stra ...

Stocks Extend Month-Long Rally

Stocks in Europe and Asia extended a month-long global rally at the start of a week that will offer key clues to the course of monetary policy this year.

Subprime Flashback: Early Defaults Are a Warning Sign for Auto Sales

A high level of missed payments for such loans made recently has raised concerns about underwriting standards.

Yuan Loses Luster in Global Trade

Trading companies say China's reluctance to loosen its grip on the currency is partly to blame for the yuan's declining appeal for use in cross-border settlements.

Deep Dive: These U.S. shale-oil companies are poised to profit when prices rise

Companies are leaving drilled wells uncompleted for later harvesting at higher prices, writes Phil van Doorn.

The Tell: Morgan Stanley cuts S&P 500 target as recession fears rise

Morgan Stanley strategists are growing increasingly concerned about the risk of a global recession, slashing forecasts for all major equity markets and advising investors to sell stocks that have recently rallied.

The Wall Street Journal: Libor investigators named Deutsche Börse CEO Kengeter as possible Libor consipirator

Carsten Kengeter, who is in line to become head of Europe's largest stock exchange if the LSE merger goes through, was listed by U.K. prosecutors in 2013 as a possible rate-rigging co-conspirator.

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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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