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29Mar2016 Pre-Market Commentary: US Futures Down, European Markets In The Red, WTI Crude Slipping Ahead Of Ms. Yellen Speech

Written by Gary

US stock future indexes drift sharply lower on anticipated hawkish speech from Yellen this morning. WTI crude has slipped into the mid 38's, US dollar declines to its high 95 support and gold is volatile in the 1220 area. Markets expected to open lower in what is expected to be another quiet session.


Here is the current market situation from CNN Money

European markets are mixed. The CAC 40 is higher by 0.54%, while the FTSE 100 is leading the DAX lower. They are down 0.17% and 0.11% respectively.

What Is Moving the Markets

Here are the headlines moving the markets.

Fed's Williams urges U.S. central bank to stay on track with rate rises

(Reuters) - The U.S. economy remains on track for a gradual path of interest rate hikes and fears over the impact of a slowing global economy and bouts of financial volatility are overdone, San Francisco Federal Reserve President John Williams said on Tuesday.

Orange and Bouygues boards to meet Wednesday on telecoms tie-up: sources

PARIS (Reuters) - The Orange and Bouygues boards are scheduled to meet separately on Wednesday to discuss the planned sale of Bouygues's telecom unit, two sources close to the matter said.

Bank of England warns on Brexit risks, tightens buy-to-let lending rules

LONDON, (Reuters) - The Bank of England said on Tuesday that risks around Britain's referendum on the European Union could push up borrowing costs and weaken sterling, and tightened rules for mortgage lending to landlords.

Chrysler to recall 60,000 SUVs in China over ABS braking issue: watchdog

SHANGHAI (Reuters) - Fiat Chrysler Automobiles NV's China unit will recall over 60,000 sport-utility vehicles in the country due to issues related to the cars' anti-skid braking (ABS) systems, a Chinese regulator said in a statement on Tuesday.

Yahoo sets April 11 deadline for preliminary bids: WSJ

(Reuters) - Yahoo Inc has set an April 11 deadline to submit preliminary bids for its web business and Asian assets, The Wall Street Journal reported on Monday, citing sources.

Europe shares, dollar gain as investors look to Yellen

LONDON (Reuters) - European shares rose on Tuesday, shrugging off losses in Asia, while the dollar regained its footing as investors looked to a speech by Federal Reserve Chair Janet Yellen for clues to the interest rate outlook following weak U.S. data.

Smoke without fire: Japan becomes test ground for real tobacco e-cigarette

TOKYO (Reuters) - Two tobacco giants are seeing strong demand for their reboots of the e-cigarette in Japan, with Philip Morris International twice postponing a nationwide rollout and Japan Tobacco suspending shipments - both due to supply shortages.

Prominent Hedge Fund Luxor Capital Warns Redeeming Investors Will Be "Gated" After Sharp Losses

About a decade ago, Christian Leone's Luxor Capital was one of the biggest brand names in the industry, and alongside Harbinger and DB Zwirn, every trader and analyst on Wall Street wanted to work there. Since then things have changed. According to Reuters, Luxor, which had $3.8 billion under management at last check, "has been losing money for months" and on Monday it surprised investors when it announced it would "not be returning exiting investors cash in full, keeping a portion locked up until some illiquid investments can be sold."

Call it the latest hedge fund "gate", only unlike some prominent debt focused names, this one is only partial: "instead of returning all exiting clients' assets in cash, investors will receive 88 percent of their money back while 12 percent of the investments will be held in a so-called special purpose vehicle, Luxor's founder, Christian Leone, wrote in a letter."

The announcement comes before a critical March 31 redemption deadline and aims to treat all investors "fairly," the letter said.

"For those investors in the Fund that have submitted withdrawal requests for March 31, 2016 and for subsequent withdrawal dates, we will transfer a pro rata share of the applicable assets into a special purpose vehicle (SPV)," Leone wrote.

Client subject to the partial gate will be those who asked to get their money out on April 1 and July 1 and as a result; instead of getting all cash they will see a portion of their money put into the SPV and the fund will not charge any fees on these assets.

As Reuters reminds us (for those who have forgotten the gating junk bond funds of late 2015), "special purpose vehicles and side pockets are permitted at hedge funds but they are often viewed as a last resort that sour investors, and they have not been widely used since the 2008 financial crisis ...

Frontrunning: March 29



Headline of the day: Oil prices fall as investors' faith in rally wanes (Reuters)

Europe shares, dollar gain as investors look to Yellen (Reuters)

Chinese Bidder for Starwood Has Mysterious Ownership Structure (WSJ)

Germany wants refugees to integrate or lose residency rights (Reuters)

BlackRock Joins Pimco Warning Investors to Seek Inflation Hedge (BBG)

Goldman Sachs and Bear Stearns: A Financial-Crisis Mystery Is Solved (WSJ)

Contract Workforce Outpaces Growth in Silicon-Valley Style 'Gig' Jobs (WSJ)

Hugh Hendry has a friend: China Bull Who Beat 99% of All Bond Funds Says Yuan Drop Is Over (BBG)

Obama says journalists partly to blame for tone of presidential race (Reuters)

Newt Gingrich: Wives spat is Trump's 'wake-up call' (

Futures, Oil Dip On Stronger Dollar Ahead Of "Hawkish" Yellen Speech

With Europe back from Easter break, we are seeing a modest continuation of the dollar strength witnessed every day last week, which in turn is pressuring oil and the commodity complex, and leading to some selling in US equity futures (down 0.2% to 2024) ahead of today's main event which is Janet Yellen's speech as the Economic Club of New York at 12:20pm, an event which judging by risk assets so far is expected to be far more hawkish than dovish: after all the S&P 500 is north of 2,000 for now.

Crude slid below $39 a barrel in New York in a fourth day of losses while commodity currencies such as Russia's ruble and the Norwegian krone weakened. Euro-area sovereign securities climbed as lower energy prices dimmed the outlook for inflation and the European Central Bank prepared to increase its asset-purchase plan by 20 billion euros ($22 billion) a month in April. Treasuries advanced and U.S. equity-index futures dropped before a speech from Federal Reserve Chair Janet Yellen and several key pieces of economic data this week culminating in payrolls figures.

The shaky sentiment was summarized by Pedro Ricardo Santos, a broker at X-Trade Brokers DM SA in Lisbon. who told Bloomberg that "the correction in oil prices is outweighing any optimism about the economy in the markets. Investors will also expect a little more hawkishness from Yellen's speech today. Although the likelihood of a rate increase in April is practically zero, many are looking for two more hikes by the end of the year."

Market Snapshot:



S&P 500 futures down 0.2% to 2024

Stoxx 600 up 0.3% to 336

FTSE 100 up 0.3% to 6126

DAX up 0.7% to 9920

German 10Yr yield down 3bps to 0.15%

Italian 10Yr yield down 6bps to 1.24%

Spanish 10Yr yield down 7bps to 1.45%

S&P GSCI Index down 0.9% to 325

MSCI Asia Pacific down 0.5% to 127

Nikkei 225 dow ...

Starwood Deal: Cash Bid May Not Be King

The latest offer for Starwood from the consortium led by Anbang Insurance may face hidden regulatory pitfalls.

This Deal Shows How Italy's Banks Can Help Themselves

Banco Popolare and Banca Popolare di Milano are pursuing a merger that could make both stronger.

China's Tesla Remains at the Mercy of the State

Electric-car maker BYD reported big profits in 2015 as the market quadrupled in China. But the source of that growth "government policies "is changing direction.

Market Snapshot: U.S. stock futures edge lower ahead of Yellen speech

Wall Street looks set to open slightly lower, as investors appear to avoid major bets before a key speech by Federal Reserve Chairwoman Janet Yellen.

Need to Know: Doug Kass says stay out of stocks. Should you?

This stock market looks dangerous to some and downright dull to others. But the worst thing you can do is try to fight what's going on. It's an election year and there's other noise that means this strategy is your best option.

Market Extra: Oil, copper at risk of 25% slump on 'rush for the exits,' Barclays warns

Commodities have been among most popular assets in 2016, but natural resources such as oil and copper are at risk of sharp, near-term losses in the absence of any real improvement in the markets, Barclays warns.

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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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