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07Apr2016 Pre-Market Commentary: US Stock Future Indexes Lower After A Indecisive FOMC Decision Yesterday, Crude May Melt Lower, Investors Sitting On Hands This Morning

Written by Gary

US stock future indexes are fractionally lower this morning after the FOMC minutes yesterday did not really doing anything to dent sentiment one way or the other. WTI crude has risen modestly and could easily melt up or down. The markets are expected to open fractionally lower on what is beginning to look like another low volume 'blah' session.


Here is the current market situation from CNN Money

European markets are lower today with shares in Germany off the most. The DAX is down 0.18% while France's CAC 40 is off 0.18% and London's FTSE 100 is lower by 0.16%.

What Is Moving the Markets

Here are the headlines moving the markets.

Valeant gets extra month from lenders to file annual report

(Reuters) - Valeant Pharmaceuticals International Inc said on Thursday it had won approval from its lenders for an amendment and waiver to its credit facility, giving the embattled drugmaker an extra month to file its annual report.

Oil steady as Iraqi exports up, offsetting U.S. inventories drop

LONDON (Reuters) - Oil steadied at around $40 per barrel on Thursday as a surprise fall in U.S. inventories the previous day was offset by an increase in exports from Iraq, underlining global oversupply.

UK watchdog asks banks to check for any ties to Mossack Fonseca

LONDON (Reuters) - Britain's Financial Conduct Authority has asked 20 banks and other financial firms to check if they have any ties to Panama law firm Mossack Fonseca, the FCA said on Thursday.

Weak U.S. earnings expectations set stage for stock gains

NEW YORK (Reuters) - When Wall Street's quarterly earnings season kicks in to high gear next week, hundreds of companies will vie for the bragging rights that come from "beating the Street" - showing revenues and profits that are higher than analysts expected.

Seven & i's 83-year-old CEO quits after board rejects his proposal

TOKYO (Reuters) - The veteran boss of retail group Seven & i Holdings Co Ltd , who pioneered 24-hour convenience stores in Japan four decades ago, said on Thursday that he is stepping down to take responsibility for a failed management reshuffle.

Tata Steel UK suitor to start due diligence in around 10 days

MUMBAI (Reuters) - Liberty House Group will start due diligence within a week from Monday on the loss-making UK assets that Tata Steel has put up for sale, its boss Sanjeev Gupta said, adding he was confident of turning the business around with government help.

Swiss police raid UEFA as Panama Papers scandal spreads

ZURICH/REYKJAVIK, (Reuters) - Swiss police raided the European soccer body UEFA on Wednesday to seize information about a contract disclosed in the Panama Papers that was signed by Gianni Infantino, now head of the global soccer body FIFA.

Malaysia parliament report calls for probe into 1MDB

KUALA LUMPUR (Reuters) - A Malaysian parliamentary inquiry on Thursday slammed the board of state fund 1MDB for being irresponsible and urged a probe into its former chief, but stopped short of implicating Prime Minister Najib Razak who was an advisor for the troubled firm.

Dollar sinks again after Fed remains cautious

LONDON (Reuters) - The dollar's fall against the yen deepened on Thursday after minutes of the U.S. Federal Reserve's most recent policy meeting offered little optimism over the state of global growth and the prospect of a rise in interest rates in June.

Central Banking Insider Comes Clear: QE Cannot and Will Not Create Growth

Ignore the bounce in stocks, something much larger is playing out beneath the surface.

That "something" is key admissions from Central Banks that they have lost their ability to generate anything resembling a recovery. In particular the Bank of Japan has finally come clean in an admission so startling that it took three months for the media to even catch on.

In January 2016, the head of the Bank of Japan, Haruhiko Kuroda stated that Japan has a "potential growth rate of 0.5% or lower."

By way of context, remember that the Bank of Japan has been at the forefront for ALL monetary policy for decades. The US Federal Reserve launched its first QE program in 2008. The European Central Bank launched its first QE program in 2015. The Bank of Japan first launched QE back in 2001.

In short, the Bank of Japan has two decades of experience with QE. Indeed, Japan is responsible for the single largest QE program in history, its "Shock and Awe" program launched in April 2014 which equaled over 25% of Japan's GDP.

Which is why when Kuroda admitted that Japan's GDP growth "potential" is limited to 0.5% or lower, he was implicitly admitting that QE cannot generate growth.

Remember, Central Bankers speak in half measures. They NEVER admit failure directly. Their primary job is to maintain confidence in the financial system even if it entails lying.

Which is why when Kuroda made this admission it was so striking that the media didn't catch on for three months until today... and only in the form of realizing the financial limitations to the Bank of Japan's QE programs.

Japan Is Fast Approaching the Quantitative Limits of Quantitative Eas ...

UK Housing Bubble Pops: London Offers 20% Discounts On Luxury Apartments

Hot money flows into real estate have become an issue in some of the world's largest markets, as prices have skyrocketed. As we've repeatedly noted before, China is experiencing massive capital outflows (even if technically, overnight the PBOC said that in the last month these flows reversed to inflows for the first time in 5 months), which have mostly targeted foreign real estate, especially that in major UK, US, and Canadian urban centers. The impact of this has been so significant, that something such as living in a box in someone's living room has become reality for some unlucky people.

Countries such as the US and UK are finally taking long overdue steps to at least slow down this massive inflow of capital - which at least in the US is the equivalent of laundering money due to the NAR's exemption from Anti money laundering regulations - and it's starting to take hold. What we are learning as a result of these actions is that the housing œrecovery is being exposed as being driven largely by foreign capital flight, and has nothing to do with underlying fundamentals improving.

A few days ago we discussed that although Manhattan's median sales prices have increased, the underlying contracts signed in 2016 have pulled back. We pointed out that this was occurring just as the US Treasury started to crack down on œsecret buyers.

We now have another major city experiencing a pullback in demand for its property " once again as a direct result of Government action to dampen the impact of foreign investment. In London, as Bloomberg

Valeant Lenders Agree To Amend Credit Facility

Three days ago, the latest catalyst to weigh down Valeant stock was news that the company's lenders were pushing back on its demands to obtain a default waiver and to loosen restrictions on its negative debt covenants. It appears, however, that that issue has been resolved, and as the company reported moments ago in a press release on its website, VEX "has obtained the requisite lender approval for the amendment and waiver to its credit facility. The Company expects to close the amendment and waiver next week."

According to the agreement, the deadline for filing the Valeant 10-K will be extended to May 31, 2016 and the deadline for filing its Form 10-Q for the quarter ended March 31, 2016 will be extended to July 31, 2016.

More importantly, in addition to these waivers, the amendment will also modify, among other things, the interest coverage maintenance covenant and certain financial definitions which provides additional cushion in its financial covenants.

What's the trade off? Well, the rollup and the piggybank are gone: the company agrees to "restrict its ability to make certain acquisitions and other investments and to pay dividends and other restricted payments" until the financial statements are filed and the Company achieves certain leverage ratios.

And most importantly, "while these restrictions are in place, the Company will also be required to apply substantially all net asset sale proceeds to prepay its term loans."

In other words, any asset proceeds will be used only to repay the bank debt.

For now, the stock likes the news and was up 6% in pre market trading.

Full press release:

Intends to File 10-K on or before April 29, 2016, as Pre ...

Venezuela Declares Every Friday A Holiday To Conserve Electricity

When we last checked in on everyone's favorite Latin American socialist paradise, Venezuela, President Nicolas Maduro's opponents "had gone crazy." Or at least that's how Maduro described the situation in a œthundering speech to supporters at what he called an œanti-imperialist rally in Caracas in mid-March.

Meanwhile, thousands of demonstrators had been holding counter-rallies calling for the President's ouster. Maduro angered the opposition - which dealt Hugo Chavez's leftist movement its worst defeat at the ballot box in history in December - the previous month when he used a stacked Supreme Court to give himself emergency powers he says will help him deal with the country's worsening economic crisis.

"Now that the economic emergency decree has validity, in the next few days I will activate a series of measures I had been working on, he said, following Congress's declaration of a œfood emergency.

The "emergency measures" in effect, amounted to a shutdown of the country. "Venezuela is shutting down for a week as the government struggles with a deepening electricity crisis," Bloomberg wrote. "President Nicolas Maduro gave everyone an extra three days off work next week, extending the two-day Easter holiday, according to a statement in the Official Gazette published ...

The Fed's Next Rate Steps: Connecting the Dots

Uncover whose dot is whose in the Federal Reserve's dot plot, and the case for just two rate increases this year gets stronger.

China's Currency Victory Hides Scars of War

Beijing may want to declare œmission accomplished in its war over the yuan. But the tactics it used may obfuscate the price it paid to get there.

How to Make 7-Eleven More Convenient for Investors

Getting 7-Eleven owner Seven & I to jettison its non-convenience-store business should unlock value.

02 April 2016 Initial Unemployment Claims Rolling Average Again Worsens. But Still the Longest Streak Of Claims Under 300,000 Since 1973.

Weekly Initial Unemployment Claims

The market expectations (from Bloomberg) were 261,000 to 290,000 (consensus 272,000), and the Department of Labor reported 267,000 new claims. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 263,250 (reported last week as 263,250) to 266,750. The rolling averages generally have been equal to or under 300,000 since August 2014.

Project Syndicate: Anti-trade rhetoric by Trump, Sanders could doom millions to poverty

The rise of anti-trade populism in the 2016 U.S. election campaign portends a dangerous retreat from the United States's role in world affairs, writes Kenneth Rogoff.

Futures Movers: Oil futures waver after supply-driven rally loses steam

Investors are weighing an unexpected decline in U.S. crude inventories against growing doubts that major oil producers will agree to curb their output.

Capitol Report: Bookmakers set odds for next leader to resign after Panama Papers mention

An Irish bookie has set odds on which leader will quit due to the Panama Papers revelations.

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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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