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11Apr2016 Pre-Market Commentary: Markets Expected To Open Higher, Crude Prices Higher, US Dollar Sinks Below 94, Indicators Moving To The Bearish Side

Written by Gary

US stock future indexes are fractionally higher this Monday morning and WTI crude reaching the low $40's. There are no financials being reported for the US today and any market reaction, one way or the other, will be speculation, WAGs and rumors, which should not be any surprise. This week, however, is expected to be negative, before turning back up.


Here is the current market situation from CNN Money

European markets are higher today with shares in Germany leading the region. The DAX is up 0.94% while France's CAC 40 is up 0.58% and London's FTSE 100 is up 0.01%.

What Is Moving the Markets

Here are the headlines moving the markets.

Volkswagen aiming to return to debt market as early as May: sources

FRANKFURT (Reuters) - Volkswagen is hoping to return to the bond market as early as May, people familiar with the matter said, aiming to raise billions of euros to replace the costly bank loan it has been relying on in the wake of its emissions test cheating scandal.

Chesapeake Energy's borrowing base maintained at $4 billion

(Reuters) - Chesapeake Energy Corp said its borrowing base was reaffirmed at $4 billion, but the company had to pledge additional assets as collateral.

Tata Steel sells UK Scunthorpe plant to Greybull Capital

LONDON (Reuters) - India's Tata Steel agreed to sell part of its British business to investment firm Greybull Capital on Monday, preventing thousands of job losses, and freeing it up to focus on the sale of its other big plant, in Wales.

Mystery deepens over $3.5 billion Malaysia's 1MDB sent to BVI entity

ABU DHABI/KUALA LUMPUR (Reuters) - The mystery over who controlled a British Virgin Islands-registered company that received $3.5 billion from Malaysia's scandal-tainted state fund 1MDB deepened on Monday when a company in the Middle East with an almost identical name said the BVI firm did not belong to it.

Daily Mail parent in talks with private equity for Yahoo bid

LONDON (Reuters) - Britain's Daily Mail is in talks with potential partners to mount a joint bid for Yahoo's internet assets, eyeing a plan to buy the troubled U.S. Internet pioneer to help boost advertising revenues from the Mail's globally popular online news site.

European stock bounce counters broader market caution

LONDON (Reuters) - A strong rebound in Italian bank shares lifted European and world stocks on Monday, putting the brakes on risk-averse moves that had earlier lifted the yen to a 17-month high against the dollar and pushed German bond yields to a one-year low.

U.S. banks' dismal first quarter may spell trouble for 2016

(Reuters) - It is only April, but some on Wall Street are already predicting a rotten 2016 for U.S. banks.

Suffering bank investors search for bright spots

NEW YORK (Reuters) - U.S. banks are generally expected to post dismal results when their earnings season gets under way next week, but some analysts say to dig deeper: the fine print in the results, and what bank bosses say, could actually help these long-suffering stocks bounce back.

Exclusive: Bank of Italy conducting supervisory inspection at Bank of China offices

HONG KONG (Reuters) - The Bank of Italy is carrying out an on-site inspection at the Italian offices of Bank of China Ltd , a Chinese state-owned bank already facing accusations of aiding illicit money flows from Italy to China, a source familiar with the situation said.

Bill Gross : "Negative Rates Destroy Savers, The Bedrock Of Capitalism", Larry Fink Agrees

Over the weekend there was a flurry of commentary around the increasing use of NIRP by central banks, and the program's declining effectiveness. Predictably the IMF - whose Christine Lagarde recently said "When The World Goes Downhill, We Thrive", came out in support, while investors Larry Fink and Bill Gross came out hammering the program.

On one side of the argument, and to the surprise of no one, the IMF was quick to defend negative rates. In a blog post on Sunday, the organization listed the reasons they favor NIRP. Despite the fact that they admit individuals may just increase their cash position, they base their argument on the fact that lending will increase and portfolios will rebalance from fixed income into riskier assets such as equities, corporate bonds, or property.

The portfolio balance channel appears to have operated normally at negative rates. Wholesale interest rates have fallen with central bank deposit rates. Money market trading activities appeared to have declined, but it is not clear whether these effects reflect negative rates per se, or the substantial surplus liquidity associated with quantitative easing that reduces the demand for trading. Lower risk-free wholesale rates have tended to encourage investors to switch from low yield government securities to riskier assets such as equities, corporate bonds, or property. In addition, lower wholesale interest rates have reduced the cost of funds for those borrowers such as large corporates who can directly finance in commercial paper and corporate bond markets.

On the other side are Blackrock's Larry Fink and Bill Gross, both of whom came out hammering NIRP, pointing ou ...

Deutsche Bank Says World "Past The Point Of No Return" In The Default Cycle

Over the past year, the credit cycle finally turned, and has unleashed the latest default cycle. In fact, as BofA's Michael Contopoulos warned last week, it may be the worst default cycle in history with "cumulative losses over the length of the entire cycle could be worse than we've ever seen before."

Over the weekend, the FT got the memo with a report that "global company bond defaults at highest level since 2009" in which it said that "the global bond default rate by companies is running at its highest since 2009 with the US accounting for the vast majority, according to rating agency Standard & Poor's. A further four defaults this week, with three coming from the troubled oil and gas sector, pushed the overall tally to 40 with a little over a quarter of 2016 done."

To be sure, the US default cycle is bad and getting worse. But how much worse?

The latest to attempt that answer is DB's Jim Reid who in his just released 18th annual default study explains why his "late cycle fears continue to build." These are some of the highlights:

There are clear signs the cycle is turning, especially in the US. Our US strategists have previously suggested that we need the combination of three conditions for us to be confident the next default cycle is imminent. We need the accumulation of excessive debt and preferably of deteriorating quality, some kind of external shock/trigger and tighter monetary policy/a flattening of the yield curve. The pieces of the jigsaw are building. US corporate debt accumulation now compares with that seen prior to previous default cycles. Equity volatility has seen tw ...

Bank Bail Ins Begin as EU Bank œBailed In In Austria

Bank Bail Ins Begin as EU Bank œBailed In In Austria

Bank bail ins in the EU are here after Austria's financial markets regulator FMA imposed a hefty haircut on creditors in an Austrian bank. Creditors in the bank Heta Asset Resolution will receive less than half of their money back according to the country's financial regulator, the FMA.

euro_drachma

Senior bondholders in the so called œbad bank could expect to receive around ‚¬0.46 for each euro which would be paid from the realisation of assets by 2020, according to the FMA statement. It said that this had been calculated using œvery conservative assumptions.

œThis package of measures also ensures the equal treatment of creditors. Orderly resolution is more advantageous than insolvency proceedings, the FMA said.

Bo ...

Frontrunning: April 1



Italian Bank Stocks are Surging on the Back of Rescue Reports (WSJ)

European Stocks Rise Led by Italian Banks; Emerging Markets Gain (BBG)

Oil price dips on prospects for producers' meeting (Reuters)

U.S. shale oil firms feel credit squeeze as banks grow cautious (Reuters)

U.S. banks' dismal first quarter may spell trouble for 2016 (Reuters)

Miserable Year for Banks: Stocks Suffer as Rates Stay Low (WSJ)

Whipsawed Wall Street Traders Find Bullish Signal in Bad Profits (BBG)

Sales of Short-Term Health Policies Surge (WSJ)

Panama Furor Rumbles Into Week Two as Global Pressure Mounts (BBG)

Daily Mail parent in talks with private equity for Yahoo bid (Reuters)

As Puerto Rico Nears Record Default, Insured Investors Rest Easy (

The Market Might Lose This Fight With the Fed

The Federal Reserve is dovish on rates, but maybe not quite as dovish as investors think.

China's Missed Opportunities to Kill Zombie Companies

A recent flurry of Chinese defaults may just be a list of companies Beijing decided aren't important enough.

Fresh Chinese Bank IPO Turns Sour in a Hurry

Bank of Tianjin, which counts ANZ as a major shareholder, disclosed a disconcerting œrisk incident just days after its IPO.

The Fed: How Trump would change the Fed

Republican presidential front-runner Donald Trump would choose hawks for the Fed: Citi

Earnings Outlook: What to expect from Alcoa's earnings

Alcoa is scheduled to report first-quarter results after Monday's closing bell, with earnings and revenue to show year-over-year declines for the third-straight quarter.

Earnings Summary for Today

Earnings Calendar provided by Investing.com.

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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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