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18May2016 Pre-Market Commentary: US Futures Fractionally Down As Investors Await Fed Minutes, Crude Taking A Breather Off Recent Highs And US Dollar Stronger

Written by Gary

US stock future indexes are fractionally lower (SPY -0.2%) as Treasury yields and the dollar have ticked up as traders position themselves ahead of this afternoon's closely watched FOMC minutes. Goldman Sachs is at it again, downgrading its outlook on equities to "neutral" over the next 12 months, saying there's no particular reason to own them. Our short-term indicators are moderately bearish.


Here is the current market situation from CNN Money

European markets are lower today with shares in London off the most. The FTSE 100 is down 0.61% while France's CAC 40 is off 0.33% and Germany's DAX is lower by 0.25%.

What Is Moving the Markets

Here are the headlines moving the markets.

Futures little changed as investors await Fed minutes

(Reuters) - U.S. stock index futures were little changed on Wednesday as investors await the release of minutes from the Federal Reserve's April meeting, which could give clues on the path of rate hikes.

Suzuki says it used wrong mileage tests for Japan models; shares slide

TOKYO (Reuters) - Suzuki Motor Corp said it had used improper fuel economy tests for its cars in Japan but that proper testing subsequently had shown the mileage data did not need amending, in a widening of a scandal that has already engulfed Mitsubishi Motors .

Target sales miss estimates; shares sink

CHICAGO (Reuters) - Target Corp on Wednesday reported a lower-than-expected increase in sales at established stores as consumers spent more on big-ticket purchases like homes and cars than on discretionary items like apparel, a major source of revenue for department stores.

South Korea's Hotel Lotte plans $4.9 billion IPO, year's largest: sources

SEOUL (Reuters) - South Korea's Hotel Lotte Co Ltd [HTLOT.UL] plans a share sale worth up to 5.7 trillion won ($4.85 billion) next month, sources said on Wednesday, in what would be the world's biggest initial public offering since late 2015.

Microsoft to sell feature phone business to Foxconn subsidiary, HMD Global

(Reuters) - Microsoft Corp said it is selling its entry-level feature phone assets to FIH Mobile Ltd and HMD Global Oy for $350 million.

Oil prices ease despite supply disruptions

LONDON (Reuters) - Brent crude prices eased on Wednesday, after hitting 2016 highs in the previous session, as the impact of unplanned supply disruptions in Nigeria and Canada was tempered by rising supplies elsewhere.

Volkswagen expresses frustration over pace of scandal inquiry

HAMBURG/LONDON (Reuters) - Volkswagen has expressed frustration about the slow pace of investigations into its emissions scandal, responding to demands from an activist shareholder for rapid reforms at the German carmaker.

Lowe's sales beat estimates as housing market strengthens

(Reuters) - Home improvement chain Lowe's Cos Inc followed larger rival Home Depot Inc in reporting better-than-expected quarterly sales as strength in the U.S. housing market and favorable weather led to strong demand for building and home renovation products.

HK regulator says Alibaba broke takeover rules due to 'special deal'

HONG KONG (Reuters) - Hong Kong's securities regulator said on Wednesday that Chinese e-commerce giant Alibaba Group Holding Ltd breached takeover rules in the purchase of a healthcare firm in 2014 because it also bought a company owned by the brother of the healthcare firm's vice chairman at "favourable terms".

16 Months & Counting...

Authored by Michael Lebowitz via 720Global.com,

In his 2016 State of the Union Address, President Barack Obama accused those claiming the American economy is in decline of "peddling fiction".

Few economic prognosticators have actually stated that the U.S. economy is in decline. However, many, including ourselves, have pointed out that economic growth has been declining for years and the key drivers of future growth - productivity and demographics - are quickly becoming economic headwinds. All the while, the nation's ability to enhance economic growth by increasing an already burgeoning debt load is greatly limited.

We write this article to warn our clients and readers that recent Wall Street economic forecasts should be taken with a grain of salt. With GDP averaging below 1% for the last six months, it will not take much of an additional slowdown to put the U.S. in recession. Relying on overly optimistic economic forecasts could easily cause investors to miss signs of a recession and, as laid out in "Dear Prudence", miss an opportunity to sell assets before a major drawdown. After reading this article, you may have a new appreciation for who is "peddling fiction".

Citi Surprise Index Update

In "Eliminating Surprises Using Citigroup's Surprise Index" we described the uniqueness of the Citi Surprise Index (CSI) as a gauge of economic forecasting. In the article we advised that investors should focus on the magnitude and duration of forecasting errors to gain ...

Target Crashes To 2016 Lows After Missing Top Line, Slashing Guidance

How is this possible? The government just told us that retail sales jumped the most in years?

Target is out with its earnings despite beating bottom line, it missed top-line and took an ax to Q2 guidance...


*TARGET 1Q ADJ. EPS $1.29, EST. $1.19 (Good)


*TARGET 1Q REV. $16.2B, EST. $16.3B (Bad)


*TARGET SEES 2Q ADJ. EPS $1.00-$1.20, EST. $1.36 (Ugly)

In second quarter 2016, Target expects comparable sales of flat to down two percent, and Adjusted EPS of $1.00 to $1.20. Second quarter GAAP EPS from continuing operations will include approximately $0.17 of expense related to early debt retirement losses, and also may include the impact of certain additional discrete items which will be excluded in calculating Adjusted EPS. In the past, these items have included data breach expenses, restructuring costs and certain other items that are discretely managed. Beyond losses related to the early debt retirement, Target is not currently aware of any other material discrete items.

And the result - Target is down almost 10% in the pre-market...

Makes you wonder just what fiction the government is peddling?

The government data was ...

China's Housing Bubble Is So Big, Goldman Will "Need A Bigger Chart"

One of the stated reasons for the Shanghai Composite's 1.3% drop (and it would have been worse had the PPT not launched its infamous last minute buying blitz) was also the most amusing one: the stock market bubble is in danger of popping even more as a result of a housing bubble that is now raging at a pace not seen since the last Chinese housing bubble, and thus threatens to soak up even more cash from China's chronic gamblers-cum-speculators.

So just how high of a housing number did the NBS report that spooked stocks so much? Well, as Goldman summarizes, housing prices in the primary market increased 1.1% month-over-month after seasonal adjustment in April, higher than the growth rate in March. Out of 70 cities monitored by China's National Bureau of Statistics (NBS), 63 saw housing prices increase from the previous month. On a year-over-year, population-weighted basis, housing prices in the 70 cities were up 6.9% (vs. 5.5% yoy in March). According to an alterantive set of calculations by MarketNews, aggregate home prices rose 12.4% Y/Y in April after rising 10.4% in March. Since both numbers are ridiculously high, we'll just leave them at that.

However, it was not the overall market bubble that is troubling, but that focused on the most desired, top - or Tier 1 - cities. Here, April price growth was 2.6% month-over-month after seasonal adjustment, vs. 3.0% in March.

But the real shocker was that on a year-over-year price growth in tier-1 cities continue to rise however, reaching 28.3% vs. 26.0% yoy in March. In fact it is so bad that Goldman, which tried to show the surge in the second chart below, clearly needs a bigger chart. Incidentally, total property sales in tier-1 cities accounted for around 5% of nationwide property sales in volume terms, and around 15% in value terms (2015 data).

It wasn't just the top: average property prices also increased in lower tier cities: In tier-2 citie ...

Frontrunning: May 18



Stocks sag as U.S. rate rise expectations revive (Reuters)

Clinton, Sanders hit final stretch of nominating contest (Reuters)

Bernie Sanders Wins in Oregon, But He Needed Kentucky, Too (NBC)

Clinton less than 100 delegates from nomination (The Hill)

Trump needs 66 delegates to officially clinch nomination (The Hill)

Japan GDP Rebound Not Enough to Stave Off Stimulus (WSJ)

Japan Dodges Recession Thanks to Consumers, Public Spending (BBG)

Austrian State Dodges Default With $12.4 Billion Debt Deal (BBG)

Another Year of Anger for Deutsche Bank's Investors (BBG)

Bank of America Misled Trading Partners, Lawsuit Alleges (WSJ)

Mitsubishi Motors president Tetsuro Aikawa to step down over fuel-cheating scandal (

Japan GDP Rebound Not Enough to Stave Off Stimulus

Japan's underlying economic trend remains too choppy for the government to sit idly by.

The Rate Debate: Inflation Says Go, Markets Say Stop

Inflation has firmed to the point that the Federal Reserve can be more comfortable about raising rates again. But investors aren't there yet.

Why Midea Is Cuckoo for Kuka's Robots

Chinese appliance maker Midea wants German robot-maker Kuka to automate its production. Robots, however, don't come cheap.

April 2016 Adobe Digital Price Index Shows Widespread Deflation

from Adobe

Consumer goods prices shows month-over-month (MoM) deflation between 0.2 and 2.4 percent for all categories currently being tracked with the exception of hotel prices, which increased by 1.6 percent. Between March 2015 and March 2016 prices for TVs, computers, flights, appliances, toys, furniture, bedding and sporting goods dropped between 2.2 and 19.8 percent.

International Evidence On The Use And Effectiveness Of Macroprudential Policies

from Liberty Street Economics

-- this post authored by Ozge Akinci

In recent years, policymakers in advanced and emerging economies have employed a variety of macroprudential policy tools - targeted rules or requirements that enhance the stability of the financial system as a whole by addressing the interconnectedness of individual financial institutions and their common exposure to economic risk factors. To examine the foreign experience with these tools, we constructed a novel macroprudential policy (MAPP) index.

Iran's oil exports are set to surge in May,

climbing nearly 60% from a year ago, with European shipments recovering to about half of pre-sanction levels, according to Reuters. This shows that Tehran is regaining market share at a faster pace than analysts had projected as it battles with Saudi Arabia for customers by lowering its prices. April loadings at 2.3M barrels per day were around 15% higher than the International Energy Agency estimated earlier this month.

Market Snapshot: Wall Street stocks in holding pattern ahead of Fed minutes

U.S. stock futures on Wednesday moved lower, putting stocks on track to add to Tuesday's drop, as investors avoided big bets ahead of a release that could hint at when the Federal Reserve's next interest-rate hike might hit.

'Damn, Daniel': Savvy marketers stay on top of online trends to capitalize on memes

Give a couple of high school kids a smartphone and some free time and they just might turn out something that's fresh, silly and a magnet for cold, hard cash.

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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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