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25May2016 Pre-Market Commentary: Futures Are Up Fractionally, Crude Climbing, Yesterday's Big Rally Is Expected To Continue Today

Written by Gary

US stock future indexes are up fractionally, Dow futures up 0.4% at 17,757, Nasdaq-100 futures up 0.5% at 4,467 and SPY is up 0.5%. The mood is more positive in the markets, crude is rising toward $50 a barrel for the first time in seven months and yesterday's big rally in the West has continued around the globe. Markets are expected to open higher.

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 1.45% while France's CAC 40 is up 1.02% and London's FTSE 100 is up 0.57%.

What Is Moving the Markets

Here are the headlines moving the markets.

Oil nudges $50 a barrel as investors bet on shrinking overhang

LONDON (Reuters) - Oil rose toward $50 a barrel on Wednesday for the first time in seven months, driven by expectations that shrinking supply will help erode any overhang of unwanted crude, particularly after industry data showed a sharp fall in U.S. inventories.

Stock futures track rise in global equities, oil

(Reuters) - U.S. stock index futures were higher on Wednesday, mirroring global equities, as oil prices rose and investors got more comfortable with the prospect of interest rate hike as early as this summer.

Exclusive: Sanofi to unveil challenge to Medivation's board - sources

(Reuters) - France's Sanofi SA is preparing to name candidates it will put forward to replace the entire board of U.S. cancer drug company Medivation Inc as early as Wednesday, according to people familiar with the matter.

HP Enterprise to merge IT services unit with Computer Sciences

(Reuters) - Hewlett Packard Enterprise Co said it would spin off and merge its struggling IT services business with Computer Sciences Corp, allowing the company to focus on its cloud services business and other fast-growing units.

New Whole Foods chain 365 faces tough mission: Cut prices without being 'cheap'

LOS ANGELES (Reuters) - Whole Foods Market Inc unveils its new 365 grocery chain on Wednesday with a bright and airy store that offers lower prices and more technology than the company's namesake shops. To thrive, though, experts say 365 has to beat its many rivals without hijacking customers from Whole Foods itself.

Jeweler Tiffany posts steepest sales drop since financial crisis

(Reuters) - Tiffany & Co reported its steepest drop in quarterly sales since the peak of the global financial crisis, as a strong dollar discouraged tourists from buying its high-end jewelry and eroded revenue from markets outside the United States.

Microsoft retreats in smartphone battle, 1,850 jobs could go

HELSINKI (Reuters) - Microsoft Corp announced more big cuts to its smartphone business on Wednesday, just two years after it bought handset maker Nokia in an ill-fated attempt to take on market leaders Apple and Samsung.

After six years' austerity, Greeks feel no joy from new debt deal

ATHENS (Reuters) - While Greece's government trumpeted a debt relief deal with other euro zone countries on Wednesday as the beginning of the end of its bruising six-year financial crisis, many Greeks remained unconvinced.

Iran-Saudi row threatens any OPEC deal, puts role in question

LONDON/DUBAI (Reuters) - OPEC's thorniest dilemma of the past year - at least from a purely oil standpoint - is about to disappear.

Emerging Markets Turmoil Signal Pain Ahead For US Stocks

Follow EM or not? That is the big question that BofAML asks as once again Emerging Market stocks are decoupling (lower) from an exuberant US equity market.

After a big rally in risk assets today the S&P 500 is up and credit tighter (CDX IG)/ higher (CDX HY) relative to the levels on May 16th - the day before speeches by Fed officials and later the FOMC minutes re-priced the probably of a June rate hike materially higher. After today's strong new home sales report and a decline in Brexit risks (GBP up 1.0%), the implied probability of a June rate hike increased further to 34%, the dollar rallied (DXY dollar index is up 0.4%), 5s30s Treasury curve flattened by 1.5bps and financials outperformed (up 1.55% vs. 1.37% increase for the S&P 500).

However, we are seeing the same decoupling between US and EM stocks that that turned out a leading indicator for the decline in US risk assets in August last year and again in December/January this year...

As we noted last night, we suspect this is China-driven volatility rippling through from EM equities and FX inevitably spreading to US equity markets through various carry trades.

So the question is - will the Yuan turmoil ripple through markets enough to s ...

Just Stop It!

Submitted by David Stockman via Contra Corner blog,

The posse of fools in the Eccles Building is so petrified of a stock market hissy fit that it has more or less created a Wall Street doomsday machine.

After trolling on the zero bound for 89 straight months now, the FOMC falsely believes that it has levitated the U.S. economy to the cusp of full-employment via massive liquidity and wealth effects pumping.

As a consequence, it refuses to let the market have breathing room for even a modest correction, insisting that just a few more months of this monetary lunacy will permit a return to some semblance of normalcy.

But it never gets there. The truth is, this so-called recovery cycle is now visibly dying of old age and being crushed by the headwinds of global deflation. Rather than acknowledge that the jig is up, our feckless monetary politburo just equivocates, procrastinates and prevaricates about the monumental policy failure it has superintended.

So the casino punters just won't go home. They hang around against all odds, failing to liquidate and thereby enabling the robo machines to engage in endless and pointless cycling between chart points. As shown in the graph below, this has been going on for nearly 600 days now.

But of late the churning has been occurring in an increasingly narrow channel. Accordingly, the spring is being coiled ever more tightly.

When this 83-month long simulacrum of a economic recovery finally rolls over into recession someday soon, therefore, the implosion will be thunderous. The robo-machines will chase the punters out the casino exits in an epic stampede of selling.

Egypt's Economy, More Trouble Ahead

Authored by Steve H. Hanke of the Johns Hopkins University. Follow him on Twitter @Steve_Hanke.

Early last Thursday, EgyptAir 804 disappeared over the Mediterranean, becoming the second civilian airliner in less than seven months to go down while flying either to or from Egypt. Both this incident and Metrojet 9268's disaster of last October were terrorist acts. Tourism to Egypt, a major earner of foreign exchange, has already been flat for years and will suffer even further from these airline disasters.

The World Travel & Tourism Council (WTTC) provides figures on the total contribution of travel and tourism in Egyptian Pounds. If we convert this to U.S. dollars (USD) at the black market (read: free market) exchange rate, the results are not pretty.

Egypt's tourism problem is only one of many facing President Sisi. For starters, dwindling foreign reserves, a half-baked currency, and elevated inflation will likely prove to be President Sisi's Achilles' heel. The Central Bank of Egypt (CBE) is currently reporting an annual inflation rate of 10.3 percent, but that is far from the truth. Utilizing changes in black market exchange rate data and applying the Purchasing Power Parity theory, I calculate the inflation rate to be over four times higher than what the CBE reports, hovering between 40 and 50 percent for the past several months. Egypt is lying to the world about the strength of the Pound and the severity of its inflation problems (see the charts below). And lies are nothing more than a form of propaganda ...

The Libor Mess: How It Will Hit Bank Profits

The threat of big settlements in Libor litigation may weigh on the earnings of J.P. Morgan, Citigroup and Bank of America.

UniCredit Needs to Solve its Crisis of Confidence

Italian bank ousts Chief Executive Federico Ghizzoni but faces a struggle to plug its capital shortage.

Virtual-Reality Dreams Won't Erase HTC's Problems

Shares of the once-mighty Taiwanese phone maker HTC have been on a tear, but hopes for virtual reality to revive the company seem misplaced.

Ending Too Big To Fail: Lessons From Continental Illinois

from the Atlanta Fed

-- this post authored by Larry D. Wall

Too big to fail has been an important public policy issue since the 1984 bailout of Continental Illinois National Bank and Trust Company and its parent holding company, Continental Illinois Corp.[1] Congress tried to end too big to fail (TBTF) in 1991 with its passage of the Federal Deposit Insurance Corporation Improvement Act (FDICIA).[2] TBTF nevertheless persisted during the financial crisis so Congress again tried to end TBTF with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA) in 2010, which provided the supervisors with numerous additional powers.

Need to Know: What it will take to get the S&P 500 above 2,100 again

Technical signals have been pointing to trouble for the S&P 500, but a turn of fortunes may be in the cards if gains keep up Wednesday. Plus, our chart of the day is on a commodity set to benefit from Tesla's popularity

Economic Report: U.S. goods deficit shows higher trade gap in April

An early look at U.S. trade patterns in April suggest the nation's trade deficit rose about 3.4%.

The Wall Street Journal: House passes new rules on chemical safety

Bipartisan support comes after states and retailers began to address consumer concerns.

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