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01Jul2016 Pre-Market Commentary: US Futures Flat And Unchanged, US Dollar Slipping, Investors Taking Profits Before Long July 4th Weekend

Written by Gary

US stock future indexes are flat (SPY -0.03%) as investors looked ahead to a long weekend after a tumultuous week. Asia markets traded higher on the first day of the new quarter and twin surveys from China also showed its factory sector still in a rut. Short-term indicators are tipping towards the bears especially if the Spooze can't top the 2100 level.


Here is the current market situation from CNN Money

European markets are broadly higher today with shares in London leading the region. The FTSE 100 is up 1.00% while France's CAC 40 is up 0.93% and Germany's DAX is up 0.87%.

What Is Moving the Markets

Here are the headlines moving the markets.

Stock futures little changed as investors take a breather

(Reuters) - U.S. stock index futures were little changed on Friday as investors looked ahead to a long weekend after a tumultuous week.

Bond yields sink as central banks head for easier policy

LONDON (Reuters) - The prospect of further cuts in interest rates and bond-buying to support a fractured global economy kept stock markets on the up in Europe and Asia on Friday, and drove U.S. and European government bond yields to their lowest in years.

Hershey rejects $23 billion Mondelez takeover offer

(Reuters) - Hershey Co said on Thursday it had rejected a $23 billion takeover bid by Mondelez International Inc that would seek to expand the latter's limited U.S. footprint and create the world's largest confectioner.

Exclusive: BP-Exxon impasse blocks renewal of giant Azeri oil deal - sources

LONDON (Reuters) - U.S. oil major Exxon Mobil and Britain's BP are at loggerheads over a giant oil production deal with Azerbaijan, blocking renewal of what was once called "the contract of the century", three high-level industry sources told Reuters.

Oracle ordered to pay HP $3 billion in Itanium case

SAN FRANCISCO (Reuters) - A California jury ordered Oracle Corp to pay Hewlett-Packard Enterprise Co $3 billion in damages in a case over HP's Itanium servers, an Oracle spokeswoman said on Thursday.

U.S. shale oil's Achilles heel shows signs of mending

HOUSTON (Reuters) - Since the beginning of the U.S. fracking revolution, oil producers have struggled with a vexing problem: after an initial burst, crude output from new shale wells falls much faster than from conventional wells.

European factories bounce as Asia struggles, but Brexit poses threats

LONDON/SYDNEY (Reuters) - Factories across Europe enjoyed a buoyant month in June but that growth could be under threat after Britons voted to leave the European Union last week, surveys conducted almost entirely before the historic referendum showed.

JPMorgan wins approval to open three new branches in India

MUMBAI (Reuters) - JPMorgan Chase & Co said on Friday it has won approval from India's central bank to open three more branches in the country even as most foreign banks are scaling back their operations in India.

Visa, MasterCard $7.25 billion settlement with retailers is thrown out

NEW YORK (Reuters) - A federal appeals court on Thursday threw out a $7.25 billion antitrust settlement reached by Visa Inc and MasterCard Inc with millions of retailers that accused the card networks of improperly fixing credit and debit card fees.

Stocks Near All Time High Despite 16 Straight Week Of US Mutual Fund Outflows, Historic "Redemption Day"

The new normal sure is strange: with the S&P flirting with all time highs, not to mention staging another dramatic V-shaped comeback from the post-Brexit crash which saw S&P futures trade limit down a week ago, investors keep on selling. According to Lipper data, U.S.-based stock mutual funds, which are held by retail mom-and-pop investors, posted cash withdrawals of $2.8 billion over the weekly period ended Wednesday; this was the 16th consecutive week of outflows.

All stock funds, including ETFs, posted an even wider $6.8 billion outflow last week to mark their biggest withdrawals since early May, while taxable bond funds posted $2.6 billion in outflows after raking in $2.5 billion the prior week. The perpetual question of who is buying remains especially after BofA reported earlier this week that its "smart money" clients sold US stocks for the third consecutive week and in 21 of the past 22 weeks, led by institutional clients' sales.

The money went into low-risk money market funds which attracted $25.1 billion in new cash in the week ended June 29 after Britain voted to leave the European Union data from Thomson Reuters' Lipper service showed on Thursday. In addition commodities and precious metals funds, as well as funds that specialize in safe-haven U.S. Treasuries, attracted their biggest inflows since February.

Lipper research analyst Pat Keon said U.S.-domiciled mutual funds took in $18.9 billion in net new money for the fund-flows week ended Wednesday, but the large net inflow number is almost entirely attributable to money market funds "as investors put money on the sidelines to wait out the uncertainty caused by the Brexit leave vote." Municipal bond funds, also considered low-risk, contributed to the overall inflows with their 39th straight week of gains, at $649 million, Keon said. Taxable bond fun ...

Puerto Rico Defaults On $2 Billion In Debt Payments

As expected, Puerto Rico will default on about $2 billion in debt payments Friday, including $780 million in constitutionally-backed general obligation bonds, as governor Alejandro Garcia Padilla has issued an executive order authorizing the suspension of payments. In addition, Garcia Padilla also declared states of emergency at the island's biggest public pension - the Commonwealth's Employee Retirement System - which is more than 99% underfunded, as well as the University of Puerto Rico and other agencies Reuters reports. The default will mark the first time a US territory has failed to pay on its general obligation bonds.

"Under these circumstances, these executive orders protect the limited resources available to the agencies listed in these orders and prevents that these can be seized by creditors, leaving Puerto Ricans without basic services," Garcia Padilla's administration said in a statement.

The suspension of payments comes just as the Senate rushed a bill to President Obama that was signed on Thursday, and the bill will now allow Puerto Rico to access a bankruptcy-like debt restructuring process for its roughly $70 billion in debt. As Bloomberg explains, the next phase will now be for the US appointed control board to begin the restructuring negotiation process. The step allows Garcia Padilla to use cash that would otherwise go to investors to avert cuts to schools, policing and health care that Garcia Padilla sa ...

Frontrunning: July 1



Bond yields sink as central banks head for easier policy (Reuters)

PM hopeful Gove says UK leader must believe in Brexit (AP)

U.K. Can't Bank on EU's Rationality in Talks (WSJ)

Gove Makes Case for U.K. Premiership After Johnson Betrayal (BBG)

ECB not debating abandoning capital key in QE buys (Reuters)

World Biggest Pension Fund Seen Losing $43 Billion Last Quarter (BBG)

European Cities Battle for London's Finance Crown After Brexit Vote (WSJ)

PBOC injects liquidity via short-term tools in June, but less than May (Reuters)

Clinton Spending Roughly $500,000 a Day on TV Ads, Trump Zero (BBG)

Puerto Rico Defaults on Debt as Obama Approves Restructuring (BBG)

After an Attack, Germans Question Efforts to Dissuade Young Islamists (

Austrian Court Orders Rerun Of Presidential Election After Finding "Widespread" Voting Fraud

In yet another slap in the face for an already reeling Europe, moments ago Austria's Constitutional Court ruled on Friday that the presidential runoff election must be held again, handing the Freedom Party's narrowly defeated candidate another chance to become the first right-wing head of state in the European Union. Norbert Hofer of the anti-immigration FPO lost the May 22 vote to former Greens leader Alexander Van der Bellen by less than one percentage point, or around 31,000 votes, all due to mailed-in ballots.

This prompted a loud outcry of allegations that the vote had been rigged. As it turns out the allegations were spot on.


Austrian Freedom Party presidential candidate Norbert Hofer

As a reminder, one month ago - in the aftermath of the Freedom Party candidate's loss by a negligible margin in the Austrian presidential runoff election - five voting districts were being investigated over postal vote irregularities in the close-run presidential election. Allegations of fraud arose from the far-right Freedom party of defeated candidate Norbert Hofer, after the Green candidate Alexander Van der Bellen just scrapped ahead with 31,000 votes when the postal ballot was counted. As a result, the anti-immigrant Freedom Party had challenged the election result earlier this month, alleging "catastrophic" violations of election law, especially in how mail-in ballots were processed.

Many were sceptical that anything of substance would be found, and yet that is precisely what happened: as the

Mondelez and Hershey: The Hunter Could Be the Prey

Mondelez's bid for Hershey could have the effect of putting it in play.

Why Tesco Won't Get a 'Brexit' Boost

When the pound plunged in 2008, U.K. grocers were a haven in the storm. Don't expect a repeat performance now.

Lions Gate's Latest Deal May Be Starz-Crossed

Lions Gate's deal for Starz comes with financial benefits, but it may not solve either company's strategic challenges.

The Wall Street Journal: Top ECB economist says Brexit could slow eurozone economy

ECB top economist Peter Praet says there are "elevated risks" to the eurozone economic outlook in the wake of the U.K.'s Brexit vote.

The Wall Street Journal: Chipotle executive indicted in New York cocaine bust

Efforts to regain customer trust at Chipotle Mexican Grill Inc. could suffer a setback as the restaurant chain placed its top marketing executive on administrative leave after Manhattan prosecutors unveiled an indictment involving the executive and a cocaine drug ring.

The Tell: British pound could hit history-making dollar parity by end of 2016

Investors should prepare for the pound to hit parity with the dollar by early 2017, said Shaun Osborne, chief currency strategist at Scotiabank.

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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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