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26Aug2016 Pre-Market Commentary: US Futures Fractionally Down, US Dollar Falling, Gold Rising, WTI Crude Testing The 50 Handle Before Yellen's Speech

Written by Gary

US stock future indexes edged lower this morning (SPY -0.1%), the dollar edged down as investors turned cautious before a keynote speech by Fed Chair Ms. Yellen regarding U.S. interest rates. GDP readings earlier, showed the U.S. economy grew at an annualized pace of 1.1%.


Here is the current market situation from CNN Money

What Is Moving the Markets

Here are the headlines moving the markets.

Global equities set 2-week low before Yellen speech, dollar dips

LONDON (Reuters) - Global shares slipped to a two-week low and the dollar edged down on Friday as investors turned cautious before a keynote speech by Federal Reserve Chair Janet Yellen that could map out a clearer path for U.S. interest rates.

Schooled in the short run, central banks struggle with a long-term role

JACKSON HOLE, Wyo. (Reuters) - Schooled in economic thinking that confines monetary policy to the short run, central bankers gathering in Jackson Hole, Wyoming, are grappling with a singular change: whether they can take over as guardians of long-term growth with programs that may stay in place and influence markets for decades to come.

AB InBev expects to cut three percent of jobs after SABMiller takeover

BRUSSELS (Reuters) - Anheuser-Busch InBev expects to cut some 3 percent of its combined workforce after it has acquired rival SABMiller , according to takeover documents published on Friday.

Bullard agnostic on timing of Fed hike; cites tech stocks: CNBC

(Reuters) - The Federal Reserve could hike U.S. interest rates this year, St. Louis Fed President James Bullard said on Friday, noting the central bank would have to watch out for risky financial bubbles emerging in technology stocks and elsewhere in the market.

VW says sees limited impact of production stoppages on staff hours

BERLIN (Reuters) - Volkswagen said the impact of production stoppages on staff hours caused by a dispute with two parts suppliers has been significantly reduced thanks to internal remedies.

Lotte vice chairman found dead amid probe; suicide suspected

SEOUL (Reuters) - One of the top executives at South Korea's Lotte Group was found dead on Friday, a suspected suicide, hours before he was to be questioned by prosecutors conducting a criminal probe into the country's fifth-largest conglomerate.

Icahn explored selling Herbalife stake to group that included Ackman: WSJ

(Reuters) - Billionaire investor Carl Icahn was lately in talks to sell his stake in nutritional supplement maker Herbalife Ltd to a group that included hedge fund manager Bill Ackman, the Wall Street Journal reported.

Foreign seed firms team up to oppose new India GM crop rules

NEW DELHI (Reuters) - Major international seed companies formed an alliance on Friday to oppose a proposal by India that would force them to share their genetically modified crop technology with local players.

Monte dei Paschi chairman says talks of CEO replacement are groundless

MILAN (Reuters) - The chief executive of Banca Monte dei Paschi di Siena Fabrizio Viola has the full backing of the lender's chairman and reports he will be replaced are groundless, the bank's chairman said on Friday.

76-Year-Old Veteran Kills Himself In VA Parking Lot After Being Denied Treatment

Submitted by Carey Wedler via TheAntiMedia.org,

A 76-year-old military veteran killed himself outside a Long Island Veteran Affairs facility Sunday after being denied treatment. He was reportedly seeking help for mental health issues at the Northport Veterans Affairs Medical Center but was turned away, an unfortunately common experience plaguing veterans seeking healthcare in recent years.

According to the New York Times, two people connected to the hospital spoke about the incident on the condition of anonymity. They explained "he had been frustrated that he was unable to see an emergency-room physician for reasons related to his mental health," the Times reported.

"He went to the E.R. and was denied service," one anonymous source said. "And then he went to his car and shot himself."

Peter A. Kaisen of Islip, New York, committed suicide in the parking lot of the Northport facility, where he had been a patient. He was in the parking lot outside Building 92, the facility's nursing home, when he shot himself.

One of the Times' anonymous sources questioned why Kaisen had not been referred to Building 64, the mental health center at Northport.

"The staff member said that while there was normally no psychologist at the ready in the E.R., one was always on call, and that the mental health building was open '24/7,'" the Times reported.

< ...

"Will Yellen Shock Today?"

That is the question everyone is asking today ahead of Yellen's 10am ET speech which will be titled "The Federal Reserve's Monetary Policy Toolkit."

The odds are low, considering that 85% of Wall Street respondents in a recent Citi survey expect a "dovish hike signal." To be sure, a BofA's Michael Hartnett noted earlier this week, "only once in the past 10 years has Jackson Hole been a big market mover" namely in 2010 when Bernanke signaled QE2. He does concede that Jackson Hole in 2016 has volatility potential given:

Wall Street's dependence on the Liquidity Supernova: annualized return from global government bonds YTD is 20%, the second highest return in 30 years; current bull market in US stocks (2723 days) is 2nd longest ever; at or close to all-time highs: global government bonds, IG bonds, HY bonds, EM debt, REITs, US stocks, staples, discretionary, industrials, utilities.

Investor excess positioning in assets tied to "zero-rate" expectations

Recent Fed hints (in particular by Brainard & Bullard) that they are capitulating on their long-held forecasts of higher growth, inflation & interest rates...forecasts which continue to be stubbornly ignored by the market (see contrast between Fed & market dots)


Expectations for a dovish Fed are coinciding with macro strength in the US (most obviously in housing & consumer spending) as well as highest level of wage inflation since Jan'10 (Chart 4). If average hourly earnings push above 3% YoY, it will be hard for bond yields to remain so low. But the biggest catalyst for higher yields would be stronger economic data in Europe and Japan, reversing the DM demand for Treasuries.

Po ...

Buy Gold's August Dip? Gold's Monthly Sweet Spot In September as Chaotic Election Looms

Gold bullion has had its biggest gains in September over the past 20 years. Seasonally gold is entering the sweet spot with the Autumn being gold's best season and with September being gold's best month in the last 20 years.


Gold's Monthly Performance - 1994-2014 (Bloomberg)

Given the backdrop of one of the most uncertain macroeconomic, systemic, geopolitical and monetary outlooks both the U.S. and the world have ever seen, we are likely to see gold do well in its traditionally seasonal strong period. Possibly, the most vitriolic, hateful and divisive election in U.S. history is set to be witnessed and this will likely lead to considerable volatility in markets and should see the dollar come under pressure. The election date is Tuesday, November 8, 2016.

The spring and summer months frequently see seasonal weakness, since gold became a traded market in 1971. Gold bullion often sees periods of weakness in the summer doldrum months of May, June and July.

Frontrunning: August 26



Global equities set 2-week low before Yellen speech, dollar dips (BBG)

Lochte signs new endorsement deal, legal woes persist in Brazil (Reuters)

Blackstone Unleashes Cash Hoard in Texas Shale Oil Land Grab (BBG)

China to prosecute former statistics bureau chief for corruption (Reuters)

Turkey fires on U.S.-backed Kurdish militia in Syria offensive (Reuters)

U.S.-Backed Groups at Odds in Syria (WSJ)

EU Hopes Helping Workers Will Blunt Populism (WSJ)

Suicide truck bomb blamed on PKK kills 11 police in Turkey (Reuters)

Lotte vice chairman found dead amid probe; suicide suspected (Reuters)

Donald Trump's Mixed Signals on Immigration Roil Campaign (WSJ)

Judge orders search of new Clinton emails for release by September 13 (Reuters)

Facebook 'likes' illustrate the personal differences between Republicans and Democrats (WSJ)

Millions From ...

Why Citron Case Leaves Hong Kong Investors Squeezed

Hong Kong's legal action against a short seller's research will have a chilling effect for independent analysis, left and right.

Why Craft Brewing Slowdown Won't Benefit Big Beer

The upscale drift of beverage markets in the developed world cuts the wrong way for big U.S. brewers.

What to Learn From the ECB's Great European Corporate Bond Squeeze

The European corporate bond market is heading into ever more extraordinary territory.

Darrell Delamaide's Political Capital: Hillary Clinton has the black vote in the bag, right?

Democratic nominee Hillary Clinton is widely considered to have the African-American vote in the bag, but she shouldn't take it for granted, writes Darrell Delamaide.

Economic Report: U.S. trade gap narrows in July, advance report shows

Advance trade report shows exports rose slightly while imports declined.

Need to Know: Buy these stocks and pity the fools fighting the Fed

It's finally Janet Yellen day. If you've been getting in a tizzy about scarily quiet markets, she just might put you out of your misery later this Friday.

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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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