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16Sep2016 Pre-Market Commentary: Wall Street Points Again To A Lower Opening, Crude Prices And Gold Slipping, US Dollar Rising, Investors Looking Towards A Volatile Trading Session

Written by Gary

US stock future indexes are lower this morning (SPY - 0.3%) after the Labor Department reports prices at the consumer level increased 0.2% in August, coming in higher than expectations for a rise of 0.1%. Excluding the volatile food and energy components, prices were 0.3% higher, compared to expectations for a 0.2% gain


Here is the current market situation from CNN Money

European markets are mixed. The FTSE 100 is higher by 0.47%, while the CAC 40 is leading the DAX lower. They are down 0.85% and 0.79% respectively.

The blue-chip Dow futures are down - 0.4%, the S&P 500 futures have fallen - 0.4%, while the tech-heavy Nasdaq 100 futures retreated - 0.3%.

Meanwhile, oil prices have continued to move lower (- 1.7%) after the Organization of the Petroleum Exporting Countries said on Monday that crude output from rival producers is stronger than expected and will result in a bigger supply glut than previously believed this year and next.

The first column is what was reported this morning. The second column is what analysts had forecast and the third column is the previous report. Full calendar HERE.

What Is Moving the Markets

Here are the headlines moving the markets.

Rising rents, healthcare costs boost U.S. consumer prices

WASHINGTON, (Reuters) - U.S. consumer prices increased more than expected in August as rising rents and healthcare costs offset a drop in gasoline prices, pointing to a steady build-up of inflation that could allow the Federal

Deutsche Bank to fight $14 billion demand from U.S. authorities

FRANKFURT (Reuters) - Deutsche Bank said it would fight a $14 billion demand from the U.S. Department of Justice to settle claims it missold mortgage-backed securities, a shock bill that raises questions about the future of Germany's largest lender.

Wells Fargo faces scrutiny over lack of sales scandal disclosure

NEW YORK (Reuters) - A phantom account scandal at Wells Fargo & Co has put the U.S. bank's disclosure policies under a harsh spotlight.

Deutsche Bank fine compounds miserable week for Europe

LONDON (Reuters) - A monster fine for Deutsche Bank compounded a miserable week for European stocks on Friday, while bonds bounced as weak U.S. retail sales figures triggered a pullback in Federal Reserve rate hike expectations.

Fans cheer, but Asia gives iPhone 7 subdued welcome

SHANGHAI/SYDNEY (Reuters) - Apple Inc fans from Sydney to Shanghai, the first customers worldwide to snap the new iPhone 7 off the shelves, cheered as they left stores on Friday brandishing their purchases, flanked by applauding sales staff.

Exclusive: GE wins $1.9 billion order from UK's Hinkley Point nuclear plant

NEW YORK (Reuters) - General Electric Co said it will receive $1.9 billion for a contract to supply steam turbines, generators and other equipment to the Hinkley Point C project, the United Kingdom's first new nuclear power plant in decades.

Samsung to replace or refund one million U.S. Galaxy Note 7 phones

(Reuters) - Samsung Electronics Co Ltd formally recalled 1 million Galaxy Note 7 smartphones sold in the United States, replacing or refunding the flagship phones, whose susceptibility to catching fire has damaged the image of the Korean powerhouse.

New York investigating Exxon's accounting practices: WSJ

A more than 60 percent plunge in oil prices since mid-2014 has forced oil producers worldwide to write down the value of their assets.

Cost-cutting deal with unions key to VW's recovery

BERLIN (Reuters) - Volkswagen's ability to agree a big cost-cutting plan with its powerful labor unions in the coming weeks could determine whether the German carmaker's shares make a full recovery from its emissions scandal.

Here Are The "Lines Of People" Waiting For The New iPhone 7

After several spurious reports of substantial preorder spikes for the iPhone 7 by the likes of T-Mobile - if not so much Verizon - AAPL stock enjoyed the biggest weekly surge in years. However, judging by the "lines of people" waiting for the new gadget as it officially goes on sale in retail outlets, said surge in the stock may have been premature, and merely the latest marketing gimmick that has made a "scarcity" factory into a sublime art form.

Verizon in Grand Central $AAPL pic.twitter.com/XOepjHQGY9

— Walt Piecyk (@WaltBTIG) September 16, 2016

T-Mobile 46/Lex $AAPL pic.twitter.com/9kFLPfoy1G

— Walt Piecyk (@WaltBTIG) September 16, 2016

AT&T on Madison $AAPL pic.twitter.com/pDSz6XnfKp

— Walt Piecyk (@WaltBTIG) September 16, 2016

T-Mobile 6th Ave. $AAPL pic.twitter.com/FLVkZvPtwm< ...

Mother Of All Systemic Threats Is Italy, EU Bail-Ins and World War? Happy Friday !

EU Bail In Rules Ignored By Italy - Mother Of All Systemic Threats and World War?

by George Friedman for Mauldin Economics via Forbes

Italy has been in a crisis for at least eight months, though mainstream media did not recognize it until July. This crisis has nothing to do with Brexit, although opponents of Brexit will claim it does. Even if Britain had voted to stay in the EU, the Italian crisis would still have been gathering speed.

Bail In EU

The high level of non-performing loans (NPLs) has been a problem since before Brexit. It is clear that there is nothing in the Italian economy that can reduce them. Only a dramatic improvement in the economy would make it possible to repay these loans. And Europe's economy cannot improve drastically enough to help. We have been in crisis for quite a while.

Frontrunning: September 16



Deutsche Bank to fight $14 billion demand from U.S. authorities (Reuters)

Exxon's Accounting Practices Are Investigated (WSJ)

European leaders seek elusive 'road map' after Brexit shock (Reuters)

Johnson Said to Tell Italy Exit Talks Likely to Start Early 2017 (BBG)

Brexit Bulletin: Merkel Sings the Bratislava Blues (BBG)

Atlante manager's CEO says Popolare di Vicenza may need more capital (Reuters)

Unilever Is in Talks to Acquire Jessica Alba's Honest Co. (WSJ)

Japan's Central Bank Splits Over Easing Program (WSJ)

Japan Looks to Bring in More Foreign Workers as Population Falls (BBG)

Clinton visits North Carolina in campaign trail return; Trump up in polls (Reuters)

Donald Trump Promises Tax Cuts, Offset by Robust Growth (WSJ)

In Pennsylvania Senate race, unfamiliar battle lines on gun rights (Reuters)< ...

Goldman Downgrades S&P 500, Stoxx 600 To Sell, Cites "Elevated Valuations And The Risk Of Shocks"

The gloves finally come off.

After tactfully warning clients for months that staying invested in US stocks and bonds is an unacceptable risk, overnight Goldman's Peter Oppenheimer finally changed Goldman's official "tactical" bias, and as of this moment recommends selling not only bonds, as well as the S&P500 and Europe's Stoxx 600 "due to elevated valuations across assets and the risk of shocks."

Here is the full list of Goldman's latest recos:

We are Underweight S&P 500 as we see strong positioning, headwinds from the resumption of the Fed rate hike cycle and a strong Dollar, and increasing political uncertainty into the US elections.

We are also Underweight Europe into year-end due to elevated political uncertainty (from Brexit and the Italian referendum) and uncertainty on ECB policies. A 'no' vote in the Italian referendum (a 40% probability, in our view) could put pressure on Italian risky assets, in particular banks, and increase political uncertainty in Italy and the Euro area.

Negative macro surprises and the global bond sell-off since last week have driven a reversal of the 'Goldilocks' summer rally. Risk parity and balanced funds suffered in particular, with a sharp increase in equity/bond correlations. We think bond yields will increase more until year-end, and downgrade bonds to Underweight on a 3-month horizon (in line with 12-month). However, while rate volatility could pick up in the near term, we expect the most pressure in the back end and continued anchoring of the front end by central banks next week.

We remain defensive in our asset allocation and Overweight cash (3m) due to elevated valuations across assets and the risk of shocks. However, we upgrade equities back to Neutral on a 3m basis due to support from ...

New iPhone Could Be Bad News for Wireless Industry

The success of Apple's latest smartphone could spell the end of record-high wireless margins.

How Deutsche Bank Will Be Hurt by Mortgage Fines

The German lender faces demands to pay $14 billion. But, while that won't be the final number, the penalty still looks damaging.

Apple: Why Early iPhone Data Spells Relief

Apple was due for a relief rally, even as early iPhone 7 sales data remains murky.

Rail Week Ending 10 September 2016: Rolling Averages Generally Weaker

Week 36 of 2016 shows same week total rail traffic (from same week one year ago) contracted according to the Association of American Railroads (AAR) traffic data. This week, most rolling averages' were decelerating.

Economic Report: Inflation jumps 0.2% in August, CPI shows

Higher rents and surging medical and prescription-drug costs are putting a dent in the wallets and pocketbooks of American consumers, new government data show.

Need to Know: The crowd wants this stock correction too badly for it to happen

Sick of the sky-is-falling drumbeat about this market? Our call of the day says this is what happens when everyone is thinking the same thing. Our chart shows a huge move into commodities.

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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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