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27Sep2016 Pre-Market Commentary: Wall Street Futures Flat, Crude Prices Down, Indicators Bearish To Neutral

Written by Gary

US stock future indexes are flat (SPY -0.02%) after Saudi Arabia and Iran have dashed hopes that OPEC oil producers could clinch an output-limiting deal in Algeria this week. Markets are expected to open flat and make session highs early.


Here is the current market situation from CNN Money

European markets are sharply lower today with shares in Germany off the most. The DAX is down 3.53% while France's CAC 40 is off 2.94% and London's FTSE 100 is lower by 1.84%.

Today's Markets

In Asia, Japan +0.8% to 16683. Hong Kong +1.1% to 23571. China +0.6% to 2998. India -0.3% to 28223.
In Europe, at midday, London -0.2%. Paris -0.5%. Frankfurt -0.8%.
Futures at 8:45, Dow -0.6%. S&P -0.8%. Nasdaq +0.02%. Crude -2.8% to $44.75. Gold -0.7% to $1335.35.
Ten-year Treasury Yield -1 bps to 1.58%

What Is Moving the Markets

Here are the headlines moving the markets.

World stocks, Mexico peso bounce as markets score one for Clinton

LONDON (Reuters) - World shares swung higher and the Mexican peso surged more than two percent on Tuesday, as investors awarded the first U.S. presidential debate to Democrat Hillary Clinton over Republican Donald Trump.

Saudis, Iran dash hopes for OPEC oil deal in Algeria

ALGIERS (Reuters) - Saudi Arabia and Iran on Tuesday dashed hopes that OPEC oil producers could clinch an output-limiting deal in Algeria this week as sources within the exporter group said the differences between the kingdom and Tehran remained too wide.

Oil prices slip as hopes for a deal in Algiers fade

LONDON (Reuters) - Crude oil futures fell on Tuesday as optimism faded for an output-limiting deal from an oil producer meeting in Algeria that has so far failed to yield any agreement to curb one of the worst supply gluts in history.

WTO cuts 2016 world trade growth forecast to 1.7 percent, cites wake-up call

GENEVA (Reuters) - The World Trade Organization cut its forecast for global trade growth this year by more than a third on Tuesday, reflecting a slowdown in China and falling levels of imports into the United States.

Wells Fargo hit with class action lawsuit over sales practices

(Reuters) - A shareholder class action lawsuit was filed against Wells Fargo & Co on Monday that alleged the firm misled investors about its financial performance and the success of its sales practices.

German regulator orders Facebook to delete WhatsApp user data

FRANKFURT (Reuters) - A German privacy regulator ordered Facebook on Tuesday to stop collecting and storing data of German users of its messaging app WhatsApp and to delete all data that has already been forwarded to it.

Caesars inches closer to deal with bankrupt unit's creditors

(Reuters) - Caesars Entertainment Corp said on Tuesday its major creditors supported the proposed terms of a plan to push its main operating unit out of bankruptcy, making it "optimistic" of winning approval from other creditors.

VW says finances robust after media report knocks shares

FRANKFURT (Reuters) - Volkswagen said on Tuesday its finances remained robust as it sought to allay concerns after a share fall which some traders linked to a media report which said the U.S. Justice Department was assessing whether fines could put the automaker out of business.

Worries over German banks sink bond issue, hit shares

FRANKFURT (Reuters) - Deutsche Bank shares hit a record low on Tuesday and state-backed lender NordLB scrapped plans for a 500 million euro ($560 million) bond sale, underlining investor concern about the health of the financial industry in Europe's largest economy.

Deutsche Bank Stock Crashes Near Single-Digits As CDS Spike To Record Highs

The "most systemically dangerous bank in the world" is in grave trouble. Despite exclamations that there is "no need for additional capital" and that "Deutsche Bank is no Lehman" investors are fleeing the bank's assets en masse as professionals pile in to buy counterparty risk protection. With the only thing standing between bank runs and stability being the confidence of depositors, and knowing full well that everybody lies when it gets serious, one witty trader noted, "if it walks like Lehman, and talks like Lehman... it is Lehman."

Deutsche stock is collapsing...

And counterparty risk hedges are spiking...

as the bottom end of DB's capital structure is starting to reflect a serious haircut...

And the DB pain is spreading to the ent ...

Hillary vs Donald: So Who Won?

The question everyone is asking this morning is who won the debate. The answer is: it depends who you ask.

To be sure, conservative website Drudge Report had Trump a blow out winner with over 82% of the nearly 500,000 votes cast, which however can probably be explained by the self-fulfilling ideology of most of the site's visitors.

More surprising was a poll by CNBC, where of the 748,000 votes cast as of this morning, Trump had collected nearly two-thirds of the votes, although Trump's outperformance here may be explained by the fact that this, too, was linked off the Drudge main page, the same as a Time poll.

To be sure, the markets' take was different, and as we noted last night, looking at the most direct proxy of Trump performance in recent weeks, namely the move in the Mexican Peso, traders "handed" it to Hillary.

As WSJ noted this morning, the Mexican currency was up roughly 1.5% against the U.S. dollar Tuesday, showing a sharp surge during the debate, which pitted Mrs. Clinton against Donald Trump. Other emerging market currencies, from the South African rand to Indonesia's rupiah, also rallied on a belief that Trump presidency is now less likely.

Amid the confusion, the Mexican peso has emerged as a market proxy for the chances of a Tr ...

Goldman Cuts Oil Price Target From $50 To $43 On Rising Global Surplus

While we await every new headline out of Algiers, overnight Goldman threw in the towel on its "transitory" oil market bullishness, and in a note by Damien Courvalin looking "Beyond Algiers, Weakening Oil Fundamentals", the bank cut its Q4 oil price target from $50 to $43, as the bank admits the previously anticipated rebalancing will take longer to achieve, and now expects "a global surplus of 400 kb/d in 4Q16 vs. a 300 kb/d draw previously."

Speaking of the Algiers meeting, Goldman also notes that "while a potential deal could support prices in the short term, we find that the potential for less disruptions and still relatively high net long speculative positioning leave risks skewed to the downside into year-end. Importantly, given the uncertainty on forward supply-demand balances, we reiterate our view that oil prices need to reflect near-term fundamentals - which are weaker - with a lower emphasis on the more uncertain longer-term fundamentals."

Here is the summary from Courvalin:

Oil prices have remained range bound ahead of the OPEC consultation in Algiers this week and as production disruptions have yet to meaningfully ramp up. Statements by participants suggest potentially greater collaboration between OPEC members than in previous attempts, although the outcome of this advisory meeting remains uncertain. Our production forecast continues to reflect a seasonal Saudi production decline into year-end and no growth elsewhere (the equivalent of a deal) with OPEC exc. Libya/Nigeria production growth only resuming in 1Q17. ...

Frontrunning: September 27



Deutsche Bank Returns to Haunt Merkel in an Election Year (BBG)

Saudis, Iran dash hopes for OPEC oil deal in Algeria (Reuters); Iran Doesn't Want Oil Deal in Algiers, Won't Freeze Output (BBG)

Debate of century lives up to its billing (The Hill)

Candidates Spar in Debate, Offer Vastly Different Visions for Leading the U.S. (WSJ)

Clinton gains in online betting markets after U.S. presidential debate (Reuters)

Presidential Debate Illuminates Voters' Stark Choice (WSJ)

Trump goes after Fed Reserve's Yellen, claims she's 'more political' than Clinton (Fox)

Undecided Voters React Coolly to Donald Trump During Debate (WSJ)

Trump Allies Move to Stem Damage From Strong Clinton Debate (BBG)

Trump questions Clinton's temperament, calls her 'out of control' (

More Than Money at Stake in Tesla's SolarCity Deal

Weighing Tesla's merger offer for SolarCity means separating what can and can't be measured.

Too Many Chips on Macau's Recovery

More visitors are staying in Macau's shiny hotels, yet they would need to make more bets in the casinos to justify the rally in the city's gambling stocks.

Nike Can Regain Stride After Results

Nike's North American results should begin to accelerate again, as the sportswear maker pushes back against competitors.

Futures Movers: Oil prices slide more than 2% after Iran, Saudis douse hopes for output deal

Crude oil futures drop sharply Tuesday after both Iran and Saudi Arabia play down expectations for a deal to freeze or cut oil production at the closely watched informal OPEC meeting on Wednesday.

Metals Stocks: Gold, silver lose 'haven' bid in the wake of the presidential debate

Gold and silver prices dip Tuesday as investors cool to haven assets that include precious metals, in the wake of the first U.S. presidential debate.

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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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