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04Oct2016 Pre-Market Commentary: US Markets On Verge Of Major Move, Investors Jittery On Which Way, Gold Breaks Through Major Support

Written by Gary

U.S. stock index futures were slightly higher this morning (SPY -0.04%), rebounding after Monday's slight downturn, which gained following a rebound in Deutsche Bank shares. Warning crude prices and us dollar at resistance, gold has dropped through 1301 support (1296). Look for volatility.

Here is the current market situation from CNN Money

European markets are sharply higher today with shares in London leading the region. The FTSE 100 is up 2.86% while Germany's DAX is up 1.61% and France's CAC 40 is up 1.19%.

What Is Moving the Markets

Here are the headlines moving the markets.

Fed's Lacker says rates might need to rise a lot, case for hike strong

CHARLESTON, W.V. (Reuters) - Richmond Federal Reserve President Jeffrey Lacker on Tuesday said there was a strong case for raising interest rates, arguing that borrowing costs might need to rise significantly to keep inflation under control.

Stock futures slightly higher as European stocks rise

(Reuters) - U.S. stock index futures were slightly higher on Tuesday, mirroring European markets, which gained following a rebound in Deutsche Bank shares.

Bill Gross of Janus warns financial markets have become 'a Vegas casino'

NEW YORK (Reuters) - Global central bank policy makers have turned world financial markets into a casino, thanks to their unprecedented monetary policies, warned bond investor Bill Gross of Janus Capital Group on Tuesday.

Google expected to unveil new phones at San Francisco event

(Reuters) - Alphabet Inc's Google is expected to unveil new smartphones at an event on Tuesday, the company's latest effort to sell consumers on a Google-branded device and to challenge Apple Inc at the high end of the market.

EU ruling on $25 billion Abbott, St. Jude deal due by November 9

BRUSSELS (Reuters) - EU antitrust regulators will decide by Nov. 9 whether to clear U.S. pharmaceuticals company Abbott Laboratories' $25-billion bid for St. Jude Medical Inc aimed at helping it better compete with bigger rivals.

Apple launches Apple Pay payment service in Russia

MOSCOW (Reuters) - Apple Inc launched its Apple Pay software in Russia on Tuesday as the U.S. technology firm extends the global reach of its payment service.

Zika vaccine race spurred by crisis and profit potential

NEW YORK (Reuters) - The race to find protection against the Zika virus is fueled by something often missing from tropical disease research: the potential for big profit.

Road to stagnation? China Inc gets a break from lenders

HONG KONG (Reuters) - Profits at roughly a quarter of Chinese companies in a Reuters analysis were too low in the first half of this year to cover their debt servicing obligations, as earnings languish and loan burdens increase.

ABB rejects shareholder calls to spin off Power Grids

ZURICH (Reuters) - Swiss engineering group ABB is to keep its Power Grids business in a rejection of demands from an activist investor to spin it off and is to start a $3 billion share buy back from next year.

"This Cannot End Well" Bill Gross Warns

In one of his starkest warnings about the endgame of existing unorthodox, monetary policy, in his latest letter titled "Doubling Down", Bill Gross repeats a familiar tune, warning that "our financial markets have become a Vegas/Macau/Monte Carlo casino, wagering that an unlimited supply of credit generated by central banks can successfully reflate global economies and reinvigorate nominal GDP growth to lower but acceptable norms in today's highly levered world."

Once again he slams central bankers such as Carney and Yellen whom he describe as "Martingale gamblers" adding that "they do have an unlimited bankroll and that they can bet on the 31st, 32nd, or "whatever it takes" roll of the dice. After all, their cumulative balance sheets have increased by $15 trillion+ since the Great Recession. Why not $16 trillion more and then 20 or 30? They print for free, do they not, and actually they make money for themselves and their constituent banks in the process. Why not?"

He continues by observing the mockery capital markets have become, slamming central bankers who "have fostered a casino like atmosphere where savers/investors are presented with a Hobson's Choice, or perhaps a more damaging Sophie's Choice of participating (or not) in markets previously beyond prior imagination. Investors/savers are now scrappin' like mongrel dogs for tidbits of return at the zero bound."

He does warn, however, that limitations are approaching: "low/negative yields erode and in some cases destroy historical business models which foster savings/investment and ultimately economic growth. Our argument is that NIMs (net interest margins) for banks, and the solvency of insurance companies and pension funds with long dated and underfunded liabilities, have been negatively affected and that ultimately, the continuation of current monetary policies will lead to capital destruction as opposed to capital creation."

He also laments the resulting death ...

Gold Tumbles Below $1300 As Yen Crashes As Rate-Hike Odds Rise

USDJPY is surging for the 6th straight day, up 1% today, the most in 5 weeks, following Kuroda's debacle and the plunge in cable. Breaking above its 50-day moving average, USDJPy has spiked up to September Fed highs and at the same time, gold is tanking (back below $1300 for the first time since Brexit). Stocks are ignoring the typically bullish drop in Yen for now...

Yen is dumping...

And so is gold...back below Sepot FOMC lows...

Breaking back below $1300 for the first time since Brexit...

But JPY carry is not helping US stocks...

As Nov and Dec rate-hike odds hover near record highs...

Italy's 50 Year Bond Issue Set At 5 Billion: Nearly 4x Oversubscribed

The global search for yield continued this morning, when as reported yesterday, Italy was set to price its first ever super-long bond in the form of 50 year paper. According to Bloomberg, the issue size will be set at 5 billion, but what is more impressive is that with 18.5 billion in orders, it will be nearly 4x oversubscribed. According to the WSJ, the bonds are expected to price at a yield of around 2.85% but could price at a lower yield, depending on investor demand.

The terms of the offering are as follows, per Bloomberg:

Order books over EU18.5b (incl. EU2.4b JLM interest): Leads.

Guidance was BTPS 2.7% 3/2047 +54 area from IPT +mid/high 50s

Issuer: Republic of Italy

Ratings: Baa2/BBB-/BBB+

Format: Buoni del Tesoro Poliennali (Reg S in dematerialised book entry form), 144a eligible, CACs

Maturity: March 1, 2067

Settlement: Oct. 11, 2016

Coupon: Fixed, s.a., act/act, full first

Denoms: 1k/1k

Bookrunners: Banca IMI, BNP, GS (DM and B&D), HSBC, JPM, UniCredit

Once priced, Italy will become the latest nation to issue super-long bonds this year, following sovereigns including Belgium, France, Ireland and Spain in taking advantage of the historically low interest rates spurred by central bank stimulus. Italy's Treasury announced the issuance "after a thorough market analysis," it said in a statement on Monday, Bloomberg reported earlier.

Belgium and Spain have both sold debut 50-year bonds in public markets this year, with each raising 3 billion. France, which has sold long-dated bonds in the past, also raised 3 billion in new 50-year debt. Meanwhile, Ireland and Belgium have both sold 100 million of 100-year bonds in privately placed deals this year.

"Demand for these ultralong bonds seems to be very strong at the moment," ...

Janus-Henderson Deal Shows Struggle of Active Managers

The planned merger between asset managers Janus Capital of the U.S. and Henderson Group of the U.K. looks defensive for both companies, as active managers lose ground to the index-tracking industry and global institutional clients look for global fund suppliers.

Evergrande: Already Bloated Chinese Developer Bulks Up Where It Shouldn't

Evergrande, China's biggest developer by assets, is finding yet a new way to make itself even bigger. But bigger might just be more problematic.

Alibaba Needs to Prove It Can Reach Great Heights

With shares near a post-IPO high, Alibaba has to show its non-core businesses can deliver.

IMF Finds Accelerating Economic Growth In Iran Following The Nuclear Deal

from the International Monetary Fund

[Editor'sNote: This Concluding Statement describes the preliminary findings of IMF staff at the end of the official staff visit to Iran]

Economic conditions in Iran are improving substantially in 2016/17. Real GDP rebounded strongly over the first half of the year as sanctions eased post-JCPOA [known commonly as the Iran deal or Iran nuclear deal] implementation. Oil production and exports rebounded quickly to pre-sanction levels, helping cushion the impact of low global oil prices. Increased activity in agriculture, auto production, trade and transport services has led the recovery in growth in the non-oil sector.

Investor Alert: Tick Size Pilot Program Beginning 03 October 2016 - What Investors Need To Know

from the Securities and Exchange Commission

Beginning October 3, 2016, a new National Market System (NMS) Plan to implement a Tick Size Pilot Program (the 'pilot") will widen the minimum quoting and trading increment - sometimes called the 'tick size" - for some small capitalization stocks. The goal of the pilot is to study the effect of tick size on liquidity and trading of small capitalization stocks.

Netflix deal said to be in Disney's crosshairs, and it makes perfect sense to analysts

Walt Disney Co. is on the prowl to acquire assets to add to its Goliath media and entertainment business; at least that's the chatter on Wall Street.

Beat the System: Free advice for the next Trump or Romney on how to handle money

Unforced errors may cost Donald Trump the election, as Mitt Romney learned, writes Brett Arends.

These therapists specialize in the unique mental problems of millennials

America can't decide what to make of millennials. Neither can its therapists.

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