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28Nov2016 Pre-Market Commentary: Global Economic Outlook Improves Based On Trump's Victory

Written by Gary

Thanksgiving sales seem to have slid, oil and the dollar slipped - yet the markets are set to open in positive territory. OECD says Trump's fiscal spending boost and tax cuts would boost global economic growth.


Here is the current market situation from CNN Money

European markets are lower today with shares in Germany off the most. The DAX is down 0.84% while France's CAC 40 is off 0.82% and London's FTSE 100 is lower by 0.60%.

What Is Moving the Markets

Here are the headlines moving the markets.

Oil slip sends dollar, bond yields skidding

LONDON (Reuters) - The dollar saw its biggest drop in almost a month on Monday as a bashing for oil prices on doubts about an OPEC output cut this week left investors reversing "Trumpflation" trades that have gripped markets since the U.S. election.

OPEC makes last-ditch bid to save oil deal as tensions grow

VIENNA (Reuters) - OPEC was trying on Monday to rescue a deal to limit oil output as tensions grew among the producer group and non-OPEC member Russia, with top exporter Saudi Arabia saying markets would rebalance even without an agreement.

Samsung to unveil shareholder return plans amid calls to split company

SEOUL (Reuters) - Samsung Electronics Co Ltd said it will disclose plans to boost shareholder value on Tuesday - a move that comes amid pressure from U.S. fund Elliott Management to split the company in two and provide more in payouts.

U.S. shoppers spend less over holiday weekend amid discounting

CHICAGO (Reuters) - Early holiday promotions and a belief that deals will always be available took a toll on consumer spending over the Thanksgiving weekend as shoppers spent an average of 3.5 percent less than a year ago, the National Retail Federation said on Sunday.

Unions, gig-economy firms gear up for New York benefits battle

(Reuters) - Faced with a barrage of lawsuits from workers demanding benefits and recognition as employees, some companies in the fast-growing 'gig economy' are looking to settle the issues through legislation.

Oil prices gyrate as OPEC heavyweights head to Vienna

LONDON (Reuters) - Oil prices edged higher on Monday, after falling as much as 2 percent in early trading, as the market grappled over the shaky prospect of major producers being able to agree output cuts at a meeting on Wednesday aimed at reining in global oversupply.

Race-track rivalry moves to boardroom as VW brands battle for electric car jobs

FRANKFURT/HAMBURG (Reuters) - Just as Porsche and Audi have fought for supremacy on the race track, the Volkswagen brands are now locked in a cut-throat battle to develop and manufacture the next generation of electric cars at a group embroiled in the "Dieselgate" scandal.

Lufthansa seeks injunction to stop pilots' strike

FRANKFURT (Reuters) - Lufthansa has asked a labor court in Munich for a temporary injunction to avert further strikes by its pilots, a spokesman for the German flagship carrier said on Monday.

Monte dei Paschi faces potential legal claims for $8.5 billion: document

MILAN (Reuters) - Ailing Italian bank Monte dei Paschi di Siena said on Monday it is facing potential legal claims for a total of more than 8 billion euros ($8.5 billion) in a series of civil lawsuits.

OPEC Scrambles To Salvage Oil Deal In 11th Hour As Tensions Spike

One day after Saudi Arabia raised the prospect that Wednesday's OPEC summit in Vienna may conclude without a deal (which also was spun as optimistic as the market would still revert to "equilibrium", however it was unclear at what price), OPEC members tried on Monday to rescue a deal to limit oil output as tensions grew among the producer group and non-OPEC member Russia.

OPEC experts started a meeting in Vienna at 0900 GMT (4:00 a.m. ET) and were due to make recommendations to their ministers on how exactly the Organization of the Petroleum Exporting Countries should reduce production when it meets on Nov. 30. At the same time, the Algerian and Venezuelan oil ministers flew to Moscow on Monday and Tuesday in a final attempt to persuade Russia to take part in cuts instead of merely freezing output, which has reached new highs in the past year.

In September, OPEC, which accounts for a third of global oil production, agreed to cap output at around 32.5-33.0 million barrels per day versus the current 33.64 million bpd to prop up oil prices, which have more than halved since mid-2014. The meeting on Nov. 30 was expected to rubber-stamp that deal, with Russia and some other non-OPEC producers such as Azerbaijan and Kazakhstan also contributing.

However, two months later, "doubts emerged in recent weeks" as OPEC's No.2 and 3 producers, Iraq and Iran, expressed reservations about the mechanics of output reductions and Saudi Arabia voiced concern about Russia's willingness to cut Reuters muses. On Friday, OPEC canceled an experts meeting with non-OPEC producers scheduled for Nov. 28 after Saudi Arabia said the organi ...

OECD Boosts Global Growth Forecasts On Trump Optimism

The details of any Trump growth plan may not be available for a long time, but the general sentiment that Trump's fiscal spending boost will be good for global growth was enough for the Organization for Economic Cooperation and Development which on Monday said that U.S. and global economic growth would be boosted by increases in spending and tax cuts promised by the President-elect. However, the OECD also cautioned that those gains would be lost if he pressed ahead with threatened tariff increases that triggered retaliation.

As the OECD wrote in its twice-yearly report on global economic prospects "while the exact form it would take is uncertain", it does expect Trump to offer some fiscal stimulus from the early months of his presidency, and that its likely scale that would boost U.S. economic growth to 2.3% from 1.9% in 2017, and to 3% from 2.2% in 2018. As the WSJ briefed, there would also be benefits for other parts of the world as U.S. demand for imports rises, with global economic growth raised to 3.3% from 3.2% in 2017, and to 3.6% from 3.3% in 2018. The OECD is the first international economic policy agency to publish an estimate of the likely impact of Mr. Trump's proposals.

The summary of the latest OECD growth forecast is shown in the FT chart below.

"There's now some prospect of the world exiting from this low-growth trap," said Ángel Gurria, the OECD's secretary-general. "Even though we still show the signs of those very heavy legacies of the crisis, we may be at a moment where we could see a turn for the better."

"[The T ...

Global Stocks Slide On Italian Bank Worries; Dollar Dips As Trumpflation Takes A Back Seat

European shares dipped and U.S. equity-index futures (-0.3%) pointed to a lower open as traders questioned the stability of the Italian banking sector ahead of next weekend's referendum as well as the longevity of the Trumpflation rally, pressuring the dollar, sending the USDJPY sliding as low as 111.355 overnight, before rebounding over 112. That was the dollar's biggest fall against its Japanese rival since October 7 and against a basket of top world currencies it was the greenback's worst day since November.

The euro rose to an 11-day high $1.0686 as it got a lift too from the election of Francois Fillon as the center-right candidate in next year's French presidential election. The reformist former prime minister is now favorite to become president, with a flash opinion poll showing he would easily beat National Front leader Marine Le Pen in a run-off second round. Markets worry the far-right Le Pen, who has promised a referendum on membership of the European Union if she wins, would threaten the future of the currency bloc.

"It's a bit of a pull back in the dollar," said Societe Generale strategist Alvin Tan. "The fall in oil is pushing back U.S. bond yields and that is leading the consolidation in the dollar.. there is more scepticism about an (OPEC) output cut now."

"The Trump trades were a distraction for a while but now people are starting to look elsewhere for market drivers," said Kevin Lilley, a manager of euro-area equities at Old Mutual Global Investors in London. "People are getting worried about the impact that a power vacuum in Italy could have on the refinancing needs of its banks. It's a nervous market at a time when liquidity isn't great."

"Starti ...

Italian Banks Hit Again Ahead of the Looming December 4th Referendum

There may be another reason why the Euro has been so damned weak v the dollar: it might not exist for too much longer. With Le Pen from France surging in the polls and Prime Minister Renzi from Italy promising to fire himself should a drastic and very aggressive constitutional realignment fail to pass in a referendum on December the 4th, the anti EU five star movement might takeover and tell Germany to fuck off.

All of this is weighing heavily on Italian stocks, one of the worst performing indexes in the world this year, off by 23% -- somewhat immune to the greatness of QE and all of its grandiose splendor.

To that end, Italian banks continue to slug lower, amidst acrimonious sentiment that a potential exit from the EU might lead to the ultimate destruction of an already comically overburdened and woefully undercapitalized Italian banking system.

Shares are hitting new recent lows, down from 2-4% this morning.

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A Double-Digit Return Is Hiding in Plain Sight at Under Armour

The yawning gap between Under Armour's voting and nonvoting shares offers an opportunity for investors.

China's Debt-Laden Companies Take a Load Off---for Now

If Chinese companies don't take advantage of rising prices to rapidly pay down debt, more problems will be just around the corner.

Virtual Reality's Long Walk Before Running

Early VR headset sales hurt by limited supply and high prices

Housing Has Become More Affordable Over The Long Term

from the St Louis Fed

The prices of houses and apartment rents have risen faster than incomes and inflation lately. However, housing costs are actually more affordable today than they were 25 years ago, according to the latest issue of Housing Market Perspectives.

Infographic Of The Day: Chart: The End Of World Poverty Is In Sight

The number of people in extreme poverty has been cut in half since 1990.

Market Snapshot: Dow industrials on track to drop, halting four-session advance

U.S. stock futures signal a lower open on Monday, putting the Dow on track to retreat after a four-session advance.

In One Chart: Why the rally by U.S. stocks is 'just getting started' — in one chart

Many analysts have voiced fears that the U.S. stock market's advance is overdone. One chart watcher, on the other hand, is basically suggesting the opposite

Death of Fidel Castro may pressure Donald Trump on Cuba promises

The death of Fidel Castro is putting unexpected pressure on President-elect Donald Trump to follow through on earlier promises to reverse the recent openings to Cuba made by President Barack Obama.

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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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