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08Dec2016 Pre-Market Commentary: Trump Rally Powers On, WTI Crude Prices Holding At $50 Handle, US Dollar Sharply Higher And Volatile, Short-term Indicators Bullish

Written by Gary

Wall Street futures this morning pointed to slightly higher open for the major U.S. indexes (SPY +0.1%). The DOW is now within 500 points from the 20,000 point milestone, but some analysts are calling for caution.


Here is the current market situation from CNN Money

European markets are higher today with shares in Germany leading the region. The DAX is up 0.81% while France's CAC 40 is up 0.36% and London's FTSE 100 is up 0.19%.

What Is Moving the Markets

Here are the headlines moving the markets.

U.S. jobless claims decline from five-month high

WASHINGTON, (Reuters) - The number of Americans filing for unemployment benefits fell from a five-month high last week, pointing to labor strength that underscores the economy's sustained momentum.

China's Fujian drops Aixtron bid after Obama blocks deal

FRANKFURT (Reuters) - China's Fujian Grand Chip Investment Fund has dropped its takeover bid for German chip equipment maker Aixtron after U.S. President Barack Obama blocked the deal.

Global stocks, euro push higher ahead of ECB stimulus plan

LONDON (Reuters) - World shares climbed to a three-month high on Thursday as encouraging Chinese data and a record-high Wall Street kept traders upbeat before an expected extension of the European Central Bank's already generous stimulus program.

Exclusive: U.S. regulator set to fail Wells Fargo on community lending test - sources

WASHINGTON (Reuters) - A U.S. bank regulator is ready to fail Wells Fargo on a national scorecard for community lending, sources familiar with the decision said on Wednesday, in a move that could limit near-term expansion for the bank.

Sears Holdings posts loss for fifth straight quarter

(Reuters) - Retailer Sears Holdings Corp reported its fifth straight quarterly loss and said there was no guarantee when it would return to profitability.

Poll: U.S. economic outlook unmoved so far after Trump win

(Reuters) - Donald Trump's shock White House win has not altered U.S. economic forecasts much, with economists in a Reuters poll expecting three rate rises by the end of next year based on little follow-through on most of the soon-to-be president's protectionist campaign promises.

EU launches legal case against Germany, UK over Volkswagen scandal

BRUSSELS (Reuters) - The European Union opened legal action on Thursday against seven nations including Germany and Britain for failing to police emissions cheating by carmakers after the Volkswagen scandal.

ECB unexpectedly cuts asset buys, extends until end 2017

FRANKFURT (Reuters) - The European Central Bank unexpectedly reduced its asset buys on Thursday but reserved the right to increase purchases once again, a decision that may be seen as a concession to conservative euro zone members such as Germany.

Eyeing upswing, more U.S. oilfield service firms restructure

(Reuters) - After two years of hunkering down, struggling U.S. oilfield service providers are preparing for an expected oil-price recovery in an unexpected way: filing for bankruptcy.

Mario Draghi Explains His Dovish Taper (Hawkish Easing) - ECB Press Conference Live Feed

In a surprise for markets, Mario Draghi gave (extended QE) and took away (tapered purchases) the punchbowl in what we are sure will be described as 'significant additional easing' even though bond traders are clearly disappointed. Having had 45 minutes to judge the market's reaction (steeper curves, lower EUR, higher bank stocks), we wonder what tape-bomb he will drop during the Q&A to spoil the party.

Full press release:

Monetary Policy Decisions

At today's meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.

Regarding non-standard monetary policy measures, the Governing Council decided to continue its purchases under the asset purchase programme (APP) at the current monthly pace of 80 billion until the end of March 2017. From April 2017, the net asset purchases are intended to continue at a monthly pace of 60 billion until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. If, in the meantime, the outlook becomes less favourable or if financial conditions become inconsistent with further progress towards a sustained adjustment of the path of inflation, the Governing Council intends to increase the programme in terms of size and/or duration. The net purchases will be made alongside reinvestments of the principal payments from maturing securities purchas ...

Stocks And Volatility Indices Both Jump - Who's Right?

Via Dana Lyons' Tumblr,

esterday saw the VIX solidly higher despite the fact that stocks rallied hard; what do similar precedents tell us?

Markets have been on a parade of peculiarity since the presidential election a month ago. Today's rally on Wall Street was no exception. Yesterday, we noted the 3-month low in the S&P 500 Volatility Index (VIX), and the historically bullish connotations for the rest of December. Today, the VIX pulled an about-face, despite the strength in stocks. Specifically, the VIX uncharacteristically jumped 3.5% even though the S&P 500 (SPX) was up more than 1%. We thought that was odd so we looked at the historical data. It turns out that it was.

Since the VIX's inception in 1986, today marks just 30th time in which the VIX rose at least 3.5% on a day that the S&P 500 gained at least 1%. 22 of those days occurred with the SPX within 2% of a 52-week high, as was the case today.

image

So, who's right - stocks or volatility? Well, from a glance at the chart, there are a handful of glaring occurrences at cycle highs (e.g., August 1987, July 1990, March 2000). However, let's look at the aggregate performance of the S&P 500 and t ...

European Bond Yields Spike, Bank Stocks Soar, EUR Tumbles After Draghi Surprise

Having rallied into today's ECB meeting on hopes of geting more "whatever it takes" from Mario Draghi, his surprising tilt to the hawkish taper has sparked selling across European bond markets (pushing Bund yields to 11-month highs). EURUSD kneejerked higher on the statement but faded back quickly. Yield curves across Europe are also steepening dramatically and bank stocks are loving it.

EURUSD is sliding fast off kneejerk higher levels...

Bund yields are spiking...

Italian yields have spike to post-vote highs...

And yield curves are steepening across Europe...

And a steeper curve appears to be helping Italian banks (surge to highest level since June)...

Oops! UK £6 Billion Worse Off After Multi Billion Pound Gold "Accounting Error"

Oops! Experts' £6 Bln blunder sends UK trade deficit soaring

UK failed to measure huge imports of gold coins and bars after Brexit vote

By Philip Aldrick
Economics Editor
The Times, London

Britain's trade deficit with the rest of the world is £6 billion larger than previously thought — and at a record high — because the nation's bean counters made a mistake in their sums.

gold-bullion-sovereign-2017The problem was found in the collection of "non-monetary gold" data, which measures the amount of gold traded privately rather than used in jewellery

The Office for National Statistics yesterday admitted to a big "processing error" that meant it had miscalculated the value of everything that the country exp ...

Rust-Belt Debt Hangs Around Beijing's Neck

Good times won't last in China's worst-off, old-economy provinces dominated by steel and coal.

Glencore Explores Its Limits in Russian Oil Patch

Resurgent Glencore's role in a $13 billion deal for a stake in Rosneft gives the commodities giant fresh oil to play with.

What Quitters Tell Us About the Economy

More workers are willing to quit their jobs, but in the goods-sector leaving is still hard.

03 December 2016 Initial Unemployment Claims Rolling Average Insignificantly Worsens

Weekly Initial Unemployment Claims

The market expectations for weekly initial unemployment claims (from Bloomberg / Econoday) were 250 K to 262 K (consensus 255,000), and the Department of Labor reported 258,000 new claims. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 251,500 (reported last week as 251,500) to 252,500. The rolling averages generally have been equal to or under 300,000 since August 2014.

Brett Arends's ROI: The stock market's oldest indicator just flashed red

U.S. stock investors now face increasing volatility and dismal prospective 10-year returns, writes Brett Arends.

Economic Report: Jobless claims drop 10,000 to 258,000

A steady drumbeat of hiring that's reduced the unemployment rate to a nine-year low is keeping layoffs near the lowest level since the 1970s.

Market Snapshot: Dow, S&P 500 in range for records after ECB holds rates steady

U.S. stock futures point to little change at the open Thursday, putting the Dow industrials and S&P 500 on track to trade near their record closes from the prior session.

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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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