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12Dec2016 Pre-Market Commentary: Wall Street To Open On The Down Side, Crude Prices Aiming To Move Higher, US Dollar Weakening And US Treasury Notes Rise Above 2.5 Percent

Written by Gary

Wall Street futures points to a lower open for the major U.S. indexes this morning. Wall Street is looking a bit soft today following the massive run-up last week. The Dow futures were almost flat, S&P 500 futures slid 2.37 points or 0.11%, while the tech-heavy Nasdaq 100 futures were down 21.87 points or 0.45%. Crude prices are at the highest levels since July 2015.


Here is the current market situation from CNN Money

European markets are mixed. The CAC 40 is higher by 0.05%, while the FTSE 100 is leading the DAX lower. They are down 0.35% and 0.15% respectively.

What Is Moving the Markets

Here are the headlines moving the markets.

Fed turns to Trump agenda with rate hike nearly in the bag

WASHINGTON (Reuters) - The Federal Reserve inaugurates the Trump era this week with a near-certain interest rate increase and new economic forecasts providing a first glimpse into whether the U.S. election has reshaped the central bank's growth and inflation outlook.

Oil surges to 1 1/2-year high, Fed rate increase looms

LONDON (Reuters) - Oil prices surged to their highest since mid-2015 and U.S. Treasury yields hit a more than two-year peak on Monday after the world's top crude producers agreed to the first joint output cut since 2001.

Federal Reserve and Republican critics may compromise on oversight after Trump win

NEW YORK (Reuters) - Republican lawmakers and the Federal Reserve may be ready to strike a compromise deal on legislation that would give Congress greater scrutiny over the central bank, now that there is no longer the threat of a presidential veto, but it would likely stop short of dictating rules on setting interest rates.

Exclusive: Lonza says in talks to buy Capsugel; deal could top $5 billion - sources

(Reuters) - Swiss pharmaceutical manufacturer Lonza Group AG on Monday confirmed it is in advanced talks with private equity firm KKR & Co LP to acquire Capsugel, a U.S. maker of capsule products and other drug delivery systems.

Trump packs trade team with veterans of steel wars with China

WASHINGTON (Reuters) - President-elect Donald Trump is stacking his trade transition team with veterans of the U.S. steel industry's battles with China, signaling a potentially more aggressive approach to U.S. complaints of unfair Chinese subsidies for its exports and barriers to imports.

Iraq to abide by OPEC cut, expects output growth in future

VIENNA (Reuters) - Iraq is committed to cutting its production to comply with a global pact to support prices, the country's oil minister said, adding he was nevertheless confident OPEC's No. 2 producer has the potential to boost its output in coming years.

Tesla settles Norway lawsuit over car's performance

OSLO (Reuters) - Electric carmaker Tesla Motors Inc has reached an out-of-court settlement with 126 Norwegian customers who claimed their cars' performance did not match promises made in the firm's marketing.

France's Amundi to buy Pioneer from UniCredit for 3.6 billion euros

PARIS (Reuters) - French asset manager Amundi has agreed to buy rival Pioneer Investments from Italian bank UniCredit for 3.6 billion euros ($3.8 billion), extending its reach in Europe and bringing in some much-needed capital for UniCredit.

BMW November sales up 5.9 percent, Mercedes poised to overtake

FRANKFURT (Reuters) - Daimler's Mercedes-Benz is on track to overtake rival BMW to take the title of the world's biggest luxury carmaker, sales figures for November released on Monday showed.

Trump State Nominee John Bolton Suggests Russian Hack Was "False Flag" By Obama Administration

With the unconfirmed report of Russian hacking of the US presidential election to benefit Donald Trump, coupled with the ongoing crackdown against Russian propaganda "fake news", dominating the US media today, overnight the former neocon ambassador to the United Nations, John Bolton, who has been floated for the possible second highest role in Donald Trump's State Department supporting Rex Tillerson, poured fuel on the fire with questions about Russian interference in the U.S. presidential election, going so far as to suggest that the "Russian hacks" were in fact a false flag operation by the current administration.

"It is not at all clear to me, just viewing this from the outside, that this hacking into the DNC and the RNC was not a false flag operation," he told Fox News' Eric Shawn on Sunday. Asked about the use of the phrase "false flag" and whether he was accusing the US government of involvement, Bolton said, "We just don't know."

John Bolton suggests DNC hack was potentially a false flag operation by the Obama administration pic.twitter.com/3rHLwHawR8

— Ben Jacobs (@Bencjacobs) December 12, 2016

While skeptics have been quick to tear apart his allegation, where he was accurate is his assessment that "intelligence has been politicized in the Obama administration to a very significant degree."

The topic of Russian interference surged on Friday after a Washington Post story revealed that according to a "secret" CIA assessment, Russia intervened in the election to help Trump win the presidency. Curiously, the FBI - and many others - have disagreed; so ...

One River CIO's Disturbing Prediction: "This Is The Biggest Policy Error In 50 Years"

With the Dow Jones just a handful of gamma imbalance rips away from 20,000, the CIO of One River Asset Management, Eric Peters, shares some critical perspective on the market's recent euphoric surge, going so far as to brand what is going on as America's "Massive Policy Error", the biggest in the past 50 years.

His thoughs are presented below, framed in his typical "anecdotal" way.

Anecdote

"America's Massive Policy Error," said the CIO. "That's the title of the book someone will write in ten years about what's happening today." Never in economic history has a government implemented a fiscal stimulus of this size at full employment.

"The Trump team and economic elites believe that anemic corporate capital expenditure is the root cause of today's lackluster growth." It's not that simple.

If credit to first-time homebuyers hadn't been cut off post-2008, and state and local governments had spent as generously as they had after every other crisis, this recovery would have been like all others.

"People think that if only we cut taxes, kill Obamacare, and build some bridges, then American CEOs will start spending. That's nonsense." Ageing demographics, slowing population growth, and massive economy-wide debts have left CEOs unenthusiastic about expanding productive capacity.

"You make the most money in macro investing when there are policy errors and this will be the biggest one in 50yrs. These guys are going to crash the economy." But not yet. First the anticipation of higher borrowing and rising growth expectations will widen interest rate differentials. Which will lift the dollar. But unlike recent episodes of dollar strength, thi ...

Frontrunning: December 12



Crude Soars as Output Deal Weighs on Bonds; China Shares Tumble (BBG)

10-Year Treasury Yield Above 2.5% for First Time in Two Years (WSJ)

The New Reality of TV: All Trump, All the Time (NYT)

Fed May Struggle to Signal What Comes After December (WSJ)

China warns Trump against ignoring its Taiwan interests (Reuters)

China's Stocks, Bonds, Yuan Slump in Unison on Liquidity Concern (BBG)

Sovereign funds pulled cash from world markets for third year running (Reuters)

Trump Adds To Criticism Of Companies (WSJ)

Oil surges to 1 1/2-year high, Fed rate increase looms (Reuters)

Iraq to abide by OPEC cut, expects output growth in future (Reuters)

It All Went Wrong for Chinese Investors Today (BBG)

Senators Balk at Tillerson Before He's Nomi ...

An Oil Curveball for Global Bonds

Bond markets could ignore oil as long as they had faith in central banks. Now investors need to pay attention.

World's Largest Car Market Ready for Pile Up

China's car market is enjoying quite a streak of good sales. It could be about to hit a wall.

Trump and China Get Ready to Rumble

Trump has made his opening move with China. Investors shouldn't expect results from the negotiations soon. If anything, a prolonged period of surprises and trade tensions are in store.

How Congress Holds Monetary Policymakers Accountable

from the Richmond Fed

this post authored by Renee Haltom and Jessie Romero

In 1956, Federal Reserve Chairman William McChesney Martin Jr. stood before the Senate Committee on Banking and Currency to have his reappointment to the Board of Governors confirmed. Sen. Paul Douglas, D-Ill., went to great lengths to remind Martin who was in charge: "Mr. Martin, I have had typed out this little sentence which is a quotation from you: 'The Federal Reserve Board is an agency of the Congress,'" he said. "I will furnish you with Scotch tape and ask you to place it on your mirror where you can see it as you shave each morning." In 2013, Chairman Ben Bernanke was asked if he had any advice for incoming chair Janet Yellen. "The first thing to agree to," he replied, "is that Congress is our boss."

The Likelihood Of 2 Percent Inflation In The Next Three Years

from the Cleveland Fed

-- this post authored by Ellis W. Tallman

This Commentary examines inflation forecasts generated from a range of statistical models that historically have performed well at forecasting inflation. For each model, we look at the most likely future forecast path and the distribution of forecasts around that path. We show that the models project generally rising inflation, but, in contrast to other forecasts, five out of six models assign a less than 50 percent probability to inflation's being 2 percent or higher over the next three years.

The Tell: 5 things to know about the Dow's attempt to rally to 20,000 and beyond

Here are points that Dow watchers are making as the blue-chip barometer nears another big round number.

Futures Movers: Oil prices soar 4% after non-OPEC producers agree to cut output

Oil prices surge after a weekend deal to reduce output by a heavyweight producers outside of the Organization of the Petroleum Exporting Countries.

Metals Stocks: Gold falls, extending its 5-week skid

Gold futures retreat Monday, adding to the metal's five-week retreat as investors brace for a U.S. interest-rate rise that is expected later this week.

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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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