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16Jan2017 Pre-Market Commentary: Wall Street Closed For MLK Holiday, European Markets Lower, Crude Prices Slip, Investors Await Serious Market Correction As Some Bearish Analysts Claim The Sky Is About To Fall

Written by Gary

Today is MLK Holiday in the US and all markets are closed. The British pound tumbled to the lowest level since October's flash crash on Monday, European equities were lower in mid-morning trade, following a brief spike overnight (as China intervened in its equity market), crude prices slipped lower, testing towards a $51 handle.


Here is the current market situation from CNN Money

European markets finished broadly higher on Friday with shares in France leading the region. The CAC 40 is up 1.20% while Germany's DAX is up 0.94% and London's FTSE 100 is up 0.62%.

What Is Moving the Markets

Here are the headlines moving the markets.

Investors turn wary as Brexit, Trump uncertainty grows

LONDON (Reuters) - Investors sold sterling and stocks in Europe and Asia on Monday, seeking shelter in gold and the Japanese yen as uncertainty over Britain's departure from the European Union and the policies of U.S. President-elect Donald Trump curbed appetite for risk.

Trump threatens German carmakers with 35 percent U.S. import tariff

FRANKFURT/BERLIN (Reuters) - U.S President-elect Donald Trump warned German car companies he would impose a border tax of 35 percent on vehicles imported to the U.S. market, a plan that drew sharp rebukes from Berlin and hit the automakers' shares.

Trade tensions, dollar danger cloud economic optimism in Davos

DAVOS, Switzerland (Reuters) - A trade war between the United States and China and a strengthening dollar are among the biggest threats to a brightening global economic outlook, according to leading economists at the World Economic Forum in Davos.

Exclusive: China to target around 6.5 percent growth in 2017 - sources

BEIJING (Reuters) - China will lower its 2017 economic growth target to around 6.5 percent from last year's 6.5-7 percent, policy sources said, reinforcing a policy shift from supporting growth to pushing reforms to contain debt and housing risks.

Profit growth pickup could justify Wall Street rally

NEW YORK (Reuters) - U.S. companies are set to report their strongest profit growth in two years, which could go a long way toward justifying Wall Street's record-breaking rally, say stock investors who anticipate many companies will top expectations.

Luxottica and Essilor agree 46 billion euro merger to create eyewear giant

MILAN/PARIS (Reuters) - Italy's Luxottica and France's Essilor have agreed a 46 billion euro ($49 billion) merger to create a global powerhouse in the eyewear industry with annual revenue of more than 15 billion euros, they said in a statement on Monday.

South Korea prosecutor seeks arrest of Samsung chief for bribery

SEOUL (Reuters) - South Korea's special prosecutor on Monday sought a warrant to arrest the head of Samsung Group [SAGR.UL], the country's largest conglomerate, accusing him of paying multi-million dollar bribes to a friend of President Park Geun-hye.

Saudi pledges adherence to oil cut, confident others will

ABU DHABI (Reuters) - Saudi Arabia will adhere strictly to its commitment to cut output under the global agreement among oil producers, its energy minister said on Monday, expressing confidence that OPEC's plan to prop up prices would work.

Hard Brexit fears crunch sterling ahead of PM May speech

LONDON (Reuters) - Britain's pound fell sharply on Monday as concern mounted that the country was heading for a "hard" Brexit from the European Union and its single market, a day before a speech by Prime Minister Theresa May on the government's plans.

Oil Slides After Saudis Suggest Early End To OPEC Deal

Following a brief spike overnight (as China intervened in its equity market), crude prices slipped lower, testing towards a $51 handle after Saudi Arabia says OPEC is on track to wrap up its production curbs by the middle of the year, potentially leaving its aim of clearing a global oil glut unfinished.

As Bloomberg reports, OPEC and Russia won't need to prolong output cuts beyond June because the agreed reductions will have already ended the oversupply in world crude markets, Saudi Minister of Energy and Industry Khalid Al-Falih said in Abu Dhabi on Monday. However, ending the deal by mid-year and restoring production would mean the surplus just starts building again, thwarting OPEC's ambition of whittling down bloated oil inventories.

The Organization of Petroleum Exporting Countries said that draining off a stockpile "overhang" of more than 300 million barrels -- enough to supply China for almost a month -- was the main aim of supply curbs agreed with Russia and other producers. Twenty-four nations signed up to a joint cutback of 1.8 million barrels a day on Dec. 10.

If they extend the deal for six months beyond its scheduled expiry in June, that surplus will be entirely eliminated by the end of the year, according to Bloomberg calculations based on data from the International Energy Agency. If they don't extend the deal, and restore output to previous levels, about two-thirds of that glut will remain in plac ...

China Warns Trump "It Will Take Off The Gloves" If He Continues To Provoke Beijing

In the latest indication that China is becoming increasingly unsettled by Trump's relentless attacks on legacy diplomacy with China, and especially the "One China" policy, two leading state-run newspapers warned on Monday that Beijing will "take off the gloves" and take strong action if Trump continues to provoke Beijing over Taiwan once he assumes office.

The reaction was provoke by Trump's latest US interview, in which he told the WSJ that the "One China" policy was up for negotiation. China's foreign ministry, in response, said "One China" was the foundation of China-U.S. ties and was non-negotiable.

"If Trump is determined to use this gambit in taking office, a period of fierce, damaging interactions will be unavoidable, as Beijing will have no choice but to take off the gloves," the otherwise calm English-language China Daily said. It added that Beijing's relatively measured response to Trump's comments in the Wall Street Journal "can only come from a genuine, sincere wish that the less-than-desirable, yet by-and-large manageable, big picture of China-U.S. relations will not be derailed before Trump even enters office".

But China should not count on the assumption that Trump's Taiwan moves are "a pre-inauguration bluff, and instead be prepared for him to continue backing his bet". "It may be costly. But it will prove a worthy price to pay to make the next U.S. president aware of the special sensitivity, and serious consequences of his Taiwan game," said the national daily.

The far more fiery state-run nationalist tabloid, The Global Times, echoed the China Daily, saying Beijing would take "strong countermeasures" against Trump's attempt to "impair" the "One China" principle.

"The Chinese mainland will be prompted to speed up Taiwan reunification and mercilessly combat those who advocate Taiwan's independence," the paper said in an editorial.

The official statement, while less provocative, w ...

South Korea Seeks Arrest Of Samsung Chief For Bribery, Embezzlement And Perjury

South Korea political crisis spilled over into the corporate sector overnight, when the country's special prosecutor on Monday sought a warrant to arrest the head of Samsung Group, the country's largest conglomerate, accusing him of paying multi-million dollar bribes to a friend of impeached President Park Geun-hye.


Samsung Electronics vice chairman Jay Y. Lee

According to Reuters, investigators had grilled the head of Samsung, the world's biggest maker of smartphones, flat-screen TVs and memory chips, Jay Y. Lee for 22 straight hours last week as a suspect in a corruption scandal, which last month led to parliament impeaching president Park.

The special prosecutor's office accused Lee of paying bribes total 43 billion won ($36.42 million) to organizations linked to Choi Soon-sil, a friend of the president who is at the center of the scandal, in order to secure the 2015 merger of two affiliates and cement his control of the family business.

The 48-year-old Lee, who became the de facto head of the Samsung Group after his father, Lee Kun-hee, was incapacitated by a heart attack in 2014, was also accused of embezzlement and perjury, according to the prosecution's application for an arrest warrant.

In a startling admission that in Korea the concept of "Too Big To Prosecute" does not hold sway, the special prosecutors' office told a media briefing that "in making this decision to seek an arrest warrant, determined that while the country's economic conditions are impo ...

Gold Lower Before Trump Presidency - Strong Gains Akin To After Obama Inauguration?

Gold Lower Before Trump Presidency - Strong Gains Akin To After Obama Inauguration

Gold prices have had a good start to 2017 and has made gains in the majority of currencies, building on the strong gains seen in 2016. So far in 2017, gold is 3.5% higher in dollars, 2.3% higher in euros and 4% higher in sterling.

gold-price-currenciesgold-annual-returns-obama

Gold Annual Returns During First Four Years Of Obama Presidency - Goldprice.org

Increasing nerves re ...

Geopolitical Worrywarts May Have Their Day at Davos

It is time to pay more attention to the geopolitical party poopers at Davos. While the world certainly hasn't been peaceful, several years have gone by since a conflict or act of terror had a meaningful global economic impact. This year, though, economic ripples from latent conflicts are a realistic threat.

Xi Strides Into Davos, Problems Lurking Behind

A year ago, China came to Davos with one highly important task: calm the world down about its tottering financial markets. A year hence, many of those problems have been swept under the rug.

Few Places for Bond Investors to Hide

As investors fall out of love with President-elect Donald Trump, they are rekindling some affection for bonds.

Why Doesn't Capital Always Flow To High-Growth Areas?

from the St Louis Fed

It seems natural that capital would flow into countries with higher capital productivity and economic growth. A recent Economic Synopses essay, however, explores why capital doesn't always flow to the highest growth regions.

Key Words: Oxfam blasts 'grotesque' wealth of world's 8 richest men

Eight billionaires have as much wealth as the poorest half of the world, says international charity Oxfam.

London Markets: FTSE 100 seesaws, pound slides on 'hard Brexit' fears

U.K. stocks are wandering around the flatline Monday and the pound was dragged down as investors brace for the renewed prospect of the U.K. being taken out of the European Union's single market.

Key Words: German minister to Trump after tax threat: 'The U.S. needs to build better cars'

Sigmar Gabriel, Germany's economy minister, responds to Trump's warning of high tariffs for imported German car models by saying it's the wrong response to a failing U.S. auto industry.

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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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