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30May2017 Pre-Market Commentary: Market Set To Open Flat, Global Markets In The Red

Written by Gary

Just the beginning of a short trading week with oil slipping and bonds strengthening - all counterintuitive to the headlines. A read through the headlines is a demonstration of uncertainty.


Here is the current market situation from CNN Money

European markets are lower today with shares in France off the most. The CAC 40 is down 0.78% while London's FTSE 100 is off 0.53% and Germany's DAX is lower by 0.14%.

What Is Moving the Markets

Here are the headlines moving the markets.

Europe feels the heat as political temperatures rise

LONDON (Reuters) - European shares fell for a fourth day running on Tuesday and the euro was battling to avoid a similar fate, as the prospect of early Italian elections and Greece's ongoing struggles nudged up the political temperature gauge again.

Oil slips on oversupply worries despite OPEC deal

LONDON (Reuters) - Oil prices fell on Tuesday, pressured by concerns that production cuts by the world's big exporters may not be enough to drain a global glut that has depressed the market for almost three years.

British Airways says IT systems running again after weekend outage

LONDON (Reuters) - British Airways said it expected to deliver a full schedule of flights from London's Heathrow and Gatwick airports on Tuesday after its computer network recovered from an outage which left 75,000 passengers stranded over the weekend.

Greece denies report it may opt out of receiving more bailout money

ATHENS (Reuters) - Greece on Tuesday denied a German newspaper report it could opt out of receiving bailout loans needed to make a July debt repayment if its lenders fail to offer clear debt relief terms to the crisis-hit country despite it having passed more reforms.

U.S. companies no longer know rules of game under Trump, Hasbro director says

CASCAIS, Portugal (Reuters) - Confusion surrounding the trade policies of U.S. President Donald Trump's administration means U.S. companies no longer know the rules of the game, a board member and former CEO of toymaker Hasbro told an international conference on Monday.

LSE to buy Citi's bonds analysis and indexes business for $685 million

(Reuters) - London Stock Exchange (LSE) has agreed to buy The Yield Book, Citigroup's fixed-income analytics service and also its related indexing business, for $685 million in cash, the companies said on Tuesday.

Novartis has assets to sell, investors wary of what it might buy

ZURICH (Reuters) - As Novartis considers asset sales that could raise $50 billion, investors are worried any cash raised may give the Swiss drugmaker firepower for another unsuccessful megadeal.

New Russian jet heralds carbon manufacturing shake-up

PARIS (Reuters) - Russia's new jetliner, which conducted its maiden flight on Sunday, may have a hard time challenging the sales duopoly of Boeing and Airbus, but it does point the way to radical changes in how they could be building jets in the future.

Blackwater founder's FSG buys stake in Chinese security school

BEIJING (Reuters) - Hong Kong-listed Frontier Services Group (FSG), co-founded by former U.S. military services contractor Erik Prince, said it had acquired 25 percent of a Chinese security training facility, the company's latest move to tap into China's Belt and Road development plan.

Greek, Italian Risks Weigh On European, Global Markets; Oil, Gold Slide

Tuesday's session started off on the back foot, with the Euro first sliding on Draghi's dovish comments before Europarliament on Monday where he signaled no imminent change to ECB's forward guidance coupled with a Bild report late on Monday according to which Greece was prepared to forego its next debt payment if not relief is offered by creditors, pushing European stocks lower as much as -0.6%. However the initial weakness reversed after Greece's Tzanakopoulos denied the Bild report, sending the Euro and European bank stocks higher from session lows. S&P futures are fractionally lower, down 3 points to 2,410.

Elsewhere, the Japanese yen rallied after strong retail sales data while US Treasuries ground higher after returning from a long weekend largely unchanged; Australian government bonds extend recent gains as 10-year yield falls as much as four basis points to 2.37%. Asian stock markets and were modestly lower; Nikkei closed unchanged despite a stronger yen. China and Hong Kong remained closed for holidays while WTI crude was little changed.

Despite the rebound, the Stoxx Europe 600 Index declined a fourth day as data showed that contrary to expectations of a record print, euro-area economic confidence fell for the first time this year, and as Draghi's dovish comments to the European Parliament weighed on banking shares. As discussed yesterday, Italian bonds edged lower as traders digest the prospect of an earlier-than-expected election.

The Fed Is About To Hike: Why That Is Bullish For Bonds

With the market pricing in near certainty of a June rate hike despite the Fed's tacit warning that it would like to see evidence the recent economic slowdown is over, a recurring question among trading desks is why aren't long-dated bonds selling off more, or rather why is the 10 and 30Y seemingly bid the closer we get to the next Fed hike with everyone - from hedge funds, to central banks to primary dealers - buying in surprising amounts.

Overnight, an answer came from Wes Goodman, a Bloomberg columnist, who explains that the more the Fed hikes, the more bullish it is for bonds, i.e., the entire market is once again betting on "policy error" by the Fed.

Here is latest Macro View note titled "The Fed Is Going to Hike. That's Bullish for Bonds"

The Fed's likely rate hike next month will probably send Treasury yields lower, and investors from hedge funds to banks are loading up on U.S. government debt ahead of the move.

Contrary to conventional wisdom, Treasuries have rallied following the last three rate increases. Instead of sending yields higher, the hikes are driving speculation that rising short-term borrowing costs will curb the economic expansion and make it tougher for the Fed to sustain its 2% inflation target.

Hedge funds and other large speculators boosted their net long position in 10-year futures to the highest level in almost a decade.

U.S. commercial bank holdings of Treasuries and agency debt surged the most in 16 months in the latest weekly data, extending a record high.

Treasuries held by foreign central banks in custody at the Federal Reserve rose this month to the most since June 2016.

"This Market Is Crazy": Hedge Fund Returns Hundreds Of Millions To Clients Citing Imminent "Calamity"

While hardly a novel claim - in the past many have warned that Australia's housing and stock market are massive asset bubbles (which local banks were have been forced to deny as their fates are closely intertwined with asset prices even as the RBA is increasingly worried) - so far few if any have gone the distance of putting their money where their mouth was. That changed, when Australian asset manager Altair Asset Management made the extraordinary decision to liquidate its Australian shares funds and return "hundreds of millions" of dollars to its clients according to the Sydney Morning Herald, citing an impending property market "calamity" and the "overvalued and dangerous time in this cycle".

"Giving up management and performance fees and handing back cash from investments managed by us is a seminal decision, however preserving client's assets is what all fund managers should put before their own interests," Philip Parker, who serves as Altair's chairman and chief investment officer, said in a statement on Monday quoted by the SMH.

New Generation Of Bombs Undetectable By Airport Scanners: What's The Solution?

Authored by Mike Shedlock via MishTalk.com,

In response to Homeland Security Ponders Laptop Ban On All International Flights: Surefire Way to Stop Bombs on Planes reader Brindu sent a pair of interesting links discussing new bombs that airport scanners cannot detect.

Please consider U.S. Believes ISIS' Bomb-Making Research Includes New Generation of Explosives.

Amid the bombed-out ruins of Mosul University, U.S. officials say they have uncovered evidence that the Islamic State of Iraq and Syria (ISIS) was developing a new type of bomb that could pass through an airport scanner undetected.

CBS News joined Iraqi Special Forces in Mosul just days after the hard-fought battle to recapture the University in January. It's long been believed that Mosul University was the center of the militants' bomb-making projects, using the school's equipment and labs.

Now, U.S. officials believe that research includes a new generation of more powerful explosives that could be concealed in a computer.

When ISIS overran Mosul in 2014, they also captured the city's international airport. And with it, all the modern security scanner and screening equipment necessary to test their new bombs.

Why U.S. Natural Gas Demand Is Closer to Tipping the Market

Just a decade or so ago, energy traders believed that using natural gas to generate electricity instead of coal was akin to bringing Dom Pérignon to a party where Budweiser would do. How times have changed. The country is several years into a natural gas glut while several coal producers have gone bust.

S.F. Express Needs UPS Tie-Up to Deliver

S.F. Express needs a tie-up with UPS to go very well to justify its sky-high valuation.

Japan's Banks Could Benefit From Riskier Lending

Major Japanese banks have been issuing more subordinated loans. That could raise their income and speed up reform in Japan.

Infographic Of The Day: Measuring Perceptions Of Uncertainty

What is the difference between an event that is probable and one that is highly likely?

Early Headlines: Asia Stocks Mixed, Dollar Flat, Oil Down, Gold Up, Senate Turf Wars Over Russia, Euro Crisis Fades, BA Massive Fail, Japan Labor Mkt Tight, North Korea Surprise, And More

Written by Econintersect

Early Bird Headlines 30 May 2017

Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.

early-bird-301-180

Opioids are ravaging the U.S., but they're still the best pain drug we've got

The quest has seemed so elusive that it regularly draws comparison to the Holy Grail and unicorns.

Need to Know: These tech stocks are the next superstars, ready for a breakout

May could be building to a historic month for tech stocks. That doesn't mean investors aren't wary, but our call of the day says there are still unearthed treasures in this market. These stocks are the next tech superstars.

ShotSpotter IPO: Five things to know about the gunshot-detection company

ShotSpotter, a gunshot-detection company with the goal of reducing gun violence in violence-racked cities, is aiming for Wall Street. .

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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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