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20Jun2017 Pre-Market Commentary: Wall Street To Open Fractionally Lower, Tech Stocks Continue To Recover, Crude Prices Fall Further, US Dollar Up One Percent

Written by Gary

US stock index futures were fractionally in the red, but flat today (SPY -0.2% as technology stocks continued to recover from their steep selloff last week. Crude prices fell over 2% to a seven-month lows after news of increases in supply by several key producers.


Here is the current market situation from CNN Money

European markets are mixed today. The CAC 40 is up 0.11% while the DAX gains 0.04%. The FTSE 100 is off 0.08%.

With little data, Wall Street set to focus on Fed speeches

Today's Markets

In Asia, Japan +0.8%. Hong Kong -0.3%. China -0.1%. India flat.
In Europe, at midday, London +0.1%. Paris +0.3%. Frankfurt +0.3%.
Ten-year Treasury Yield flat at 2.18%

Today's Economic Calendar

8:30 Current Account
8:55 Redbook Chain Store Sales
3:00 PM Fed's Kaplan: Monetary Policy

Companies reporting earnings today »

What Is Moving the Markets

Here are the headlines moving the markets.

Boeing lifts 20-year industry demand forecast to $6 trillion

PARIS (Reuters) - Boeing raised its 20-year industry forecast for passenger and freight plane deliveries by 4 percent on Tuesday, though executives at the world's biggest airshow in Paris expect demand this year to cool from recent red-hot levels.

Whole Foods CEO hints at another brand under Amazon

(Reuters) - After Amazon.com Inc completes its takeover of high-end grocer Whole Foods Market Inc , it might launch another brand with different standards, the grocery chain's chief executive said in remarks reported in a securities filing on Monday.

Apple tells court Qualcomm chip licenses are invalid

(Reuters) - Apple Inc broadened a legal attack on Qualcomm Inc, arguing to a U.S. federal court that license agreements that secure the chip maker a cut of every iPhone manufactured were invalid.

Oil prices hit seven-month lows on global oversupply

LONDON (Reuters) - Oil prices fell to seven-month lows on Tuesday after news of increases in supply by several key producers, a trend which has undermined attempts by OPEC and other producers to support the market through reduced output.

Nestle buys stake in U.S. ready meals group Freshly

ZURICH (Reuters) - Nestle has acquired a minority stake in U.S. healthy ready meals group Freshly, as the Swiss food giant seeks to hone its distribution network in a rapidly changing U.S. market.

Germany to focus on free, fair trade at G20 summit: Merkel

BERLIN (Reuters) - Germany wants to make progress in its presidency of the Group of 20 leading economies on improving free and fair trade and will try to get broad agreement on open markets at next month's leaders' summit, Chancellor Angela Merkel said on Tuesday.

Tesla driver in fatal 'Autopilot' crash got numerous warnings: U.S. government

WASHINGTON (Reuters) - A man killed in a crash last year while using the semi-autonomous driving system on his Tesla Model S sedan kept his hands off the wheel for extended periods of time despite repeated automated warnings not to do so, a U.S. government report said on Monday

Pamplona Capital to take Parexel private for $4.5 billion

(Reuters) - U.S. pharmaceutical research services provider Parexel International Corp said on Tuesday it would be taken private by Pamplona Capital Management LLP in a $4.5 billion deal.

What Is The Market Telling Us?

Authored by Charles Hugh Smith via OfTwoMinds blog,

The entire global economy now depends on this stripped-of-information "market" for its stability.

Ho-hum, another day, another record high in the S&P 500 (SPX). What is this market telling us? If you're long, the market is screaming "you're a genius!":

But other than that, what else is the market telling us? Is it telling us anything about the real-world economy and the open market for equities based in that real-world economy?

Before we can answer "what is the market telling us?" we must first ask, "what can the market tell us?" That is, what is the current market capable of communicating?

This is the key question, for as we all know central banks have intervened in the market in an unprecedented fashion for over eight years. Central banks have transformed stock markets into signaling devices that are intended to boost the perception of increasing wealth, whether earnings and productivity are actually increasing or not.

The idea is to generate a "wealth effect" that encourages people to borrow and spend more as they feel their wealth is increasing. This "wealth effect" borrowing and spending will (so goes the assumption) overcome the stagnation of wages and spending, and spark a gloriously self-reinforcing consumer credit-spending binge.

This is considerably different from an open market of decentralized buyers and sellers, which reflects statistical data and sentiment regarding the real-world economy of sales, profits and productivity.

Traditionally speaking, the stock m ...

SocGen: The Fed Is Raising Rates Too Slowly To Contain Asset Bubbles

Yesterday, when looking at the divergence between the slowing US economy and the Fed's insistence on hiking rates, Bank of America's David Woo asked if there is a different motive behind the Fed's tightening intentions, namely is the Fed trying to pop the market asset bubble:

"Can it be the case that its hawkishness was prompted by something other than its reading of the economy? For example, is it possible that the Fed has become concerned about the recent surge in the equity market, especially tech stocks that has been feeding off low interest rates and low volatility? According to our equity strategists, the P/E of the tech sector (19x) is currently at its highest levels post-crisis while the EV/Sales ratio is at the highest sinec the Tech Bubble"

Today, in a note which may have been inspired by BofA's rhetorical question, SocGen's FX strategist Kit Juckes picks up on what Woo said and notes that "Whether the Fed is raising rates too fast given their inflation mandate or not, they are raising them too slowly to contain asset price inflation." Which, incidentally is confirmed by the latest Goldman data on financial conditions, which since the Fed's 2nd rate hike of 2017 have continued to loosen and were "easier" by anotehr 5.4 bps

There's more. In his note titled "A real test for the party mood", Juckes highlights the divergence between 10Y TIPS and the dollar, and wonders if the yield on the inflation indicatior, whi ...

Frontrunning: June 20



Central bank caution beefs up stock gains (Reuters)

Pound Drops as BOE's Carney Says Not Yet Time to Raise Rates (BBG)

Oil Just Hit Its Lowest Level of the Year (BBG)

Britain charges Barclays, ex-bosses over 'unlawful' Qatari deal (Reuters)

Senate GOP Sets Ambitious Deadline on Health-Care Vote (WSJ)

Both Parties Have a Lot to Lose in Georgia and S.C. Special Elections (WSJ)

House speaker vows to complete tax reform in 2017 (Reuters)

The New Face of Trump's Legal Team Is the Christian Right's Pitbull (BBG)

Russia probe focuses on role of Flynn partner (Reuters)

Among the iPhone's Biggest Transformations: Apple Itself (WSJ)

Democrats protest Senate Republican healthcare secrecy (Reuters)

Texas Is Too Windy and Sunny for Old Energy Companies to P ...

Australia Suspends Military Flights Over Syria, Citing "Potential Threats" From Russia

Russia's Monday decision to suspend a memorandum of cooperation with the US-led coalition in retaliation after a US jet shot down a Syrian Army plane has rattled some US allies, who fear escalating tensions between Russia and the coalition. In what it called a "precautionary measure," Australia became the first coalition member to suspend flights in Syria, claiming it's too dangerous for its planes to fly without the agreement, according to BBC.

"As a precautionary measure, Australian Defense Force (ADF) strike operations into Syria have temporarily ceased," Australia's Department of Defense said in a statement, adding its operations in Iraq would continue as part of the coalition."

"ADF personnel are closely monitoring the air situation in Syria and a decision on the resumption of ADF air operations in Syria will be made in due course."

"Australian Defense Force protection is regularly reviewed in response to a range of potential threats," the Department of Defense said.

Australia has deployed about 780 military personnel as part of the US-led coalition fighting the Islamic State in Iraq and Syria

The BBC notes that Australia has a small but highly capable contingent of six F/A-18 strike aircraft; a tanker; and an E-7A Wedgetail early warning aircraft, all based at Al Minhad in the United Arab Emirates. Most of the Australian strikes have been in Iraq, though its aircraft do also operate over Syria. Australian commanders will reassess the situation in due course. The more fundamental question is what the Russian threat actually amounts to. Is it just rhetoric or does Moscow want to deny certain areas of Syrian airspace to US-led ...

Amazon Shops Locally, But Spreads Fear Globally

The tech giant's $13.7 billion acquisition of Whole Foods has set alarm bells ringing around the world—perhaps prematurely.

What Virtual Reality Needs to Get Real

High-end VR hasn't created a large enough installed base of customers for game publishers to commit major development dollars. And without must-have games, virtual reality just won't break out of its niche.

Avocado Toast Looks a Better Bet Than Australian Housing

Australia's housing market is particularly vulnerable as Chinese buyers are stymied by capital controls.

Prices On Black Gold Plummet: Is The Future Of Investor Economy Safe?

Written by Econintersect

The experts said it before, oil is no longer the most valuable global resource. This revelation seems to hold water given the current economic atmosphere in the oil market. Oil prices are plummeting dramatically with no hope of rising soon. What does this mean to a potential investor?

Amazon's Whole Foods deal makes online grocery 'prime' for acceleration

Amazon's acquisition of Whole Foods could speed the process of online grocery adoption, some experts say

Mark Hulbert: Here's one thing the bulls can cross off their worry list

This is why analogies to the top of the internet bubble fall flat, writes Mark Hulbert

Use this simple strategy to profit from choppy summer trading

Pocket short-term gains with a proactive strategy like this "Lock and Walk" approach.

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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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