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26Jun2017 Pre-Market Commentary: Wall Street To Open Higher, Durable Goods Slip, Crude Prices Rise And Investors Flee Gold

Written by Gary

US stock index futures are higher (SPY +0.3%) and the markets are expected to open moderately higher although 'Durable Goods' came in lower than expected. Crude prices have rebounded +0.6% and gold has slipped over 1.2%.

Here is the current market situation from CNN Money

European markets are broadly higher today with shares in France leading the region. The CAC 40 is up 1.02% while Germany's DAX is up 0.79% and London's FTSE 100 is up 0.66%.

Orders for durable goods backslide again

WASHINGTON (MarketWatch) — Orders for durable goods such as planes and computers fell in May for the second month in a row and registered the biggest drop in six months, suggesting that an early-year surge has faded.

Durable-goods orders slipped 1.1% last month following a similar drop in April, the government reported Monday. Economists polled by MarketWatch had forecast a 0.8% decline.

Oil, banks in the spotlight for traders on Wall Street

Looking at the last three columns (below), the first one (Actual), is what was reported this morning. The second column (Forecast) is what analysts had forecast and the third column is the previous report. Full calendar HERE.

What Is Moving the Markets

Here are the headlines moving the markets.

Stock futures higher as oil prices rebound

(Reuters) - U.S. stock index futures were higher as oil prices rebounded, while investors awaited economic data for a reading on the health of the economy.

Oil holds above November lows but under threat from U.S. supply

LONDON (Reuters) - Oil edged up for a third straight session on Monday, climbing off last week's seven-month lows but with gains capped by the relentless rise in U.S. supply and bloated global inventories.

Japanese airbag maker Takata files for bankruptcy, gets U.S. sponsor

TOKYO (Reuters) - Japan's Takata Corp , the firm at the center of the auto industry's biggest ever product recall, filed for bankruptcy protection in the United States and Japan, and said it would be bought for $1.6 billion by U.S.-based rival Key Safety Systems.

U.S. activist presses for 'bold action' at Nestle

(Reuters) - Nestle is under pressure from U.S. activist shareholder Third Point, which has taken a $3.5 billion stake in the food maker and is pushing Europe's largest company to improve margins, buy back shares and get rid of non-core businesses.

'Pharma bro' Martin Shkreli heads into fraud trial

NEW YORK (Reuters) - Martin Shkreli, the pharmaceutical entrepreneur vilified as the "pharma bro" for raising the price of a life-saving drug by 5,000 percent, will go on trial on Monday for what U.S. prosecutors called a Ponzi-like scheme at his former hedge fund and a drug company he once ran.

Clogged oil arteries slow U.S. shale rush to record output

GUERNSEY, WYOMING (Reuters) - A gallon of gasoline that allows a driver on the U.S. East Coast to travel about 25 miles has already navigated thousands of miles from an oil field to one of the world's largest fuel markets.

Facebook in talks to produce original TV-quality shows: WSJ

(Reuters) - Facebook Inc is in talks with Hollywood studios about producing scripted, TV-quality shows, with an aim of launching original programming by late summer, the Wall Street Journal reported on Sunday.

EU court seen ruling on Intel antitrust case next year: judge

PARIS (Reuters) - Europe's top court is likely to rule on Intel's appeal against a record 1.06 billion euro ($1.19 billion) EU antitrust fine next year, an EU judge said on Monday, a case that may affect companies such as Google and Qualcomm in the EU's crosshairs.

Pharmacy executive tied to 2012 U.S. meningitis outbreak to be sentenced

BOSTON (Reuters) - A former Massachusetts pharmacy executive who was convicted of racketeering and fraud charges for his role in a deadly U.S. meningitis outbreak in 2012 is scheduled to be sentenced on Monday.

A Stock Market Crash Scenario

Authored by Charles Hugh Smith via OfTwoMinds blog,

The one thing we can know with certainty is it won't be easy to profit from the crash.

After 8+ years of phenomenal gains, it's pretty obvious the global stock market rally is overdue for a credit-cycle downturn, and many research services of Wall Street heavyweights are sounding the alarm about the auto industry's slump, the slowing of new credit and other fundamental indicators that a recession is becoming more likely.

Few have taken the risk of projecting a date for the crash, this gent being a gutsy outlier: Hedge Fund CIO Sets The Day When The Next Crash Begins.

Next February is a good guess, as recessions and market downturns tend to lag the credit market by about 9 months.

My own scenario is based not on cycles or technicals or fundamentals, but on the psychology of the topping process, which tends to follow this basic script:

When there are too many bearish reports of gloomy data, and too many calls to go long volatility or go to cash, the market perversely goes up, not down.

Why? This negativity creates a classic Wall of Worry that markets can continue climbing. (Central banks buying $300 billion of assets a month helps power this gradual ascent most admirably.) The Bears betting on a decline based on deteriorating fundamentals are crushed by the steady advance.

As Bears give up, the window for a Spot of Bother decline creaks open, however grudgingly, as central banks make noises about ending thei ...

Key Events In The Coming Busy Week: Yellen, Inflation, Durables And GDP

It's set to be a busy week with a a jam-packed agenda for central bank watchers, with speeches due from Janet Yellen, Mario Draghi, Mark Carney, Haruhiko Kuroda and more. Economic data may also drive momentum in financial markets, with closely watched reports due on inflation, employment, manufacturing and housing from China to the U.S. We also have GDP, durable goods and consumer confidence in US, industrial production in Japan and confidence indexes in EA

Key highlights:

In the US, it will be a busy week with durable & capital goods orders, pending home sales, core PCE inflation, personal income & spending and multiple Fed speakers on the agenda.

In the Eurozone, key releases include money supply M3, CPI and confidence data. There will also be a central banking forum with ECB, BoJ, BoE and BoC speakers in the schedule.

In UK, we wait for final GDP, credit & lending data, house prices and money supply M4.

In Japan, main releases include retail sales, CPI and industrial production.

In Canada, beyond GDP, we will hear from BoC speakers.

In China, we will have current account balance and PMIs.

The focus is on inflation releases in US (PCE), EZ and Japan. The attention on these releases should remain high given recent market action: declining oil and inflation was cited as one of the main reasons that supported the recent downward move in long-end rates.

A breakdown of key events just in the US:

A summary of all the key DM events in the coming week is below:

Frontrunning: June 26

Italian Bank Deal Raises Questions About Eurozone Rules (WSJ)

UK PM May strikes $1.3 billion deal to get Northern Irish DUP support for her government (Reuters)

Nestle Targeted by Dan Loeb in Activist's Biggest-Ever Bet (BBG)

Nestle 'committed' to strategy as activist investor moves in (Reuters)

Troubled Air-Bag Maker Takata Files for Bankruptcy (WSJ)

Merkel's Election Opponent Slams Her for Being Too Nice to Trump (BBG)

Berlusconi Stages Comeback to Frontline Politics (BBG)

European Stocks Jump as Crude, Nestle Power Gains (BBG)

Amazon's Grocery Ambitions Spell Trouble for Food Brands (WSJ)

Clogged oil arteries slow U.S. shale rush to record output (Reuters)

U.S. warship stayed on deadly collision course despite warning - container ship captain (

SocGen: "Fundamentals No Longer Matter? Yeah Right..."

Following JPM's calculation that only 10% of trading is fundamentally driven by flesh-and-blood investors, and increasing rumblings that traders now exist at the mercy of machines, many of which respond merely to fund flows and not fundamentals, SocGen's Andrew Lapthorne cross-asset strategist will have you know that he will have none of that nonsense, and in a note that is sure to spark strong reactions across Wall Street, writes this morning that "with all the talk of systematic and passive investment dominating markets and, conversely, the apparently low participation of fundamentally-driven investors in daily stock flows (which we also see), many are concluding (we'd say once again) that stock fundamentals no longer matter."

We disagree. There remains a clear correlation between changes in bottom-up consensus earnings expectations and relative share price movement - see charts below. So it is not that changes in fundamentals are not driving share prices, it is that predicting those changes is ('twas ever thus) incredibly difficult.

What is Lapthorne's thesis? Qite the opposite of what is slowly becoming conventional knowledge, namely that value investing is dead (as Goldman recently suggested tongue-in-cheek), and that fundamentals no longer matter. Here's why:

Many also argue that quantitative systems ignore these fundamentals. However the inverse is perhaps more accurate. Any systematic strategy formulated around any notion of price momentum (we'd put volatili ...

Why Italy's Bank Rescue Looks a Backward Step for Europe

A sweetheart deal to wind down two small banks raises wider questions about state support for lenders.

Ties Between Chinese Banks and Deal Makers Run Deep

Whether or not the ties between banks and companies like HNA amount to systemic risk, it's clear the relationships are complex

Why Failure Would Be a Virtue in Banking

Support measures and regulations to protect the financial system that have been put in place since the financial crisis are propping up banks that in normal times would shrink, close down or get bought. Some of these need re-examining.

In One Chart: The cheapest and priciest approaches to car ownership — in one handy chart

Want to make sure your car won't wreck your budget? Here's a chart that might help.

Bond Report: Treasury yields steady before durable goods data

Durable orders and the Chicago Fed's National Activity Index will both be released at 8:30 a.m. Eastern

Key Words: Trump calls Obama a copycat for labeling Republican health bill 'mean'

President Donald Trump confirmed Sunday he had called the House-approved health-care bill "mean," and claimed former President Barack Obama stole that descriptor from him.

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