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26Jul2017 Pre-Market Commentary: Wall Street To Open Higher, New SP 500 Highs Expected, WTI Crude Pushes Into The Low 48 Handle

Written by Gary

US stock market index futures are up moderately (SPY +0.2%) and new record highs for the SP 500 are expected at the opening.


Here is the current market situation from CNN Money

European markets are higher today with shares in France leading the region. The CAC 40 is up 0.85% while London's FTSE 100 is up 0.43% and Germany's DAX is up 0.30%.

While the Fed is expected to keep its benchmark interest rate unchanged today, investors will be keeping a close eye on the central bank's statement. The focus will center around updated language on inflation and the timing of a long-awaited balance sheet reduction. The latest policy decision will come at 2 pm ET.

What Is Moving the Markets

Here are the headlines moving the markets.

Boeing second-quarter earnings top estimates; raises 2017 forecast again

(Reuters) - Boeing Co on Wednesday posted second-quarter profit and cash growth that beat analysts' estimates even though sales were less than expected, sending shares up sharply.

Lower tax rate fuels Ford beat, seen lifting full-year profit

DETROIT (Reuters) - Ford Motor Co on Wednesday reported a better-than-expected quarterly net profit due to a lower tax rate and increased U.S. sales of more-profitable pickup trucks, but forecast a slightly lower 2017 pre-tax profit and its shares dipped 1.2 percent in premarket trading.

Coca-Cola profit beats on demand for healthier drinks

(Reuters) - Coca-Cola Co reported a better-than-expected profit, helped by higher demand for its healthier non-carbonated beverages as well as low and no-sugar versions of its sodas, in the company's first quarter under new Chief Executive James Quincey.

Oil bounce, company results keep stocks on high

LONDON (Reuters) - Oil's rise back above $50 a barrel helped prod stock markets higher on Wednesday, while company results and economic data continued to soothe worries that the world economy may be ripe for a another slowdown.

Fed expected to leave rates unchanged; balance sheet in focus

WASHINGTON (Reuters) - The Federal Reserve is expected to hold interest rates unchanged on Wednesday and possibly hint that it will start winding down its massive holdings of bonds as soon as September in what would be a vote of confidence in the U.S. economy.

USTR Lighthizer: Trump challenging China's industrial policies - radio interview

WASHINGTON (Reuters) - The top U.S. trade negotiator said late on Tuesday that President Donald Trump is determined to challenge China's use of unfair subsidies and "non-economic" industrial policy to build up export industries that are costing American jobs.

Exclusive: Banks dealing EU sovereign debt may be dragged out of London

LONDON (Reuters) - Banks at the heart of EU government borrowing could be forced to move some operations out of London if they want to hold on to that business after Brexit, according to three senior bankers with knowledge of the matter.

D.R. Horton posts slowest order growth in three quarters

(Reuters) - No.1 U.S. homebuilder D.R. Horton Inc posted a quarterly profit that scraped past analysts' estimates, and the company reported its slowest growth in orders in three quarters.

Hilton's profit beats; raises earnings forecast again

(Reuters) - Hilton Worldwide Holdings Inc , the owner of the Waldorf Astoria hotel chain, reported a higher-than-expected quarterly revenue and profit, as more people booked rooms at higher prices, and raised its 2017 earnings forecast yet again.

Who Bought The New Greek Bonds: Here Is The Answer

After triumphantly returning to the bond market three years after it last issued a euro-denominated long bond (which one year later nearly defaulted when only a third bailout prevented Grexit), this morning Bloomberg has provided details of who the lucky buyers of the just priced 3BN bond offering were. And not surprisingly, the biggest source of new funds for the Greek government (which will then use most of this to pay interest owed to the ECB) were US buyers.

As Bloomberg notes, just under half, or 1.425BN of the 3BN deal was new money with 1.57b of existing paper rolled, with the following distribution of buyers into the new bonds by geography:



U.S. 44%

U.K./Ireland 26%

Greece 14%

France 7%

Spain/Portugal/Italy 3%

Germany/Austria 3%

Others 3%

By investor type:



Fund managers 46%

Hedge funds 36%

Banks/private banks 13%

Others 5%

Meanwhile, roughly half, or 1.574BN of the existing bondholders rolled into the new issue, as follows:



Greece 75%

France 11%

Switzerland 6%

U.K./Ireland 4%

U.S. 3%

Others 1%

And by investor type:



Banks/private banks 74%

Fund managers 16%

Hedge funds 5%

Insurance 4%

Others 1%

But the best news of all for this new batch of mostly American investors: the bonds are already profitable: the new 5Y bonds were trading tighter one day after the country's first sale in three years.

The spread on new Greek paper to the underlying Obl ~8bps lower, according to Bloomberg data. The bonds, which were launched at +476.7bps, are now being quoted by Greek banks at 99.32 bid, or +468.6bps as of noon London time.

Five Years Ago Today...

Time flies when you are printing money.

As Citi's FX desk is kind enough to remind us, it was five years ago today that Donald Trump was a businessman and TV personality, and ECB President Mario Draghi vowed that:

"The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough."

He then compared the common currency to an insect:

"The euro is like a bumblebee. This is a mystery of nature because it shouldn't fly but instead it does. So the euro was a bumblebee that flew very well for several years. And now -- and I think people ask "how come?"-- probably there was something in the atmosphere, in the air, that made the bumblebee fly. Now something must have changed in the air, and we know what after the financial crisis."

"Has Draghi succeeded?" Citi asks... "Where are we now?"

Looking at the chart below, it took two and a half years thereafter for EUR to fall back below that level but since then, we haven't seen the 1.20 level since January 2015.

It has been a slow and difficult (and at times highly uncertain) road, but it does seem to have been enough when it comes to growth. The Eurozone economies are gradually recovering, with Citi Economics recently revising higher its Q2 2017 GDP estimate to 0.7% QoQ. Hard data looks to be gradually catching up with strong sentiment signals. This is despite the recent strength in EUR and looming political uncertainties.

However ...

Senate Chaos Returns: Six Hours After Major GOP Victory, "Repeal And Replace" Is Voted Down

If this is what passes for a legislative victory in the Trump administration, the president may be in trouble.

Less than a day after the Senate GOP leadership mustered the minimum number of Republican votes necessary to begin debate on a bill to repeal Obamacare (and even then thanks only to a tiebreaking vote by Vice President Mike Pence), the Republican campaign to kill the legislation remains in chaos.

Just six hours after the successful vote to proceed, the Senate overwhelmingly rejected a plan to repeal and replace Obamacare, voting 43-57 against with 9 Republicans joining Democrats in the process. That plan requires 60 votes to pass because of its impact on the budget deficit, and without support from Democrats, that bill has a 0% chance of survival. The failed vote has dashed Republican hopes of replacing Obamacare with another plan.

Although Trump celebrated the motion to proceed at a rally in Youngstown, where he proclaimed that the US is now "one step closer to liberating our citizens from this Obamacare nightmare", the president's hopeful remarks ignore that Senate Republicans are still in chaos, especially after John McCain's fiesty speech in the Senate on Tuesday. As Reuters and a handful of other media outlets have reported, despite the success of the vote, the Senate GOP doesn't have enough support to pass any of its plans to repeal, or repeal and replace, Obamacare, as many moderates ...

Good News! YOU are Wealthier than Jared Kushner!

Feeling poor? Cash-strapped? Can't make payments on that Crackered-up pick-up truck? Jealous because you can't make 'funny money' work for you! Don't despair. You---yes, YOU---are wealthier than Jared the Eunuch.

I know it's tough for you. I know a good night's sleep in as rare as a sane Trump Tweet. You fret because you just cannot make ends meet. You try so hard to be a 'playa', but always come up short. You see soprano-voiced wimps like Jared the Eunuch living the high life, possibly sharing the carnal favors of a tall blonde strumpet with the POTUS himself, and all you've got is another 118 months of $369.72 per on that new F-150, and a 300 pound spouse with a cellulite-filled Cinnabun Butt. Sucks to be you. You're so up against it you want to dip your Glock into a glass of Maker's Mark and go meet the drink's namesake. You can't understand why that nerd can soar while you are so low you have to look up to see down. It's hashtag UNFAIR in bold.

Don't despair! All might be lost for you, but believe it or not it could be worse. As miserable and hopeless as things are for you---and don't fool yourself into thinking they are not, because they are---it's worse for Jared the Eunuch. He's not only broke, he has a bigly negative net worth.

If you were on this site back when it was primarily finance-based, you are all too familiar with 'funny money', debt servicing, cash flow, and maybe even cap rates. If so, you'll understand Jared's dilemma. He might well be setting an unenviable record.

Records are made to be broken, or so it is said. Some records, however, are such outliers that they are likely to stand forever. Think Cy Young's 511 wins. Wilt averaging 50 points a game for a season. George McGovern only winning Massachusetts and DC. Well, Jared The Thin Man(child) may set the mark for World's Poorest Man.

How can that be, you ask? While the kid isn't as nattily a ...

The Coming Squeeze for Shale Oil Drillers

Oil field services firms such as Halliburton and Schlumberger see more improvement in the U.S. shale patch, but their rising margins may come at the expense of oil and gas producers' profits.

AMD's New Chips Are Stacking Up

Strong results from the heavily shorted chip maker should calm some nerves.

Citigroup Sets High Bar for Itself

Citigroup shares have been on a tear. Did executives get too giddy on their future prospects?

If you can buy only one stock or ETF, make it this one

With this investment, you're tapping into the momentum of the market, says Nigam Arora.

Key Words: Trump: Apple's Tim Cook is promising a major stateside manufacturing push

Trump's revelation: that he's been in ongoing contact with Apple CEO Tim Cook and that Cook is making big — actually big, big, big — plans to onshore at least a portion of the Silicon Valley pioneer's manufacturing.

Outside the Box: The Apple Car could run traditional automakers off the road

Apple has an inside track to lead a radically new automobile industry, writes Vitaliy N. Katsenelson.

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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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