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04Aug2017 Pre-Market Commentary: Wall Street Headed For A Strong Opening, DOW Looking For New Historic Highs, US Dollar Is Making A Strong Move Upward

Written by Gary

US stocks index futures are modestly higher this morning (SPY +0.2%) after the monthly employment numbers for July came in above expectations. Stocks, gold and most metals headed for a fourth week of gains.


Here is the current market situation from CNN Money

European markets are higher today with shares in Germany leading the region. The DAX is up 0.55% while London's FTSE 100 is up 0.38% and France's CAC 40 is up 0.13%.

What Is Moving the Markets

Here are the headlines moving the markets.

Payrolls for starter, trade war for main?

LONDON (Reuters) - Stocks, gold and most metals headed for a fourth week of gains on Friday, as fresh political woes for U.S. President Donald Trump and the prospect of a trade war with China kept the dollar depressed ahead of U.S. payrolls figures.

Stock futures extend gains after strong employment data

(Reuters) - U.S. stocks index futures extended gains on Friday after a report from the Labor Department showed monthly employment numbers for July came in above expectations.

Exclusive: China regulators plan to crack down further on overseas deals

HONG KONG (Reuters) - China plans to further tighten the screws on overseas acquisitions by Chinese companies and borrowing to fund those transactions, and has started closely scrutinizing the commercial aspects of the deals, three people familiar with the move said.

Toyota and Mazda link up to build $1.6 billion U.S. plant, develop electric cars

TOKYO (Reuters) - Toyota Motor Corp and Mazda Motor Corp plan to build a $1.6 billion U.S. assembly plant, the two said on Friday, as part of an alliance that will also see the Japanese automakers jointly develop electric vehicle technologies.

Uber knowingly rented out faulty cars, WSJ says; firm says it's fixed the problem

SINGAPORE (Reuters) - Uber Technologies Inc knowingly rented its drivers defective cars at risk of catching fire, the Wall Street Journal reported on Friday, and the ride-hailing firm said it moved to fix the problem after one of the vehicles suffered a fire.

Global refiners brace themselves as China cements its oil market dominance

SINGAPORE/BEIJING (Reuters) - China is on pace to overtake the United States as the world's biggest oil importer this year, cementing its status as Asia's most pivotal oil market actor that will increasingly dominate the region's fuel trade.

ADP says Ackman's Pershing Square seeking control of company

(Reuters) - William Ackman's Pershing Square Capital Management is seeking effective control of Automatic Data Processing Inc by nominating five directors to its board, the HR services provider said in a statement on Friday.

Daimler defends use of German auto industry committees

FRANKFURT (Reuters) - German carmaker Daimler defended industry committees on Friday, as cartel authorities examine allegations of collusion between BMW , Mercedes, Porsche, Audi and Volkswagen .

Nothing cold about sub-zero rates, IMF researchers find

LONDON (Reuters) - Negative interest rates imposed by central banks have generally worked as a tool to boost inflation, pulling down yields and sometimes weakening currencies, International Monetary Fund research has concluded.

Central Banks Stumped As Global Inflation Hits Lowest Level Since 2009 - Here's Why

Authored by Mike Shedlock via MishTalk.com,

Yesterday, I commented on "transitory" factors holding down inflation.

Today, the Wall Street Journal reports Global Inflation Hits Lowest Level Since 2009.

The Organization for Economic Cooperation and Development said Thursday that consumer prices across the G-20—the countries that account for most of the world's economic activity—were 2% higher than a year earlier. The last time inflation was lower was in October 2009, when it stood at 1.7%, as the world started to emerge from the sharp economic downturn that followed the global financial crisis.

The contrast between then and now highlights the mystery facing central bankers in developed economies as they attempt to raise inflation to their targets, which they have persistently undershot in recent years.

According to central bankers, inflation is generated by the gap between the demand for goods and services and the economy's ability to supply them. As the economy grows and demand strengthens, that output gap should narrow and prices should rise.

Right now, the reverse appears to be happening. Across the G-20, economic growth firmed in the final three ...

"Payrolls Should Be Boring: Two Numbers Can Make It Exciting"

From Steven Englander of Rafiki Capital

Even when non-farm payrolls (NFP) are as neglected and downplayed as this time around, you have to ask yourself what it would take to make them meaningful. The reason for the markets disinterest is that no one thinks the Fed is going to raise rates earlier than December and we have four more payrolls releases beyond tomorrow's release before they have to decide. And even though Janet Yellen has been certified as a 'low interest-rates person' she is unlikely to cut rates any time soon.

We have only one additional release before the expected balance sheet reduction announcement. But it would take a lot to put some uncertainty into the balance sheet shrinkage . Especially because claims have been extremely stable at extremely low levels, no one will trust an isolated softish NFP number. The consensus on NFP is 180k.

That said, below 130k and with some soft survey indicators softening, I think investors get nervous. It's a bit awkward for the Fed, having told us that balance sheet reduction won't do any damage. But say we get two 130k prints on NFP this month and next, they may very well decide that a brief delay is prudent and that 'relatively soon' extends well beyond September. So 130k or lower on Friday means you have to worry a bit that the labor market is coming off the rails. Anything above 150k seems plenty good enough to go ahead with balance sheet reduction. Bond yields may come off a bit more if we print below 160k even though that is good enough to get balance sheet reduction going.

What about a good result? Problem is we have strong NFP recently and the 180k consensus suggests that a firm labor market is priced in. So 250k on its own is not enough to put a September hike on the calendar but it could firm December odds slightly.

I am skeptical that hourly earnings are enough to turn things around on their own. Most forecasters ar ...

Frontrunning: August 4



July's U.S. Labor-Market Numbers Will Probably Look Familiar (BBG)

Paul Singer Says Passive Investing Is 'Devouring Capitalism' (BBG)

Beyond Bankruptcy: How Failed Stores Come Back Online (WSJ)

Tesla short sellers lose almost $800 million as stock rallies after earnings (MW)

Toyota, Mazda to Invest in Each Other (WSJ)

EU to impose more Russia sanctions over Siemens case on Friday (Reuters)

Trouble Comes in Threes for Germany's DAX Losing European Crown (BBG)

Credit Card Rewards Are Playing Harder to Get (BBG)

China regulators plan to crack down further on overseas deals (Reuters)

BOE Finds Error Behind Spike in U.K. Mortgage Arrears (BBG)

China's Fear of Japan-Style Economic Bust Drives Crackdown on Deals, Says Source (

Gold Outperforming Stocks YTD As Dollar Has 5th Monthly Decline

Gold Outperforming Stocks YTD As Dollar Has 5th Monthly Decline

- Gold consolidates on 2.5% gain in July as the dollar has fifth monthly decline
- Trump administration and vicious "civil war" politics casting shadow over America and impacting dollar
- All eyes on non farm payrolls today for further signs of weakness in U.S. economy
- Gold recovers from 1.7% decline in June as dollar falls
- Gold outperforms stocks and benchmark S&P 500 YTD
- Gold gains 10.8% versus 10.6% gain for S&P - led by frothy tech sector (see performance table)
- Gold outperforms stocks globally - Euro Stoxx 50 up 5.7% ytd, FTSE up 4.8% and Nikkei up 4.5%
- Gold's technicals increasingly positive; now trading above its 50-day & 200-day moving averages & looks set to target $1,300 again

No Cure in Sight for Teva

Don't be fooled by the low valuation. Teva Pharmaceutical Industries is a dangerous stock to own.

Square: Don't Overpay for Payments Hype

Payments company Square turned in a solid quarter, but its shares are just too expensive.

A Ferrari SUV? Investors Should Hope So

Ferrari is speeding toward a fork in the road. It shouldn't hesitate to take the more ambitious path.

Economic Report: U.S. adds impressive 209,000 jobs in July as jobless rate matches 16-year low

The U.S. labor market shows little sign of exhaustion nine years into an economic recovery, as the economy added an impressive 209,000 new jobs in July.

The Sniff Test: Victoria's Secret has a bra problem

Victoria's Secret parent L Brands has said its exit from the swimwear and clothing categories in 2016 have repeatedly weighed on sales since then, but the real problem may be its core bra business.

The Ratings Game: Four years and 'Grand Theft Auto' is as big a boon as ever for Take-Two earnings

Shares of videogame developer Take-Two Interactive Software Inc. rose more than 11% on Thursday morning after the company reported it swung to a profit during the fiscal first quarter, as earnings blew past Wall Street expectations.

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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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