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07Aug2017 Pre-Market Commentary: Wall Street To Open Flat, DOW Expected To Edge Up For A New Record High, WTI Crude Slips Into The 48 Handle, Analysts Are Becoming Bearish

Written by Gary

US stock market index futures are pointing towards a flat opening (SPY +0.02%) that should send the DOW fractionally higher, before trending down.


Here is the current market situation from CNN Money

European markets are mixed today. The FTSE 100 is up 0.21% while the CAC 40 gains 0.07%. The DAX is off 0.42%.

What Is Moving the Markets

Here are the headlines moving the markets.

Tesla seeks to raise $1.5 billion to fund Model 3 production

(Reuters) - Tesla Inc said on Monday it intends to raise about $1.5 billion in a bond offering as the U.S. automaker seeks to ramp up production of its newest electric sedan, the Model 3.

World stocks reach new peak in world full of surprises

LONDON (Reuters) - World stocks breached record highs on Monday as better-than-expected company earnings and economic data from the United States stole the focus from rising geopolitical tension over North Korea's nuclear program.

Samsung scion Lee fights back tears as prosecutors seek 12 years' jail

SEOUL (Reuters) - Samsung Electronics Vice Chairman Jay Y. Lee fought back tears and denied wrongdoing on Monday as prosecutors sought a 12-year jail term on charges that include bribing the former president to help cement control of the South Korean tech giant.

Infrastructure borrowing drops as U.S. states await Trump plan details

SAN FRANCISCO/NEW YORK (Reuters) - President Donald Trump arrived in office having promised a bold $1 trillion infrastructure investment plan over 10 years for roads, bridges, airports and transit systems crumbling by the day across the United States.

Toshiba may gain auditor sign-off, reducing delisting risk: media

TOKYO (Reuters) - Toshiba Corp may gain a partial endorsement from its auditor for its annual financial results after disagreements over accounting for the much of the year, Japanese media reported - a step that would lessen, but not remove, the risk of a delisting.

Google employee's anti-diversity memo prompts company rebuke

(Reuters) - Google executives over the weekend rushed to denounce an engineer's memo that ascribed gender inequality in the technology industry to biological differences, a view that sparked outrage at the internet giant and inflamed tensions over sexual harassment and discrimination in Silicon Valley.

Higher-cost crude could squeeze margins at U.S. refiners

HOUSTON (Reuters) - U.S. refiners could face a continued squeeze on profit margins in the months ahead as dwindling supplies of heavy crude from Venezuela and elsewhere are leading several to switch to higher-priced but easier-to-refine light, sweet crude.

Oil slides from nine-week highs as market looks to OPEC

LONDON (Reuters) - Oil prices edged lower on Monday, sliding away from nine-week highs, as worries lingered over high production from OPEC and the United States.

U.S. cable firms embrace former foe Netflix as TV viewing shifts

(Reuters) - A growing number of U.S. cable operators are forming alliances with Netflix Inc NFLX.O, a shift that is helping the streaming pioneer add customers as its largest single market matures.

North Korea Refuses To Negotiate, Threatens US With "Severe Nuclear Lesson"

For all the hope that this weekend's UN breakthrough, in which the Security Council voted unanimously 15-0 to impose $1 billion in sanctions on North Korea exports, that saw both China and Russia side with the US, it appears that North Korea refuses to even contemplate a negotiation or a cooling of tensions. As the following headlines suggest, a retaliation remains a real possibility.



NORTH KOREAN FOREIGN MINISTER: PYONGYANG WILL 'UNDER NO CIRCUMSTANCES' NEGOTIATE ON ITS NUCLEAR WEAPONS

NORTH KOREA SAYS IT'S READY TO TEACH U.S. 'SEVERE LESSON' WITH NUCLEAR STRATEGIC FORCE IF IT TAKES MILITARY ACTION

NORTH KOREA TOP DIPLOMAT SAYS NO NEGOTIATIONS ON ITS NUCLEAR & MISSILE PROGRAM UNLESS U.S. GIVES UP HOSTILE POLICY TOWARD PYONGYANG:

This was North Korea's first official response to the fresh sanctions voted through by the UN security council.

As Reuters elaborates, North Korea is ready to give the United States a "severe lesson" with its strategic nuclear force if it takes military action against it, and will not put its nuclear program or its missiles on the negotiating table, it said in a statement to a regional meeting on Monday.

In a transcript of a statement by Foreign Minister Ri Yong-ho, which was distributed to media in Manila, Pyongyang called new U.N. sanctions "fabricated" and warned there would be "strong follow-up measures" and acts of justice. It said the resolution showed the United Nations had abused its authority.

As quoted by Bloomberg, North Korea asked Asean and participants in regional forum in Manila to "take impartial and practical stand and attitude" on its nuclear weapons, which it says it has no intention of using against any other country except U.S. and those that will join America.

"We take great pride and self-conceit ...

Tesla To Raise $1.5 Billion In Bond Offering

Just days after reporting its biggest quarterly cash burn in history, Tesla announced on Monday it plans to raise about $1.5 billion in new cash, although in a welcome change for equity investors, this time it decided against an equity or convertible sale, and will offer bonds instead to take advantage of the insatiable bond market, as the carmarker seeks to ramp up production of its latest Model 3 electric vehicle. Tesla had over $3 billion in cash on hand at the end of the June quarter, compared with $4 billion at the end of the previous quarter and $3.25 billion a year earlier.

The debt offering comes as Tesla has reportedly received thousands of advance reservations for the Model 3, which Elon Musk said were averaging at about 1,800 per day since the car's launch in late July. Tesla counts on the Model 3, its least pricey car, to become a profitable, mass market electric car maker although it may have difficulties in a market that is becoming increasingly competitive.

At the launch event, Musk said the company would face "at least six months of manufacturing hell" as it increases production of the Model 3, which has a $35,000 base price.

Tesla's cash burn, expected to top $2 billion this year, hit a record $1.16 billion in the second quarter...

... and prompted short-sellers like David ...

SocGen: Stock Valuations Remain "Remarkably High" Yet Nobody Cares

As discussed earlier, with most traders taking the next 1-2 weeks off for vacation, global markets remain on auto pilot, hitting new all time highs overnight driven by strength out of China where reflationary spirits have returned after industrial commodities surged on speculation that the PBOC's recent attempt to contain excess liquiduity have failed (explaining the 3 consecutive days of reverse repo drains). Meanwhile, as SocGen's Andrew Lapthorne writes, global equity markets continue to move higher, with both MSCI Developed and Emerging adding 0.4% last week. DM Is now up 12.4% in 2107 and EM an impressive 23.8% higher.

Most markets saw gains last week, with Europe playing catch-up, having tracked down or sideways for the last few months. In local currency terms, the Eurozone is still in negative territory over the last few months, but this is more than made up for by the strength of the currency, with the MSCI Eurozone index up 5% in USD over the same timeframe. That said there were a few soft patches. The Nasdaq was down, as was the S&P 500 on an equal-weighted basis. The Russell 2000 dropped 1.2%. Japanese small cap growth stocks also faltered with the volatile Mothers index falling 3.9%.

Will the euphoria continue? For the answer look at the Euro. As SocGen's Andrew Lapthorne writes, earnings momentum appears increasingly polarised, "with the US enjoying its usual reporting season bounce on the back of analyst upgrades, and both Pacific ex Japan and Japan seeing sharp improvement in analyst optimism." However both Europe ex UK and Emerging Markets, the standout US dollar performers this year, are yet to see a pickup in upgrades, with downgrades remaining more common. A big reason for this is the recent surge in the Euro, which is fast approaching 1.20, the level beyond which analysts have said any further g ...

World Stocks Hit Another All-Time High As Crude, Treasurys Drop

World stocks hit a new record high on Monday, as U.S. index futures followed Asian stocks on better-than-expected company earnings and strong US jobs data deflected attention from the rising geopolitical tension over
North Korea's nuclear program. European stocks traded near session lows while Crude oil prices fall. The Bloomberg Dollar Spot Index was little changed ahead of speeches by the Fed's James Bullard and Neel Kashkari later Monday. Yields on U.S. and German Bunds rose off one-month lows hit at the end of last week, while the yield on China's 10-year sovereign bonds climbs 3 bps to a two-month high of 3.67%, after Friday's better-than-expected jobs data brightened investors' outlook for the U.S. economy.

The Dow Jones recorded its eighth consecutive record high on Friday, with MSCI's broadest index of Asia-Pacific shares outside Japan adding 0.5% on Monday. Helping global stocks hit record highs, of the nearly 1000 companies in the MSCI world index that have reported, 67% have beaten expectations, according to Reuters data. Of the MSCI Europe companies having reported, 61% have either met or beat expectations. But focusing on industrial firms - of which many depend on exports, and are sensitive to a stronger euro - the beat ratio is just 37%. Also the U.S. dollar dipped slightly but held on to much of Friday's gains - its biggest daily rise this year - after data showed the United States created more jobs than forecast last month. As a result, the MSCI World index rose above a peak breached late last month, setting a new all-time high of 480.09 on Monday.

"The US made the most noise last week ... At the start of the new week, risk sentiment improved in Asia with investors continuing to show a certain degree of risk affinity," DZ Bank strategist Rene Albrecht said.

For some analysts, Monday's pull back in the dollar backs some views in markets that Friday's rally may not have legs. The dollar index, which tracks ...

Guggenheim Funds Are Worth the Price For Invesco

Invesco has enjoyed healthy inflows into its ETFs, though it remains far smaller than BlackRock and State Street. Guggenheim's funds would add scale, which is the main driver of profitability for asset managers.

Alcohol-Free Beer Could Give Brewers a Buzz

Near-beer may finally be quitting its niche as a pity-inspiring barbecue drink for drivers and pregnant women. That's better for big brewers than you might think, though any benefit will take time.

Why Jobs, Wages and Savings Mean Weaker Profits

The U.S. economy has reached a turning point: If companies don't start paying employees more soon, consumer spending may slow. But the alternative—faster wage growth—would raise companies' costs.

Outside the Box: What Blue Apron needs to do to survive the threat of Amazon

Bold flavors, more recipes — and no discounting, writes Sharmila Chatterjee

Jeff Reeves's Strength in Numbers: 3 restaurant stocks to eat up — and 3 to trash

Jeff Reeves looks at Chipotle, Starbucks and more.

ETF Focus: ETF volumes go near mute levels as volatility drops to near-record lows

Exchange-traded funds are a part of the global market that is getting bigger and bigger, but lately, they've also been getting quieter and quieter.

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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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