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14Aug2017 Pre-Market Commentary: Wall Street To Open Higher, NOKO Tensions Lessened, WTI Crude Slipping Into The Mid 48 Handle

Written by Gary

US stock index futures were significantly higher this morning (SPY +0.6%) as NOKO tensions subsided somewhat. Oil prices fell as a slowdown in Chinese refining raised concerns.


Here is the current market situation from CNN Money

European markets are broadly higher today with shares in Germany leading the region. The DAX is up 1.11% while France's CAC 40 is up 0.88% and London's FTSE 100 is up 0.53%.

What Is Moving the Markets

Here are the headlines moving the markets.

World shares, dollar rise after week of North Korea-driven losses

LONDON (Reuters) - World stocks rose on Monday, recovering some of their poise after fears of a U.S.-North Korea nuclear standoff drove them to the biggest weekly losses of 2017, while the dollar too rose off four-month lows it had hit against the yen.

Futures higher as North Korea tensions ease slightly

(Reuters) - U.S. stock index futures were higher on Monday as tensions on the Korean peninsula eased slightly after key U.S. officials played down the risk of an imminent war with North Korea.

China a sweet spot for U.S. companies' earnings in second-quarter

SHANGHAI (Reuters) - Trade tensions between Washington and Beijing may be running high but Corporate America is finding China to be a reliable source of profit growth this year.

Exclusive: Arab bloc won't discriminate against U.S. firms in Qatar rift - sources

DUBAI (Reuters) - Four Arab countries that imposed sanctions on Qatar have told the United States that U.S. companies doing business with them would not be punished for also working with Doha, four sources with knowledge of the matter said.

China's Fosun, Shanghai Pharma say bid for stake in U.S. drugmaker Arbor

HONG KONG (Reuters) - A unit of China's Fosun Group and Shanghai Pharmaceuticals Holding Co are among bidders for a stake in U.S. speciality drugmaker Arbor Pharmaceuticals LLC, the companies said on Monday.

Aldi enters grocery delivery in partnership with Instacart

CHICAGO (Reuters) - German grocery chain Aldi Inc [ALDIEI.UL] said on Sunday it has partnered with Instacart Inc to deliver groceries in three U.S. cities, a move that comes amid intense competition and disruption in the industry.

Uber improves conditions for British drivers, adds tips

LONDON (Reuters) - Taxi app Uber will improve conditions for its British drivers with changes including in-app tipping, after criticism from lawmakers and unions for not giving them more rights.

Oil prices slip on Chinese demand concerns, rising U.S. activity

AMSTERDAM (Reuters) - Oil prices fell on Monday as a slowdown in Chinese refining raised concerns about demand in the world's second-biggest consumer, while an increase in U.S. drilling capacity could deepen a global supply glut.

North Korea factories humming with 'Made in China' clothes, traders say

DANDONG, China (Reuters) - Chinese textile firms are increasingly using North Korean factories to take advantage of cheaper labor across the border, traders and businesses in the border city of Dandong told Reuters.

Are We Already In Recession?

Authored by Charles Hugh Smith via OfTwoMinds blog,

If we stop counting zombies, we're already in recession.

How shocked would you be if it was announced that the U.S. had just entered a recession, that is, a period in which gross domestic product (GDP) declines (when adjusted for inflation) for two or more quarters?

Would you really be surprised to discover that the eight-year long "recovery," the weakest on record, had finally rolled over into recession?

Anyone with even a passing acquaintance with the statistical pulse of the real-world economy knows the numbers are softening.

-- Auto/light truck sales: either down or off a cliff, depending on how much lipstick has been applied to the pig.

-- Restaurant/dining sales: down.

-- Tax receipts: down.

-- Retail sales: flat, stagnant or down, depending on the sector and if the numbers have been adjusted for inflation/loss of purchasing power.

-- Rents in high-rent regions: finally softening after years of relentless increases.

-- Consumer debt: hitting new highs.

-- Corporate profits: stripped of gimmickry, stagnant or down.

Those who study recessions know that employment often tops out just before the economy rolls over into recession. Strong employment is the last gasp of an expansionary phase.

There are several fundamental reasons why we might be in a recession that manages to avoid the official definition. The starting place is the artificial nature of the eight-year long "recovery" since 2009; in the view of many observers, the economy never really exited the 2008-09 recession.

Those in this camp look at fundamentals, not the stock market, which has been held up as a proxy for the real economy, when in fact it is onl ...

Frontrunning: August 14



Korea tensions ease slightly as U.S. officials play down war risks (Reuters)

Pence Plays Down Trump Threat on Venezuela (WSJ)

Trump Pressed to Reject White Nationalist Groups (WSJ)

White House Says Trump Abhors Neo-Nazis (BBG)

Charlottesville, and the World, Take Stock of Violent Episode (NYT)

Car Attack Suspect Had Shown Troubling Behavior (NYT)

U.S. Default? Unlikely, But Bond Traders Are Taking No Chances (BBG)

Voters sense betrayal in Britain's Brexit heartlands (Reuters)

What the Google Controversy Misses: The Business Case for Diversity (WSJ)

Chinese state newspaper says Trump trade probe will 'poison' relations (Reuters)

Chinese try to buy Fiat Chrysler (Automotive News

China Slams Trump's "Trade War" Announcement, Says It Is A Distraction From "Domestic Turmoil" In The U.S.

Today at 3pm, President Trump will sign a memo addressing "China's laws, policies, practices, and actions related to intellectual property, innovation, and technology" effectively launching the first shot in what many predict will blossom into an all-out trade war with China. As discussed over the weekend, administration officials said Saturday that memo will direct U.S. Trade Representative Robert Lighthizer to consider investigating China over its IP policies, especially the practice of forcing U.S. companies operating in China to transfer technological know-how.

Predictably, China is not happy. In an editorial published in the China Daily, the government lashed out at Trump, warning him that by "politicizing" trade, he risks "exacerbating" the US's "economic woes," and "poisoning" the relationship between the world's two largest economies.

Here's Reuters:

"In an editorial, the official China Daily said it was critical the Trump administration doesn't make a rash decision it will regret.

"Given Trump's transactional approach to foreign affairs, it is impossible to look at the matter without taking into account his increasing disappointment at what he deems as China's failure to bring into line the Democratic People's R ...

China Bans Coal, Lead, Iron Imports From North Korea

China's Ministry of Commerce said that Beijing will halt imports of coal, iron, iron ore and seafood from North Korea starting on Tuesday, cutting an important economic lifeline for the Pyongyang regime, as it implemented a package of sanctions passed by the United Nations Security Council on August 6.

China accounts for roughly 90% of North Korean trade but moved earlier in February to suspend North Korea's coal imports until the end of the year. Coal normally accounts for about half of North Korea's exports, but despite the coal ban, overall trade between the two countries remained healthy according to WaPo.

Last month China announced that imports from North Korea fell to $880 million in the six months that ended in June, down 13% from a year earlier. Notably, China's coal imports from North Korea dropped precipitously, with only 2.7 million tons being shipped in the first half of 2017, down 75 percent from 2016. But a 29 percent spike in Chinese exports to North Korea — North Korea bought $1.67 billion worth of Chinese products in the first six months of the year — helped push total trade between the two countries up 10 percent between January and June, compared with the same period last year.

While the latest move to halt imports of iron, iron ore, lead and lead ore, and seafood products will put significantly more pressure on Pyongyang, it is unlikely to be enough to convince Pyongyang to abandon its nuclear program, which it sees as essential to its own survival, experts say.

The announcement comes after days of increasingly bellicose rhetoric between President Trump and North Korean leader Kim Jong-un, which however appears to have moderated somewhat in the past 48 hours when contrary to some expectations, there were no escalations - and no missile or nuclear tests by North Korea - over the weekend. Last we ...

The Market is Right: Car Stocks Are Cheap for a Reason

In an expensive stock market, car makers are sensationally cheap. Sadly, though, this looks like a rational response.

China Sets Its Banks on Scramble for Funding

A crackdown on a key funding source for banks is bound to cause some lenders to hit regulatory limits.

Margin Pressure Ahead for U.S. Companies

Productivity growth is companies' best weapon against rising costs. Unfortunately for them, it has been extraordinarily weak and is unlikely to get much better.

Mark Hulbert: What the solar eclipse on Aug. 21 will mean for stocks

Might the solar eclipse coincide with the final bull-market top? Mark Hulbert investigates and finds some studies show stock markets are indeed affected by astronomical (if not astrological) phenomena.

Trump's failure to enact policy is having a 'chilling effect' on earnings

The double-digit growth in S&P 500 earnings is masking underlying weakness in consumer spending as subdued wage growth and unfilled policy promises have hampered business investment.

Jeff Reeves's Strength in Numbers: Why 'America first' isn't your best investment idea

Bargain-hunting stock investors should look anywhere but the U.S., writes Jeff Reeves.

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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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