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22Jan2018 Pre-Market Commentary: Wall Street Is Set To Start The Week Flat As The US Government Shutdown Enters Its Third Day, Crude And The US Dollar Slip Fractionally

Written by Gary

The US equities main benchmarks are flat ahead of the opening bell (SPY -0.02%) as investors shrug off the government shutdown. The dollar is pulling back slightly and Treasury yields are touching 3 1/2-year highs.


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 0.27% while Germany's DAX is up 0.16% and London's FTSE 100 is up 0.08%.

What Is Moving the Markets

Here are the headlines moving the markets.

Stocks shrug off U.S. shutdown, dollar dips

LONDON (Reuters) - World stocks and U.S. bond markets on Monday shrugged off a government shutdown in Washington, although the dollar pulled back as the euro continued its strong start to the year.

Halliburton beats on fourth quarter profit, makes tax provision

(Reuters) - Halliburton Co posted a much bigger than expected quarterly profit in the fourth quarter, benefiting from a shale-driven surge in U.S. oil production towards 10 million barrels per day.

Sanofi digs deep to buy U.S. haemophilia group Bioverativ for $11.6 billion

PARIS (Reuters) - French healthcare group Sanofi has agreed to buy U.S. haemophilia specialist Bioverativ for $11.6 billion, its biggest deal for seven years, which it said would strengthen its presence in treatments for rare diseases.

Icahn, Deason to jointly push Xerox to explore selling itself, other options: WSJ

(Reuters) - Investor Carl Icahn and Darwin Deason, the biggest- and third-largest shareholders of Xerox Corp, jointly plan to push the printer and photocopier maker to explore options, including a sale of the firm, the Wall Street Journal reported on Sunday.

Aston Martin hit by Daimler steering-column recall

PARIS (Reuters) - Aston Martin has become the latest carmaker to be caught up in a major recall of faulty Daimler steering-column components that can cause unintended airbag deployments.

Stock futures slightly lower as U.S. shutdown enters third day

(Reuters) - Wall Street was set to start the week slightly lower as a U.S. government shutdown entered its third day, while investors mulled over a flurry of multi-billion corporate mergers.

Euro schism reopens in central Europe as EU pushes reform

ESZTERGOM, Hungary/STUROVO, Slovakia (Reuters) - On the euro zone's eastern flank, some Slovaks in the border town of Sturovo wish their country had never opted for the common currency and now head over the Danube to Hungary for the cheaper shopping.

AIG to buy reinsurer Validus Holdings for $5.56 billion

(Reuters) - American International Group on Monday said it would buy Validus Holdings for $5.56 billion in cash to strengthen its reinsurance business, the company's first deal under Chief Executive Brian Duperreault.

Germany confirms Audi recall due to illicit emission-control device

BERLIN (Reuters) - Germany's transport ministry confirmed a media report on Monday that the KBA automotive watchdog detected illicit emission-control software in Audi's latest Euro-6 diesel models and ordered a recall of the vehicles.

Central Banks: From Coordination To Competition

Authored by Charles Hugh Smith via OfTwoMinds blog,

This is one reason why I anticipate "unexpected" disruptions in the global economy in 2018.

The mere mention of "central banks" will likely turn off many readers who understandably have little interest in convoluted policies and arcane mumbo-jumbo, but bear with me for a few paragraphs while I make the case for something to happen in 2018 that will impact us all to some degree.

That something is the decay of the synchronized central bank stimulus policies that have pumped trillions of dollars, yuan, yen and euros into the global financial markets over the past nine years. Here are two charts that depict the "tag team" coordinated approach central banks have deployed: when one CB tapers its stimulus, another ramps up its money-creation/asset-purchases stimulus:

The balance sheets of all the primary central banks added together is astronomical:

This team effort is motivated by self-interest, of course; no one central bank can reflate the entire global economy, and yet that is the only way to reflate each nation/bloc's own economy, given the global connectedness of the modern economy.

But the threads of mutual self-interest are fraying. At this late stage in the credit cycle, the central banks must begin "tapering", i.e. diminishing and then ending their stimulus policies and eventually reducing their balance sheets by selling assets they bought in the stimulus phase (or simply stop replacing bonds they own that mature).

The Federal Reserve was first ou ...

Citi Spots A Very "Odd" Change In The Market

Over the past week, we have highlighted several market indicators which we - and many others - have found surprising - and concerning - about the euphoric risk rally in the new year (including record overbought RSIs, near record stretched retail sentiment, very positive analyst earnings revisions, a record period of time without a 5% correction, and very low pairwise correlations within equity indices).

We can now add one more way in which recent market sessions "have displayed odd cross-asset price action" as Citi's Jeremy Hale writes.

According to the cross-asset strategist, while the S&P 500 has rallied to new highs, credit spreads have widened slightly of the tights...

asd

... and implied equity vols have also increased.

asd

As Hale adds, "

What Government Data Will Be Released During The Shutdown

Today, hundreds of thousands of federal workers will wake up with the U.S. government still shut down and the Senate expected to try again to restore federal funding, if only temporarily, and work on resolving a dispute over immigration.

As Reuters notes this morning, until Monday, most federal workers were not directly affected by the shutdown that began at midnight on Friday. Many were still awaiting notification on whether they are "essential" employees or not, which would determine whether they must report to their offices.

Even late on Sunday, the federal Office of Personnel Management was providing little guidance. It said on its website that "federal government operations vary by agency."

The Department of Defense published a memo on its site detailing who does and does not get paid in a shutdown and saying that civilian employees were on temporary leave, except for those needed to support active-duty troops.

The Department of Interior, led by Secretary Ryan Zinke, offered no guidance on its website, which still had a "Happy Holidays from the Zinke Family" video near the top of the site. The department oversees national parks and federal lands.

The State Department website said: "At this time, scheduled passport and visa services in the United States and at our posts overseas will continue during the lapse in appropriations as the situation permits."

One thing that is clear, however, is that until a "funding gap" resolution is reached, all those non-essential workers who work as data compilers, goal-seekers, analysts, manipulators, fact-checkers, distributors and printers will get an extended vacation for one or more days, which means that critical government data may be indefinitely delayed.

Which da ...

Global Markets Shrug As US Government Shutdown Enters Day 3

Global stocks and U.S. bond markets on Monday shrugged off day three of the US government shutdown in Washington, although the dollar pulled back as the euro continued its strong start to the year, while U.S. stock index futures dipped less than 0.1% on expectations that the political impasse will not hurt the U.S. economy and that it will be resolved shortly, which may prove to be an overly optimistic outlook.

asd

Here is Bloomberg's quick on what has been a particularly quiet overnight session:

Exceptionally quiet European session due to lack of pertinent economic data or macro events, focus remains on U.S. government shutdown. USD is offered against G-10, DXY remains firmly within 90-91 range established last week. ZAR outperforms after reports that ANC leadership decided Zuma must leave office, albeit without a deadline. Core European equity markets trade flat, energy sector leads gains despite crude futures also trading unchanged, OPEC+ weekend meeting ended with recommendation to keep cuts for whole of 2018. UST curve holds overnight flattening, focus on long-end swap spreads which tighten back from blowout on Friday; Spain outperforms other EGBs after Fitch upgrade. Metals markets grind marginally higher across the board due to move in USD

U.S. Treasury yields, which fell during previous government shutdowns, rose as investors saw limited economic fallout from the standoff in the U.S. capital and instead focused on ...

What Facebook's Feed Changes Mean for the News

Publishers would be wise to reduce their dependency on Facebook as it gets ready to tweak its algorithm.

Chinese Banks' Sudden Strategy Shift Isn't Risk-Free

Ping An Bank's aggressive foray into retail lending may not be the answer to its problems.

Raises and Bonuses Are About Economics, Not Politics

The bonuses and wage increases companies have been handing out since the tax plan passed won't weigh very heavily on profit margins. The environment that engendered them will.

CryptoWatch: Bitcoin under pressure but retains grip above $11,000

Bitcoin prices are slightly weaker on Monday, but maintaining a level above $11,000 as the cryptocurrency and its rivals remain under pressure in the early weeks of 2018.

The Uber-Waymo trial will hinge on one piece of technology

What began as a shocking and salacious courtroom brawl between a Silicon Valley advertising titan and an ambitious ride-hailing upstart may, as it turns out, hinge on the arcane details of one crucial technology needed to make self-driving vehicles.

Key Words: Why Apple's Tim Cook doesn't want his nephew to use social networks

Although he runs the biggest tech company on the planet, Apple Inc. Chief Executive Tim Cook is concerned by the risk that technology poses to kids.

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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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