14Sep2015 Pre-Market Commentary: China Slides 2.7%, U.S. Stock Futures Index Flat, Oil Prices Testing Support, Investors Await Fed’s Rate Decision On Thursday

Here is the current market situation from CNN Money

European markets are lower today with shares in France off the most. The CAC 40 is down 0.39% while London’s FTSE 100 is off 0.19% and Germany’s DAX is lower by 0.12%.

To JPM, Both A Rate Hike And A Delay Would Be Bullish For Stocks

Worried how stocks will react to the Fed’s announcement this Thursday? Well don’t, because no matter what the Fed announces, the outcome will be favorable. At least that is JPM’s pitch.

The reason: according to equity strategist Mislav Matejka, either announcement should “be received well” by the market. To wit:

The eagerly awaited Fed meeting is upon us. Regardless of the actual decision, we suggest that the market impact could end up being positive. If the Fed does raise rates, but at the same time reassures the market that this will be a gradual process, it would be received well. If, on the other hand, the Fed delays the move, this could be interpreted as a signal that the Fed is aware of and is responding to recent market concerns. A delay could dampen the link between the DXY and commodity prices.

To be sure, JPM realizes that a rate delay is confirmation that not all is well with the economy, and that another big chunk of Fed credibility will be lost, but who cares: at the end of the day, it is all about stocks or as Goldman calls it “risk management.”

Even though inaction might be seen as prolonging market anxiety, the key in our view is that investors get to know what the new Fed’s reaction function is. One of the main current investor concerns is over the lack of clarity from central banks. We believe that the policymakers are still on the side of the risky assets and will act supportively; the ECB opening the doors to QE2 is a case in point.

This takes us back to what Bank of America’s Michael Hartnett said ten days ago happens if the Fed does not hike. Among his key observations, the bolded one is key:

Deutsche Bank prepares to shut Russian operations: source

FRANKFURT (Reuters) – Deutsche Bank is preparing to close all of its Russian operations, except for transaction banking services, a financial source told Reuters on Monday.

Frontrunning: September 14

China stocks slide as data raises fresh economy worries (Reuters)

Was Tom Hayes Running the Biggest Financial Conspiracy in History? (BBG)

The Fed’s Policy Mechanics Retool for a Rise in Interest Rates (NYT)

Germany re-imposes border controls to slow migrant arrivals (Reuters)

Thousands flee California wildfire as homes go up in flames (Reuters)

Bavarian minister says German border controls could last for weeks (Reuters)

China sells record FX in August, shows pressure after devaluation (Reuters)

China Unveils Overhaul of Bloated State Sector (WSJ)

U.K. Labour Names Bank of England Opponent to Treasury Role (BBG

Futures up despite weak China data; Fed awaited

(Reuters) – U.S. stock index futures were higher on Monday, shrugging off weak Chinese economic data, ahead of this week’s U.S. Federal Reserve meeting that would decide on an interest rate increase.

Silver Bullion – “Brave Contrarians” Will Again “Earn Fortunes”

Silver has had a rough year, slumping to major new secular lows. After sliding on balance for years now, even the diehard silver bulls are losing faith in their metal.

Silver in USD — 10 Years

Despite its vexing slumber, silver’s price-appreciation potential from today’s levels remains enormous. Between radical under-investment and very high speculator silver futures shorting, silver is poised to see massive buying as gold recovers.

Like all markets, silver is forever cyclical. It perpetually meanders from in favor to out of favor and back again. And after falling on balance for years as QE3 sucked capital and interest away from portfolio diversification with alternative investments, silver is way overdue to reverse into its next major bull.

The brave contrarians willing to buy silver and its miners low before this becomes widely apparent stand to earn fortunes.

Editors note: Adam Hamilton of Zeal Speculation and Investment was one of the few contrarian analysts who correctly predicted that silver would rise from below $5 to nearly $50 per ounce in the early 2000s. Adam is calling for similar gains for depressed silver today and his latest research is well worth a read — “Silver’s Vexing Slumber”

DAILY PRICES

Today’s Gold Prices: USD 1108.00, EUR 977.98 and GBP 716.97 per ounce.

OPEC Cuts Forecast of Oil Supplies From Nonmembers

The Organization of the Petroleum Exporting Countries has cut its forecast of oil supplies from nonmember countries in 2015, a sign that crude’s price collapse is hitting U.S. shale drillers and other competing sources.

VW China unit to recall 78,000 cars over air bag defect: regulator

BEIJING (Reuters) – A China unit of Volkswagen will recall 78,000 vehicles over a potential defect that could prevent driver-side air bags from deploying properly, China’s safety regulator said on Monday.

Fiat Chrysler CEO cancels auto show appearance to assist with labor talks

FRANKFURT (Reuters) – Chief Executive Sergio Marchionne has canceled his appearance at the Frankfurt auto show this week after Fiat Chrysler Automobiles (FCA) was picked as the target company in labor talks in the United States, a company spokesman said on Monday.

Futures Fade Early Euphoria After Chinese Stocks Resume Slide

Yesterday when we commented on the Chinese open for trading, we noted that US equity futures, up between 10-15 points at the time on hopes for even more central bank intervention (even if a September rate hike is now largely off the table as far as the market is concerned) we warned that algos still appear unaware that the most bullish catalyst – Gartman’s short position – has been stopped out and as such “algos are flying blind.” Since then US futures have trimmed their gains by half and at this rate we may even open red, depending on whether Gartman once again flop-flipped, this time to bullish.

But while any moves in the US stock market ahead of Thursday are largely irrelevant, as only Yellen’s statement in 4 days will unleash epic algo buying or short covering (yes, according to JPM the Fed statement is bullish no matter what), it is what happened in China that is concerning, because while we had expected Chinese stocks to go nowhere in particular now that index future trading volumes have plunged by 99% or perhaps rise on hopes of even more easing after the latest terrible economic data, the Shanghai Composite dropped 2.7%, but it was the retail darling Shenzhen Composite which tumbled 6.7% – its worst selloff since August 25, while China’s Nasdaq, the ChiNext crashed -7.5%.

Is China startting to losing control again? Judging by the latest PBOC data, …

Lesson for Fed: Rate Increases Are Fickle

In the seven years since the world’s central banks responded to the financial crisis by slashing interest rates, more than a dozen in advanced economies have tried to move rates back up—but not a single one has been able to keep them there.

Has Forward Guidance Been Effective?

from the Kansas Fed

— this post authored by A. Lee Smith and Thealexa Becker

Since 2008, the Federal Reserve has relied on unconventional policy measures to fulfill its dual mandate. These unconventional tools became necessary when the effective lower bound on nominal rates prevented further cuts in the target federal funds rate. One such tool used in the aftermath of the Great Recession has been forward guidance, which is communication about the future path of policy rates. But has forward guidance, as recently practiced by the Federal Open Market Committee (FOMC), been effective?

Brent oil prices dip on weaker China data

LONDON (Reuters) – Brent crude oil fell on Monday as weaker-than-expected Chinese data weighed on markets, adding to concerns that declining global demand would exacerbate a surplus of crude.

Google’s self-driving car push spurs hiring spree at automakers

FRANKFURT (Reuters) – German premium carmakers BMW , Mercedes-Benz and Audi are snapping up software experts as tech firms such as Google threaten to outflank them in the race to develop a self-driving car.

Stocks shrug off China data, Fed weighs on markets

LONDON (Reuters) – Stocks rose on Monday, shrugging off tepid Chinese economic data while the dollar weakened before a U.S. Federal Reserve decision on whether to raise interest rates for the first time since 2006 later this week.

China stocks slide as data raises fresh economy worries

SHANGHAI (Reuters) – China’s stocks fell on Monday after data suggesting economic growth was running below the 2015 target level of about 7 percent heightened concerns about the health of the economy.

Alibaba shares could fall another 50 percent, says Barron’s cover story

(Reuters) – Shares of Alibaba Group Holding Ltd , which recently slipped below their initial offering price after having rocketed 75 percent in their first two months of trading, could lose another 50 percent of their value, Barron’s said in the cover story of its Sept. 14 issue.

Earlh Headlines: Chinese Overseas Home Purchases Insignificant, Labour Proposals Panic Big Money, BIS Sees Global Debt Bomb, Germany Controls Border, China To Fix SOEs And More

Written by John Lounsbury

Early Bird Headlines 14 September 2015

Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.

Bits Blog: Google Hires Auto Veteran to Lead Self-Driving Car Project

Google announced that John Krafcik, an auto industry veteran, would become chief executive of its self-driving car project.