16Feb2018 Pre-Market Commentary: Wall Street On Track For Best Week In 6 Years, Housing Starts Soar In January, Building Permits Hit 10 1/2-year High, Dollar Index Holds Gains After Housing, Import Price Data

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 0.97% while London’s FTSE 100 is up 0.67% and Germany’s DAX is up 0.59%.

Global stocks set for best week in six years, dollar sags

LONDON (Reuters) – World shares were set for their best week of gains in six years on Friday after two consecutive weeks in the red, shrugging off a rise in global borrowing costs while the dollar hit its lowest since 2014.

Backstory: Warren Buffett’s Valentine’s Day surprise for investors

NEW YORK (Reuters) – Warren Buffett had a Valentine’s Day surprise for investors in Teva Pharmaceutical Industries Ltd .

Coca-Cola sales beat as consumers drink more vitamin water, coffee

(Reuters) – Coca-Cola Co reported better-than-expected quarterly profit and sales on Friday as it sold more teas, coffees and vitamin water, sending its shares up 2.4 percent.

Futures rise, setting stocks on firm ground for the week

(Reuters) – U.S. stock futures rose on Friday, set to build on a rally that has lasted five straight days as investors shrug off inflation fears and focus on growth in the economy and corporate profits.

Wynn Resorts says ex-CEO Steve Wynn not entitled to severance pay

(Reuters) – Wynn Resorts Ltd said on Friday that former Chief Executive Officer Steve Wynn was not entitled to severance payments or any other compensation.

Kraft Heinz quarterly profit, sales miss estimates

(Reuters) – Kraft Heinz Co’s quarterly profit and sales missed analysts’ estimates on Friday, hurt by lower shipments for nuts, natural cheese and cold cuts in the U.S.

Campbell Soup organic sales fall as customer dispute continues

(Reuters) – Campbell Soup Co on Friday reported a 2 percent drop in organic net sales in its second quarter as a key customer in North America placed fewer orders for its canned soups.

Uber introduces new safety features as it fights to retain London license

LONDON (Reuters) – Taxi service Uber [UBER.L], battling to retain its license to operate in the British capital, said on Friday it would introduce new safety features, including 24-hour telephone support for riders and drivers.

SEC blocks Chicago Stock Exchange sale to China-based investors

(Reuters) – U.S. regulators on Thursday killed the politically sensitive sale of the Chicago Stock Exchange (CHX) to a group led by China-based investors, saying a lack of information on the would-be buyers threatened the ability to properly monitor the exchange after the deal.

Indian Banks Tumble After $2 Billion Fraud By One Of India’s Richest Men Emerges

Indian authorities have uncovered a $2 billion banking fraud involving one of the country’s 100 richest men, a jeweler who made his name dressing Hollywood and Bollywood actors including Kate Winslet and Priyanka Chopra. His name is Nirav Modi, and on Friday shares of the Punjab National Bank – or PNB – plunged after federal investigators first unveiled their findings in a fraud investigation.

In its complaint to India’s the Central Bureau of Investigation, PNB alleged that the fraud was led by Nirav Modi, a jeweler who’s dressed Hollywood and Bollywood actors including Kate Winslet and Priyanka Chopra. Modi’s No. 85 on Forbes’s 2017 list of India’s richest people and, at 47, is one of the youngest names on that list, according to Bloomberg.

The scheme also involved Mehul Choksi, whose Gitanjali Group of companies was intimately involved in the fraud.

PNB on Friday said it had filed complaints against Mehul Choksi’s Gitanjali Group of companies. These include Gitanjali Gems Ltd. and PNB alleges a 49 billion rupee (nearly $800 million) loss from Choksi’s companies, CBI spokesman Abhishek Dayal said in a text message.

Nirav Modi

PNB a …

“Setting The Stage For A Broad Meltdown”: Bond Funds See 5th Biggest Outflow On Record

Earlier this week, GMO’s James Montier repeated verbatim one of our recurring puzzling observations about the current market: while “a recent Bank of America ML survey showed the highest level of those citing “excessive valuation” ever. Yet despite this, the same survey showed fund managers to still be overweight in equities.” Back in August, we called this just one of the many bizarre market paradoxes observed in the market.

Here is another paradox.

As we noted earlier, after last week’s volocaust, this week was the best week for global stocks since 2011 as traders and algos furiously BTFD (and sold vol), clearly forgetting what happens when markets become too stretched, as they are becoming again.

It wasn’t just stocks: junk bond yields dropped the most in three months, and CCC yields saw the biggest drop in more than five weeks yesterday amid what is reportedly buying flurry. As Bloomberg put it, “it was as if high yield investors were making up for the lost week” with HYCDX rising the most in 11 months, and junk bond ETFs, JNK and HYG, saw the biggest increase in three months.

As one would expected, junk spreads tightened across ratings.

And yet, despite surging prices, investors couldn’t wait to get the hell out of credit amid the sudden repricing of inflation expectations which are certain to send yields higher (unless, of course, another wave of deflation emerges). In fact, BofA finds that last week saw the first simultaneous outflows from IG, HY and EM bond funds since the U. …

Deutsche: “Nobody Can Understand What’s Going On With The Dollar… The Answer Is Simple”

Earlier this week, the bizarre, unexplainable, ongoing plunge in the dollar and US bond prices in the aftermath of the stronger than expected CPI print which also sent equities surging, prompted at least one trader at Citi to explode: “Wake Up Folks, It’s Not Risk Positive”

Then again, maybe it is not all that unexplainable.

As Deutsche’s FX strategist, George Saravelos, writes, he has been getting numerous inquiries as to how can it be that US yields are rising sharply, yet the dollar is so weak at the same time?

He believes the answer is simple: the dollar is not going down despite higher yields but because of them. Higher yields mean lower bond prices and US bonds are lower because investors don’t want to buy them, or as he puts it “this is an entirely different regime to previous years.”

Below we repost his simple explanation, while highlighting that maybe…

… just maybe, the bottom for the dollar is now in?

From Deutsche Bank:

Blame the dollar on yields

We are well into 2018 and our feedback from recen …

Violent Dollar Swings Fail To Stop Futures Levitation, Best Week For Stocks Since 2011

Global stocks were set to post their best week of gains in six years on Friday after two consecutive weeks spent in the red, shrugging off a rise in global borrowing costs while the dollar hit its lowest level since 2014. The MSCI world index rose 0.4% after European bourses opened. .After suffering its biggest weekly drop since August 2015 last week, this week’s recovery puts the index on track for its best weekly showing since early December 2011.

As Deutsche Bank notes, “The S&P 500 (+1.21%) rose for the 5th day and is now up +2.15% YTD which on a compounded annualised basis is c18.5%!! On this basis the NASDAQ (+1.58% yesterday, +5.11% YTD) is up c49.5% on an annualised basis.”

As Reuters notes, investors remain puzzled at this week’s quick rebound in stock markets, which has also coincided with a rise in bond yields on evidence that inflation is starting to creep up globally. The most frequent argument offered by economists has been that historically, it’s not unusual for stocks and bond market borrowing costs to rise in tandem with a rapidly expanding economy.

“For me it’s really a question of maybe. Markets are taking a look at the inflationary outlook and saying OK, maybe rates are going up and maybe the economy will compensate for that,” said Michael Hewson, chief markets analyst at CMC Markets. “That might change if we move to 3 percent on the 10-year (Treasury).”

In an especially quiet and illiquid overnight session, with most of Asia on holiday celebrating the Lunar New Year, FX traders saw fireworks in the latest violent lunges of the dollar, and especially the USDJPY, which tumbled as low as 105.55, taking out perimeter stops, and sending the pair to a fresh 15 month low, as the market shrugged off the widely-expected nomination of Haruhiko Kuroda (translation: no change to the BOJ’s policy) …

Health-Care Deals: An Offer They Can’t Refuse

The health-care industry is in the throes of a major shake-up. That creates a situation in which companies face a greater risk by standing pat than possibly overpaying for an acquisition.

Cisco Switches Back On

The network giant’s old businesses help revive growth.

Nestlé’s Fortunes Melting Like Ice Cream

Nestlé’s Chief Executive Mark Schneider has grasped the challenge facing the world’s largest food company. But making Nestlé more responsive and entrepreneurial is proving to be a very tall order.

ALS patient group unhappy with how $115 million raised by the Ice Bucket Challenge is being spent

Individuals with ALS say they aren’t benefiting from the Ice Bucket Challenge donations that poured into the nonprofit ALS Association.

Metals Stocks: Firmer gold futures head for weekly gain

Gold futures firmed Friday and headed for a weekly gain of about 3% even as the dollar index tipped higher and rebounding, if still turbulent, stocks headed for their best week in more than a year.

In One Chart: Why the bull market may not play dead in the Year of the Dog

Will the year of man’s best friend also be good to investors?