21May2015 Pre-Market Commentary: US Futures Off This Morning, Americans Filing New Claims Rose

Here is the current market situation from CNN Money

European markets are mixed. The FTSE 100 is higher by 0.05%, while the DAX is leading the CAC 40 lower. They are down 0.48% and 0.36% respectively.

April 2015 CFNAI Super Index Continues to Show USA Economic Softness. Data Was Below Market Expectations.

Written by Steven Hansen

The economy was growing marginally faster last month based on the Chicago Fed National Activity Index (CFNAI) 3 month moving (3MA) average – but continues to grow below the historical trend rate of growth (but well above levels associated with recessions).

Read more …

U.S. Jobless Claims Up; Four-Week Average Lowest Since 2000

The number of Americans filing new claims for unemployment benefits rose slightly more than expected last week, but the underlying trend continued to suggest the labor market was tightening.

Best Buy profit beats on strong demand for TVs, smartphones

(Reuters) – Best Buy Co Inc , the largest U.S. consumer electronics chain, reported better-than-expected quarterly profit and sales, helped by strong demand for smartphones and large-screen TVs.

Food Companies Fear Avian Flu May Cause Egg Shortages

The flu is forcing farmers to kill more than 38 million infected birds, 33 million of which are laying hens.

Fed Minutes Weigh on Dollar

The euro edged higher after Fed officials signaled they were unlikely to raise rates interest rates in June.

Hanergy Spins as Goldin Turns Into Straw

The share collapse of Hong Kong high flyers Hanergy, Goldin Financial and Goldin Properties is a reminder of the limits of passively managed money in unevenly regulated markets.

CVS to buy pharmacy services provider Omnicare for $10.1 billion

(Reuters) – CVS Health Corp , the second-largest U.S. drugstore operator, said on Thursday it will buy pharmacy services provider Omnicare Inc for $10.1 billion to expand in the market serving the elderly.

Democracy Under Fire: Troika Looks To Force Greek Political “Reshuffle”

The countdown to the June 5 IMF payment is about to go under two weeks and if there’s one thing that Greece and the IMF agree on, it’s that Athens can’t make that payment unless creditors disburse the last tranche of aid from the country’s current bailout program. European officials have done an admirable job of making life miserable for Syriza since the democratically elected government took over in January, as the “institutions” (and Germany) are keen on sending the following unequivocal message to any other ‘leftist radicals’ who may be thinking about using the “one move and the idea of EMU indissolubility gets it” routine as a way to negotiate for breathing room on austerity pledges: you will get exactly nowhere and will have a very unpleasant time on the way.

But time is running short and the Greeks have yet to cave on ‘red lines’, setting up the possibility that Germany’s Hellenic debt serfs may actually default next month, triggering instability in Europe and testing the ECB’s “whatever it takes” resolve in sovereign debt markets. That’s not ideal for EU officials who would much rather force PM Alexis Tsipras to abandon his campaign promises in exchange for aid or, perhaps better yet, make things so unbearable for Greeks that the populace begins to ask itself if a government of pandering technocrats is better than starving. This is perhaps why both Moody’s and Schaeuble stepped up their efforts to trigger a terminal bank run on Wednesday.

Whatever the case, it is becoming increasingly clear that the Syriza show will ultimately have to be canceled in Greece (or at least recast) if the country intends to find a long-t …

Futures lower as Fed rate hike seen further out; data eyed

(Reuters) – U.S. stock index futures were slightly lower on Thursday, a day after minutes from the latest Federal Reserve meeting bolstered expectations that interest rates would stay near zero until later this year.

Greek optimism about imminent deal not justified: Schaeuble

BERLIN (Reuters) – German Finance Minister Wolfgang Schaeuble told Reuters the Greek government’s optimism about clinching a cash-for-reforms deal with its lenders in days was not backed up by negotiations and he could not rule out Greece becoming insolvent.

Frontrunning: May 21

Once-Unthinkable Criminal Pleas by U.S. Banks Get Investor ‘Meh’ (BBG)

The E-Mail That Helped Catch Barclays: ‘ISDAfix Is Manipulated’ (BBG)

ECB scraps embargoed media speeches in wake of hedge fund storm (Reuters)

CFTC Said Preparing ISDAfix Probe Talks in Weeks: Credit Markets (BBG)

Islamic State takes control of Syria’s Palmyra in westward advance (Reuters)

Tensions High as Greece Gets Smallest Aid Rise Yet (BBG)

The Rise of the $50,000 Rental (BBG)

U.S. says South China Sea reclamations stoke instability (Reuters)

First Hanergy Now Goldin: Hong Kong Stocks Drop Like Stones (BBG)

New History …

Lenovo annual profit up 1 percent, missing forecasts, amid China smartphone competition

BEIJING/HONG KONG (Reuters) – Lenovo Group Ltd , the world’s biggest PC maker by sales, said on Thursday its annual net profit rose 1 percent to $829 million, slightly below analyst expectations, as intense competition in the Chinese smartphone market eroded margins.

Fed Looks Past June for First Rate Rise

Federal Reserve officials at their April policy meeting said in the most explicit terms yet that they are unlikely to start raising short-term interest rates in June, as seemed possible when 2015 began.

Lenovo’s PC Success Won’t Ring Smartphone Bell

Chinese computer maker Lenovo’s low-cost, high-volume formula continues to work for its core PC business. Smartphones is another matter.

Despite Weak Economic Data Overnight, Futures Slide On Rate Hike Concerns

The big news overnight was neither the Chinese manufacturing PMI miss nor the just as unpleasant (and important) German manufacturing and service PMI misses – the second consecutive monthly slowdown – but that speculation about a rate hike continues to grow louder despite the abysmal economic data lately, with the latest vote of support of a 25 bps rate increase coming from Goldman which overnight updated its “Fed staff model” and found surprisingly little slack in the economy suggesting that the recent push to blame reality for not complying with economist models (and hence the need for double seasonal adjustments) is gaining steam, and as we first suggested earlier this week, it may just be the case that the Fed completely ignores recent data (saying it was not adjusted enough), and pushes on to tighten conditions, if only to rerun the great Trichet experiment of the summer of 2011 when the smallest of rate hikes resulted in a double dip recession.

This may also be why equity futures this morning are a peculiar shade of green, one not seen in over a week, as the reality that a rate hike is coming finally trickles down to the smallest and slowest algorithm.

We will have more to say on the Goldman note shortly, but here are the main take-aways are: (1) potential growth has continued to recover (estimated at 1.8% year-over-year in 2015Q1); (2) the structural unemployment rate has remained low at 5%; (3) the cyclical gap in participation is very small; and (4) the output gap has continued to close (reaching -0.6% in 2015Q1). Goldman summarizes that “we broadly agree on the model’s estimates for potential growth.” In other words, a rate hike in the current slow-growth, un-double-seasonally adjusted environment may be just what the Econ Ph.Doctor ordered.

As for economic data overni …

Japan unveils $110 billion plan to fund Asia infrastructure, eye on AIIB

TOKYO (Reuters) – Japan unveiled a plan on Thursday to provide $110 billion in aid for Asian infrastructure projects, as China prepares to launch a new institutional lender that is seen as encroaching on the regional financial clout of Tokyo and its ally Washington.

Weak euro zone, Asia pin hopes on U.S. economy for global bounce

LONDON/SYDNEY (Reuters) – Euro zone business growth was weaker than expected this month and factory activity in Asia’s top two economies remained stuck in low gear, putting the onus squarely on the United States to drive a pick-up in global growth.

Banks to Pay $5.6 Billion in Probes

The five big banks will plead guilty to criminal charges to resolve a U.S. investigation into whether traders colluded to move foreign-currency rates for their own benefit.

Airbus sees ‘significant’ number of orders at Paris Airshow

PARIS (Reuters) – Airbus expects to win a “significant number” of orders at next month’s Paris Airshow, a senior executive said on Thursday.

Deutsche Telekom to consider partner for T-Mobile US: CEO

COLOGNE, Germany (Reuters) – Deutsche Telekom will consider any partner that can improve profitability at its U.S. operations, its chief executive told the company’s annual shareholders meeting.

Shares subdued by mixed China, euro zone PMI data

LONDON (Reuters) – World shares hovered near record highs on Thursday after downbeat Chinese manufacturing data put pressure on Beijing for more stimulus and the Federal Reserve signaled an increase in U.S. interest rates is still some way off.