20Jul2015 Pre-Market Commentary: U.S. Futures Higher, Gold Sharply Lower, Oil Testing Support, Markets Expected To Open Higher

Here is the current market situation from CNN Money

European markets are higher today with shares in Germany leading the region. The DAX is up 0.94% while France’s CAC 40 is up 0.80% and London’s FTSE 100 is up 0.28%.

Lockheed posts profit above estimate, could sell some businesses

(Reuters) – Lockheed Martin Corp , the Pentagon’s largest arms supplier, reported a better-than-expected 4.5 percent rise in quarterly profit and said it could spin off or sell its government IT and technical services businesses.

SunEdison to buy Vivint Solar for about $2.2 billion

(Reuters) – Solar company SunEdison Inc said it would buy Vivint Solar Inc in a deal valued at about $2.2 billion, including debt, to expand in the residential and commercial solar power business.

Have Dealers’ Strategies In The GCF Repo Market Changed?

by Liberty Street Economics

— this post authored by Nina Boyarchenko, Thomas Eisenbach, and Or Shachar

In a previous post, Mapping and Sizing the U.S. Repo Market, our colleagues described the structure of the U.S. repurchase agreement (repo) market. In this post, we consider whether recent regulatory changes have changed the behavior of securities broker-dealers, who play a significant role in repo markets. We focus on the General Collateral Finance (GCF) Repo market, an interdealer market primarily using U.S. Treasury and agency securities as collateral.

Lockheed to buy UTC’s Sikorsky for $9 billion

WASHINGTON (Reuters) – Lockheed Martin Corp , the Pentagon’s largest supplier, on Monday announced it had agreed to buy Sikorsky Aircraft, the helicopter unit of United Technologies Corp , for $9 billion, or about $7.1 billion after taking into account

Morgan Stanley beats estimates as trading revenue jumps

(Reuters) – Morgan Stanley reported a better-than-expected second-quarter profit on Monday as its business that trades bonds and equities handily outperformed those of its Wall Street rivals.

Greeks Get First Look At Their Future: Long Bank Lines And Punishing Taxes

Although the details of Greece’s third bailout program have yet to be finalized, Monday marked the beginning of a new dawn for Greeks. Last week, PM Alexis Tsipras forced a set of draconian “reforms” through parliament and sacked political rivals, effectively legislating away the country’s sovereignty while condemning the Greek people to a fate of even tougher austerity and ensuring that despite rhetoric out of Athens, “normality” will not return to Greece for a very long time.

Greek banks reopened and as expected there were long lines. On the bright side, the queues were described as “orderly.” From AP:

In downtown Athens, people lined up in an orderly fashion as the banks unlocked their doors at 8 a.m., taking a number and reading the paper as they waited for their turn at the till.

Many restrictions on transactions, including cash withdrawals, remained, however.

The Greek government kept the daily cash withdrawal limit at 60 euros ($65) but added a weekly limit of 420 euros ($455) that will be available beginning Sunday. This means depositors who don’t make it to the bank on Monday to withdraw cash could pull out 120 euros ($130) on Tuesday instead, and so on, so Greeks don’t have to feel they need to visit an ATM every day.

Bank customers will still not be able to cash checks, only deposit them into their accounts, and they will not be able to get cash abroad with their credit or cash cards, only make purchases. There are also restrictions on opening new accounts or activating dormant ones.

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Futures rise as earnings remain in focus

(Reuters) – U.S. stock index futures rose on Monday with earnings continuing to be in focus after the Nasdaq composite closed at a record high for a second straight session and the S&P 500 stopped short of its record high.

Halliburton profit falls 93 percent on lower drilling activity, charges

(Reuters) – Oilfield services provider Halliburton Co reported a 93 percent fall in quarterly profit as oil producers pummeled by a steep decline in oil prices cut drilling activity, and the company incurred about $400 million in charges.

The Impact Of Student Loan Debt On Small Business Formation

by Philadelphia Fed

Small businesses are the backbone of the U.S. economy and account for approximately one-half of the private-sector economy and 99% of all businesses. To start a small business, individuals need access to capital. Given the importance of an entrepreneur’s personal debt capacity in financing a startup business, student loan debt, which is difficult to discharge via bankruptcy, can have lasting effects and may have an impact on the ability of future small business owners to raise capital.

Oil drops on concerns of glut in refined products

LONDON (Reuters) – Oil dropped on Monday as signs of a growing glut in refined products outweighed a fall in Saudi crude exports and slower U.S. rig activity.

Exclusive: Lockheed to buy United Tech’s Sikorsky for over $8 billion

WASHINGTON (Reuters) – Lockheed Martin Corp has agreed to buy United Technologies Corp’s Sikorsky Aircraft for over $8 billion, two sources said on Sunday, cementing a deal that would confirm Lockheed’s dominance in weapons making and giving the Black Hawk helicopter to the maker of the F-35 fighter jet.

Frontrunning: July 20

Gold Plunges to Lowest Since 2010 (BBG)

In Greek crisis, one big unhappy EU family (Reuters)

Greek Banks Reopen Their Doors (WSJ)

Greek reshuffle hints at autumn election (FT)

Angela Merkel signals conditions for Greek debt talks (FT)

Dollar hits three-month high on rate view, pans gold (Reuters)

History Shows Iran Could Surprise the Oil Market (BBG)

‘Charlie Hebdo’ Will Cease Publishing Cartoons of Prophet Muhammad (Newsweek)

Lockheed to buy United Tech’s Sikorsky for over $8 billion (Reuters)

Ukraine extends creditor talks as threat of default looms (FT)

China’s Total Gold Holdings Much Higher – Owns Gold In SAFE and CIC

China’s Total Gold Holdings Much Higher – Owns Gold In SAFE and CIC

– China revises up its stated gold reserves in bid for IMF membership and reserve currency status
– China announces a 604 tonne increase in gold reserves
– First public disclosure re reserves in since 2009
– China officially owns around 1,660 tonnes of gold reserves – true total figure is likely much larger
– Playing long game – protecting USD reserves and positioning RMB as global reserve currency
– China true gold holdings much higher as also owns gold in SAFE and CIC

China officially revised its gold reserves upward for the first time since 2009 on Friday. The People’s Bank of China (PBOC) stated on Friday that it had added 604 tonnes of gold to its official reserves last month.

Gold is no longer used to back paper and digital money of today, however it remains an important part of monetary reserves internationally. This can be seen in the People’s Bank of China’s (PBOC) announcement of an increase in their gold reserves.

China’s official reserves are now almost 1660 tonnes of gold. Analysts, including Bloomberg and ourselves, had been expecting a sharp jump to at least 2,000 tonnes and possibly as high as 3,000 or 4,000 tonnes.

It is clear by the secrecy surrounding China’s reserves that they view gold as a vital strategic asset. Chinese gold reserves increased by 57 percent and China’s holdings have now surpassed those of Russia to become …

Just Released: The U.S. Treasury Market On October 15, 2014

by Liberty Street Economics

— this post authored by Nashrah Ahmed, Alain Chaboud, Dobrislav Dobrev, Joseph Fiorica, Michael Fleming, Frank Keane, Michael McMorrow, Suraj Prasanna, Ernst Schaumburg, Nathaniel Wuerffel, and Ron Yang

The $12.7 trillion U.S. Treasury market plays a critical role in the global economy, serving as the primary means of financing the U.S. government, a risk-free benchmark for other financial instruments, and a key venue for the Federal Reserve’s implementation of monetary policy. On October 15, 2014, the market experienced unusually high volatility, record trading volume, and a rapid “round-trip” in prices without a clear cause.

Pharma’s Recovery Runs Low on Interest

The pharmaceuticals sector’s stock market rally seems to be running out of steam. As well as fundamental reasons for caution, broader market winds are also turning against the sector.

Banks reopen, first repayments start as Greece aims for return to normal

ATHENS (Reuters) – Greece reopened its banks and started the process of paying off billions of euros owed to international creditors on Monday in the first signs of a return to normal after a deal to agree a new package of bailout reforms.

Futures Levitate After Greek Creditors Repay Themselves; Commodities Tumble To 13 Year Low

As we said in our Friday morning wrap, a low volume levitation coupled with a stronger dollar managed to lift stocks to yet another green close, while the Nasdaq soared to a new all time high on terrible breadth with decliners far outpacing advancers however it was all about Google which added in value more than the market cap of about 80% of S&P companies.

The dollar’s resumed strength means corporate revenues are about to slide again, confirming the revenue recession that the S&P has found itself will last a long time. However, judging by recent non-GAAP revenue numbers, the algos will gladly ignore the 2-3% recurring decline in top-line number because USD strength is expected to be “one-time” non-recurring which is somewhat of a paradox in a world in which, according to economists, the Fed is poised to hike rates as soon as September.

Today’s action is so far an exact replica of Friday’s zero-volume ES overnight levitation higher (even if Europe’s derivatives market, the EUREX exchange, did break at the open for good measure leading to a delayed market open just to make sure nobody sells) with the “catalyst” today being the official Greek repayment to both the ECB and the IMF which will use up €6.8 billion of the €7.2 billion bridge loan the EU just handed over Athens so it can immediately repay its creditors. In other words, Greek creditors including the ECB, just repaid themselves once again.

One thing which is not “one-time” or “non-recurring” is the total collapse in commodities, which after last night’s precious metals flash crash has sent the Bloomberg commodity complex to a 13 year low.

The Bloomberg Commodity Index plunges to 13-year low, led by a drop in gold. http://t.co/03c3WYrlGe pic.twitter.com/8IY7TSVgk3

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Yahoo’s Alibaba Spinoff Creates Unparallel Lines

Holding Aabaco, Yahoo’s proposed Alibaba-share spinoff, is a bet that the e-commerce giant chooses to snap up its shadow sooner rather than later.

Growth-Starved Investors Bid Up Tech Shares

Large tech firms like Google and Netflix are being handsomely rewarded for sales gains, underscoring how scarce revenue growth has become amid economic softness.

Sales of Bonds With Floating Rates Sink

Sales of corporate bonds whose interest payments rise and fall with market benchmarks are down nearly 40% this year, another sign investors are skeptical after several false starts that U.S. interest rates will rise significantly in coming years.

Dollar hits three-month high on rate view, pans gold

LONDON (Reuters) – The dollar jumped to three-month highs on Monday, extending its recent run of gains as expectations of a U.S. rate rise gathered pace, while gold prices plunged to their lowest in more than five years.