14Aug2015 Pre-Market Commentary: U.S. Futures Lower, Oil Prices At 6-1/2 Year Lows, Investors Still Worried About China And The EU

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 0.73% while Germany’s DAX is off 0.41% and London’s FTSE 100 is lower by 0.18%.

July 2015 Producer Prices Year-over-Year Deflation Marginally Increases

Written by Steven Hansen

The Producer Price Index year-over-year deflation continued – and deflation marginaly grew over last month. The intermediate processing continues to show a large deflation in the supply chain.

U.S. crude oil hits six-and-a-half-year low on high stocks

LONDON (Reuters) – U.S. crude oil steadied on Friday after falling to its lowest in almost 6-1/2 years as huge stockpiles and refinery shutdowns heightened concerns about global oversupply.

Accused ‘flash crash’ trader to be released on bail in London

LONDON (Reuters) – Navinder Sarao, the London-based trader wanted in the United States for his alleged role in the 2010 Wall Street “flash crash”, is set to be freed on bail on Friday after his conditions were modified, one of his lawyers said.

Malaysia Meltdown: Asian Currency Crisis 2.0 Sends Ringgit, Stocks, Bonds Crashing

When China went the “nuclear” (to quote SocGen) devaluation route earlier this week in a last ditch effort to rescue its export-driven economy from the perils of an increasingly painful dollar peg, everyone knew things were about to get a whole lot worse for an EM currency basket that was already reeling from plunging commodity prices, slumping Chinese demand, and the threat of an imminent Fed hike.

Sure enough, EM currencies from Brazil to South Korea plunged, and monetary authorities – unsure whether to play down the move or cry foul – scrambled to respond.

With some Asian currencies already falling to levels last seen 17 years ago, some analysts fear that an Asian Currency Crisis 2.0 may be just around the corner.

That rather dire prediction may have been validated on Friday when Malaysia’s ringgit registered its largest one-day loss in almost two decades.

As FT notes, “sentiment towards Malaysia has been damped by a range of factors including sharp falls in global energy prices since the end of June. Malaysia is a major exporter of both oil and natural gas, with crude accounting for almost a third of government revenue.” The central bank meanwhile, “has opted to step back from intervening in the market in response to the falling renminbi, unleashing pent-up downward pressure on the ringgit.” That, apparently, marks a notable change in policy. “The most immediate challenge is the limited scope of Malaysia’s central bank to step in,” WSJ says, adding that “for weeks, it tried to stem the currency’s slide, digging into its foreign-exchange reserves to prop up the ringgit and warning banks from aggressively trading against its currency.”

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Exclusive: Japan Post’s $11 billion triple listing expected November 4 – sources

TOKYO (Reuters) – Japan Post Holdings Co is expected to list shares in its holding company and bank and insurance units on Nov. 4, several people close to the deal said on Friday, in Japan’s biggest sale of state-owned enterprises in nearly three decades.

Global M&A activity surges toward record high

LONDON (Reuters) – Global mergers and acquisitions (M&A) have climbed close to a record high this year, accelerated by a trio of multibillion-dollar deals in the U.S., Thomson Reuters data showed.

Fed’s Balance Sheet 12 August 2015 – Essentially Unchanged

Total Fed Balance Sheet:

Fed’s Balance Sheet week ending balance sheet was $4,450 trillion..

Stock futures lower as investors await economic data

(Reuters) – U.S. stock index futures were lower on Friday ahead of the release of a raft of economic data that could give a clearer idea of when the Federal Reserve will raise interest rates.

Tesla raises share offering to $642.5 million

(Reuters) – Electric car maker Tesla Motors Inc said it was looking to raise about $642.5 million through a share sale, above the $500 million it announced on Thursday.

Gold Jumps After China Reveals It Bought Another 19 Tons In July

One month ago, when everyone suspected that the PBOC’s dramatic, 57% jump in gold holdings after a 6 year silence, to a “record” 1658 tons would be a “one-and-done” event, meant to facilitate China’s admission into the SDR, we disagreed. This is what we said:

… now that the seal has been finally broken after so many years, and since today’s update indicates that Chinese gold numbers are clearly goal-seeked with a specific policy purpose – to boost confidence – we await for the PBOC to start leaking incremental gold holding data every month (and especially in months when the market crashes) which will bring us ever closer to what China’s true gold holdings are.

One month later, this is precisely what happened, when overnight the People’s Bank of China reported that even as the price of gold dropped once more in the month of July after the epic June drubbing (when China supposedly “bought” over 500 tons of gold), it added another 610,000 ounces of the yellow metal, or 1.1%, bringing its total to 53,930,000 ounces, or 1677 tons of gold.

Our view on China’s disclosure (if not accumulation: this has already happened and now the PBOC is merely picking the right moments to gradually reveal what its true gold holdings are) of gold have not …

Stocks set for weekly drop, bruised by China’s yuan weakness

LONDON (Reuters) – European stocks were poised for their worst week in six on Friday, under pressure from a falling oil price, as global markets struggled to regain poise after China’s surprise currency devaluation on Tuesday.

Greek PM faces biggest party revolt yet as bailout approved

ATHENS (Reuters) – Greek Prime Minister Alexis Tsipras faced the widest rebellion yet from his leftist lawmakers as parliament approved a new bailout program on Friday, forcing him to consider a confidence vote that could pave the way for early elections.

Stock Futures Lower Despite Overnight Calm In Ongoing Currency Wars

After a week of relentless FX volatility, spilling over out of China and into all other countries, and asset products, it was as if the market decided to take a time-out overnight, assisted by the PBOC which after three days of record devaluations finally revalued the Yuan stronger fractionally by 0.05% to 6.3975. And then, as a parting gift perhaps, just as the market was about to close again, the Chinese central bank intervened sending the Onshore Yuan, spiking to a level of 6.3912 as of this writing, notably stronger than the official fixing for the second day in a row. In fact the biggest news out of China overnight is that contrary to expectations, the PBOC once again “added” to its gold holdings, boosting its official gold by 610,000 ounces, or 19 tons, to 1,677 tones (more detail in a subsequent post).

But while the Chinese FX market was positive docile overnight, leading to a modest 0.27% bounce in Chinese stocks, other Asian countries are starting to feel the Asian Currency Crisis of 1997 deja vu effect, most notably Malaysia, whose Ringit plummeted overnight on a series of bad economic and liquidity news (more on that shortly), which in turn is forcing the question: who gets hammered next, and next, and next, and so on.

Asian equity markets were more subdued and traded mixed following a subdued Wall Street close, while the PBoC strengthened the CNY for the first time in 4-days, however the change was significantly less than the prior devaluations from the central bank. Shanghai Comp (+0.3%) outperformed with gains in all 10 sectors and is on course for its best week in since June. Elsewhere, Nikkei 225 (-0.4%) and the ASX 200 (-0.6%) amid underperformance in the energy complex after oil prices fell to 6-years lows.

Still, this masked the turbulence beneath the surface as the Asian stock index sank to its lowest level since January.

And Asian stocks sink to lowe …

EU regulators to decide on FedEx, TNT deal by January 13

BRUSSELS (Reuters) – European Union antitrust regulators will decide by Jan. 13 instead of Dec. 8 whether to clear FedEx’s 4.4-billion-euro ($4.90 billion) bid for Dutch rival TNT after the logistics companies asked for more time.

European GDP Unexpectedly Disappoints As All “Big Three” Economies Miss Expectations

Define irony: in a quarter in which Greece was supposed to have been near death (at least according to the worst PMI print in history and of course, judging by the bank lines in front of the capital controlled institutions), yesterday we learned that Greek GDP surged relative to expectations rising by 0.8%, which was what analysts had expected but with a minus sign in front of it.

Then overnight, we got the rest of European GDP, including the big three: Germany, France and Italy. The results were nothing short of a big disappointment.

To wit: Germany Q2 GDP rose by 0.4%, below the 0.5% expected; Italy’s GDP rose by 0.2%, also below the 0.3% expected, but the biggest surprise was France, which did not even rise, and Q2 GDP was unchanged, well below the 0.2% expected, and down substantially from the revised 0.7% GDP growth in Q1.

At the Euroarea level, the result was also a big negative surprise with Q3 GDP rising 0.3%, down from 0.4%, and below expectations. This was the worst GDP print since Q3 2014.

From Eurostat:

Seasonally adjusted GDP rose by 0.3% in the euro area1 (EA19) and by 0.4% in the EU281 during the second quarter of 2015, compared with the previous quarter, according to flash estimates2 published by Eurostat, the statistical office of the European Union. In the first quarter of 2015, GDP grew by 0.4% in both areas.

Compared with the same quarter of the previous year, …

U.S. authorities seek to seize $1 billion in telecom probe: WSJ

(Reuters) – U.S. authorities are asking counterparts in Europe to seize about $1 billion in assets related to an investigation into three telecom companies and intermediaries close to the daughter of Uzbekistan’s president, the Wall Street Journal reported on Friday.

Euro zone economy sputters as China risks loom

BERLIN (Reuters) – Germany enjoyed robust if unspectacular growth in the second quarter while the French economy stagnated, leaving policymakers looking at a fragile euro zone recovery and risks from volatile Chinese markets.