06Jan2016 Pre-Market Commentary: Global Markets Deep In The Red This Morning As Investors Fears Grow, China's Weakening Economy And The Oil Glut Outweigh Middle East Tensions

Written by Gary

U.S. stock future indexes are once again deep in the red this morning. Premarkets opened down 1.5% and SPY has crashed below 3% at 9 am. China fueled fears about its economy by permitting the yuan to weaken further and a nuclear test by North Korea added to geopolitical worries (see both below). With ever-increasing concerns, investors are continuing to replace risky assets with safe havens.

Here is the current market situation from CNN Money
	European markets are sharply lower today with shares in France off the most. The CAC 40 is down 1.95% while London’s FTSE 100 is off 1.73% and Germany’s DAX is lower by 1.70%.

What Is Moving the Markets

Here are the headlines moving the markets.
	Stock futures fall on China worries, North Korea nuclear test (Reuters) – U.S. stock index futures were sharply lower on Wednesday as China allowed its currency to weaken further and oil prices fell to their lowest in more than 11 years.
	Oil hits 11-year low, Saudi-Iran row cuts chances of output restraint LONDON (Reuters) – Oil prices hit their lowest in over 11 years on Wednesday, as the row between Saudi Arabia and Iran was seen making any cooperation between major exporters to cut output even more unlikely.
	Shuttered up: As China slows, Hong Kong company closures hit record HONG KONG (Reuters) – A record number of Hong Kong firms shut up shop last year as China, the mainstay of the city’s economy, trundled to its slowest economic growth in a quarter of a century and spending by mainland visitors dried up.
	Exclusive: Verizon launches auction to sell data centers – sources (Reuters) – Verizon Communications Inc has started a process to sell its data center assets, hoping to fetch more than $2.5 billion, people familiar with the matter said on Tuesday, as the U.S. telecommunications conglomerate focuses on its core business.
	Volkswagen brand chief confident of finding solution to U.S. diesel issues (Reuters) – The head of Volkswagen AG’s top-selling brand said on Tuesday he is confident the German automaker will reach agreement with U.S regulators to bring nearly 500,000 diesel vehicles into compliance with U.S. emissions laws.
	Global stocks hit by China worries, North Korea nuclear test LONDON (Reuters) – World stocks fell for a fifth day on Wednesday as China fueled fears about its economy by allowing the yuan to weaken further and a nuclear test by North Korea added to a growing list of geopolitical worries.
	AirAsia sets up $1-billion funding program to shore up finances SINGAPORE (Reuters) – Asia’s largest budget airline, AirAsia Bhd , has set up a $1-billion financing plan through a multicurrency medium-term note program, months after it faced calls to shore up its financing in tough operating conditions.
	ADP Payrolls Soar To Highest Since 2014, Zandi Sees “Return To Full Employment By Mid-Year” Great news right? For those hoping for some “bad news is good news to slow The Fed down” data, ADP is a disappointment. The December monthly change was a rise of 257k – hugely better than the expected 198k and th ebiggest rise since December 2014. Most importantly the goods-producing sector added a shocking 23,000 jobs – despite every single manufacturing indicator deep in recession. Service-sector jobs added 234k. The details from the report: Payrolls for businesses with 49 or fewer employees increased by 95,000 jobs in December, up from November’s downwardly revised 72,000. Employment among companies with 50-499 employees increased by 65,000 jobs, up about 10 percent from last month. Employment at large companies ” those with 500 or more employees ” came in at 97,000 an increase from the upwardly revised 80,000 jobs added in November. Companies with 500-999 added 39,000 jobs, while companies with over 1,000 employees gained 58,000 jobs. Goods-producing employment rose by 23,000 jobs in December, well up from a downwardly revised -2,000 the previous month. The construction industry added 24,000 jobs, which was roughly in line with the 21,000 average monthly jobs gained for the year. Meanwhile, manufacturing stayed in positive territory for the second straight month adding 2,000 jobs. Service-providing employment rose by 234,000 jobs in December, up from an upwardly revised 213,000 in November. The ADP National Employment Report indicates that professional/business services contributed 66,000 jobs, the larg …
	A Shocked Wall Street Reacts To China’s “Surprising” Devaluation Less than a month ago, and just days after the Yuan was finally inducted into the IMF’s hall of reserve currency fame, the Chinese Foreign Exchange Trade System, a part of the PBOC, made it very clear that what was about to happen would not be pretty, when it announced – in a statement which clearly everyone ignored – that going forward it would index the relative strength of the CNY not to the USD but the a basket of currencies (against which the USD to which it is pegged has been soaring). At the time we explained that “what this means is that for anyone who thought the Yuan devaluation is over, now that the currency is at the lowest level relative to the dollar since 2011, the reality is that the devaluation relative to everyone else is only just starting. And, with the PBOC’s warning that the “RMB is relatively a strong currency among the major international currencies” the real devaluation is, just as we warned four months ago, about to be unleashed. Expect at least a 15% reduction in Trade-Weighted terms in the coming weeks and months, especially if the Fed hikes. One month later, it appears that not a single person heeded this warning, and now that the PBOC has unleashed a whopper of a devaluation round…
	Warning: the FANGs Are Breaking Down The FANGs are beginning to break down. FANG is an acronym that stands for Facebook, Amazon, Netflix, Google. These are four of the top performing stocks of 2015. Netflix was the top stock for the S&P 500 returning 134% in 2015. Amazon was #2, returning 118%. Google returned 44% and Facebook returned 34%. In very simple terms, these are the big market leaders. And now all of them are beginning to break down. Facebook (FB) is testing critical support. Below this the long-term bull market trendline at sub-100. Amazon (AMZN) has just taken out support. We’re likely to test to the bull market trendline running back to early 2015. Netflix (NFLX) has broken its bull market trendline and is coming up against key support. And finally Google (GOOG) is testing key support. Below this is nothing until 700. All four of these are sporting ugly charts. Keep an eye on them as former market leaders (and hedge fund darlings) they have critical importance for gauging the general market’s momentum. Speaking of which, I’ll leave you with this long-term chart of the S&P 500.
	Frontrunning: January 6 Obama, wiping tears, makes new push to tighten gun rules (Reuters) Global stocks hit by China worries, North Korea nuclear test (Reuters) Oil hits 11-year low, Saudi-Iran row cuts chances of output restraint (Reuters) North Korea says successfully conducts first H-bomb test (Reuters) Valeant Planning to Appoint New Leader as CEO Remains Hospitalized (WSJ) Treasuries Extend 2016 Winning Start With Growth Outlook Clouded (BBG) Apple Scales Back Orders for Its iPhones (WSJ) Apple Suppliers Drop Globally After IPhone Output Cut Report (BBG) Bank Options Turn Bearish as Favorite 2015 Trades Keep Unwinding (BBG) Starboard Calls for Management, Structural Changes at Yahoo (WSJ) U.S. Apartment Vacancies Climb as New Buildings Crowd the Market (
	Global Stocks Drop Amid North Korea, China Worries Global stocks fell, continuing their shaky start to the year, as news of a possible nuclear test in North Korea and lingering concerns over China spooked investors.
	Oil Prices Fall to 11-Year Low Oil prices slid to an 11-year low under pressure from a strong dollar and weak Chinese data, as crude continues to suffer from a persistent supply glut.
	Banks Get Relief on Accounting Headache The Financial Accounting Standards Board saidÂ it would change a rule that requires banks to take losses when some of their own debt is considered safe and to record gains when the debt is considered riskier.
	Hedging Income Fluctuations With Foreign Currency Assets from Liberty Street Economics — this post authored by Bianca De Paoli and Hande Kucuk The world has gone through a process of financial globalization over the past decades, with countries increasing their holdings of foreign assets and liabilities. At the same time, countries have started to have a more positive foreign currency exposure by reducing their bias toward holding assets in domestic currency instead of foreign currency. One possible reason for these changes is that nations view demand shocks as more likely than supply shocks.
	Economic Report: Private sector adds 257,000 jobs in December: ADP Private-sector hiring ramped up last month by 257,000 jobs, Automatic Data Processing Inc reported Wednesday. That was the strongest month since December 2014.
	The Fed: Fed minutes may show cracks in central bank’s united front The Fed’s ˜all for one, one for all’ stance in December in raising interest rates for the first time since 2006 may not stand close scrutiny when the minutes of their meeting are released Wednesday.