19Jan2016 Pre-Market Commentary: US Futures Sharply Higher, WTI Oil Slipping Fractionally, Markets Expected To Open Higher

Here is the current market situation from CNN Money

European markets are sharply higher today with shares in France leading the region. The CAC 40 is up 2.66% while London’s FTSE 100 is up 2.14% and Germany’s DAX is up 1.96%.

Delta Air misses fourth-quarter expectations, sees unit revenue decline

(Reuters) – Delta Air Lines Inc on Tuesday reported fourth-quarter profit slightly below analysts’ expectations and forecast that passenger unit revenue will continue to decline in early 2016 amid “international volatility” and currency pressures.

BofA profit up as costs drop, revenue rises in most businesses

(Reuters) – Bank of America Corp, the No. 2 U.S. bank by assets, reported a 9.8 percent rise in profit for the final quarter of 2015, helped by lower expenses and growth in revenue in three of its four large businesses during a tough period for banks.

Oil rises on record Chinese demand, oversupply caps gains

LONDON (Reuters) – Oil prices rose more than 3 percent on Tuesday as data showed Chinese oil demand likely hit a record high in 2015, but contracts remained near 12-year lows as the IEA said the market should stay oversupplied this year.

IEA says oil market to remain oversupplied until late 2016

(Reuters) – Unseasonably warm weather and rising supply will keep the crude oil market oversupplied until at least late 2016, the International Energy Agency said in its monthly report on Tuesday.

Johnson & Johnson to cut 3,000 jobs in medical devices division

(Reuters) – Healthcare conglomerate Johnson & Johnson said it would cut about 3,000 jobs within its medical devices division, or between 4 percent and 6 percent of the unit’s global workforce, over the next two years.

Credit Agricole revives plan to simplify its structure, shares rise

PARIS (Reuters) – French bank Credit Agricole is reviving plans to simplify its ownership structure with a scheme to inject capital into the listed entity through the sale of a cross-shareholding back to the co-operative parent.

Morgan Stanley posts quarterly profit as costs plunge

(Reuters) – Morgan Stanley reported a fourth-quarter profit, compared with a year-earlier loss, as its legal costs plunged and compensation expenses fell.

Stock futures up as weak China GDP raises stimulus hopes

(Reuters) – U.S. stock index futures were higher on Tuesday after China’s slowest annual growth rate in 25 years raised hopes of further stimulus measures from Beijing.

IMF cuts global growth forecast as China, falling oil prices weigh

WASHINGTON (Reuters) – The International Monetary Fund cut its global growth forecasts for the third time in less than a year on Tuesday, as new figures from Beijing showed that the Chinese economy grew at its slowest rate in a quarter of a century in 2015.

BofA Beats EPS Despite Revenue Miss, Sliding Sales And Trading; Reports $21.3 Billion In Energy Exposure

In the aftermath of Citi and JPM’s earnings last week, the only thing investors wanted to know about when it came to the just released Bank of America earnings moments ago, was the bank’s energy exposure, and we’ll get to that in a second, but first here are the housekeeping items.

Bank of America reported Q4 EPS of $0.28, or $0.29 ex-DVA, a modest improvement from a year ago, and above the 0.27% expected, driven by ongoing expense reduction in the form of fewer lawsuits and fewer employees. However, GAAP revenue of $19.5 (not the non-GAAP revenue of $19.8 proudly featured), missed expectations of $19.8 billion, on continued deterioration in Sales and Trading revenues.

The expense reduction was driven by “progress made on LAS cost initiatives, while benefits from optimization efforts across the franchise were largely offset by investments in the business” as well as the bank’s neverending reduction in force: “FTE headcount was down 5% from 4Q14, as continued progress in LAS and other reductions in support staff and infrastructure more than offset increases in client-facing professionals.”

BofA did warn however, that compared to 4Q15, 1Q16 expenses are expected to be impacted by the following items:

Annual retirement-eligible incentive compensation costs, which are expected to be approximately $1.0B

Seasonally elevated payroll tax costs, which are expected to be high …

“The Oil Market Could Drown In Oversupply,” IEA Warns

On Monday, we noted with some incredulity that North Dakota Sour – a high-sulfur grade of crude – was briefly going for -$0.50 at the Koch brothers’ Flint Hills Resources refining arm.

That’s not a misprint. If you had yourself some North Dakota Sour, you’d have to pay a refinery to take it off your hands. Your product was worth less than nothing.

We use the past tense there because once Bloomberg broke the story, Flint Hills quickly replaced the negative number with a positive one – you can now get $1.50.

Negative oil prices – even if they merely reflect the increased cost of transporting certain grades – underscore just how acute the downturn has become in the face of a global deflationary supply glut created by the Saudis, perpetuated by ZIRP, and exacerbated by the incipient threat of Iran’s return to market.

Now, with crude having dipped below $30 (today’s rebound notwithstanding) the question on everyone’s mind is simply this: can oil continue to move lower? According to the IEA, the answer is œan emphatic yes.

In its latest oil market report, the agency warns that the world could œdrown in oversupply with the return of Iranian crude. “If Iran can move quickly to offer its oil under attractive terms, there may be more ˜pricing in’ to come, the agency’s monthly report says. œWhile the pace of stock building eases in the second half of the year as supply from non-OPEC producers falls, unless something changes, the oil market could drown in over- supply.

To be sure, the IEA isn’t convinced the Iranians will be able to meet their ow …

Equities Soar, Oil Back Over $30 On Hopes For More Stimulus Following Disturbing Chinese Data

Only the most intellectually dishonest can claim that last night’s Chinese economic data deluge was anything but miserable. As we showed last night, everything missed:

Industrial Production +5.9% (MISS vs +6.0% YoY expectations)

Retail Sales +11.1% (MISS vs +11.3% YoY expectations)

Fixed Asset Investment +10.0% (MISS vs +10.2% YoY expectations),

Q4 GDP growth +6.8% (MISS vs +6.9% YoY expectations).

Even as the real full year GDP of 6.9% was in line, it was still the lowest since 1990…

… while the nominal Q4 GDP was well below 6% when excluding the 0.9% deflator, suggesting unadjusted Chinese growth just had its worst quarter in the 21st century.

MarketNews’ take confirmed as much: “a closer look under the hood shows a more troubling picture. Industrial output growth in December slid back to below 6% after a surprise acceleration in November, fixed-asset investment growth continued its slow grind lower, coming in at 10% for the Jan-Dec period, the weakest pace since 2000. The overhang of unsold real estate persists and although sales are improving in first-tier cities, the government’s own data show that floor space under construction rose just 1.3% in 2015. While that’s an improvement from a record low of -3.6% in the Jan-Aug y/y period, the lack of growth in investment will continue to be a significant drag on the economy this year given the sector’s importance to other industries including steel, cement and household goods.”

Gold Retains œKey Role Of A Major Diversifier – Dr Gurdgiev

– 2015 and start 2016 œworrying for markets
– Gold’s long term performance strong in all currencies (see table)
– œImproved performance in market for gold coins
– œDemand for U.S. Mint issued gold coins rose 45.6% y/y in weight terms
– œ2015 the third busiest year over the last ten years
– Gold has key role of a major diversifier in portfolios

2015 was a troubling year for the financial markets. Across currencies, commodities, equities and fixed income, full year performance was lacklustre in terms of aggregate returns and worrying in terms of risk metrics. Market volatility at the outset of 2016 suggests we are likely to see more volatility in 2016.

GLOBAL CURRENCIES 1 YEAR 3 YEAR 5 YEAR 10 YEAR US dollar -11.1 -36.7 -23.2 +109.4 Euro +0.8 -23.8 -6.7 +128.4 Pound sterling -7.3 -31.9 -20.0 +144.2 Japanese yen -9.2 -7.6 +12.2 +115.0 Swiss franc

Bank of America’s Results Improve as Trading Holds Up

Bank of America said its fourth-quarter profit rose 9%, thanks in part to growth in its consumer bank and trading revenue holding up despite tough market conditions.

Global Stocks Rally

Global stocks rallied Tuesday despite a steeper-than-expected slowdown in Chinese growth, as sharp gains in oil prices lifted energy and mining shares.

Oil Market Could ‘Drown in Oversupply’

Oil prices could fall further this year as the market faces an œenormous strain on its ability to absorb new supplies from producers such as Iran, the International Energy Agency said.

North Korea, The Outlier In U.S. Policy

from STRATFOR

— this post authored by Rodger Baker

Pyongyang’s latest nuclear test is another reminder of the seemingly intractable “problem” of North Korea. The country’s pursuit of nuclear weapons has apparently been unstoppable. First quietly in the 1980s but lately rather overtly, North Korea has proceeded with its weapons program despite sanctions, isolation, military threats, and attempts at engagement and reconciliation.

Economic Preview: Home buyers may get helping hand from stock meltdown

The Federal Reserve recently raised interest rates, U.S. stocks are tumbling and new worries about the Chinese economy seem to emerge daily. So go ahead and buy that house you’ve been looking at.

Need to Know: How investors should prepare for that short-term stock breather

Several out there are calling for a short-term bump for stocks, but this respite is not exactly a chance to jump in and buy like crazy.

Market Snapshot: Dow futures rise more than 200 points as stocks try to rebound

U.S. stock futures point to a higher open, putting the market on track to rebound a little from its worst 10-session start to a year ever. A report on Chinese economic growth spurs stimulus hopes and comforts investors who feared worse.