27Jan2016 Pre-Market Commentary: Looks Like Another Down Day

Here is the current market situation from CNN Money

European markets are lower today with shares in Germany off the most. The DAX is down 0.47% while France’s CAC 40 is off 0.31% and London’s FTSE 100 is lower by 0.25%.

Shell shareholders approve $49 billion BG takeover

THE HAGUE, Netherlands (Reuters) – Shareholders of Royal Dutch Shell approved the company’s $49 billion takeover of BG Group on Wednesday, clearing one of the final hurdles for a deal that will create the world’s biggest liquefied natural gas (LNG) trader.

Global stocks, dollar struggle ahead of Fed as oil falters

LONDON (Reuters) – European stocks succumbed to another slide in oil prices on Wednesday as markets waited cautiously to see what the Federal Reserve’s reaction will be to what has been a brutal start to the year for world markets.

United Technologies quarterly revenue falls 4.5 percent

(Reuters) – United Technologies Corp, which makes Pratt & Whitney aircraft engines and Otis elevators, on Wednesday reported a 4.5 percent decline in fourth-quarter revenue, hurt by a strong dollar.

EU seeks more powers over national car regulations after VW scandal

BRUSSELS (Reuters) – The European Union sought sweeping powers over national car regulations on Wednesday, aiming to prevent a repeat of Volkswagen’s emissions test cheating scandal and sparking a tough debate as governments and industry resist change.

Bosch launches internal probe into emissions scandal

STUTTGART (Reuters) – German auto supplier Robert Bosch [ROBG.UL] said it had launched an internal probe to investigate whether any of its staff were involved in a scandal over the rigging of automotive emissions tests that has engulfed Volkswagen .

Fiat Chrysler fourth-quarter beats expectations, guidance cautious

MILAN (Reuters) – Fiat Chrysler Automobiles reported a better than expected rise in fourth-quarter operating profit on Wednesday as strong results from North America and improving operations in Europe offset weakness in Latin America and Asia.

Iraq says would consider deal on global oil cuts but it is still elusive

BAGHDAD (Reuters) – Iraq is ready to take part in an extraordinary OPEC meeting and even reduce its fast growing output if all OPEC and non-OPEC members agree – a deal which at this stage seems elusive, the country’s finance minister said.

Oil falls as inventory build dashes optimism over supply

LONDON (Reuters) – Oil futures fell on Wednesday, after a surprise rise in U.S. inventories wiped out the optimism that had built up the day before over the potential for the world’s largest exporters to cut output enough to stem a 19-month-long price slide.

Boeing Stock Tumbles After Drop In Revenue, Cash Flow; Huge Cut To Guidance

It must have been scary for Boeing for those few months in which the all important Ex-Im bank was taken offline. The result: moments ago BA announced Q4 earnings which while beating expectations (which were sharply lowered in recent months) of $1.27, were still a 31% drop compared to Q4 of last year, driven by a 4% drop in the top line, leading to a substantial decline in gross profit from $3.8 billion to just 2.9 billion, and a whopping 38% plunge in operating cash flow to just $3.1 billion (and $2.5 biliion in FCF).

The sharp decline took place even as Boeing benefited generously from America’s numerous wars around the globe, leading to a 7% increase in military aircraft revenue in the fourth quarter, however it was not enough to offset a 7% drop in commercial aircraft deliveries, which at 182 were 13 lower from the 195 a year ago.

But the biggest hit to Boeing was its slashed guidance, which came in far below consensus estimates:

Boeing’s 2016 Core EPS guidance of between $8.15 and $8.35 was far below the $9.42 expected;

Boeing’s 2016Revenue of $93-$95 billion was also well below the $97.3 billion expected.

The rest of the guidance was uneventful:

But the cherry on top was a reported that came not in the earnings report but a few hours earlier, when the Seattle Times announced that “Boeing is likely to announce Wednesday morning another production rate cut, this time for the 777 program, according to a senior executive with a 777 customer whom Boeing consulted as it prepared its plan.

Frontrunning: January 27

Global stocks, dollar struggle ahead of Fed as oil falters (Reuters)

Bond Bulls Bank on Fed Mention of Market Chaos as Drag on Growth (BBG)

Fees on Mutual Funds and ETFs Tumble Toward Zero (WSJ)

China Climbs Back Up Janet Yellen’s Worry List (BBG)

The World’s Favorite New Tax Haven Is the United States (BBG)

New Jersey Gov. Christie backs Atlantic City takeover plan (Reuters)

U.S. Universities Raised a Record $40.3 Billion Last Year (BBG)

With China weakening, Apple turns to India (Reuters)

Cash Is King as Europe Adapts to Negative Interest Rates (BBG)

Trump pulls out of Republican debate in Iowa (Reuters)

French Justice Minister Taubira Quits Over Constitutional Change (

Bill Ackman Blames Abysmal Performance On Hedge Fund Groupthink

There were many excuses in Bill Ackman’s annual letter to shareholders, in fact some 13 pages worth, which sought to explain how “Pershing Square funds suffered their greatest peak-to-trough decline and worst annual performance ever.”

To be sure, Ackman is quick to point out that the 21% plunge in P&L in 2015 was not just due to his infamous tryst with Valeant, although that’s where it started:

“the inception of the portfolio’s decline began with Valeant in August. We have discussed at length the events at Valeant which catalyzed the stock’s initial decline: political attention on drug pricing and the industry, regulatory scrutiny, attacks by short sellers, and the termination of a distribution arrangement representing ~7% of Valeant’s sales. But, we would never have expected that the cumulative effect of these events would have caused a nearly 70% decline in the stock, nor do we believe that they will permanently impair Valeant’s intrinsic value.”

It quickly went downhill from there:

Contemporaneous with the decline of Valeant, the rest of our portfolio went into free fall which has continued up until the present.

Ah yes, words to warm the heart of any LP. The ongoing collapse of Perishing Square is confirmed by the followng table:

Futures Slide On Apple Disappointment, Oil Slumps Ahead Of Fed Decision

While the focus in the overnight session has traditionally been about two things, namely oil and China, today one can also throw in AAPL which is down 4% in the pre-market after its disappointing earnings yesterday in which it confirmed our channel-checked warnings about China from last summer, and the Fed which is set to release the January FOMC statement this afternoon.

Unlike yesterday, when the National Team allowed stocks to tumble, today the Chinese Plunge Protection Team intervened, and with the Shanghai Composite down as low at 2,638, the benchmark stock index pared the loss of as much as 4.1%, spurred by rallies for PetroChina, ICBC and other shares that are long considered favorite holdings of state-linked rescue funds. The result was a -0.52% drop in the composite, preventing what could have been the latest two-day -10% correction. Still, after today’s close the index dropped to the lowest since December 2014.

With the Fed set to take center stage today, the dollar’s prospects – which increasingly many recognize needs to somehow decline to avoid a worsening global recession – rest on the wording of the Fed’s policy statement. Since the U.S. central bank raised interest rates on Dec.16 for the first time in almost a decade, a Bloomberg gauge tracking the dollar against 10 of its leading global peers has risen 1.5 percent, touching a record high on Friday. Those gains have been fueled in part by indications from the Fed that there will be four rate hikes in 2016. Investors are watching for any deviation from that plan. Traders have been more dovish than the Fed, pricing in roughly one rate increase this year. At the end of December the odds of a March move were 51 percent. Fed fund futures now put the probability at 25 percent.

Dollar’s Rise Poses Risk for Fed Plans

As Federal Reserve officials prepare to release interest-rate guidance Wednesday, investors are bracing for the dollar to renew its rise against America’s major trading partners and intensify unrest throughout the world’s financial markets.

Global Stocks Lower Ahead of U.S. Interest Rate Decision

Global stocks followed oil prices lower, while investors wait for the Federal Reserve’s first monetary policy decision of the year.

Amid Pressure, AIG Will Pare Down

The insurer could significantly shrink AIG over time, but the plans stopped well short of giving activist investors Carl Icahn and John Paulson the immediate breakup they want.

Infographic Of The Day: The Future Of Mobile Payments

As mobile payments become more popular and more viable, they will continue to change and shape the way we interact with money.

Early Headlines: Asia Stocks Weak, Oil Down, U.S. A Tax Haven, Trump Refuses Debate, Peak Apple, S. Korea Growth And Exports Slow, China Capital Flows And More

Written by Econintersect

Early Bird Headlines 27 January 2015

Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.

Mark Hulbert: Here’s why the news about Apple is so bad

Bad news tends to come in waves, so be prepared for more, says Mark Hulbert.

Capitol Report: Boston, D.C. are cities with jobs least likely to be taken away by robots

Boston and Washington D.C. are the cities that have the least percentage of their jobs available to be taken away by automation, according to a new study.