28Jan2016 Market Update: Rumors Move Crude Prices Higher, Then Fall As US Markets Trade In The Green Sideways

Here is the current market situation from CNN Money

North and South American markets are higher today with shares in U.S. leading the region. The S&P 500 is up 0.71% while Brazil’s Bovespa is up 0.52% and Mexico’s IPC is up 0.50%.

18.20%

Russia says Saudis proposing global oil production cut

ST PETERSBURG, Russia/DUBAI (Reuters) – Russia said on Thursday that OPEC’s largest producer Saudi Arabia, had proposed oil production cuts of up to 5 percent in what would be the first global deal in over a decade to help clear a glut of crude and prop up sinking prices.

Oil up 3 percent on possible production cuts to remedy glut

NEW YORK (Reuters) – Oil prices were about 3 percent higher on Thursday after the Russian energy minister said Saudi Arabia had proposed that oil-producing countries trim output, which would be the first global deal in over a decade to help clear a glut that has depressed prices for over a year and a half.

Lower oil prices squeezing U.S. manufacturing sector

WASHINGTON (Reuters) – New orders for long-lasting U.S. manufactured goods in December recorded their biggest drop in 16 months as lower oil prices and a strong dollar pressured factories, the latest indication that economic growth braked sharply at the end of 2015.

Wall Street drifts higher as tech, energy gain

(Reuters) – Wall Street was higher after swinging between gains and losses on Thursday as a fall in healthcare stocks capped gains in technology and energy shares.

Ford Motor quarterly profit beats Street expectations

DEARBORN, Mich. (Reuters) – Ford Motor Co said on Thursday fourth-quarter results beat Wall Street expectations, and it reiterated a forecast that 2016 pretax profit would be equal to or higher than last year.

Under Armour demand continues to soar, stock leaps

(Reuters) – Under Armour Inc , the No. 2 U.S. sportswear maker, on Thursday reported a better-than-expected 31 percent jump in revenue, allaying concerns that apparel sales were slowing, sending its stock up as much as 21 percent.

Yahoo to shut Argentina and Mexico offices

(Reuters) – Yahoo Inc plans to close its offices in Argentina and Mexico, a company spokeswoman said on Thursday.

Facebook’s market value surges $38 billion as mobile ad sales soar

(Reuters) – Facebook Inc’s market value soared by $38 billion in morning trading on Thursday, vaulting the company ahead of Amazon.com Inc , after the social networking service’s quarterly results blew away expectations on every key measure.

Raytheon sees higher sales, profit in 2016; fourth-quarter profit tops view

WASHINGTON (Reuters) – Raytheon Co on Thursday reported better-than-expected fourth-quarter profit and forecast higher results for 2016, citing increasing demand from the Middle East, Asia and Europe for precision missiles and missile defense.

Manufacturing Matters

Submitted by Sean Corrigan via HindeSightLetters.com,

Much predictably fatuous comment has been devoted to the fact that, to the extent that the US is facing any difficulties at all outside the oil patch, at present these ‘only’ affect manufacturing – a sector which , as any fool knows, accounts for a mere 12% of GDP. Ergo, we are told, while employment in general holds up and consumer spending is maintained, a recession is not to be countenanced – a bill of clean health which conveniently supports the sell-side’s fingers-crossed contention that stocks are cheap and that credit is beginning to offer up real bargains for the man brave enough to dip his toe back into the waters.

We Austrians, however, tend to hold a different view of the pivotal role of what we call ‘higher order’ sectors in the economic machine, while recognizing that the modern-day institutions of Big Government and mass, end-consumer finance can partly mask their workings in a manner which would have been alien to the theory’s early architects.

To acquire a feel for this argument, we must look beyond the final-use fixation of the GDP arithmetic and cast our gaze instead at wider measures of activity. The charts presented here are an attempt at achieving such an overview.

The first shows the distribution of business revenues compiled from almost 6 million corporate tax returns in 2012 (the latest period for which we have available data). Out of a total of $26 trillion in sales (a number, please note, while far from including all economic activity in the country is already some 60% greater than that same year’s GDP estimate), the manufacturing sector’s $8 trillion contribution accounted for the single biggest fraction, namely 31%. In terms …

This Could Be A Problem: China’s Debt-To-GDP Rises To A Gargantuan 346%

In early 2015, after years of China’s massive debt pile being roundly ignored by most so-called experts (despite being profiled here many years prior), McKinsey released a report showing that not only has the world not delevered since the financial crisis, adding well over $60 trillion in debt (through 2016), but also revealing in a format so simple even an economist could grasp it, just how massive China’s all-in leverage has become.

Many were shocked when they read that China’s total debt/GDP had risen by 125% in under 7 years, hitting 282% as of Q2 2014.

Those same people may be just as shocked to learn that according to the head of financial markets research Asia Pacific at Rabobank, Michael Every, not only has China not begun to delever at all, but since McKinsey’s update, its debt has risen by another 70% of GDP!

According to Every, China’s 2015 debt-to-GDP might be as high as 346%, and while that is in line with wealthier developed economies but is œvastly higher than any EM peer.

Cited by Bloomberg, Every adds that the time-frame for debt accumulation pre-crisis varies, but what always follows is a major currency drop afterwards, as has happened even with reserve currencies such as dollar, yen, euro and pound.

He also adds that nominal GDP needs to rise faster than debt for a sustained period if deleveraging is to truly be under way, aka Dalio’s beautiful deleveraging thesis. The problem, however, is that with even Goldman admitting that China’s real GDP growth rate is about 4.5%, China’s debt load is rising orders of magnitud …

Oil Prices Climb on Hopes for Output Cutback

Oil prices surged on Thursday, then pared some gains, on comments from Russia’s energy minister that the country is willing to meet with members of OPEC to discuss production cuts.

U.S. Stocks Climb, Along With Oil

U.S. stocks rose Thursday, as oil prices climbed and a slew of companies posted fourth-quarter earnings.

It’s 2 p.m., Time for Chinese Stocks to Fall

Chinese stocks have been moving sharply in the final hour of trading, like they did last summer when the œnational team of state funds often bought shares to boost the market. But this time shares are usually falling after 2 p.m.

Kansas City Fed Manufacturing Contraction Continues in January 2016

Of the four regional manufacturing surveys released to date for January, three are in contraction and one is barely in expansion.