02Feb2016 Pre-Market Commentary: US Futures Lower After Crude Prices Sink To $26, Lackluster Economy Making Investors Nervous

Here is the current market situation from CNN Money

European markets are sharply lower today with shares in London off the most. The FTSE 100 is down 2.05% while France’s CAC 40 is off 1.87% and Germany’s DAX is lower by 1.35%.

ChemChina close to striking deal for Syngenta: sources

(Reuters) – China’s state-owned ChemChina is nearing a deal to take over Swiss seeds and pesticides group Syngenta for around 43 billion Swiss francs ($42 billion), two people familiar with the matter told Reuters on Tuesday.

Exxon’s fourth-quarter profit tumbles 58 percent as low crude hurts

(Reuters) – Exxon Mobil Corp on Tuesday reported a 58 percent drop in quarterly profit as low oil prices hurt results at the world’s largest publicly traded oil company.

Dow Chemical’s focus on high-margin businesses paying off

(Reuters) – Dow Chemical Co reported a better-than-expected quarterly profit as its move to focus on more profitable businesses such as packaging and electronics by divesting low-margin assets pays off.

Pfizer forecasts 2016 revenue, earnings below estimates

(Reuters) – U.S. drugmaker Pfizer Inc , which is in the process of buying Botox-maker Allergan Plc for $160 billion, forecast 2016 revenue and earnings below analysts’ estimates, citing generic competition and a strong dollar.

Spin-off or sale? Yahoo turnaround plan in focus as earnings awaited

SAN FRANCISCO (Reuters) – Yahoo Inc’s plans to turn around its struggling core business are set to dominate its earnings report on Tuesday, with investors keen to see if CEO Marissa Mayer will push ahead with a proposed spin-off or entertain calls for a complete sale.

Futures slump as oil prices fall further

(Reuters) – U.S. stock index futures were lower on Tuesday after oil prices resumed their downward spiral, hit by worries about weak demand and rising supply.

BP reports biggest ever annual loss

LONDON (Reuters) – BP slumped to its biggest annual loss last year and announced thousands more job cuts on Tuesday, showing that even one of the nimblest oil producers is struggling in the worst market downturn in over a decade.

Oil slips toward $33 as hopes for production cut fade

LONDON (Reuters) – Oil prices fell around 3 percent on Tuesday, dented by worries about the demand outlook and rising supply, while hopes for a deal between OPEC and Russia on output cuts faded.

Global stocks snap winning streak as oil pressure returns

LONDON (Reuters) – World stocks dipped after a three-day run of gains and emerging markets were back under pressure on Tuesday, as a sharp drop in oil prices following lacklustre economic data sparked renewed nerves.

The January Bear-ometer

Via Dana Lyons’ Tumblr,

Very weak January’s have had a tendency to lead to weak long-term returns in the stock market.

Investors must be thinking, “thank God February is here.” Well, before we put the brutal January to rest, we have one more depressing post. We wrote several posts throughout January on the historic weakness and volatility that was occurring during the month. Previous looks at intra-month variations on the “January Barometer” have pointed to weak returns going forward for stocks. This post will just put a bow on things as we look at the dismal month-end tally and whether it suggests weakness as well.

First off, what was the dismal tally? Well, as of last Monday, the stock market was down -8.84%, judging by the Dow Jones Industrial Average. At that point, it would have marked the worst opening month in 116 years. As it happens, the DJIA rallied furiously over the last 2 days of the month. Even with that rally, though, the DJIA still closed the month down -5.6%, the worst since 2009, and 1990 before that (FYI, we are using the DJIA simply because we have the most historical data on the index).

Can anything be gleaned by looking at other weak January’s, historically? Well, with the usual disclaimers that these seasonal patterns are merely averages and past results do not guarantee anything about future returns, etc…,we took a look at the historical stats. Using the DJIA since 1900, there have been 18 other years in which the DJIA lost at least 4%. Since we are trying to find reasonable comparisons to our present case, we thought to weed out years in which the DJIA had already suffered considerable weakness. Somewhat arbitrarily, we eliminated 4 years that saw the index already down over 20% from its 52-week high c …

Paying A Corporation To “Buy” Its Debt? It’s Coming Soon, Jim Reid Warns

As a result of the rush to global NIRP, which now sees central banks and their sovereigns accounting for over 25% of global GDP, amounting to around $6 trillion in government bonds, trading with negative yields, a question has emerged: when will corporate bonds follow this govvie juggernaut and how soon until investors pay not government but companies to borrow?

That is the focal piece in today’s note by our favorite DB credit strategist Jim Reid who muses as follows:

There is starting to be chatter as to what the incentive is to buy Euro corporate bonds at a negative yield if it ever happens. It may well be tested very soon as one consequence of the recent ECB/BoJ hint/action has been the strong rally in global fixed income.

A scatter of the European non-financial corporate yield universe (in today’s pdf) shows we have so far resisted such a move (bar 3 bonds with a bid yield a basis point or two sub-zero). There is a perception that investors won’t buy corporates with a negative yield and therefore a deeper rally in Government bonds would be a spread widener. Whilst this makes some sense the evidence of spread behavior as yields have gone lower and lower doesn’t necessarily support this. 1-3yr and 3-5yr Euro AA spreads have been range bound in the last 6 months – a period that 2 and 4 year Bund yields have rallied around 30bp and 40bps respectively and deep into negative territory. So one might have expected some widening if the zero bound was a hard floor for corporates.

Our central view is that zero might be a temporary resistance point if Government yields rally further but that at some point the dam will break and corporates will trade on a spread basis and go sub-zero.

Obviously this all depends on whether a further deeper rally occurs. At the moment 2 year bu …

In Biggest Ever Chinese Corporate Takeover, ChemChina Set To Buy Swiss Syngenta For $43 Billion

The ink was not yet dry on the seemingly endless Monsanto-Syngenta on again/off again takeover drama, when moments ago in a shocking development the newswires were lit up with news that a new, and very much unexpected, bidder has emerged for the Swiss pesticides giant Syngenta: China National Chemical Corp, or ChemChina as it is known, which according to WSJ and BBG is set to pay $43.7 billion to acquire a piece of Swiss corporate history.

According to Bloomberg, China National Chemical Corp. is nearing an agreement to buy Syngenta for CHF 43.7 billion as the state-backed company extends its buying spree with what would be the biggest-ever acquisition by a Chinese firm, said people familiar with the matter.

More details:

ChemChina, as the closely-held company is known, offered about 470 francs a share in cash to acquire Syngenta and a deal could be announced as early as Wednesday when the Swiss company reports earnings, the people said, asking not to be named as the details aren’t public. That’s 24 percent higher than Syngenta’s last close of 378.40 francs on Feb. 1. Its shares rose 7.1 percent to 405.1 francs as of 1:26 p.m. in Zurich.

The deal would help Chairman Ren Jianxin transform ChemChina into the world’s biggest supplier of pesticides and agrochemicals, while snatching an asset coveted by St. Louis-based Monsanto Co. It also underscores the importance China attaches to owning seed and cropcare technology that can boost agricultural output and help feed the world’s biggest population.

Bloomberg notes that if successful, the $43 billion purchase would be the largest acquisition by a Chinese firm, surpassing China Unicom Hong Kong Ltd.’s $29 billion purchase of China Netcom Group Corp. in 2008. It remains to be seen whether Europe’s anti-trust authorities, let alone the Swiss, will g …

Stocks Fall as Sliding Oil Prices Hit Energy Shares

Stocks around the world fell as renewed weakness in oil prices triggered a slide in energy shares. The Stoxx Europe 600 was down 1.5% halfway through the session.

UBS Shares Tank on Wealth-Management Woes

Shares in UBS tumbled 8% after the Swiss bank said its flagship wealth-management unit was drained of billions of dollars in assets during the fourth quarter of last year.

Bank of Japan’s Kuroda is Smarter Than a Robot

Bank of Japan Gov. Haruhiko Kuroda stunned economists, investors and even a pair of artificial-intelligence programs when he set negative interest rates.

Blogger Sentiment More Bearish Entering February 2016

The latest Blogger Sentiment Poll released 01 February 2016 by Ticker Sense is more bearish than it was at the beginning of January 2016.

Counterparties And Collateral Requirements For Implementing Monetary Policy – Part Two Of Four

from Liberty Street Economics

— this post authored by Emily Eisner, Antoine Martin, and Ylva Sovik

What types of counterparties can borrow from or lend to a central bank, and what kind of collateral must they possess in order to receive a loan? These are two key aspects of a central bank’s monetary policy implementation framework. Since at least the nineteenth century, it has been understood that an important role of central banks is to lend to solvent but illiquid institutions, particularly during a crisis, as this provides liquidity insurance to the financial system.

Need to Know: Apple could offer investors shelter in a recessionary storm

Analysts are talking about readying for a recession, and the ideas are flying around. One says buy Apple because it’s proven its mettle. Read on for more.

Capitol Report: Coin toss broke 6 Clinton-Sanders deadlocks in Iowa ” and Hillary won each time

In the Democratic Iowa caucus, the race between Hillary Clinton and Bernie Sanders for some delegates was decided by the toss of a coin ” and Clinton won all six.