12Feb2016 Pre-Market Commentary: US Futures Higher This Morning Along With WTI Crude Climbing Higher While Gold Slips Off Yesterday’s Highs

Here is the current market situation from CNN Money

European markets are sharply higher today with shares in London leading the region. The FTSE 100 is up 1.84% while Germany’s DAX is up 1.50% and France’s CAC 40 is up 1.00%.

Volkswagen group sales return to growth in January

FRANKFURT (Reuters) – Volkswagen group sales returned to growth in January, bolstered by demand in China, where core brand VW posted its best month ever.

Futures higher as oil prices offer some respite

(Reuters) – U.S. stock index futures were higher on Friday in tandem with higher oil prices and after a punishing, widespread rout this week due to concerns about the health of the global economy.

Airbus A320neo’s engine problems to be solved by April: Pratt CEO

HAMBURG (Reuters) – Any technical problems with the engines of Airbus’s A320neo jetliner should be solved in the coming weeks, the head of engine manufacturer Pratt & Whitney said.

Asian shares slide as bank fears add to global gloom

LONDON (Reuters) – Relative calm returned to world markets on Friday after a hurricane-force week that gave dollar/yen its biggest smashing since 2008, wiped billions off share prices and saw a stampede into top-rated government bonds and gold.

Amazon acquires Italy-based software firm

(Reuters) – Amazon Web Services, the cloud computing arm of Amazon.com Inc , said it has acquired NICE, a software developer for technical computing.

Burberry faces U.S. lawsuit accusing it of deceptive price tags

LONDON (Reuters) – British luxury fashion brand Burberry is to face a class action lawsuit in the United States, claiming it used misleading price tags at its outlets stores to fool shoppers into believing they were getting big bargains.

Growing trust helps flurry of Sino-German deals

FRANKFURT (Reuters) – A flurry of sales of German and Swiss companies to Chinese buyers in the past month is testament to increasing Chinese expertise in European bidding processes and growing trust, German bankers and advisers say.

Yellen’s dilemma: a downturn with no easy response

WASHINGTON (Reuters) – The Federal Reserve’s carefully scripted decision to raise interest rates last December, and begin a return to “normal” policy, may now become a nightmare for the U.S. central bank if an economic downturn forces a return to unconventional methods.

Elon Musk’s vision is not for the faint of heart

(Reuters) – Leave it to Elon Musk to make a company’s stock jump nearly 5 percent a day after reporting widening losses – all in the middle of a market selloff.

Europe’s Most Distressing Chart: For Banks 2016 Is Already Worse Than 2008

As we have reported previously on various occasions things are bad for European banks: from DB’s record wide 5Y Sub CDS, to Credit Suisse record low stock price, to everyone else inbetween. But did you know that for most European banks, 2016 is shaping up far worse than the dreaded 2008? As the following chart from Reuters shows, the year-to-date stock price performance for most European banks is on pace to far surpass – to the downside – the dreadful for the global financial system 2008.

As Reuters puts its it, “Euro zone banks have seen their shares plummet by nearly 30 percent and yields on their bonds surge since the start of the year, as investors worried about thinning profits and uncomfortably high levels of bad loans in some countries.”

This is shown in the chart below.

One problem resulting from this collapse is well framed by Reuters: “A protracted selloff in the shares and bonds of euro zone banks has the potential to knock the fragile economic recovery off track by raising financing costs for banks, limiting their ability to lend. It may also undo some of what the European Central Bank has been trying to do to increase bank lending an pump up inflation via spending.

The selloff makes it more expensive for banks to raise capital on the market by selling shares or bonds.

If this situation were to last, it would dent banks’ capacity to grow their balance sheets by extending new loans to companies and households. This would jeopardise a tentative rebound in lending driven by the ECB’s ultra-easy moneta …

Deutsche Bank: “Markets Are Crying Out For A Circuit Breaker”, But There Is A Problem

Having been at the forefront of the recent collapse in core European bank stock prices, Deutsche Bank has – as we first reported last weekend – been ‘crying uncle’ but not in a way most would expect: instead of begging for more central bank easing, DB told the ECB (and BOJ) to stop easing as negative rates and more excess liquidity, are crushing it. This is why central banks are trapped, because they are damned if they don’t ease any more with the global economy on the edge of recession, and damned if they ease further, pushing bank default risk even higher.

Which brings us to this morning’s note from DB’s Jim Reid who puts it best: “Markets are crying out for a circuit breaker at the moment.”

There is just one problem: nobody knows what this circuit breaks would and should be, or if it would even work.

From today’s Early Morning Reid

Markets are crying out for a circuit breaker at the moment. There is lots of talk about whether the ECB could buy senior bank debt and also whether Europe might look to bring in their own version of TARP. The former brings a whole host of moral hazard, political, legal and logistical questions especially in a bank bail-in regime. Before the ECB embarked on each of their government bond purchases (from Greece in 2010 to QE in 2015) there were similar arguments so it’s not an insurmountable challenge but it’s not a policy that is likely to be conducted overnight. With regards to TARP, remember this was a government led initiative and achieving a similar one in Europe with all the different governments having to agree on it would be a challenge to say the least. It’s not as if Angela Merkel doesn’t have her work cut o …

Frontrunning: February 12

Yellen’s dilemma: A downturn with no easy response (Reuters)

Clinton, Sanders clash over Obama as they vie for minority votes (Reuters)

Risk Grows of Markets Sparking Recession (WSJ)

Global Stock Rout Eases Amid Oil Advance as German Bonds Decline (BBG)

U.S. Benchmark Yield Will Be at Record Low in March at This Rate (BBG)

Oil Prices Rally on Hopes of Production Cuts (WSJ)

More Cuts Loom as Oil Nears $25 (WSJ)

Euro-Area Maintains Momentum as Turmoil Threatens Outlook (BBG)

Major powers agree to plan for ‘cessation of hostilities’ in Syria (Reuters)

Dimon Just Spent a Year’s Pay on JPMorgan Stock After Bank Rout (BBG)

Market Meltdown Threatens Japan’s Economic-Revival Plan (WSJ)

Five-Decade Market Pro Who Called Bond Rally Sees 1% U.S. Yields (

Greece Slides Back Into Recession Amid Riots, Rewewed “Grexit” Calls

It was just over a year ago that Greece elected Alexis Tsipras and Syriza amid a flurry of anti-austerity sentiment.

Things didn’t exactly go as planned.

The new PM and his œradical finance minister Yanis Varoufakis thought they could shake things up in Brussels and wrench Greece from the clutches of Berlin-style fiscal rectitude. As it turns out, Wolfgang Schaeuble is not a man who is easily bested at the bargaining table and after more than six months of negotiations, the imposition of capital controls, a referendum on the euro that Tsipras promptly sold down the river, Greeks ended up facing an outright depression.

In the end, Varoufakis unceremoniously resigned and Tsipras agreed to a third bailout before calling for snap elections that would ultimately see the PM re-elected albeit at the helm of a party that was completely gutted by the arduous bailout talks.

As we and quite a few others warned, the new bailout and the attached terms would do exactly nothing to turn the Greek economy around. We’re all for being responsible with the budget but you can’t very well implement fiscal retrenchment during a depression unless you intend to remain in said depression in perpetuity, but alas, that’s exactly what Brussels forced Greece to do and on Friday we learn that the country has slipped back into recession.

GDP contracted 0.6% in Q4 after shrinking 1.4% in Q3. œWith opposition mounting to the government’s pension reform plan, the European Union pressuring it to stem the tide of refugees entering the country and the global market rout hastening the sell-off in Greek assets, dark clouds are gathering again, Bloomberg writes. Ironically, capital controls appear to have helped the economy perf …

Stocks Rebound in Europe

A rally in energy and banking shares lifted European markets and U.S. futures, even as Japan’s main index fell to its lowest level in more than a year as it caught up with a sharp selloff in the previous session.

Market Meltdown Threatens Japan’s Economic Revival

Global market turmoil has upended Japan’s finely tuned plan for recovery, sending the country’s top economic advisers scrambling for ways to cope.

Risk Grows of Markets Sparking Recession

While current U.S. economic data show no recession, market turmoil speaks to deeper problems and could spark a recession, writes WSJ chief economics commentator Greg Ip.

Fed’s Balance Sheet 10 February 2016 Insignificantly Changed

Total Fed Balance Sheet:

Fed’s Balance Sheet week ending balance sheet was $4,447 trillion..

Economic Report: Retail sales increase 0.2% in January

Sales at U.S. retailers rose 0.2% in January, as consumers boosted purchases of new cars and groceries and shopped more online.

Market Snapshot: Dow futures up nearly 100 points as oil prices leap

U.S. stocks were poised to bounce back Friday after plunging to multiyear lows a day ago as investors hunted for bargains in a battered market.

The Tell: The dollar’s selloff against the yen has only just begun, Barclays says

The latest forecast from Barclays sees dollar tumble at ¥95 by the end of the year, from closer to ¥113 now.