06Jul2016 Pre-Market Commentary: US Markets Are Scheduled To Open Fractionally Lower, Gold Highest Since 2014, WTI Crude Drops Into 45’s, Short-Term Indicators Are Looking Ugly

Here is the current market situation from CNN Money

European markets are sharply lower today with shares in Germany off the most. The DAX is down 2.11% while France’s CAC 40 is off 2.09% and London’s FTSE 100 is lower by 1.61%.

Stock futures fall for second day as uncertainty weighs in

(Reuters) – U.S. stock index futures were lower for the second day on Wednesday as fears of instability after Britain’s vote to leave the European Union added to global growth worries.

Global stocks and bond yields sink as growth fears set in

LONDON (Reuters) – Fear of instability in the European Union and of decades of global stagnation sent stock markets sharply lower on Wednesday as Britain’s pound sank below $1.30 for the first time in more than three decades.

Gold races to 28-month high, oil pressured as Brexit fears return

MANILA (Reuters) – Gold rallied to its highest since 2014 on Wednesday and oil struggled to recover from deep losses, as renewed fears over the impact of Britain’s exit from the European Union pushed investors toward safe havens.

Oil prices edge lower on concerns about demand

LONDON (Reuters) – Oil edged lower on Wednesday, extending losses to a third straight session, as investors grew concerned over consumption due to weaker demand from refineries and potentially slower economic growth after Britain’s decision to leave the EU.

Gross says $10 trillion of zero, negative-yield bonds drag global GDP

NEW YORK (Reuters) – Noted bond investor Bill Gross of Janus Capital Group Inc said Wednesday that with yields at near zero and negative on $10 trillion of global government credit, the contribution of money velocity to GDP growth is coming to an end and may even be creating negative growth.

Global bond burn from Brexit may now force fiscal response

LONDON (Reuters) – A slump in long-term interest rates since Britons voted to quit the European Union is the clearest financial market verdict on the global impact of ‘Brexit’ – yet another body blow to world growth that may now need a game-changing policy response.

Brexit shock may boost, not hinder, yuan internationalization

HONG KONG (Reuters) – London’s role as a major offshore yuan hub is likely to survive Britain’s decision to leave the European Union, but the vote could help foster the Chinese currency’s internationalization by encouraging multiple yuan hubs in the bloc.

Tesla told regulators about Autopilot crash nine days after accident

SAN FRANCISCO/DETROIT (Reuters) – Tesla Motors alerted regulators to a fatality in one of its electric cars in partial self-driving Autopilot mode nine days after it crashed, the company said on Tuesday, defending its decision not to make the accident public before a federal investigation was announced.

In up-to-$10 billion IPO, China’s PSBC eyes ticket to online financial services boom

HONG KONG (Reuters) – As part of plans for an up-to-$10 billion initial public offering, Postal Savings Bank of China (PSBC) aims to transform itself from a brick-and-mortar lender into a digital player, helped by its investors Ant Financial and Tencent Holdings.

Peasants, Pitchforks & How Corporate Power Destroyed Democracy

Submitted by Charles Hugh-Smith via OfTwoMinds blog,

There is no avenue left for advocacy, grievances or redress in a system dominated by global corporations.

In the original version of feudalism, peasants armed with pitchforks knew where to go for redress or regime change: the feudal lord’s castle on the hill. Though you won’t find this in conventional narratives of the Middle Ages, peasant revolts were a common occurrence; serfs weren’t always delighted to toil for their noble masters.

In the present era of corporate dominance, where can serfs go to demand redress and financial freedom from the neofeudal system? Nowhere. The global corporations that own the land and the productive assets have no castle that can be stormed; they exist in an abstract financial world of stock shares, buybacks, bonds, lobbyists and political influence.

When the agribusiness corporation fouls the local water supply with animal waste, where do the local peasantry go to demand restoration of their water quality? The corporation? What if the headquarters are thousands of miles away?

What impact will 100 serfs gathered outside the modern-day castle have on water quality in a distant land? Zero, because the corporation has rendered it illegal (via lobbying the local political flunkies desperate for “jobs” and campaign contributions) to even take photos of their vast animal-waste output or their inadequate disposal.

Where do oppressed serfs go to advocate for transparency in America’s private Gulag prison system? If you go to the prison to protest, you’ll be arrested and will soon be looking at the world from inside the privately oper …

Goldman Warns Of A Sharp Plunge In Stocks In “Next Few Months”

That Goldman’s David Kostin has been warning about the possibility of a sudden, sharp drawdown in the market, is not new: we first reported on that in early May when we presented “Six Reasons Why Goldman Is Suddenly Warning About A “Large Drop” In The Market” in which we cited the head Goldman equity strategist who said that “unbalanced distribution of upside/downside risks suggests “sell in May” or buy protection.” He adds that “we continue to expect S&P 500 will end 2016 at 2100, roughly 3% above the current level even as “a shift in investor perception of various risks could easily trigger a drawdown.”

Specifically, he warned that “a drawdown during the next few months could find the S&P 500 index falling by 5%-10% to a level between 1850 and 1950. 16 drawdowns greater than 5% have occurred since 2009, including the 13% correction that lasted 3 months and ended in February (Exhibit 1). S&P 500 trades at 2047 and has a forward P/E of 16.7x based on bottom-up adjusted EPS of $123. A 5% pullback would lower the P/E to 15.8x, implying an index level of 1950. A 10% correction would reduce the P/E to 15.0x and the index level to 1850.”

Two months, and one brief Brexit swoon later, Goldman is back with another similar warning, now expecting a 5-10% drop in the “next few month”, which Goldman expects will be met with another round of BTFDing, and pushing stocks once again higher, as they close the year at 2,100. To wit:

The S&P 500 enters 2H 2016 just 3% above where it began the year. Tactically, we continue to expect the market will experience a pullback of 5%-10% during the next few …

“Gold Has Entered a New Phase” Says UBS

With gold prices having risen by 24% in dollar terms already this year, UBS analyst Joni Teves declared in a note to clients yesterday that; “gold has entered a new phase”.

Here’s the key reasoning behind that forecast, from UBS’ Global Precious Metals Comment note according to Business Insider today:

Key drivers include: 1) low/negative real rates, 2) the view that the dollar has peaked against DM currencies, and 3) lingering macro risks. We expect the next leg to be driven by an extension of the trend of strategic portfolio allocation into gold from a diverse set of investors. This trend should now deepen, attracting more participants and encouraging those who have been hesitating to get more involved. Relatively orderly retracements, which have typically been shallow and brief indicates strong buying interest. This suggests that gold’s floor is likely higher now given an even stronger …

Cirrus Logic: Plugged In to the iPhone Cycle

Chip maker Cirrus Logic sees clear opportunities if the iPhone’s headphone jack is removed.

Low-Yield Blues? Corporate Bonds Are the Last Ones Paying

With bond yields around the world falling further in the wake of Brexit, U.S. corporate bonds are the only game left in town.

Question for Yellen: How Weak Was the U.S. Economy Pre-Brexit?

Minutes from the Fed’s June meeting will likely offer investors an unfriendly reminder.

Economic Report: U.S. trade deficit jumps 10% in May to $41.1 billion

Higher oil prices and stronger demand by consumers for imports such as cell phones, sneakers and home furnishings boost the U.S. trade deficit in May by 10% to a three-month high of $41.1 billion.

Market Snapshot: Dow futures slide as Brexit-inspired backlash nags

Wall Street is set for another downbeat trading day on Wednesday, as Brexit-related uncertainties continue to spook the market and investors stay on the sidelines ahead of Federal Reserve minutes.

The Wall Street Journal: China orders foreign banks to set aside reserves for forex forward trading

Foreign banks must hold reserves equal to 20% of the forward-trade position.