07Oct2016 Pre-Market Commentary: Future Indexes Fractionally Lower, Indicators Show A Possible Break To The Downside Imminent, UK Pound Waterfalls, Crude Prices Moving Higher

Here is the current market situation from CNN Money

European markets are mixed. The FTSE 100 is higher by 0.82%, while the CAC 40 is leading the DAX lower. They are down 0.40% and 0.31% respectively.

Stock futures fall ahead of jobs report

(Reuters) – U.S. stock index futures were lower on Friday as investors counted down to the September payrolls report, which is expected to influence the Federal Reserve’s decision on interest rates.

Exclusive: Qatar won’t sell Deutsche Bank shares, might buy more – sources

DOHA/FRANKFURT (Reuters) – Qatari investors who own the largest stake in Deutsche Bank do not plan to sell their shares and could consider buying more if the embattled German bank decides to raise capital, sources familiar with Qatari investment policy told Reuters.

‘Flash crash’ decimates sterling

LONDON (Reuters) – Sterling lost a tenth of its value in minutes on Friday, in what traders said was a “flash crash” driven by computer-initiated sell orders that left the pound at a fresh 31-year-low and heading for its worst week since January 2009.

Twitter shares plunge on report bidders are scarce

(Reuters) – Twitter Inc shares plunged on Thursday as fears mounted that a much-anticipated auction of the social media company will draw minimal interest from potential buyers.

Sterling slide fuels risk-off on U.S. payrolls day

LONDON (Reuters) – Sterling recouped some losses after plunging almost 10 percent on Friday, as growing fears of a “hard” exit by Britain from the European Union sent a shiver through world stocks markets before U.S. jobs data.

Snapchat parent working on IPO valuing firm at $25 billion or more: WSJ

(Reuters) – Photo-sharing app Snapchat’s parent is working on an initial public offering that could value the company at $25 billion or more, the Wall Street Journal reported, citing several people familiar with the matter.

IMF, global finance leaders fret over populist backlash

WASHINGTON (Reuters) – World finance leaders on Thursday decried a growing populist backlash against globalization and pledged to take steps to ensure trade and economic integration benefited more people currently left behind.

Oil ebbs as physical excess undermines futures push

LONDON (Reuters) – Brent crude futures fell on Friday after briefly nearing their 2016 high, as financial market confidence in the rally came up against a physical excess of crude.

“I Initially Doubted What I Saw On My Screen” – Wall Street Responds To The Historic “Pounding”

Today’s biggest story was supposed to be the September payrolls; instead courtesy of a few wild algos, a fat finger, or a deliberate attack on sterling during the most illiquid time in the day, it was the 6% “pounding”, as sterling tumbled dramatically in chaotic trading that included a flash, 2 minute drop in early Asian hours and sustained falls in London. By morning it had managed to recoup much of its losses however the selling pressure has continued and the currency appears unable to regain all of its losses as would have been the case if this was a mere “fat finger.”

The sharp drop in illiquid Asian trading came amid worries about the U.K.’s “hard exit” from the EU, accelerated by computerized trades. The pound fell more than 6% just after 7 a.m. Hong Kong time on Friday to as low as $1.1819 from just above $1.26, before recovering above $1.24, according to Thomson Reuters data. But it took another dive in London hours and was down to just over $1.23.

But more interesting even than the drop itself, were Wall Street’s reactions to the “pounding”, and none was more indicative than that of Kenji Yoshii, a foreign exchange strategist at Mizuho Securities, who told WSJ that “I initially doubted what I saw on my screen.”

Here are some other notable quotes from stunned market participants:

“This is not something you would expect in a half-efficient market,” said Ul …

“The Most Important Ever” Payrolls Preview (Again)

The distribution of guesses for tomorrow’s “most important payrolls print ever” or at least until next month, skews modestly to the upside after the biggest spike in ISM employment ever this week jarred some economists to become more optimistic, and side with Goldman Sachs expecting a Fed-inspiring drop in the unemployment rate, rise in average hourly earnings, and better than expected payrolls of 190K. As a result, while consensus expects a NFP rebound from 151K to 172K, the whisper number is around 200k. Anything above this would send December rate hike odds surging to the all important 70% or above, bond yields spiking and equities at the mercy of whichever way the risk parity machines were calibrated tomorrow.

Others disagree: Southbay Research is leaning on the bearish side, nothing the following positive and negative factors ahead of tomorrow’s report:

The Good

ISM Non-Mftg: Surges to 57.1 from 51.4

ISM Mftg: Up to 51.5 from 49.4

PMI Services: Up to 52.3 from 51

Chicago PMI: Up 54.2 from 51.5

The Bad

ADP: Payrolls drop (Forecast September 155K)

PMI Mftng: Slips to 51.5 from 52

Construction: drops -0.7% versus -0.3% prior month

Corporate Profits 2Q: -1.7% y/y versus -2.2% prior quarter

Durable Goods Orders (ex Trans): -0.4%

Employment indicators:

ISM Non-Mftg: Employment Index surges to 57.2 from 50.7

ISM Mftg: Employment Index ticks up to 49.7 from 48.3

PMI Services: Weakest employment levels in 4.5 years

PMI Mftg: Employment consistent with 115K jobs

It is worth noting that conflicting data is the hallmark of inflection points. Furthermore, as Southbay notes, “Forget Manufacturing, Focus on Services.” Here is the full bearish case:

Frontrunning: October 7

Pound struggles to recover after plunging 6% in 2 minutes (FT)

Flash Crash of the Pound Baffles Traders With Algorithms Being Blamed (BBG)

Pound Plummets Against Dollar in Chaotic Trading (WSJ)

Two-Minute Mystery Pound Rout Puts Spotlight on Robot Trades (BBG)

U.S. nonfarm payroll job growth seen pushing case for Fed hikes (Reuters)

Qatar won’t sell Deutsche Bank shares, might buy more (Reuters)

Commerzbank Disses Deutsche Bank in Blitz to Lure German Clients (BBG)

Snapchat Parent Working on IPO Valuing Firm at $25 Billion or More (WSJ)

IMF, global finance leaders fret over populist backlash (Reuters)

Foreigners in London ‘Horrified’ by May’s Immigration Vision (BBG)

Wal-Mart Expects Profit Pressures, Fewer New Stores (WSJ)

Hurricane Matthew batters Florida as Haiti death toll rises (Reuters)

Russia …

White House Intervened To Suppress Hillary email Scandal, Leaked Emails Reveal

Last October, about 6 months after the New York Times first revealed the existence of the Hillary Clinton private email server, President Obama appeared on “60 Minutes” and denied any and all knowledge of her potentially illegal technology arrangements. When asked point blank whether he knew about Hillary’s private email server, Obama responded, quite simply, “No.”

Of course, we now know from the FBI’s investigation notes that, in fact, that was a complete lie. As we noted back in September, Huma Abedin’s interview with the FBI on April 5, 2016 revealed an email sent on June 28, 2012 from Obama, using an unknown pseudonym, to Hillary on her private email server. So, either Obama is so incompetent that he didn’t recognize that Hillary wasn’t using a “.gov” email account or he simply lied in the following interview. We’ll let you be the judge.

But now, per a report last night from the Wall Street Journal, we know that, not only did the Obama administration know about Hillary’s private email server they actually conspired, along with the State Department, to cover it up. New emails, obtained by the Wall Street Journal via a FOIA request by the Republican National Committee, reveal communications between the White House and the State Department coordinating over how to minimize the potential fallout from Hillary’s email scandal so as to not impact her nascent presidential campaign.&nb …

Elliott Agitates Samsung in the Right Direction

Elliott Management’s call for change at Samsung Electronics pushes the company in a direction it is already heading. That should benefit shareholders.

Chinese Consumers Could Feel Pinch of Debt

Judging by how much debt Chinese consumers are accumulating, they may be less resilient than they appear.

Wal-Mart: What Will It Cost to Compete With Amazon?

Investors will want proof that Wal-Mart’s spending on its new e-commerce strategy is having the needed effect.

Rail Week Ending 01 October 2016: September Loadings Down 4.8 Percent

Week 39 of 2016 shows same week total rail traffic (from same week one year ago) contracted according to the Association of American Railroads (AAR) traffic data. However, the data was marginally better compared to last week.

Economic Report: U.S. gains 156,000 new jobs in September

The economy created 156,000 new jobs in September, another solid gain in employment that’s likely to prod the Federal Reserve to raise interest rates in the next few months.

What hackers know about your medical device could kill you

Anything from pacemakers to insulin pumps to heavy-duty hospital equipment could be at risk.

Distracted consumers could pause holiday shopping around election, but they’ll come back

Shoppers are expected to turn their attention away from holiday shopping as the presidential election approaches