19Jan2018 Pre-Market Commentary: Wall Street Calm As Government Shutdown Looms, US Shutdown Fears Hurt Dollar, Treasury Yields At Highest Since 2014, WTI Crude Trends Down Into The Low 63 Handle

Here is the current market situation from CNN Money

European markets are higher today with shares in Germany leading the region. The DAX is up 1.00% while France’s CAC 40 is up 0.40% and London’s FTSE 100 is up 0.13%.

U.S. shutdown fears hurt dollar, Treasury yields at highest since 2014

LONDON (Reuters) – The dollar wallowed near three-year lows on Friday as heightened fears of a U.S. government shutdown unnerved investors, while U.S. Treasury yields continued an upward march to hit their highest levels since September 2014.

SEC says bitcoin funds raise ‘investor protection issues’

(Reuters) – The U.S. securities regulator on Thursday raised alarm about the safety of bitcoin-themed investments, telling the fund industry they want answers to their concerns before endorsing more than a dozen proposed products based on cryptocurrencies.

Exclusive: Most U.S. states lost coal mining jobs in 2017 – data

WASHINGTON (Reuters) – Nearly two-thirds of U.S. coal producing states lost coal mining jobs in 2017, even as overall employment in the downtrodden sector grew modestly, according to preliminary government data obtained by Reuters.

Japan, U.S. to discuss trade ‘framework’, U.S. envoy says: NHK

TOKYO (Reuters) – Japan and the United States next week will start to discuss a framework of negotiations with the aim of concluding a trade pact and fixing bilateral trade imbalances, Japanese public broadcaster NHK quoted the U.S. ambassador to Japan as saying.

Wall Street traders brace for meager paychecks as bonus season approaches

NEW YORK (Reuters) – Some traders at the largest Wall Street banks are about to get big, fat zeroes for bonuses while they watch markets thrive.

Futures climb as investors shrug off government shutdown fears

(Reuters) – U.S. stock futures pointed to a record open for the benchmark S&P 500 index on Friday as investors bet on strong corporate earnings, while playing down fears of a potential U.S. government shutdown.

Emirates A380 orders allow Airbus to maintain minimum production – COO

PARIS (Reuters) – Airbus Chief Operating Officer Fabrice Bregier said on Friday that Emirates’ latest order for up to 36 A380 aircraft worth $16 billion at list price would allow the European planemaker to maintain a minimum production level of the superjumbo.

Delta Air to tighten onboard emotional support animal requirements

NEW YORK (Reuters) – Delta Air Lines is tightening the requirements for passengers traveling with onboard service and emotional support animals, the carrier said on Friday, following a sharp uptick in animal-related safety issues over the last several years.

Lowe’s names two directors after talks with activist investor

(Reuters) – Lowe’s Cos Inc has appointed two new board members following talks with activist hedge fund D.E. Shaw & Co, which recently built a stake in the home improvement chain.

WTI Tumbles To $62 Handle After IEA Predicts “Explosive” US Shale Production As Oil Prices Surge

Update: The IEA report has impact prices – as would be expected – sending WTI back below the crucial support level of $63 once again…

With WTI Futures net long positioning at extreme longs, one wonders if $63 can hold.

* * *

Overnight, the International Energy Agency became the latest entity to recognize that 2018 is shaping up to be a pivotal year for energy production in US shale fields, and a showdown between OPEC and non-OPEC producers, namely those in the US.

According to the latest IEA report, US shale output is poised for “explosive” growth in 2018 as WTI trades at its strongest level since the summer of 2015, which in turn will unleash pent up US output, potentially leading to a sharp oversupply of black gold,

As Bloomberg notes, the IEA’s forecast supports OPEC’s own projections: As we pointed out yesterday, the cartel also expects US production to ramp up in 2018 as shale producers – much more lean and efficient and significantly delevered after the 2015/2016 “episode” – unleash output as oil price continue to rise well above the generally accepte …

Stocks Suffer As 10Y Yields Reach 2014 Highs, Curve At Inflection Point

Overnight saw 10Y Treasury yields touch 2.64%, topping the post-election peak to its highest since September 2014 (and crossing Jeff Gundlach’s “red line” for stock damage). However, the yield curve’s bear-steepening may suggest a turning point.

10Y is up almost 30bps since The Fed hiked rates in December…

Highest 10Y since Sept 2014…

For some context across the curve, US Treasury Yields are the highest since…

1-Month: 2008

3-Month: 2008

6-Month: 2008

1-Year: 2008

2-Year: 2008

3-Year: 2008

5-Year: 2010

10-Yr: 2014

30-Yr: 2017

The question is, of course, what happens next? Extreme short positioning in Treasuries is likely not going to help but as Bloomberg points out, the 10Y-2Y spread is back at levels that have been greeted by aggressive flattening trades…

Frontrunning: January 19

Budget Showdown Looms in Senate; Blame Game Begins (WSJ)

Empty prisons, grounded warplanes: Budget dysfunction hits home (Reuters)

U.S. Government Nears Shutdown With GOP Stopgap Bill at the Brink (BBG)

Shutdown threat prompts warnings to workers (Reuters)

Fed Working on Proposal to Ease Up on Bank Leverage Limits (BBG)

Williams has Fed vice-chair job in his sights (FT)

SEC Pours Cold Water on Prospect of Bitcoin ETFs (WSJ)

Tanker With Russian Gas for Boston Makes Mid-Atlantic U-Turn (BBG)

Macron rejects special access for City after Brexit (FT)

Former Venezuelan Oil Hub Decays in Hunger and Rust (WSJ)

Trump to address U.S. anti-abortion march, cementing U-turn on issue (

“Are You Totally Stupid”: Varoufakis Reveals Outburst Against Tsipras

Remember the Summer of 2015 Greek tragicomedy, when Athens bluffed, then double bluffed it was going to exit the Eurozone only to realize all its deposits are held hostage by the ECB, resulting in “pro-austerity” PM Alexis Tsipras becoming a vassal of Brussels, and firing his firebrand finance minister Yanis Varoufakis who demanded Greece hold until the bitter end?

Well, it now appears that the bad blood between the two is still there because as The Greek Reporter writes this morning, Yanis Varoufakis revealed he accused Prime Minister Alexis Tsipras of being “totally stupid” in accepting a demand by Greece’s creditors for big primary surpluses.

During an interview with Greece’s Parapolitika radio, Varoufakis said when he learned that Tsipras in 2015 accepted, without consulting him, a primary surplus target of 3.5% he confronted the premier:

“I told him: ‘Are you totally stupid? What have they given you in return?’ And he replied: ‘Oh, maybe I was stupid. I will retract from the promise’.” Amusingly, Varoufakis actually said he used a stronger word than “stupid”.

In the same interview, the former finance minister repeated claims that Tsipras did not really want to win in the infamous July 2015 referendum on the bailout, something which has been speculated previously. …

Whistling Past the Shutdown

The economy would have no problem weathering a temporary government shutdown. That doesn’t mean investors should be complacent about one.

It’s Time for China’s Property Developers to Quit Gambling

The likes of China Evergrande have performed well as China’s property market boomed. But their high leverage could haunt them now as prices cool.

Is Lithium the Next Canary in the Markets Mine?

Suppliers of key battery component lithium are selling off after reports that heavyweight Chilean miner SQM will boost output.

Need to Know: A government shutdown ‘could reintroduce investors to the fact that markets go down’

Stocks are sauntering toward a third straight weekly win, but Washington just might help usher them to a loss by day’s end. Today’s call warns about the potential government shutdown, but historically shutdowns haven’t sparked huge selling.

In One Chart: This is what happens in the stock market when the government shuts down

If the U.S. government shuts down this weekend, will the stock market’s nearly uninterrupted march higher also come to a close?

Apple has big spending plans, but the ‘smart money’ isn’t buying tech stocks

Nigam Arora says investors ought to sell into strength and buy the dips.