Tuesday August 23 Daily Market Primer

US stocks were flat yesterday with the Dow and S&P down slightly and the Nasdaq up a bit.   Energy shares dragged down the market as oil prices continued to fall, and Iraq moved to increase production ahead of the upcoming Saudi – OPEC Russia talks, and Goldman put out a note that said any supply cuts would be quickly made up by other market participants.  The VIX is back down below 12, and trading is slow as is typical for late August.  Stocks were/are mostly up in Asia an Europe and the US stock market has had a strong opening, up .5%.

DJIA	18529.42	-23.15	-0.12%
Nasdaq	5244.6	6.22	0.12%
S&P 500	2182.64	-1.23	-0.06%
Russell 2000	1239.74	2.97	0.24%
Global Dow	2463.43	7.23	0.29%
Japan: Nikkei 225	16497.36	-100.83	-0.61%
Stoxx Europe 600	343.56	3.13	0.92%
UK: FTSE 100	6873.77	45.23	0.66%
CBOE Volatility	11.98	-0.29	-2.36%
Australia: S&P/ASX 200	5553.8	38.7	0.70%
China: Shanghai Composite	3089.71	4.9	0.16%
Hong Kong: Hang Seng	22998.93	1.02	0.00%
India: S&P BSE Sensex	27990.21	4.67	0.02%
Japan: Nikkei 225	16497.36	-100.83	-0.61%
Singapore: Straits Times	2850.43	9.24	0.33
France: CAC 40	4423.11	33.17	0.76%
Germany: DAX	10598.9	104.55	1.00%
Italy: FTSE MIB	16697.11	327.97	2.00%
Spain: IBEX 35	8574.4	106.4	1.26%
U.S. 3 Month	0.315	0/32
U.S. 2 Year	0.742	0/32
U.S. 5 Year	1.133	0/32
U.S. 10 Year	1.537	1/32
U.S. 30 Year	2.219	11/32
Germany 2 Year	-0.622	0/32
Germany 10 Year	-0.096	Mar-32
Brent Crude	48.66	-0.5	-1.02%
Natural Gas	2.722	0.021	0.78%
S&P GSCI	361.58	-2.82	-0.77%
E-mini S&P 500	2187.5	6	0.28%

Euro-Zone PMI data is pretty good, and Best Buy is out with a blowout earnings surprise this morning, earning .57 per share vs. the consensus .43.  Another mega-merger is in the works, as German giant Bayer is getting closer to buying St. Louis based global agri-business Monsanto.  Meanwhile, Uber’s little brother Lyft denied rumors that the private company us up for sale.  Hillary Clinton denied persistent poor health rumors being circulated by the Trump camp but could not deny more trouble from a judicial order for the State Department to quickly review the 15,000 previously missing emails and a separate email release from conservative watchdog group Judicial Watch.

Here’s the news:

Euro-area PMIs

Data released by IHS Markit this morning show the euro-area remained on a steady growth path in August, with a composite Purchasing Managers Index rising for a second month to 53.3. Germany, the largest economy in the currency bloc, lost some momentum as manufacturing and services cooled. In France, where former president Nicolas Sarkozy announced he is throwing his hat into the ring for next year's presidential election, PMI data showed the economy is picking up. 

Oil falls

West Texas Intermediate for October delivery was trading 1 percent lower at $46.95 a barrel at 5:57 a.m. ET, following  yesterday's decline. Goldman Sachs Group Inc. has warned that any agreement to freeze output at next month's informal OPEC talks could prove to be self-defeating as it would benefit other suppliers. The recent rally in prices, which saw oil enter a bull market wasn't enough to stop withdrawals from the ETF which tracks oil prices, with the U.S. Oil Fund losing the most since March last week. 

Markets rise

The MSCI Asia Pacific Index added 0.1 percent overnight, as pressure from crude prices and the strengthening yen was outweighed by advances in health-care and consumer staples. In Europe, the Stoxx 600 was 0.9 percent higher at 6:05 a.m. ET, with equities boosted by the positive PMI data released earlier. S&P 500 futures added 0.3 percent.

Bayer, Monsanto move closer to deal

Bayer AG and Monsanto Co. are making progress towards a deal in the coming weeks, according to people familiar with the matter. The back-and-forth between the two companies that began with Bayer's initial offer in May could end soon as negotiations are progressing on the purchase price. In other corporate news, Volkswagen AG reached a deal with a parts supplier to end a dispute that saw production halted at some of its factories.

Clinton says she's fine

Democratic presidential nominee Hillary Clinton strongly rejected speculation fermented by her Republican rival Donald Trump and his supporters that she is in poor health during an appearance on ABC’s "Jimmy Kimmel Live." Donald Trump, who may be softening some of his campaign pledges, still faces an uphill battle in his run for the White House, with even Texas proving less warm than usual to a republican nominee.

Oil is under pressure. West Texas Intermediate crude oil is lower by 1.1% at $46.87 a barrel. Tuesday's selling has the energy component lower for a second straight day following its seven-day winning streak.
China controls 2 of the North Sea's biggest oil fields. Nexen, a company owned by China National Offshore Oil Corporation, extracts nearly 200,000 barrels of oil each day across those two fields, according to The Times' analysis of CNOOC accounts. The Chinese company gained a foothold in the region after George Osborne, the former British chancellor, gave tax breaks for oil companies in the North Sea in an effort to combat the drop in oil prices.
Bayer and Monsanto are nearing a deal. Talks between the two sides have continued after Monsanto rejected Bayer's $55 billion offer back in July. The companies continue to work toward a deal, progressing on issues such as purchase price and a termination fee, Bloomberg reports, citing people familiar with the matter.
Lyft says it's not looking to sell itself. The company is pushing back against reports that it had failed to sell itself to six different companies. Lyft's president, John Zimmer, told Business Insider's Biz Carson the company wasn't seeking a buyer and, "Getting approached and then having it characterized as us wanting to sell the business and failing to do so is a large mischaracterization."
Toll Brothers beat on the top and bottom lines. The luxury homebuilder earned $0.62 a share as revenue spiked 23.5% to $1.27 billion. "Given our land holdings, geographic diversity, variety of product offerings and brand name recognition, we believe we will continue to benefit from our strong position within the luxury new home market," CEO Douglas C. Yearley Jr. said in the press release.
Amazon is working on a music subscription service. The online retailer is in the planning stages of a subscription music service that would run through its Echo hardware, Recode reports, citing sources. Amazon is reportedly deciding whether the service will cost $4 or $5 a month.
Those Emails Again
A federal judge has prodded the State Department to quickly review a batch of 14,900 emails, discovered during an FBI probe, as the controversy over Hillary Clinton’s correspondence while she served as America’s top diplomat continues to simmer. Judge James Boasberg set a deadline for the department to complete the email review by Sept. 22 to determine which ones contain sensitive government information and which are strictly personal conversations. The judge’s request came on the same day as the release of a separate batch of emails, obtained through a lawsuit by a conservative watchdog group, showing a Clinton Foundation official seeking access to the State Department via Huma Abedin, a top adviser to Mrs. Clinton. Meanwhile, despite signs that Donald Trump may be softening his rhetoric on illegal immigrants, he said Monday that he wasn’t waffling and reiterated his commitment to strict anti-immigration measures.
Sobering News
The alcohol industry is in danger of losing its “health halo,” and companies are going on the offensive in what has become a multimillion-dollar global battle. For decades, beer, wine and liquor producers have been helped by a notion, enshrined in a number of governments’ dietary advice, that a little alcohol can provide modest coronary and other health benefits. Rapidly, that advice is shifting as health-policy officials around the world scrutinize their previous advice in the light of research pointing to possible cancer risks. The change is pressuring the alcohol industry in some of its biggest markets, including the U.S., the U.K. and Russia. The industry’s response is as expensive and sprawling as the threat it perceives, including attacking anti-alcohol advocates’ research, working with governments to formulate policy and funding its own research.
Chinese Takeover
The Committee on Foreign Investment in the U.S., or CFIUS, blessed China National Chemical’s $43 billion planned takeover of seed giant Syngenta, months after shooting down much smaller Chinese deals for electronics and lightbulb manufacturers. The decision indicates that potential worries about the long-term security of the American agricultural industry resonate far less than immediate concerns over foreign ownership of technology and cybersecurity assets. CFIUS, a Treasury-led panel that can scotch mergers over national-security concerns, has approved multibillion-dollar deals putting swaths of U.S. food production under Chinese ownership in the past three years. State-owned ChemChina’s planned purchase of Swiss-based Syngenta, which supplies about one-fifth of the world’s pesticides and about 10% of soybean seeds to U.S. farmers, would rank as Beijing’s biggest-ever overseas deal.
The Power of Negative Thinking
There is an upside to feeling down. In a movement that some experts are calling “the second wave of positive psychology,” many psychologists are recognizing that negative feelings that make us uncomfortable or unhappy may sometimes be good for us. If we pay attention to them, they can help us identify what is wrong and motivate us to seek change. Research even shows that people who have negative thoughts along with positive ones are healthier. This is a response to the approach popular since the late 1990s, when the field of positive psychology arose, emphasizing upbeat emotions. Beneficial negative feelings—ones that typically can be harnessed for positive change—include guilt, anger, sadness, anxiety, envy and loneliness. The trick is to be able to identify the emotion correctly, then figure out what change in your behavior will alleviate it.
Stock markets around the world are mixed. Spain's IBEX (+1.1%) leads in Europe after Japan's Nikkei (-0.6%) lagged in Asia. S&P 500 futures are up 5.25 points at 2,186.75.
Earnings reports trickle out. Best Buy and JM Smucker will release their quarterly reports ahead of the opening bell.

US economic data remains light. Markit US Manufacturing PMI and new home sales will cross the wires at 9:45 a.m. ET and 10 a.m. ET. The US 10-year yield is higher by 2 basis points at 1.57%.

China's best bank called 'mirage' of shadow lending.

Citigroup: This 'hot commodity' is destined to cool off soon.

Urging a Fed rethink doesn't require ditching 2016 hiking bias.

FEMA Proposes Rules for Construction in Flood Areas

California High Court Refuses to Hear Appeal of Teacher Tenure Law

Philippine Leader Duterte’s Antidrug Crusade Inflicts Spiraling Death Toll

Russian Raids on Syria From Iranian Air Base Finished, Tehran Says

Risk Grows in Safe Stocks

The Hunt for Yield Ends in Argentina

It's been exactly two months since the Brexit vote, and the world is still waiting for definitive signs of the vote's impact. So far, there have been few signs of the economy collapsing. One really eye-catching chart is the Citi Economic Surprise Index for the United Kingdom. It's absolutely surged since bottoming in early June. It's now near its highest level since the middle of 2013. Of course a surprise index is not an absolute measure of how well the economy is performing, but rather a measure of how well an economy is performing relative to expectations. So if the data, post-Brexit, has roughly held steady, but the expectations have gone down dramatically, then the index will surge. Of course, surprise indices always mean revert. Either economists start upping their forecasts or the data comes down to match the expectations.

Source: Bloomberg, BI, WSJ, CFAI Fin. Newsbrief