Gold: $1085.50 down $11.60 (comex closing time)
Silver $13.74 down 12 cents
In the access market 5:15 pm
Gold $1086.50
Silver: $13.79
At the gold comex today, we had a poor delivery day, registering 0 notices for nil ounces.Silver saw 0 notices for nil oz.
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 200.28 tonnes for a loss of 103 tonnes over that period.
In silver, the open interest fell by 1526 contracts down to 166,440. In ounces, the OI is still represented by .832 billion oz or 118% of annual global silver production (ex Russia ex China).
In silver we had 1 notice served upon for 5,000 oz.
In gold, the total comex gold OI fell by a monstrous 16,413 contracts to 407,544 contracts as gold was down $1.30 in yesterday’s trading. (although down around 15 dollars from the access price)
We had no change in inventory at the GLD, / thus the inventory rests tonight at 651.68 tonnes. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. Our 670 tonnes of rock bottom inventory in GLD gold has been broken. It looks to me that China has taken the last amounts of physical gold from the GLD. I guess the only place left for China to receive physical gold, after they deplete the GLD will be the FRBNY and the comex. In silver,/we had no changes to inventory/Inventory rests at 316.368 million oz.
First, here is an outline of what will be discussed tonight:
1. Today, we had the open interest in silver fall by 1526 contracts down to 166,440 as silver was down by only 5 cents with respect to yesterday’s trading. The total OI for gold fell by 16,413 contracts to 407,544 contracts as gold was down $1.30 in price yesterday
(report Harvey)
2 a) Gold trading overnight, Goldcore
(Mark OByrne)
3. ASIAN AFFAIRS
i)Early last night
Last night, MONDAY night, TUESDAY morning: Shanghai up a fraction / Hang Sang falls badly. The Nikkei was closed down badly as well. Chinese yuan down a bit despite POBC intervention but still they desire further devaluation throughout this year. Oil is down,. Stocks in Europe mostly in the green. Offshore yuan trades at 6.61 yuan to the dollar vs 6.57200 for onshore yuan. The POBC soaks up considerably off shore yuan in Hong Kong causing shortages of yuan and this in turn causes HIBOR to rise to 66%. POBC then increases capital controls as they ordered banks to limit the yuan outflow. It will not work as panic is setting in on China:
TWO COMMENTARIES
iii) The Chinese government last night hit speculators borrowing off shore yuan badly as the overnight deposit rate climbed to .66%. Och!
4. EUROPEAN AFFAIRS
non today
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
i) Big bomb blast in the centre of Istanbul:
( zero hedge)
ii) This should spice up the tensions a notch: iran seizes 2 USA Navy boats and crewman:
6 GLOBAL ISSUES
i)Nigeria is short of dollars. (reported to you two weeks ago) The central bank halted dollar sales because of the scarcity. This caused the black market to spike to 282 Nigerian naira to one USA. The Nigerian CDS rose to levels implying drastic devaluations. Foreign reserves have dropped from 37 billion to only 27 billion. Hyperinflation is one its way into Nigeria!!
( zero hedge)
ii) As oil is reading to break the 30 dollar handle, the Cdn dollar surpasses 1.43 to the dollar:
iii) Yesterday we reported on the coverup not to report on the refugee sex assault. Today, the police started to scramble as the responded by arresting some of the perpetrators:
iv) Dave Kranzler comments on rail freight collapsing:(courtesy Dave Kranzler/IRD
v) The Baltic Dry Index falls to a record low of 401. Also Chinese shipbuilding yards are basically vanishing with no orders:
(courtesy zero hedge)
7. EMERGING MARKETS
non today
8. OIL MARKETS
i) Following are a few giant oil projects which will continue to add oil into the global glut this year:
(courtesy GEFIRA)
ii) BP fires 4,000 poor souls
(BP/zero hedge)
iii) WTI plunges back to the 30 dollar handle this morning sending stocks lower:
iv) Dr Chris Marten interview Arthur Berman: an excellent interview(courtesy Berman/Taggart/zero hedge/Dr Chris Martenson)
v) Late in the day WTI breaks the 30 dollar barrier
(zero hedge)
vi) Late in the day, API buildup causes WTI crude to fall
(zero hedge)
9. PHYSICAL MARKETS
i) Eric King on the gold/oil ratio at its extreme levels;
( Eric King/Kingworldnews)
ii)RBS states: sell everything as a deflationary crisis is upon us:
( Ambrose Evans Pritchard)
iii) The Fed should be audited
( Rand Paul/NT Sun)
iv) Ted Butler’s commentary today “Eureka Moment”
(Ted Butler/Chris Powell introduction)
v) If only they had bought real metal
(Bloomberg/GATA)
vi) Investors fleeing Chinese stock markets into gold
( Mukerji/WallStreet Journal)
10. USA STORIES WHICH WILL INFLUENCE THE PRICE OF GOLD/SILVER
i) It sure looks like trading today takes the path of a huge policy error:
( zero hedge)
ii) This giant in the junk bond field, billionaire Lasry must be experiencing huge redemptions
(Tim McLaughlin and Svea Herbst-Bayliss/yahoo finance)
And now your overnight trading in gold and also physical stories that may interest you:
Sales Surge After U.S. Mint Quadruples Silver Eagles Allocation
American Eagle silver coin sales jumped on Monday after the U.S. Mint said it set the first weekly allocation of 2016 at 4 million ounces, roughly four times the amount rationed in the last five months of 2015, after a surge in demand.
More than half of the week’s allocation sold on Monday, the first day of 2016 sales, the mint said, a sign that demand remains strong as spot silver prices hovered above a 6-1/2-year low of $13.60 per ounce hit in December.
The mint said nearly 2.76 million ounces of American Eagle silver bullion coins sold, about half of the 5.53 million ounces that sold in all of January 2015.
First-day sales of American Eagle gold bullion coins were also strong at 60,000 ounces, compared with the 81,000 ounces that sold in the entire month of January 2015, mint data showed.
On Monday, spot gold prices traded just below $1,100 an ounce, which is up about 5 percent from the near six-year-low of $1,045.85 reached in early December.
The mint ran out of American Eagle silver coins in July because of a “significant” increase in demand as spot silver prices fell to a six-year low.
The bullion coins are bought by authorized dealers who then sell to the general public at a premium, which changes according to supply and demand. The coins are viewed as a more affordable form of investment in physical bullion than the much larger bars.
Inventory was replenished in August and sales resumed. But the coins were on weekly allocations of roughly 1 million ounces for the rest of the year because of low supplies.
The U.S. Mint was not alone in limiting silver coin sales. The unexpected surge in demand put the global silver-coin market in an unprecedented supply squeeze, forcing other mints around the world to ration sales, while U.S. buyers had to look abroad for supplies.
Reporting by Marcy Nicholson; Editing by Dan Grebler and Peter Cooney – See article here
Precious Metal Prices
12 Jan LBMA Gold Prices: USD 1,094.95, EUR 1,008.76 and GBP 756.92 per ounce
11 Jan LBMA Gold Prices: USD 1,104.70, EUR 1,014.08 and GBP 758.18 per ounce
8 Jan LBMA Gold Prices: USD 1,097.45, EUR 1,009.86 and GBP 750.67 per ounce
7 Jan LBMA Gold Prices: USD 1,096.00, EUR 1,009.45 and GBP 752.51 per ounce
6 Jan LBMA Gold Prices: USD 1,083.85, EUR 1,009.66 and GBP 739.84 per ounce
Eric King: Gold/oil ratio hits extreme in gold’s favor
Submitted by cpowell on Tue, 2016-01-12 00:43. Section: Daily Dispatches
7:40p ET Monday, January 11, 2016
Dear Friend of GATA and Gold:
Eric King of King World News reports tonight that the gold/oil ratio has just reached an extreme in gold’s favor, signifying that gold has held up well amid the collapse in other commodities:
http://kingworldnews.com/the-gold-market-has-just-experienced-a-stunning…
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org
end
RBS states: sell everything as a deflationary crisis is upon us:
(courtesy Ambrose Evans Pritchard)
RBS cries ‘sell everything’ as deflationary crisis nears
Submitted by cpowell on Tue, 2016-01-12 01:08. Section: Daily Dispatches
By Ambrose Evans-Pritchard
The Telegraph, London
Monday, January 11, 2016
RBS has advised clients to brace for a “cataclysmic year” and a global deflationary crisis, warning that major stock markets could fall by a fifth and oil may plummet to $16 a barrel.
The bank’s credit team said markets are flashing stress alerts akin to the turbulent months before the Lehman crisis in 2008. “Sell everything except high-quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” it said in a client note.
Andrew Roberts, the bank’s credit chief, said that global trade and loans are contracting, a nasty cocktail for corporate balance sheets and equity earnings. This is particularly ominous given that global debt ratios have reached record highs. …
… For the remainder of the report:
http://www.telegraph.co.uk/finance/economics/12093807/RBS-cries-sell-eve…
end
The Fed should be audited
(courtesy Rand Paul/NT Sun)
Rand Paul, NY Sun denounce Fed’s plutocratic objectives
Submitted by cpowell on Tue, 2016-01-12 02:03. Section: Daily Dispatches
9p ET Monday, January 11, 2015
Dear Friend of GATA and Gold:
Incisive criticism of the plutocratic objectives and effects of the Federal Reserve comes tonight from U.S. Sen. Rand Paul and the New York Sun.
In commentary in Time magazine headlined “The Fed Is Crippling America,” Paul writes that after rescuing investment banks by purchasing their rotten assets, the Fed has been paying banks generally a bonus not to lend to the public. Paul concludes that the Fed should be audited. His commentary is posted at Time here:
http://time.com/4170969/sen-rand-paul-audit-the-fed/
The Sun, also advocating an audit of the Fed, notes the Fed’s attempt to gain still more control over the financial markets while resisting oversight by Congress. The Sun’s commentary is headlined “A Gander at the Fed”:
http://www.nysun.com/editorials/a-gander-at-the-fed/89412/
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org
end
For your enjoyment:
(Ted Butler/Chris Powell introduction)
Ted Butler: Eureka moment
Submitted by cpowell on Tue, 2016-01-12 16:51. Section: Daily Dispatches
11:50a ET Tuesday, January 12, 2016
Dear Friend of GATA and Gold:
Volatile trading in silver, market-rigging opponent Ted Butler writes this week, suggests that the investment banks rigging the market are starting to compete with each other for smaller profits and that price suppression is getting more difficult.
Butler also condemns the U.S. Commodity Futures Trading Commission for not acting against the manipulation of the silver market, though if the U.S. government is behind that manipulation, either directly or through intermediaries, such manipulation would be legal under the Gold Reserve Act, which authorizes the U.S. Treasury Department’s Exchange Stabilization Fund to rig any market in the world in secret:
https://www.treasury.gov/resource-center/international/ESF/Pages/esf-ind…
Butler’s commentary is headlined “Eureka Moment” and it’s posted at GoldSeek’s companion site, SilverSeek, here:
http://www.silverseek.com/commentary/eureka-moment-15202
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org
Eureka Moment
|
January 12, 2016 – 10:56am
Over the past month, there have been at least three separate occasions in which silver rallied sharply in a single day, only to lose most of those gains the next day. On another occasion silver rallied over several days, only to lose its gains in one day. This is highly unusual price behavior, even for silver, the world’s most manipulated market. There are no legitimate supply/demand explanations for this kind of erratic price behavior. It always comes down to who’s tapping who on the COMEX – check that – it always comes down to how the commercials are tapping the technical funds.
Whereas I previously labeled the commercials (big banks) as colluding among themselves in their dealings with the technical hedge funds and not exhibiting any true competitive behavior in their trading activities I must now amend that. The commercials are still collusive in their approach to the markets, but a new level of competition has emerged within the overall commercial collusion. Just as occurs in every Wall Street scheme eventually, the sure pickings the commercials enjoyed in their dealings with the technical funds has evolved into slim pickings, due to competition among the commercials. So eager have the commercials become to skin the technical funds that they are selling to the funds at lower and lower prices and smaller profits. This explains the phenomenon of the progressively smaller rallies in gold and silver over the past few years and also explains the big up days in silver followed immediately by next day takedowns.
It strikes me that the increasing aggression on the sell side by the commercials indicates that we are in the late stages of the silver manipulation. All financial schemes on Wall Street go through various stages and all blow up in the later stages and I can’t see why silver would be different. The overall profits to JPMorgan and the collusive commercials are definitely shrinking. The likelihood of serious miscalculation looms large. Miscalculation goes hand in hand with shrinking profits and aggressive positioning. The aggressive commercial selling is contrary to the spirit of U.S. commodity law. None of this COMEX positioning has the slightest connection to legitimate hedging by real producers or consumers. It’s no more than a Wall Street financial scheme designed to benefit a few insiders at the expense of the many. That it may have reached its terminal phase is nothing but good news.
Once again, the regulators have dropped the ball. A good number of obvious facts make the silver manipulation the greatest financial scheme ever to exist. Yet, the CFTC pretends that nothing is wrong with silver prices being set by purely speculative positioning on the COMEX and can’t even bring itself to comment on the most important market issue of the day. I don’t know how these people can live with themselves. They are either so clueless that they can’t understand failing in their main regulatory mission, or they are so corrupt that they do understand and choose to neglect their mission. In either case, they are not fit for office.
Keep in mind that the increasingly blatant silver manipulation has resulted in such an incredibly low and uneconomic price for silver that the price is reason enough to consider silver as the premier investment opportunity. This is particularly true when comparing silver to just about every other investment opportunity. The reasons for how we got to such a low price of silver are all rotten and illegitimate, but in time the high price to come will make the reasons for how we got here a distant memory.
(This is an abbreviated version of a report sent to subscribers on Jan 9, 2016)
end
(courtesy Bloomberg)
If only they had bought real metal. …
Submitted by cpowell on Tue, 2016-01-12 15:45. Section: Daily Dispatches
Investors on Gold ETF Buying Spree Amid Global Stock Rout
By Ranjeetha Pakiam
Bloomberg News
Tuesday, January 12, 2016
Investors embarked on the biggest three-day buying spree in gold-backed exchange traded funds for a year as bullion rallied at the start of 2016 amid a stock-market slump.
Holdings in ETFs climbed 19.6 metric tons in the three days through Monday to 1,477.7 tons, according to data compiled by Bloomberg, the largest increase since January 2015. Assets rebounded from the lowest in almost seven years on Jan. 6. Investors had been selling gold on expectations that U.S. borrowing costs would rise, hurting the metal as it doesn’t pay interest. …
… For the remainder of the report:
http://www.bloomberg.com/news/articles/2016-01-12/investors-on-gold-etf-…
end
(courtesy Mukerji/WallStreet Journal)
Investors Fleeing China’s Stock- Market Turmoil Seek Safety in Gold
Gold is up about 4.3% since the beginning of 2016
By
Biman Mukherji Jan. 11, 2016 4:24 a.m. ET
HONG KONG—China’s stock-market volatility is driving up the price of gold as investors seeking safety pile into the yellow metal, reversing expectations that the price would slump this year in the wake of a strengthening dollar.
Gold is up about 4.3% since the beginning of 2016, trading around $1,106.20 a troy ounce Monday, after breaking through a key psychological level of $1,100 an ounce last week.
At the end of 2015, analysts had predicted gold prices would fall below $1,000 an ounce early this year, as the dollar, spurred on by higher U.S. interest rates, gathered strength. Historically, gold has an inverse relation to the dollar as it is priced internationally in the U.S. currency.
However, these expectations have been upended by the recent stock-market tumult.
“If there is continued weakness in stocks, then we expect gold prices to move higher,” said Seamus Donoghue, Chief Executive at Allocated Bullion Solutions, a Singapore-based international bullion-trading network. When a large equity market such as China loses so much in a single day, “there will be a flight to quality assets,” he added.
The yuan’s weakening by 1.5% against the U.S. dollar last week sparked selling in commodities and currencies of China’s trading partners and sent investors to assets perceived as safe.
China shares slid again on Monday, and losses in other regional markets deepened. The Shanghai Composite Index fell 2.4% to 3109.95 and the smaller Shenzhen Composite Index was last down 3.5%. Shares in Hong Kong sank to their lowest in roughly 2 1/2 years.
In mid-August last year gold prices rallied sharply following the yuan’s devaluation, but the increase was quickly sapped by dollar strength in ensuing weeks. A strong dollar makes the precious metal more expensive for buyers elsewhere, which matters as China and India together account for over half of the global demand.
“The equity market volatility will definitely help allocation to gold. The market has discounted the impact of dollar strength and [the U.S. interest] rate hike for now,” said Jammy Chan, head of Greater China and managing director at Gold Bullion International, a physical global precious-metals trading platform for institutional investors.
A signal of the divergence in pricing between gold and the dollar came on Friday when a strong U.S. jobs report for December made little impact on the price of the precious metal.
A Hong Kong-based banker whose company is a large supplier of bullion to the region said the switch to gold was gathering pace not only in China, but other countries in the region as well.
“The demand for gold in India was high a couple of weeks ago but recent currency weakness [in the rupee] has stifled demand,” he said.
Write to Biman Mukherji at biman.mukherji@wsj.com
And now your overnight TUESDAY morning trading in bourses, currencies, and interest rates from Europe and Asia”
1 Chinese yuan vs USA dollar/yuan falls a bit in value , this time to 6.5761/ Shanghai bourse: in the green , hang sang: red
2 Nikkei closed down 479.00 or 2.71%
3. Europe stocks up on Yen rise /USA dollar index up to 98.96/Euro down to 1.0854
3b Japan 10 year bond yield: falls to .222 !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 117.68
3c Nikkei now just above 18,000
3d USA/Yen rate now well below the important 120 barrier this morning
3e WTI: 31.24 and Brent: 31.53
3f Gold down /Yen down
3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.
Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.
3h Oil down for WTI and up for Brent this morning
3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund rises to .549% German bunds in negative yields from 6 years out
Greece sees its 2 year rate fall to 8.46%/: still expect continual bank runs on Greek banks
3j Greek 10 year bond yield rises to : 8.69% (yield curve flat)
3k Gold at $1088.70/silver $13.77 (7:45 am est)
3l USA vs Russian rouble; (Russian rouble down 30/100 in roubles/dollar) 76.49
3m oil into the 31 dollar handle for WTI and 31 handle for Brent/
3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar.
30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning 0.9999 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0854well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.
3p Britain’s serious fraud squad investigating the Bank of England on criminal charges/arrests 10 traders for Euribor manipulation
3r the 6 year German bund now in negative territory with the 10 year rises to + .549%/German 6 year rate negative%!!!
3s The ELA at 75.8 billion euros,
The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”. Next step for Greece will be the recapitalization of the banks and that will be difficult.
4. USA 10 year treasury bond at 2.18% early this morning. Thirty year rate at 2.98% /POLICY ERROR
Overnight rate: 0.20% (policy error)
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Futures Jump After Oil Rebounds From 11 Year Low On Turkish Terrorist Attack
As reported last night, now that the PBOC has devalued the Yuan to a level China’s central bank is comfortable with, if only for the time being,and having done so by unleashing a “murderous” short squeeze “to deter bearish bets and helping to stabilize equity markets”, manifesting itself in the offshore Yuan 1 week deposit rate exploding to a record 82%…
… markets are content that the Chinese debacle seems to be contained if only for a while, and so the attention of both traders and algos alike has focused on oil, which earlier in the session dragged global equities lower as it dropped by 3%, just shy of the $30 level, a new 11 year low, before staging another dramatic rebound in minutes, wiping out all losses in the aftermath of what appears to be a deadly suicide bomber explosion (unclear if this one is real or staged) on a square the middle of Istanbul’s historic district.
And since the Paris terrorist attacks taught everyone that terrorism is bullish for stocks via the “OPEC wealth effect channel”, after starting off the session in the red, and sliding as low at 1900, US equity futures have staged yet another furious rebound, and have risen nearly 30 points since roughly the European open, with the bulk of the surge coming after the Turkish news with a little lie from Nigeria, which earlier said that “OPEC May Meet Soon as Oil Even Hurting Saudi Arabia“, also helping oil. (Incidentally, OPEC quickly denied Nigeria’s attempt to boost oil with Bloomberg citing delegates who said that the organization currently has no plan to meet before the scheduled June conference.)
Here is where we stand now:
- S&P 500 futures up 0.7% to 1929
- Stoxx 600 up 1.5% to 345
- FTSE 100 up 0.9% to 5925
- DAX up 2.5% to 10066
- German 10Yr yield up 4bps to 0.58%
- Italian 10Yr yield up 5bps to 1.63%
- Spanish 10Yr yield up 5bps to 1.85%
- MSCI Asia Pacific down 1.7% to 121
- Nikkei 225 down 2.7% to 17219
- Hang Seng down 0.9% to 19712
- Shanghai Composite up 0.2% to 3023
- S&P/ASX 200 down 0.1% to 4925
- US 10-yr yield up 1bp to 2.19%
- Dollar Index up 0.21% to 98.93
- WTI Crude futures down 1% to $31.09
- Brent Futures down 0.3% to $31.47
- Gold spot up less than 0.1% to $1,094
- Silver spot up less than 0.1% to $13.88
A quick recap of global markets, we find Asian stocks traded mixed as stock markets found some mild respite following the recent market turmoil, although markets in Japan underperformed as they play catch-up on their return from their extended weekend which sawNikkei 225 (-2.7%) wipe out all of last year’s gains.
The Shanghai Composite Index rose 0.2 percent after dropping below the 3,000 level for the first time since September. The gauge sank 5.3 percent on Monday, extending the world’s biggest selloff this year, even after state-controlled funds intervened in the market last week.
“Everyone rational wants to sell, while everyone official has been told to buy,”Michael Every, head of financial markets research at Rabobank Group in Hong Kong told Bloomberg. “By throwing good money after bad, it just delays the inevitable.”
Well, isn’t that the whole point of central banking: to delay the inevitable.
The Hang Seng China Enterprises Index dropped 0.8 percent to trade at 6.3 times trailing earnings, the cheapest level in 14 years. Hong Kong’s Hang Seng Index slid to its lowest level since September 2012.
Elsewhere, the ASX 200 (-0.1%) traded relatively flat as continued energy sector weakness pressured the index with WTI at its lowest since 2003. Elsewhere the Shanghai Comp. (+0.2%) opened higher led by financials after the largest broker CITIC Securities reported earnings however, the index then fluctuated between gains and losses as weakness in commodity linked sectors capped gains. Finally, 10yr JGBs saw mild gains amid weakness in Japanese stocks region, while the BoJ also entered the market to purchase JPY 890b1n in bonds.
Top Asian News
- In Rush to Exit Yuan, China Traders Buy Sinking Hong Kong Stocks: Chinese investors add 23.7b yuan of the city’s equities
- Singapore’s Next Bond Default Looms in Pacific Andes Tussle: Bond trustee HSBC alleges 2017 notes have breached terms
- Modi Seen Failing to Cut India Subsidy Bill Despite Oil Fall: India spending on fuel subsidies said to hit budget target
- Uber China Raises Financing at $7 Billion Valuation: Co. raised cash from local investors to fund battle with local rival Didi Kuaidi
- Macau Gaming Sees ‘Very Strong Start to the Year,’ JPMorgan Says: Macau GGR for first 10 days of Jan. estimated to be ~20% higher than Dec.
In Europe, the Stoxx Europe 600 Index rose 1.5, even as the MSCI All-Country World gauge was still 0.1 percent lower, extending its loss this year to 6.6 percent, after Japan’s Topix index tumbled 3.1 percent in a sixth day of declines.
Equities have seen modest upside today (Euro Stoxx: +0.2%), and while retail names did help bolster sentiment in early trade, the impact of the aforementioned commodity slump has taken its toll as the session has continued, with the material and energy sectors among the worst performers on the continent.
Top European News
- SAP Sales Top Estimates as New Software Cycle Takes Hold: S/4 Hana customers reach 2,700, double end of previous quarter
- Villeroy Says ECB Can Act If Needed as Inflation Remains Too Low: New Bank of France Governor says ECB policy is effective
- Orange Won’t Do Bouygues Deal If Too Risky to Execute, CEO Says: Says ‘in-depth’ review of possible deal is under way
- Airbus Wins Order for Three A380s, Breaking Sales Drought: Deal revealed in sales data; buyer — or buyers — not named
- RBS Recommends Bunds, Treasuries on Potential Crisis, Telegraph Says: Major stock mkts may fall 20%, oil may reach $16
Commodities have been at the centre of attention yet again today, with WTI and Brent breaking below USD 31.00/bbl overnight and printing 11 and 12 year lows respectively. Although oil futures have come off their worst levels by mid-morning the outlook remains bearish, with many looking closely at the USD 30.00/bbl handle as a key level ahead of tomorrow’s DoE inventories, which are expected to show a build while many investment banks have downgraded their forecast in recent days.
Perhaps there will be a few more terrorist suicide bombings around the globe to lift oil, and thus energy stocks, and overall trader sentiment…
In FX, oil is also the leading story affecting FX this morning, so no surprise to see the CAD weaken further as both WTI and Brent target USD 30.00 — holding above here as yet. USD/CAD has now pushed the upside to a tick shy of 1.4270, with cross/JPY setting fresh 3+ year lows ahead of 82.0. USD/JPY has found some stability in the mid 117.00’s, as Nikkei losses in Asia were tempered by China actions to contain CNH volatility and narrow the spread vs CNY. AUD weakness contained ahead of Monday lows. Cable pushed below the Monday lows under 1.4500 after some weak industrial/manufacturing stats. EUR/USD continues to sit it out on the side lines, struggling ahead of 1.0900 today.
In commodities, the main story has been the abovementioned rebound in oil, even as copper has come under renewed pressure in early LME trade this morning, with prices hitting the lowest levels for over six-and-a-half years, as a result of increasingly negative sentiment. Copper fell below USD 4,360 per tonne, as earlier short-covering and attempts to regain the USD 4,400 level proved futile. Perhaps we need suicide bombers to blow up a few copper mines?
Negative sentiment has hit other LME metals, with LME Zinc prices falling under the USD 1,450 per tonne level for the first time since June 2009 and LME Nickel continues to underperform this week with prices hammered down to May 2003 lows.
Iron ore has continued to decline amid increases in China stockpiles and a fear of increasing closures of Chinese steel producers, which has been exacerbated by tighter anti-pollution measures by Chinese authorities.
With China dictating price action in metals, participants await the country’s trade figures tomorrow, whereby the imports will be a barometer for the pace of domestic demand in the economy, while the export figures could show the extent of slower global demand, according to BNZ.
The main event on the US calendar is the JOLTS job opening report for November where the quits and hiring rates are set to be closely watched; we also get the January IBD/TIPP economic optimism print and December NFIB small business optimism reading. Today’s Fedspeak is set to come from Lacker who is due to speak on the US economic outlook at 8.15pm GMT. US President Obama’s State of Union Address, due shortly after lunchtime, will also be worth keeping an eye on. There’s little to report on the corporate earnings front before the banks at the end of the week.
Global Top News:
- China Steps Up Yuan Defense as Soaring Offshore Rates Slam Bears: Interbank yuan lending rates jump to records in Hong Kong
- Oil Extends Losses From 12-Year Low as Stockpiles Seen Expanding: Inventories probably rose 2m barrels last week
- Petronas Predicts More Tough Years as $30 Oil Seen on Oversupply
- Several Dead After Blast in Istanbul’s Old City Tourist District: Police investigating whether blast caused by suicide bomber
- China’s Richest Man Buys ‘Godzilla’ Maker for $3.5b: Dalian Wanda buys Legendary Entertainment
- McDonald’s Faces Antitrust Attack as Unions Complain to EU: Coalition of consumers, unions say firm abuses its dominance
- Senate Democrats Pressure White House for More Iran Sanctions: House expected to vote Wednesday on a separate sanctions bill
- U.S., Major Automakers Set to Announce Safety Accord, Reuters Says: Seeks to improve vehicle cyber security, use of early-warning data to detect potential defects
- Icahn Says He Doesn’t Own Any Shares in Time Warner, CNBC Reports: New York Post reported Sunday Icahn was thought to be buying up shares
- AIG Investors Want Change, Bernstein Says Following Survey: Strategy has very little support among investors that may own as much as a third of shares
- FTC Said Uninterested in Settling With Staples on Merger, NYP Says: Offer to sell corporate contracts isn’t much given they are one-year contracts
- Starbucks Plans to Add 500 More China Stores in Fiscal 2016: Aims for >3,400 stores in China by 2019
- GE Said to Get Bids From Midea, Haier for Appliances Unit: Chinese companies offer more than $3b for business
- Delta Passes United to Become No. 2 in U.S. After American: Merger with Continental has hurt United’s focus, analyst says
- Apollo Global Said in Talks to Buy Apollo Education, DJ Says: Could pay $1b for Apollo Education
Bulletin Headline Summary by RanSquawk and Bloomberg:
- Commodities have been at the centre of attention yet again today, with WTI and Brent breaking below USD 31.00/bbl overnight and printing 11 and 12 year lows respectively
- CAD weakens further as both WTI and Brent target USD 30.00, while USD/JPY has found some stability in the mid 117.00’s
- Today’s highlights include US JOLTS job openings and IBD/TIPP economic optimism and comments from Fed’s Lacker, BoE’s Carney and ECB’s Praet and Weidmann
- April 2011.
China stepped up its defense of the yuan, buying the currency in Hong Kong, pushing the cost to borrow yuan overnight in the city’s interbank market to 66.82%, more than five times the previous high on Monday - “A 66% rate is murderous for others being swept up in this who are not speculating,” Rabobank strategist Michael Every said; the surge in Hibor reflects “further PBOC efforts to stamp out speculation”
- Betting against the yuan will fail and calls for a large depreciation are “ridiculous” as policy makers are determined to ensure the currency’s stability, a Chinese senior government official said
- Merkel moved swiftly to tighten asylum rules in response to public outrage over New Year’s Eve sexual assaults as the German leader warned that failing to gain control of the region’s refugee crisis is putting Europe at risk
- Swedish police, responding to accusations of a cover-up, said on Monday that they were investigating why the public had not been informed about sexual assaults by men reported to be migrants at a festival in Stockholm last summer: NYT
- Third Avenue Management, which took the rare step of freezing redemptions in a distressed debt mutual fund last month, saw investors also pull money from its equity funds, contributing to a 21% decline in the firm’s assets last quarter
- Obama is coming under pressure from his own party to advance new penalties to punish Iran for its recent ballistic missile tests even as a landmark nuclear deal, which would loosen international sanctions, is on the verge of being implemented
- A suicide bomb in the heart of Istanbul’s main tourist district on Tuesday morning left 10 people dead and injured another 15
- Sovereign bond yields higher. Asian stocks fall, European stocks higher, equity-index futures higher. Crude oil steady, copper and gold fall
DB’s Jim Reid completes the overnight recap
This morning at the midday break we’ve seen a bit of a rebound for the Shanghai Comp (+0.48%), CSI 300 (+1.13%) and Shenzhen (+0.49%), albeit not without a decent amount of volatility as the currency continues to generate plenty of headlines. While the CNY fix was kept unchanged for the third consecutive session, more PBoC buying of the offshore CNH saw it at one stage rally as much as +0.6% from the day’s lows and achieve parity with the onshore CNY. It’s off the intraday high as we type but the intervening has seen liquidity drained with the Hong Kong overnight interbank rate (CNH Hibor) climbing a huge 53 percentage points to nearly 67%. That’s after we highlighted it surging to over 13% yesterday. While the government will claim that the interventions are intended to crack down on speculators and create some stability, concerns that a bigger devaluation may be around the corner have not necessarily dissipated.
Meanwhile in the rest of Asia this morning, having been closed yesterday, markets in Japan are playing catch up this morning with the Nikkei (-2.59%) falling sharply. Elsewhere the Hang Seng is +0.10% but well off the early highs while the Kospi (-0.07%) and ASX (-0.13%) have fallen slightly. Credit markets are largely unchanged along with US equity futures.
Yesterday saw a late rally on Wall Street in the last hour of trading bringing to an end three consecutive days of heavy losses for the S&P 500 after the index crept into positive territory (+0.09%) by the closing bell. There was no shortage of volatility however after markets initially opened with a positive tone, shrugging off those steep falls in China, only to then fall as low -1.1% intraday before that late rally as attention quickly turned to more huge falls in the Oil complex. WTI finished -5.28% lower by the end of play, or nearly $2 lower while Brent ended the session down -5.96% with both close to creeping below $31 following further moves lower this morning. WTI in particular closed at the lowest since 5th December 2003 yesterday although there appeared to be little new news to spark the latest leg lower, with the focus still on the overriding supply and demand story as well as the turmoil in China. It was enough to see losses of 6-7% for shares in Chesapeake, Anadarko and Marathon. Staying on the energy theme, yesterday also saw US coal miner Arch Coal file for creditor protection with the WSJ suggesting that over a quarter of US coal production is now in bankruptcy. Notably, the company will now begin the process of restructuring some $4.5bn of debt, including five outstanding USD bonds.
With earnings season around the corner, the latest batch of quarterly reports in the energy sector will be a big theme once again this quarter. Speaking of which, yesterday saw Alcoa unofficially kick off the season after the closing the bell. Despite a miss at the top line, earnings beat consensus (4c vs. 2c expected) which helped in sending the shares up a couple of percent in extended trading although it’s worth highlighting that previous market forecasts for the quarter were as much as 14c at the beginning of October, so it shows how far expectations have fallen in the last few months.
Closer to home, a late stumble saw European equity markets close broadly lower yesterday. The Stoxx 600 continued its torrid start to the year by closing -0.33% and has now fallen on five of the six trading days this year so far. Across rates markets, Spanish bonds were the notable underperformers, finishing some +9bps wider (Bunds +3bps, Treasuries +6bps) post the news of the formation of the government in Catalonia. In a note yesterday, DB’s Marco Stringa highlighted that he expects the new Catalan government to carry on with the unilateral independence pledge with a 15-20 month timeframe, with the last-minute formation of a pro-independence government increasing the pressure to form a government at the national level. The issue remains however of there being no straightforward solution for the unprecedented post-electoral fragmentation in Spain with the belief that even if a government is formed it will be short-lived and with a limited mandate. Marco also believes that rationally, a unilateral declaration of independence is in the interest of neither Catalonia nor Spain. Catalonia would likely by cut out of the EU while the economic impact on the Spanish economy would likely be large. There is, however, a risk that the election leaves a deeply divided Catalonia and a deep division between Catalonia and the Central Government, so a negative outcome cannot be excluded.
Elsewhere yesterday, comments from Atlanta Fed President Lockhart suggested that in his mind there was unlikely to be enough new data to justify a rate hike in the first quarter of this year. With FOMC meetings scheduled for January and March, the market is currently pricing in a 39% chance of a hike in that time. When questioned on the current turmoil in financial markets, Lockhart also went on to say that ‘if the volatility continues for several weeks, I may have to revise my view that I don’t know see a connection between financial markets abroad and the real economy’.
Wrapping up yesterday and what was a fairly quiet session for data. In the US the December labour market conditions edged up 0.2pts to 2.9 (vs. 0.4 expected) from an upwardly revised November print. Prior to this in Europe the only data of note was the latest Euro area investor confidence reading for this month which tumbled 6.1pts to 9.6 (vs. 11.4 expected) – the lowest print since this time last year.
Looking at today’s calendar, it’s a fairly quiet start to proceedings in Europe this morning with the main releases of note out of the UK where we’ll get the November industrial and manufacturing production reports. Over in France we’ll get the December business sentiment reading. This afternoon in the US the main release of note is the JOLTS job opening report for November where the quits and hiring rates are set to be closely watched. As well as this we will receive the January IBD/TIPP economic optimism print and December NFIB small business optimism reading. Today’s Fedspeak is set to come from Lacker who is due to speak on the US economic outlook at 8.15pm GMT. US President Obama’s State of Union Address, due shortly after lunchtime, will also be worth keeping an eye on. There’s little to report on the corporate earnings front before the banks at the end of the week.
end
let us begin:
Last night, MONDAY night, TUESDAY morning: Shanghai up a fraction / Hang Sang falls badly. The Nikkei was closed down badly as well. Chinese yuan down a bit despite POBC intervention but still they desire further devaluation throughout this year. Oil is down,. Stocks in Europe mostly in the green. Offshore yuan trades at 6.61 yuan to the dollar vs 6.57200 for onshore yuan. The POBC soaks up considerably off shore yuan in Hong Kong causing shortages of yuan and this in turn causes HIBOR to rise to 66%. POBC then increases capital controls as they ordered banks to limit the yuan outflow. It will not work as panic is setting in on China:
TWO COMMENTARIES
FIRST:
(COURTESY ZERO HEDGE)
Chinese Stocks Extend Losses Despite Flat Yuan Fix, Shanghai Loses Key 3,000 Level
Despite all the flatness and stability, Chinese stocks are extending losses… *SHANGHAI COMPOSITE FALLS 0.8% TO BELOW 3,000 LEVEL
As we detailed earlier, with Chinese equities tumbling in the face of PBOC’s liquidity withdrawal (record spike in o/n HIBOR) and short-squeeze of CNH shorts (and carry traders), the sell-side is as confused as a CNBC anchor at what is good and what is bad. UBS urges investors not to sell while JPM fears a structured-product-driven vicious cycle between EM and Chinese equities. Following a record-breaking surge in offshore Yuan against the USD (12 handles top to bottom) during the US session, selling has resumed into the fix.“Expectations the yuan will depreciate sharply should be seen as ridiculous and humorous,” warned one Chinese official (who obviously did not get the memo of the last 3 weeks) as The PBOC injected CNY 80 billion and decided for the 3rd day in a row to hold the Yuan fix unchanged.
As we begin tonight’s “trading”, Chinese equities are deep in the red YTD:
- *SHANGHAI MARGIN DEBT BALANCE DECLINES MOST IN FOUR MONTHS
“Expectations the yuan will depreciate sharply should be seen as ridiculous and humorous,” warned one Chinese official (who obviously did not get the memo of the last 3 weeks)…
- *PBOC TO INJECT 80B YUAN WITH 7-DAY REVERSE REPOS: TRADER
- *CHINA KEEPS YUAN FIXING LITTLE CHANGED FOR THIRD DAY
- *SHANGHAI MARGIN DEBT BALANCE DECLINES MOST IN FOUR MONTHS
Offshore Yuan is selling back down a little after an epic day of squeezing…
Meanwhile, away from the actual dynamics of tonight’s early moves, mixed messages from a desperate sell-side tonight with UBS proclaiming:
- INVESTORS SHOULDN’T SELL CHINESE STOCKS AT THESE LEVELS: UBS
And JPMorgan warning of a vicous cycle of selling between China and EM equities:
Events in Chinese equity markets feel uncomfortably close to the June-August sell-off.
The Shanghai and Shenzhen indices are down 15% and 20%, respectively, in the first six trading days of 2016. MSCI China, EM and World are down 11%, 9% and 7%, respectively. Onshore investors’ confidence in the local policy is weak. Shorting of H-share futures increased when A-share circuit breakers kicked in. If HSCEI moves below 8000 (spot 8505) then we approach structured product strikes leading to H-share futures selling. To add to the discomfort, the CNH overnight rate spiked to 23% as aggressive PBoC intervention results in a shortage of offshore renminbi. Finally, the market was disappointed that post the record decline in FX reserves, there was no RRR cut.
Simply the market is unsure on policy and is technically weak, driving EM toward our bear case end 2016 target of 720.
Wondering why we care about China? Here’s one reason… US and Chinese stocks are extremely correlated since The Fed slowed and then stopped its money-printing… (and that correlation has increased since August and The Fed’s September “fold”)
The jawboning started early
- *YUAN FALL TO STIMULATE CHINA’S EXPORTS: SECURITIES JOURNAL
which is entirely incorrect…
And then this:
- *EXCHANGE RATE NOT DETERMINING FACTOR FOR EXPORTS: SEC. JOURNAL
Confused?
And finally there is this:
- *PBOC’S ZHOU ATTENDS BIS MEETING
In other words – they are starting to coordinate!! Against The Speculators? Or The Fed?
end
(courtesy zero hedge)
SECOND:
After “Murderous” Squeeze, China Boosts Capital Controls By Ordering Banks To Limit Yuan Outflows
Back in September, just weeks after China’s first dramatic currency devaluation, and when Bitcoin was trading at $220, we wrote that “China Scrambles To Enforce Capital Controls” and explained why this is “Great News For Bitcoin.” Sadly, China’s attempts to boost its capital controls failed as confirmed a few months later by the biggest one-month reserve liquidation in history which took place this past December, while fears about ongoing currency devaluation have led to lines of people rushing to exchange their Yuan into dollars. Oh yes, Bitcoin today is double where it was in September.
So, now that China renewed its currency devaluation over the past 2 weeks with the CNY and CNH both plunging and unleashing the latest round of cross-asset selling across the world, it was only a matter of time before China boosted, or at least tried to, capital controls once again. Which according to Bloomberg it did moments ago:
- CHINA’S SAFE SAID TO ASK BANKS TO LIMIT YUAN OUTFLOWS
Actually, since all Chinese banks are at least partially state-owned, change that “ask” to “order.” Here are the details:
China’s foreign-exchange regulator has verbally instructed some banks operating in the mainland to limit yuan outflows and reduce offshore yuan positions and liquidity, according to people with knowledge of the matter.
Banks are asked to better manage net yuan outflows in their capital accounts in the near term, according to the people, who asked not to be identified because the information hasn’t been made public.
Banks are also requested to properly manage cross-border interbank yuan borrowing and corporate offshore yuan lending.
The State Administration of Foreign Exchange didn’t immediately respond to a faxed request for comment after office hours.
This takes place after overnight the PBOC unleashed a “murderous” liquidity squeeze,which sent the deposit rate on the offshore Yuan to 66%, or an overnight widowmaker for anyone who was short the currency.
What happens next? Most likely a rerun of September, when a comparable (failed) attempt to boost capital controls and preserve capital outflow simply lead the public to find more effective ways to evade said capital controls… and also lead to a doubling of bitcoin in 4 months.
Finally, how long before it becomes obvious to everyone that what is going on in among the top echelons of power in China can be summarized with one word: panic.
The Chinese Central Bank Just Pulled A Martin Shkreli
Something very dramatic happened overnight to currency traders who were short the offshore Yuan, or the CNH: they were crushed by the Chinese Central Bank. Specifically, as we reported last night, the overnight HIBOR, or deposit rate in the offshore currency, aka the cort of borrowing Yuan in Hong Kong went from almost nothing to… 66%!
Using very colorful terms, a Rabobank strategist told Bloomberg that “a 66% rate is murderous for others being swept up in this who are not speculating.” Earlier in the day, a PBOC advisor warned that short selling the yuan “will not succeed,” adding that “it is pure imagination that the Chinese yuan will act like a wild horse without any rein.”
Indeed, the PBOC quickly “reined in” the wild horse, but what is most interesting is how it did that.
Think Martin Shkreli and Kalo Bios.
Recall how the worthless stock soared from almost nothing first to $10, then to $20 before finally peaking in the mid-$40s: the reason for that is that Martin Shrekli, since arrested, proceeded to buy ever more of the KBIO float, making shorting first prohibitively expensive, and ultimately, impossible when he owned virtually all of the float.
The PBOC did just that overnight when it made the cost of shorting the CNH so high that every short had no choice but to cover and run, leading to the biggest squeeze in the CNY in recent history, and a parity between the onshore and offshore currencies.
to patirty
Still confused? Here is Axiom’s Gordon Johnson explaining what happened in more detail:
First… see this chart (i.e., 1 week HIBOR up a WHOOPING 200% overnight… WOW!!!):
What the Chinese government is doing is restricting access to the CNH market to bring the CNH back in line with the CNY.
How? Well, draining liquidity from the CNH market by selling dollars and buying CNH… then not providing any new CNH for the banks to lend (since the PBOC is the one who CREATES CNH, they can simply restrict the supply). On top of that, they are ordering commercial banks not to lend any of the remaining CNH they may have to short sellers.
Thus, as stated above, this has the side effect of making the currency totally unusable… so presumably they won’t allow this state of affairs to continue for long.
But their immediate priority was to bring the CNH back into line with CNY (I mean, their whole pitch for SDR inclusion was that the CNH would track the CNY, so even though the currency isn’t fully convertible, investors/central banks/whoever could own something that was the equivalent of owning the currency – before this recent experiment, THIS IS NOT THE CASE).
So, in our view, now they will oscillate back and forth between draining liquidity (when the CNH weakens vs. the CNY) and adding liquidity back (to make the market function).
They hope, I guess, that there’s some magical point they can find where the CNH doesn’t sell off but the market still functions? We are taking the “other side” of this bet.
How does it all end? Well, we know that despite Martin Shrekli’s attempt to manipulate KBIO stock higher, the company – which had no fundamental value – went bankrupt just one month after Shrekli’s manipulation. As for Shrekli, he is arrested pending charges of fraud, and could spend many years in prison.
As for China’s attempt to repeat what Shkreli (and Volkswagen management before him) did, we doubt the ending will be any happier.
EUROPEAN AFFAIRS
none today
RUSSIAN AND MIDDLE EASTERN AFFAIRS
Big bomb blast in the centre of Istanbul:
(courtesy zero hedge)
Suicide Bomber Detonates In Central Istanbul Square: At Least 10 Dead
From the time AKP lost its absolute majority in parliament in June of last year, Turkey has been a hotbed for violence.
A suicide bomber killed more than two dozen people in Suruc the month after the elections, setting the stage for six months of turmoil including a deadly blast in Ankara that left more than 100 dead in October. Some have suggested the Erdogan regime staged the attacks in an effort to show Turks why a “strong” AKP government is necessary to keep the “peace”.
On Tuesday we get the latest tragedy out of Turkey as at least 10 are dead in a suicide attack on Istanbul. The explosion rocked Sultanahmet Square outside the city’s Blue Mosque injuring 15 in addition to those killed.
“Police immediately shut down the site of the blast as graphic images emerged on social media of bodies in the main plaza in Istanbul’s old town, which is surrounded by the Ottoman-era Topkapi palace, the Blue Mosque and Hagia Sophia, a sixth century church that is now a museum,” WSJ reports, adding that “the Turkish government quickly imposed a blanket media ban on coverage of the incident as investigators scoured the scene for evidence.”
Here’s Reuters with more:
An explosion in the heart of Istanbul’s historic Sultanahmet tourist district killed at least ten people and wounded 15 on Tuesday and some local media reports said a suicide bomber may have been responsible.
Several bodies lay on the ground in the Sultanahmet square, close to the Blue Mosque and Hagia Sophia, a major tourist area of Turkey’s most populous city. A police officer and witness at the scene reported also seeing several bodies and body parts.
Tourists from Germany and Norway were among the wounded, broadcaster CNN Turk said. An official from one tour company told Reuters a group from Germany was in the area at the time but said there was no immediate information on whether any of them had been injured.
The attack at the heart of one of the world’s most visited cities comes as Turkey battles Kurdish militants in its southeast and Islamic State insurgents just across its southern borders in Syria and Iraq.
“We heard a loud sound and I looked at the sky to see if it was raining because I thought it was thunder but the sky was clear,” a Kuwaiti tourist said. “The explosion was very loud. We shook a lot. We ran out and saw body parts,” a local shop owner added.
“Ambulances started rushing in and I knew it was a bomb right away because the same thing happened here last year,” a kiosk owner who sells snacks and drinks on the square remarked, referencing an explosion that rocked a police station for tourists a little over a year ago. “This is not good for Turkey but everyone was expecting a terrorist attack,” the man adds, flatly.
There are some indications that German citizens were targeted in the blast. The bomber was “of Syrian-origin” President Erdogan says. Expect the anti-refugee movement in Germany to promptly trot this out as further evidence of why Angela Merkel should do away with the open-door policy for asylum seekers. We can almost see the signs now: “we give them asylum and they kill our tourists.”
“Tourism revenues of $34 billion in 2014 accounted for about 4 percent of the country’s gross domestic product [while] Istanbul is the fifth-most visited city in the world,” Bloomberg notes. “Following the blast, Germany’s Foreign Ministry issued an advisory for visitors to Turkey, saying they should avoid crowded areas including public squares near tourist attractions.”
Here’s a timeline from Hurriyet:
1:30 p.m. Turkish President Recep Tayyip Erdogan has said Sultanahment explosion was a suicide attack of Syrian origin
1:25 p.m. Hour-long security meeting chaired by PM Davuto?lu has ended
1:15 p.m. Former Turkish President Abdullah Gül expressed his condolences to the families of the attack’s victims and urged unity against terror.
“Our citizens should support the government and the state in all related manners and act in accordance to its demands,” Gül has told reporters
1: 10 p.m. Peoples’ Democratic Party (HDP) co-leader Selahattin Demirta? extended condolence to families of the victims who lost their lives in the blast which he called a “brutal massacre.”
“We condemn the massacre in Sultanahmet. We will not stop following [the blast] so as not to let it be left in the dark and to reveal the ones responsible,” Demirta? said, while addressing a parliamentary group meeting of his party.
1:00 p.m. Justice and Development Party (AKP) spokesperson Ömer Çelik has posted a tweet condemning the “vile” attack in Sultanahmet.
“May God rest the victims’ souls,” the tweet said, while wishing a quick recovery to all those wounded in the explosion.
12.50 Security authorities believe an Islamic State of Iraq and the Levant-linked suicide bomber was behind the explosion in Sultanahmet, daily Hürriyet has reported.
Authorities are focusing on ISIL links because tourists and civilians were targeted in a touristic area.
12.21 Security meeting to be held at Çankaya Palace under the chairmanship of PM Davuto?lu.
According to sources from the Prime Ministry, Deputy PM Numan Kurtulmu?, Interior Minister Efkan Ala, Health Minister Mehmet Müezzino?lu, Foreign Ministry Undersecretary Feridun Sinirlio?lu, National Intelligency Organization (M?T) Undersecretary Hakan Fidan and Director General of Public Security Celalettin Lekesiz will attend the meeting.
12.16 Six German citizens, one Norwegian and one Peruvian were among the three wounded people rushed to the Haseki Hospital, Do?an News Agency has reported.
Meanwhile, two people who were lightly wounded in the explosion were hospitalized at Bezmialem Vak?f University Hospital.
12.15 Interior Minister Efkan Ala briefs Prime Minister Ahmet Davuto?lu for half an hour at the Prime Ministry residence. Davuto?lu has moved on to Çankaya Palace, state-run Anadolu Agency has reported.
11. 50 The official Twitter account of the British Ambassador to Turkey posted a tweet expressing “concern” at reports of the Sultanahmet explosion.
“In touch with Turkish authorities. Thoughts with those injured. Nationalities of victims currently unknown,” the tweet said.
11:44 The official twitter account of the United States Embassy in Ankara posted a tweet quoting U.S. Ambassador John Bass saying the U.S. is “closely following reports” on the explosion.
“Our thoughts are with those affected,” the tweet said.
Iran Seizes 2 US Navy Boats, Crewmen
Tensions were already running high between Tehran and Washington in the wake of Iran’s move to test-fire a next generation surface-to-surface ballistic missile with the range to hit Israel.
And then the IRGC conducted a live-fire rocket test within 1,500 yards of a US aircraft carrier in the Strait of Hormuz.
Now, in a further escalation, Iran has reportedly seized two US Navy ships.
- 2 U.S. NAVY BOATS IN IRANIAN CUSTODY, PENTAGON SAYS: AP
- RHODES SAYS U.S. WORKING ON RETURN OF CREW
- RHODES SAYS U.S. WORKING TO RESOLV
But nobody panic, because Iran has promised to return the crew “promptly” and as CNN adds,according to Iran the sailors are safe:
AP writes that the Pentagon says it briefly lost contact with two small Navy craft in the Persian Gulf on Tuesday but has received assurances from Iran that the crew and vessels will be returned safely and promptly.
Pentagon spokesman Peter Cook tells The Associated Press that the boats were moving between Kuwait and Bahrain when the US lost contact with them.
Cook says, “We have been in contact with Iran and have received assurances that the crew and the vessels will be returned promptly.”
The crews, which total 10 Navy sailors, are being held at Farsi Island, a highly restricted island between Bahrain and Kuwait, where Iran has a naval base. US officials are saying it is unclear how the crew members ended up in Iranian waters, though Secretary of State John Kerry has kept phone contact with Iranian officials in Tehran, urging for a release. A senior official told NBC News the Iranians understand a mistake was made and have agreed to a release to come in hours.
According to AP, an anonymous senior official says Kerry “personally engaged with” Iranian Foreign Minister Javad Zarif to work out a solution almost immediately upon hearing of the development around 12:30 pm EST.
Josh Earnest, the White House spokesperson, said the sailors will be released “promptly” and ” allowed to continue their journey.”
end
GLOBAL ISSUES
Nigeria is short of dollars. The central bank halted dollar sales because of the scarcity. This caused the black market to spike to 282 Nigerian naira to one USA. The Nigerian CDS rose to levels implying drastic devaluations. Foreign reserves have dropped from 37 billion to only 27 billion. Hyperinflation is one its way into Nigeria!!
(courtesy zero hedge)
Nigerian Currency Collapses After Central Bank Halts Dollar Sales To Stall “Hyperinflation Monster”
Having told banks and investors “don’t panic” in September, amid spiking interbank lending rates and surging default/devaluation risks, it appears the massive shortage of dollars that we warned about in December has washed tsunami-like ashore in oil-producing Nigeria. Following the Central bank’s decision this week to halt dollar sales to non-bank FX market operators, black market exchange rates spiked to 282/USD (vs 199 official) andCDS spiked to record highs implying drastic devaluations loom.
As Reuters reports, Nigeria’s central bank is halting dollar sales to non-bank foreign exchange operators and letting commercial banks accept dollar deposits with immediate effect, its governor said on Monday, in an effort to shore up dwindling foreign reserves.
Africa’s biggest economy, an OPEC member state that depends on oil sales for about 95 percent of its foreign reserves, has been hammered by a collapse in global oil prices, which has triggered a slide in its naira currency.
Godwin Emefiele said the sale of foreign exchange to bureaux de change would be discontinued because they were using up the country’s foreign reserves for illegal transactions and selling the dollar at 250 naira compared to the official central bank rate of 197 naira.
The currency hit a record low of 282 per dollar on the unofficial market on Monday after the central bank’s announcement.
Emefiele said foreign reserves stood at around $28 billion compared with $37 billion in June 2014, and that the bureaux were depleting them at a rate of $28.4 million per week.
“This is a huge haemorrhage on our scarce foreign exchange reserves, and cannot continue,” Emefiele told a news conference in the capital Abuja.
To avoid devaluing the currency, a stance so far supported by President Muhammadu Buhari,the central bank adopted increasingly stringent foreign exchange rules last year and effectively banned dollar access for the purchase of 41 items, which has also been criticised at the World Trade Organisation by the United States and the European Union.
The CDS market gives the clearest picture of what traded levels for the Naira may be like…
Implying at least a 20-25% devaluation of the Naira is already priced in to capital markets and any efforts to stall the outflows will inevitably leak (just as they do in China).
As we concluded previously, of course, defending one’s currency is a losing game as not only Argentina most recently, but the Swiss National Bank most infamously, will admit.
“As African central banks place restrictions on access to their dollars, while burning through these reserves to support their currencies, they are also storing up longer-term troubles.
“Few investors will want to put money into a country at an official exchange rate that is not set by the market and which is not seen as sustainable in the long run,“ said Charles Robertson, global chief economist at investment bank Renaissance Capital.”
For now Africa has avoided the “hyperinflation monster”, the result of an all too predictable scarcity of dollars, however the countdown is on and with every passing day that oil prices do not rebound, the inevitability of a full-on continental currency collapse, with hyperinflation and social unrest to follow, becomes increasingly more likely.
Worse, Africa is just the start: while the manifestations will differ, the mechanics of the dollar shortage, which we recently quantified in the trillions of dollars, are universal, and should the Fed’s rate divergence path with the rest of the world continue pushing the USD ever higher, soon this USD-shortage will escape the confines of the world’s poorest continent and make landfall somewhere where it will be far more difficult to ignore the adverse consequences of the global commodity collapse and the Fed’s monetary policy.
* * *
Finally, Nigeria has resorted to desperation, apparently lying about upcomgh emergency OPEC meetings (the same M.O. Venezuela used multiple times last year)…
OPEC will soon make efforts to convene before the next scheduled meeting in June as the slump in oil prices is hurting producers, including the world’s biggest exporter, Saudi Arabia, said Emmanuel Kachikwu, Nigeria’s minister of state for petroleum resources.
Even so, there’s been no formal request for an OPEC meeting, according to three delegates who asked not to be identified. And the U.A.E.’s energy minister said OPEC can’t change its policy because of low prices.
“I certainly hope that it doesn’t go below $30 for the sake and survival of everybody” Kachikwu said. “My perception is that we will see it get worse before it gets better.” Oil is seen ending the year at $40 to $50 a barrel, he said.
And then there is this…
- *NIGERIA’S STATE OIL CO. PLANS FIRST IPO IN 2 YEARS: MINISTER (Harvey: what a joke!)
Well if Aramco can do it!!??
Loonie Lurches To 13 Year Lows As Crude Nears ‘2’ Handle
Today’s renewed plunge in WTI Crude (on the verge of a ‘2’ handle any second) has extended the Canadian Dollar’s weakness (among many other oil producers). For the first time since early 2003, the Loonie is worth less than 70c… (anyone for skiing?)
This can only serve to worsen the death of the Albert Dream, and all the societal depressions that is bringing with it.
end
The Baltic Dry Index falls to a record low of 401. Also Chinese shipbuilding yards are basically vanishing with no orders:
(courtesy zero hedge)
Chinese Shipyards “Vanish” As Baltic Dry Collapses To New Record Low
Another day, another plunge in The Baltic Dry Index, which just dropped a further 3.1% to 402 today – a new record low. While the index is driving headlines, under the surface, reality in the shipping (and shipbuilding) industry is a disaster. Total orders at Chinese shipyards tumbled 59% in the first 11 months of 2015, and as Bloomberg reports, with bulk ships accounting for 41.6% of Chinese shipyards’ $26.6 billion orderbook as of December, there is notably more pain to come, as one analyst warns “Chinese shipbuilders won’t be able to revive even if you try breathing some life into them.”
Baltic Dry Bloodbath…
About 140 yards in the world’s second-biggest shipbuilding nation have gone out of business since 2010, and more are expected to close in the next two years after only 69 won orders for vessels last year, JPMorgan Chase & Co. analysts Sokje Lee and Minsung Lee wrote in a Jan. 6 report. That compares with 126 shipyards that fielded orders in 2014 and 147 in 2013.
As Bloomberg reports, the weakening yuan and China’s waning appetite for raw materials have come around to bite the country’s shipbuilders, raising the odds that more shipyards will soon be shuttered.
“The chance of orders being canceled at Chinese yards is becoming greater and greater,” said Park Moo Hyun, an analyst at Hana Daetoo Securities Co. in Seoul.
“While a weaker yuan could mean cheaper ship prices for customers, it still won’t be enough to lure back any buyers. Chinese shipbuilders won’t be able to revive even if you try breathing some life into them.”
And it is not going to get better anytime soon…
Bulk ships accounted for 41.6 percent of Chinese shipyards’ $26.6 billion orderbook as of Dec. 1, according to Clarkson Plc, the world’s largest shipbroker.
That compares with a 3.5 percent share at South Korean shipyards, which have more exposure to the tankers and gas carriers that are among the few bright spots in a beleaguered shipping industry.
Builders have sought government support as excess vessel capacity drives down shipping rates and prompts customers to cancel contracts. Zhoushan Wuzhou Ship Repairing & Building Co. last month became the first state-owned shipbuilder to go bankrupt in a decade.
The Arrests Begin: Sweden Police Scramble To Respond To Refugee Sex Assault Coverup
On Monday, we brought you “Massive Coverup Exposed In Sweden As Media, Cops Hid Migrant Sex Attacks” in which we detailed an evolving story out of Stockholm where police and some members of the media stand accused of covering up a wave of sexual assaults that allegedly occurred at a festival in August of last year.
According to Nyheter Idag, a reporter for the prominent daily Dagens Nyheter had an opportunity to talk with police about the attacks but ultimately shied away from the story when it became apparent that many of the accused were migrants.
Just a day before the Nyheter Idag story was published, Dagens Nyheter ran its own account of the incident and blamed police for covering up the attacks.
That certainly looked like an effort to get out ahead of the Nyheter Idag exposé but whatever the case, someone (or several someones) apparently took it upon themselves to keep the festival assaults from getting publicized for fear of sparking an anti-migrant backlash. Here’s what we wrote on Monday:
If Nyeter Idag’s allegations are true, it certainly seems possible that Dagens Nyheter was under political pressure to avoid the story if possible. Meanwhile, if Dagens Nyheter’s account is accurate, it appears the police could have been under similar pressure. After all, it’s the politicians that set the agenda, the media simply perpetuate it and the police simply enforce it, so it’s difficult to believe that the media and the police conspired alone to cover up the attacks.
Long story short, the attacks in Cologne have made it impossible to sweep the Stockholm assaults under the rug and now, authorities and politicians are rushing to “investigate” what happened.
(a scene from the festival)
On Tuesday, the arrests began as a 15-year-old boy was taken into custody in connection with the fiasco. “A 15-year-old boy has been charged with assault and sexual assault at a music festival in Stockholm, after police were accused of withholding information about a string of attacks there,” The Local writes, adding that “police said the boy had been charged with assault and sexual assault against two 14-year-old girls at the event.” Here’s more:
There were 38 reports of rape and sexual assault filed after the We Are Sthlm festival, which uses the postal abbreviation for Stockholm, in 2014 and 2015, according to police, who released the information on Monday after the Dagens Nyheter (DN) newspaper suggested that there had been a cover-up.
The paper reported it had seen a memo from last summer, warning police ahead of the event that there was a known “problem with young men who rub themselves against young girls” at the festival.
Police would not say how many men had been linked to the alleged assaults, but DN reported that as many as 50 Afghan refugees who had come to Sweden without their parents were suspected to be involved.
The free We are Sthlm festival is put on every year for 12 to 17-year-olds and is held in various locations in the city centre, including Kungsträdgården, a large park close to Stockholm’s Royal Palace. The programme in 2015 boasted a number of international dance companies and circuses alongside Swedish artists including Zara Larsson, who headlined the event.
Police said last summer that there had been “relatively few crimes and people taken into custody considering the number of participants” in the festival, however documents sent by police to DN and the AFP news agency showed allegations of a total of 17 sexual assaults and one rape during the 2014 music festival, and 19 sexual assaults and one rape in 2015.
“We should certainly have written and told people about this, no doubt. Why it did not happen I do not know,” Varg Gyllander, a police press spokesperson, told DN.
Varg may “not know”, but if we had to guess, the police determined that creating a media spectacle around the attacks wasn’t worth it considering what the implications might be for other refugees living in the country and for immigration policy writ large.
As for Dagens Nyheter, the daily flatly denies allegations that it chose not to run the story last year in order to avoid inflaming tensions between Swedes and migrants. “The data on the DN would pursue blackout is mendacious: an important thing that young women are subjected to systematic abuse is an obvious novelty for DN to report,” an amusing translation of a statmentfrom editorial director Caspar Opitz reads. Opitz goes on to explain that he was unable to get “confirmation of the molestations”: “In our regular checking with the police and other channels and sources we received last summer no confirmation of these molestations.” As everyone knows, the first rule of journalism is that you must always confirm your molestations. Here’s a bit more from Opitz who apparently interrogated himself as the statement is presented in FAQ format:
But you did, according to information circulated on the network, a concrete tip that many people had suffered molestation and harassment?
– Yes, it came in August a tip to our ledarredaktion that there has been a series of systematic molestation at the festival. The tip came from a source who wished to remain anonymous. We took it very seriously, had contact with the source and tried to move forward with the tip, but failed to get it confirmed. An aggravating factor was of course that the police, who have the right government mandate to investigate crimes, not went out and talked about the incident. Therefore, reported virtually no media – established or alternative – if serious abuses in the Royal Garden last summer.
How could you fail there?
– We get hundreds of tips to the editor every day. We sift through them, make the most credible, devote time to some, prioritizes away others.The quality of the advice varies widely. In this case, made a number of calls and checks, but because we have not reached an acknowledgment that there was no article. There was, for example, information in the tips we got on that very many people had been arrested, that a check is not proved to be correct.
Seen how that works? It’s the police’s fault because if they had made a bigger deal out of it, the media would have been forced to report it.
Of course in reality it’s the other way around. The media discovers a coverup, shares the details with the world, and then officials are forced to come clean. When the media doesn’t do its job, that process never gets started.
It’s also worth mentioning that the editor of Nyheter Idag is what The Local describes as “a formerly active member of the anti-immigration Sweden Democrat party,” so clearly they had an agenda in reporting the Dagens Nyheter coverup.
“Growing frustration in Sweden with an asylum policy that will allow up to 190,000 refugees into the country this year is driving Europe’s self-declared ‘humanitarian superpower’ into the arms of radical nationalism,” The Guardian wrote in November. “The Sweden Democrats (SD), a nationalist party that emerged from the neo-Nazi movement and has been shunned by Sweden’s mainstream parties because of its far-right immigration policies, is now the country’s third-largest party with 49 representatives in parliament.” Given that, it seems likely that someone from the country’s “mainstream” parties might have “suggested” that Dagens Nyheter not cover the story and that police keep any investigations of the attacks to themselves in order to keep the issue from becoming free marketing material for an “undesirable” political party that’s rapidly gaining popular support.
Now, that strategy has backfired. Anti-immigration parties will be able to point to the coverup as evidence to suggest that not only is Sweden’s immigration policy dangerous, the politicians who support it are corrupt. We close with a quote from Daniel Poohl, editor-in-chief of Expo, a pressure group that charts fascist activity in Sweden:
“I think we have to be aware that the far-right didn’t disappear from Europe, it just had an enormous backlash after 1945. At that time democracy was the ID that destroyed society; today it’s multiculturalism that destroys the nation.”
end
Dave Kranzler comments on rail freight collapsing:
(courtesy Dave Kranzler/IRD)
Rail Freight Shipments Are Collapsing
The pundits can disingenuously blame the crashing Baltric Dry Index on container ship overcapacity and find some dopes to believe that fairy tale, but there’s only one explanation for collapsing rail freight shipment volume in the United States: the consumer has finally suffocated from too much debt and declining real income.
We believe rail data may be signaling a warning for the broader economy,” the recent note from Bank of America says. “Carloads have declined more than 5 percent in each of the past 11 weeks on a year-over- year basis. While one-off volume declines occur occasionally, they are geUntitlednerally followed by a recovery shortly thereafter. The current period of substantial and sustained weakness, including last week’s -10.1 percent decline, has not occurred since 2009. – Bank of America brain trust
Eric Dubin of The News Doctors brought this article to my attention: Rail Traffic Is Saying Something Worrying About the U.S. Economy
I’d like to point out that the price of oil is collapsing. It will soon be in the $20’s. Several Wall Street fraud shops have decided that oil is headed to $20. I made that call 6 months ago. Oil is the economy’s canary in the coal mine that the Fed can not remove before it dies. Rail freight traffic is the canary’s twin brother.
I hope everyone is braced for impact because the system is in for a much bigger shock than occurred in 2008/2009…and the Fed is out of bullets – just ask former Fed President Richard Fisher…
http://investmentresearchdynamics.com/rail-freight- shipments-are-collapsing/
***
end
EMERGING MARKETS
none today
your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/TUESDAY morning 7:00 am
Euro/USA 1.0854 down .0002
USA/JAPAN YEN 117.74 up 0.055
GBP/USA 1.4424 down .01179
USA/CAN 1.4213 down .0010
Early this morning in Europe, the Euro fell by 5 basis points, trading now just above the important 1.08 level rising to 1.0854; Europe is still reacting to deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP and the USA tightening by raising their interest rate / Last night the Chinese yuan was up in value (onshore). The USA/CNY up in rate at closing last night: 6.761 / (yuan down and still undergoing massive devaluation/ which will cause deflation to spread throughout the globe)
In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31/2014. The yen now trades in a southbound trajectory as settled down again in Japan by 5 basis points and trading now well below that all important 120 level to 117.74 yen to the dollar.
The pound was down this morning by 112 basis points as it now trades just below the 1.45 level at 1.4424.
The Canadian dollar is now trading up 10 in basis points to 1.4213 to the dollar.(despite collapsing oil prices)
We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;
1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.
2, the Nikkei average vs gold carry trade (blowing up and the yen carry trade also blowing up)
3. Short Swiss franc/long assets (European housing/Nikkei etc. This has partly blown up (see Hypo bank failure).(blew up)
These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>
The NIKKEI: this TUESDAY morning: closed down 479.00 or .2.71%
Trading from Europe and Asia:
1. Europe stocks all in the green
2/ Asian bourses deeply in the red/ Chinese bourses: Hang Sang red (massive bubble forming) ,Shanghai green (massive bubble bursting), Australia in the red: /Nikkei (Japan) red/India’s Sensex in the red /
Gold very early morning trading: $1092.30
silver:$13.84
Early TUESDAY morning USA 10 year bond yield: 2.18% !!! up 1 in basis points from MONDAY night and it is trading BELOW resistance at 2.27-2.32%. The 30 yr bond yield rises to 2.98 up 2 in basis points. ( still policy error)
USA dollar index early TUESDAY morning: 98.96 up 15 cents from MONDAY’s close. ( Now below resistance at a DXY of 100)
This ends early morning numbers TUESDAY MORNING
OIL MARKETS
Here are a few giant oil projects which will continue to add oil into the global glut this year:
(courtesy GEFIRA)
Meet Manifa (And Other Giant Oil Projects) That Will Add To The Global Oil Glut
World oil consumption is more than 90 million barrels a day. Between 2009 and 2014 oil was traded for about 110 dollars a barrel; now oil is changing hands for 32 dollars a barrel.Roughly a 7-billion-dollar cash flow a day is vanishing from the global market.
Norway’s sovereign wealth fund that has accumulated a stake of 4.5 billion dollars in Apple over the past years, will turn from an Apple buyer into an Apple seller.
The China Development Bank (a Chinese policy bank) has poured nearly 50 billion dollars into Venezuela in return for oil, with the country now collapsing under the Chinese debt, having no other choice but to drill for more oil.
These are just some of the challenges the world is facing in 2016 as oil prices are heading towards 20 dollars a barrel.
Speculators and manipulators were able to manipulate the oil price to more than 120 dollars a barrel, with the production cost being roughly between 20 and 80 dollars. With a huge profit margin the world was digging for more and more liquid gold.
* * *
Kashagan: The $50 Billion Oil Development That Doesn’t Work
Shell, Total S.A., Exxon Mobil and China National Petroleum Corporation are now stuck with a 50-billion-worth project in the Caspian Sea, called Kashagan. The project is full of problems and delays, but is expected to add 300.000 barrels of oil a day to the global oil glut the coming year.
The field is developed by the international consortium under the North Caspian Sea Production Sharing Agreement. The Agreement is made up of 7 companies consisting of Eni (16.81%), Royal Dutch Shell (16.81%), Total S.A. (16.81%), ExxonMobil (16.81%), KazMunayGas (16.81%), China National Petroleum Corporation (8.4%), Inpex (7.56%). The initial production is expected to be 90,000 barrels per day (14,000 m3/d). It should reach a production rate of 370,000 barrels per day (59,000 m3/d)Source Wikipedia
Prelude
2016 will also be the inauguration of Shells Prelude, the world’s first floating liquefied natural gas platform as well as the largest offshore facility ever constructed. We expect the media to give limited coverage to its inauguration.
Prelude FLNG is the world’s first floating liquefied natural gas platform as well as the largest offshore facility ever constructed. Prelude FLNG was approved for funding by Shell in 2011. Analyst estimates in 2013 for the cost of the vessel were between US$10.8 to 12.6 billion. Pressures from an increase in the long-term production capabilities of North American gas fields and increasing Russian export capabilities may reduce the actual profitability of the venture from what was anticipated in 2011. Source Wikipedia
Manifa
While the media attention was directed to the shale oil boom in the US, the Saudis created a giant offshore oil project called Manifa. With one single project Manifa added 1 million barrels a day to the world oil glut. Manifa will expand its capacity the coming year, adding a further 500 million barrels a day to world markets.
The project is part of the development of the Saudi oilfields, which are expected to see an increase in production to over 12.5 million barrels a day from 11 million barrels a day. The first phase of the project began production in April 2013. The field produced 500,000bpd by July 2013. It will produce 900,000bpd of crude oil once fully completed by the end of 2014. Additionally, there will also be production of 90 million standard cubic feet per day of sour gas, 65,000bpd of gas condensate, and water. Source Offshore Technology
There are plans to extend the project with a further 500 barrels a day capacity.
* * *
ZH: With global storage levels at their limit, these massive projects (and their sunk-cost desperation for cash-flow) will add already extreme pressure an over-supplied market in which, as Morgan Stanley notes, “oil has no intrinsic value.”
END
BP fires another 4,000 workers as the oil slump continues to deepen:
(courtesy BP/zero hedge)
BP Fires 4,000 As Oil Slump Deepens
Just days after The Fed admitted “we got it wrong” on the “unequivocally good” low oil prices, BP has joined a long list of energy entities slashing jobs. The oil company will cut 4,000 jobs in exploration and production because of toughening market conditions “we need to take specific steps to ensure our business remains competitive and robust.”
As Fed’s Williams recently admitted:
The Fed got it wrong when it predicted a drop in oil prices would be a big boon for the economy. It turned out the world had changed; the US has a lot of jobs connected to the oil industry.
BP Chief Financial Officer Brian Gilvary noted the company’s restructuring efforts started on the corporate side two and a half years ago, where it saw significant headcount reductions in both employees and contractors.
“You’re also seeing significant headcount reductions in upstream and downstream as we progress through the year and I think you’ll see more of that before we get to the end of the year,” Gilvary said.
The further weakness in oil prices has push BP to today’s announcement confirming “significant” layoffs to come… (as AP reports)
Oil company BP is cutting some 4,000 jobs in exploration and production over the next two years amid sharp drops in the price of crude.The cuts in BP’s upstream business globally will include the loss of some 600 jobs in the North Sea.The cost-cutting announced Tuesday comes as the price of oil dropped to a 12 year-low near $31 a barrel. Part of the decline is due to concern over a drop in demand in China, which is depressing commodity prices worldwide.Company officials began notifying employees of the action in town hall meetings in Scotland.Mark Thomas, regional president for BP North Sea, says in a statement thatbecause of toughening market conditions “we need to take specific steps to ensure our business remains competitive and robust.”
The cuts include 600 people working at North Sea projects: they’ll lose their positions over the next two years “with the majority in the first year,” he said.
The job losses add to the 4,000 positions cut by BP last year as it hunkers down for a prolonged period of lower prices. Crude’s slump has been brutal for oil companies as revenue and profit drop, projects are postponed and thousands of employees are fired.
- *BP AIMS TO HAVE HEADCOUNT BELOW 20,00 BY YEAR END: REUTERS
So yes, dear Fed, you got this wrong as you finally admitted. Very, very wrong. But that’s ok – just keep on supporting the S&P500, surely nothing wrong can possibly happen there…
WTI Crude Plunges Back To $30 Handle – Drags US Stocks Lower
Crude carnage continues and despite the best efforts of the USDJPY pumpers, US equity markets are tumbling along with oil (and copper)…
Remember when China was “fixed” overnight?
Yeah – no!
end
WTI Crude Crashes Under $30 After EIA Cuts Demand, Increases Production Forecast
In yet another hit for the energy complex, EIA just cut their global oil demand forecast to 95.19 million barrels a day this year (down from 95.22 million in December’s outlook). The energy agency also increased its forecast for global production to 95.93 million barrels a day (up from 95.79 million last month). This pressured WTI Crude back off a brief bounce and pushed it to a 20-handle at $29.97 for the first time since December 2003.
Despite a short-term bounce after Jeff Gundlach suggested today would be a short-term bottom in crude,
Jeffrey Gundlach, the widely followed investor who runs DoubleLine Capital and was prescient in his call for lower oil prices last year, said oil has hit a short-term bottom on Tuesday.
As oil prices per barrel flirt with the $30-mark, Gundlach told Reuters:“Fundamentals are lousy but the technicals call for a short term bottom today.”
we reverted back lower after this:
- *CRUDE OIL PRICES COULD DECLINE FURTHER, EIA’S SIEMINSKI SAYS
As Nanex shows, all the sub-$30 stops were instantly flushed (or the HFTs removed all liquidty)
Carnage!
WTI Slides After API Reports Massive Build In Gasoline & Distillate Inventories
With the seasonally drawdown-prone December completed, we begin seasonally build-prone January with expectations for a 2mm barrel build. However, according to API, both total and Cushing inventory levels tumbled (-3.9mm and 300k respectively). Great news – so why is crude tumbling? Simple – massive builds in end-products again with Gasoline up a massive 7mm barrels and Distillates up 3.6mm barrels. Having ramped off sub-$30 levels aftwr NYMEX closed, and lifted by the Iran-US news, WTI is sliding back rapidly.
December saw a very flat inventory overall (despite being a seasonally extreme period for drawdowns into year-end tax planning)…
Judging from history, as Bloomberg notes, it should resume as soon as the festive season is over: Stocks have built by 3.2 million barrels on average in January since 1921.
Dr Chris Marten interview Arthur Berman: an excellent interview
(courtesy Berman/Taggart/zero hedge/Dr Chris Martenson)
Arthur Berman: Why The Price Of Oil Must Rise
Submitted by Adam Taggart via PeakProsperity.com,
Geologist Arthur Berman explains why today’s low oil prices are not here to stay, something investors and consumers alike should be very aware of. The crazy-low prices we’re currently experiencing are due to an oversupply created by geopolitics and (historic) easy credit, not by sustainable economics.
And when the worm turns, we are more likely than not to experience a sudden supply shortfall, jolting prices viciously higher. This will be a situation not soon resolved, as the lag time for new production to come on-line will be much longer than the world wants:
The same things that always drive prices in the end it’s always about fundamentals. The markets are peculiar and they change every day. But the fundamentals of supply and demand at some point markets come back to those and have to adjust accordingly. Not on a daily basis, maybe not even on a monthly basis. But eventually they get it right. So this oil price collapse is really straight forward as far as I can tell, and it has to do with cheap stupid money because of artificially low interest rates that resulted in over-investment in oil — as well as lots of other commodities that are not in my area of specialty, but that’s what I see. And over-investment led to over-production and eventually over-production swamped the market with too much supply and the price has to go down until we work our way through the excess supply.
Now the wrinkle in all of this is that because the supply excess/surplus was generated by debt and a lot of correlative instruments, the problem is that the companies and the countries that are doing all this over-production need to keep generating cash flow so they can service the debt, which means they have to continue producing pretty much at the highest levels they possibly can which doesn’t really allow very much room for reducing the surplus. So that’s piece number one and then there’s the demand side. So the thing that drove all of this over investment and over production were high prices. And after a while people get tired of high prices and we see a phenomenon called demand destruction or you know as Jamie Galbraith calls it the choke chain effect. You know your dog runs out on a leash, eventually you know it stops and he chokes and so we’re dealing with that. People have changed their behavior because of high prices and then we add to the fact that people just change their behavior. I mean young people aren’t driving as much as they used to, they spend their time in a – you know on a smart phone more than they do in a car. We’ve got climate change issues. There’s considerable momentum toward cutting back on fossil fuels. Add it all together, demand is down, supply is up, it’s a bad situation…
We started this conversation with your important observation that we’re only talking about a million or million and a half barrels a day of oversupply. So we could go from over-supply to deficit pretty quickly, because we’re not investing in finding that additional couple of million barrels a day that we need to be discovering. So we’re deferring major, major investments. We’re not just deferring exploration; we’re deferring development of proven reserves. Capital cuts across the world represent 20 billion barrels of development of known proven reserves. And so we will get to a point, and we will, we most certainly will, where suddenly everybody wakes up and says “Oh my God we don’t have enough oil! We’re now half million barrels a day low.” And what will happen? The price will shoot up. That’s the way commodity markets work. And everybody will say “Whoopee! Let’s get back to drilling big time.” Well there’s a big lag. There’s a huge time lag between when the price responds and people actually get around to drilling and they actually start bringing the oil onto the market and it becomes available as supply, because they’ve been asleep at the wheel for you know for how many months or years. And so you know you can’t just turn a valve and all of a sudden everything is okay again
Click the play button below to listen to Chris’ interview with Arthur Berman (56m:07s)
end
Portuguese 10 year bond yield: 2.68% up 3in basis points from MONDAY
Last-Hour Buying-Panic Saves Nasdaq From Longest Losing Streak In 31 Years
It just seemed appropriate…
A 65% tumble for the S&P? https://t.co/QAnEECpuGX pic.twitter.com/rlr67A4qk1
— MarketWatch (@MarketWatch) January 12, 2016
8 down days as of yesterday was longest losing streak since Jan 2008 but a red close today would have made it 9 down days in a row – The longest losing streak for Nasdaq Composite since May 1984
Deja Vu All Over Again…
As once again, USDJPY took over after NYMEX closed…
A desperate attempt to squeeze shorts at the open (Most Shorted spiked over 2% at the open) gave way to selling pressure… but then as soon as NYMEX closed – the squeeze resumed…
So panic buying stocks and panic-selling VIX saved the day…once again all sponsored by the NYMEX Close…
Leaving all the majors green by the close
Futures show the swings best…
1225 Dow points in 24 hours!!!
But it appears insiders are selling (since QE3 ended)…
h/t @NorthmanTrader
High yield credit markets remain deeply recessionary at these levels…
Treasury yields collapsed today (as China stopped supporting Offshore Yuan)… 30Y yields crashed 13bps from high to low back to 2.875%
It’s pretty clear that yesterday’s “odd” weakness in Treasuries given equity tumble was due to China selling TSYs sto fund their defense of the Offshore Yuan (and today we catch back down as they offer disappears)…
The USD Index pushed higher again today with CAD dumping under 70c for the first time since 2003…
- *RUSSIAN RUBLE CLOSES AT RECORD-LOW 77.0650 PER USD
Commodities were very mixed with copper and crude carnaging while gold and silver were flat but started to accelerate higher into the last hour as things started breaking…
WTI broke down below $30 foir the first time since December 2003…
So fingers crossed that China does not open and that API does not have a huge build (as expected).
Charts: Bloomberg
(courtesy zero hedge)
Fed “Policy Error” Panic Continues
With rate-hike odds plunging for every meeting across 2016, and bond yields collapsing almost as fast as stocks, it appears the market’s faith in the The Fed is faltering fast…
Crude is now down 20% since The Fed! Stocks down 7% and bonds and bullion up 2% – does that sound like The Fed’s decision inspired confidence?
No – of course not. But then there’s this:
“You should trust the Fed, not the markets,” Posen told Tom Keene and Francine Lacqua on Bloomberg Television on Tuesday.
“I think the market is under-pricing the likelihood of both a March rise and the number of rises in the year to come.”
BOSTON (Reuters) – A junk bond fund run by billionaire Marc Lasry’s Avenue Capital Management, which has experienced heavy investment losses and investor withdrawals, has stopped voluntarily reporting daily asset figures to the mutual fund industry’s top two tracking firms.
Research chiefs for Morningstar and Lipper said on Monday they had not received daily asset under management figures from the Avenue Credit Strategies Fund (ACSBX.O) since about mid-December. The fund is not required to report the figures, but not doing so is “very unusual,” said Jeff Tjornehoj, head of Americas research for Lipper, a Thomson Reuters unit.
Avenue Capital’s decision to stop reporting asset levels to the widely followed research firms happened on the heels of the biggest blow up in the mutual fund industry since the 2008 financial crisis.
People familiar with the situation said outflows from the Avenue Capital fund had become a distraction after an unrelated junk bond fund run by Third Avenue Capital Management imploded in early December. Junk bond investors already were on edge, pulling $3.6 billion from high-yield funds in November, according to Morningstar data.
Avenue Capital’s fund was particularly hard hit after Third Avenue said on Dec. 9th it was liquidating its Focused Credit Fund. Investors reacted by yanking $262 million from the Avenue Capital fund during the first two weeks of December, according to Lipper data.
“Our fund investors receive all key information on the fund, either directly or through our website,” a spokesman for Avenue Capital Management said. The fund also continues to report its daily net asset value to the independent research firms.
But the research firms cannot calculate a fund’s flows – investor deposits and withdrawals – unless they have asset levels.
“We calculate flows in-house so if we don’t have assets, we won’t have flows,” said Annette Larson, senior research analyst at Morningstar.
The Avenue Credit Strategies Fund has lost about 40 percent of its $1.2 billion in assets since the end of October. The fund currently has about $650 million to $700 million in assets, with about 15 percent in cash holdings and less than 5 percent in illiquid investments, according to people familiar with the situation.
The Avenue Capital fund’s total return of minus 13.35 percent in 2015 was worse than 98 percent of high-yield peers, according to Morningstar data. So far in 2016, the fund’s total return is minus 1.49 percent.
But the fund has been able to meet investor redemption requests and has plenty of cash to find some bargains in a battered sector.
It is standard for mutual funds to voluntarily report asset levels to Morningstar and Lipper on a regular basis, as they are seen as independent clearinghouses for calculating investor withdrawals and deposits, and performance figures.
The Avenue Credit Strategies Fund had been reporting assets under management on a daily basis, but then stopped after Dec. 14, Morningstar’s Larson said.
(Reporting by Tim McLaughlin and Svea Herbst-Bayliss; Editing by Peter Cooney and Michael Perry)
end
And now David Stockman reports on the above story:
(courtesy David Stockman/ContraCorner)
Billary Buddy Marc Lasry’s Last Rodeo——The Jig Is Up On 25 Years Of Bottom Fisher Bailouts
by David Stockman • January 12, 2016
As the Fed’s third and last bubble of this century heads for its splatter spot, the stench of desperate crony capitalism fills the air. You can count hedge fund mogul and Billary Buddy, Marc Lasry, among the upchucking financiers.
A few months back I heard him say on bubble vision that energy debt was a “once in a lifetime opportunity”. My thought was good luck with that, but even better luck to your investors—–who will need to get out of Dodge fast.
The truth is, Lasry had it upsidedown. Energy prices over the last 15 years were carried skyward by a once in a lifetime central bank driven credit explosion. The latter fueled a surge of phony demand and a tidal wave of malinvestment——not only in oil and gas, but practically everything else in the material and manufacturing economy of the world.
The reason that 2016 will prove to be a great historical inflection point is that the central banks of the world have finally run out of dry powder. After a 20 year spree in which their balance sheets exploded by nearly 11X—–from $2 trillion to $21 trillion—-they are being forced to shutdown their printing presses.
China has to stop because it has been slammed with a $1 trillion capital flight in the last year, and it’s accelerating. The BOJ and the ECB have already shot their wad and it’s done no good at all. The Fed spent 84 months dithering on the zero bound and now it has no dry powder left as the US economy slides into recession.
Accordingly, the great global credit bubble has finally run out of new central bank fuel. It has now surely reached its apogee at about $225 trillion compared to only $40 trillion back in 1994 when oil prices were still well under $20 per barrel. And soon the world’s mountain of debt will be falling in upon itself—–starting with the cratering Red Ponzi of China.
Needless to say, the latter amounts to a sword of Damocles hanging over the world’s massively deformed and dangerously unbalanced energy markets. To wit, almost all of the increase in global oil demand since the 2008 crisis has been in China and its caravan of EM suppliers and fellow travelers.
Total global demand in 2015, in fact, averaged about 92.6 mb/d per day (liquids basis)—–up nearly 7.0 mb/d since 2008. But 4.0 mb/d of that growth was attributable to China and another 6.0 mb/d to Brazil, Korea, the petro-states and the balance of the EM economies. By contrast, oil demand in the US, Western Europe and Japan is actually down by about 3.0 mb/d since the 2008 peak, as shown below:
Now here’s the thing. While the red line above representing the Red Ponzi and its supply chain looks like its still slightly rising, it’s actually in the process of heading sharply southward. That means that in the period ahead, demand will be falling all across the planet on a sustained basis for the first time in modern history.
Moreover, that is not a forecast——it’s already happening. China’s apparent growth of 500k b/d last year was entirely due to filling its strategic reserve. But it has now run out of space—- at the very same time that its oil-using industrial economy is falling out of bed.
In fact, rail freight volume last year plunged by 10%, meaning that even China’s working commercial petroleum stocks are overflowing. The same slide in demand is obviously occurring in Brazil and throughout the EM.
Accordingly, the current 1.5 mb/d per day global surplus is just a warm-up. The global surplus is swelling toward 2-3 mb/d or even more. And prices are heading back into the $20s——a zone which was actually penetrated today for the first time since December 2003.
None of this is a mystery—–except to Wall Street gunslingers like Lasry who have become billionaires suckling on the madness of the world’s central banks. Still, last Friday when I accidentally turned on the sound during the CNBC halftime cattle call, I couldn’t believe my ears. Lasry was back saying—–
“It is now just a question of when the energy turnaround takes place in the next 3-months, 6-months or a year…….crude oil is going to be at $70 to $90 two years from now….. debt purchased at 60 cents today will be worth par, yielding 30 percent returns.”
And why was he so confident? Well, he seemed to think that the US economy is in the pink of health!
“I don’t think it’s a time to panic, I think it’s actually a time where you’ve got opportunities out there. Invest in solid companies and you’ll end up doing pretty well……I.don’t think we’re going into a recession, I think it’s whether we’re growing at 1 or 2 percent,” he said. “So the fact that you’ve got lower GDP, that’s fine, but at the end of the day the U.S. economy is doing fine……you saw the jobs report”.
Well, yes we did, and it was the weakest December NSA report this late in the business cycle in modern history, as we pointed out in our weekend analysis (Newsflash From The December ‘Jobs’ Report—–The US Economy Is Dead In the Water”).
But as it turns out Lasry was not playing at macro-economist after all. As we learned from Reuters last night, he was desperately shucking and jiving, trying to hide the fact that one of his major funds is suffering larger losses, huge redemptions and has stopped reporting its daily results:
A junk bond fund run by billionaire Marc Lasry’s Avenue Capital Management, which has experienced heavy investment losses and investor withdrawals, has stopped voluntarily reporting daily asset figures to the mutual fund industry’s top two tracking firms….
Research chiefs for Morningstar and Lipper said on Monday they had not received daily asset under management figures from the Avenue Credit Strategies Fund since about mid-December……The Avenue Credit Strategies Fund has lost about 40 percent of its $1.2 billion in assets since the end of October. The fund currently has about $650 million to $700 million in assets……
The Avenue Capital fund’s total return of minus 13.35 percent in 2015 was worse than 98 percent of high-yield peers, according to Morningstar data. So far in 2016, the fund’s total return is minus 1.49 percent.
In short, what was a $2 billion fund a year ago, which bet big on busted energy debt, is now itself circling the drain.
But you would never know it from bubble vision. In a remarkably fast turn around, CNBC’s noontime host, Scott Wapner, who is apparently on the job 24/7, issued a post refuting the Reuters story hardly 30 minutes after it appeared at 11:25 PM.
A report that raises questions about a junk bond fund run by Avenue CapitalGroup is “misleading,” Avenue boss Marc Lasry has told CNBC….The fund is not required to report such data (but)……Beginning in February, Avenue will be reporting to these data services our AUM on a monthly, rather than daily, basis, similar to the practice of many funds and fund companies.
Remarkable, but revealing. Wapner has never posted a midnight before—–so the level of desperation at Avenue Capital Group must be at DEFCON 1 levels.
And well it should be. The US oil patch is heading for a debt conflagration like never before with more than one-third of industry of the industry facing bankruptcy, according to a recent Wall Street Journal survey.
Crude-oil prices plunged more than 5% on Monday to trade near $30 a barrel, making the specter of bankruptcy ever more likely for a significant chunk of the U.S. oil industry.
Three major investment banks— Morgan Stanley, Goldman Sachs Group Inc. andCitigroup Inc.—now expect the price of oil to crash through the $30 threshold and into $20 territory in short order as a result of China’s slowdown, the U.S. dollar’s appreciation and the fact that drillers from Houston to Riyadh won’t quit pumping despite the oil glut.
As many as a third of American oil-and-gas producers could tip toward bankruptcy and restructuring by mid-2017, according to Wolfe Research…..
More than 30 small companies that collectively owe in excess of $13 billion have already filed for bankruptcy protection so far during this downturn, according to law firm Haynes & Boone.
Morgan Stanley issued a report this week describing an environment “worse than 1986” for energy prices and producers, referring to the last big oil bust that lasted for years. The current downturn is now deeper and longer than each of the five oil price crashes since 1970, said Martijn Rats, an analyst at the bank.
Needless to say, the reason that this could be the worst oil industry crash since 1970 is that the bubble which preceded had no precedent, either. The central bank driven scramble for yield resulted in what amounted to an insane inflow of debt into an industry that is inherently risking and subject to massive cyclical swings in price.
Indeed, the juxtaposition of the 20004-2009 oil price chart with the staggering $150 billion debt increase in the North American E&P industry alone says it all. After the thundering $100 per barrel oil price collapse between July 2008 and early 2009, no honest and properly priced debt market would have ever advanced that much debt to shale and tar sands producers in a world war the marginal barrel from Saudi Arabia has a lifting cost of less than $15 per barrel.
So this time is different. We are not talking about 60 cent energy debt springing back to par.
In fact, the more likely course is exactly what is transpiring in the string of US coal company bankruptcies now working through the system. In the case of the latest to file——Arch Coal——it appears that bondholders will get a penny on the dollar and the banks will end up with equity of completely dubious value——given the massive excess capacity that will remain in the domestic and global coal industry after the reorganization.
The same dynamic is at work in the oil patch. Twenty year of rampant global credit growth and 7-years of massive financial repression by the central banks after the 2008 crisis have created a wholly new condition.
Namely, so much excess and uneconomic capacity that it will take years of operation at variable cost to absorb it or cause it to be eventually abandoned. That means this time there will be no V-shaped recovery of asset values. They are down for the count. As the WSJ article further explained:
Energy companies that took on huge debt loads to finance their slice of the U.S. drilling boom have no choice but to keep pumping to generate cash for interest payments. As they do, they are drilling themselves into a deeper hole. Companies including Sandridge Energy Inc., Energy XXI Ltd. and Halcón Resources Corp. all paid more than 40% of third-quarter revenue toward interest payments on their loans, according to S&P Capital IQ. Representatives for Sandridge and Halcón didn’t respond to requests for comment.
There’s no reason to be anybody’s savior,” said Chad Mabry, a senior energy analyst atFBR & Co. “If you can just get the assets out of bankruptcy, then you don’t have to save anyone.”
At the end of the day, what is coming this time is real bankruptcies, not the kind of faux workouts that allowed so-called “distressed” investors to feed on the short bottoms of 1990-1991, 2000-2002, and 2008-2009 and then see asset values coming screaming back after the Fed launched another round of bubble finance.
end
Well that about does it for tonight
I will see you tomorrow night
Harvey
harveyorganblog.com 
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