Buy Gold As “Extremely Low-Risk Asset” – Rogoff Advises Creditor Nations

Buy gold as it is an “extremely low-risk asset” is the advice of Professor Kenneth Rogoff to emerging market, creditor nation central banks including the People’s Bank of China (PBOC).

Rogoff believes that there is a good case to be made that emerging market central banks, such as the People’s Bank of China who have over $3.3 trillion in foreign exchange reserves, accumulate gold as this would “help the international financial system function more smoothly and benefit everyone”.

Russian central bank bought another  500,000 troy ounces of gold in April (ShareLynx)

Writing in Project Syndicate Rogoff notes that:

“Moreover, there is a case to be made that gold is an extremely low-risk asset with average real returns comparable to very short-term debt. And, because gold is a highly liquid asset – a key criterion for a reserve asset – central banks can afford to look past its short-term volatility to longer-run average returns.”

Rogoff notes that creditor nation central banks have been accumulating gold already but at a snail’s pace:

“Emerging markets have remained buyers of gold, but at a snail’s pace compared to their voracious appetite for US Treasury bonds and other rich-country debt. As of March 2016, China held just over 2% of its reserves in gold, and the share for India was 5%. Russia is really the only major emerging market to increase its gold purchases significantly, in no small part due to Western sanctions, with holdings now amounting to almost 15% of reserves.”

The latest data from Russia over the weekend shows that the Russian central bank bought another 500,000 troy ounces of gold in April.

Russia and China continue to be the largest sovereign buyers of gold today and central bank demand remained robust in the first quarter of the year – central banks purchased 109 metric tonnes. This represents the 21st consecutive quarter that central banks have been net purchasers of gold as they continue to diversify their huge exchange reserves and significant US dollar exposures.

Despite the steady buying, most creditor nations still hold less than 10% of their reserves in gold compared to 60% to 100% in large debtor nations such as the US, Greece, Italy, France and others.

Source Wikipedia 

Other emerging market creditor nation central banks with large foreign exchange reserves include Saudi Arabia, India, Brazil, Mexico, Thailand, Algeria, Iran, Turkey, Indonesia, Malaysia and United Arab Emirates (UAE).

The article by Rogoff is an important one and yet, like many recent significant developments in the gold market, it got surprisingly little mainstream media coverage.

It is another sign that gold is being re-monetised in the global financial and monetary system.

It also bodes well for gold’s outlook as the massive scale of international foreign exchange reserves means that even a small allocation into the small physical gold market by creditor nation central banks should see gold reset to much higher levels in all currencies. This may be why Professor Rogoff says  regarding gold that “there is no limit to its price.”

Rogoff is a thought leader and a leading voice of western central banks. He was the chief economist of the International Monetary Fund from 2001 to 2003 and is the Professor of Economics and Public Policy at Harvard University. See full article onProject Syndicate here

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Gold Prices (LBMA AM)
23 May: USD 1,250.40, EUR 1,115.84 and GBP 860.89 per ounce
20 May: USD 1,256.50, EUR 1,120.18 and GBP 862.75 per ounce
19 May: USD 1,253.75, EUR 1,117.74 and GBP 857.37 per ounce
18 May: USD 1,270.90, EUR 1,127.21 and GBP 882.05 per ounce
17 May: USD 1,270.10, EUR 1,121.43 and GBP 877.50 per ounce

Silver Prices (LBMA)
23 May: USD 16.31, EUR 14.55 and GBP 11.27 per ounce
20 May: USD 16.56, EUR 14.76 and GBP 11.35 per ounce
19 May: USD 16.60, EUR 14.81 and GBP 11.35 per ounce
18 May: USD 17.05, EUR 15.13 and GBP 11.77 per ounce
17 May: USD 17.08, EUR 15.09 and GBP 11.80 per ounce

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Mark O’Byrne

Executive Director

Futures Fade Early Bounce, Slide In Illiquid Tape As Yen Rises, Oil Drops

following the latest month abysmal trade and PMI data out of Japan overnight (April exports crashed -10.1 %, worse than the exp. -9.8 and worse than last month’s -6.8% while imports plunged -23.3% also far worse than exp. -18.8 and March -14.9%; PMI 47.6, Exp. 48.3, last 48.2), it was supposed to be a straight up for the USDJPY, and its carry linked E-mini. However, that this did not happen, and instead the Yen jumped, sinking the USDJPY as low as 109.3 was troubling and suggests that the G7 “Sendai discord”, profiled here on Saturday, was worse than even we expected, and Japan indeed no longer has a right to devalue its currency which in turn has pressured the Yen higher.  (HARVEY:  SEE SENDI MEETING COMENTARY)

Aside from Japan, and the previously announced latest mega-M&A in the form of Bayer’s unsolicited $62 billion bid for Monsanto, the overnight session saw various European PMI prints, where despite a miss and drop in the EU Composite PMI (at 52.9, below Exp. 53.2, and last 53.0), Germany reported a modest improvement in its mfg and service PMIs which provided some optimism to the session.

That however does not explain the sharp, sudden swings in the Dax and Stoxx 600, which from opening red, then turning green, were back in the red at last check. Energy companies posted the biggest decline of the equity benchmark’s 19 industry groups as commodities tumbled. Bayer AG lost 3.2 percent after disclosing an unsolicited $62 billion all-cash offer to acquire Monsanto Co. amid investor concern that it might overpay for a deal that would create the world’s biggest supplier of farm chemicals and genetically-modified seeds.

Apple Inc. suppliers AMS AG and Dialog Semiconductor Plc rose at least 2.4 percent, leading a gauge of technology stocks, after Taiwan’s Economic Daily News reported that the iPhone maker has asked suppliers to prepare production for a new version of its smartphones. Aixtron SE jumped 16 percent after the German supplier of semiconductor equipment said it has agreed to a 670 million-euro takeover bid from a group of Chinese investors.

One recurring concern is what the Fed will do, and how this will impact the dollar. As a result, government bonds rose as investors weighed the timing of the Federal Reserve’s next increase in interest rates and the outlook for inflation.  As Bloomberg puts it, treasury 30-year yields fell for a third day. The yen rose from near this month’s low, spurred by the biggest trade surplus in six years and a U.S. rebuttal of Japan’s case for intervention to weaken the exchange rate.

Investors are moving to price in the Fed’s first increase in interest rates since December after several policy makers signaled a move is becoming more likely, with Fed Bank of Boston President Eric Rosengren telling the Financial Times at the weekend that he’s ready to back a rate increase. Investors now see a 28 percent chance of a June rate hike, while the chances of a July increase have climbed to 48 percent. Regional Fed chiefs for St. Louis, San Francisco and Philadelphia are due to speak Monday.

“There is a lot of discussion about interest rates in the U.S. and the data we will see this week is important,” Herbert Perus, head of equities at Raiffeisen Capital Management in Vienna, told Bloomberg. “Maybe then we’ll have a better idea of what’s going on in June, July, or September.”

Maybe. Meanwhile, oil fell for a fourth day after Iran said again that it won’t countenance freezing output until its production is back at pre-sanctions levels, while iron ore tumbled on rising Chinese stockpiles and copper declined. The Stoxx Europe 600 Index fell, erasing an advance of 0.4 percent.

Futures on the S&P 500 also declined after initially jumping higher in thinly traded, illiquid tape. Best Buy Co. posts earnings today. Investors are also looking to economic data for indications of the strength of the world’s biggest economy and the trajectory of interest rates. A preliminary report due Monday is forecast to show U.S. manufacturing activity expanded to 51.0 in May, up from 50.8 a month ago.

Market Snapshot

• S&P 500 futures down 0.2% to 2046
• Stoxx 600 up 0.5% to 336
• DAX down 0.8% to 9838
• S&P GSCI Index down 0.5% to 365.3
• MSCI Asia Pacific up 0.4% to 126
• Nikkei 225 down 0.5% to 16655
• Hang Seng down 0.2% to 19809
• Shanghai Composite up 0.6% to 2844
• S&P/ASX 200 down 0.6% to 5319
• US 10-yr yield down 1bp to 1.83%
• German 10Yr yield down 1bp to 0.15%
• Italian 10Yr yield down less than 1bp to 1.47%
• Spanish 10Yr yield down less than 1bp to 1.56%
• Dollar Index down 0.05% to 95.29
• WTI Crude futures down 1.1% to $47.83
• Brent Futures down 0.9% to $48.19
• Gold spot down 0.2% to $1,250
• Silver spot down 1% to $16.37

Looking at regional markets, Asian stocks traded mixed despite initially beginning the week mostly higher following last Friday’s tech led-gains in US. Nikkei 225 (-0.5%) underperformed on weak data in which exports and imports fell more than expected highlighting sluggish demand. Japanese exporter sentiment was also pressured by a firmer JPY and contraction in PMI figures. ASX 200 (-0.3%) trades with losses as weakness in copper and oil weighed on sentiment, while Chinese bourses bucked the trend with the Shanghai Comp (+0.6%) & Hang Seng (-0.4%) initially mildly supported after the PBoC continued liquidity injections, coupled with comments from President Xi and Premier Li calling for several measures to support the economy. 10yr JGBs traded mildly higher as the risk-averse sentiment in Tokyo supported safe-haven demand.

China President Xi Jinping called for local authorities to prioritize supply-side reform and increase confidence in economic restructuring, while Chinese Premier Li Keqiang urged for less red tape, improved regulations and better services to support a sustained and healthy development of the economy.

Top Asian News

• Yuan Basket at One-Month High as China Seen Curbing Volatility: Gains against peers show aim to prevent disorderly sales, OCBC says
• Japan’s Exports Post Seventh Monthly Decline on Stronger Yen: April exports fall 10.1% y/y vs est. -9.9%
• Goldman Manages Japan Minus-Rate Bond as Swaps Lure Global Funds: State-backed Japan co. sells its first negative-rate notes
• 1MDB Bond Fates Diverge as Abu Dhabi Vow Trumps Najib Support: Malaysian fund talks with creditors Monday after April default
• S.F. Holding to Backdoor List in Estimated 43.3b Yuan Deal: Co. will list through reverse merger with Maanshan Dingtai Rare Earth

The European week has kicked off in a choppy fashion, with equities initially trading in the red across Europe before pulling off their worst levels by mid-morning (Euro Stoxx 50: -0.3%). German large cap Bayer (-2.1 %) is among the worst performers on the continent, after the Co. announced their USD 62b1n bid for Monsanto, with shares lower by around 14% since reports of their interest initially surfaced. The downside in equities has been met with upside in Bunds, with the German benchmark briefly moving above 164 albeit failing to hold the level , as participants initially focussed on the slip in supply this week, with some desks are also noting a recommendation from Commerzbank to take a tactical long position in Bunds. Of note however, the EFSF have mandated banks for an upcoming dual tranche offering with books now open for their new 10 and 31yr bonds.

European Top News

• Ryanair Profit Growth to Slow as Terror ‘Drip’ Crimps Fares: earnings growth will slow this year as a spate of terror attacks combines with lower fuel prices to prompt European airlines to cut fares
• CF Abandons $5.4 Billion OCI Deal in Face of Tax Inversion Rules: Although both companies explored alternative structures to try and get the deal done, they failed to find an option that would work
• Chinese Group to Buy Europe’s Aixtron for $752 Million: A group of Chinese investors agreed to buy Aixtron SE for about 670 million euros, giving the manufacturer a chance to boost sales by expanding in Asia
• Sky, Iliad Said Among Suitors Weighing Italian Wireless Assets: Vimpelcom, CK Hutchison seeking to sell towers, spectrum. Fastweb, Tiscali also in talks with owners of Wind, 3 Italia
• Brexit Spurs Torrent of Options Trading in Last Hedging Rush: investors are piling into contracts protecting against stock swings, paying prices not seen in more than a year for the hedges
• World’s Biggest Wealth Fund Faces Wider Ban on Coal Investments: A majority of parties in Norway’s parliament want to tighten guidelines that prevent the $850 billion fund from owning companies that base more than 30 percent of their activities or revenues on thermal coal

In FX, as anticipated, a cautious morning of trade, with the USD pushing a little higher, but after some of the recent moves seen, seems to be marginal positioning at best . Much of the focus is on Fed chair Yellen’s speech on Friday, so this will likely keep USD trade 2 way for the most part of the week, with her familiarly measured(/dovish) leaning (since the start of the year) a major risk for USD bulls. The yen appreciated 0.7 percent to 109.38 per dollar, after losing ground in each of the last three weeks as Japanese officials warned they may intervene to weaken the currency. Finance Minister Taro Aso raised the issue in a meeting with U.S. Treasury Secretary Jacob J. Lew, who said yen moves haven’t been overly volatile. The two were attending a meeting of Group of Seven finance chiefs in Japan.

Early action today has seen EUR/USD pushing lower to test bids from 1.1200 again, with moves partially driven by EUR/GBP losses which have seen Cable pushed back into the mid 1.4500’s as a result. German PMI’s were better than expected, but this was not reflected in the EU wide numbers. AUD/USD continues to struggle ahead of .7260 on the topside to keep the prospect of fresh lows alive, while USD/CAD is still consolidating above 1.3100 to see a potential move on 1.3200 on the table.

A measure of implied price swings in the pound over the next one month climbed to its highest since February as the vote that will decide the fate of Britain’s membership in the European Union draws closer. One-month implied volatility, a measure of price swings based on options, climbed 80 basis points to 11.24 percent.

In commodities, WTI and Brent looked to have based out in the session with WTI just under the USD 48.00/bbl level and Brent just above USD 48.00/bbl. West Texas Intermediate crude dropped 1.3 percent to $47.80 a barrel and Brent slid 1 percent to $48.23. The Organization of Petroleum Exporting Countries is unlikely to set a production target when the group meets June 2 as it sticks with Saudi Arabia’s strategy to squeeze out rivals, according to all but one of 27 analysts surveyed by Bloomberg. Iron ore prices fell in Asia as rising port inventories in China spurred concern that global supplies are once again topping demand. Futures on the Dalian Commodity Exchange fell 3.5 percent to 359 yuan a ton ($54.79). Steel rebar futures in Shanghai dropped 3.5 percent on Monday to 1,983 yuan a ton.

Copper fell 0.5 percent to $4,557 a ton, declining with other industrial metals following suggestions the Fed could raise interest rates as early as next month. Zinc lost 1.6 percent and nickel slid 1.7 percent. U.S. natural gas advanced after forecasts showing an increasing probability of above-normal temperatures in the northeast and Midwest, which can increase demand for electricity for cooling. Futures rose 2.6 percent to $2.116 per million British thermal units.

Gold has been trading sideways at USD 1250.83/oz firmly within a USD 15.00 trading range. Silver has just bounced off of its USD 16.33/oz support level but remains in a downtrend. Elsewhere in base metals copper and iron ore prices fell with Dalian iron ore futures slumping by 5% to its lowest since early March at the beginning of trade due to demand concerns from the world’s largest iron ore consumer, China.

Bulletin Headline Summary from Bloomberg and RanSquawk

• European trade has been relatively choppy thus far as initial downside in equities was pared with some citing upbeat German PMI data
• In FX markets, early action today has seen EUR/USD pushing lower to test bids from 1.1200 again
• Looking ahead, highlights include US PMI alongside Fed’s Bullard, Williams and Harker
• Treasuries rise during overnight trading amid drop in Japanese, European equity markets after euro-area Markit PMI showed growth in region’s private sector unexpectedly slowed in May, and Japan’s exports fell for a seventh consecutive month in April as the yen strengthened.
• Speaking in Beijing, St. Louis Fed President Bullard said growth inconsistent with slow-rising path for policy rate; also said some data support market view, some support FOMC view
• Belgium, Canada, France, Mexico, Spain, Switzerland and the U.K. have all sold debt maturing in 40 to 100 years since 2014, even if infrequently. Not the U.S., which in the interest of keeping sales regular has stuck to securities of three decades or less
• Mark Carney is limbering up for another encounter with members of Parliament’s Treasury Committee on Tuesday at 10 a.m. in London after a fiery exchange with pro-Brexit lawmaker Jacob Rees-Mogg in March over the U.K.’s referendum on European Union membership
• The U.K. government issued its starkest warning yet about the dangers of a vote to leave the EU in next month’s referendum, saying Brexit risks causing a yearlong recession, sparking a decline in the pound and costing hundreds of thousands of jobs
• With only one month to go before the U.K. votes on whether to remain in the EU, investors are piling into contracts protecting against stock swings, paying prices not seen in more than a year for the hedges
• Greece’s European creditors are preparing to disburse EU11b ($12.3 billion) once the nation successfully completes a review of its bailout program
• All but 1 of 27 analysts surveyed by Bloomberg said the OPEC won’t set an output target on June 2, as it sticks with Saudi Arabia’s strategy to squeeze out rivals including U.S. shale drillers by pumping near-record volumes
• The Swiss are discussing paying people $2,500 a month for doing nothing. The country will vote June 5 on whether the government should introduce an unconditional basic income to replace various welfare benefits
• Sovereign 10Y yields mostly lower; Asian equities mixed, European equities lower; U.S. equity-index futures lower; WTI crude oil, precious metals fall

DB’s Jim Reid concludes the overnight wrap

a new week begins with today’s various flash PMIs from around the world the main highlight. Europe is expected to generally see a modest improvement overall as is the flash manufacturing number in US (51.0 expected vs. 50.8 last month). This number will be interesting as many of the regional numbers have been weak recently (Philly Fed and Empire Manufacturing) and the recovery in manufacturing seen in the US through Q1 seems to be stalling even with a firmer oil price.

Before we get to the data though, there’s been a few interesting snippets of newsflow to highlight over the weekend first. Over at the G7 finance leaders meeting this weekend much of the headlines are focused on what appears to be growing tension between the US and Japan concerning exchange rate policies. Indeed Japan’s Finance Minister Taro Aso hinted at growing frustration in the Japan camp about the stronger Yen and the subsequent impact that this was having on exporters. This point was seemingly made to US Treasury Secretary Jack Lew with Aso saying to reporters that he had told Lew that ‘one-sided, abrupt, and speculative moves were seen in the FX market recently, and abrupt moves in the currency market are undesirable and the stability of currencies is important’. According to Reuters Lew responded by saying that he did not consider recent moves in the Yen to be ‘disorderly’ and that ‘it’s important that the G7 has an agreement not only to refrain from competitive devaluations, but to communicate so that we don’t surprise each other’.

The Yen is close to half a percent stronger this morning while Japanese equity markets are weaker (Nikkei -1.11%) to begin the week although that in part reflects the latest trade data which was released overnight. Japan’s trade surplus has risen to the highest since March 2010 after imports plummeted in April (-23.3% yoy vs. -19.2% expected, -14.9% previously) – offsetting a steeper than expected fall in exports (-10.1% yoy vs. -9.9% expected, -6.8% previously). Also released a short time ago out of Japan was the Nikkei manufacturing PMI for May which showed further deterioration in the sector after dropping 0.6pts to 47.6 and to the lowest level since December 2012. Elsewhere it’s a bit more mixed in trading this morning. The ASX (-0.24%) is also lower although the Hang Seng (+0.23%), Shanghai Comp (+0.43%) and Kospi (+0.18%) are posting modest gains. Oil markets are slightly weaker (WTI -0.54% to $48.15/bbl) following comments over the weekend out of Iran’s state oil minister suggesting that the nation will refrain from joining any potential production freeze at the June 2nd meeting with OPEC partners.

Also of note from the weekend is the latest from Greece where some important progress has been made towards unlocking the next set of emergency funds. Lawmakers yesterday approved a package of additional austerity measures including tax increases and pension cuts, as well as the formation of a new privatisation fund. The vote passed by a narrow majority of 153 lawmakers in the 300-seat parliament. Unsurprisingly there was big push-back from the rival opposition parties, with the next stage now tomorrow’s Eurogroup meeting where the finer details are set to be discussed around debt relief and the actual disbursement of funds.

Staying in Europe, today marks the one month countdown to the UK EU referendum date. As per Reuters, an opinion poll from Opinium on behalf of the Observer newspaper became the sixth poll out of the last seven to be published which has shown the ‘Remain’ campaign as coming out on top. The results from the online poll showed that 44% would vote to stay in the EU with the leave campaign at 40%. The same pollster had the split at 42% and 41% respectively at the end of last month. Indeed our UK rates strategists (Jack Di-Lizia) now note that implied probabilities from bookmakers’ odds are tilted heavily in favour of a vote to remain, with the probability of a Remain outcome now at 82% which is up 4% from the prior week. That said much of the commentary – as highlighted by Reuters – is still suggesting that there is still a difference between the outcomes of telephone polls and online polls with the former tending to show a larger lead for the ‘Remain’ campaign, while the latter tend to show a much closer race. It’s worth noting that from this Friday (27th) the pre-referendum ‘purdah’ period kicks in which restricts the ability for those connected to government to campaign for either outcome. So it’s possible some of the noise around the campaign dies down as a result.

Moving on. It’s worth noting that this morning our European equity strategists have downgraded their YE 2016 Stoxx 600 forecast from 380 to 325 (current 338). They cite the latest FOMC minutes as a reason for increasing risks with fears that we will re-enter the “doom loop” from a more hawkish Fed to a stronger dollar, lower oil prices, higher HY credit spreads and lower equity markets. On the upside, they think the Fed’s increased sensitivity to the problem of dollar strength means it will quickly abandon its tightening intentions once asset prices are falling, thus capping the downside for markets.

Quickly recapping how we closed out markets on Friday. Despite there being no obvious drivers in what was a pretty quiet day overall, risk sentiment was vastly improved with equity markets bouncing back from their post-minutes retreat. The S&P 500 finished +0.60% and in the process moved back to within less than half of a percent of where it was immediately prior to the FOMC minutes on Wednesday. The move also helped the index snap three consecutive weekly declines after closing the five-days with a +0.28% return. US credit was also stronger (CDX IG -1.5bps) while the rebound for risk assets in Europe was even greater. The Stoxx 600 closed +1.23% while Main and Crossover ended 2bps and 5bps tighter respectively.

Treasury yields continue to stall with the benchmark 10y hovering at 1.839%, while the USD rally also took a pause for breath with the Dollar index little changed on Friday. That in part also reflected a quiet day for data. The only data out across the pond was the April existing home sales numbers with sales reported as increasing at a slightly greater than expected rate last month (+1.7% mom vs. +1.3% expected). The only data of note in Europe had been the UK’s CBI Industrial Trends survey (-8 vs. -13 expected) which was suggestive of some modest improvement this month.

Meanwhile in terms of Fed expectations we ended the week with a close to 50% hike priced in for this summer. The odds of a July hike are sitting at 48% (up from 47% on Thursday) with June sitting at 28% (unchanged versus Thursday). As you’ll see shortly it’s a busy week for Fedspeak this week and it’s set to be capped off by Fed Chair Yellen on Friday evening. There was actually a bit of chatter from the weekend to note with regards to the Fed. The usually dovish Rosengren (voter), in an interview with the FT, said that while he is sensitive to how the data comes in, also noted that he ‘would say that most of the conditions that were laid out in the minutes, as of right now, seem to be on the verge of being met’. Rosengren also added that the Fed had set a ‘relatively low threshold’ for improvement in growth and that the economy was ‘making progress on getting to inflation at 2%’. Meanwhile fellow Fed official Williams (non-voter), who leans slightly hawkish, played down the US President Campaign as having an impact on the Fed’s decision for a possible change in policy.

end

ASIAN AFFAIRS

(courtesy zero hedge)

“The Sendai Dischord” – Japan Humiliated At G-7 Meeting In Sharp Rift Over Yen Intervention

a must read..

 

France Hit By Gas Shortages, Rationing After Refinery Workers Go On Strike

In the wake of French president Francois Hollande using an obscure article of the constitution in order to bypass parliament and force through labor reforms that are viewed as unfavorable to workers, protests have been ongoing in the country.

Now, French refinery workers have launched a strike to hit the government where it hurts the most. Protesters have blocked deliveries to gas stations from at least half of France’s eight refineries, and workers at three Total refineries have voted to halt all output by Tuesday according to France 24.

The news sent drivers rushing to gas stations in order to fill up their tanks while they could.About 820 stations out of 11,500 in France were out of fuel on Sunday, and another 800 were lacking at least one type of fuel.

Prime Minister Manuel Valls said that the situation is fully under control, and that there are enough fuel reserves to deal with the blockade.

“We have the situation fully under control. I think that some of the refineries and depots that were blocked are unblocked or will be in the coming hours and days. In any case, we have the reserves to deal with these blockades.”

Kristine Petrosyan, an oil market analyst for refining at the International Energy Agency adds “there is a noticeable fuel shortage in the North West and North of the country, including parts of the greater Paris region.”

Strikers aim to block access to fuel infrastructure, including refineries, fuel depots, and ports, so imports won’t reach consumers if fuel depots continue to be blocked. France is net gasoline exporter, “but world’s biggest diesel importer” – It imports ~420k b/d of diesel, and exports ~100k b/d gasoline.

Moments ago, Total chimed in as well, saying 612 of its French gas stations have a partial or full fuel shortage, as a result of 2 of 9 fuel depots being blocked by striking workers.

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.@Total mobilisé – dispositif exceptionnel – doublement des ravitaillements #carburant. Point de situation à 13h30.

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For now, it doesn’t appear the situation is “fully under control” in fact quite the opposite. And if the striking workers are indeed serious in their demands, the already unpopular French government may have just two options: walk back its labor reform law, or suffer a crippling economic slowdown, something which GDP “powerhouse” France can hardly afford.

end

Again Deutsche bank admits that it now rigged stocks.  It stock slides again

(courtesy PMI/zero hedge)

So much for the huge China credit impulse spreading around the world. After this morning’s extremely disappointing European data, US Manufacturing’s flash PMI for May printed a disappointing 50.5 – its lowest since 2009.Under the surface the state of American manufacturing is even more disastrous as Markit notes, output is falling for the first time since the height of the global financial crisis, with factories hit by slowing growth of order books and falling exports.

It’s rate-hiking time…A general lack of pressure on operating capacity was signalled by the latest survey data, with outstanding work at U.S. manufacturers falling for the fourth successive month in May.

U.S. manufacturers signalled the first reduction in output since September 2009 in May, although the rate of decline was only marginal. A number of monitored firms mentioned that uncertainty around the general economic outlook had caused clients to delay spending decisions, which in turn prompted firms to trim their production schedules.

As Markit’s Chris Williamson warns, the weak manufacturing PMI data cast doubt on the ability of the US economy to rebound from its disappointing start to the year in the second quarter.

“The survey is signalling that manufacturing will act as a drag on economic growth in the second quarter, leaving the economy once again dependent on the service sector, and consumers in particular, to sustain growth.

“Output is falling for the first time since the height of the global financial crisis, with factories hit by slowing growth of order books and falling exports.

“Backlogs of work are also dropping at the fastest rate since the recession, meaning firms will be poised to cut capacity unless inflows of new work start to pick up again.

“The survey’s employment gauge is in fact already running at a level consistent with a further reduction in the official measure of factory payroll numbers.

“Any uplift in prices was largely due to higher commodity prices, notably oil. Core price pressures look to have been once again subdued by weak demand.”

Seems like a great time to be hiking rates?

Some were concerned earlier today, when SF Fed’s John Williams said that he sees about 2-3 rate hikes in 2016, followed by another 3-4 in 2017, suggesting a grand total between 5 and 7 more rate hikes over the next 18 months. However, those fears were promptly dissiptated when as Williams himself admitted during the reporter Q&A, he – like virtually everyone else at the Fed – has no idea what he is talking about. To wit:

• FED’S WILLIAMS SAYS `I DON’T KNOW WHAT WE’LL DO IN JUNE’

Clearly unwavering from having zero credibility, her also added the following:

• WILLIAMS SAYS UPCOMING FOMC MEETINGS ARE `LIVE’ FOR RATE MOVE
• WILLIAMS SAYS FED FACING LOT OF UNCERTAINTIES SUCH AS BREXIT
• WILLIAMS SAYS BACK-TO-BACK RATE HIKES ARE POSSIBLE BUT UNLIKELY
• WILLIAMS: BACK-TO-BACK HIKES INCONSISTENT WITH GRADUAL FED PLAN

Some more Fed “observations” on the economy:

• WILLIAMS: WANT TO SEE DATA CONSISTENT W/BETTER 2Q GDP TRACKING
  WILLIAMS: Q1 GDP PRETTY ANEMIC, Q2 TRACKERS SHOWING ABOVE 2%
  WILLIAMS: EXPECTS TO MOVE VERY GRADUALLY THIS YEAR, NEXT
•  WILLIAMS: STILL SEE UNCERTAINTY ON BREXIT, CLD IMPACT JUNE

And the punchline:

• WILLIAMS: ‘GOOD THING’ MKTS RATE HIKE PRICING CLOSER TO FOMC’S

What he meant is “good thing” the Fed’s “dot plot” and rate hike forecast is closer to the market’s.

(courtesy Mish Shedlock)