Good evening Ladies and Gentlemen:
Here are the following closes for gold and silver today:
Gold: $1234.30 up $1.60 (comex closing time)
Silver: $17.13 up 59 cents (comex closing time)
In the access market 5:15 pm
The Ukrainian situation received a lot of press today. As we pointed out to you yesterday, Ukraine has only 7.5 billion dollars of reserves left (or about 5 weeks of imports). The USA stated that they would lend them $2 billion dollars. However Russia will no doubt accelerate it’s repayment of a 3 billion USA loan given in 2013. The Ukraine is nothing but a cash drain on the west.
Oil continues to be the big topic of the day. At one point in the day, both Brent and WTI traded at identical levels as Europe continues to deflate. The losses in the oil patch are huge due to losses in the mega dollar short plus the oil and other commodities that were bought with the dollar short. The yen carry trade continues to unwind as does the Nikkei/gold cross trade. Expect to see billows of massive smoke from the mammoth losses in the trillions.
Gold/silver trading: see kitco charts on right side of the commentary.
The gold comex today had a poor delivery day, registering 0 notices served for nil oz. Silver comex registered 0 notices for nil oz.
Three months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 247.23 tonnes for a loss of 56 tonnes over that period.
In silver, the open interest rose by 775 contracts with yesterday’s silver price up by 15 cents. The total silver OI continues to remains relatively high with today’s reading at 155,983 contracts. However the bankers are still loathe to supply much of the non backed silver paper. The January silver OI contract remains at 15 contracts.
In gold we had a large increase in OI with the rise in price of gold yesterday to the tune of $16.70. The total comex gold OI rests tonight at 399,525 for a gain of 5013 contracts. The January gold contract lowers to 87 contracts.
Today, we had no change in tonnage at the GLD / tonnes of gold/Inventory 707.82 tonnes
In silver, no change in silver inventory/
SLV’s inventory rests tonight at 327.979 million oz
We have a few important stories to bring to your attention today…
Let’s head immediately to see the major data points for today
First: GOFO rates:
Most rates moved in the positive direction with the exception of the one year rate. . Now the one month GOFO rate left backwardation and it is now in contango along with the other GOFO rates
Sometime in January the LBMA will officially stop providing the GOFO rates.
Jan 13 2015
+.10% +1025% +.105% +.1125 .1475%
Jan 12 2014:
+.057% +.075% +.085 % +.0975% +.1525%
Let us now head over to the comex and assess trading over there today.
Here are today’s comex results:
The total gold comex open interest rose today by 5013 contracts from 394,512 all the way up to 399,525 with gold up by $16.70 yesterday (at the comex close). We are now onto the January contract month. The non active January contract month saw it’s OI contracts fall to 87 for a loss of 37 contracts. We had 0 contracts served yesterday. Thus we lost 37 gold contracts standing or 3700 oz will not stand for delivery in this January contract month. The next big delivery month is February and here the OI fell by 7,602 contracts to 189,877 contracts with many moving to April. The estimated volume today was poor at 107,599. The confirmed volume yesterday was fair at 163,473 contracts, even though the high frequency traders gave some help with respect to volume. Today we had 0 notices filed for nil oz .
And now for the wild silver comex results. Silver OI rose by 775 contracts from 155,208 up to 155,983 with silver was up by 15 cents yesterday. The front January contract month saw its OI remain at 15 contracts for a loss of 0 contracts. We had 0 notices filed yesterday, so we neither gained nor lost any silver contracts standing for silver in the January contract month. The next big contract month is March and here the OI fell by 51 contracts up to 104,293. The estimated volume today was fair at 34,196. The confirmed volume yesterday was fair at 29,083. We had 0 notices filed for nil oz today. The rise in silver is certainly scaring our bankers into supplying more non backed paper.
January initial standings
|Withdrawals from Dealers Inventory in oz||nil oz|
|Withdrawals from Customer Inventory in oz||nil|
|Deposits to the Dealer Inventory in oz||nil oz|
|Deposits to the Customer Inventory, in oz||nil|
|No of oz served (contracts) today||0 contracts(nil oz)|
|No of oz to be served (notices)||87 contracts (8700 oz)|
|Total monthly oz gold served (contracts) so far this month||8 contracts(800 oz)|
|Total accumulative withdrawals of gold from the Dealers inventory this month|
Total accumulative withdrawal of gold from the Customer inventory this month
Today, we had 0 dealer transactions
total dealer withdrawal: nil oz
we had 0 dealer deposit:
total dealer deposit: nil oz
we had 0 customer withdrawal
total customer withdrawal: nil oz
we had 0 customer deposits:
total customer deposits; nil oz
We had 0 adjustments
Today, 0 notice was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 0 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account.
To calculate the total number of gold ounces standing for the December contract month, we take the total number of notices filed for the month (8) x 100 oz or 800 oz to which we add the difference between the January OI (87) minus the number of notices served upon today (0) x 100 oz = 9500 oz , the amount of gold oz standing for the January contract month. (.2954 tonnes of gold)
Thus the initial standings:
8 (notices filed for the month x 100 oz) +OI for January (87) – 0(no. of notices served upon today) 9500 oz (.2954 tonnes).
We lost 3700 oz standing for delivery
Total dealer inventory: 770,487.09 oz or 23.96 tonnes
Total gold inventory (dealer and customer) = 7.948 million oz. (247.23) tonnes)
Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 56 tonnes have been net transferred out. We will be watching this closely!
This initializes the month of January for gold.
And now for silver
Jan 13 2015:
January silver: initial standings
|Withdrawals from Dealers Inventory||nil oz|
|Withdrawals from Customer Inventory||820,478.85 oz (CNT,HSBC, Scotia) oz|
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory||nil oz|
|No of oz served (contracts)||0 contracts (380,000 oz)|
|No of oz to be served (notices)||15 contracts (455,000 oz)|
|Total monthly oz silver served (contracts)||104 contracts (520,000 oz)|
|Total accumulative withdrawal of silver from the Dealers inventory this month|
|Total accumulative withdrawal of silver from the Customer inventory this month||4,576,631.0 oz|
Today, we had 0 deposits into the dealer account:
total dealer deposit: nil oz
we had 0 dealer withdrawal:
total dealer withdrawal: nil oz
We had 0 customer deposit:
total customer deposit nil oz
We had 3 customer withdrawals:
i) Out of CNT: 300,042.19 oz
ii) Out of HSBC: 20,007.46 oz
iii) Out of Scotia; 500,429.200 oz (one decimal)
total customer withdrawal: 820,478.85 oz
we had 0 adjustments
Total dealer inventory: 65.037 million oz
Total of all silver inventory (dealer and customer) 173.363 million oz.
The total number of notices filed today is represented by 0 contracts for nil oz. To calculate the number of silver ounces that will stand for delivery in December, we take the total number of notices filed for the month (104) x 5,000 oz to which we add the difference between the OI for the front month of January (15) – the Number of notices served upon today (0) x 5,000 oz = 595,000 oz the number of ounces standing so far for the January delivery month.
Initial standings for silver for the January contract month:
104 contracts x 5000 oz= 520,000 oz +OI standing so far in January (15)- no. of notices served upon today(0) x 5,000 oz = 595,000 oz
we neither gained nor lost silver ounces standing for the January contract month.
for those wishing to see the rest of data today see:
The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.
***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:
i) demand from paper gold shareholders
ii) demand from the bankers who then redeem for gold to send this gold onto China
vs no sellers of GLD paper.
And now the Gold inventory at the GLD:
Jan 13.2014 no change in gold inventory/GLD inventory tonight at 707.82 tonnes
Jan 12 no change in gold inventory/GLD inventory tonight at 707.82 tonnes
January 9.2015: an addition of 2.99 tonnes of gold/Inventory 707.82 tonnes
Jan 8.2014: no change/inventory 704.83 tonnes
Jan 7.2015: we lost another exact 2.99 tonnes of gold inventory at the GLD/Inventory at 704.83 tonnes
Jan 6.2014: we lost 2.99 tonnes of gold inventory at the GLD//inventory 707.82 tonnes
Jan 5/2015 we gained 1.49 tonnes of gold inventory into the GLD/Inventory tonight: 710.81 tonnes
Jan 2 2015: inventory remained constant/inventory 709.02 tonnes
Dec 31.2014: we lost another 1.79 tonnes of gold at the GLD today/Inventory 709.02 tonnes
Dec 30.2014/ we lost 1.49 tonnes of gold at the GLD today/inventory 710.81 tonnes
Dec 29.2014 no change in gold inventory at the GLD/inventory 712.30 tonnes
Dec 26.2013/ a small loss of .6 tonnes of gold. Inventory tonight at 712.30 tonnes
Dec 24.2014: wow!! somebody robbed the cookie jar/ we had a huge withdrawal of 11.65 tonnes from the GLD inventory/inventory at 712.90 tonnes. England must be bleeding badly!
Today, Jan 13/2015 /no change in gold inventory at the GLD /Inventory rests tonight at 707.82 tonnes
inventory: 707.82 tonnes.
The registered vaults at the GLD will eventually become a crime scene as real physical gold departs for eastern shores leaving behind paper obligations to the remaining shareholders. There is no doubt in my mind that GLD has nowhere near the gold that say they have and this will eventually lead to the default at the LBMA and then onto the comex in a heartbeat (same banks).
GLD : 707.82 tonnes.
And now for silver (SLV):
Jan 13.2014 no change in silver inventory/327.979 million oz/
Jan 12.2014 we had a huge withdrawal of 1.915 million at the SLV/inventory at 327.979 million oz.
Jan 9.2015: we had a huge addition of 1.437 million oz at the SLV/Inventory 329.894 million oz
Jan 8.2015: no change in silver inventory/inventory at 328.457 million oz.
Jan 7.2015: we had another loss of 958,000 oz of silver from the SLV/Inventory 328.457 million oz
jAN 6.2015: we had a small loss of 149,000 oz/inventory 329.415 million oz
Jan 5 no change in silver inventory/Inventory at 329.564 million oz
jan 2.2015: no change in silver inventory/ Inventory 329.564 million oz
Dec 31.2014: we had no change in silver inventory at the SLV./Inventory
at 329.564 million oz
Dec 30.2014: we lost another 574,000 oz of silver from the SLV/Inventory at 329.564 million oz/
Dec 29.2014 we had a small loss of 431,000 oz at the SLV to probably pay for fees/inventory 330.138 million oz.
Dec 26/ no change in silver inventory at the SLV/inventory 330.569
Dec 24.2014: we had a huge loss of 7.566 million oz/inventory 330.569 million oz
Dec 23.2014: no change in silver inventory/338.135 million oz
Jan 13/2015 / no change in silver inventory at the SLV
registers: 327.979 million oz
And now for our premiums to NAV for the funds I follow:
Note: Sprott silver fund now for the first time into the negative to NAV
Sprott and Central Fund of Canada.
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)
1. Central Fund of Canada: traded at Negative 9.2% percent to NAV in usa funds and Negative 9.1 % to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 61.2%
Percentage of fund in silver:38.4%
( Jan 13/2015)
2. Sprott silver fund (PSLV): Premium to NAV falls to + 1.00%!!!!! NAV (Jan 13/2015)
3. Sprott gold fund (PHYS): premium to NAV rises to negative -0.48% to NAV(Jan 13/2015)
Note: Sprott silver trust back into positive territory at +1.00%.
Sprott physical gold trust is back in negative territory at -0.48%
Central fund of Canada’s is still in jail.
And now for your most important physical stories on gold and silver today:
Early gold trading from Europe early Tuesday morning:
(courtesy Mark O’Byrne)
Gold In Euros Up 7.2% In 2 Weeks – Surges Over EUR 1,050 Per Ounce
Gold priced in euros surged through the €1,050/oz barrier to a high of €1,052.04 per ounce this morning. It’s up 7.2% this month, outperforming gold in dollars which is up 4.8%, and building on the 12% gains seen in 2014. Market participants are increasing allocations to gold in order to hedge a ‘Grexit’ and risks posed by euro money printing.
The euro slumped to a near nine-year low against the dollar after another report that the European Central Bank (ECB) is moving closer to announcing a full-scale quantitative-easing programme.
ECB policy makers, who have already cut their refinancing rate to a record, introduced a negative deposit rate and offered cheap funding to banks to boost lending, hold their next policy meeting on January 22.
The ‘single’ currency has lost 5.2% versus the dollar over the past three months, as a very weak recovery and concerns about deflation have raised expectations that the ECB will begin purchasing sovereign bonds, beginning what economists call “full-blown” quantitative easing.
CNBC reported yesterday that the ECB is planning to base its money printing programme on how much a national bank has paid to the ECB every year. This would then determine how much the ECB would buy of that country’s government bonds, a source close to the central bank told CNBC.
Ahead of the ECB’s January meeting, economists increasingly expect the bank to announce full-blown QE after the latest consumer-price data showed the eurozone is battling deflation.
Also supporting gold is the fact that the dollar has also weakened after the U.S. jobs report for December showed hourly wage growth contracted last month. This made investors delay their expectations for when the Federal Reserve will begin raising its benchmark interest rate.
There are also questions as to how successful QE in the Euro area will be given the mixed results seen in the U.S. and Japan. Many economists are skeptical of QE and do not think it will be the panacea that some seem to think it is.
According to economists polled in a Financial Times survey last week, “any effort by the European Central Bank to launch a massive quantitative easing programme this year would fail to revive the eurozone economy.”
The FT survey of 32 eurozone economists, mainly working in financial services, conducted in mid-December, found most expected the ECB to launch QE in 2015. However, most of the FT poll’s respondents expected growth and inflation to remain weak even with quantitative easing.
Anticipation of QE in the eurozone and the possibly of the failure of QE is seeing gold rise. Gold in euros is at a 16 month high, the first time at these levels since September 2013.
Resistance is at EUR 1,070 per ounce, however we would expect a correction soon given the speed of the recent gains.
Gold remains 25% below the record euro gold high of 1,400 per ounce achieved in September 2012 at the height of the most recent phase of the Eurozone crisis. With the crisis set to resume, those holding euro denominated assets should hedge that exposure by diversifying their portfolios and allocating to gold.
OUTLOOK 2015 – Uncertainty, Volatility, Possible Reset – DIVERSIFY
Today’s AM fix was USD 1,239.00, EUR 1,049.91 and GBP 820.97 per ounce.
Yesterday’s AM fix was USD 1,222.00, EUR 1,035.77 and GBP 808.09 per ounce.
Spot gold climbed $13.30 or 1.09% to $1,233.80 per ounce yesterday and silver rose $0.11 or 0.67% to $16.57 per ounce.
Spot gold in Singapore rose as high as $1,238.81 an ounce, its highest since October 23, and was trading up 0.3 percent at $1,241 in late morning trade in London.
Gold continued gains to the highest in almost 3 months. Plummeting oil prices which hit $45/barrel in New York and concern over when the Fed will increase interest rates are increasing gold’s attractiveness.
U.S. Fed San Francisco President John Williams commented that raising rates in June would be a close call amid “strong momentum” in the labor market and weaker wage gains.
The yellow metal has also had more interest due to the uncertainty with the Greek elections and the ECB meeting both set for next week.
Gold bullion for immediate delivery rose as much as 0.9 percent to $1,244.29 an ounce, its highest price in dollars since Oct. 23, and traded at $1,239.06 at 10:01 a.m. in London, according to Bloomberg pricing.
Silver was up 2.3 percent at $17.10 an ounce. Platinum was equivalent with gold after spending most of the last 18 months at a premium to the yellow metal. Spot platinum was up 0.8 percent at $1,247.30 an ounce, while spot palladium was up 0.5 percent at $817.90 an ounce.
Get Breaking Gold News and Updates Here
Turk is correct that Europe is heading for deflation. However the USA is poised for hyperinflation!!
he explains why!!
(courtesy James Turk/Kingworldnews)
Deflation in Europe, hyperinflation in U.S., Turk tells KWN
9:15p ET Monday, January 12, 2015
Dear Friend of GATA and Gold:
Interviewed today by King World News, GoldMoney founder and GATA consultant James Turk mocks U.S. economic data and says European stock markets are sensing deflation while the U.S. stock market is sensing hyperinflation from money printing. This, Turk says, will be gold’s year. An excerpt from the interview is posted at the KWN blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
exactly what we have been telling you:
(courtesy GATA/Yahoo news)
UAE says OPEC price cut aims to suppress North American shale oil production
UAE Says OPEC Will No Longer Shore Up Oil Price
From Agence France-Presse
via Yahoo News
Tuesday, January 13, 2015
ABU DHABI, United Arab Emirates — The United Arab Emirates said on Tuesday that OPEC will no longer move to shore up crude prices, arguing that rising North American shale oil output needs to be curbed.
World prices have been falling since June but the pace of the slide accelerated in November when the Organisation of the Petroleum Exporting Countries (OPEC) decided to maintain its production unchanged at 30 million barrels per day.
Analysts say that richer cartel members like the UAE have been ready to accept the price fall in the hope that it will force higher-cost shale producers out of the market.
“We cannot continue to be protecting a certain price,” the UAE energy minister, Suhail al-Mazrouei, said.
“We have seen the oversupply, coming primarily from shale oil, and that needed to be corrected,” he told participants in the Gulf Intelligence UAE Energy Forum in Abu Dhabi. …
For the remainder of the report:
No surprise here:
French central bank’s chief market rigger says they never explain
1:30p ET Tuesday, January 13, 2015
Dear Friend of GATA and Gold:
Though the French central bank is, like other Western central banks, the agency of a nominally democratic government, its gold and currency market interventions will remain secret, the bank’s director of market operations, Alexandre Gautier, wrote yesterday in a reply to our friend Fabrice Drouin Ristori, chief executive officer of Goldbroker.com.
In presentations to the London Bullion Market Association in 2013 and last year, Gautier reported that the Banque de France has been trading gold for its own account and the accounts of other central banks “nearly on a daily basis” and that central banks lately have been managing their gold reserves “more actively”:
Citing those presentations, Ristori last week wrote to Gautier asking for details about the Banque de France’s gold trading, including its objectives and counterparties:
Replying yesterday, Gautier refused to elaborate on those presentations, writing: “I cannot expand beyond their contents because Banque de France does not make public the management of its foreign exchange reserves. Furthermore, we very seldom give interviews.”
Of course this particular episode of the unaccountability of central banking will not surprise anyone who has been following GATA. The question that now should be prompted by Gautier’s reply to Ristori is: Why doesn’t the Banque de France disclose its “management” of its foreign exchange reserves? We may assume that the answer is that the objective of this “management” is largely market manipulation and that transparency would defeat the objective.
Secret intervention in markets by central banks — the destruction of markets, what even some central bankers themselves have called “financial repression” — is such a big financial news story, the only one that matters anymore, and would be so easy for mainstream financial news organizations to pursue. They would need to ask only: Are central banks secretly trading in the gold, currency, bond, and stock markets, directly or through intermediaries, or not? If they are doing such trading, is it just for fun or does it have policy purposes? If it does have policy purposes, what are they? And to be successful do these policy purposes require deception and expropriation of certain investors?
Gautier’s acknowledgments — that the Banque de France trades secretly in the gold market “nearly every day” for itself and other central banks and that the bank won’t account for it — are great gifts to journalists. He practically writes the story for them. Of course GATA can provide much more documentation for such a story:
But journalistic courage in the West lately seems to consist mainly of publishing juvenile and gratuitiously insulting cartoons of the Prophet Muhhammad — peace be upon him — and daring the religious crazies to do something about it. Who in Western journalism has the courage to put to central banks some specific questions about their secret market interventions? Such questions are easily formulated —
— and if enough journalists started asking, the government security agencies couldn’t get away with killing them all.
At least Ristori is still alive as of this hour — peace be upon him too — and he has posted his reply from Gautier at Goldbroker here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
A very important topic for you today
(courtesy Bill Holter/Miles Franklin)
Is this business as usual?
Last week I described the story of my New Year’s Eve shenanigans where I conducted a very “informal” poll. If you recall, my goal for the evening was to slip the phrase “when the banks close this year” into each conversation I had. I did this to see what type of reactions it would elicit. Sure enough, 100% of the reactions were either disbelief, or belief I was a crazyman. If you also recall, in each and every conversation I asked the question “do you believe the government is broke?” and also received a 100% response of agreement. The following exercise may again be very basic to you but it is my belief we all should revisit the basics every now and then to make sure our logic is on sound footings.
And now for the important paper stories for today:
Early Tuesday morning trading from Europe/Asia
1. Stocks mixed on major Asian bourses / the yen falls to 118.59
1b Chinese yuan vs USA dollar/ yuan strengthens to 6.1983
2 Nikkei down 110 points or .64%
3. Europe stocks in the green /Euro falls/ USA dollar index up to 92.25/
3b WOW!!! Japan 10 year yield at .26% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 119.17/
3c Nikkei now slightly above 17,000
3e The USA/Yen rate well below the 120 barrier this morning/
3fOil: WTI 44.81 Brent: 45.85 /all eyes are focusing on oil prices. This should cause major defaults.
3g/ Gold up/yen down;
3h/ Japan is to buy the equivalent of 108 billion usa dollars worth of bonds per MONTH or $1.3 trillion
Japan’s GDP equals 5 trillion usa/thus bond purchases of 26% of GDP
3i 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 (see Von Greyerz)
3j Oil falls this morning for both WTI and Brent
3k China to stimulate its economy by 1 trillion dollars worth of infrastructure/poor Chinese PPI numbers as their economy softens.
3m Gold at $1240. dollars/ Silver: $16.93
3n USA vs Russian rouble: ( Russian rouble down 3 roubles per dollar in value) 66.06!!!!!!
3 0 oil falls into the 44 dollar handle for WTI and 45 handle for Brent
3p volatility high/commodity de-risking!/Europe heading into outright deflation including Germany/Germany has low unemployment/Italy very high unemployment (high jobless rate)/Germany bad factory order numbers/
3Q ECB still unsure of QE format weighs down European bourses
4. USA 10 yr treasury bond at 1.89% early this morning. Thirty year rate well below 3% (2.47%!!!!)/yield curve flattens/foreshadowing recession
5. Details: Ransquawk, Bloomberg/Deutsche bank Jim Reid
(courtesy zero hedge)/your early morning trading from Asia and Europe)
Market Wrap: Futures Rebound, Ignore Continuing Crude Crash, 10Y Under 1.9%, 30Y Near Record Low
So far today has been a replica of yesterday, with the crude rout continuing and pushing WTI under $45, but largely ignored by the FX carry pairs, and thus equity futures, which have seen some positive momentum from overnight trade data out of China where exports jumped 9.7% beating the 6% expectation, while imports fell 2.4% compared to a projected 6.2% decline as the trade surplus narrowed from November’s record $54.4 billion.
For the full year, however, Chinese trade grew at just 3.4%, missing the government’s target of 7.5% growth for the third year in a row as the government quick to blame the slowing global economy. In any event, the USDJPY is well off the overnight lows which means the EuroStoxx is up some 0.8% which, just like yesterday, the E-mini is up some 9 points and rising. It remains to be seen if, just like yesterday, US equities will crash at a precipitous pace after the open, once algos realize that nothing at all has changed.
Back to China, the trade numbers pushed the Shanghai Composite Index modestly higher by 0.2%, even if the overall Chinese stock market is massively overbought in recent months, and helped rebound the USDJPY from 117.80, a level not seen since mid December. Then again, China’s GDP print is due for release next week, and there are rumblings it may miss the government’s target of 7.5%, already the lowest in a century, only for the first time since 1998 when it is expected to print between 7.2% and 7.4%.
As a reminder the Chinese slowdown is the true reason for the collapse in commodity prices – among which crude oil – further demonstrated moments ago Copper plunged by another 2.8%, the biggest daily loss since November, and a move that the pundits can hardly blame on “OPEC oversupply.”
Elsewhere in Asia, JGBs trade higher supported by weakness in Japanese equities although the Nikkei 225 (-0.64%) bounced off worst levels after shedding over 300 points, weighed on by JPY strength and a further fall in oil prices. Other Asian equity markets trade mixed with outperformance observed across the Hang Seng (+0.01%).
And speaking of global slowdown, the 10 Year continues to tell the real story, and has dropped to 1.88% as of this moment, the lowest since October 15 with the 30 Year new record lows! Bloomberg observes that “signs of short covering in Asia” are pushing yields even lower (as expected), with strong volumes in TYH5, eurodollars, according to InTouch Capital Markets managing director David Fuller writes in note. Stops seen in futures space after taking out highs from New York session.
European equities, however, ignore the macro and focus on micro updates, trading higher amid positive broker moves with consumer discretionary stocks leading the advance with ASOS and Morrisons seen up in excess of 5% following pre-market trade updates. However, the continued decline in oil prices continues to weigh on energy stocks resulting in underperformance in Europe once again. In macro news, the Greek Finance Minister Hardouvelis said Greece could stumble out of the Euro by accident if a new government fails to reach an agreement with international creditors soon after this month’s elections. Separately, ECB’s Nowotny, Noyer and Coeure all signal that the ECB are still in discussion over the details of a potential QE program, ahead of their schedule meeting on the 22nd of January.
In the US, Fed’s Lacker (voter, hawk) said labour slack close to being eliminated underscores view that the Fed should raise rates sooner rather than later to keep inflation under control. (RTRS) Fed’s Lockhart (voter, dove) remarked that if data is mixed, prefers later lift-off date and the Fed should be cautious and conservative on rates. (RTRS) Fed’s Williams (voter, dove) said June rate rise ‘reasonable’ amid job gains. (BBG)
In FX, the USD-index (+0.2%) has reversed all of its overnight weakness with EUR/USD breaking below 1.1800. Elsewhere, the lone tier 1 data release this morning was UK Inflation which fell to its lowest level since May 2000 (0.5% vs. Exp. 0.7%) with the ONS stating that the main contributions to the fall came from the December 2013 gas and electricity price rises falling out of the calculation and the continuing drop in motor fuel prices. This prompted GBP/USD to break below 1.5100 to the downside and marks the first time that the BoE will need to write a letter to the UK Chancellor explaining why inflation has ‘undershot’ the Bank’s mandated target of 2%
In summary: European shares near session highs with retail and autos sectors outperforming and tech, basic resources underperforming. China December exports rise more than estimates. U.K. inflation slows more than forecast. Crude oil, copper extend declines, ruble weakens. Japan 5-year bond yield drops to zero for first time. French and German markets are best-performing larger bourses, Swedish the worst. The euro is weaker against the dollar. Japanese 10yr bond yields fall; French yields decline. Commodities decline, with Brent crude, WTI crude underperforming and natural gas outperforming. U.S. monthly budget statement, JOLT job openings due later.
- S&P 500 futures up 0.3% to 2028.6
- Stoxx 600 up 0.8% to 342.5
- US 10Yr yield down 3bps to 1.87%
- German 10Yr yield down 1bps to 0.47%
- MSCI Asia Pacific down 0% to 137.8
- Gold spot up 0.5% to $1239.8/oz
- Euro down 0.28% to $1.1801
- Dollar Index up 0.25% to 92.22
- Italian 10Yr yield down 2bps to 1.79%
- Spanish 10Yr yield down 3bps to 1.62%
- French 10Yr yield down 2bps to 0.73%
- S&P GSCI Index down 1.7% to 378.2
- Brent Futures down 4% to $45.6/bbl, WTI Futures down 3.5% to $44.4/bbl
- LME 3m Copper down 2.6% to $5860.5/MT
- LME 3m Nickel down 1.4% to $14889/MT
- Wheat futures up 0.8% to 559.8 USd/bu
Bulletin Headline Summary from Bloomberg and RanSquawk
- European bourses reside in positive territory shrugging off the continued slide in oil prices and the lagging energy sector after WTI broke below USD 45 earlier this morning.
- Looking ahead to the US session highlights include the Fed’s discount minutes, API crude oil inventories and USD 21bln to be sold in a 10yr note auction.
- Treasuries gain, 10Y yield falls to lowest since Oct. 15, 30Y nears record low as WTI crude breaks below $45/bbl. Week’s auctions continue with $21b 10Y, WI 1.885% lowest since May 2013; drew 2.214% in Dec.
- While last year’s 50% plunge in Brent from its June peak prompted most economists to predict a boost to global growth, now that the fall has extended another 21% two weeks into 2015, it risks not being as positive as some first imagined
- Britain’s inflation rate weakened to 0.5% in Dec., lowest in almost 15 years, which will force Governor Mark Carney to write the Bank of England’s first open letter explaining why prices are rising too slowly
- China’s exports rose 9.7% in Dec., more than forecast; imports fell 2.4%, less than expected, leaving a trade surplus of $49.61b, the customs administration said in Beijing
- Jiangsu SOHO Holdings Group Co., a state-owned firm with businesses including finance, property and knitwear, said some units missed payments on their letters of credit, underlining the financial risks of Chinese companies
- An adviser to the EU Court of Justice will say tomorrow whether the ECB’s Outright Monetary Transactions program overstepped the law in a non-binding opinion that may signal whether QE must also be reined in
- Amid anti-austerity promises by Greece’s Syriza party, which leads in polls before Jan. 25 elections, the ECB is signaling a willingness to withdraw EU30b even if it tips Greece into a crisis that ultimately sees it leave the single currency
- Merkel will join a march to promote tolerance after a German group opposing Islam’s influence in Europe drew a record 25,000 people to a rally in Dresden, with both sides hardening their stance over Muslims in the country
- Sovereign yields fall. Asian stocks mixed; European stocks, U.S. equity-index futures gain. Crude falls, with WTI below $45/bbl; copper plunges 2.7%, gold higher
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DB’s Jim Reid concludes the overnight recap
The trend lower in crude is indeed continuing as yesterday saw fresh cycle lows again with Brent now following WTI below $50 for the first time since April 2009. Indeed both WTI (-4.74%) and Brent (-5.35%) closed the day at $46.07/bbl and $47.43/bbl – hitting fresh five and a half year lows (and have declined some 1.5%-2% further this morning). Downgraded 2015 broker forecasts appear to be the reason for yesterday’s move with the result an all-too-similar sharp sell off for energy stocks. Yesterdays -0.81% close for the S&P 500 was not helped by a 2.80% decline in the energy sector. Credit markets also weakened with IG23 1.7bps wider on the day. US HY energy stocks fared little better with spreads closing 20bps wider whilst at the US’s second largest oil producer, the latest count of the North Dakota oil rigs showed the number of operating rigs falling to the lowest level since November 2010.
On a related subject, it’ll be interesting to see what today’s inflation data in the UK brings. Following November’s 1% yoy CPI headline reading, our UK economists note that household energy bills have not risen in December (having been up 6.4% a year ago) and petrol prices have dropped by some 5% at the pump. As a result they expect the headline reading to fall well below 1% to 0.6% yoy for December.
Before this number 30 year Gilt yields hit a record low of 2.314% yesterday. While we have plenty of sympathy for why yields will stay relative low for some time we wonder what the average inflation rate in the UK will be over 30 years. Answers on a postcard please. Happy to hear all genuine guesses and I’ll average the results in tomorrow’s edition. My guess is nearer to 4% but with no sign that we’re getting close to that level anytime soon.
Coming back to markets, the fall in Oil and uncertainties continue to support US Treasuries with the 10y benchmark closing at 1.907% and 3.8bps lower on the day. In fact 10y yields are now 27bps lower than they were at the end of 2014 and are trading lower again this morning with the yield just breaking through 1.90% as we go to print (1.894%). In terms of Fedspeak, there was something for everyone. Commenting after the US close, the Fed’s Williams was quoted on Bloomberg saying that ‘I would expect by June that the argument pro and con for lifting off rates will probably be a close call’. The Fed official noted that last week’s data shows ‘significant employment gains’ but that ‘on the other side, wage and price data are still soft’. This comes on the back of comments from Lockhart which we mentioned yesterday, suggesting that the Fed should take a ‘cautious and conservative approach’. Finally in the US, the calendar was quiet data-wise yesterday with just the lesser followed labour market conditions index showing improvement through December (6.1 vs. 2.9 previously).
Although closing off the intraday highs, European equity markets actually closed firmer yesterday with the Stoxx 600 and Dax finishing +0.57% and +1.38% respectively – benefiting from the timing in the oil sell off. On top of this, a second successive stronger day for Greek equities (+3.78%) also helped the better sentiment with the market appearing to come to terms with the latest opinion polls data over the weekend showing SYRIZA maintaining its lead. European government bonds also had a stronger day with 10y yields Bunds closing 1.4bps lower at 0.477% and peripheral bonds also tightening with Spain (-8bps), Italy (-6.7bps) and Portugal (-4bps) all lower. With no significant data releases, the moves were perhaps aided by comments out of the ECB’s Nowotny who lent a hand to those in support of imminent ECB QE by saying that ‘you always have to consider that monetary policy has an impact only after a long delay’, going on to say ‘that means if I want to do something I should do it sooner rather than later’. Comments from the ECB’s Noyer were also interesting with the central bank official noted in the Handelsblatt saying that ‘any QE program would have to have clear limits measured in percent of outstanding debt, to ensure that the majority of government financing goes through the private market’.
Away from the obvious ECB, Fed, Energy and Greece news in the near term, earnings season in the US is also just kicking into gear. Reuters noted that Q4 earnings for S&P 500 companies are expected to have increased 3.8% yoy although earnings for energy stocks could be as much as 21% yoy lower. The early signs overnight were decent with US aluminum producer Alcoa reporting a solid beat in the US after market close and perhaps more importantly, as something of a cyclical bellwether, signaling to a strong 2015 outlook. It’ll be interesting to see the market reaction to those companies with any significant oil exposure however and we should get an early taste of that with Schlumberger reporting on Thursday. We’re also expecting some numbers out of the banks this week too including JP Morgan, Goldman Sachs and Citigroup.
Refreshing our screens this morning, despite both WTI (-1.69%) and Brent (-1.98%) falling further through the Asia session, equity bourses are fairly mixed across the region. The Nikkei (-1.35%) and Kospi (-0.13%) are both lower, however the Shanghai Composite (+0.42%) and Hang Seng (+0.77%) are proving resilient. The latter markets in particular appear to be supported by a better than expected trade surplus print in China with exports (+9.7% yoy vs. +6.0% expected) in particular surprising to the upside through December. Following a larger than expected trade surplus print in Japan too this morning, boosted by a weaker Yen, 5y JGB’s have declined to 0.001% having briefly traded in negative territory – joining just Germany and Switzerland as the only nations with negative 5y yields.
In terms of the rest of today’s calendar, aside from the UK inflation data it’s a quiet morning data-wise with just the German wholesale price index and Italian industrial production. In the US this afternoon, the calendar picks up starting with the NFIB small business optimism survey for December. This is then followed up by the IBD/TIPP economic optimism reading for January and then the JOLTS job opening print for November – important given that it breaks down job openings, hiring’s and separations. Later on this evening we will also get the monthly budget statement out of the US.
Guess who is buying boatloads of oil: China!! as they are filling up their strategic reserves. What happens when they are finished buying this excess?
(courtesy zero hedge)
Low Prices Spark Biggest Surge In Chinese Crude Imports Ever
Despite the collapse of several key industries (cough Steel & Construction cough), as we have discussed in detail related to the record number of VLCCs charging towards China, Chinese crude oil imports surged by almost 5 million barrels in December – the most on record. This 19.5% surge MoM (and 13.4% YoY) indicates significant efforts to fill the nation’s strategic reserve but –absent this ‘artificial’ demand – spells problems for an already over-supplied global oil market (and its near record contango).
A record surge in crude imports in December…
And think what prices would have done if this ‘demand’ was not there…
They have a point! Arab ministers state that the world (USA??) should reduce ‘irresponsible’ production. See why!!
(courtesy zero hedge)
Did The Fed Ignite The “Irresponsibility” Of US Oil Over-Supply?
Saudi Arabian Oil Minister Ali Al Naimi has asked why he should be responsible for cutting output while U.A.E. Energy Minister Suhail Al-Mazrouei said non-OPEC producers should reduce “irresponsible” production. How can that be? How can American production be ‘irresponsible’ in the land of the free (money). Well, as the following chart from Bloomberg shows, perhaps OPEC members have a point…
As Bloomberg’s Chart of the Day shows, crude production in the U.S. increased 75 percent over the past 5 years while output from the Organization of Petroleum Exporting Countries grew 5 percent.
Canada boosted supplies by 42 percent while Brazil pumped 24 percent more, according to data from New York-based Energy Intelligence Group.
“The biggest contributor to the glut has been the rising output in the U.S., which has driven up global supplies,” said Kang Yoo Jin, a commodities analyst in Seoul at NH Investment & Securities Co.
“OPEC producers can’t be completely free from taking the blame as they were the ones who let U.S. shale oil players enter the market by limiting supply and keeping oil at $100.”
* * *
However, what we find most intriguing is the inflection point in US production came at a coincidentally (because to claim causality would be ridiculous, right?) crucial time for the Federal Reserve as it went all in on unlimited open-ended money-printing which crashed the cost of funding for any and every project no matter how non-economic through-the-cycle.
Perhaps this post should be re-named “A Fed-Induced Mal-Investment Boom Busts In Real-Time”…
Here come the losses!!
(courtesy zero hedge)
First Of Many: Standard Chartered Hit By Billions In Losses From Commodity Crash
Now that even the pundit brigade has confessed that crashing crude may not be the “unambiguously good” event all of them had sworn as recently as a month ago it surely would be, and stocks are beginning to comprehend that plunging oil may well be rather “unambiguously bad” because without EPS growth (energy is well over 10% of S&P EPS), without multiple expansion (rumor has it the Fed will hike this year), without a jump in stock buybacks (energy companies account for 30% of the buyback growth in 2015 according to Goldman) and without a boost to GDP (energy capex plans are imploding), the only way is down. But there was one key element missing from the “bad” scenario: impaired banks. At least until now, because as Reuters reports, Asia-focused bank Standard Chartered is the first (of many) bank facing billions in losses resulting from the crude crash.
The bank, which recently has been on a firing spree and even exited its entire equity business, will likely need $4.4 billion of extra provisions to cover losses from commodities loans, potentially forcing it to raise billions of dollars from investors, analysts said on Monday.
Credit Suisse analysts said the losses could force Standard Chartered to raise $6.9 billion to improve its core capital ratio to 11 percent by the end of the year. “We think the needed provisioning could be large enough to require further capital measures, such as further equity raising, and/or dividend reductions,” analyst Carla Antunes-Silva said in a note.
Standard Chartered’s shares were down 2.3 percent at 923 pence by 1330 GMT, the weakest major European bank.
There were previous hints, completely ignored by the markets of course, that things at this China-heavy bank are going from bad to worse: a jump in Standard Chartered’s bad debts in the third quarter has prompted concern that it could face heavy losses from commodities loans after the fall in the price of oil and commodities.
The loss could be lower…
Credit Suisse’s estimate was based on an “adverse” scenario that would see the bank need $4.4 billion to maintain its capital ratio, based on a potential $2.6 billion of pretax provisioning for commodities loans that sour and a higher risk-weighting on the loans.
Then again, considering that the “adverse” scenario in the ECB stress case didn’t even consider the current deflationary environment, the loss could be far higher. Which means capital raises are on deck, and logically Credit Suisse said the bank could announce a rights issue or cut the dividend at its 2014 results, due on March 4.
“We believe the last two years of de-rating have been driven largely by weaker revenue and that the asset quality deterioration leg is now setting in,” said Credit Suisse, maintaining its “underperform” rating on the stock. Analysts at JPMorgan and Jefferies also cut their target prices on the stock on Monday, saying that credit quality could deteriorate.
Standard Chartered CEO Peter Sands is under pressure after a troubled two years in which profits have fallen, halting a decade of record earnings. Some investors have said that Sands should go or the bank should set out succession plans.
One down: many more to go. Hopefully equity investors are as generous to all those other banks who will bestunned to learn they, too, need billions more in capital.
This will surely help with Canada’s GDP:
(courtesy zero hedge)
Suncor Cuts Capex By $1 Billion, Fires 1000, Implements Hiring Freeze
For all those who have forgotten that the I in the GDP equation stands for Investment, here is a reminder courtesy of the latest crude collapse victim, Suncor, which moments ago announced it is not only cutting its 2015 CapEx by $1 billion (as in I, directly and adversely impacting US GDP by the same amount) but that it would also cut “operating expenses” by up to $800 million, and,drumroll, implementing “a series of workforce initiatives that will reduce total workforce numbers in 2015 by approximately 1000 people, primarily through its contract workforce, in addition to reducing employee positions. There will also be anoverall hiring freeze for roles that are not critical to operations and safety.”
Or as Joe LaVorgna and all the other mainstay CNBC “analysts” would call it, “unambiguously good.”
From the press release:
Suncor Energy Inc. announced today significant spending reductions to its 2015 budget in response to the current lower crude price environment. The cuts include a $1 billion decrease in the company’s capital spending program, as well as sustainable operating expense reductions of $600 million to $800 million to be phased in over two years offsetting inflation and growth.
“Our integrated model and strong balance sheet have positioned us well for the price downturn,” said Steve Williams, president and chief executive officer. “Cost management has been an ongoing focus, with successful efforts to reduce both capital and operating costs well underway before the decline in oil prices. However, in today’s low crude price environment, it’s essential we accelerate this work. Today’s spending reductions are consistent with our commitment to spend within our means and maintain a strong balance sheet. We will monitor the pricing environment and take further action as required.”
Suncor is implementing a number of initiatives to achieve the cost reduction targets. These include deferral of some capital projects that have not yet been sanctioned, such as MacKay River 2 and the White Rose Extension, as well as reductions to discretionary spending. Budgets affecting the company’s safety, reliability and environmental performance have been specifically excluded from the cost reduction program.
Suncor has also implemented a series of workforce initiatives that will reduce total workforce numbers in 2015 by approximately 1000 people, primarily through its contract workforce, in addition to reducing employee positions. There will also be an overall hiring freeze for roles that are not critical to operations and safety.
Major projects in construction such as Fort Hills and Hebron will move forward as planned and take full advantage of the current economic environment. These are long-term growth projects that are expected to provide strong returns when they come online in late 2017.
Suncor has issued an update to its 2015 guidance to reflect, among other items, reduced spending and lower pricing and related assumptions. Production guidance for 2015 has not changed.
Suncor’s fundamental goals remain the same, with operational excellence, capital discipline and profitable growth remaining key to its business strategy. In fact, today’s announcement reflects the application of these principles, in the context of the current low price environment.
“The strategic decisions we’ve made are consistent with our unwavering focus on capital discipline and operational excellence,” said Williams. “We will continue to carefully manage our spending priorities: sustaining safe, reliable and environmentally responsible operations, providing a meaningful, competitive dividend for our shareholders and investing in profitable growth.”
Many, many more to go.
The following is a must read as Michael Snyder goes through the numbers and agrees what we have been telling you. The globe has a massive short in the USA dollar of 9 trillion and much of those dollars purchased commodities like copper and oil. The total commodities purchased this year is around 22 trillion dollars and now much of that is under water. The powder keg has been lit…
a must read….
(courtesy Michael Snyder/Economic Collapse Blog)
Boom Goes The Dynamite: The Crashing Price Of Oil Is Going To Rip The Global Economy To Shreds
By Michael Snyder, on January 12th, 2015
If you were waiting for a “black swan event” to come along and devastate the global economy, you don’t have to wait any longer. As I write this, the price of U.S. oil is sitting at $45.76 a barrel. It has fallen by more than 60 dollars a barrel since June. There is only one other time in history when we have seen anything like this happen before. That was in 2008, just prior to the worst financial crisis since the Great Depression. But following the financial crisis of 2008, the price of oil rebounded fairly rapidly. As you will see below, there are very strong reasons to believe that it will not happen this time. And the longer the price of oil stays this low, the worse our problems are going to get. At a price of less than $50 a barrel, it is just a matter of time before we see a huge wave of energy company bankruptcies, massive job losses, a junk bond crash followed by a stock market crash, and a crisis in commodity derivatives unlike anything that we have ever seen before. So let’s hope that a very unlikely miracle happens and the price of oil rebounds substantially in the months ahead. Because if not, the price of oil is going to absolutely rip the global economy to shreds.
What amazes me is that there are still many economic “experts” in the mainstream media that are proclaiming that the collapse in the price of oil is going to be a good thing for the U.S. economy.
The only precedent that we can compare the current crash to is the oil price collapse of 2008. You can see both crashes on the chart below…