May 26/Huge demand from China in the latest reporting week equal to 45 tonnes/Greece calls off meeting with its creditors/Syriza party seems to be fragmenting/Russia calls off purchase of its 2 Mistral ships/France must pay for non delivery/

Here are the following closes for gold and silver today:

Gold:  $1187.20 down $17.10 (comex closing time)

Silver $16.73 down 30 cents (comex closing time)

 

In the access market 5:15 pm

Gold $1188.00

Silver: $16.77

 

 

Gold/Silver trading: see kitco charts on the right side of the commentary

Following is a brief outline on gold and silver comex figures for today:

 

At the gold comex today, we had a poor delivery day, registering 0 notices serviced for nil oz.  Silver comex  filed with 0 notices for nil oz

 

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 243.81 tonnes for a loss of 59 tonnes over that period.

 

In silver, the open interest fell by 1262 contracts as Friday’s silver price was down by 8 cents.   The total silver OI continues to remain extremely high with today’s reading at 173,331 contracts maintaining itself near multi-year highs despite a record low price. This dichotomy has been happening now for quite a while and defies logic. There is no doubt that the silver situation is scaring our bankers to no end.

 

In silver we had 0 notices served upon for nil oz.

 

In gold,  the total comex gold OI rests tonight at 414,882 for a loss of 2,939 contracts as gold was down $0.10 on Friday. We had 0 notices served upon for nil oz. Whenever we approach first day notice, the entire open interest for the gold or silver complex collapses.

 

Today, we had a slight change in inventory at the GLD, an addition of .600 tonnes of gold; thus the new inventory rests tonight at 715.86 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.

 

In silver, /we had no change in silver inventory at the SLV/Inventory rests at 317.930 million oz

 

We have a few important stories to bring to your attention today…

 

1. Today we had the open interest in silver fall by 1262 contracts as silver was down in price on Friday by 8 cents.  The OI for gold fell by 2,939 contracts down to 414,882 contracts as the price of gold was down by $0.10 on Friday. We continually witness open interest contraction once first day notice approaches on an active precious metals contract.

(report Harvey)

2,Today we had 3 major commentaries on Greece

(zero hedge )

3.Koos Jansen reports on the Chinese gold demand for the last reporting week:  45 tonnes of gold.

(Koos Jansen)

4. Dave Kranzler discusses today’s raid and Friday’s COT report

(Dave Kranzler/ IRD)

5, Spanish regional election brings on anti austerity gains.  The ECB not enamoured with the results.

(zero hedge)

 

6. Bill Holter delivers a super commentary on China’s huge appetite for gold and where this is heading

(Bill Holter/Holter-Sinclair collaboration)

 

7.  We had 4 big misses in today’s USA data report.

(zero hedge)

 

8. The Russians abort their purchase of 2 Mistral ships.  Now comes the damages that France must pay.  China is looking to purchase those ships and no doubt that they will deliver the ships to Russia.

 

(zero hedge)

 

 

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 fell by 2939 contracts from 417,821 down to 414,882 as gold was down by $0.10 on Friday (at the comex close). For at least the past 18 months, we have been witnessing a total contraction of open interest in an active precious metals month once we are about to enter first day notice. We are in the active delivery month of May and here the OI fell by 6 contracts falling to 76. We had 0 notices filed yesterday.  Thus we lost 6 gold contracts or an additional 600 oz will not stand for delivery in May. The next big active delivery contract month is June and here the OI fell by 16,988, contracts down to 122,309. June is the second biggest delivery month on the comex gold calendar. First day notice is May 29.2015 so we have 3 trading sessions left. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was fair at 203,905. The confirmed volume on Friday (which includes the volume during regular business hours + access market sales the previous day) was poor at 193,583 contracts paper. Today we had 0 notices filed for nil oz.

 

And now for the wild silver comex results.  Silver OI fell by 1261 contracts from 174,5932 down to 173,331 as the price of silver was down in price by 8 cents, with respect to Friday’s trading. We are into the active delivery month of May where the OI fell by 35 contracts and thus falling to 252. We had 30 contracts filed upon with respect Friday’s trading.  So we lost 5 contracts or an additional 25,000 oz will not stand for delivery in this active May month. The estimated volume today was poor at 29,406 contracts (just comex sales during regular business hours. The confirmed volume on Friday (regular plus access market) came in at 34,683 contracts which is fair in volume.  We had 0 notices filed for nil oz today.

 

 

May initial standings

May 26.2015

Gold

Ounces

Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz   101.85 oz (HSBC
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz 3500.000 oz ???HSBC,
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices)  76 contracts(7600) oz
Total monthly oz gold served (contracts) so far this month 15 contracts(1500 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month 164,151.8 oz
Total accumulative withdrawal of gold from the Customer inventory this month  53,156.2 oz

 

Today, we had 0 dealer transactions

 

 

total Dealer withdrawals: nil oz

 

we had 0 dealer deposit

total dealer deposit: nil oz
we had 1 customer withdrawal

i) out of HSBC: 101.85 oz

total customer withdrawal: 101.85  oz

 

We had 1 customer deposits:

i) Into HSBC: 3,500.000 oz  ???? (not divisible by 32.15)

 

Total customer deposit:  3500.00 oz

 

We had 0   adjustments:

 

 

Today, 0 notices 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 May contract month, we take the total number of notices filed so far for the month (15) x 100 oz  or 1500 oz , to which we add the difference between the open interest for the front month of May (76) and the number of notices served upon today (0) x 100 oz equals the number of ounces standing.

 

Thus the initial standings for gold for the May contract month:

 

No of notices served so far (15) x 100 oz  or ounces + {OI for the front month (76) – the number of  notices served upon today (0) x 100 oz which equals 9100 oz standing so far in this month of May. (.2830 tonnes of gold)

we lost 600 oz of gold standing in this May delivery month.

 

Total dealer inventory: 372,630.992.022 or 11.59 tonnes

Total gold inventory (dealer and customer) = 7,838,715.16 (243.81) tonnes)

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 243.71 tonnes for a loss of 59 tonnes over that period. Lately the removals  have been rising!

 

end

 

And now for silver

 

May silver initial standings

May 26 2015:

Silver

Ounces

Withdrawals from Dealers Inventory 5192.537 oz (Scotia)
Withdrawals from Customer Inventory nil
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory  19,496.700 oz (CNT)
No of oz served (contracts) 0 contracts  (nil oz)
No of oz to be served (notices) 254 contracts (1,270,000 oz)
Total monthly oz silver served (contracts) 2703 contracts (13,515,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month  126,359.680 oz
Total accumulative withdrawal  of silver from the Customer inventory this month 3,853,785.3  oz

Today, we had 0 deposits into the dealer account:

total dealer deposit: nil   oz

 

we had 1 dealer withdrawal:

i) Out of Scotia: 5,192.537 oz

total dealer withdrawal: 5,192.537 oz

 

We had 1 customer deposits:

i) Into CNT: 19,496.700 oz

total customer deposit: 19,496.700  oz

 

We had 0 customer withdrawals:

i) Out of CNT:  1006.80 oz

total withdrawals from customer;  1006.80 oz oz

 

we had 0 adjustments

 

Total dealer inventory: 60.849 million oz

Total of all silver inventory (dealer and customer) 178.779 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 May, we take the total number of notices filed for the month so far at (2703) x 5,000 oz  = 13,515,000 oz to which we add the difference between the open interest for the front month of April (284) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing.

Thus the initial standings for silver for the May contract month:

2703 (notices served so far) + { OI for front month of April (289) -number of notices served upon today (0} x 5000 oz = 14,810,000 oz of silver standing for the May contract month.

We neither lost nor gained any silver ounces standing for the May contract month.

 

for those wishing to see the rest of data today see:

http://www.harveyorgan.wordpress.com orhttp://www.harveyorganblog.com

 

end

 

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:

may 26.2015/we had a slight addition of .600 tonnes of gold to the GLD inventory/inventory rests at 715.86 tonnes

May 22.2015: no changes in gold inventory at the GLD/Inventory rests at 715.26 tonnes

May 21./no changes in gold inventory at the GLD/Inventory rests at 715.26 tonnes

May 20./we had another withdrawal of 2.98 tonnes of gold leaving the GLD. Inventory rests tonight at 715.26 tonnes

May 19/no changes in gold inventory at the GLD/Inventory at 718.24 tonnes

May 18/we lost another 5.67 tonnes of gold inventory at the GLD/Inventory rests at 718.24 tonnes

May 15./no change in gold inventory at the GLD/Inventory rests at 723.91 tonnes

May 14./ a huge withdrawal of 4.41 tonnes of gold/Inventory rests at 723.91 tonnes

May 13.2015: no change in inventory at the GLD/Inventory rests at 728.32 tonnes

May 12/no change in inventory at the GLD/inventory rests at 728.32 tonnes

May 11/ no changes at the GLD/Inventory rests at 728.32 tonnes

May 8/ they should call in the Serious Fraud squad as the owners of the GLD just saw 13.43 tonnes of gold leave its vaults heading for China:

Inventory tonight:  728.32 tonnes

May 7. no change in gold inventory at the GLD/741.75 tonnes

May 6/no change in gold inventory at the GLD/741.75 tonnes

may 5/no change in gold inventory at the GLD/741.75 tonnes

may 4/no change in gold inventory at the GLD./741.75 tonnes

 

 

May 26 GLD : 715.86  tonnes.

 

end

 

And now for silver (SLV)

May 26.2015: no change in SLV /Inventory rests at 317.93 million oz

May 22.2015: no changes in SLV/Inventory rests at 317.93 million oz

May 21.no changes at the SLV/Inventory rests at 317.93 million oz

May 20/no changes at the SLV. Inventory rests at 317.93 million oz/

May 19.2015: we lost another 1.195 million oz of inventory at the SLV/Inventory rests at 317.93 million oz/

May 18.2015: we lost another 1.625 million oz of inventory at the SLV/Inventory rests tonight at 719.125 million oz

May 15./no change in silver inventory at the SLV/inventory rests tonight at 320.75 million oz

May 14/ a huge withdrawal of 1.912 million oz from the SLV/Inventory at 320.75 million oz.

May 13.2015: no changes at the SLV/Inventory rests at 322.662 million oz

May 12/no changes at the SLV/Inventory rests at 322.662 million oz

May 11/no changes at the SLV/Inventory rest at 322.662 million oz

May 8/ today we lost a huge 2.87 million oz of silver from the SLV/Inventory 322.662

May 7/no change in silver inventory/325.53 million oz

May 6/we had a huge withdrawal of 2.143 million oz of silver from the SLV/325.53 million oz

May 5/no change in silver inventory at the SLV/327.673 million oz

May 26/2015   no change in inventory/SLV inventory 317.930 million oz/

 

end

 

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 8.2% percent to NAV in usa funds and Negative 8.4% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 60.6%

Percentage of fund in silver:39.0%

cash .4%

( May 26/2015)

 

2. Sprott silver fund (PSLV): Premium to NAV falls to-0.58%!!!!! NAV (May 26/2015)

3. Sprott gold fund (PHYS): premium to NAV rises to -23% to NAV(May 26/2015

Note: Sprott silver trust back  into negative territory at -0.58%.

Sprott physical gold trust is back into negative territory at -.23%

Central fund of Canada’s is still in jail.

end

 

 

Early morning trading from Asia and Europe last night:

 

Gold and silver trading from Europe overnight/and important physical

stories

 

(courtesy Mark O’Byrne/Goldcore)

 

John Nash RIP: “Beautiful Mind” Game Theory May Lead to Gold Standard

– ‘Beautiful Mind’ Nobel winner Nash dies in tragic crash
– Nash was subject of movie “A Beautiful Mind” with Russell Crowe
– Nash was renowned mathematician who developed game theory
– Game theory suggests that world may be forced back onto a gold standard
– Debased dollar vulnerable to bitcoin, crypto-currencies, silver and gold
– Gold standard could cause a price reset at $10,000

John Nash meets with Russell Crowe and Ron Howard on the set of A Beautiful Mind

The death of mathematician John Nash on Sunday was met with a degree of sympathy and publicity seldom enjoyed by mathematicians whose contribution to society is usually a quiet, unappreciated one, behind the scenes. The 86 year old was killed with his wife in a tragic taxi accident in New Jersey.

The 2002 movie “A Beautiful Mind” with Russell Crowe popularised the story of his work on game theory – a mathematical study of how decisions are made – and his life with schizophrenia. He developed what became known as the ‘Nash Equilibrium’ for which he won the Nobel Prize for Economics in 1994.

Game theory, according to Wikipedia, is the study of strategic decision making. Specifically, it is “the study of mathematical models of conflict and cooperation between intelligent rational decision-makers.”

The most famous scene from “A Beautiful Mind” shows him applying his nascent theory in a social setting. While he and his college friends sit in a bar drinking a group of girls enter, one of whom is a particularly stunning blonde woman. As the young men prepare to descend upon the girls in an attempt to win the favour of the blonde girl, Nash devises a strategy.

goldcore_chart2_26-05-15
The blonde girl is obviously very used to male attention and it probably earns her the jealous resentment of her friends and so the scenario of a group of young men vying for her attention is not likely to lead to a favorable outcome.

Instead, Nash suggests that his friends focus their attentions on the other girls – ignoring the blonde. The other girls thereby enjoy some male attention perhaps amplified by the satisfaction that the beauty is being left on the shelf. The humbling experience then brings the blonde into the range of the young men whereas, had she received their initial attentions she would likely have been unobtainable.

goldcore_chart3_26-05-15
In his excellent 2012 book ‘The Golden Revolution’, John Butler describes how Nash’s game theory would suggest that the era of fiat currencies is drawing to a close and the world will soon be forced back onto some form of gold standard.

Butler believes that the BRICS nations, especially Russia and China, will not stand for a dollar reserve currency in its current form and that this will likely cause them to move back to a form of gold standard. Indeed, since publication of the book the central banks of some BRICS nations have been rapidly acquiring gold – particularly the Central Bank of Russia and the People’s Bank of China (PBOC).

goldcore_chart4_26-05-15
In an important interview with Reuters in 2012 Butler suggested that if one country – he cited Russia – were to back its currency with gold it could cause a 20% collapse in the dollar in just 24 hours. In order to stabilise the currency and in an attempt to preserve the reserve currency status of the dollar the U.S. would be forced against its will to back its currency with gold.

If the dollar were to be fully backed by gold it would cause a dramatic spike in the price of gold. With M1 at nearly $2980 billion at the time and stated gold reserves of 8,500 tonnes, gold would have to be revalued at roughly $9,900 per ounce.

Critics will attack Butler’s bold call in terms of the timing of these events as clearly $10,000 per ounce gold did not happen in 2013. However, the substantive points Butler makes regarding game theory, a return to some form of gold standard and gold potentially being revalued to $10,000 per ounce remain valid.

Indeed, events in recent years such as

– the continuing deterioration of the U.S.’ fiscal position (national debt now over $18.24 trillion and unfunded liabilities of over $100 trillion)

– the continuing debasement of the dollar and decline in its position as sole reserve currency

– Russia’s and China’s steady accumulation of gold bullion reserves

– China’s using gold as an important strategic tool in order to position the yuan as a rival reserve currency and enhance Chinese monetary, financial and economic power

all suggest that Butler’s timing will have been wrong but the call may be proven correct in the fullness of time as competitive currency devaluations and currency wars escalate .

goldcore_chart5_26-05-15

The status of the dollar as a global reserve currency is by no means guaranteed. A fiat currency which suffers continual debasement through currency creation on a scale never seen before in history will not be tolerated indefinitely.

Continuing demand for gold and silver bullion throughout the world and especially in Asia and the emergence ofcryptocurrencies and bitcoin show the world is moving towards alternatives already.

Owning physical gold in secure vaults will  protect one’s wealth from the instability stemming from a disruption to or transition from the current fragile international financial and monetary system.

Must Read Storage Guide:
7 Key Bullion Storage Must Haves

MARKET UPDATE

Today’s  AM LBMA Gold Price was USD 1,194.00, EUR 1,095.56 and GBP 774.77 per ounce.
Friday’s AM LBMA Gold Price was USD 1,211.00, EUR 1,083.45 and GBP 772.96 per ounce.

Yesterday was a spring bank holiday in the UK and the U.S. observed Memorial Day.

Silver in U.S. Dollars - 10 Years

Yesterday, gold dipped below $1,200 an ounce near a two week low while the U.S. dollar climbed higher after Fed Chair Janet Yellen was seen to reaffirm the central bank’s tightening stance on monetary policy.

Overnight, gold bullion in Singapore was down 0.8 percent at $1,197.46 an ounce and gold has traded sideways in London too.

Today, there is more U.S. economic data due –  core durable goods, durable goods orders, HPI, flash service PMI, CB consumer confidence, Richmond manufacturing data, and new home sales.  Negative data should see gold rise and positive numbers could see more weakness.

The outlook for Greece remains very uncertain. If they do not make their IMF payment next week it may trigger more safe haven demand for gold bullion.

The risk that the heavily indebted Chinese economy goes into recession and drags the U.S. and the world with it remains underestimated. China’s top banking regulator warned overnight of rising credit risk from real estate, local government debt and “unconventional” forms of finance, sources with direct knowledge told Reuters.

The regulator highlighted Beijing’s struggles to prevent risky debt from engulfing a stuttering economy.

In late morning European trading gold is down 1.06% at $1,194.05 an ounce. Silver is off 1.99 percent at $16.76 an ounce and platinum is also trading off 1.37 percent at $1,132.20 an ounce.

 

end

 

 

(courtesy London Telegraph/Titcomb/GATA)

Banks brace for more FX-rigging pain as civil lawsuits come forth

Section:

By James Titcomb
The Telegraph, London
Saturday, May 23, 2015

Banks are bracing for hundreds of millions of pounds in new claims for foreign exchange manipulation from class-action lawsuits triggered by last week’s vast market rigging fines.

Barclays, Royal Bank of Scotland, and four other banks were ordered on Wednesday to pay $6 billion (L3.84 billion) by UK and US authorities.

The Barclays penalty represents the biggest bank fine in British history.

The regulators, detailing how traders gathered in chatrooms using monikers such as “The Cartel” and “Coiled cobra” to rig the $5.3 trillion-a-day currency market, also forced the banks to plead guilty to criminal charges.

Lawyers say that the fines, as well as an investigation from the European Commission, could be a springboard to damaging civil litigation in the UK and Europe. …

… For the remainder of the report:

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11625158…

 

end

 Eric Sprott correctly states that the ECB will save Greek banks but not the Greek citizens nor its government:
(courtesy Eric Sprott/Kingworldnews/Eric King/GATA)

ECB would save Greek banks but not the government, Sprott tells KWN

Section:

6:50p ET Saturday, May 23, 2015

Dear Friend of GATA and Gold:

Greece, its government, and its people can go down but the European Central Bank means to protect the country’s banks, Sprott Asset Management’s Eric Sprott tells King World News today. The bankers, Sprott says, “care more about the banking system than they care about the government because they don’t want the domino effect to start.” Sprott’s interview is excerpted at the KWN blog here:

http://kingworldnews.com/billionaire-eric-sprott-on-the-greatest-financi…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

 

end

 

Bill Murphy discusses manipulation with Greg Hunter of USAWatchdog

(courtesy Bill Murphy/Greg Hunter)

Governments keep metals down to avert ‘derivatives nightmare,’ Murphy says

Section:

9:40p ET Sunday, May 24, 2015

Dear Friend of GATA and Gold:

Interviewed by USA Watchdog’s Greg Hunter, GATA Chairman Bill Murphy says governments and investment banks need to suppress gold and silver prices to avert a “derivatives nightmare.” Murphy adds that it’s strange that silver is the only market the U.S. government purports to have investigated without finding impropriety. The interview is 28 minutes long and can be viewed at USA Watchdog’s Internet site here:

http://usawatchdog.com/rising-gold-price-could-set-off-derivative-nightm…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

 

end

 

Have fun with this: coming to a store near you!

 

(courtesy Associated Press/Via Minneapolis Star Tribune/GATA)

Businesses turn to dollar in fiercely anti-American Venezuela as currency crashes

Section:

By Hannah Dreier
Associated Press
via Minneapolis Star-Tribune
Saturday, May 24, 2015

CARACAS, Venezuela — It’s still possible to buy a gleaming Ford truck in Venezuela, rent a chic apartment in Caracas, and snag an American Airlines flight to Miami. Just not in the country’s official currency.

As the South American nation spirals into economic chaos, more products are not only figuratively out of the reach of average consumers but literally cannot be purchased in Venezuelan bolivars, which fell into a tailspin on the black market last week.

Businesses and individuals are turning to dollars even as the anti-American rhetoric of the socialist administration grows more strident. It’s a shift that’s allowing parts of the economy to limp along despite a cash crunch and the world’s highest inflation. But it could put some goods further out of reach of the working class, whose well-being has been the focal point of the country’s 16-year-old socialist revolution.

The latest sign of an emerging dual-currency system came this month when Ford Motor Co. union officials said the company had reached a deal with officials to sell trucks and sport utility vehicles only in dollars.

A few weeks earlier American Airlines announced that it had stopped accepting bolivars for any of its 19 weekly flights out of Venezuela. Customers must now use a foreign credit card to buy the tickets online. Virtually all other foreign carriers have made the same switch with the government’s consent, according to the Venezuela Airlines Association.

Driving the shift is the crumbling value of the bolivar, which has lost more than half its value this year, plunging to 400 per dollar on the free market as Venezuelans scramble to convert their savings into a more stable currency. Desperate, people are selling bolivars for a rate 60 times weaker than the strongest of country’s three official exchange rates. …

… For the remainder of the report:

http://www.startribune.com/businesses-quietly-switch-to-dollar-in-social…

 

end

 

Bill Holter also discusses the following in his commentary:  the concept of a new gold fund under the direction of China:

 

(courtesy Reuters/GATA)

China sets up gold fund as part of ‘Silk Road’ initiative, official media say

Section:

By Ruby Lian and A. Ananthalakshmi
Reuters
Monday, May 25, 2015

China has established a fund that is expected to raise about $16 billion for gold-related investment as part of its “Silk Road” initiative to develop trade and transport infrastructure across Asia and beyond, official media reported.

The fund, which will be run by a new company to be set up by gold producers and financial institutions, is expected to raise an estimated 100 billion yuan ($16.13 billion) in three phases, Shanghai Securities News reported at the weekend.

Two leading gold producers, Shandong Gold Group, the parent of Shandong Gold Mining Co. Ltd., and Shaanxi Gold Group will take stakes of 35 percent and 25 percent respectively, with the rest owned by financial institutions, the newspaper said.

The fund’s activities could take in the launch of gold-backed exchange-traded funds and buying stakes in listed gold companies and mining firms. …

… For the remainder of the report:

http://in.reuters.com/article/2015/05/25/china-gold-idINKBN0OA0G62015052

 

end

 

TF Metals Report: Bullion banks now short 350% of all Comex gold and silver stocks

Section:

11:51p ET Monday, May 25, 2015

Dear Friend of GATA and Gold:

Bullion bank shorting of gold and silver on the New York Commodities Exchange has reached grotesque levels, the TF Metals Report’s Turd Ferguson writes tonight — 350 percent of the total available supplies of gold and silver reported in Comex warehouses. He notes that while the big banks lately have been prosecuted for and have admitted rigging markets in London-based interest rates, currencies, industrial metals, energy, and equities, there have been no prosecutions and admissions of big banks for rigging the gold and silver markets.

This curious omission is a clue to what’s really going on in the latter markets — the surreptitious involvement of governments, which control market-rigging prosecutions. To paraphrase former President Richard Nixon’s befuddled remark to the journalist and television program host David Frost: When the government does it, that means that it’s not illegal — and indeed in the United States the Gold Reserve Act of 1934, as amended in the 1970s, gives the U.S. Treasury Department, operating through the Exchange Stabilization Fund, the authority to rig any market in the world in secret:

http://www.treasury.gov/resource-center/international/ESF/Pages/esf-inde…

Maybe that’s why the CME Group, operator of the major futures exchanges in the United States, offers discounts to central banks for their secret trading of all major futures contracts on CME Group exchanges:

http://www.gata.org/node/14385

This is all the biggest open secret since Hans Christian Andersen wrote the fairy tale “The Emperor’s New Clothes” almost 200 years ago. Today the fairy tale is the “market” system of the West —

http://www.gata.org/node/14839

— with financial news organizations filling the role played by Andersen’s cowardly bystanders.

Don’t bother pointing this out to the Financial Times, New York Times, Reuters, Bloomberg, the Associated Press, The Economist, or any other Western news organization that claims respectability. They all already know, having been given the documentation and having resolved to suppress it and never even hint about it with a critical question to anyone in authority. For the moment gold and silver market rigging can be discussed openly only in China —

http://www.gata.org/node/10380

http://www.gata.org/node/10416

— whose fairy tales impose different burdens on different people.

The TF Metals Report’s analysis is headlined “On with Rory and Denver Dave” and it’s posted here:

http://www.tfmetalsreport.com/blog/6870/rory-and-denver-dave

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

 

end

 

Demand for gold for the last reporting week: May 11-May 15 was 45 tonnes of gold which is huge.

A great report today from Koos Jansen:

(courtesy Koos Jansen)

 

Posted on 26 May 2015 by

Don’t Believe Everything You Read On The Internet

Wholesale gold demand measured by withdrawals from Shanghai Gold Exchange (SGE) vaults remains very strong this year at 45 tonnes in week 19 (May 11 -15). Year to date 903 tonnes have been withdrawn.

Shanghai Gold Exchange SGE withdrawals delivery 2015 week 19 dips

Shanghai Gold Exchange SGE withdrawals delivery only 2014 - 2015 week 19

Year to date withdrawals are up 20 % from 2014 and 8 % from 2013. In the next chart we can see the strength of SGE withdrawals in 2015 compared to previous years.

SGE withdrawals YTD

We can see withdrawals are stronger than ever. We must consider though, the gold withdrawn can be supplied through domestic mining output, import and recycled gold (and stock-carry over). Bare in mind, it’s not proven how much of what component has supplied the SGE this year. Additionally, withdrawals could have been made through the Shanghai International Gold Exchange (SGEI).

Don’t Believe Everything You Read On The Internet

Recently a website called Want China Times published a story titled, “China Could Crash US Dollar With 30,000 Tons Of Gold: Commentary”. I would like to share my opinion on this story about the Chinese gold market that has directly or indirectly reached many readers.

First I would like to go back to last year. On May 17, 2014, I published an article on the Chinese silver market, “Chinese Real Estate Debt Settled In Silver?”. Based on an article from Want China Times, I wrote real estate debt in the Chinese city Ordos was settled in physical silver. Real estate debt of 1 million yuan was settled with 500,000 yuan in silver, according to Want China Times (WTC). Regrettably I copied this story. A commenter on my post raised serious concern about the validity of the WTC story. On May 19, I wrote WTC an email asking for the original source their article was based on. Until this day I have received no reply on this inquiry.

On June 2, 2014, WTC published an article that was also eagerly read in the gold space, “Wall Street Concerned Over China’s Gold Hoarding”. WTC disclosed the source of this article to be a Chinese website called BWChinese, that quoted an analyst from Hong Kong, Leung Hai-Ming. Again my doubts on the integrity of WTC was triggered. I called WTC, BWChinese and tried to find Leung Hai-Ming. On the BWChinese website I couldn’t find anything that remotely resembled the story at WTC. On the phone BWChinese couldn’t help me either.

On June 3, 2014, I received an email from WTC in response to my question about the source of the “Wall Street Concerned Over China’s Gold Hoarding” article:

Dear reader of WantChinaTimes,

As your request on email and a call from Charlie in In Gold We Trust, we have found the story you mentioned in our website comes from an article in BWCHINESE. It was written in Chinese. Here is its link:

http://www.bwchinese.com/article/1057136_5.html

Thanks for your mail and call. I hope this info will be useful to you.

WantChinaTimes.com
2014-06-03

At the time my blog was titled In Gold We Trust.

When reading the link to BWChinese it became apparent to me the WTC article could not have been based on this story. The story on BWChinese was about gold, but did not resemble the content of the WTC article. Perhaps WTC thought I couldn’t read Chinese and thus wouldn’t figure out that there was no source, who knows. In any case they sent me a false link, which severely damaged their credibility.

I decided to publish my findings and write I was wrong on the Chinese real estate market in my post from May 17, 2014 – as I came to believe WTC is no credible source and real estate debt was not settled in silver. I had learned to be more skeptical, especially towards “Chinese” websites – WTC is based in Taiwan, and thankfully I can always correct myself when I’m wrong.

Back to WTC’s recent piece, the 30,000 tonnes story from May 15, 2015. In this article they refer to the source Duowei, again a Chinese “unreadable” website. And again, WTC is quoting a gentleman with a Chinese name, this time it’s Jin Zihou. From Want China Times:

China has the ability to crash the unstable US dollar with 30,000 tons of gold reserves, says Chinese economic observer Jin Zihou. 

Who exactly is Jin Zihou and where did he say this? Well, Jin Zihou is an author (/blogger) with no particular expertise of the Chinese gold market, he wrote an article published on May 6, 2015, at … wait for it … BWChinese. The Duowei story is nearly an exact copy of Jin’s story at BWChinese. Shortly we’ll discuss where he got the 30,000 tonnes number. Let us continue at WTC:

In a commentary posted online, Jin noted that former US Federal Reserve chair Alan Greenspan once said that the renminbi could become unexpectedly powerful in today’s financial system if Beijing would convert its US$4 trillion in foreign reserves into gold.

Greenspan once said that China could convert its $4 trillion reserves into gold, according to Jin Zihou. First of all there is no evidence Greenspan has ever said this. Second, would it be a smart thing to do? If China would sell $4 trillion and buy gold in a short period of time the global monetary system would collapse and the value of the dollar would evaporate, which would immediately halt global trade. This is not particularly in China’s interest. Needless to say, China is slowly trying to get out of its grotesque USD position, but it can not convert $4 trillion into gold any time soon. So, I’m not so sure about this statement from Greenspan.

With the US dollar growing more unstable and China being America’s largest creditor, Beijing could potentially crash the US dollar with 30,000 tons of gold, Jin said.

However, Alasdair Macleod, head of research for GoldMoney, states that China could have easily piled up 25,000 tons of gold between 1982 and 2003, meaning its gold reserves could have exceeded 30,000 tons by now.

Alasdair Macleod has written an article in 2014 stating “the Chinese state has probably accumulated between 20,000 and 30,000 tonnes since 1983”. In my humble opinion this estimate is based on no evidence, but you can read the article and make up your own mind. Now, was the 30,000 tonnes number conceived by MacLeod or Jin? The onlysource I could find on the 30,000 tonnes number is MacLeod’s estimate. In a new Chinese jacket (Duowei, Jin) the story was transformed and made additional rounds. (if someone else has an additional source I would love to read it, please comment below.)

Starting from BWChinese via Duowei and Want China Times the 30,000 tonnes story was re-ignited and has spread over the internet. Shortly after Russian website Pravda.ru published, “China Saves Up 30,000 Tons Of Gold To Topple US Dollar From Global Reign”. Pravda did not include any links, but they mention Duowei as the source (so again, this was MacLeod’s estimate). Sputnik published, “Dragon Rising: China’s Gold Will Break World’s Dependence on US Dollar”. From Sputnik:

China can ultimately overthrow the US dollar domination using its 30,000 tons of gold reserves, according to Chinese economist Jin Zihou.

Clearly Sputnik used the WTC article. They continue:

Remarkably, Alasdair Macleod, a researcher and former Executive Director at an offshore bank in Guernsey and Jersey, pointed out that between 1983 and 2003 China could have secretly accumulated almost 20,000 tons of gold.

This is not remarkable, as Jin and MacLeod are the same source.

There have been many blogs and websites that copied the same story, all multiplied from the WTC article. My point being, the truth is hard to come by and the internet did not make the process more easy, at best only faster. From my personal experience I like to use hard evidence as a foundation from where speculation can be used to progress. Recently I wrote an article trying to separate facts from speculation regarding PBOC gold purchases, which you can readhere.

My grand father told me as early as 1965, “don’t believe everything you read on the internet.”

Koos Jansen
E-mail Koos Jansen on: koos.jansen@bullionstar.com

 

end

 

The following is extremely important:

(courtesy Bill Holter/Holter-Sinclair  Collaboration)

 

China has only one option …

 

The title is of course a little misleading because China has many options, none of which except one in my opinion will actually work.  Options to what exactly you ask?  Options to a collapsing global economy and an imploding financial system which will surely affect China as much as anywhere else, but with one caveat.  I take these events as a given, others do not but betting against an outright panic and global bankruptcy is betting against pure mathematics itself.

  Let’s back up a little bit and look at where China is currently.  They are the second largest economy in the world (maybe the largest, we can’t really know because the numbers here, there, and everywhere are made up).  China is by far THE largest manufacturer in the world and also an enormous exporter.  China is also in a three horse race as to who owns the most U.S. Treasuries with Japan and unbelievably the Federal Reserve itself.  They have an oversized shadow banking system which has already been shown as fraudulent in several cases regarding copper, zinc and lead as “collateral” (or not).
  The Chinese also have a stock market bubble boiling that makes the tulip craze http://www.zerohedge.com/news/2015-05-22/chinas-tulipmania-full-frontal-shenzhens-parabolic-stocks-just-hit-67x-pe  look tame.  Because of sheer size of the country, they are opening something like four million brokerage accounts per month.  In recent days they have had several stocks hit new highs only to drop 50-60% or more in just one day.  In fact, they had one company stock hit a new high and then go to ZERO the following day because it was discovered their books were cooked to a crisp.
  We also know China is a huge importer of gold AND the largest producer of gold in the world.  NONE of their production ever leaves their borders.  There have been estimates of gold tonnage held by many.  Alisdair Mcleod believes they may have 25,000 tons or more, I personally believe it is possible if you include legacy or “elders” gold.  Others believe the number is closer to the 5,000 ton range.  My belief is that 10,000 tons is a justifiable number and very easily proven, if this is true, much of it had come from the U.S. and other Western sources and thus depleting the reserves.
  I assume the number is 10,000 tons or more, this is a safe number in my mind.  I think it is also a safe bet to say the U.S. has sold a minimum of one half of “our” gold which would leave about 4,000 tons.  If this is the case, there is already a  new world order where China has as much gold as numbers 2, 3 and 4.  Looking backwards in time, after the Bretton Woods agreement, the U.S. had every incentive to keep the “price” of gold down at $35.  This is so and evidenced by the old saying “it’s as good as gold”.  The saying originally came about as a description of the dollar.  As it turns out, the dollar was NOT as good as gold, in fact it was not as good as anything, even a cup of coffee.  The dollar was overprinted and abused (inflated) by politicians (the Fed) in order to hide anything and everything “bad”.  This worked until we hit the wall, let’s call this wall “debt saturation”.  Now, the process is reversing and will end in a massive deflation versus real money while fiat currencies follow their issuers into insolvency.
  Getting back to China, whenever they do make an announcement of how much gold they have, the yuan will appreciate greatly versus all fiat currencies.  Many will pooh pooh this thought because “China will never do that, they will kill their own manufacturing base”.  Let me answer this before moving forward.  The Chinese are very smart people, they can see the West is hitting the debt wall.  They also know that as the wall is hit and markets begin to implode, their “customers” are going to have an even harder time buying Chinese produced goods.  In fact, they already know this.  They already know this is happening and can see it in their trade figures …which is why they recently formed the AIIB and are working feverishly to open the “old silk road” trade route!  They are simply lining up new customers from one end of the silk road to the other!
  I have hypothesized many times in the past, China has built out their infrastructure and even “ghost cities” using credit.  Once the credit markets begin to default, they will be left with “stuff”, in place and will last for the next 50 to 100 years.  Roads, bridges, buildings, airports, ports, etc., you name it they have already built it.  And yes, their stock market will crash, their real estate market is already softening, in reverse and declining.  I am not saying it will be all rosy, to the contrary, there will be bankruptcies galore in China… with a caveat.  The “government” of China will go through this liquidation phase with the most gold in the world.
  Moving forward, since China will be hurt badly as investments default, I believe they will re price their gold higher initially.  I believe marking their gold higher in terms of yuan will be their only option.  They will be forced to in order to “recapitalize” themselves (and their banking system) and begin to fill in the black holes created by defaulted U.S. Treasuries and other “assets” held.  You see, not only is the old saying “he who owns the gold makes the rules” true, it is also true that he who owns the gold has the ability to PRICE IT.
  This has been true for so many years as the U.S. (the West) has wanted low gold prices as a show or display that their fiat currencies were “good”.  Now, as the curtain goes down on the West, China will want a very high gold price in yuan for when the curtain rises again.  A gold price maybe even higher than it should be will give the PBOC more power initially AND will allow them some room to inflate and grow.  Please notice I am only talking about China in this paragraph.  As for the dollar and other Western currencies, they will be revalued downward versus the yuan which gives gold priced in dollars a double whammy of re pricing.
  Let’s tie this all together and look at the old silk road and the trade route China is focusing on.  It goes from Asia, through the Middles East and into Europe.  Could this be why various European nations are repatriating their gold?  Not only because they have lost trust in their custodian but they also know China will put an emphasis on gold holdings in the future?  What do many Asians hold as money?  Yes, Gold.  Indians?  Gold.  Arabs?  Again gold.  The point I am trying to make is the “old silk road” might as well be called the “yellow brick road” and one paved with gold from beginning to end!  It seems to me, the only ones who don’t understand this or even disagree are Westerners and in particular, Americans.  Our standard of living is about to pulled right out from under us while violently proclaiming “it can never happen”.  I would say, it should have already happened but has not because we still had a few kilos left to supply the paving crew of the “Wizard of OZ paving company”.
  The above was finished midday on Saturday, since then two new pieces of news have come out.  First, China announced it is setting up “the world’s largest gold fund”  http://www.zerohedge.com/news/2015-05-24/china-establishes-worlds-largest-physical-gold-fund  .  They will earmark $16 billon to purchase physical gold.  If you do the math, this is around 500 tons or about 20% of global production.  By calling it “the world’s largest gold fund”, maybe China is saying they do not believe “GLD” is real?  Just an observation.
  In the latest piece of news, http://rt.com/business/261289-brics-new-development-bank/  RT ran an editorial piece pointing out that China already lends more to Africa and Latin America than the World Bank and IMF combined.  Is this posturing “for” the Chinese before the IMF readjusts the SDR?  Seemingly disconnected pieces to the puzzle, don’t bet on it!
Regards, Bill Holter for;
Holter/Sinclair collaboration.

And now overnight trading in stocks and currency in Europe and Asia

 

1 Chinese yuan vs USA dollar/yuan strengthens to 6.1970/Shanghai bourse green and Hang Sang: green

2 Nikkei closed up by 23.71  points or .12%

3. Europe stocks all in the red (except Paris)/USA dollar index up to 96.89/Euro falls to 1.0915/

3b Japan 10 year bond yield: slight rises to .43% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 122.54/

3c Nikkei still just above 20,000

3d USA/Yen rate now well above the 122 barrier this morning

3e WTI 59.39 and Brent:  65.17

3f Gold down/Yen down

3gJapan 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. Last night Japan refused to increase it’s QE

3h Oil down for WTI and down for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund falls to 59 basis points. German bunds in negative yields from 4 years out.

Except Greece which sees its 2 year rate rise  to 24.98%/Greek stocks up 1.28%/ still expect continual bank runs on Greek banks./Greek default inevitable/

3j Greek 10 year bond yield rises to: 11.41%

3k Gold at 1195.60 dollars/silver $16.82

3l USA vs Russian rouble; (Russian rouble par in roubles/dollar in value) 50.25 , the rouble is still the best acting currency this year!!

3m oil into the 59 dollar handle for WTI and 65 handle for Brent/Saudi Arabia increases production to drive out competition.

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation. This can spell financial disaster for the rest of the world/China may be forced to do QE!!

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9469 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0339 well below the floor set by the Swiss Finance Minister.

3p Britain’s serious fraud squad investigating the Bank of England/

3r the 4 year German bund remains in negative territory with the 10 year moving further away from negativity at +.59/

3s Tw0 weeks ago, the ECB increased the ELA to Greece by another large 2.0 billion euros.Last week, they raised it another 1.1 billion and then last Wednesday they raised it another tiny 200 million euros thus at this point the new maximum was 80.2 billion euros. The ELA is used to replace depositors fleeing the Greek banking system. The bank runs are increasing exponentially. The ECB is contemplating cutting off the ELA which would be a death sentence to Greece and they are as well considering a 50% haircut to all Greek sovereign collateral which will totally wipe out the entire Gr. banking and financial sector.

3t Greece  paid the 700 million plus payment to the IMF last Wednesday but with IMF reserve funds.  It must be paid back in on June 9.

3 u. If the ECB cuts off Greece’s ELA they would have very little money left to function. So far, they have decided not to cut the ELA

4. USA 10 year treasury bond at 2.18% early this morning. Thirty year rate well below 3% at 2.95% / yield curve flatten/foreshadowing recession.

 

5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.

 

 

Overnight trading early Tuesday morning from Asia and Europe:

(courtesy zero hedge/Jim Reid Deutsche bank)

Futures In The Red On Europe Jitters Ahead Of Obligatory Low-Volume Levitation

While yesterday most markets were closed and unable to express their concerns at the very strong showing of “anti-austerity” parties in Spain’s municipal election from Sunday, then today they have free reign to do just that, and as a result European stocks are broadly lower, alongside the EURUSD which dripped under 1.09 earlier today, with Spanish banks among the worst performers: Shares of Banco Sabadell, Bankia, Caixabank and Popular were down 1.8 to 2.3% earlier this morning, and while the stronger dollar was a gift to both the Nikkei and Europe in early trading, after opening in the green, Spain’s IBEX has since slid into the red on concerns of what happens if the Greek anti-status quo contagion finally shifts to the Pyrenees.

“Markets are trying to digest what is going on in Spain and what it means for Greece,” Michael Hewson, CMC Markets analyst, told Reuters. “Anti-austerity parties in Spain have been giving the incumbent government a kicking…That’s keeping investors on the back foot.”

As for Greece, with not even a chance of a deal on the horizon, the various local illiquid markets are getting hit with bonds getting the brunt of it so far:

  • GREEK TWO-YEAR NOTES DROP WITH YIELD CLIMBING 172 BPS TO 24.82%

This comes as the Greek finmin does some more improv ahead of yet another Eurogroup meeting, this time proposing a 15% tax rate for deposits held abroad.

Asia was once again immune to any global newsflow, and Chinese stocks again bounced, this time by another 2% bringing the weekly gain to about 5%, on news that policymakers will allow cross-border sales of mutual funds with mainland China. The Shanghai Comp (+1.64%) and CSI 300 (+1.48%) have continued their strong start to the week, supported by the news that Beijing has invited private investors to help build and operate around $318bn of projects.This capped the biggest 6 day surge in the Composite since 2008.

And if anyone was worried that Friday’s latest revelations about Hanergy could put an end to China’s stock bubble, have no fear: more than 250 stocks rose by the 10% daily limit on the Shenzhen Composite, the smaller of China’s two exchanges that has doubled this year and trades at 71x reported earnings!

To be sure, nobody in China noticed or cared that Zhuhai Zhongfu Enterprise Co., which supplies bottles for Coca-Cola Co. and PepsiCo Inc. in China, said it won’t be able to fully repay a bond due May 28, raising concern it will become third company to default in onshore market this year. After all, the risk of a bond market collapse is bullish for stocks as it means even more stimulus by the PBOC to blow the mother of all bubbles.

The Nikkei was also modestly higher as the USDJPY rose to a fresh high not seen since 2007.

A closer look at European trading shows that as expected, today’s session has been dominated by news filtering out of Greece from over the weekend, with concerns mounting that the country will be unable to pay their IMF debts due in June. As many European participants come back to their desk after a long weekend, EUR has seen weakness this morning, breaking to four week lows and residing below the 1.0900 handle.

This comes after comments this weekend from the Greek Interior Minister Voutsis, who stated on Sunday that Greece will not make repayments to the IMF of EUR 1.6bln expected next, however these comments were later contradicted by Greek government spokesman Sakellaridis said Greece will make its debt repayments but wants a deal by end-May or early June and has not asked for a bailout extension. Also of note, Greece narrowly rejected a call to stop paying IMF debt & nationalize banks; voting 95-75 with one blank vote. EUR weakness has bolstered the USD, with USD/JPY (+122 pips) taking out touted barriers at 122.00 and 122.50 to trades at highest levels since 2007.

European equities trade in the red this morning (Eurostoxx: -0.37) amid concerns regarding Greece, despite the DAX initially opening higher benefiting from the weaker EUR. On an index specific basis, IBEX underperforms (-0.54) after Spanish local elections saw a strong performance from the anti-austerity Podemos party. In fixed income markets, Bunds trade around 75 ticks higher today amid concerns surrounding Greece and Spain, while the short end of the Greek yield curve has risen dramatically today, with 2 yr yields higher by over 230 bps. Also of note, in terms of corporate issuance, today may see a three tranche EUR 1.5bln deal from Ely Lilly. Looking ahead in terms of US equities, today sees earnings from AutoZone at 1200BST/0600CDT, while in fixed income at 1800BST/1200CDT there is a USD 26bln 2yr Note Auction.

Over the weekend Fed’s Fischer (voter, soft dove) said that he sees an argument for publishing the Fed’s rate path forecast but says that if they do so, the market must understand that the Fed has no obligation to stick to it. Fischer added that, while markets largely expect the first rate hike in September, it will be determined by data and not by date. While Fed’s Mester (Non Voter, Hawk) said the time is near for a rate hike. Mester added that the FOMC will go into the June meeting with an ‘open mind’ about rate hikes and will look at the latest data. (BBG)

Looking ahead, the European afternoon sees US Durable Goods orders, Composite and Services PMI, New Home Sales and Richmond Fed Manufacturing Index.

Asian stocks mostly rose led by Chinese bourses which showed few signs of slowing down the recent rally. Shanghai Comp. (+2.02%) is on course for its biggest 6-day rally since Nov’08, as the Hang Seng (+0.92%) soared to a fresh 7yr high amid reports HK fund managers are going to be allowed to sell HK funds to Chinese investors. ASX (+0.91%) rose after breaking above its 100 DMA, while Nikkei 225 (+0.12%) is relatively unchanged amid light newsflow.

Commodities have spent the day in the red, weighed on by the aforementioned greenback strength. Brent July crude futures have so far today found support around the USD 65.00, while spot gold (1193.33) has broken below the psychological USD 1200 handle and 50 DMA at 1197.85 this morning to reach its lowest level since 7th March. As a reminder, today sees the expiry of Gold, Silver, Heating Oil, RBOB and Henry Hub NatGas June’15 options.

In summary: European shares fall with the utilities and banks sectors underperforming and travel & leisure, basic resources outperforming. Fed’s Mester yday said ‘time is near’ for U.S. interest-rate boost. IMF says yuan Is no longer undervalued amid  reserve currency bid. The German and Spanish markets are the worst-performing larger bourses, the Italian the best. The euro is weaker against the dollar. German 10yr bond yields fall; French yields decline. Commodities decline, with silver, natural gas underperforming and soybeans outperforming. U.S. consumer confidence, FHFA house price index, new home sales, Dallas Fed index, durable goods orders, capital goods orders, Richmond Fed index, Markit U.S. composite PMI, Markit U.S. services PMI due later.

Market Wrap

  • S&P 500 futures down 0.2% to 2121
  • Stoxx 600 down 0.2% to 405.8
  • US 10Yr yield down 4bps to 2.17%
  • German 10Yr yield down 6bps to 0.55%
  • MSCI Asia Pacific down 0.3% to 153.5
  • Gold spot down 0.7% to $1194.8/oz
  • 5 out of 19 Stoxx 600 sectors rise; travel & leisure, basic resources outperform, utilities, banks underperform
  • Asian stocks fall with the Shanghai Composite outperforming and the Sensex underperforming.
  • MSCI Asia Pacific down 0.3% to 153.5
  • Nikkei 225 up 0.1%, Hang Seng up 0.9%, Kospi down 0.1%, Shanghai Composite up 2%, ASX up 0.9%, Sensex down 0.3%
  • 3 out of 10 sectors rise with financials, energy outperforming and consumer, staples underperforming
  • Charter Said to Be Near Time Warner Cable Deal for $55.1b
  • BYD Said to Plan About $1.6b Private Share Sale in China
  • Euro down 0.63% to $1.0909
  • Dollar Index up 0.99% to 96.97
  • Italian 10Yr yield up 7bps to 1.92%
  • Spanish 10Yr yield up 1bps to 1.85%
  • French 10Yr yield down 5bps to 0.85%
  • S&P GSCI Index down 0.4% to 440.2
  • Brent Futures down 0.7% to $65.1/bbl, WTI Futures down 0.7% to $59.3/bbl
  • LME 3m Copper up 0.1% to $6166/MT
  • LME 3m Nickel down 0.4% to $12660/MT
  • Wheat futures down 0.5% to 512.8 USd/bu

Bulletin Headline Summary from RanSquawk and Bloomberg

  • USD trades higher by over 0.5% as EUR is weighed on by suggestions from the Greek Interior Minister that the country may not pay their IMF repayment on June 5th
  • European equities reside firmly in the red, also weighed on by Greek concerns
  • Looking ahead, today sees US Durable Goods orders, Composite and Services PMI, New Home Sales and Richmond Fed Manufacturing Index
  • Treasuries gain as wrangling continues over Greece’s aid demands; week’s auctions begin with $26b 2Y notes, WI yield 0.65%, highest since Dec., vs 0.54% in April
  • Greek officials will revive their bid to access financial aid with Finance Minister Yanis Varoufakis blaming creditors’ insistence on more austerity for the impasse
  • While PM Tsipras’s spokesman said yesterday a deal can be reached by end of May, he admitted that disagreements remain in areas such as budget targets, sales-tax rates, pension and labor market rules
  • The IMF officially dropped its long-held view that the yuan is undervalued, strengthening China’s case for the currency to win reserve status at the lender
  • Chinese stocks rallied, with the Shanghai Composite completing its biggest six-day advance since November 2008
  • More than 250 stocks rose by the 10% daily limit on the Shenzhen Composite, the smaller of China’s two exchanges that has doubled this year and trades at 71 times reported earnings
  • China set out its ambitions for a bigger naval presence far from its coasts, amid wariness among its neighbors over whether the country’s fleet will be used to back up its territorial claims
  • Iraq has announced the launch of an operation to drive Islamic State out of western Anbar province, where the extremists captured the provincial capital earlier this month: AP
  • Charter Communications Inc. is near an agreement to buy Time Warner Cable Inc. for about $55.1b in cash and stock, according to people familiar with the matter
  • Zhuhai Zhongfu Enterprise Co., which supplies bottles for Coca-Cola Co. and PepsiCo Inc. in China, said it won’t be able to fully repay a bond due May 28, raising concern it will become third company to default in onshore market this year
  • Sovereign bond yields mostly lower; Greek 10Y +60bps.  Asian stocks gain, European stocks, U.S. equity-index futures fall. Crude oil and copper lower; gold higher

 

DB’s Jim Reid completes the overnight summary

 

With most major markets closed yesterday, we’ve re-attached the week ahead that Craig published yesterday at the end of the report this morning. It was an unsurprisingly quiet session yesterday from a trading volume and newsflow standpoint. The political events in Spain attracted the bulk of the attention following the Spanish local and regional elections over the weekend in which the ruling People’s Party suffered its worst election result in 24 years. The previous two-party regime is looking now more like a four-party contest after both the anti-austerity focused Podemos and (to a lesser extent) newcomer Ciudadanos made strides. Spanish equities fell 2.01% in yesterday’s session in the aftermath of the weekend’s results. Despite the People’s Party still remaining the largest political presence in Spain by number of votes, the nation is now in something of an uncertain period with a number of close calls across regions meaning lengthy coalition negotiations will now begin. There was a notable win for the Podemos backed activist Ada Colau who was elected mayor of Barcelona, while in Madrid, the fragmentation of the Spanish political scene was evident as, after 24 years of control, the People’s Party look set to lose out to a Podemos coalition should they secure sufficient backing. With a Spanish General Election due by the end of the year, Prime Minister Rajoy attempted to instill some confidence in his voters yesterday, saying that the People’s Party still remains the Spanish voters ‘first choice’ and that, although acknowledging the significant loss of votes, is still ‘very comfortable’ leading his party into a General Election. So political risk is still high in Europe. Podemos have actually been dipping in the polls all year as the economic recovery builds. Perhaps the full general election will see the main parties benefit more from the recovery but European politics remains fragile and probably will remain so for a number of years.

As well as in Spain, there were similar falls for other European peripheral equity markets yesterday as the FTSE MIB and ASE fell 2.09% and 3.11% respectively. Commodity markets were fairly muted as Gold finished +0.03% and Brent was +0.23%. The Euro meanwhile ended 0.32% down versus the Dollar as both the Spanish political situation and Greece saga weighed on sentiment. On the subject of Greece, talks are due to resume today between the Brussels Group and Greek government with issues over fiscal targets and specifically pension and labour reforms still dominating the agenda. Greek government spokesman Sakellaridis said yesterday that a deal can be made by the end of May and that ‘based on the liquidity problems that we have, there is an imperative need for us and the euro zone to have a deal as soon as possible’. The head of the ESM, Klaus Regling, was a lot more cautious however in an interview with German newspaper Bild. Regling was quoted as saying that ‘there is little time left’ and that ‘without an agreement with the creditors, Greece will not get any new loans’ before warning that ‘then there’s a threat of insolvency’.

As it currently stands, Greece has €1.6bn of redemptions due in June alone (of which €1.5bn are due to the IMF), starting on June 5th with a €310m payment. Although we have little transparency on the government’s cash position, comments from both Greece officials and its creditors suggest that it looks increasingly difficult that Greece will be able to make the payment due on the 5th. In the meantime, we appear to be no closer to a Staff Level Agreement needed to release funds. Given that progress continues to be slow and non-payment is looking increasingly more likely, we list below three potential scenarios as highlighted by DB’s Mark Wall in the Focus Europe piece last week. The first scenario is where a Staff Level Agreement is made and approved by the Eurogroup, then even before we have had the national approvals, we would expect the ECB to accommodate the non-payment through letting the ELA and T-Bill ceiling rise to allow Greece to make payment. The second scenario is similar to the first but where a referendum is called, resulting in adding 2-3 weeks to the timeframe. In this situation, we believe that the ECB would be willing to find a balanced solution and would envisage haircuts on collateral at the ELA being raised, but not enough to cap ELA and trigger capital controls. The third scenario is where there is no Staff Level Agreement and Eurogroup approval. Although a non-payment on the IMF repayment would not necessarily be deemed a ‘default’ as per credit rating agencies, we believe that the ECB would view the lack of payment as rendering Greece insolvent. A potential reaction would be to immediately cap ELA and force Greece to close its banks and reopen them under capital controls. A split deal and parallel currency have also been mentioned at various stages as other scenarios, however we deem these lower probability scenarios as of now.

If this wasn’t enough, despite PM Tsipras winning backing from his Syriza party, tensions clearly still lie internally. The WSJ has reported that when Syriza’s Central Committee debated the state of debt negotiations this weekend, the hard-line Left Platform submitted a motion calling for the government to default on the IMF loans rather than compromise. The proposal was only just rejected, with 75 voting in favour and 95 against. The Left Platform leader Lafazanis (also the Minister of industry and energy) highlighting the divergent views in the party after being quoted as saying that ‘who says that an exit from the euro and a return to the national currency is a catastrophe?’. Ultimately the situation continues to remain very tense, with internal pressures still very much an issue and the end game still uncertain. We continue to think that a Grexit will be avoided, but the path to such an outcome is not easy to predict.

Away from Greece and Spain, it was interesting to see that the ECB slowed the pace of asset purchases slightly last week after data released yesterday, despite Coeure’s comments that asset purchases are set to be front loaded over the next two months ahead of low liquidity in July and August. The data released yesterday showed that €11.8bn of government and agency bonds were purchased over the week which marks the smallest increase in three weeks.

Despite US markets being closed yesterday, there was some Fedspeak as Vice Chair Fischer and Cleveland Fed President Mester were speaking. Fischer in particular reiterated much of the other comments of late, saying that any move will be data dependent while also noting that it is ‘misleading’ to give so much importance to the first move given that any process of returning to normalization will likely take a few years. Meanwhile, the hawkish leaning Mester said that ‘the time is near’ for a move and that ‘in my mind every meeting is on the table’.

Looking at our screens this morning, bourses are mostly trading firmer and led by the Hang Seng (+1.42%) which has bounced on the news that policymakers will allow cross-border sales of mutual funds with mainland China. The Shanghai Comp (+1.64%) and CSI 300 (+1.48%) have continued their strong start to the week, supported by the news that Beijing has invited private investors to help build and operate around $318bn of projects. Elsewhere, the ASX is +0.78% and the Nikkei (+0.08%) is more or less unchanged. Treasuries have started this morning on a firmer footing, led by the 10y (-1.8bps) in particular.

Looking at the week’s calendar now, we’ve just got Japan PPI and UK CBI reported sales to look forward to in the Asia and European timezones this morning before we get a bumper data day in the US this afternoon with durable goods orders, capital goods orders, FHFA house price index, S&P/Case Shiller house price index, May flash composite and services PMI’s, new home sales, consumer confidence, Richmond Fed manufacturing index and the Dallas Fed manufacturing activity index. Tomorrow starts in China where we get industrial profits data for April and small business confidence in Japan. There are more confidence indicators in Europe on Wednesday with German and French consumer confidence. There are no releases of note in the US in the afternoon. On Thursday we get Japan retail sales in the early morning. We then turn to Europe where we get various May confidence indicators for the Euro area. Initial jobless claims and pending home sales will be due in the US on Thursday. It’ll be a busy end to the week on Friday as we get CPI, industrial production, housing starts and the jobless rate out of Japan. In Europe we start with French consumer spending, quickly following by Euro area money supply data and then the preliminary Q1 GDP report for the UK. Over in the US the second reading for Q1 GDP will be important given the expected revisions, while we also get the Chicago PMI and the final May University of Michigan consumer sentiment reading. There’s plenty of Fedspeak this week with Fisher, Mester, Lacker, Williams and Kocherlakota all due.

end

 

Sunday news from Greece:

 

A Grexit looms as today, hospitals run out of sheets and painkillers.

Pharmacies have not been paid for over 19 months;

(courtesy zero hedge)

 

Grexit “Disaster” Looms As Greek Hospitals Run Out Of Sheets, Painkillers

The default countdown is about to go under 10 days and it is becoming increasingly apparent that both Greece and its creditors have had enough.

Months of tense negotiations have gone nowhere and yielded exactly nothing and it now looks like PM Alexis Tsipras and FinMin Yanis Varoufakis may be willing to miss a June 5 payment to the IMF if it means proving they are serious about keeping their campaign promises and forcing the troika to the bargaining table. The implications of a missed payment aren’t entirely clear but Athens is keen to predict the worst as it tries to squeeze concessions from creditors. Bloomberg has more:

A day after Prime Minister Alexis Tsipras said Greek society can’t absorb any more austerity measures, Finance Minister Yanis Varoufakis said his government has met the euro area and IMF three-quarters of the way, and that it’s up to creditors to cover the remainder.

 

“Greece has made enormous strides reaching a deal, it is now up to the institutions to do their bit,” Varoufakis said Sunday on BBC’s Andrew Marr Show. “It is not in their interests as our creditors that the cow that produces the milk should be beaten into submission to the extent that the milk will not be enough for them to get their money back”…

 

German Finance Minister Wolfgang Schaeuble, meanwhile, signaled there isn’t much wiggle room after Tsipras’s government committed to policy changes in return for aid in a euro-area accord on Feb. 20.

 

“That is the condition for completing the current program,” Schaeuble said in a Deutschlandfunk radio interview aired Sunday. “The problems are rooted in Greece. And now Greece does have to fulfill its commitments.”

 

Some members of Tsipras’s Syriza party advocate defaulting on loans rather than backing down from the anti-austerity policies that swept it to power in January even if that leads the country out of the euro.

 

Greece doesn’t have the money, and won’t pay what it owes the IMF in June, Interior Minister Nikos Voutsis said in a Mega TV interview on Sunday. Spiegel Online on April 1 cited Voutsis as saying Greece should delay an April 9 payment to the fund, which was made.

 

“We’ve done remarkably well for an economy that doesn’t have access to the money markets to meet our obligations,” Varoufakis said. “At some point we will not be able to do it.”

 

 

“Once you are in a monetary union, getting out of it is catastrophic,” Varoufakis said. “It would be a disaster for everyone involved. It would be a disaster primarily for the Greek social economy but it would also be the beginning of the end of the common currency project in Europe, whatever some analysts might be saying.”

 

And “whatever some analysts might be saying”, Greeks are now suffering mightily, as the €22 million per day hit to the economy has now bankrupted the country’s hospitals which have reportedly run out of painkillers and sheets. Here’s The Independent:

 

 
 

Greek hospitals have run out of supplies such as painkillers, scissors and sheets as budget cuts have left the health service unable to provide even basic provisions for operations and medical procedures…

 

 
 
Huge cuts to the healthcare budget, amid the economic turmoil which made millions unemployed, have left than 2.5m Greeks uninsured, up from 500,000 in 2008..
healthcare spending has fallen by 25 per cent since 2009, creating shortages of the most basic surgical equipment and leaving too little money to pay nurses’ salaries.
Reports have surfaced of patients being turned away from hospital because there was no meter to measure their high blood pressure, while others have had to do without painkillers during medical procedures. One patient was even asked to bring their own sheets to hospital.
A trainee surgeon at KAT, a respected state hospital in Athens, said the situation was at “breaking point”.
“There is no money to repair medical equipment, no money for ambulances to use for petrol, no money to hire nurses and no money to buy modern surgical supplies.”
Meanwhile, Tsipras is steadfastly refusing to compromise on the now ubiquitous “red lines” and the most outspoken austerity advocates look to be entrenching themselves even further as the following quote from German FinMin Wolfgang Schaeuble makes clear:
Greece committed itself to the fulfillment of this program on Feb. 20 and therefore we don’t need to talk about alternatives.
Clearly, the end game is approaching although it’s till unclear what form it will take. The idea that a developed country cannot provide basic emergency medical care because it is in poor standing with the institutions that print a fiat currency is patently absurd and simply isn’t tenable meaning that one way or another, this ‘situation’ will resolve itself in the coming weeks, an event which will put Europe’s broken bond markets to a rather difficult test.
end

Monday news:  (courtesy Jim Reid/Deutsche bank)

 

Away from Asia, the Greek saga continues to drag on after little meaningful progress over the weekend. Instead, the Greek government has called on its creditors to compromise and according to Finance Minister Varoufakis, ‘do their bit’. As the clock ticks, Interior Minister Nikos Voutsis has once again reiterated that Greece will not be able to make the IMF repayments due in June totaling €1.6bn (and starting on the 5th) saying that ‘this money will not be given and is not there to be given’. Issues over reforms, particularly labour and pensions, still remain at the heart of the disagreement and lack of progress with the Greek government adamantly stating that it will stick to its ‘red lines’ and PM Tsipras again saying on the weekend that the government ‘won’t budge to irrational demands’. In the meantime, German Finance Minister Schaeuble remains defiant, saying that the problems are rooted in Greece and now Greece does have to fulfill its commitments. For now, technical talks are set to continue this week with pressure and time mounting. Expect to see more and more headlines with time appearing to be close to running out.

The political situation is also taking shape in Spain where over the weekend the ruling People’s Party (PP) suffered a loss of support in the regional and local elections, with anti-austerity focused Podemos and the emerging Ciudadonos party making gains. In Madrid in particular (a PP stronghold), the People’s Party won the municipal election but could lose control of the city council after the ruling party took 21 seats but Podemos backed Ahora Madrid took 20, meaning it’s now looking like they could form a coalition with the third placed Socialists, according to Reuters. It’s a similar story in Spain’s second largest city Barcelona, where Podemos backed activist Ada Colau has won the most votes in the mayoral race. Although coalition negotiations may take some time, it’s one that worth keeping an eye on.

 

end

 

Regional election results in Spain, Monday morning:

(courtesy zero hedge)

 

Greek “Anti-Austerity” Wave Spreads In Dramatic Loss For Spanish Status Quo

Last week in “Portugal’s Left Wing Forces Threaten Troika Revolt,” we highlighted the country’s Socialist Party which is enjoying a lead in the polls ahead of elections expected in October and which has pledged to implement a “reverse policy” as it relates to austerity and the country’s creditors. We argued that the ascendancy of left-wing political parties across the periphery means Europe will take an increasingly hard-line stance in negotiations with Greece. Here’s how put it:

The reason why concessions (any concessions) to the Greeks are a non-starter in Athens’ negotiations with creditors is that the IMF, the European Commission, and most especially Germany, want to send a clear message to any other ‘leftist radicals’ who may be thinking about using the “one move and the idea of EMU indissolubility gets it” routine as a way to negotiate for breathing room on austerity pledges, will get exactly nowhere and will have a very unpleasant time on the way.

With just 10 days until a June 5 IMF payment that Athens almost certainly will not make unless it strikes a deal for the disbursement of more bailout funds, things just got quite a bit more interesting on the political front after Spain’s Popular Party was dealt a dramatic electoral blow on Sunday by the leftist Podemos and center-right Ciudadanos. WSJ has more:

Spanish voters punished the governing Popular Party in regional and municipal elections, throwing significant support to two upstart parties that capitalized on anger over high unemployment, cuts in public spending and corruption.

Near-complete returns showed that Prime Minister Mariano Rajoy’s conservative party was assured of retaining control of only three of the 13 regions that elected parliaments Sunday. That is a reversal of the party’s dominance in 2011, when it won in 10 regions, eight with absolute majorities.

Although it gathered the most votes nationwide, the Popular Party could be hard-pressed to form functional governments in many former strongholds, including the city of Madrid, without support from smaller parties.

“It’s a brutal wake-up call from Spanish society to a party that has enjoyed a hegemony in parts of this country,” said Emilio Sáenz-Francés, professor of history and international relations at Comillas Pontifical University in Madrid.

He said the vote would usher in a new era in Spanish politics, obliging humbled establishment parties to resort to horse-trading and coalition-building with rivals to ensure governability.

In a possible foretaste of national balloting late this year, in which Mr. Rajoy is seeking a second term, his party’s share of the nationwide vote fell 10 percentage points from its 37% in local and regional elections four years ago. Voters moved to two upstart parties,the leftist Podemos and the center-right Ciudadanos.

In Barcelona, the anti-poverty, anti-eviction activist Ada Colau (who leads Barcelona En Comú) was elected mayor in what she called a victory “for David over Goliath,” and the PP also appeared weak in Madrid.

Via The Guardian:

A grassroots movement of several leftist political parties, including Podemos, and thousands of citizens, Barcelona En Comú vowed to return decision-making in the city to the people, promising to do away with home evictions, increase public housing and redistribute the city’s wealth. Colau’s party won 11 of the 41 seatson the city council, meaning that she will need to form alliances in order to govern.

In Madrid, the People’s party is not certain of hanging on to power in a city where it has dominated for two decades.

The PP candidate, Esperanza Aguirre, 63, who is a countess by marriage, squeaked ahead in Sunday’s vote, winning 21 council seats in the city.

Aguirre is seen as a hard case but she got a run for her money from “indignada” candidate Manuela Carmena, whose Podemos-backed coalition Ahora Madrid came a close second.

The results suggest that coalition building will now begin, a process that will likely be complicated by the fact that some voters could feel betrayed were Podemos or Ciudadanos to cooperate with their rivals. 

https://embed.theguardian.com/embed/video/world/video/2015/may/25/we-have-shown-change-is-possible-says-barcelona-en-com-leader-video

Here’s The NY Times summing things up…

The elections, however, failed to produce the kind of clear-cut winner of four years ago, when the conservative Popular Party swept to power as voters punished the Socialists for sinking Spain into an economic crisis. Instead, Sunday’s vote is likely to be followed by tense coalition-building negotiations in Madrid as well as across much of the rest of Spain.

The elections were seen as a bellwether for the governing Popular Party and Prime Minister Mariano Rajoy’s own chances of winning general elections later this year.

While the Popular Party won the most votes, according to preliminary results, it was set to lose its parliamentary majorities in most, if not all, of the country’s provinces. That setback raises the likelihood that left-leaning parties will join forces in the coming weeks to remove the Popular Party and form coalition governments.

…and Barclays has some color on coalition building…

We think that neither of the two new parties, Podemos and Ciudadanos, will be keen on coalitions with either PP or PSOE in the near term. As argued above, these parties could be penalized by voters if they do form coalitions and find compromises ahead of the general elections to be held in the autumn. Moreover, both parties have been running on strong manifestos against corruption, therefore they are likely to set very strong red lines on these issues in order to be willing to give their support to any of the two traditional parties. However, a key difference between the new parties is that Ciudadanos may be relatively more likely to form coalitions with either PP or PSOE, as its policy agenda may be closer to the traditional parties relative to Podemos. Instead, Podemos is highly unlikely to form coalitions with the conservative PP…

The most important take away of this weekend’s regional and municipal elections in Spain (24 May) is what we will learn in the coming days/weeks from the behaviour of the four main parties (PP, PSOE, Podemos and Ciudadanos), as the results delivered few absolute majorities. These four parties will have to engage in complex coalition talks. Podemos and Ciudadanos may set ‘red-lines’ when they engage with PP and PSOE. In fact, in some cases they may choose to let minority governments be in charge, as coalitions could carry a high political cost for junior coalition partners ahead of the general elections in Nov/Dec 2015 (no specific date set yet).

The results indicate that patience for 25% unemployment and austerity is wearing rather thin. We imagine there will be quite a few closed door discussions between the ‘institutions’ as it now appears exceedingly likely that Spain will pursue a mandate that mirrors the election promises which helped Syriza sweep to power in Greece earlier this year.

This will make it more difficult for Greece to win concessions at the negotiating table as the troika will want to be extremely careful about what kind of message they’re sending to the currency bloc’s other “ascendant socilaists.”

As a reminder, here is what ‘austerity’ looks like in a heavily-indebted EU periphery nation:

end
Monday morning:
Chinese stocks surge, however Portuguese bond yield rise 48 basis points which is a huge move for one day:
(courtesy zero hedge)

China Stocks Surge, Europe/US Purge, & Portuguese Bonds Are Crashing

Between escalating Grexit concerns and Podemos ‘victory’ in Spain, European bond and stock markets shuddered somewhat today. EURUSD continues to close lower – back below 1.1000. All major bourses across Europe are in the red with Greece and Spain worst (ASE -3%) but the most notable shift is a collapse in Portuguese bonds.Illiquidity has always been an issue for PORTUG bonds but today’s near 4 point collapse in 10Y bond prices (and 48bps spike in spreads) is dramatic to say the least. Spain also saw bond risk jump 10bps. Bond yields and spreads are now higher than before Draghi announced Q€ in January and dramatically higher since bond-buying began. If EU leaders proclaim they can see no contagion from Greece, show them these charts. Finally, despite cash markets being closed, US equity futures also suffered(despite an exuberant BTFD rip higher in China overnight).

 

European stocks in the red…

 

Portuguese bonds are crashing… unwinding all the excited exuberance of Q€… Of course with The ECB hoovering up everything in sight, any selling pressure is exaggerated by the total lack of liquidity (see CYNK or Hanergy) but based on Bloomberg data it appears real and traded and is the benchmark 10Y bond for the nation!

 

EURUSD continues to close lower – back below 1.1000…

 

US markets were not unharmed as futures slid further from the late-Friday weakness…

 

China’s incessant BTFD’ers came out after a very weak opening but by the close the great rotation from CHINEXT momo high-flyers to Shanghai idiot-makers was well on its way to exponential…

 

Charts: Bloomberg

 end
Monday: important peripheral bond yield closings:
Portuguese 10 year bond closing yield: 2.86% or up 43 basis points.
Spain; 1.84% up 6 basis points
Italy:   1.86 flat in  basis points.
end
Monday night:  Syriza party is totally fragmented:
(courtesy zero hedge)

Greece Was 20 Votes Away From Defaulting This Weekend

Up until this moment, Greece may not have had the financial wherewithal to pay its creditors, forced instead to use circular math gimmicks in which the IMF paid the IMF for the country’s most recent €750 million due on May 12 when it effectively pre-defaulted and used SDR reserves as “payment”, but at least it had a united facade when facing Europe and political cohesion when dealing with the Troika.

That too may have just evaporated over the weekend, when in a surprisingly close vote showing just how deeply the ruling Greek Syriza party has splintered, the hard line “Left Platform” a faction within Syriza, proposed that Greece stop paying its creditors if they continue with “blackmailing tactics” and instead seek “an alternative plan” for the debt-racked country. Its motion called for the government to default on the IMF loans rather than compromise to creditor demands, among which a change to value-added tax rates, further liberalization of the labor market and changes to the pension system, including further cuts to pensions and wages.

According to the NYT, which first reported the vote outcome, the proposal was narrowly rejected with 95 people voting against and 75 in favor.

The WSJ adds:

The Left Platform’s leader, Energy Minister Panagiotis Lafazanis, told the meeting default was preferable to surrender, even if it meant Greece tumbling out of the euro.

 

Who says that an exit from the euro and a return to the national currency is a catastrophe?” Mr. Lafazanis said at the meeting.

Who? Well, all those – mostly bankers – who for the past 5 years bailed out European banks at the expense of preserving Greek participation in a doomed monetary union and avoiding the collapse of the Eurozone, an outcome which would lead to massive losses for the oligarchic status quo.

But back to Greece where with a vote as close as that, the genie of the full-blown dissent within Syriza, which has a tiny majority of just 12 seats in Greece’s 300 seat partliament, is out of the bottle which could mean that the Troika’s long sought after goal of pushing Greece into a political crisis, may be just around the corner.

As the WSJ reports, “Tsipras’s difficulty in selling a painful compromise to Syriza’s hard left, as well as to other parts of his ideologically diverse party, has become the largest obstacle to a deal. European officials and analysts—and privately even Greek government officials—say they don’t know whether the roughly 30 lawmakers who make up Left Platform will vote as defiantly as they talk if creditors’ terms are put before the Athens Parliament.”

That may be a moot point, since Greece needs a deal yesterday: as a reminder, Greece has about 10 days of cash left, and this time there is no kicking the can – if there is no deal by June 5, Greece will be in default first to the IMF, and soon to everyone else.

 

Worse, while Greece may not have decided to formally prioritize pensions and wages over IMF repayments, at least not yet, it has absolutely no working proposal to present to the Eurogroup ahead of this week’s latest meeting.

The Central Committee agreed on a text saying any deal with creditors must involve no pension cuts, a small budget surplus before interest, increased public investment and a restructuring of Greece’s debt—terms that lenders are unlikely to accept. The text isn’t binding on Mr. Tsipras’s government but indicates how hard it will be to sell a deal to Syriza.

But while some may have harbored hope that the Troika may agree to at least the smallest of concessions, after Sunday’s municipal vote in Spain which showed a dramatic plunge in popularity of the ruling PP, a harbinger of even even more “anti-austerity” platforms coming to power, Merkel will do everything in her power to make an example of Greece that nobody can dictate terms to the Troika and in the end it is a very simple choice: the German way or the autbahn.

And just like that Greece is suddenly caught between the devil and the deep red lines: an intransigent Troika and potential rebels within the party itself.

“The biggest threat may not end up being Mr. Lafazanis, but other parliamentary members who lack party discipline, who are newly elected and are completely unpredictable,” said Dimitris Keridis, an associate professor of international politics at Panteion University in Athens.

 

Parliamentarian Ioanna Gaitani, a self-described Trotskyite in the Left Platform, said Greece can survive a debt default and lenders aren’t respecting Syriza’s mandate.

 

“When faced with the pseudo-dilemma of ‘euro or national currency,’ the answer is a unilateral write-off of most of the debt, the taxation of large wealth, and the implementation of Syriza’s program,” she said. “For the Left, the needs of the people are above profits and debts.”

The best news perhaps for Greece and everyone else who has been following this ultra slow motion trainwreck for the past 5 years, is that it is nearly over (one can hope), and that when it comes to defaulting, Greece has a trulyexceptional range of choices how to make sure its last Euro-denominated check bounces in the most dramatic fashion possible.

end
Tuesday morning with respect to Greece:
Markets falter on this news:
(courtesy zero hedge)

Greece Postpones Meeting With Creditors, Denies ATM Tax

With the countdown to default now at just 10 days, Greece and its creditors are scrambling to come to some kind of agreement that will allow the country to repay the IMF on June 5. The payment is not possible without the disbursement of all or a portion of a €7.2 billion tranche of aid under Athens’ current bailout program.

On the heels of a vote which betrayed fractures within PM Alexis Tsipras’ ruling Syriza party, a Eurogroup meeting in Brussels scheduled for today has now been postponed, according to a Greek official who did not give a reason for the cancellation. Negotiations will reportedly take place over the phone later today once Athens has had time to conduct “preparatory discussions.”

  • GREEK OFFICIALS TO MEET CREDITORS IN BRUSSELS TMRW: OFFICIAL
  • GREECE, CREDITORS TO HOLD TELECONFERENCE TODAY: GOVT OFFICIAL

Meanwhile, there are rumors that the country will impose a levy on ATM withdrawals in an effort to encourage Greeks to use credit cards and thereby stem the deposit outflow that’s crippling the Greek banking sector. These reports were promptly denied by the Finance Ministry.

First there was this, via Bloomberg:

Greece considering to impose levy on bank transactions, such as cash withdrawals, Greek Finance Minister Yanis Varoufakis tells reporters in Athens.

And then this shortly thereafter:

  • GREECE WON’T IMPOSE LEVY ON ATM TRANSACTIONS: FINANCE MINISTRY

There were suggestions earlier this month that Athens had floated a levy on certain bank transactions as a concession to creditors.

And meanwhile…

  • FAILURE TO REACH GREEK DEAL MAY MEAN UNCERTAINTY: U.S. OFFICIAL

 

end

 

Russia gives up on France in their delivery of the two Mistral ships.  Now the only topic of discussion between France and Russia is compensation.  However it looks like China is in the market for those two Mistral ships and we can assure you that they will forward the ships over to Russia.
(courtesy zero hedge)

Russia Tells France It Gives Up On Mistral Ship Deal

With French ministers crowing about their better-than-expected GDP data (+0.7%) as some trend reversal that heralds a revolution, it appears Vladimir Putin is about to put a dent in their hopes and dreams. As Sputnik News reports,Moscow has finally given up on the $1.3 billion deal for two Mistral-class helicopter carriers and plans to build its own. Even worse for France, now Russia will discuss only the sum that Paris should pay Russia for the failed contract. However, as with everything in the world, there may be ulterior motive, as China comes sniffing as a white knight for the amphibious vessels (at a reduced price) and then sells to its ‘ally’ Russia (who has already pocketed the contract cancellation fees).

As Sputnik News reports,

During the negotiations on the Mistral deal Russia and France have discussed only one question – the sum of the compensation.

 

“We switch the conversation to business – give us our money back… We’re now discussing just one thing – the exact sum of money France owes Russia,” Oleg Bochkaryov, a deputy chairman of the Russian Military Industrial Complex said.

 

Russia and France signed a $1.3-billion deal for two Mistral-class helicopter carriers in 2011. The handover of the first ship to Russia was scheduled for November 2014, but never happened. French President Francois Hollande put the delivery on hold due to Moscow’s alleged interference in the Ukrainian crisis.

 

Moscow has repeatedly denied the accusations, and urged Paris to deliver on its contractual obligations.

 

Earlier today Oleg Bochkaryov told journalists that Russia plans to build its own Mistral-class helicopter carriers to replace the ones not delivered by France.

 

“We have these types of ships planned… but we will build them a bit differently. We’re not going to blatantly copy the [French] Mistral [design] right out,” Bochkaryov said.

click image below for interactive detail on the Mistral-class warship

However, while that may be immediate bad news for France, it appears there may be a silver lining. As The Diplomat’s Ankit Panda wonders

Is China Eyeing These Advanced French Amphibious Assault Ships?

 

China could be looking to purchase the two French Mistral ships that were originally built for Russia.

 

In 2014, France determined that it would avert plans to sell two of its Mistral-class amphibious assault ships that were originally bound for sale to Russia. The decision was spurred, in part, by pressure from French allies, including the United States, who saw a sale of a complex naval asset to Russia in the wake of its support of anti-government Ukrainian rebels as inappropriate. The deal between France and Russia had originally been concluded in 2011, and was canceled last year, leaving the French with two Mistrals in hand, miffed at the lack of an eager customer. The Franco-Russian agreement for the Mistral sale reached a final price of $1.37 billion euros for the two ships.

 

Two weeks ago, reports emerged in the Taiwan-basedChina Times, citing Duowei News, that China may be the latest customer for the French Mistral vessels. The report further noted that China’s People’s Liberation Army’s microblog noted a French task force visit to France. The French had sent two warships, including the Dixmude, the final Mistral-class ship built for the French navy. The French naval task force also comprised the Aconit, a La Fayette-class frigate. The report further noted that this visit marked the first time that a French Mistral docked at a Chinese port. All of this activity takes place amid the political difficulty of putting together a sale given the European Union’s still-in-place arms embargo against China–a retaliatory move for Beijing’s suppression of the Tiananmen Square protests of 1989.

 

The Mistral-class amphibious assault ship, named for the frigid, northwesterly wind that sweeps out from the French coast into northern Mediterranean waters, is well-equipped for island warfare, and littoral projection and command. For China, an investment in an advanced off-the-shelf amphibious assault vessel would be sensible given current tensions over disputed islands and sea features in the East and South China Seas. The Mistral is also capable of assisting in humanitarian assistance and disaster relief (HADR) scenarios, with extensive hospital facilities on board.

 

The French had further modified the Mistrals that were Russia-bound to accommodate the Russian Navy’s Ka-27 Helix helicopters. China also operates the Ka-27, and the more advanced Ka-28.China has both the use scenarios and the military infrastructure necessary to make effective use of the ships. China could additionally apply its own domestic know-how in modifying the Mistral to serve as a potent anti-submarine warfare (ASW) platform. The Mistral‘s hangar deck would let the PLA-N conduct considerably less constrained helicopter surveillance operations than its own Jiangdao-class Type 056A frigates.

 

Of course, none of this, including the tenuous rumors picked up by some sources, mean that China is anywhere near finalizing a purchase of the two Mistrals that never made it into the Russian navy. The possibility of China snapping up the Mistrals on the open market will surely spark the same sort of concern in the United States as the prospect of the Russian sale did in early 2014. Already, commentators are making the case that it might make sense for the United States to pluck these ships off the market, lest China add two capable ships to its growing and increasingly modern navy.

 

As unlikely as a sale might be, watch this space. The fate of these two free-floating French Mistrals could end up further tilting the balance in Asia should China purchase them.

*  *  *

To sum up:Russia ends deal, China steps in, France sells to China, then Russia buys from China

end
Oil related stories:

Crude Carnage Continues – WTI Hits 1-Month Low

 

WTI is having its worst day in over 2 months as the front-mointh tumbles back below $57.50 to one-month lows… Perhaps fundamentals do matter after all – or is this pre-OPEC dump to force non-Saudi cartel members to revolt?

 

end
Pay attention to what Graham Summers is stating:
(Phoenix Research Capital/Graham Summers)

The Single Largest Misallocation of Capital in History

The global Central Banks, driven by their Keynesian lunacy, have induced the single largest misallocation of capital in history.

Nowhere is this clearer than in the bond market today.

Do the following sound normal?

1)   Globally 45% of all Government bonds yield less than 1%.

2)   Over 40% of European Sovereign bonds now have negative nominal yields..

3)   German bunds have NEGATIVE yields as far out as 8 YEARS.

4)   The 10-YR US Treasury yield is at levels not seen since we were in a World War.

True, the world faces issues today… so it’s not odd for bond yields to be lower… but are those issues on par with a disease that wiped out 25%+ of Europe’s population… or the single largest military conflict in history?

The bond market is now over $100 trillion in size. The large banks have used a small portion of this (under 10%) as collateral to generate over $551 trillion in derivatives.

The bubble is so massive, that the Treasury department had survival kits delivered to the large banks around the country in anticipation of a crisis.

The NY Fed, similarly, is increasing the scope of operations in satellite office Chicago branch in preparation of a natural disaster or other eventuality could shut down its market operations as it approaches an interest rate hike…”

And then of course there are the big banks themselves… who lobbied Congress to the put taxpayers on the hook for their (the banks’) future losses on their gargantuan derivatives portfolios.

The simple truth is that the Central Banks bet the financial system on their academic theories… and have found that the system didn’t respond as they hoped. The economic “recovery” is the weakest in 80+ years… and that’s based on data that OVER states growth.

The Fed’s own research shows that its QE programs only dropped unemployment by 0.13%… spending over $390,000 per new job created between the start of the crisis and the alleged end of the recession.

The ECB hasn’t done any better. It is now actively CHARGING depositors for sitting in cash. Several EU nations are now showing metrics on par with 3rd world countries.

And then there’s the Bank of Japan… which has induced a record high number of Japanese on welfare… and boosted the misery index to a 33 year high (mind you, this period of 33 years includes the collapse of the biggest asset bubble in Japan’s history… and people are MORE miserable NOW).

Another crisis is coming. And judging from the actions of the Fed and others to prepare (survival kits, etc.) it’s going to be far worse than the 2008 collapse.

 

end

 

 

Your more important currency crosses early Tuesday morning:

 

Euro/USA 1.0915 down .0053

USA/JAPAN YEN 122.54 up .853

GBP/USA 1.5413 down .0056

USA/CAN 1.2359 up .0041

 

This morning in Europe, the Euro fell again by a considerable 53 basis points, trading now well below the 1.10 level at 1.0915; Europe is still reacting to deflation, announcements of massive stimulation, a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, a possible default of Greece and the Ukraine, rising peripheral bond yields and today crumbling bourses for most of them (except Paris).

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. The yen continues to trade in yoyo fashion as this morning it settled down again in Japan by 85 basis points and trading well above the 122 level to 122.54 yen to the dollar.

The pound was down this morning as it now trades well below the 1.55 level at 1.5413, still very worried about the health of Barclay’s Bank and the FX/precious metals criminal investigation/Dec 12 a new separate criminal investigation on gold, silver and oil manipulation.

The Canadian dollar is down by 41 basis points at 1.2359 to the dollar.

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

2, the Nikkei average vs gold carry trade (still ongoing)

3. Short Swiss franc/long assets (European housing/Nikkei etc. This has partly blown up (see Hypo bank failure). Swiss franc is now 1.0425 to the Euro, trading well above the floor 1.05. This will continue to create havoc with the Hypo bank failure.

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 morning : up 23.71 points or 0.12%

Trading from Europe and Asia:
1. Europe stocks mostly in the red

2/ Asian bourses mostly in the green … Chinese bourses: Hang Sang green (massive bubble forming) ,Shanghai in the green (massive bubble ready to burst), Australia in the green: /Nikkei (Japan) green/India’s Sensex in the red/

Gold very early morning trading: $1195.60

silver:$16.82

 

Early Tuesday morning USA 10 year bond yield: 2.18% !!! down 3 in basis points from Friday night and it is trading under resistance at 2.27-2.32%.

 

USA dollar index early Tuesday morning: 96.89 up 88 cents from Friday’s close. (Resistance will be at a DXY of 100)

 

This ends the early morning numbers, Tuesday morning

 

And now for your closing numbers for Tuesday:

 

Closing Portuguese 10 year bond yield: 2.54 up 11 in basis points from Friday

 

Closing Japanese 10 year bond yield: .43% !!! up 1 in basis points from Friday/

 

 

Your closing Spanish 10 year government bond, Tuesday, up 1 points in yield

Spanish 10 year bond yield: 1.78% !!!!!!

 

Your Tuesday closing Italian 10 year bond yield: 1.94% up 7 in basis points from Friday: ( still massive central bank intervention/)

trading 16 basis point higher than Spain.

 

IMPORTANT CURRENCY CLOSES FOR TODAY

 

Closing currency crosses for Tuesday night/USA dollar index/USA 10 yr bond: 4 pm

 

 

Euro/USA: 1.0873 down .0095 ( Euro down 95 basis points)

USA/Japan: 123.02up  1.371 ( yen down 137 basis point)

Great Britain/USA: 1.5386 down .0084 (Pound down 84 basis points)

USA/Canada: 1.2428 up .0111 (Can dollar down 111 basis points)

The euro fell badly today. It settled down 95 basis points against the dollar to 1.0873 as the dollar was well up against all the various major currencies. The yen was down 137 basis points and closing well above the 123 cross at 123.02. The British pound lost huge ground today, 84 basis points, closing at 1.5386. The Canadian dollar lost huge ground to the USA dollar,111 basis points closing at 1.2428.

As explained above, the short dollar carry trade is being unwound, the yen carry trade , the Nikkei/gold carry trade, and finally the long dollar/short Swiss franc carry trade are all being unwound and these reversals are causing massive derivative losses. And as such these massive derivative losses is the powder keg that will destroy the entire financial system. The losses on the oil front and huge losses on the USA dollar will no doubt produce many dead bodies.

Your closing 10 yr USA bond yield: 2.14% down 7 in basis points from Friday (below the resistance level of 2.27-2.32%)

 

Your closing USA dollar index:

 

97.30 up 129 cents on the day.

 

European and Dow Jones stock index closes:

 

England FTSE down 82.73 points or 1.18%

Paris CAC down 33.63 points or 0.66%

German Dax down 189.88 points or 1.61%

Spain’s Ibex down 82.00 points or 0.72%

Italian FTSE-MIB  up 41.84 or 0.18%

 

The Dow down 190.48  or 1.04%

Nasdaq; down 56.61  or 1.11%

 

OIL: WTI 58.08 !!!!!!!

Brent:63.82 !!!!

 

Closing USA/Russian rouble cross: 50.90 down 1 rouble per dollar on the day.

 

end

 

And now your important USA stories:

 

NYSE trading for today

VIX-nado, Dollar-splosion, & Crude Carnage Spark Dump In Stocks & Bond Yields

Jubilant Chinese investors did not help as good news is terrible news it would seem… despite Stan Fischer’s confidence-inspiring message that “just the tip” of interest rate hikes won’t hurt… *FISCHER IS RIGHT; MARKETS OVER FOCUS ON 1ST HIKE, EL-ERIAN SAYS

 

After an ‘odd’ day yesterday with BTFDing machines rescuing stocks, US equity markets reopening saw some selling overnight and then a deluge during the day session… (weak data early and 1230ET Fischer)

  • *FISCHER SAYS FED COULD SLOW RATE RISES IF WORLD GROWTH FALTERS
  • *FISCHER: FED SHOULD `EXPECT SPILLOVERS’ WHEN POLICY TIGHTENS

 

Since Friday, the cash indices are all notably red… Trannies NOT off their lows…

 

The Dow traded back below its 50DMA (18,010) briefly…

 

And Trannies “Death Crossed”

 

Today was the biggest VIX (percentage) jump in 2015…

 

US equities roundtripped from the May 14th melt-up pre-OPEX spike…

 

And has almost erased all its May gains…

 

Trannies are a disaster year-to-date still…

 

Away from the stock market vol, there was turmoil everywhere else…

Treasury yields plunged…

 

The Dollar surged… now up 6 of the last 7 days…

 

This is the best 7-day run in the dollar since Lehman…

 

And Commodities cratered…

 

Led by Crude Carnage-ing back to one-month lows…

 

Charts: Bloomberg

Bonus Chart: Apple On Fire (literally)

Dallas Fed Crashes To Six Year Lows As Employment Collapses

Having missed for a record 5 months in a row, Dallas Fed Manufacturing Outlook collapsed further in May to -20.8 (against expectations of -12.4). Thisis the 5th drop in a row (only ever seen in a recession) and 6th monthly miss in a row (never seen before) as it appears Former Dallas Fed Fisher was talking crap once again when he said “net, low oil prices were good for Texas.” Despite Consumer Confidence indicating, somehow, that Texans are the most confident in a year (up from 121 to 130 in May), business survey continues to point to notable weakness with employment collapsing, hours worked crashing, and production plunged. However, on a bright note, expectations for the future jumped from -5.9 to +4.9 – hope springs etermal eh?

Dallas Fed is crashing…

 

and Employment is plunging…

 

Under the covers it is really ugly…

 

end

 

Second:  Richmond manufacturing index steadies:

(courtesy zero hedge)

Near-Record Wage Spike Stabilizes Richmond Fed Manufacturing Survey

Against expectations of a ‘0’ print, Richmond Fed Manufacturing rose from -3 to +1 in May – the first positive print since January. Despite expectations for future shipments sliding to 4-month lows and a decline in number of employees, the index itself was driven higher mainly by a huge spike in the wages subcomponent – from 9 to 20.

This is the 2nd biggest spike in wages on record…

 

Under the surface, it was wages that single-handedly saved the index…

 

Charts: Bloomberg

 end
Third:  USA services PMI falters again:

(courtesy zero hedge)

US Services PMI Slides To Lowest Since January

After a hopeful start to the year – despite the weather, the West Coats ports, and every other excuse – US Services PMI has slipped the last 2 months, back to the lowest since January. At 56.4, below expectations, this is the biggest 2-month drop since December. Input prices edged up to 9-month highs. This is the first YoY drop in the Services PMI since December. As Markit proclaims hopefully, “policymakers will be eager to see if this slower growth trend develops
further over the summer months before risking any tightening of policy.”

 

 

Commenting on the flash PMI data, Chris Williamson, chief economist at Markit said:

“The US economy looks to have grown at a healthy pace in May, providing further evidence that the rate of expansion has picked up from the weak start to the year. The resilience of domestic demand in particular helped encourage companies to take on extra staff at the fastest rate for almost a year.

 

“An upturn in business optimism to a six-month high also bodes well for robust growth to be sustained in coming months.

 

“The survey data put the economy on course to rebound in the second quarter, with GDP rising at an annualised rate of around 3%, with non-farm payroll growth continuing to run around the 200,000 level.

“Such keen hiring and robust economic growth inevitably tips the scales in favour of the Fed hiking rates later this year rather than waiting until 2016.

 

“However, the rate of expansion remains below the buoyant rates seen throughout much of last year, as slower growth of service activity has been accompanied by a slowdown in the manufacturing sector, which has seen exporters hit by the stronger dollar. Policymakers will be eager to see if this slower growth trend develops further over the summer months before risking any tightening of policy.”

Charts: Bloomberg

end
Fourth:  durable goods orders slide year over year.  Each month for the past 4 months it was fallen despite suspect upwards revisions;
(courtesy zero hedge)

Durable Goods Orders Slide YoY 4th Month In A Row Despite Dramatic Upward Revisions

After dramatically upwardly revised data from last month (but following an even more dramatic downward revision to all historical data earlier in the month) – the highly noisy series of Durable Goods Orders printed -0.5% (from +5.1% in March, revised up from +4.0%). Capital Goods Orders (non-defense Ex-Air) beat expectations MoM (printing +1.0% vs 0.3%) and was revised remarkably up from the biggest drop since 2012 to a 1.5% rise in March.

Core Capital Goods Orders, however, remains negative YoY for the 4th months in a row. The last time this happened was either a recession, or the Fed unleashed QE3.

Durable goods ex-transports Y/Y: up sequentially, down Y/Y.

Core capex: the reason the USD is surging is because the core capex number printed up 1.0% compared to the 0.3% expected. And yet, on an annual basis we just printed yet another consecutive decline in April.

All this despite drastic revisions in historical data.

end
The one tiny bright spot:
(courtesy zero hedge)

New Home Sales Rebound Despite Median Price Rising To Just Shy Of All Time High

Following last month’s disappointing slump to only 481K new home sales in March (now revised to 484K) which was the biggest drop in nearly 2 years driven by a collapse in Northeast transactions, according to the latest new home sales data by the Census Bureau housing rebounded back over 500K, printing at 517K thanks to a 37% sequential jump in Midwest new home sales, which rebounded from 57K to 78K, even as sales in the Northeast continued to decline and even the West saw a modest drop.

Curiously, while there are double digit annual increases from April of 2014 across 3 of America’s 4 housing regions, the Northeast continues to deteriorate, and is now down 19% from a year ago.

The total sales figure represented 4.8 months of supply, down from 5.1 the month before.

However, as the long-term chart shows, new home sales have a long way to go before they regain the levels seen during the last bubble.

 

Yet while the actual number of sale transactions has a long way to go,the median price rose once more and at $297,300 per new house, is not only the highest of 2015, but just shy of the record highest median price seen of $302,700 hit in November of 2014.

end
With the better than expected new home sales, the Atlanta Fed raises its 2nd Q GDP up by a scant .1% to .8%
(courtesy zero hedge)

Today’s Economic Data Enough To Push Q2 GDP By Whopping 0.1% To 0.8%

at least according to the Atlanta Fed. Based on the one GDP model which hasn’t lost all credibility and which for the past 3 months has captured the attention to wannabe weathermen and other Wall Street strategists, today’s bevy of stronger than expected data, everything from Durable Goods, to core CapEx, to New Home Sales, to Case Shiller, to Consumer Confidence, and even the Richmond Fed was sufficient to push Q2 GDP… by 0.1% to 0.8%.

From the Atlanta Fed GDP Now webpage:

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2015 was 0.8 percent on May 26, up slightly from 0.7 percent on May 19. Following this morning’s advance durable manufacturing report from the U.S. Census Bureau, the forecast for second-quarter real equipment investment growth increased from 3.5 percent to 5.1 percent while the forecast for the change in inventory investment in 2009 dollars increased from -$22 billion to -$19 billion.

Perhaps today’s market reaction, with yields tumbling and telegraphing that the reflation trade is gone and with stocks at LoD, is actually completely reasonable and normal in light of the fact that according to the Atlanta Fed, the US economy is still contracting in the first half, laughable seasonal adjustment notwithstanding.

end
The following is not a good sign as far as the economy is concerned:
it is when the 50 day moving average (heading south) crosses the 200 day moving average.  Spells trouble!! Trannies (transportation index) is a good bellwether on the USA economy:
(courtesy zero hedge)

Trannies Tumble As Death Cross Triggers

Ominous or not? At the least it suggests all is not well in the broad market… Trannies are now down almost 8% year-to-date (and down 3.5% from the end of QE3).

Charts: Bloomberg

end

 

On Friday night:

Lake Mead Water Level Mysteriously Plunges After Nevada Quake

A 4.8 magnitude earthquake (originally reported 5.4) shook Las Vegas and surrounding areas Friday morningcausing roads and bridges to be closed. The quake went little-reported outside of local news (since there was at first glance minimum damage caused) but, since the quake’s occurrence, something considerably more worrisome has occurred.

In the 36 hours since the quake’s occurrence, water levels at Lake Mead have plunged precipitously.While we know correlation is not causation, the ‘coincidence’ of an extreme loss in water levels occurring in the aftermath of one of the largest quakes in recent Vegas history does raise a suspicious eyebrow – especially when there has been no official word on the precipitous decline.

The earthquake hit mid-morning on Friday:

A 4.8 magnitude earthquake shook Las Vegas and surrounding areas Friday morning, forcing loose a rubber casing on a bridge and leading state officials to close Spaghetti Bowl interchanges for several hours.

 

After the Nevada Department of Transportation inspected bridges for possible structural damage, they deemed the roads safe for travel and reopened them just before 5 p.m. Traffic had backed up for miles during the closures, which came at the start of the Memorial Day weekend.

 

The quake, which hit at 11:47 a.m., was centered about 23 miles south-southwest of Caliente, the U.S. Geological Survey said. The magnitude was originally reported as 5.4, but the official number was lowered twice Friday.

 

The ramp from southbound U.S. Highway 95 to southbound Interstate 15 was closed about 12:20 p.m. Friday, officials said.

 

“The joint damage was pre-existing. The tremblor simply dislodged the protective rubber encasing the bridge seam making it look much worse than it was in reality” and prompting an immediate shutdown of the ramps, NDOT engineer Mary Martini said in a news release about 3:45 p.m.

Since then, official water level data shows an incredible 8 foot plunge in water levels since the earthquake.

considering the (average drop in the last 10 years is 1 inch, this is a troubling outlier.

Source: Lake Mead Water Database,  h/t Professor Doomand Quasar

There is , of course, a possibility that the drop is the result of broken sensors and we will be following up during the week to see if levels normalize.

This is crucial since, as we noted previously,

If the water level drops below 1,075 feet elevation by January 1, 2016, it will trigger a federal water emergency. And water rationing.

 

Las Vegas Review Journal reported that forecasters expect the level to drop to 1073 feet by June, before Lake Powell would begin to release more water. Assuming “average or better snow accumulations in the mountains that feed the Colorado River – something that’s happened only three times in the past 15 years,” the water level on January 1 is expected to be barely above the federal shortage level.

 

Even with these somewhat rosy assumptions of “average or better than average snow accumulations,” the water level would begin set new lows next April. But if the next winter is anything like the last few, all bets are off.

 

If the level drops below 1050 feet, one of the two intake pipes for the Las Vegas Valley, which gets 90% of its water that way, will run dry.

As Roman Catholic Imperialist notes, this is quite unprecedented… For a sense of just how bad things are gettiing, the following images will help…

 

 

 

 

Update: moments ago the Lake Mead National Recreation Area officially denied that the online reading was accurate blaming the water level collapse on inaccurate water levels as of this morning.

Dare we say it: double seasonally-adjusted water levels?

end
Monday afternoon:

What Exactly Is Going On At Lake Mead?

Following our exposure of the plunge in Lake Mead water levels post Friday’s earthquake, officials were quick to point out that the drop was “due to erroneous meter readings” – which in itself is odd given we have not seen such an aberration before in the measurements. The data today shows a super surge in the Lake Mead water level – which, even more mysteriously, indicates from pre-earthquake to now, theLake has risen by the most in a 3-day-period in years (as long as we have found history). How was this level ‘manufactured’ you ask? Simple – discharge flows from the Hoover Dam were curtailed dramatically. We are sure there is a simple explanation for all this…

Yesterday we noted the plunge in Lake Mead water levels…

Officials said – do not worry, the readings are faulty…

Which resulted in this miracle…

The biggest 3-day net surge in water levels (0.7 feet from Thursday to Sunday) on recent record…

How was this miracle achieved (given the general lack of precipitation)? Were discharge levels curtailed drastically?

Nope – nothing odd here at all…

So what exactly is going at Lake Mead?

end

 

Well that about does it for today.

 

 

see you on Wednesday,

Harvey

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