June 4/Greece asks for bundling of IMF payments/IMF lowers GDP growth for the USA/IMF asks USA to hold off on increasing rates/Ukraine asks Neo Nazis for help in tackling rebels/

Good evening Ladies and Gentlemen:

 

Here are the following closes for gold and silver today:

Gold:  $1174.90 down $9.80 (comex closing time)

Silver $16.09 down 38  cents (comex closing time)

 

In the access market 5:15 pm

Gold $1176.50

Silver: $16.16

 

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 fair delivery day, registering  10 notices serviced for 1,000 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 245.22 tonnes for a loss of 57 tonnes over that period.

 

In silver, the open interest rose by 1795 contracts despite the fact that Wednesday’s silver price was down by 32 cents.   The total silver OI continues to remain extremely high with today’s reading at 180,138 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 402,546 for a gain of 3822 contracts despite the fact that gold was down $9.40 on Wednesday. We had 10 notices filed for 1000 oz.

 

Late last night, we had no change in gold inventory at the GLD,  thus the inventory rests tonight at 709.89 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 changes in silver inventory at the SLV/Inventory rests at 318.175 million oz

 

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

1. Today, we had the open interest in silver rise by 164 contracts despite the fact that silver was up in price by 2 cents yesterday.  The OI for gold rose by 3822 contracts up to 402,546 contracts as the price of gold was up by $5.80 yesterday.

(report Harvey)

2,Last night, huge volatility in the Chinese stock markets.

3. Today, 4 important commentaries re  Greece

(Lilico and zero hedge)

4. The rebels from Eastern Ukraine are on the offensive against Ukraine. Today the Ukraine mobilized the Neo Nazis to engage the rebels.

(zero hedge)

5. Danish individuals attack the Danish tax authorities

(zero hedge)

6. IMF slashes growth for the USA.

(IMF/zero hedge)

7. Precious metals trading overnight from Asia/Europe

(Goldcore)

8. Trading from Asia and Europe overnight

(zero hedge)

9. Trading of equities/ New York

(zero hedge)

 

 

we have these plus other stories to bring your way tonight. But first……..

 

let us now head over to the comex and assess trading over there today.

Here are today’s comex results:

The total gold comex open interest rose by 3822 contracts from 398,724 up to 402,546 as gold was down $9.40 yesterday (at the comex close).  We are now in the big active delivery contract month of June.  Here the OI fell by 518 contracts down to 1544. We had 74 notices served upon yesterday.  Thus we lost 444 contracts or an additional 44,400 oz will not stand for delivery.  No doubt, again, we had a huge number of cash settlements.  The next contract month is July and here the OI rose by 1 contract up to 481.  The next big delivery month after June will be August and here the OI rose by 3,855 contracts  to 265,427. No doubt that the cash settled June contracts, having been bought out for fiat, rolled into August. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 83,940. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day) was poor at 130,162 contracts. Today we had 10 notices filed for 1000 oz.

And now for the wild silver comex results.  Silver OI rose by 1795 contracts from 178,343 up to 180,138 despite the fact that the price of silver was down in price by 32 cents, with respect to Wednesday’s trading.  The front non active  delivery month of June saw it’s OI rise by 0 contracts remaining at 33. We had 0 contracts delivered upon yesterday.  Thus we neither gained nor lost any silver contracts standing in this non active June contract month. The estimated volume today was poor at 22,999 contracts (just comex sales during regular business hours. The confirmed volume yesterday (regular plus access market) came in at 75,152 contracts which is very good in volume. We had 0 notices filed for nil oz today.

June initial standing

June 4.2015

Gold

Ounces

Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz  51,156.437 oz (Brinks HSBC)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz  50,092.138 oz (HSBC)
No of oz served (contracts) today 10 contracts (1000 oz)
No of oz to be served (notices) 1534 contracts (153,400 oz)
Total monthly oz gold served (contracts) so far this month 2598 contracts(259,800 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month nil
Total accumulative withdrawal of gold from the Customer inventory this month  70,941.9 oz

Today, we had 0 dealer transactions

total Dealer withdrawals: nil oz

 

we had 0 dealer deposit

total dealer deposit: nil oz
we had 2 customer withdrawals

i) Out of Brinks 1000.000 oz  ????

ii) Out of HSBC:  50,092.137 oz

total customer withdrawal: 51,156.437 oz

 

We had 1 customer deposits:

i) Into HSBC:  50,092.138 oz

Total customer deposit: 50,092.138 oz

 

We had 1  adjustment:

i) Out of HSBC:  11,030.437 oz was adjusted out of the dealer and this landed into the customer of HSBC>

 

Today, 0 notices was issued from JPMorgan dealer account and 10 notices were issued from their client or customer account. The total of all issuance by all participants equates to 10 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 2 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 (2598) x 100 oz  or 258,900 oz , to which we add the difference between the open interest for the front month of June ( 1544) and the number of notices served upon today (10) x 100 oz equals the number of ounces standing.

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

No of notices served so far (2598) x 100 oz  or ounces + {OI for the front month (1544) – the number of  notices served upon today (10) x 100 oz which equals 413,200 oz standing so far in this month of June (12.852 tonnes of gold).  Thus we have 12.852 tonnes of gold standing and only 17.04 tonnes of registered or for sale gold is available:

 

Total dealer inventory 536,829,434 or 16.69 tonnes

Total gold inventory (dealer and customer) = 7,883,944.288 (245.22 tonnes)

 

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 245.22 tonnes for a loss of 57 tonnes over that period.

 

end

 

And now for silver

June silver initial standings

June 4 2015:

Silver

Ounces

Withdrawals from Dealers Inventory 411,7888.792 Scotia
Withdrawals from Customer Inventory 600,269.800 oz (Scotia)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory  411,788.792 oz (JPM)
No of oz served (contracts) 0 contracts  (nil oz)
No of oz to be served (notices) 33 contracts(165,000 oz)
Total monthly oz silver served (contracts) 199 contracts (995,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month 526,732.4  oz
Total accumulative withdrawal  of silver from the Customer inventory this month 1,242,227.8 oz

Today, we had 0 deposits into the dealer account:

total dealer deposit: nil   oz

 

we had 1 dealer withdrawals:

i) Out of Scotia;  411,788.792 oz

total dealer withdrawal: 411,788.792 oz

 

We had 1 customer deposit:

i) Into JPMorgan:  411,788.792 oz

 

total customer deposit: 411,788.792  oz

 

We had 1 customer withdrawal:

i) Out of Scotia:  600,269.800 oz

total withdrawals from customer;  600,269.800 oz

 

we had 0 adjustments

 

Total dealer inventory: 57.777 million oz

Total of all silver inventory (dealer and customer) 179.807 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 June, we take the total number of notices filed for the month so far at (199) x 5,000 oz  = 995,000 oz to which we add the difference between the open interest for the front month of June (33) 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 June contract month:

199 (notices served so far) + { OI for front month of June (33) -number of notices served upon today (0} x 5000 oz = 1,160,000 oz of silver standing for the June contract month.

we neither gained nor lost any silver contracts that  will stand for delivery in this month of June.

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:

June 4/ no change in gold inventory at the GLD/Inventory rests at 709.89 tonnes

June 3/late last night: a huge withdrawal of 4.18 tonnes. Tonight’s inventory rests at 709.89

 

June 2/no change in gold inventory at the GLD/Inventory rests at 714.07 tonnes

June 1/ we had a huge withdrawal of 1.79 tonnes of gold from the GLD/Inventory rests tonight at 714.07 tonnes

May 29/ no changes in gold inventory at the GLD/Inventory rests at 715.86 tonnes

May 28/ no changes in gold inventory at the GLD/Inventory rests at 715.86 tonnes

may 27: no changes in gold inventory at the GLD/Inventory rests at 715.86 tonnes

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

June 4 GLD : 709.89  tonnes.

 

end

 

And now for silver (SLV)

June 4/no change in silver inventory/rests tonight at 318.175 million oz

June 3/ we had a small withdrawal of 138,000 oz of silver inventory/Inventory rests at 318.175 million oz

June 2/ we had a huge addition of 1.243 million oz of silver inventory at the SLV./Inventory rests at 318.313 million oz

June 1/no change in inventory at the SLV/Inventory rests at 317.07 million oz

May 29/no changes in inventory at the SLV/Inventory rests at 317.07 million oz

May 28/a small deposit of 143,000 oz of silver added to the SLV/Inventory rests at 317.070 million oz

May 27/we had another 1.003 million oz withdrawn from the SLV/Inventory rests tonight at 316.927 million oz

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/

 

June 4/2015: no change in inventory/SLV inventory at 318.175 million oz/

 

end

 

And now for our premiums to NAV for the funds I follow:

 

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 8.1% percent to NAV in usa funds and Negative 7.9% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 60.9%

Percentage of fund in silver:38.7%

cash .4%

( June 4/2015)

 

2. Sprott silver fund (PSLV): Premium to NAV rises to +.30%!!!!! NAV (June 4/2015)

3. Sprott gold fund (PHYS): premium to NAV rises to  .25% to NAV(June 4/2015

Note: Sprott silver trust back  into negative territory at +.30%.

Sprott physical gold trust is back into negative territory at -.25%

Central fund of Canada’s is still in jail.

 

Last week Sprott formally launches its offer for Central Trust gold and Silver Bullion trust:

SII.CN Sprott formally launches previously announced offers to Central GoldTrust (GTU.UT.CN) and Silver Bullion Trust (SBT.UT.CN) unitholders (C$2.64)
Sprott Asset Management has formally commenced its offers to acquire all of the outstanding units of Central GoldTrust and Silver Bullion Trust, respectively, on a NAV to NAV exchange basis.
Note company announced its intent to make the offer on 23-Apr-15 Based on the NAV per unit of Sprott Physical Gold Trust $9.98 and Central GoldTrust $44.36 on 22-May, a unitholder would receive 4.45 Sprott Physical Gold Trust units for each Central GoldTrust unit tendered in the Offer.
Based on the NAV per unit of Sprott Physical Silver Trust $6.66 and Silver Bullion Trust $10.00 on 22-May, a unitholder would receive 1.50 Sprott Physical Silver Trust units for each Silver Bullion Trust unit tendered in the Offer.
* * * * *

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)

Bitcoin “Total Crypto Breakdown” Shows Risks To Non-tangible Assets

– Bitcoin wallet app Blockchain suffers major security blunder
– Poor tech sees multiple accounts being created using same address
– Security lapses in electronic and digital currencies not uncommon
– Bitcoin and cryptocurrencies in infancy but are useful tools
– Physical gold offers most secure form of wealth preservation

goldcore_chart3_4-06-15
Blockchain.com, which claims to be the maker of the most popular Bitcoin wallet, suffered at the weekend what the Guardian describes as a “total crypto breakdown”, highlighting once again the vulnerability of electronic and digital currencies to human and technological errors and hacking.

Multiple accounts were created using the same bitcoin address which meant that many users apparently had access to the same pool of funds which led to losses for a few.

The newspaper reports that a “series of bad development choices” in the software “all failed in the worst way possible”. It was operating in the typical “belt and braces” mode where if one line of defence failed another should still be operational.

“Bitcoin wallets are typically created by randomly generating a public address and a related private key. As a result, it is important for address and key to be truly random, or else it may be possible to guess the private key by looking at the public address.”

In the case of Blockchain.com, the random code was generated from two different sources which were then combined. The first was the random number generator on the device on which the app was being installed.

However, some Android phones failed to deliver the code to the blockchain app which meant its random code was generated entirely from the second source. The second source was an online service called random.org.

“But on 4 January, Random.org strengthened the security of its website, requiring all visits to be made over an encrypted connection. The blockchain app, however, continued to access the site through an unencrypted connection. So rather than getting a random number, as expected, it got an error code telling it that the site had moved.”

Blockchain then unwittingly used the same error code in creating the address for multiple users, the devices of whom had failed to produce the first line of random code.

“The magnitude of the error sparked shocked reactions from information security professionals.”

Security lapses in software for managing digital and electronic currencies are by no means uncommon. The constant march forward of technology often means that less attention can be paid to older systems which have not yet become obsolete.

goldcore_chart4_21-05-15

Early last year banking giant JP Morgan was hacked. It had its system hacked and details of 76 million customers were stolen (Cyber Attacks Growing In Frequency – Entire Western Financial System Is Vulnerable). JP Morgan use the “belt and braces” approach of two-factor authentication but in one older overlooked system they were still using a less sophisticated single password system.

In February, we covered the story where Russian cybersecurity firm Kaspersky lab uncovered an international hacking group who had managed to tamper with customers accounts in order to steal possibly up to $1 billion from over 100 banks globally (International Hacking Group Steals $300 Million – Global Digital Banking System Not Secure).

There have been numerous incidences in recent months where strategically vital monetary, financial and infrastructural computer systems have been seen to be very vulnerable to human error and malintent.

We can see the benefits of Bitcoin and cryptocurrencies in the coming years. We are particularly excited about the potential of the Blockchain itself (Blockchain Promises To Be As Disruptive A Technology As The Internet)

Cryptocurrencies are a useful tool which could provide a vital degree of short-term liquidity and means of exchange in the event of capital controls and or a banking or currency collapse.

However, given their non-tangible nature and other risks posed to them, we do not view them as a store of value or a safe haven asset akin to physical gold bullion in your possession or stored in the safest vaults in the world in the safest jurisdictions in the world.

Must Read Guides:

Essential Guide To Storing Gold In Singapore
Essential Guide To Gold Storage In Switzerland

 

MARKET UPDATE
Yesterday’s AM LBMA Gold Price was USD 1,186.60, EUR 1,067.23   and GBP 777.60 per ounce.Today’s  AM LBMA Gold Price was USD 1,182.45, EUR 1,041.76 and GBP 766.55 per ounce.

Gold fell $8.10 or 0.68 percent yesterday to $1,185.30 an ounce. Silver slipped $0.25 or 1.49 percent to $16.55 an ounce.

Gold in USD - 5 Years

Gold in Singapore for immediate delivery fell 0.2 percent to $1,182.80 an ounce near the end of the day,  while gold in Switzerland edged marginally higher.

Gold stumbled to its lowest in three weeks today despite very mixed U.S. economic data – there is a perception amongst some market participants that the U.S. economy is recovering and a U.S. rate hike will be occur … timing undetermined.

Physical gold demand remains robust in China and India and this is supporting gold near the $1,200 level.

The chart below shows the cumulative gold buying in “Chindia” since 2008. As can be seen gold demand has been and continues to be voracious. Monthly global gold production is shown in the bottom section highlighting the rampant gold demand of Chindia.

goldcore_chart1_04-06-15

U.S. weekly jobless claims are at 12:30 GMT and tomorrow’s nonfarm payrolls figure will be watched.

Gold is moving into the quiet summer months. Demand from Asia remains robust with premiums in China at $1.50-$2 over the global benchmark and SGE withdrawals robust.

Greek Prime Minister Alexis Tsipras said a deal with creditors was “within sight” after he stepped out of talks with senior EU officials in Brussels. Tsipras said that they would make the IMF payment on Friday.

This has taken some of the safe haven appeal out of gold bullion and moved money into other assets as market participants see a Grexit as less of a threat. Although stock markets today are sharply lower suggesting jitters on bond markets are spreading to equities.

In late European trading gold is down 0.27 percent at $1,182.40 an ounce. Silver is off 0.17 percent at $16.47 an ounce, while platinum is up 0.17 percent at $1,105.55 an ounce.

end

 

RUSSIA TO INCREASE ITS GOLD RESERVES-CENTRAL BANK HEAD

(COURTESY SPUTNIK NEWS)

The head of Russia’s Central Bank is determined to increase the country’s gold reserves to its previous levels in 2012-2013, from $360.5 billion up to $500 billion.

Russia will increase its gold reserves by up to $500 billion, said Elvira Nabiullina, the head of Russia’s Central Bank, Rossiyskaya Gazeta reported.

Russia will aim at $500 billion, despite the fact that a sufficient level of gold reserves for the country is $188 billion, Nabiullina said.Currently, Russia owns $360.5 billion worth of gold reserves. The amount covers more than three months of imports, short-term foreign debt and 20 percent of Russia’s entire money supply.

The country’s gold reserves exceeded $500 billion during 2012-2013, when global oil prices were at their peak. However, right now due to low oil prices, the Russian budget will receive $150-170 billion a year compared to a few years ago before the crisis.

“Recent experiences forced us to reconsider some of our ideas about sufficient and comfortable levels of gold reserves,” the head of the Central Bank said, adding that the Russian economy needs the amount of gold reserves to be able to cover negative capital outflow for the next 2-3 years.

Russia will accumulate its gold reserves gradually in order to avoid high inflation, Nabiullina concluded

Read more:

 

http://sputniknews.com/business/20150604/1022941140.html#ixzz3c7vzfPQj

END

(courtesy TF Metals/Turd Ferguson)

TF Metals Report: Avoiding the GLD

Section:

1:57p ET Thursday, June 4, 2015

Dear Friend of GATA and Gold:

Metal in the exchange-traded gold fund GLD is being drained for shipment to Asia, where people know that they don’t own gold if they can’t hold it, the TF Metals Report’s Turd Ferguson writes today. His commentary is headlined “Avoiding the GLD” and it’s posted at the TF Metals Report here:

http://www.tfmetalsreport.com/blog/6894/sham-gld

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

 

end

 

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

 

1 Chinese yuan vs USA dollar/yuan weakens to 6.2019/Shanghai bourse green and Hang Sang: red

2 Nikkei closed down by 14.68  points or .07%

3. Europe stocks all in the red/USA dollar index down to 94.78/Euro rises to 1.1360

3b Japan 10 year bond yield: huge rise to .50% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 124.11/very ominous to see the Japanese bond yield rise so fast!!

3c Nikkei still just above 20,000

3d USA/Yen rate now well above the 124 barrier this morning

3e WTI 59.78 and Brent:  63.88

3f Gold down/Yen up

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.

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 huge to 92 basis points. German bunds in negative yields from 3 years out.

Except Greece which sees its 2 year rate rise  to 22.26%/Greek stocks down 2.45%/ still expect continual bank runs on Greek banks /Greek default inevitable/

3j Greek 10 year bond yield falls to: 10.60%

3k Gold at 1183.00 dollars/silver $16.50

3l USA vs Russian rouble; (Russian rouble falls 1/5  rouble/dollar in value) 53.41 , the rouble is still the best acting currency this year!!

3m oil into the 59 dollar handle for WTI and 63 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 .9302 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0564 well above the floor set by the Swiss Finance Minister.

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

3r the 3 year German bund remains in negative territory with the 10 year moving still near negativity at +.92/

3s Six weeks ago, the ECB increased the ELA to Greece by another large 2.0 billion euros.Four weeks ago, they raised it another 1.1 billion and then two weeks ago they raised it another tiny 200 million euros to a maximum of 80.2 billion euros. Last week, the limit was not raised. Yesterday, the ECB raised the ELA by 1/2 billion euros to 80.7 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 2.40% early this morning. Thirty year rate just above 3% at 3.13% / yield curve flatten/foreshadowing recession.

 

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

 

(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)

Volatility Explodes: China Crashes Then Soars; Bund Tumble Continues With Yield Touching 0.99%

For once, Mario Draghi was right.

A day after the European central bank head warned of a spike in volatility, volatility did just that. Only it wasn’t just the German Bund, which as we previously noted suffered its biggest two day drop since the 1990s – this time it was China, whose Shenzhen index is where Bill Gross said in a tweet would be the next “short of a lifetime (not just yet)”.

And sure enough, just a few hours later, the Shenzhen suffered its biggest crash in more than two years, plunging 6.2%, with the Shanghai Composite also tumbling 5.35%. The catalyst: much as Gross would like to take credit wasn’t the Bond King in absentia, but a local broker, Golden Sun, which announcedshortly after the start of trading that it would suspend margin purchases of shares on Shenzhen’s startup board, ChiNext. A drop, incidentally, which brought the YTD gain on the ChinExt to just over 100%.

Promptly the concerns about a long-overdue market crash emerged: “The market has seen strong gains and sentiment is turning cautious with investors worrying if the index will repeat the correction seen years ago,” Shenwan Hongyuan analyst Qian Qimin told Bloomberg “It’s a market built purely on sentiment, and once that sentiment changes, people will follow suit to take profit. Bocom’s Hong Hao added that “Once the selling starts, it will ripple through the market especially in a highly leveraged environment.”

And then, just as suddenly as the selling started, it stopped. Not only did it stop, but a furious wave of buying in the closing hours wiped out the entire 6% loss, and the Shenzhen closed barely unchanged, down just 0.6%. The move on the Composite was even more unprecedented: following the 5.35% slump, the exchange actually closed up 0.8%, with bubble mania volatility reminiscent of what happened to bitcoin at its peak.

Then Europe opened, and as if continuing on the negative sentiment (not the late BTFD surge) German Bunds resumed their crash with European stocks and US equity futures all falling sharply. In fact, as the chart below shows, the Bund rose within 1 basis point of the critical 1.00% level before modestly retracing some of the major losses. The ongoing slide in Bunds has dragged both European peripheral and US Treasurys lower, with the 10Y yield rising as high as 2.42%, the highest since October.

It wasn’t just China that led to the overnight volatility: it was also Greece, whose prime minister rejected Europe’s “best and final” proposal, preserving the hope for a deal in the next few days on terms more agreeable to Athens even though the Troika has made it quite clear such a deal won’t come. As for today’s payment to the IMF, he added “don’t worry.

In any event, it was once again all about Bund, where SocGen noted moments ago that “Bund buyers are few and far between” adding “even investors who are long-term bulls seem to be short-term bears, with many looking for better levels before stepping in and adding to longs. Many are still very long, which isn’t helping.”

This has been a continuation of the recent sell-off seen in fixed income products over the past month with Bunds down over 1000 ticks from their best levels this year. This move was extended yesterday by comments from ECB’s Draghi who said that there could be more volatility to come and they are willing to look through this. In terms of this morning, German bonds have been subject to a significant bout of CTA selling which has subsequently seen a substantial course of bear-steepening in the German curve.

From an equity stand-point, stocks in Europe are also lower this morning after the DAX opened below its 100DMA and has
continued to drift lower since the open. Additionally, strength seen in the EUR has weighed heavily on German exporters with BMW (-2%) and Daimler (-2.4%) both lower. Furthermore, a lack of progress in discussions between Greece and their European counterparts has also erased some of the optimism heading into discussions, this has also been coupled with some talk doing the round about a dramatic rise in ATM withdrawals in Greece over the past week and comments from the Greek deputy shipping minister who said he could not accept current reform proposals. On a sector specific basis, utilities underperform in the wake of the unfavourable German nuclear tax ruling, while the CAC is the laggard index with losses of 2%.

At last check ,US equity futures were down 0.7% on heavier than usual volume, although should volume trickle down as it usually does during the regular session, expect all of the losses which have unwound yesterday’s modest gains, to evaporate just like in China.

In FX markets, EUR/USD has printed its highest reading in 2 weeks (USD-index -0.6%) with higher yields helping to support EUR, furthermore EUR/USD has also taken out stops through 1.1300 where there was a touted option barrier with the move said to be exacerbated by hedge fund buying. Moves in the EUR have subsequently boosted some of its other major counterparts with EUR/JPY and EUR/GBP at 5 month and 5 week highs respectively.

In the commodity complex, price action has been particularly muted despite the volatility endured in other asset classes with energy prices sitting tight ahead of tomorrow’s OPEC meeting while spot gold and silver failed to extend on their  modest uptick seen alongside the European open.

In summary: European shares remain lower, though off intraday lows, with the basic resources and utilities sectors underperforming and tech, telco outperforming. Greek PM rejected proposals that would unlock bailout funds necessary to avert a default. The French and German markets are the worst-performing larger bourses, the Swiss the best. The euro is stronger against the dollar. Japanese 10yr bond yields rise; German yields increase, reach highest since Sept. Commodities little changed, with nickel, copper underperforming and natural gas outperforming. U.S. jobless claims, continuing claims, Bloomberg consumer comfort, Challenger job cuts, nonfarm productivity, unit labor costs due later.

Market Wrap:

  • S&P 500 futures down 0.6% to 2103.3
  • Stoxx 600 down 1.4% to 390.6
  • US 10Yr yield up 3bps to 2.4%
  • German 10Yr yield up 6bps to 0.94%
  • MSCI Asia Pacific down 0.4% to 149.6
  • Gold spot down 0.2% to $1182.8/oz
  • Eurostoxx 50 -1.5%, FTSE 100 -1.3%, CAC 40 -1.7%, DAX -1.4%, IBEX -1.1%, FTSEMIB -1.2%, SMI -0.8%
  • Asian stocks fall with the Shanghai Composite outperforming, after falling as much as 5% earlier, and the ASX underperforming; MSCI Asia Pacific down 0.4% to 149.6
  • Nikkei 225 up 0.1%, Hang Seng down 0.4%, Kospi up 0.5%, Shanghai Composite up 0.8%, ASX down 1.4%, Sensex down 0.1%
  • Euro up 0.71% to $1.1355
  • Dollar Index down 0.71% to 94.79
  • Italian 10Yr yield up 3bps to 2.21%
  • Spanish 10Yr yield up 4bps to 2.18%
  • French 10Yr yield up 6bps to 1.23%
  • S&P GSCI Index down 0% to 436.1
  • Brent Futures up 0.2% to $63.9/bbl, WTI Futures up 0.3% to $59.8/bbl
  • LME 3m Copper down 1% to $5950.5/MT
  • LME 3m Nickel down 1.1% to $12855/MT
  • Wheat futures down 0.5% to 508.3 USd/bu

Bulletin headline summary:

  • A failed attempt by the German 10yr to breach the 1.00% yield level to the upside acts as a source of support for
    European asset classes
  • Sentiment for equities have been soured by a lack of progress in Greek negotiations and the broadly stronger
    EUR with the CAC lower by almost 2%
  • Looking ahead, today sees the release of the weekly jobs data from the US, BoE rate decision, as well as potential comments from ECB’s Knot and Fed’s Tarullo.
  • Treasuries fall for a fourth day, 10Y yield rises to 2.423%, highest since October, as EGB rout continues; German bund yield approaching 1% level, up from record low 0.049% on April 17.
  • UST selloff “purely a liquidity-driven event” spurred by EGBs; “however nothing fundamentally has changed,” with government regulation to blame for thin balance sheets, lack of risk-takers, ED&F Man head of U.S. rates Tom DiGaloma writes
  • Greek PM Tsipras will convene his inner circle to plot the next move in the standoff with international creditors after a round of top-level talks failed to yield a breakthrough
  • After meeting with Juncker and Dijsselbloem in Brussels, Tsipras stuck to his position that any basis for an accord must be a Greek proposal
  • The excessive strength in the yen that damaged Japanese manufacturing in recent years has now been corrected, according to an ally of Bank of Japan Governor Haruhiko Kuroda
  • Discussions at this week’s OPEC summit are mostly about pumping more oil, with Iraq to increase exports this month and Iran urging group to make room for more output when sanctions recede
  • China’s benchmark stock index erased losses after tumbling as much as 5.4% on news a brokerage suspended margin financing for investors in smaller companies
  • Sovereign 10Y bond yields surge. Asian stocks mostly lower, European stocks plunge, U.S. equity-index futures drop. Crude oil higher, copper and gold lower

 

DB’s Jim Reid completes the overnight market summary

 

The recent rising yield environment has so far had limited impact on credit, especially HY. However yesterday saw another test with Bunds (as already highlighted) hitting YTD yield highs having climbed +16.8bps. That’s +39.6bp this week alone. Yesterday’s move seemed to be triggered by Draghi’s press conference where he warned investors to expect more fixed income volatility dashing hopes that he would try to calm markets after the recent bond wobbles. He also exuded confidence that QE was working in increasing growth and inflation but that it still required full implementation of QE to achieve their objectives. He did say they could if anything do more if financial/economic conditions tightened. There was also an unsurprising upgrade to inflation forecasts for this year to +0.3% (from 0.0%), while 2016 and 2017 forecasts were kept at 1.5% and 1.8% respectively. Growth is expected to be 1.5% in 2015, before rising to 1.9% in 2016 and 2% in 2017 (a -0.1% mechanical revision versus previous forecasts).

The lurch higher in yields yesterday was also notable with the 4y Bund trading back in positive territory (+0.02%) for the first time since early December. There were similar moves for other core European bond markets yesterday. 10y yields in Netherlands (+15.7bps), Sweden (+15.8bps) and France (+14.7bps), amongst others, took a steep leg higher. Peripherals were very much the laggard yesterday as 10y yields in Spain, Italy and Portugal closed just +5.3bps, +5.3bps and +3.1bps higher, although that may have more to do with the move in Greek yields as the 10y in particular ended 62bps tighter as confidence mounted that we might be one step closer to a resolution. The Euro rose for a second consecutive session, ending 1.11% higher, while equity markets were fairly mixed on the whole with the Stoxx 600 (-0.13%) modestly lower and the DAX (+0.80%) and CAC (+0.59%) higher.

Data flow in Europe yesterday largely played second fiddle to the Draghi comments. However there were some positive signs to take after the final services PMI reading for May in the Euro area was revised up 0.5pts to 53.8. As a result the composite was revised up 0.2pts to 53.6. The gains were led by France where the composite was revised up 1pt to 52, while in Germany the composite fell 0.2pts to 52.6. Elsewhere, Euro area retail sales for April were above market (+0.7% mom vs. +0.6% expected), helping push the annualized rate to +2.2% yoy from +1.7% previously. Unemployment for the region fell one-tenth of a percent to 11.1%. In the UK there was a sharp fall in the services PMI for May, dropping 3pts to 56.5. That dragged the composite down 2.6pts to 55.8.

Along with the bond market, Greece dominated headlines once again last night. Following a meeting in Brussels with the EC’s Juncker and Dutch Finance Minister Dijsselbloem late last night, Greek PM Tsipras was noted as saying that the two sides were ‘very close’ on primary surplus targets and that there was a ‘constructive’ will from the European Commission to reach a common understanding. The bad news however, was that Tsipras also acknowledged that differences still remain, particular around pension reforms. The PM was quoted as saying that ‘the realistic proposals on the table are the proposals of the Greek government’ and that we can’t make the same mistakes as in the past. With talks set to continue today, focus will turn to Friday’s IMF repayment. Last night’s comments from Tsipras – when questioned by reporters about whether or not Greece will make Friday’s obligation – will fuel hope that the payment will be made after the PM said not to worry about it and that Greece had also already repaid billions to the fund. These contradict earlier comments from a Syriza spokesman on Greek TV who said that ‘if there is no prospect of a deal by Friday, we will not pay’. Prior to last night’s headlines, DB’s George Saravelos published his latest update trying to make sense of the fast moving developments. He concluded that a Greek government decision on whether to accept an agreement with European creditors is inevitable over the next two weeks, but that disbursements are unlikely until the noisy political process has materialized. He notes that an agreement would be a major step forward, but the domestic political risks around the ultimate resolution would follow.

Back to markets, the significance of the moves in Europe weighed on US Treasuries once more as we saw the benchmark 10y yield close +10.2bps higher at 2.365%, a +24.3bps move this week already with the yield now the highest since November 12th. The S&P 500 (+0.21%) shrugged off weakness in utility stocks as the move higher in rates saw a bid for financials in particular. With the influence of a stronger Euro, the DXY ended 0.50% lower although had firmed in the lead up to Draghi’s press conference following the early afternoon data releases, with the latest trade balance and ADP print in particular helping find some support.

Just on this, yesterday’s ADP employment report for May will likely lift hopes for a solid payrolls print tomorrow after the 201k reading (which was more or less in line with expectations of 200k) rose 36k from April. The print actually marked the first monthly increase since November last year. April’s trade balance meanwhile showed the deficit shrinking to $40.9bn (versus $44bn expected) from a revised $50.6bn last month, reversing the West Coast ports inspired effect of last month. Having made a significant downward impact to Q1 GDP, yesterdays data meant we saw the Atlanta Fed GDPNow model upgrade their Q2 GDP forecasts to 1.1%, from 0.8% just a couple of days ago. There was some disappointment in the ISM non-manufacturing reading meanwhile, with the 55.7 reading falling 2.1pts from May and coming in well below market expectations of 57.0. The reading was actually the lowest in 13 months as new orders, employment and business activity components all declined. Lastly there was a modest downgrade to the May services PMI (down 0.2pts to 56.2), resulting in the composite falling a tad to 56.0 (from 56.1 in April).

The focus of yesterday’s Fedspeak was on Chicago Fed President Evans who said that the hurdle for increasing rates is ‘pretty high’ currently and that ‘we need to get demand moving up more strongly’. Speaking after the closing bell, the St Louis Fed President Bullard (non-voter) said that recent soft data has made it appropriate for the market to move back the likely date of policy firming. Bullard went on to say that the weakness in Q1 was likely transient however and that we should get stronger data later this year to enable the normalization process to begin.

Just wrapping up the news-flow in the US yesterday, the Fed’s Beige Book showed that the US economy is experiencing ‘moderate’ to ‘modest’ growth in seven of the twelve Fed districts, with the remainder showing ‘mixed’ to ‘slight’ growth signals.

Before we look at today’s calendar, Asian bond markets are adding to the global rout with 10y yields in Australia (+11.6ps), Japan (+4.0bps), Indonesia (+6.4bps) and Singapore (+3.7bps) all higher. 10y Treasuries are another 0.5bps wider this morning. There’s been a sharp turnaround in equity markets meanwhile with the Shanghai Comp and CSI 300 -1.78% and -1.74% respectively, the bulk of the falls appearing to come in the last ten minutes before we go to print although it’s not entirely clear what’s caused the sell-off. Elsewhere, the Hang Seng (-1.39%) has followed the China losses, while the Nikkei (+0.24%) and Kospi (+0.31%) are both trading higher.

Onto today’s calendar now, French employment data is the early release this morning before we get the BoE meeting around midday. This afternoon in the US we’ve got more employment indicators with Challenger job cuts for May and the latest weekly initial jobless claims data. The final Q1 unit labour costs and nonfarm productivity round off the releases today. The Fed’s Tarullo will be the latest Fed official to speak.

 

end
Last night in China: just take a look at the volatility. Totally nuts!!
(courtesy zero hedge)

China Is Crashing (Again)

It appears – as opposed to what the world’s asset-gathering commission-takers would have one believethat huge illiquid spikes in bond markets are not good for stocks. As the bond carnage continues to careen throughout Asia, Chinese stock investors appear to have decided enough is enough at doubling their money in a mere few months. After early weakness out of the gate, the ubiquitous dip-buyer-of-last-resort failed to appear as the afternoon session arrived and Chinese stock indices are down between 5% (Shanghai Comp – which never took out its previous highs) and 7%(CHINEXT which was up over 16% in the last 3 days) overnight. Everybody better be hoping for a disastrous jobs number on Friday or this drop may suddenly become the long lost ‘healthy’ correction in global stocks so many have called for.

 

Today…

 

And the last week… 10% correction… 16% face-ripper… 7% correction

 

Every asset manager in the world is currently praying that MSCI does not include China in its indices or risk budgets everywhere will be blown and exposure to global equities will be forced lower.

 

Charts: Bloomberg

 

end

 

And now for our huge story on Greece:  why no deal!!

(courtesy Andrew Lilico/Chairman of Europe Economics)

Greece: Out Of Cash, Out Of Time, Out Of Options

Authored by Andrew Lilico – Chairman of Europe Economics (@Andrew_Lilico), excerpted from CapX.xom,

On Friday Greece is due to pay at least a quarter of the €1.5bn due to the IMF in June. 

The creditors say they will only disburse the money if the Greek government enacts various key economic reforms and does not roll back reforms the last government agreed with the lenders and if the Greek government undertakes to run large enough budget surpluses every year in the future that Greece might have a chance of paying back the money the creditors have lent it.

 

The Greek government says there is no possibility of it ever paying back all the money it has been lent and the creditors need to accept that, write off some of the debt, and not insist that Greece runs large surpluses (predicated on the fantasy of paying back the debt) or cuts back on pensions or enacts other similar measures that run contrary to the Greek voters’ will (as expressed in the last election).

Most commentary still appears predicated on the idea that there will be some last-minute deal – either because the creditors will back down and give Greece some more money without requiring it to be paid back or because the Greek government will back down if it understands that not doing so would ultimately mean leaving the euro.

I, on the other hand, don’t believe either side is particularly interested in achieving a deal.

The Eurozone does not want to make any compromise with the current Greek government because:

 

(a) they don’t believe they need to because Greek threats to leave the euro are empty both because internal polling suggests Greeks don’t want to leave and because if they did leave that doesn’t really constitute any threat to the euro;

 

(b) because they (particularly perhaps Angela Merkel) believe that under enough pressure the Greek government might collapse and be replaced by a more cooperative government, as has happened repeatedly before in the Eurozone crisis including in Italy and Greece itself; and

 

(c) because any deal with Greece that is seen to involve or be presentable as any victory for the Greek government would threaten the political positions of governments in several Eurozone states including Spain, Portugal, Italy, Finland and perhaps even the Netherlands and Germany.

 

Furthermore, it’s not clear to me that the Eurozone creditors at this stage would have much interest in any deal based upon promises, regardless of how much the Greek had verbally surrendered.  Things have gone too far now for mere words to work.  They would need to see the Greeks deliver actions — tangible economic reforms and tangible, credible primary surplus targets and a sustainable change in the long-term political mood within Greece that meant other Eurozone states might eventually get their money back.  That is almost certainly not doable at all with the current Greek government.  The only deal possible would be with some replacement Greek government that had come in precisely on the basis that it did want to do a deal and did want to pay the creditors back.

 

On the Syriza side, I see no more appetite for a deal.  They believe that austerity has been ruinous for the lives of Greeks and that decades more austerity would mean decades more Greek economic misery.  From their point of view, default or even exit from the euro, even if economically painful in the short term, would be better than continuing with austerity now.  The only kind of deal they could countenance would be one in which creditors accepted that austerity must end and much of the monies lent are never coming back.

Even though neither side thinks a deal is possible with the other, they keep talking and keep telling the world a deal is close because:

(a) some on the Eurozone side continue to hope that under enough pressure the Greek government might collapse or make some bad political mistake that leads to its downfall;

 

(b) the Eurozone does not want to eject the Greeks – it wants them to choose to leave, instead, if indeed they do leave in the end;

 

(c) the Greek government wants to be thrown out or, if it chooses to leave in the end, to be able to say credibly to the Greek people (who continue to be in favour of euro membership — though that is no longer true of the majority of Syriza voters, 58 per cent of whom now say in opinion polls that euro exit would be preferable to more austerity) that it tried everything and euro exit was a final resort.

The past 24 hours have seen an alleged “Take-it-or-leave-it” proposal from the Eurozone, which reports indicate appears to involve no debt relief at all, no material change in the demands for economic reforms, and primary surpluses of 1% in 2015, 2% in 2016, 3% in 2017, and 3.5% thereafter.  Since the Greek economy has deteriorated further through 2015 with the political turmoil, a 1% target might be difficult to meet and at this stage is no kind of “compromise”, whilst the 3.5% longer-term target continues to reflect the narrative of placing the Greeks in a position to repay their debts, which the Greek government refuses to accept.  It is hard to see how Syriza could accept that without collapsing.  If it really is “take-it-or-leave-it” then if Syriza wants to contemplate it at all that might mean a referendum – which would presumably lead to a rejection.  I suspect they will simply start the defaulting on Friday by not paying the IMF.

On the other side, the Greek made their own counter-proposals.  The German finance minister Wolfgang Schaeuble — who publicly said some time ago that no-one had any idea how a deal could be reached — said public statements of optimism were not justified and that his impression of the Greek proposals was that talk won’t be over soon.

And yet, even if all the current excitement about an imminent deal, within hours or a few days, were justified, what would it really mean?  They are still only debating the conditions for the disbursement of the final €7.2bn from the previous Greek bailouts!  Even if they agree to that, which would cover the €6.5bn or so that Greece needs to get through June, that would still leave Greece with no way to pay its large debts to the ECB and others that are due in July and August.  To get through the summer, there would need to be another whole bailout agreement, covering around €30-50bn more given to Greece and including a whole additional set of economic reforms and surplus targets!  Which Eurozone Parliament is going to vote for that?

Read more here…

end

 

Results of the meeting last night and where we go from here:

 

(courtesy zero hedge)

Tsipras Sticks To “Red Line” Rhetoric Cornered By Party Radicals

Wednesday evening’s “high level” meeting between between Greek PM Alexis Tsipras, Jean-Claude Juncker and Jeroem Dijsselbloem came and went with little more than a promise to keep talking, in what has become a familiar scene for those glued to the Greek drama.

For now at least, Tsipras appears to be sticking to his party’s so-called “red lines” around pension cuts and a higher VAT, a stance that is apparently incompatible with the prepackaged deal prepared for him by Merkel, Hollande, Junker, and Draghi on Tuesday. Greece presented its own proposal on Monday evening prior to an emergency meeting in Berlin and it now appears creditors may actually have to read that draft if they hope to stick to the idea that Tuesday’s troika offer truly did not represent an ultimatum to Athens. Here’s more viaBloomberg:

Tsipras said demands by the euro area and the IMF for cuts in the income of poor pensioners and increases in value-added tax on power are unacceptable,highlighting what have been red lines in Greece’s stance since his anti-austerity Syriza party swept to power in snap elections in January.

 

“Ideas like cutting benefits for low-income pensioners, or raising the VAT rate for electricity by 10 percentage points, can’t be a basis for discussion,” he said…

 

“There was a constructive will from the European Commission to reach a common understanding,” he said.

 

(Tsipras in Brussels on Wednesday)

 

Greece has looked to the commission for support to dilute the austerity-first formula that’s underpinned two Greek rescues totaling 240 billion euros since 2010. This has led to clashes with creditors who say such bailout conditions have worked for other countries such as Ireland now out of aid programs and Greece should get no special treatment.

 

Creditors want the targets for the primary budget surplus – – the budget balance excluding interest payments — to be 1 percent of gross domestic product this year, 2 percent of GDP in 2016, 3 percent in 2017 and 3.5 percent in 2018, said the Greek official, who called these proposals a “good basis” for further deliberations on the matter.

 

Tsipras said both sides were “very close” to an agreement on the targets for the primary surplus.

In other words: things are going nowhere very fast.

Barring some manner of end-around whereby Athens is able to borrow from some as yet untapped source of funds, Friday’s IMF payment will almost certainly be missed (although some reports indicate the government still claims it has the cash). This was largely expected. Given Greece’s dire financial position, it seems reasonable to assume they will take any opportunity to buy time and the bundling option (whereby Greece can bundle all of its June IMF payments into one payment) will afford the Greeks a few days of breathing room while Tsipras tries to close a deal.

Through it all, the troika is still holding all of the cards — or all of the cash. Unless creditors abruptly decide to relinquish calls for pension reform, Tsipras will eventually be forced to accept an unpalatable deal. Even if the ECB were to decide to remain completely neutral by routinely raising ELA and keeping haircuts on pledged assets unchanged, Greek banks will eventually run out of collateral. With deposit flight running above €100 million a day, the coffers would empty in a matter of weeks (if not days). At that point, it’s either introduce a parallel currency or revert to a barter economy.

Given this, the base case scenario still seems to be concessions by Tsipras on pensions and VAT, concessions which will not go over well with Syriza hardliners whoessentially put euro membership to a vote late last month. Should Tsipras be forced to accept a deal on creditors’ terms, he will have to pitch the unpopular agreement to an unwieldy parliament — political turmoil will ensue.

Deutsche Bank has more on the possible outcomes:

What are the components of an “agreement”? The first component is Greek government sign-off, with the Prime Minister ultimately responsible. Our continued (marginal) baseline remains that such an agreement will be achieved, but the exact timing depends on the amount of pressure placed tonight as well as ECB willingness to tolerate ongoing increases to ELA funding. [This week] a small 500mio EUR increase to the ELA cap was granted, with accelerating deposit outflows in recent days likely further reducing the liquidity buffer available to Greek banks.

The second component to an agreement requires domestic political approval, with passage through the current ruling parliamentary majority being a pre- requisite for fund disbursement. It is only once legislation has passed through the Greek parliament that funding will be released. If the Greek government signs a deal, the three possible political processes would appear possible, in order of likelihood:

Passage through parliament, with potential opposition support and change in government coalition. This political avenue now seems the most likely as it is the quickest. Parliamentary ratification of an agreement could take place within a few days, with the main source of uncertainty being whether the current ruling coalition remains intact. Out of a 12 MP ruling majority, reports suggest a range of 10-40 MPs expressing strong dissatisfaction with the current state of play. Minister Nikos Pappas, one of the PM’s closest associates, last week explicitly stated that the government would impose a three-line whip on any parliamentary vote, and the Prime Minister would likely attempt to ensure that any agreement is pre-approved by the party’s central committee ahead of a parliamentary vote. With the track record of the current parliamentary majority exceptionally short however, it remains very difficult to assess the odds of parliamentary success. The need for opposition support – possibly in exchange for a change in the government coalition – would seem a likely outcome.

Referendum. A successful referendum would provide the Prime Minister with stronger political backing to pass an agreement through parliament, increasing the odds of ruling party support. However, this political avenue would require at least two weeks as well as requiring the prime minister’s implicit backing. Absent such “reluctant support”, it is unclear if the referendum would be a success. It is also unclear whether a referendum could materialize before the end of June, when all IMF payments would be due, and as a result whether European creditors (and the ECB) would be willing to extend the existing program (even without disbursements) under such uncertainty.

Early election. A number of senior SYRIZA party officials have over the last few days suggested that an agreement may trigger an early general election. This is likely a means of pre-emptively exerting pressure on ruling party MPs, who in the event of withdrawing support from the government would be unlikely to be included in the party’s new electoral list. An early election would be possible, but the least likely: the PM will likely be able to pass an agreement through parliament with opposition support, in turn generating strong incentives for a shift to a more moderate coalition within the existing parliament rather than a new electoral campaign following a painful compromise with European creditors. This notwithstanding, financial stability under an early election could only be ensured if some disbursements have materialized ahead of time accompanied by ongoing ECB financing of Greek banks. This itself will likely be conditional on passage of an agreement through parliament before a general election is called. 

Note the last bolded passage above: “…the PM will likely be able to pass an agreement through parliament with opposition support, in turn generating strong incentives for a shift to a more moderate coalition within existing parliament rather than a new electoral campaign following a painful compromise with European creditors.” That translates to this: Tsipras accepts creditors’ demands and enough Syriza ‘radicals’ relent for the PM to pass the deal through parliament effectively transforming the party into a more moderate political position.

Again, that outcome remains the end goal for the troika. Creditors will force Tsipras to concede on most (if not all) of Syriza’s mandate and the PM will then exert similar pressure on party hardliners until the deal is sealed and Syriza is effectively no longer Syriza.

After that, the only question will be how the Greek populace responds.

 

end

Late in the day, it looks like Tsipras may ask for a vote of confidence as the Greek parliament debates the bailout question:

(courtesy zero hedge)

Tsipras May Ask For Vote Of Confidence As Parliament Debates Bailout

Unconfirmed reports now suggest Greek PM Tsipras will ask for a vote of confidence as early as Friday.

The chatter comes as Bloomberg says parliament is set to debate creditors’ proposal tomorrow:

Greece’s parliament will hold debate to discuss bailout talks Friday, at 6pm local time, a govt official says in e-mail to reporters.

 

Debate to take place following PM Alexis Tsipras request.

 

Official asked not to be named in line with policy.

EURUSD spiked on the rumor “news”…

…and here’s a bit of spoofing in the EUR…

 
end
And finally this:
(courtesy zero  hedge)

Greece Unable To Make €300 Million IMF Payment, Requests “Bundling”

With Greece and creditors unable to come to a compromise on a deal over the past several days, we’ve said repeatedly that despite claims to the contrary by Greek economy minister George Stathakis,Greece will not make Friday’s €300 million payment to the IMF and will instead request to have the payments bundled so as to buy PM Alexis Tsipras a few extra weeks to negotiate a deal and pass an agreement through parliament.

Indeed, we said the following on Sunday:

It’s quite possible the sense of urgency around the negotiations has now eased because, as we mentioned on Saturday, it looks as though Greece can buy a few weeks by opting to “bundle” its June payments to the IMF, something the Greek government has denied (meaning it’s probably assured) but which seems increasingly likely especially given cryptic comments like this one from economy minister George Stathakis:

  • STATHAKIS SEES `TECHNICAL SOLUTION’ SOON TO MEET IMF PAYMENTS

While it’s unclear whether that means the country will find yet another channel by which they can ask creditors to pay themselves back as they did with the IMF last month or whether that’s a reference to bundling the payments is unclear, but here’s what Stathakis told Corriere della Sera:

“There shouldn’t be any neeed [to bundle the payments]”

We shall see. 

And then yesterday following the latest failure to reach a deal:

However, Christine Lagarde was confident as recently as three hours ago:

IMF chief Christine Lagarde said Thursday that she was “confident” that Greece will make a key debt payment on Friday, as the country mulls a new proposal from official creditors.

 

Lagarde said the proposal offered by European creditors in talks Wednesday, with revised performance requirements for the Greek government, “clearly demonstrated significant flexibility on the part of the institutions.”

Needless to say, we were rather skeptical when she said it:

Now may be an opportune time for Lagarde to update everyone her “confidence” level, because moments ago, what we knew was inevitable, was confirmed:

  • DJ GREECE SUBMITTED A REQUEST FOR BUNDLING JUNE IMF PAYMENTS INTO ONE — GREEK GOVERNMENT OFFICIAL

And Reuters:

Greece has asked to bundle its four debt payments to the International Monetary Fund that fall due in June so that it can pay them in one batch at the end of the month, Greek newspaper Kathimerini reported on Thursday.

 

The request is expected to be approved by the IMF, the newspaper said. That would mean Greece does not have to pay the first tranche of 300 million euros that falls due on Friday.

 

Greece faces a total bill of 1.5 billion euros owed to the IMF over four installments this month.

And just like that, after effectively defaulting to the IMF a month ago, Greece has just re-effectively re-defaultedto the same IMF on its payment due tomorrow, which now will not be made, just as predicted.

Then, adding to the confusion, Greek PM Tsipras tweeted some token statement which for some inexpicable reason had a photo of himself in the tweet:

All of the above of course indicates that Athens has rejected the proposal drafted by creditors on Tuesday and indeed we now have confirmation from the Greek finance ministry:

“After 4 months of negotiations, creditor institutions submitted proposals which can’t solve the riddle of the economic crisis caused by the policies implemented in the last 5 years. The proposals submitted would deepen poverty and unemployment”

 

“The agreement and solution which both Greece and Europe so badly need requires the immediate convergence of institutions to more realistic proposals, which will advance economic growth and social sensitivity. Greek government has submitted such proposals”

Just like that, Greece has called the troika’s bluff and put the ball back into creditors’ court. For their part, Europe expects a re-counter proposal to the troika’s original counter proposal by June 8:

The Euro Working Group expects Greece to respond to an EU proposal to conclude the country’s bailout by June 8, according to a person familiar with the talks.

The farce continues.

In any event, with Friday’s payment delayed, there are just a few more left.

end
Following the rebel advances, Ukraine mobilizes the Neo Nazis  in renewed fighting.
(courtesy zero hedge)

Ukraine ‘Mobilizes’ Right Sector Neo-Nazis Amid Renewed Fighting; NATO Points Finger, Russia Responds

Following yesterday’s “large-scale” rebel offensive, as Ukraine’s military reported it, and hot on the heels ofPoroshenko’s threat of imminent martial law(including theright to detain or force relocate foreign nationals at will) and Soros’ exposure as the ‘lethal-weapon-demanding’ puppet-master, Tass reports Ukraine’s nationalists affiliated with the extremist organization calling itself the Right Sector (outlawed in Russia) have been urged to cut short their vacations and all commanders, ordered to begin full mobilization. NATO has asked both sides to back down, focused on Russia’s responsibility as Poroshenko says there are now more than 9,000 Russian troops on Ukraine soil (though YouTube proof remains absent).

 

As Tass reports, Poroshenko appears to be falling back on his neo-nazi ‘non-terrorist’ supporters to fight the pro-Russian ‘terrorists’…

Ukraine’s nationalists affiliated with the extremist organization calling itself the Right Sector (outlawed in Russia) have been urged to cut short their vacations and all commanders, ordered to begin full mobilization, Right Sector spokesman Andrey Stempitsky has said.

 

“Those who are away on vacation or have left for home during the lull on the frontline should get ready to return to their units. The commanders of reserve battalions shoulddeclare mobilization to build up their squads to full strength and keep their men ready to leave for combat units or a training center,” Stempitsky says in a message posted on Facebook.

 

Stempitsky said that “despite resistance from the advocates of armistice we will go to fight.”

 

The Right Sector is a Ukrainian association of radical nationalist organizations. In November 2014 Russia’s Supreme Court declared it as an extremist organization and outlawed its operation in Russia’s territory. Earlier, Russia launched criminal proceedings against the group’s leader Dmitry Yarosh over calls for terrorism.

As DPA reports, Poroshenko knows who to blame…

There are more than 9,000 Russian troops in Ukraine, presenting the threat of an upcoming large-scale offensive, Ukrainian President Petro Poroshenko said Thursday. A surge in fighting between pro-Russian separatists and Ukrainian military forces in eastern Ukraine this week has been the deadliest since a ceasefire was signed in February.

 

“There is still a colossal threat of a resurgence of large-scale military actions by Russian terrorist groups,” Poroshenko told parliament during a speech to mark the end of his first year in office.

 

“On the territory of Ukraine there are 14 Russian military battalions of tactical groups amounting to more than 9,000 servicemen,” Poroshenko said.

As does NATO…

Russia must act to reduce east Ukraine tension – NATO’s Stoltenberg

 

Russia has a particular responsibility to help stop the renewed fighting in eastern Ukraine, NATO Secretary-General Jens Stoltenberg said on Thursday. Both sides in the conflict must withdraw heavy weapons from the frontline and help implement the previously signed ceasefire agreements, he told reporters in Oslo.

*  *  *

Then the finger-pointing escalated:

  • *RHODES: `ONGOING VIOLATIONS’ BY RUSSIA OF MINSK AGREEMENTS
  • *RUSSIA REITERATES IT HAS NO TROOPS IN UKRAINE: IFX

 

It appears, perhaps strengthening Soros’ case for lethal aid, that The Minsk Accord is hanging by a thread.

 

end

 

Over in Denmark, the citizens are starting to revolt:
(courtesy zero hedge)

The Danes Are Revolting: Tax Administration Set On Fire

In Fredensborg, Denmark, ten official cars from the Tax Administration Office were set on fire and destroyed overnight in a protest. As ExstraBladet reports, police received notification Wednesday night at 3:09 a.m. that the Tax Administration offices on Kratvej were on fire. So far, there are no suspects. But, as Martin Armstrong notes, the police will undoubtedly hunt for someone retaliating against the Tax Man.

 

As Martin Armstrong further points out, this is not the first time the world has seen this…

On February 18, 2010, a man in a dispute with the IRS for seizing his home flew his plane in a suicide mission directly into the IRS building in Austin, Texas.

His battle against the Tax Man made him a hero to many.

As the economy turns down and governments become far more aggressive to grab money from everyone, we should see a sharp rise in these types of incidents.

This is part of the rising trend in civil unrest.

 

This is all insane since money is no longer tangible; taxes are also no longer necessary. We should seriously address the fact that money is not what it used to be.

 

We have moved forward in technology, science, medicine, and every field except economics. France is high on the list for a major tax revolution as nearly 50% of GDP is consumed by annual tax collections. That is totally insane. And they wonder why the rich flee and unemployment rises? This is the 21st century, not the 17th. Money has changed and taxes are no longer necessary, yet they create it anyway. That is like me giving you a $100 bonus and then charging you $50 to receive it.

What’s the point? They spend more than they collect anyway.

end

Your more important currency crosses early Thursday morning:

 

Euro/USA 1.1360 up .0098

USA/JAPAN YEN 124.11 down .193

GBP/USA 1.5424 up .0098

USA/CAN 1.2444 down .0011

This morning in Europe, the Euro rose by a considerable 98 basis points, trading now just above the 1.13 level at 1.1360; 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.

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 up again in Japan by 20 basis points and trading just above the 124 level to 124.11 yen to the dollar.

The pound was well up this morning as it now trades well above the 1.54 level at 1.5424, 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 and today crumbling bourses.

The Canadian dollar is up by 11 basis points at 1.2411 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 1.0564 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 14.68 points or 0.07%

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

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

Gold very early morning trading: $1183.00

silver:$16.50

Early Thursday morning USA 10 year bond yield: 2.40% !!! up 3 in basis points from Tuesday night and it is trading above resistance at 2.27-2.32%.

 

USA dollar index early Thursday morning: 94.78 down 68 cents from Wednesday’s close. (Resistance will be at a DXY of 100)

 

This ends the early morning numbers, Thursday morning

And now for your closing numbers for Thursday:

 

Closing Portuguese 10 year bond yield: 2.85 down 3 in basis points from Wednesday (getting ominous)

Closing Japanese 10 year bond yield: .51% !!! up 3 in basis points from Wednesday/(getting ominous)

Your closing Spanish 10 year government bond, Thursday, down 3 points in yield (very ominous)

Spanish 10 year bond yield: 2.11% !!!!!!

 

Your Thursday closing Italian 10 year bond yield: 2.15% down 3 in basis points from Tuesday: (very ominous)

trading 4 basis point higher than Spain.

 

IMPORTANT CURRENCY CLOSES FOR TODAY

 

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

Euro/USA: 1.1239 down .0021 ( Euro down 21 basis points)

USA/Japan: 124.33 up  .023 ( yen up 29 basis points)

Great Britain/USA: 1.5363 up .0038 (Pound up 13 basis points)

USA/Canada: 1.2498 up .0042 (Can dollar down 42 basis points)

The euro fell marginallly today. It settled down 21 basis points against the dollar to 1.1239 as the dollar collapsed against some of the various major currencies . The yen was down 2 basis points and closing just above the 124 cross at 124.33. The British pound gained some  ground today, 13 basis points, closing at 1.5363. The Canadian dollar lost some ground against the USA dollar, 42 basis points closing at 1.2498.

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: 2.30% down 6 in basis point from Thursday// (well above  the resistance level of 2.27-2.32%)/

 

Your closing USA dollar index:

95.50 up 3 cents on the day.

 

European and Dow Jones stock index closes:

 

England FTSE down 91.22 points or 1.31%

Paris CAC down 47.04 points or 0.93%

German Dax down 79.02 points or 0.69%

Spain’s Ibex down 121.50 points or 1.080%

Italian FTSE-MIB down 272.33 or 1.15%

 

The Dow down 170.69  or 0.94%

Nasdaq;down 47.11  or 0.92%

 

OIL: WTI 58.15 !!!!!!!

Brent:62.20!!!!

 

Closing USA/Russian rouble cross: 56.25  down 2  roubles per dollar on the day.(due to Eastern Ukraine conflict)

 

end

 

And now for your more important USA stories.

 

NY trading for today:

Volatility Explodes: China, Bunds Crash Then Smash; Dow, S&P500 Tumble Below Key Support Levels

When Draghi warned traders yesterday that “markets must get used to periods of higher volatility” boy was he not kidding.

The day’s absurd vol started first in China, where as noted previously, things first when bump after news a major brokerage was cutting margin for ChiNext stocks, forcing a plunge in both the SHCOMP and the Shenzhen of some 6%, however to prevent the collapse from carrying over and shattering the bubble sentiment ,”someone” stepped in after the break and Chinese stocks went linearly up as if nothing had happened to the tune of another 6%: a 12% round-trip in one day!

However, those who hoped this would be the end of volatility hadn’t seen anything yet.

Enter Europe, where moments after the market open, German Bunds ignored China’s manic close, and focused instead on the panic selling, leading to an aggressive continuation of the previous day’s Bund selloff, with 10Y German paper briefly touching 0.99% before quickly finding buyers ahead of what seemed like an inevitable stop flush. As a reminder, this was trading 0.07% bps less than two months ago.

The move led to a just an aggressive selling in the Dax, which briefly plunged at the open, only to promptly recover nearly 2% in losses before closing just modestly lower.

The question: was the German bond market leading the Euro or vice versa? The EURUSD had jumped in early trading, pushing the pair up an unprecedented 400+ pips in the past three days alone…

… and ironically dragging the US 10Y Treasury along for the ride, nearly tick for tick, not to mention the Bund.

In fact, alongside the drop in the USD and the Bund, overnight the 10Y yield initially surged to the highest since early October, only to recoup all daily losses and then some, courtesy of two events:

i) the IMF’s slashing of its 2015 US growth forecast to 2.5% coupled with calls for more QE provided a bid into US paper

ii) early in the afternoon by news which we had predicted would happen, when Greece admitted it is out of money and would be unable to make its €345 million payment to the IMF tomorrow, sending risk scrambling for cover.

And while until recently stocks, which as we noted earlier,had been living in a volatility world of their own…

… had been largely ignoring, and certainly taking in stride, all news related to the deteriorating Greek situation, today they finally paid attention, and the immediate result was a plunge in the DJIA which not only finally lost the key 18,000 psychological support level from which it had rebounded on so many occasions since mid-May, but closed at one month lows.

And while the Dow finally dipped under 18,000, so the S&P finally tumbled beneath its own psychological support level of 2100 on heavy volume.

This, despite the best effort of a seemingly rabid VWAP algo (thank you Citadel) that went berserk moments before the close pushing the ES nearly 10 points higher in the span of minutes, and scrambling to push ES to less than one point of 2100 and VWAP.

The Dow and the S&P weren’t  the only things that failing to break higher, had no choice but to slide lower: after repeatedly trying to break into the mid-$60 range, WTI finally gave up and briefly dipped under $58. Should Crude slide one more dollar and take out its own 1 month support, then then the path to $50 or below is clear. In fact, tomorrow’s OPEC meeting during which production is expected to remain constant if not increase, may be just the selling catalyst.

And while volatility was raging across all asset classes, one place where vol was strangely absent was gold and silver. Here, the only prevailing sentiment was that of constant, relentless selling.

And now we turn our attention to tonight’s upcoming China session where, if volatility is cumulative, we should see some truly dramatic manic-depressive fireworks and, of course, tomorrow’s NFP session where anything in the 250,000 and above NFP range, and all key moving average support for the S&P will suddenly be in jeopardy. On the other hand, a complete collapse in payrolls – and US economy in general will be just the short squeeze catalyst that margins out Yellen Capital LLC.

end

 

Initial claims hover near 42 year lows.  However Texas saw initial claims rise:

(courtesy zero hedge)

Initial Jobless Claims Hover Near 42 Year Lows

After 2 weeks of increassing (though near cycle low) jobless claims, last week saw a modest drop from a revised 284k to 276k. Texas saw initial claims jump to the highest in 5 weeks – stable at new normal higher-than-before the oil price crash. This leaves the smoother average hovering at or near 42 year lows… which leaves everyone in the world asking why ZIRP and why lower for longer and why moar threats of QE at every negative macro print or 2% drop in stocks. It seems pretty clear that companies have cut as far as they can cut… so any downturn in the economy now flows right through to the bottom line. The big question is – does any of this data extrapolate into the noise-prone payrolls number tomorrow.. and thus the future of the western world’s wealth-creation bubble machine.

 

 

With Texas still troubled…

 

Charts: Bloomberg

 end
The IMF slashes USA growth and demands that the Fed hold their rates at zero for one more year:
(courtesy zero hedge)

IMF Panics – Slashes US Growth Forecasts, Demands Fed Stay On Hold For Another Year

Anxiety over financial stability and shadow banking risks appear to have force Christine Lagarde and her fellow extrapolators to hit the panic button:

  • *IMF CUTS U.S. 2015 GROWTH FORECAST TO 2.5% FROM 3.1%
  • *FED SHOULD WAIT FOR TANGIBLE SIGNS OF WAGE, PRICE GAINS: IMF
  • *DOLLAR `MODERATELY OVERVALUED,’ CURBING U.S. GROWTH, JOBS: IMF
  • *IMF URGES FED TO DELAY FIRST RATE INCREASE UNTIL 1H 2016

 

Adding that they viewed the Dollar as “moderately overvalued” and any more appreciation would be “harmful,” it seems global disinflationary pressures have left the IMF no choice but to say publicly what everyone has uttered under their breath.

 

As Bloomberg reports,

The Federal Reserve should hold off from raising interest rates until the first half of 2016, the International Monetary Fund said as it cut its U.S. growth forecast for the second time in three months.

 

The lender also said that the dollar was “moderately overvalued” and a further marked appreciation would be “harmful,” in a statement released in Washington on Thursday on its annual checkup of the U.S. economy.

 

“The FOMC should remain data dependent and defer its first increase in policy rates until there are greater signs of wage or price inflation than are currently evident,” the IMF said. Based on the fund’s economic forecast, and “barring upside surprises to growth and inflation, this would put lift-off into the first half of 2016.”

 

 

“There is a risk that a further marked appreciation of the dollar — particularly one that takes place in an environment where policies to address growth deficiencies languish both in the U.S. and abroad — would be harmful.”

 

The report also discussed financial stability, with the IMF pointing to higher risks in shadow banking, a potential lack of liquidity in fixed-income markets, and greater market risk-taking in the insurance industry

*  *  *

Now Yellen is really cornered.. and just exactly how are the talking heads going to spin this as positive?

end
Well that about does it for tonight
I will see you tomorrow night
Harvey
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