August 6/Atlanta fed states that 3rd Quarter GDP will be only 1%/Silver production from major mines fell off a cliff these past few months/Huge increase in NPL’s in China/Brazil also fell off a cliff as their bonds and currency crash/Huge layoffs reported by Challenger,Christmas,Gray/

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold:  $1090.20 up $4.50   (comex closing time)

Silver $14.67 up 12 cents.

 

In the access market 5:15 pm

Gold $1090.00

Silver:  $14.67

 

First, here is an outline of what will be discussed tonight:

 

At the gold comex today, we had a poor delivery day, registering 8 notices for 800 ounces  Silver saw 27 notices for 135,000 oz

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 235.44 tonnes for a loss of 67 tonnes over that period.

In silver, the open interest fell by 1637 contracts despite the fact that silver was unchanged yesterday. The total silver OI continues to remain extremely high, with today’s reading at 184,211 contracts   In ounces, the OI is represented by .9210 billion oz or 131% of annual global silver production (ex Russia ex China). 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 as they continue to raid as basically they have no other alternative.

In silver we had 27 notices served upon for 135,000 oz.

In gold, the total comex gold OI rests tonight at 432,301. We had 8 notices filed for 800 oz today.

We had no change in gold leaving the GLD today /  thus the inventory rests tonight at 667.93 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. I thought that 700 tonnes is the rock bottom inventory in GLD gold, but I guess I was wrong. However we must be coming pretty close to a level of only paper gold and the GLD being totally void of physical gold.  In silver, we had no changes in silver  inventory at the SLV, / Inventory rests at 326.209 million oz.

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

1. Today, we had the open interest in silver fell by 1637 contracts down to 184,211 even though silver was unchanged in price yesterday. Again, we must have had some short covering.  The OI for gold fell by 1972 contracts to 432,301 contracts as gold was down by $5.00 yesterday.  We still have close to 22 tonnes of gold standing with only 19.66 tonnes of registered gold in the dealer vaults ready to satisfy that which stands.

(report Harvey)

2. One story on Greece whereby the IMF will delay making a decision to join in the bailout until the fall

(courtesy Reuters)

3.Gold trading overnight, Goldcore

(/Mark OByrne)

 

4. Two stories on the plummeting stock market and economy inside China

(zero hedge)

5 Trading of equities/ New York

(zero hedge)

 

6.  USA stories:

i) Data for today:

a) huge layoffs reported in the Challenger/Christmas/Gray report

b) the Thursday jobless report

c) Atlanta Fed reports that they believe 3rd quarter GDP will be only 1%

d) Personal finance confidence falters badly

ii) Looks like the FBI are undergoing a criminal probe on Hillary

(zero hedge)

6. Two oil related stories:

(zero hedge/Wolf Richter)

 

7. James Turk discusses gold backwardation with greg Hunter

(Greg Hunter usa watchdog/James Turk/Dave Kranzler)

 

8. The next “Argentina” is Brazil:  (i.e. to default)

(two stories/zero hedge)

9.  Iran refuses to let inspectors in:

(zero hedge)

10. The Bank of England reports that they are now moving to the dovish side as the global economy is sinking:

(zero hedge/Bloomberg)

 

11.Silver production from the mines fell off the cliff these past few months;

(Steve St Angelo/SRSRocco report)

12.

Here are today’s comex results:

 

The total gold comex open interest fell from 434,273 down to 432,301 for a loss of 1972 contracts as gold was down $5.00 yesterday. For the past two years, we have strangely witnessed two interesting developments with respect to the gold open interest:  1) total gold comex collapse in OI as we enter an active delivery month, and 2) a continual drop in the amount of gold standing in an active month, and today the latter stopped its decline and actually rose. What is interesting is that the LBMA gold is witnessing a 7.40 premium spot/next nearby month as gold is now in backwardation over there. We are now in the contract month of August and here the OI fell by 2718 contracts falling to 3875 contracts. We had 2828 notices filed upon on yesterday and thus we gained 110 contracts or 11,000 additional ounces will stand for delivery. The next delivery month is September and here the OI rose by 245 contracts up to 2523.  The next active delivery month if October and here the OI  rose by 300 contracts up to 26,713.  The estimated volume on today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 82,238. The confirmed volume on yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 127,924 contracts. Today we had 8 notices filed for 800 oz.

And now for the wild silver comex results. Silver OI fell by 1637 contracts from  185,848 contracts down to 184,211 despite the fact that silver was unchanged in price yesterday .  We continue to have some short covering as our bankers pulling their hair out with respect to the continued high silver OI as the world senses something is brewing in the silver  arena. We are in the delivery month of August and here the OI fell by 0 contracts remaining at 60. We had 0 delivery notices filed yesterday and thus we gained 0 contracts or an additional zero ounces will stand for delivery in this non active August contract month. The next major active delivery month is September and here the OI fell by 3023 contracts to 113,664. The estimated volume today was poor at 21,236 contracts (just comex sales during regular business hours). The confirmed volume yesterday (regular plus access market) came in at 43,932 contracts which is excellent in volume.  We had 27 notices filed for 135,000 oz.

August contract month: initial standing

August 6.2015

Gold

Ounces

Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  16,916.156 oz (JPMorgan,Scotia
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz 18,043.443 (Delaware,Scotia)
No of oz served (contracts) today 8 contracts (800 oz)
No of oz to be served (notices) 3867 contracts (386,700 oz)
Total monthly oz gold served (contracts) so far this month 3178 contracts(317,800 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 292,138.1   oz

Today, we had 0 dealer transactions

 

total Dealer withdrawals: nil  oz

 

we had 0 dealer deposits

total dealer deposit: zero

 

we had 2 customer withdrawals
i) Out of JPMorgan: 16,783.956 oz
ii) Out of Scotia: 100.05 oz
iii) Out of Manfra; 32.15 oz (1 kilobar)

total customer withdrawal: 16,916.156  oz

We had 2 customer deposits:

i) Into Delaware: 1770.37 oz

ii) Into Scotia: 16,273.406 oz

Total customer deposit: 18,043.443 oz

We had 1  adjustment

 

ii) out of Scotia: 10,754.504 oz was adjusted out of the dealer and this landed into the customer account of Scotia.

 

 

JPMorgan has 11.66 tonnes left in its registered or dealer inventory.

(375,019.978 oz)

.

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 8 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 August contract month, we take the total number of notices filed so far for the month (3178) x 100 oz  or 317,800 oz , to which we add the difference between the open interest for the front month of August (3875) and the number of notices served upon today (8) x 100 oz equals the number of ounces standing

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

No of notices served so far (3178) x 100 oz  or ounces + {OI for the front month (3875) – the number of  notices served upon today (8) x 100 oz which equals 704,600 oz standing so far in this month of August (21.916 tonnes of gold).

Thus we have 21.916 tonnes of gold standing and only 19.66 tonnes of registered or dealer gold to service it.

We gained 110 contracts or an additional 11,000 oz will stand for delivery in this active month of August.

Total dealer inventory 632,041.588 or 19.66 tonnes

Total gold inventory (dealer and customer) = 7,569,584.573 oz  or 235.44 tonnes

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 235.41 tonnes for a loss of 67 tonnes over that period.

 

end

 

And now for silver

August silver initial standings

August 6 2015:

Silver

Ounces

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 1,028,623.39  oz (CNT,Brinks, Scotia)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory nil
No of oz served (contracts) 27 contracts  (135,000 oz)
No of oz to be served (notices) 33 contracts (165,000 oz)
Total monthly oz silver served (contracts) 45 contracts (225,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month 85,818.47 oz
Total accumulative withdrawal  of silver from the Customer inventory this month 4,039,673.1 oz

Today, we had 0 deposits into the dealer account:

total dealer deposit: nil   oz

 

we had 0 dealer withdrawal:

 

total dealer withdrawal: nil  oz

 

We had 0 customer deposits:

 

 

total customer deposits:  nil  oz

 

We had 3 customer withdrawals:

i)Out of Brinks:  1000.000  oz ????

ii) Out of CNT:  967,619.46 oz

iii) Out of Scotia:  1,028,623.38 oz

 

total withdrawals from customer: 1,028,623.38  oz

 

we had 2  adjustments

 Out of Brinks:
i)  35,902.400 oz leaves the customer account and lands into the dealer account of Brinks
ii) Out of CNT:
39,098.000 oz (???) leaves the customer and lands into the dealer account at CNT:

Total dealer inventory: 55.829 million oz

Total of all silver inventory (dealer and customer) 172.381 million oz

The comex has been bleeding silver lately.

 

The total number of notices filed today for the August contract month is represented by 27 contracts for 135,000 oz. To calculate the number of silver ounces that will stand for delivery in August, we take the total number of notices filed for the month so far at (45) x 5,000 oz  = 225,000 oz to which we add the difference between the open interest for the front month of August (60) and the number of notices served upon today (27) x 5000 oz equals the number of ounces standing.

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

45 (notices served so far)x 5000 oz + { OI for front month of August (60) -number of notices served upon today (27} x 5000 oz ,= 390,000 oz of silver standing for the August contract month.

we neither gained nor lost any silver ounces in this delivery month of August.

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

http://www.harveyorgan.wordpress.comorhttp://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:

August 6/no change in gold inventory at the GLD/Inventory rests at 667.93 tonnes

August 5.we had a huge withdrawal of 4.77 tonnes from the GLD tonight/Inventory rests at 667.93 tonnes

August 4.2015: no change in inventory/rests tonight at 672.70 tonnes

August 3.2015: no change in inventory at the GLD./Inventory remains at 672.70 tonnes

 July 31/we had a huge withdrawal of 7.45 tonnes/Inventory rests this weekend at 672.70 tonnes

July 29/no change in inventory/rests tonight at 680.13 tonnes

July 28/no change in inventory/rests tonight at 680.13 tonnes

July 27/no change in inventory/rests tonight at 680.13 tonnes

July 24.2015/we had another massive withdrawal of 4.48 tonnes of gold form the GLD/Inventory rests at 680.13 tonnes.

July 23.2015: we had another withdrawal of 2.68 tonnes of gold from the GLD/Inventory rests at 684.63 tonnes

july 22/another withdrawal of 2.38 tonnes of gold from the GLD/Inventory rests at 687.31

July 21.2015: a massive withdrawal of 6.56 tonnes of gold from the GLD.

Inventory rests at 689.69 tonnes.  China and Russia need their physical gold badly and they are drawing their physical from this facility.

July 2o.2015: no change in inventory

July 17./a massive withdrawal of 11.63 tonnes  in gold tonnage tonight from the GLD/Inventory rests at 696.25 tonnes

July 16./we lost 1.19 tonnes of gold tonight/Inventory rests at 707.88 tonnes

 

August 6 GLD : 667.93 tonnes

 

end

 

And now SLV:

August 6/no changes in SLV/inventory rests at 326.209 million oz

August 5/ a small withdrawal of 142,000 oz of inventory leaves the SLV/Inventory rests tonight at 326.209 million oz

 

August 4.2015: a small withdrawal of 476,000 oz of inventory at the SLV/Inventory rests at 326.351 million oz

August 3.2015; no change in inventory at the SLV/inventory remains at 326.829 million oz

And now for silver (SLV)  July 31/no change in inventory/rests tonight at 326.829 million oz

July 29/no change in silver inventory/326.829 million oz

July 28/we had a huge withdrawal of 2.005 million oz from the SLV/Inventory rests at 326.829 oz

July 27/no change in silver inventory/inventory rests tonight at 328.834 million oz

July 24/no change in silver inventory/inventory rests tonight at 328.834 million oz

July 23.2015; no change in silver inventory/rests tonight at 328.834 million oz

july 22/no change in silver inventory/inventory rests at 328.834 million oz.

July 21.we had a massive addition of 1.241 million oz into the SLV/Inventory rests tonight at 328.834 million oz.

Please note the difference between gold and silver (GLD and SLV).  In GLD gold is being depleted and sent to the east.  In silver: no depletions, as I guess this vehicle cannot supply physical metal.

July 20/no change

july 17.2015/no change in silver inventory tonight/inventory at 327.593 million oz

July 16./no change in silver inventory/rests tonight at 327.593 million oz

 

August 6/2015:  tonight inventory rests at 326.209 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 11.4 percent to NAV usa funds and Negative 11.7% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 62.0%

Percentage of fund in silver:37.7%

cash .3%

( August 6/2015)

2. Sprott silver fund (PSLV): Premium to NAV falls to -1.04%!!!! NAV (August 5/2015)  not out today

3. Sprott gold fund (PHYS): premium to NAV rises to – .76% to NAV(July August5/2015) not out today

Note: Sprott silver trust back  into negative territory at-  1.04%

Sprott physical gold trust is back into negative territory at -.76%

Central fund of Canada’s is still in jail.

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

SII.CN Sprott formally launches previously announced offers to CentralGoldTrust (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

 

And now for your overnight trading in gold and silver plus stories

on gold and silver issues:

 

(courtesy/Mark O’Byrne/Goldcore)

a must read….

Gold Bullion Demand In ‘Chindia’ Heading Over 2,000 Tons Again

  • Shanghai Gold Exchange deliveries at 73.289 tonnes last week
  • 3rd largest week of gold withdrawals ever on SGE
  • Both China and India heading for over 1,000 metric tonnes in 2015 … again
  • India imports 96.1 tonnes in May alone
  • ‘Chindia’ imports 296.55 tonnes in May – 14% greater than global production
  • South Korean gold demand surges in wake of Chinese crash
  • Asian and global gold demand robust contrary to anti-gold narrative

China India Gold Demand

The recent lower prices in gold have not deterred investors internationally from buying gold coins and bars in large volumes again. Indeed the Perth Mint and the US Mint are struggling to fulfill demand for gold coins and bars.

This is particularly the case in the eastern hemisphere – especially in India and China – where demand has again increased significantly on price weakness.

Between them, these two countries are on-track to import 2,000 tonnes of gold this year – that is more than two thirds of the total annual global gold mine production, which is set to be about 2,800 tonnes this year.  (Harvey:  2,200 ex China ex Russia)

The Shanghai Gold Exchange, which deals exclusively in physical bullion, saw buyers take delivery of over 73 tonnes of gold last week, the third largest withdrawal on record. This follows two weeks of steadily increasing demand as investors pull or attempt to pull money out of the Chinese stock market.

Demand out of China is on track to surpass last year’s official figure of 974 tonnes and may reach 1,000 tonnes this year. Chinese demand has been steadily growing, with the encouragement of the government. The ban on gold ownership imposed by Chairman Mao in 1949 was lifted in 2003.

Shanghai Gold Exchange - Gold Withdrawals

As such, demand from the nation of 1.3 billion people who have a strong cultural affinity to gold – and experience of monetary mismanagement and hyperinflation – has been rising from a base of nearly zero and has recently surpassed that of India to become the world’s top gold buying nation. Nonetheless, Chinese gold ownership remains very low when compared to that of India.

Prudent Indian households hold 11% of the world’s gold. That is more gold than the gold reserves that the U.S. Federal Reserve, the German Bundesbank and the Swiss central bank are believed to own put together.

Indian demand remains robust. In April and May alone the country imported over 155 tonnes of the precious metal.

Demand so far this year has greatly exceeded that of the same period last year – up 61% – as Indians take advantage of the low prices despite the fact that we are some months away from the typical gold buying season. Indian demand is also expected to hit 1,000 tonnes this year.

India gold imports

Together, “Chindia” imported 296.55 tonnes of gold in May. This surpasses current monthly mine supply globally by 14%. Clearly there is an imbalance in the gold market when demand from two countries alone exceeds total mine supply, which must then be supplemented by existing stocks. (Harvey: world produces 183 tonnes per month)

 

Yet prices remain in a downward trend as speculative short selling continues to depress prices. Indeed it not just the huge Asian nations of China and India where demand remains high. There are reports of strong demand – including by thePerth Mint – in Thailand, Vietnam and Malaysia. Demand for gold in South Korea has surged in recent weeks, according to Reuters.

Koreans, nervous about the fallout from the crash in China’s stock market, are choosing to diversify into gold and take advantage of lower dollar prices.

This trend is likely to be repeated across east and south-east Asia in countries who are reliant on the increasingly important Chinese economy.

Quarterly Gold Supply 2010-2015

While it is unlikely to have significant impact on global demand – last year’s demand from South Korea amounted to only 17 tonnes – it demonstrates the psychological appeal that gold still has in times of economic crisis among people across the world – and especially in Asia.

The triumphalism with which some Wall Street commentators have covered the temporary set-back in gold prices looks misplaced and misguided. This is especially the case when the bigger picture is taken into account – including the significant macreconomic, systemic, geopolitical and monetary risks of today.

These are being ignored for now – as they were in 2007 and early 2008.

Gold will continue to retain value well into the future – a claim we would not be too confident about making with regards to paper currencies and bonds issued by the most indebted nations in the world.

Own allocated, segregated gold coins and bars of which you can take delivery.

MARKET UPDATE
Today’s AM LBMA Gold Prices were USD 1,085.00, EUR 996.05 and GBP 694.56 per ounce.
Yesterday’s AM LBMA Gold Prices were USD 1,086.50, EUR 1,000.18 and GBP 697.82  per ounce.

Gold and silver on the COMEX were nearly unchanged yesterday – down $3.20 and up 1 cent respectively – to $1,085.00/oz and $14.60/oz.

Gold in Euros - 5 years

Silver futures for September delivery fell less than 0.1 percent to $14.66 on the Comex.

Palladium for September delivery rose 0.8 percent to $602 an ounce on the New York Mercantile Exchange. Platinum for October delivery rose 0.3 percent to $955.90 an ounce.

Breaking News and Research Here

Follow GoldCore on Twitter, GoldCore on Facebook, GoldCore on LinkedIn

end

 

(courtesy Moneymetals.com/GATA)

Surging demand for the real stuff even as paper gold prices fall

Section:

10:07a ET Wednesday, August 5, 2015

Dear Friend of GATA and Gold:

Another monetary metals dealer, Money Metals Exchange in Idaho, reports surging demand for the real stuff even as prices for “paper gold” fall, “more buying interest than at any time since the 2008 financial crisis.” The firm reports its recent sales data here:

https://www.moneymetals.com/news/2015/08/05/gold-silver-demand-000746

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CXPowell@yahoo.com

 

end

 

I brought this to your attention yesterday, but it is worth repeating due to its importance:

(courtesy James Turk/Greg Hunter/GATA)

Unprecedented backwardation in gold, Turk tells USAWatchdog

Section:

4:40p ET Wednesday, August 5, 2015

Dear Friend of GATA and Gold:

GoldMoney founder and GATA consultant James Turk today tells USAWatchdog’s Greg Hunter that he has never seen such a long period of backwardation in the gold market. Turk says that “the money bubble” is getting ready to pop. His interview is 26 minutes long and can be watched at USAWatchdog here:

http://usawatchdog.com/prolonged-gold-backwardation-has-never-happened-i…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

end

 

the following commentary from Dave Kranzler is extremely important.

The number of shorts in the GLD has now risen from 9 million shares to over 14 million shares. This is how the criminals are obtaining some gold by borrowing shares and then redeeming them for metal.  Gold is in severe backwardation in the physical gold market in London.  Although we do not get the GOFO rates, Kitco publishes the gold lease rates.  The higher the rate, the more gold is in tight supplies.  The lease rates today are extremely high!!

(courtesy Dave Kranzler/IRD)

Massive Shortages In Gold And Silver Developing – GLD Looting Continues

Renowned gold expert James Turk says prolonged gold backwardation like we are seeing now, where the spot price is higher than the future price, has never happened before. Turk contends, “No, never, and I am a student of monetary history as well, and I have never seen it happen like this in monetary history.  – James Turk on Greg Hunter’s USAWatchdog

The signs are everywhere.  We are seeing extreme “backwardation” in gold on the LBMA. Backwardation occurs when the spot price is higher than the future price for LBMA forward contracts.  It means that buyers of gold are willing to pay more for gold for immediate delivery than pay a lower price to receive delivery in the future (30-day, 60-day, etc).  It means that physical gold buyers do not trust the ability of the market to delivery physical gold in the future.

It is an unmistakable sign of physical gold shortages.

Not surprisingly, the LBMA suspended reporting the gold forward rate which was the best indicator of physical gold shortages in London, but we can still get reports onphysical market conditions from London gold market participants, like James Turk.

To reinforce this information, Bill Murphy reported his latest conversation with his LBMA trader source in London (www.lemetropolecafe.com):

The essence of it is more confirmation that the BIG MONEY is buying down here at these price levels.More confirmation that silver is extremely difficult to buy in size. It takes two to four weeks for delivery. What is new is that buying gold in size is now becoming a thing … for our source says it now takes two weeks to buy in size.

Perhaps the most visible sign is the removal of gold from the GLD ETF.   The only way gold is removed from the Trust is when an Approved Participant bank redeems 100k share block in exchange for delivery of bars from the Trust. – (source:  John Titus of the “Best Evidence” Youtube channel, edits are mine) – click to enlarge:

GLD tonnage.001

Make no mistake about it, the bullion banks often can borrow GLD shares to scrape together 100k share lots in order to redeem gold. Or they can smash the gold price with paper and force weak holders of GLD to sell shares in the hands of the bullion banks.  In the last two weeks the short interest in GLD has soared 49% from 9.4 million shares to 14 million.  That represents roughly 46 tonnes.

The ongoing raid of GLD gold is perhaps the most direct evidence that the Central Banks and their bullion bank agents are struggling to find gold in which to deliver into Asia.  But speaking of which, something interesting is occurring on the Shanghai gold exchange.  In the last three days, 298 tonnes of gold have been delivered into the SGE.  While everyone monitors the amount of gold withdrawn from the SGE, the amount of gold flowing in to the SGE is just as important.   This is by far the most amount of gold that has been delivered into the SGE that I can recall.

I get my data from John Brimelow’s “Gold Jottings” report, which is invaluable for tracking the physical gold market outside of London.  He had this to say about the stunning flow of gold into China over the last three days:

Delivery Volume was 90.444 tonnes (Wednesday 112.454 tonnes) and open interest surged 48.374 tonnes (11.26%) to 477.920 tonnes. Since last Friday Shanghai open interest has risen 18.68%. Something is happening in gold in China. What is not immediately apparent.

Finally, to further reinforce the evidence of physical market shortages, we can monitor the gold lease rates, published by Kitco everyday.  I sourced this graph from Jesse’s Cafe Americain, who sourced it from Sharelynx – click to enlarge:

JessesCafeGold lease rates spike up like this when there is heavy demand from bullion banks to borrow physical gold from Central Banks in order to sell the gold into the market or deliver gold that can’t be readily procured in adequate quantities in the spot market.  It is one of the most visible signs that there is a shortage of physical gold on the market.

To be sure, the unprecedented degree manipulation of the gold price in the paper gold market reflects a serious desperation by the Central Banks and western Governments to cover up an enormous disaster fomenting beneath the heavily applied of veneer of “things are so good we need to raise interest rates in September” mantra.  In fact, the specific reason to keep a lid on the price of is to enable the Central Banks to maintain a zero interest rate policy.

The truth is, the Fed can’t afford to raise interest rates and anyone with two brain cells to rub together and a willingness to look at the truth knows that the Fed is trapped – unless it wants to crash the system for some reason.

We note that physical off-take of gold is spiking higher, with Reuters reporting yesterday that the South Koreans are buying gold in record sums while the US Mint reports that sales of gold coins in July were nearly 5 times what they were a year ago.  – John Brimelow, “Gold Jottings” report

 

end

 

Not only is demand for silver skyrocketing but the supply side of the equation is well down with all the 3 major countries reporting lower production of silver:

1, Mexico

2. Peru

3. Australia

it will not be long before silver is in backwardation in London.

a must read…

 

 

(courtesy Steve St Angelo/SRSRocco report)

In a stunning development, the world’s largest silver producing countries reported big declines in recent months.  This was surprising because the top two producers, Mexico and Peru, stated positive growth in the first two months of the year.  However, silver production from these two countries reversed this trend by declining in April and May.

While this was a significant drop in silver mine supply from the leading producers, what took place in Australia (world’s fourth largest silver producer), was quite a shocker.  Not only did Australian silver production fall precipitously, it was down a stunning 31% during the first quarter of 2015 compared to the same period last year:

Australian Silver Production Q1 2015

As we can see, Australian silver production declined from 491 metric tons (mt) in Q1 2014, to 340 mt Q1 2015.  This was a 151 mt decline (31%) year-over-year (y.o.y.).  I tried to contact the Australian Government Department that provides the Resources & Energy Quarterly Reports on this figure, but did not receive a reply. 

Often, the figures are revised.  However, I have never seen silver production figures revised more than 5-8%.  Furthermore, I went back to the site several times to see if there was a revision, or if the figure was a misprint… no change.  Here is the table from their June 2015 Quarterly Report:

Australian Silver Production Energy & Resouces June 2015

You will notice silver production started to decline in Q3 2014, but fell off a cliff in the first quarter of 2015.  Queensland, Australia suffered the largest declines, falling from 381 mt in Q2 2014, to 246 mt in Q1 2014.

Again, I am reporting the data put out by the Australian Government.  I will put out an update when their Q2 figures come out.  If they still show the 340 mt (or figure close to it), this will not be good news.

Okay, let’s look at Peru silver production.  Peru is the second largest silver producer in the world.  In the first three months of the year, Peru’s silver production was up a whopping 11%.  However, production was flat y.o.y. in April, and really declined in May.  Here is Peru’s silver production in the first five months of 2015:

Peru Silver Production 2014 vs 2015

Even though production was up 11% in the first quarter, when we factor in the large 14% decline in May, total production for the first five months was only up 42 mt or 3%.  This same trend (to a lessor extent), was also experienced in Mexico… the world’s largest silver producer.

Mexico’s silver production was up slightly during the first two months of 2015, but this all changed starting in March.  Silver mine supply from Mexico dropped 7% in March compared to the same month last year, a stunning 12% in April, and another 10% in May:

Mexico Silver Production Jan-May 2015

Which means, Mexico’s silver production is down 188 mt (6%) in the first five months of 2015, compared to the same period last year.  If we combine the figures for Mexico, Peru and Australia, this is the total decline of silver production in the first five months of the year:

Top Silver Producers Jan-May 2015

Total estimated silver production from these top producers in the world would be down from 4,704 mt (Jan-May) 2014, to 4,365 mt in 2015.  Again, I say estimated because I don’t have Q2 data for Australia.  I assumed a small build in production in the second quarter and estimated Australia’s silver production for the first five months of 2015.

If my assumption for Australia’s Q2 silver production is correct (or close), then total silver mine supply from these top producers will be down 339 mt (7%) compared to the same period last year.  This is a lot of silver…. nearly 11 million oz.

Falling silver mine supply from the world’s leader producers (China is ranked 3rd, no public data released) comes at a time when silver investment demand has gone into HIGH GEAR.  How high?  Well, we know the U.S. Mint sold more Silver Eagles than ever in the first half of the year.  Furthermore, July’s Silver Eagle sales which reached 5,529,000 were even higher than June (4,840,000).

Then we had this news release by the folks at Money Metals Exchange on the huge increase in precious metal purchases, especially from first-time buyers, Retail Gold & Silver Demand Surged 135% since June, 365% More First-Timers:

From June 16 to July 31, Money Metals Exchange experienced a 135% surge in gold and silver sales over the prior 45-day period (which was representative of the early months of 2015). Since June 16, the number of first-time customers rose even more dramatically, with 365% more new purchasers than the prior period.

MMX Sales figures June 16-July 31 2015

Not only did their total precious metals sales double from June 16-July 31, First-Time orders increased 365%.  I would imagine this was similar through-out the precious metals retail industry.

Precious metals investors need to realize there are very few real STORES OF WEALTH to own in the future.  These stores of wealth are based on stores of ECONOMIC ENERGY.  The world is about to witness a huge collapse in the Great U.S. Shale Oil Industry.  Watch for fireworks to start in Q3 and pick up speed in Q4 when the shale oil companies will have to revalue their reserves due to much lower oil prices.

This should start to speed up the peak and decline of lousy global unconventional oil production.  Falling oil production will be DEATH on most PHYSICAL & PAPER ASSETS.  This is the most important reason to own gold and silver.  More on this in future articles and reports.

 

end

 

 

 

(courtesy Avery Goodman/seeking Alpha/GATA)

 

Avery Goodman: U.S. guarantees Comex gold, hastening offtake there

Section:

Demand for Physical Gold Deliveries Doubles in August

By Avery Goodman
Tuesday, August 4, 2015

Last month I wrote about an usual situation at the COMEX futures exchange:

http://seekingalpha.com/article/3227026-gold-market-tightness-puts-comex…

At that time, only 376,000 ounces of gold were available to back up a delivery requirement of about 550,000 ounces. A day later, JPMorgan Chase bailed out the clearing firms that handle short-side speculators, adding enough registered gold to meet deliveries.

In the article, I reached several conclusions. First, given that commercial for-profit institutions don’t normally put themselves at financial risk to bail out their competitors, it was likely that JPMorgan was an agent of the U.S. government. I also concluded that the Comex is an excellent place for large physical gold buyers to source gold. …

… For the full commentary:

http://seekingalpha.com/article/3396845-demand-for-comex-physical-gold-d…

end

 

And now your overnight Thursday morning trading in bourses, currencies, and interest rates from Europe and Asia:

 

1 Chinese yuan vs USA dollar/yuan remains constant at  6.2096/Shanghai bourse: red and Hang Sang: red

2 Nikkei up 50.38 or 0.24%

3. Europe stocks mixed  /USA dollar index up to 97.98/Euro down to 1.0900

3b Japan 10 year bond yield: rises to 42% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 124.84

3c Nikkei still just above 20,000

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

3e WTI 44.73 and Brent:  49.45

3f Gold up  /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.

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 slightly rises to .75 per cent. German bunds in negative yields from 4 years out.

Except Greece which sees its 2 year rate rises to 20.65%/Greek stocks this morning up by 3.34%:  still expect continual bank runs on Greek banks /

3j Greek 10 year bond yield rises to  : 11.98%

3k Gold at $1086.45 /silver $14.60

3l USA vs Russian rouble; (Russian rouble down 1.05 in  roubles/dollar) 64.03,

3m oil into the 44 dollar handle for WTI and 49 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 .9829 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0713 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

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

3r the 4 year German bund remains in negative territory with the 10 year moving further from negativity to +.75%

3s The ELA rose another 900 million euros to 90.4 billion euros.  The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”. Greece votes again and agrees to more austerity even though 79% of the populace are against.

4. USA 10 year treasury bond at 2.25% early this morning. Thirty year rate below 3% at 2.94% / yield curve flatten/foreshadowing recession.

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

 

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

Futures Flat, China Slides Again, Oil Tumbles Near 2015 Lows

It has been more of the same in the latest quiet overnight session where many await tomorrow’s NFP data for much needed guidance, and where Chinese markets opened weaker, rose during the day, then went through a mini rollercoaster, then sold off in the afternoon.  The Shanghai Composite and HS China Enterprises indices finished down .9% and .3%, respectively. Trading volume continued to be very subdued, running at half the thirty day average assome 20 million “investors” have pulled out of the market to be replaced with HFTs such as Virtu.

Despite what some have estimate is as much as a trillion in Chinese “plunge protection” allocation, the Shanghai Composite is now near the lows hit on July 8 when China openly threatened sellers and shorters with arrest. If that low is taken out, China will have a big headache on its hands.

Other Asian equities traded mixed following the positive close on Wall Street where sentiment was supported by strong US data and comments by Fed’s Powell which contradicted recent hawkish remarks from Fed’s Lockhart. Nikkei 225 (+0.2%) was bolstered by a slew of strong earnings, while gains where further underpinned by JPY weakening to a 2-month low against the greenback. The ASX 200 (-1.1%) was led lower by broad losses in large banks. Finally, JGBs fell following the EU and US counterpart, with losses exacerbated by a weak enhanced liquidity auction drawing the lowest b/c on record.

European shares are lower, for the moment halting a rally that has been on-going since July 28. The Stoxx 600 index is up about 18% YTD. There has been no discernable difference between core and peripheral performance. Despite the looming risk events, including the release of the latest NFP report on Friday and the eagerly awaited “Super Thursday” in the UK today, stocks traded mixed (Euro Stoxx: -0.1 %), with Greece’s stock market rebounding after three days of heavy losses. The FTSE-100 index underperformed (-0.3%), weighed on by BP (-3%) and Anglo American (-3%), with both trading ex-dividend. Overall, energy names underperformed, as WTI prices remained under-pressure, while the upside support was provided by industrials and financials sectors.

The release of the much better than expected German Factory Orders data, together with somewhat mixed retail PMIs did little to drive the price action across asset classes , with Bunds and Gilts trading little changed. At the same time, the expected volatility in GBP/USD later on in the session failed to weigh on the pair, which traded with little changed after giving back some of it overnight gains following mixed UK data (Industrial Production M/M -0.4% vs. Exp. 0.10%, Manufacturing Production M/M 0.20% vs. Exp. 0.10%). While the USD (USD-index: +0.1%) heading into the North American crossover flat on the day.

Elsewhere, AUD was in focus overnight following a mixed Australian jobs reports, where AUD initially surged higher amid a significant beat in employment change (M/M 38.5K vs. Exp. 10.0K Prey. 7.3K, Rev. 7.0K ). However, AUD/USD fell below preannouncement levels as the unemployment rate rose to a 7-month high (M/M 6.3% vs. Exp. 6.1% Prey. 6.0%, Rev. 6.1%).

But while stock action has been muted, the story of the night so far is oil and the energy complex broke out of a tight overnight range early in the European session to continue yesterday’s downward trend, seeing WTI Sep’15 futures fall below the USD 45.00 handle after yesterday’s DoE crude oil inventories saw US crude output rise by 0.552%.

As of this moment oil was trading at $44.72, just pennies above the low print of 2015.

Perhaps the catalyst for the latest weakness was another report out of Goldman’s Jeff Currie in which he says the “lost decade reinforces lower for longer.” Some more details:

Although spot oil prices have only retraced to the lows of this winter, forward oil prices, commodity currencies and energy equities/credit (relative to the broad indices) have now all retraced to levels not seen since 2005, erasing a decade of gains. This creates a very different economic environment as the search for a new equilibrium resumes: financial stress is higher, operational stress as defined below is more extreme and costs have declined further due to more productivity gains, a substantially stronger dollar and sharp declines in other commodity prices. These differences reflect not only a further deterioration in fundamentals, but also the financial markets’ decreasing confidence in a quick rebound in prices and a recognition that the rebalancing of supply and demand will likely prove to be far more difficult than what was previously priced into the market. This is all in line with our lower-for-longer view. While we maintain our near-term WTI target of $45/bbl, we want to emphasize that the risks remain substantially skewed to the downside, particularly as we enter the shoulder months this autumn.

Elsewhere, metals have traded relatively range bound overnight with gold flat, remaining near yesterday lows after strong US data pressured prices, while investors are looking ahead to the key risk event in the form of US jobs data on Friday to give more clues as to the timing of a Fed rate hike.

Moving onto today’s calendar now. This morning all eyes turn to the UK and the BoE where we’ll have a lot of information to get through with the BoE rate decision, meeting minutes and the Inflation Report, while the BoE Carney is also scheduled to speak in what’s being billed as ‘Super Thursday’. June readings for industrial and manufacturing production are also expected for the UK. We also get more employment data in the US with initial jobless claims and Challenger job cuts data. This will be the last chance for economists to fine tune their payroll forecasts for tomorrow’s important number.

In Summary: European shares fall with the oil & gas and basic resources sectors underperforming and retail, insurance outperforming.  oil little changed. German factory orders above expectations, U.K. industrial output below. U.K., Denmark, Norwegian bourses underperform in Europe; Greece, Finland outperform. Yields fall on eurozone 10-yr bonds with Spanish, Portuguese yields down most. U.S. jobless claims, continuing claims, Bloomberg consumer comfort, Challenger job cuts due later.

Market Wrap

  • S&P 500 futures little changed at 2094.5
  • Stoxx 600 down 0.4% to 402.4
  • US 10Yr yield down 1bps to 2.26%
  • German 10Yr yield down 2bps to 0.73%
  • MSCI Asia Pacific down 0.3% to 140.7
  • Gold spot up 0% to $1085.4/oz
  • Eurostoxx 50 -0.2%, FTSE 100 -0.3%, CAC 40 -0.2%, DAX +0%, IBEX +0.1%, FTSEMIB -0.3%, SMI -0.2%
  • CF Industries, OCI Said Near Agreement for Fertilizer Merger
  • Bill Ackman Amasses $5.6b Stake in Oreo Maker Mondelez
  • Jeff Bezos Sells More Than $500m in Amazon Shares
  • Euro down 0.17% to $1.0887
  • Dollar Index up 0.04% to 98
  • Italian 10Yr yield down 4bps to 1.87%
  • Spanish 10Yr yield down 5bps to 2.02%
  • French 10Yr yield down 2bps to 1.04%
  • S&P GSCI Index down 0.2% to 368.4
  • Brent Futures down 0% to $49.6/bbl, WTI Futures down 0.5% to $44.9/bbl
  • LME 3m Copper up 0.5% to $5201.5/MT
  • LME 3m Nickel up 0.4% to $10905/MT
  • Wheat futures flat at 502 USd/bu

Bulletin Headline Summary from RanSquawk and Bloomberg

  • The release of the much better than expected German Factory Orders data, together with somewhat mixed retail PMIs did little to drive the price action across asset classes as market participants await the BoE’s ‘Super Thursday release
  • See a preview of today’s ‘Super Thursday’ release here (http://portal.ransquawk.com/headlines/501389)
  • Going forward, apart from focusing on the releases from the BoE, other data releases include US Challenger Job Cuts, US weekly jobs reports, EIA natural gas storage change data, as well as earnings by Duke Energy and Allergan
  • Treasury yields little changed ahead of today’s job cuts/jobless claims data; 2Y yield touched three-year high yday after July ISM Non-Manufacturing Composite reached highest level in nearly a decade.
  • Along with its August interest-rate decision, BOE will also release officials’ votes and new forecasts, the realization of Carney’s push to revamp communications by releasing all elements of the Monetary Policy Committee’s decisions at once
  • The pound strengthened for a fourth day versus the euro as investors braced for an unprecedented slew of data from the BoE that may lend clarity on the timing of its first interest-rate increase in eight years
  • Unconventional monetary policy is now conventional as asset purchases introduced during the financial crisis and beefed up in the subsequent fight against recession now represent a permanent part of officials’ toolkit
  • ECB officials must be patient for quantitative easing to work its way through the economy and drive a pickup in inflation, Governing Council member Bostjan Jazbec said
  • China Securities Finance Corp., the government agency mandated to buy stocks to stem a market rout, is seeking access to an additional 2 trillion yuan ($322 billion), said people with knowledge of the matter
  • While Greece’s Alexis Tsipras finds himself running a country in a state of economic emergency, his popularity remains unchallenged as polls show Syriza has as much as twice the support of its nearest rival
  • Almost a month after Saudi Arabia sold $4 billion of bonds to domestic banks the world still knows next to nothing about the securities as details of the issuance, including the price, the maturity and even the date of the sale remain elusive
  • $4.4b IG deals priced yesterday, $2.01b high yield. BofAMLCorporate Master Index OAS holds at new YTD wide 158; YTD low 129. High Yield Master II OAS -12 to 529; reached YTD wide 549 last week; YTD low 438
  • Sovereign 10Y bond yields mixed. Asian, European stocks mostly lower, U.S. equity-index futures mixed. Crude oil lower; copper and gold rise

 

DB’s Jim Reid concludes the overnight recap

Bond market appetite has also shrunk over the last 36 hours after Lockhart’s interview on Tuesday night concerning a possible September hike, and after yesterday’s highest US non-manufacturing ISM since August 2005 (60.3 vs. 56.2 expected). This overshadowed what was a softish ADP report (185k vs. 215k expected). Had it not been for the ISM we wonder whether there would have been intense debate as to whether the ADP represented ‘some’ improvements in the jobs data or not. We won’t have to wait too long for the main event though as US payrolls comes tomorrow.

The data sparked a fairly choppy session for the Treasury market yesterday. The benchmark 10y eventually closed up 4.9bps higher in yield at the close to 2.271% although that was after yields dipped as low as 2.212% in the moments shortly following the ADP print, only to then march higher post ISM. 2y Treasury yields actually touched an intraday high in yield of 0.756%, the highest since 2011 before closing more or less unchanged at 0.726%. Looking across the Fed Funds contracts, the Dec15 contract was unmoved at 0.330% while the Dec16 (+1.5bps) and Dec17 (+4.0bps) contracts rose slightly to 1.045% and 1.675%. The probability of a September move meanwhile, based on market pricing, has remained steady at 50%. In the FX space the closing level for the Dollar index (+0.05%) masked what was a fairly volatile day as the Greenback ebbed and flowed with the various data, trading in a 60bps range.

Meanwhile in the equity space the S&P 500 (+0.31%), although weakening as the day went on, managed to halt three consecutive days of losses with the tech sector in particular leading the way (supported by a first rise in six days for Apple). That saw the NASDAQ (+0.67%) outperform although the Dow (-0.06%) failed to hold earlier gains, led lower by a disappointing earnings report from Walt Disney. In the commodity space Oil again took another leg lower with WTI (-1.29%) and Brent (-0.80%) both down with the latter at one stage creeping closer to $49 as the market digested the latest US inventory data. Other commodity markets followed suit with Gold (-0.25%), Aluminum (-1.36%) and Copper (-1.09%) all closing down.

Looking at how markets have followed up this morning, with the exception of the Nikkei (+0.78%) it’s been a fairly soft start across most of Asia this morning. In China the Shanghai Comp (-0.33%) and Shenzhen (-0.29%) are lower as we go to print, although both have bounced back from an initial 2% drop at the open. Elsewhere the ASX (-0.98%), Hang Seng (-0.52%) and Kospi (-0.60%) have also declined, the former coming after a weaker than expected unemployment rate print out of Australia (6.3% vs. 6.1% expected). Treasury yields have pared back some of yesterdays move higher, with 10y yields -1.1bps at 2.259%. Bond markets in the rest of Asia are largely mixed. Credit markets in Asia and Australia are largely unchanged.

Digging deeper into yesterday’s data in the US, there were some notable improvements in the components of yesterdays non-manufacturing ISM print. Of particular interest was the new orders measure which rose to 63.8 (from 58.3) and also at a decade high, business activity which moved to 64.9 (from 61.5) and the highest since 2004 while the employment component, in stark contrast to the softish ADP print, moved 6.9pts higher to 59.6 – the biggest one-month increase in the 18-year history of the report. Elsewhere, the separate final services PMI reading was revised up 0.5pts to 55.7, helping to push the composite print up (+0.5pts to 55.7) for the month. Meanwhile the trade deficit for June widened $2.9bn to $43.8bn during the month and slightly above market ($43bn expected). Following on from Lockhart’s comments on Tuesday, Fed Governor Powell said that the ‘time is coming’ to raise rates but that he has not yet decided on a timeframe and instead is ‘going to be very, very focused on the data’.

It wasn’t just the Treasury market where we saw yields move higher yesterday. Over in Europe, supported by both the US data and European PMI numbers as well as a delayed reaction to Lockhart’s comments the previous evening, yields surged higher with 10y Bund yields closing up 11.5bps at 0.752%. Similar maturity yields in France (+10.4bps) and Netherlands (+11.3bps) also rose while in the periphery we saw Italy, Spain and Portugal yields move +14.3bps, +13.0bps and +11.5bps higher respectively. Equity markets were well supported meanwhile with the Stoxx 600 closing +1.30% and the DAX (+1.57%) and CAC (+1.65%) also having stronger sessions.
Looking at the data-flow in the region, DB’s Peter Sidorov suggested that the final July PMIs confirmed the broadly stable data tone that we have seen recently for the Euro area. The composite Euro area PMI was revised up 0.2pts at the final revision to 53.9 (down slightly from the 54.2 in June) on the back of a 0.2pt upward revision to the services reading to 54.0. Spain was the main surprise in the services reading (+3.5pts to 59.7) while Germany and France saw little change on their initial flash reading. Italy’s services print (-1pt to 52.0) was the notable downward revision. Peter notes that the message for inflation is improving with the latest PMI numbers, with the output price index reaching its highest level since March 2012. In the UK meanwhile we saw the services print revised down 0.6pts to 57.4, a drop of nearly a point from June. Elsewhere we saw a softer than expected Euro area retail sales reading for June (-0.6% mom vs. -0.2% expected).

Staying in Europe, yesterday we got the latest polls data out of Spain which showed a boost for Spanish PM Rajoy’s ruling People’s Party and declining support for the radical Podemos party. The poll, run by CIS, showed support for the People’s Party at 28.2%, up nearly 3% from the last poll in April and ahead of the opposition Socialists on 24.9%. On the other side, Podemos support fell to 15.7%, a fall of nearly a point from April and nearly 8 points from the January peak. The political situation in Spain is clearly still far from certain with still a reasonable degree of fragmentation, but the latest polls will likely be seen as encouraging in the sense of declining support for the more radical Podemos party in light of recent events in Greece.

Before we take a look at the day ahead, refreshing our earnings beats/miss monitor again and with 426 S&P 500 companies now having reported, there was no change yesterday to our earnings (74%) and sales (49%) beats numbers. In Europe there was no change either at 64% and 66% respectively.

Moving onto today’s calendar now. German factory orders data for June will kick proceedings off this morning before all eyes turn to the UK and the BoE where we’ll have a lot of information to get through with the BoE rate decision, meeting minutes and the Inflation Report, while the BoE Carney is also scheduled to speak in what’s being billed as ‘Super Thursday’. June readings for industrial and manufacturing production are also expected for the UK. We also get more employment data in the US this afternoon with initial jobless claims and Challenger job cuts data. This will be the last chance for economists to fine tune their payroll forecasts for tomorrow’s important number.

end
Early last night, Chinese stocks stumble again:
(courtesy zero hedge)

Chinese Stocks Tumble Despite Margin Debt Rises As Virtu Is Unleashed To Provide “Liquidity” After Citadel Ban

No lesser liquidity-providing high-frequency-trading never-a-losing-trade shop than Virtu financial has been ‘allowed’ to trade Chinese capital markets. Coming just days after Citadel’s ban, one can only assume that Chinese regulators made a deal with the devil CEO Doug Cifu to levitate markets at any and every cost in order to pick up pennies in front of de-leveraging, over-margined army of farmers and grandmas now seeking exits. Sure enough for the second day in a row margin debt is on the rise again. The retail-dominated Chinese stock market will be ripe picking for the HFTs, as long as not to many are allowed and a tail-chasing flash-crash ensues… but for now its appears yesterday afternoon’s selling pressure continues with CSI-300 down almost 2% at the open.

Each bounce yesterday saw immediate selling pressure..

 

All that matters for now is keeping Shanghai Composite above the 200-day moving average…

 

So today’s key level will be what happens when SHCOMP hits 3574?

 

And it appears the 200DMA will be tested again…

  • *CHINA’S CSI 300 INDEX SET TO OPEN DOWN 1.7% TO 3,802.93
  • *CHINA SHANGHAI COMPOSITE SET TO OPEN DOWN 1.9% TO 3,625.50

 

As Bloomberg reports, Virtu Financial Inc., one of the world’s biggest high-speed trading firms, has started trading in its 35th country: China.

The company reached an agreement during the second quarter with a Chinese brokerage house to provide liquidity on “a very limited basis,” according to Virtu Chief Executive Officer Doug Cifu. Virtu is using automated market-making strategies to buy and sell commodities listed in mainland China. In other markets, it trades other assets including stocks and currencies.

 

“This agreement is the first step in what we view as a very long process,” Cifu said in a conference call on Wednesday. He did not identify the firm’s Chinese partner.

 

 

Mainland exchanges have frozen 38 accounts, including one owned by Citadel Securities, as the local authorities investigate algorithmic traders.

 

“We are certainly cognizant of the recent market volatility in China, and the regulatory scrutiny being placed on electronic trading by the local regulator,”Cifu said. “Long term, we view China as an established capital market with volumes comparable to the largest markets in which we operate.”

 

Virtu will confine its presence to Chinese data centers. It won’t be opening offices or “putting boots on the ground,” he said.

What does it take for famers to learn?

  • *SHANGHAI EXCHANGE MARGIN DEBT RISES FOR SECOND DAY

Another crash it would appear...

*  *  *

Having tried (and failed) with everything so far, it seems China is willing to unleash HFT hell on their retail citizens… we suspect Virtu’s agreement will be torn up if stocks drop any more..

 

end

This is not good.  Bad debt soars almost 35% in China.  How on earth will China continue to hide this?

 

(courtesy zero hedge)

Bad Debt Soars 35% In China As Government Set To Fabricate Dismal Loan Data

Back in March, we noted that decelerating economic growth and bad debt are taking a toll on profitability at China’s largest banks, leading them to slash payouts to shareholders.

“Particularly hard hit is ABC, which saw its non-performing loans jump 25bps Q/Q,” we observed, adding that “NPLs for loans made to manufacturers more than doubled that number, rising 54bps sequentially.” That figure underscores the degree to which China’s transition from an investment-led, smokestack economy to a model driven by consumption and services is weighing heavily on industry and in turn, on banks that lend to the manufacturing sector.

Although NPLs have been rising for some time in China, determining the true extent of the problem is largely impossible due to Beijing’s “management” of bad loans. As we outlined in “How China’s Banks Hide Trillions In Credit Risk,” there’s no way to know how pervasive Beijing’s practice of forcing banks to roll-over problem loans truly is, meaning that even if we ignore the fact that quite a bit of credit risk is obscured by the practice of shifting it around, moving it off balance sheet, and reclassifying it, (i.e. if we just look at traditional loans) it’s still difficult to know what percentage of loans are actually impaired because it’s entirely possible that a non-trivial percentage of sour debt is forcibly restructured and thus never makes it into the official NPL figures.

Indeed, the fact that NPLs are remarkably similar across banks suggests the numbers are, much like China’s GDP data, “smoothed out.” That said, a look at “special mention” loans and overdue loans can help to paint a more accurate picture although the figures still look grossly understated.

Source: Fitch

On Thursday, we got still more evidence that the NPL situation is deteriorating rapidly in China when Reuters reported that according to a transcript of an internal meeting of the China Banking Regulatory Commission,bad loans jumped CNY322.2 billion in H1 to CNY1.8 trillion, a 36% increase. The NPL ratio was 1.82 as of June 30, up 22 bps on the year. Here’s more:

Shang Fulin, chairman of China Banking Regulatory Commission (CBRC), told an internal meeting last week that non-performing loans (NPLs) at banks rose 322.2 billion yuan in the first six months of the year to 1.8 trillion yuan ($289.9 billion), according to a transcript of the meeting seen by Reuters.

 

He also said the banks’ profit growth in the first-half slowed by 13.03 percentage points from a year ago, with total net profits amounting to 1.1 trillion yuan in the first six months.

 

“In the bigger context of (China’s) economic slowdown, the whole truth of the banking sector’s credit risks is beginning to emerge,” Shang said, according to the transcript.

 

Lower profit growth will “reduce shareholder return, weaken banks’ capability to supplement capital and prevent risks,” he added, saying it was now the “new normal.”

Of course this “new normal” isn’t going to please the Politburo which is why we suspect efforts to manage the data will now kick into high gear and indeed, it looks as though the PBoC has already figured out a way to mask anemic demand for credit.

According to MNI, the central bank will begin including interbank loans to non-banking institutions in its calculations, a practice which could mean the headline figure will be “three times” what it would have been were it calculated using the old methodology.

The PBoC, MNI continues, will include loans made to CSF, China’s plunge protection vehicle, in the figures, meaning Beijing will pretend that the state-directed effort to artificially shore up the country’s stock market represents real, organic demand for credit.

 As for the real situation, one loan officer at a Big Four bank told MNI that “our bank’s loans in July in the Beijing area were even weaker than in June. We can’t find the demand.”

But that’s ok because in the absence of government intervention, Chinese stocks “can’t find” a bid, which is why, as Bloomberg reported earlier today, CSF “seeks access to as much as CNY5 trillion to support the stock market if needed.”

The government has already lined up nearly CNY3 trillion for the vehicle, so where will the other CNY5 trillion come from you ask? Why, from the banks of course. Here’s Bloomberg again: “CSF is currently seeking funding from banks for periods ranging between 3 and 12 mos at rate of as much as 4.4%.”

So there you have it, another CNY2 trillion in loan “demand” created out of thin air.

The only question now is what happens when the PBoC loses complete control of the market again and the loans to CSF themselves go bad.

There will be no IMF decision on a Greek bailout until the fall. Remember that the IMF wants a haircut on Greek debt, something that Germany does not want to give.

end

 

It seems that the IMF will wait until the fall to give its decision if it wishes to help with the Greek bailout:

 

(courtesy Reuters)

No IMF decision on Greek bailout until autumn, Swedish representative tells paper

 

end

 

I guess this was to expected!!!

 

 

 

(courtesy zero hedge)

Iran Refuses UN Inspector Access To Scientists, Caught Trying To “Clean Up” Suspected Nuclear Site

Surprise! In what must be the most predictable geopolitical event in recent days, WSJ reports that Iran has refused to let United Nations inspectors interview key scientists and military officers to investigate allegations Tehran maintained a covert nuclear-weapons program. This comes hours after CNN reported that the intelligence community believes Iran has been attempting to clean up the suspected nuclear site at Parchin prior to the arrival of international inspectors based on new satellite imagery. While the administration attempts to ‘clear up’ any misunderstandings, Senate Foreign Relations Committee Chairman Bob Corker told reporters.It was not a reassuring meeting…I would say most members left with greater concerns about the inspection regime than we came in with.”

For now, the landmark nuclear agreement forged between world powers and Iran on July 14 in Vienna is on hold. AsThe Wall Street Journal reports,Iran’s stance complicates the International Atomic Energy Agency’s investigation into Tehran’s suspected nuclear-military program—a study that is scheduled to be finished by mid-October, as required by the treaty.

The IAEA and its director-general, Yukiya Amano, have been trying for more than five years to debrief Mohsen Fakhrizadeh-Mahabadi, an Iranian military officer the U.S., Israel and IAEA suspect oversaw weaponization work in Tehran until at least 2003.

 

Mr. Amano said Tehran still hasn’t agreed to let Mr. Fakhrizadeh or other Iranian military officers and nuclear scientists help the IAEA complete its investigation. The Japanese diplomat indicated that he believed his agency could complete its probe even without access to top-level Iranian personnel.

 

Tehran has repeatedly denied it ever had a secret nuclear weapons program.

 

But Mr. Amano said in a 25-minute interview in Washington that Iran still hasn’t agreed to provide access to Mr. Fakhrizadeh or other top Iranian military officers and nuclear scientists to assist the IAEA in completing its probe.

 

“We don’t know yet,” Mr. Amano said about the agency’s interview requests. “If someone who has a different name to Fakhrizadeh can clarify our issues, that is fine with us.

But, as CNN reports, the intelligence community believes Iran has been attempting to clean up the suspected nuclear site at Parchin prior to the arrival of international inspectors based on new satellite imagery, a senior intelligence official told CNN on Wednesday.

 

The commercial imagery shows that Iran has moved heavy construction equipment to the area. But the senior intelligence official, who is familiar with the imagery in question, said the U.S. is confident that such sanitization efforts cannot succeed because radioactive materials, if present, are extremely difficult to conceal.

 

“The (International Atomic Energy Agency) isfamiliar with sanitization efforts and the international community has confidence in the IAEA’s technical expertise,” the official said.

 

Sen. Chris Coons, D-Delaware, told reporters on Tuesday that he has “concerns about the vigorous efforts by Iran to sanitize Parchin.”

 

A furious lobbying effort by both supporters and foes of the Iran nuclear deal continues in the Senate ahead of a mid-September vote on the agreement.On Wednesday, Senate Majority Leader Mitch McConnell said the Iran debate will begin on the Senate floor on Sept. 8 after the August recess is over.

As The Journal concludes,

Mr. Amano visited Capitol Hill on Wednesday in a bid to assure skeptical U.S. lawmakers the IAEA is capable of implementing a vast inspections regime of Iran’s nuclear facilities and clarifying the weaponization issue.

Senate Republicans and skeptical Democrats, however, left the 90-minute closed-door meeting frustrated that Mr. Amano refused to share the agency’s classified agreements on access to Iranian military sites, scientists and documents.

“I would say most members left with greater concerns about the inspection regime than we came in with,” Senate Foreign Relations Committee Chairman Bob Corker (R., Tenn.) told reporters. “It was not a reassuring meeting.”

*  *  *
Somewhere Benjamin Netanyahu is doing “the told you so” dance… as Kerry’s deal and Obama’s legacy hang by a thread.

 end
From London England:  Carney very dovish/far more than expected.
A clue of the faltering global economy!!!
(courtesy zero hedge)

3 Charts To Watch During Today’s More Dovish Than Expected BoE “Super Thursday”

Update: the release and Minutes are out, and it would appear that the BOE finally pulled up an oil chart, and as a result the report was far more dovish than consensus had expected”

From the announcement:

The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy in order to meet the 2% inflation target and in a way that helps to sustain growth and employment.  At its meeting ending on 5 August 2015, the MPC voted by a majority of 8-1 to maintain Bank Rate at 0.5%.  The Committee voted unanimously to maintain the stock of purchased assets financed by the issuance of central bank reserves at £375 billion, and so to reinvest the £16.9 billion of cash flows associated with the redemption of the September 2015 gilt held in the Asset Purchase Facility.

 

CPI inflation fell back to zero in June.  As set out in the Governor’s open letter to the Chancellor, around three quarters of the deviation of inflation from the 2% target, or 1½ percentage points, reflects unusually low contributions from energy, food, and other imported goods prices.  The remaining quarter of the deviation of inflation from target, or ½ a percentage point, reflects the past weakness of domestic cost growth, and unit labour costs in particular.  The combined weakness in domestic costs and imported goods prices is evident in subdued core inflation, which on most measures is currently around 1%.

 

With some underutilised resources remaining in the economy and with inflation below the target, the Committee intends to set monetary policy in order to ensure that growth is sufficient to absorb the remaining economic slack so as to return inflation to the target within two years.  Conditional upon Bank Rate following the gently rising path implied by market yields, the Committee judges that this is likely to be achieved.

 

In its latest economic projections, the Committee projects UK-weighted world demand to expand at a moderate pace.  Growth in advanced economies is expected to be a touch faster, and growth in emerging economies a little slower, than in the past few years.  The support to UK exports from steady global demand growth is expected to be counterbalanced, however, by the effect of the past appreciation of sterling.  Risks to global growth are judged to be skewed moderately to the downside reflecting, for example, risks to activity in the euro area and China.

More importantly, the inflation report which was also released, and it was here where the dovish revisions were most acute:

The GBP is not happy, and promptly tumbled over 100 pips:

* * *

A preview of today’s BOE “Super Thursday” from RanSquawk and Forex.com

Today the Bank of England releases its rate decision, minutes and quarterly inflation report (QIR) all at 1200BST with the QIR press conference to be held by Governor Carney at 1245BST. Given the volume of information on offer, the release is likely to be met with volatility.

Background

The rate decision is expected to see the BoE keep policy on hold , however the minutes could prove to be more interesting.
Consensus suggest this month’s minutes could see a 7-2 vote (currently 9-0) with some analysts even suggesting a 6-3 vote after July’s meeting saw ‘a few’ members suggest a ‘fine balance’ between voting for a rate hike or not. The two most touted members to vote for a rate hike are McCafferty and Weale. Other names include Miles, who is leaving the committee after this month and has recently forecast inflation rising to the 2% target towards the end of this year, and Forbes who has previously been considered the most likely member to join McCafferty and Weale. It should be noted however that if BoE’s Miles were to vote for a rate hike, it would be less consequential than other members as he is being replaced in September by Gertjan Vlieghe, who analysts at Barclays and Citi both forecast will have a more dovish leaning.

The BoE’s QIR could also prove of interest to many participants, with the report potentially shedding more light on the bank’s outlook for inflation and growth. The previous report said CPI is on track to return to the 2% target in 2 years despite cutting the 2016 CPI forecast to 1.6% citing downside risk to near term inflation. More specifically, the BoE said inflation is likely to be below as above 2.0% in Q2 2017, therefore any shift in the distribution of inflation expectations around 2% will be key.

Since this report, inflation has failed to show any marked pick-up (currently stands at 0.0% Y/Y). However, the central bank themselves have been more upbeat for the inflation outlook (as per above comments from Miles). That said, analysts suggest that although it is hard to pinpoint an exact forecast, there is downside risk to near-term inflation outlook given the appreciation of GBP and continued decline in oil prices. Nonetheless, analysts at Goldman Sachs suggest that the 2yr outlook for inflation could be lifted and if so then participants could be presented with a steeper curve.

From a growth perspective, the latest GDP reading saw Q2 print at 0.7% Q/Q which has subsequently led to a more optimistic outlook for UK growth (also allied with a dissipation of fears surrounding Greece) and as such there could be a potential shift in expectations on this metric despite having been cut in the previous report for 2015 and 2016. Some commentators add that the latest figures could lead policy-makers to shrug off the disappointing Q1 reading of 0.4% and thus could provide one of the more hawkish elements of the release.

In terms of other metrics, hawkish tones could also be provided by any further mentions on slack which was seen as shrinking in the previous minutes release . With regards to wage growth, this may take somewhat of a back-seat this time round given that economists’ view that little has changed on this front since the previous report in May.

Market Reaction

With so much to digest from the BOE later today, we need to find easy ways to try and break if down to see what impact the combined release of the BoE interest rate decision, minutes and Inflation Report could have on the markets.

Rather than try to track everything, we will be looking at 3 assets to determine the impact of Super Tuesday.

1, The Sonia rate

The Sonia rate is useful to look at today to get a sense of the market’s expectations of UK interest rates in 3 months’ time. If this is considered hawkish then Sonia rates should rise and the market may start to price in a potential rate hike before the end of this year, helping the UK to play catch up with US rate expectations.

Chart 1:

Source: City Index and Bloomberg

2, GBPUSD

Can a hawkish Carney take us out of this range?  We hope so, since GBPUSD has been as dull as dishwater recently. If the BoE talks tough on wage pressures and the need to get started on normalising interest rates then we think this could push GBPUSD outside of its range and back towards 1.60.

Chart 2:


Source: City Index and Bloomberg

3, The performance of highly indebted, UK-listed companies such as Aggreko

This power generator leasing company has a high debt load, approx. 1/6th of its market cap. It has also suffered from weak profit growth, falling EBITDA margins and negative earnings per share growth in recent months. Could a hawkish BoE, and the threat of higher interest rates weigh on the share price, we think so. We will be watching the performance of Aggreko during Carney’s speech and using the performance of its share price as a good gauge of whether the market thinks that higher interest rates are a near term possibility for the UK.

Chart 3: 

Source: City Index and Bloomberg

end
And summarizing the above story:
(courtesy Valentin Marinov/Credite.Agricole./zero hedge)

Bank Of England Post Mortem: Rate Hike On Hold Due To Crashing Commodities, Strong GBP

From CA’s Valentin Marinov

BoE inflation report – strong GBP made all the difference it seems

Reading through the August inflation report two things seem to stand out:

1/ The MPC is more optimistic on (domestic demand-driven) GDP growth – supported by growing wages, cheaper bank funding and growing house prices.  Indeed, they revised their growth projections slightly to the upside compared to May.

2/ The MPC has turned more cautious on inflation because of persistent commodity price weakness and, indeed, FX appreciation. This is reflected in their lower inflation projections.

The message is: yes, we will hike but not before we are certain that the negative impact from lower commodity prices and stronger GBP have abated.The above also means that to a certain degree the decision to hike or not is not really in BoE’s hands, at least for now. This is different from the Fed, where we do see clear signals that hikes will be needed fairly soon.

This also means that verbal intervention in GBP by Carney is now a distinct risk going into the press conference at 12:45

end
You are now looking at the next Argentina as Brazil’s economy is collapsing including its credit default swaps..
a must read..
(courtesy zero hedge)

Is This Country Latin America’s Next “Argentina”

One week ago we reported on the economic devastation in he one Latin American country which has yet to be noticed by the broader financial media: Brazil. This is what we said:

Back on December 29 of last year, we explained how under the burden of its soaring current account deficit, and its its first primary fiscal deficit since 1998, not to mention numerous corruption scandals and a dysfunctional monetary policy, the Brazilian economy “just imploded.” We also noted the main reason for the Latin American collapse: Brazil had for the past decade become China’s favorite source of commodities, and now that China suddenly no longer needed commodities, the Brazilian economy went into freefall.

 

We followed this up a month later with “Brazil’s Economy Is On The Verge Of Total Collapse” which repeated more of the same, only this time the situation was even worse.

 

It took the rating agencies 7 months to figure out what our readers had known since 2014, when two days ago S&P downgraded Brazil’s credit rating from Stable to Negative citing, what else, the “sharp deterioration of the growth and fiscal consolidation outlook and heightened political/institutional friction” adding that “the negative outlook reflects the agency’s view of a “greater than one–in–three likelihood that the policy correction will face further slippage given fluid political dynamics and that the return to a firmer growth trajectory will take longer than expected.”

Following the S&P announcement others promptly jumped on the bandwagon, most prominently Goldman Sachs which had some jarring words about what is going on in Brazil’s economy:

Records show that over the last 11 years we cannot find a period with a strictly-worse growth-inflation outcome than that of 2Q2015 . That is, since 1Q2004 there has not been a single quarter in which we had simultaneously higher inflation and lower growth than during 2Q2015. In fact, in 96% of the 46 quarters between 1Q2004 and 2Q2015 the economy was delivering simultaneously higher growth and lower inflation than during 2Q2015.

We concluded as follows: “In short, the Brazilian economy has never been worse and just to hammer that point home, Goldman added a chart which makes it quite clear that Brazil is not in a recession: it is almost certainly in a depression at this moment – note the recession bar on the chart below and where it is now.”

Today, following another spike in negative news, it appears that the credit markets have finally woken up, and a quick look at Brazil’s CDS shows that following today’s spike to 314bps, the country’s implied default risk is back to levels last seen in April of 2009!

 

And here’s why we expect the blowout in CDS not to stop here.

First, overnight the WSJ reported that Brazilian President Dilma Rousseff’s approval rating has slumped into the single digits to a record low, as the country’s economy struggles and a corruption scandal grows.

Only 8% of respondents across the country said Ms. Rousseff’s administration was “good or excellent,” and 71% considered it to be “bad or terrible,” according to a poll released Thursday by the Datafolha polling institute. That compared with approval of 10% and disapproval of 65% in a June poll, also by Datafolha. The survey result is the lowest for any president since 1990, when the polling series began.

Ms. Rousseff’s approval rating in the latest poll was lower even than former President Fernando Collor de Mello, who slipped to 9% in September 1992, shortly before he was impeached.

As the WSJ adds, Rousseff is facing a combination of negative factors, of which the depressionary economy is just one: “The county’s economy is expected to contract by around 1.8% this year, according to a central bank survey of private sector bank economists. Annual inflation stands at 9.25%, well above the central bank’s tolerance band of 2.5% to 6.5%. And the poor economic conditions are raising fears among Brazilians that they could lose their jobs.”

Then there is corruption:

Meanwhile, a continuing investigation surrounding state-run oil company Petróleo Brasileiro SA, or Petrobras, is also weighing on Ms. Rousseff’s approval rating, though she hasn’t been accused of any wrongdoing and has denied involvement in the scandal. Petrobras has said it is cooperating with the investigation.

 

Earlier this week, federal police arrested José Dirceu, a former minister of ex-President Luiz Inácio Lula da Silva, on allegations that he received bribes from former Petrobras executives. A lawyer representing Mr. Dirceu said he denies any wrongdoing.

 

Mr. da Silva, who handpicked Ms. Rousseff as his party’s candidate to succeed him, hasn’t been implicated in the Petrobras scandal.

Worse, like in Greece, Brazil’s ruling coalition is now fracturing, when yesterday two parties broke from President Dilma Rousseff’s ruling coalition, further eroding support for her measures to shore up the country’s fiscal accounts.

This happened after the lower house approved in a first round vote a constitutional amendment by 445 against 16 votes granting salary increases to police chiefs, prosecutors and government attorneys. The bill still needs to pass a second round vote before going to the Senate.

 

Earlier, leaders of the Brazilian Labor Party and the Democratic Labor Party, or PTB and PDT, said they would act independently and no longer participate in meetings of the ruling coalition. The parties together have 44 out of 513 seats in the Chamber.

But Brazil’s biggest concern, the one from which all of its other problems stem, is China. Unless the country that was the driver of Brazil’s commodity export golden age returns to its place as Brazil’s most important trading partner, no matter what fiscal or monetary policies Brazil implements, the domestic politics, already ugly, are set to get worse.

And as everyone knows by now, China has its own spate of problems to deal with, with Brazil’s commodity export troubles far on the back burner.

Which is why expect more credit market participants to notice the depressionary developments in brazil, and as the country’s CDS continue to blow out, many will start asking themselves: is Brazil the next Argentina?

 

end
And now Morgan Stanley and Bill Gross warn of a “debacle” in the emerging markets as currencies and their bonds collapse
(courtesy zero hedge/Bill Gross/Morgan Stanley)

Emerging Market Mayhem: Gross Warns Of “Debacle” As Currencies, Bonds Collapse

Things are getting downright scary in emerging markets. Just ask Bill Gross:

Or have a look at this week’s headlines:

And on, and on.

One particularly alarming case that we’ve been keen to document lately is that of Brazil which, you’ll recall, is “up shit creek without a paddle” both figuratively and literally. For one thing, as Goldman recently noted,there’s not a single period in over a decade “with a strictly-worse growth-inflation outcome than that of 2Q2015.” In other words, “since 1Q2004 there has not been a single quarter in which we had simultaneously higher inflation and lower growth than during 2Q2015.”

And here is what that looks like on a scale of 100 to -100 with 100 being “high growth, low inflation” and -100 being “stagflation nightmare“:

This helps to explain why CDS spreads have blown out to post-crisis wides.

For those who favor a more qualitative approach to assessing an economy’s prospects, don’t forget that the Brazilian economy recently hit its metaphorical, and literal, bottom when AP reported that, with the Brazil Olympics of 2016 just about 1 year away, “athletes in next year’s Summer Olympics here will be swimming and boating in waters so contaminated with human feces that they risk becoming violently ill and unable to compete in the games.”

So that’s Brazil, and while not every EM country is coping with the worst stagflation in 11 years while simultaneously trying to explain away rivers of raw sewage to the Olympic Committee, the combination of slumping commodity prices and the threat of an imminent Fed liftoff are wreaking havoc across the space. Consider the following from Bloomberg for instance:

Central bankers in commodity-dependent Andes economies aren’t even considering interest-rate cuts to revive growth, even as prices for oil, copper and other raw materials collapse.

 

That’s because the deepening price slump is also dragging down currencies in Colombia and Chile — a swoon that’s fanning inflation and tying policy makers’ hands. Fixed-income traders have now ratcheted up cost-of-living expectations for Colombia and Chile after their tenders sank more than 10 percent in the past three months.

 

“It’s causing a headache,” Luis Oscar Herrera, the chief Andean region economist at BTG Pactual SA, said by telephone from Santiago. “All the Andean countries have headline and core inflation above their target ranges.”

 

In an interview with local newspaper La Tercera published Sunday, Chile central bank President Rodrigo Vergara said rate cuts are completely off the table as the sinking peso fuels price acceleration. That’s even after Chile’s economy shrank 0.07 percent on a seasonally adjusted basis in the first five months of the year, buffeted by the nosedive in copper prices. Chile is the world’s biggest exporter of the metal, which has tumbled 26 percent in the past year.

 

In other words, central bankers are grappling with slumping export-driven economies and FX-pass through inflation or, more simply, bankers are caught between a “can’t cut to boost the economy” rock and a “can’t hike to tame inflation” hard place.

“Inflation [in Colombia] stood at a monthly 0.19% in July, a print above market consensus (0.11% MoM) and our forecast (0.15% MoM) [which] goes in-line with a materialization of the foreign exchange pass-through to inflation in a month where the COP depreciation against the USD stood at 10.9%,” Citi said earlier this week, adding that “the transmission still looks small and this has prompted some analysts to consider that there is a delayed pass-through effect which should materialize in the months ahead.” In other words: it’s about to get worse.

More broadly, “developing-nation currencies have fallen to their lowest levels since 1999, and bonds denominated in those currencies have wiped out five years’ worth of gains,” Bloomberg notes.

Tying it all together, Morgan Stanley says that Brazil has taken “center stage as the great EM unwind takes hold.” In short, “a triple unwind of EM credit, China’s leverage and easy US monetary policy” has tanked the space and although Morgan thinks we may be more than halfway through the cycle, the bank “remains wary of new risks, naturally.”

Yes, “naturally,” because this is the same Morgan Stanley which just two weeks ago predicted that based on the forward curve, the rebound in crude prices will be so bad as to have no parallel “in analysable history.” Needless to say, that doesn’t bode well for commodity currencies and neither does a Fed rate hike. So in this environment, who is most exposed? Morgan Stanley endeavors to explain. Here’s more:

Who’s Most at Risk? 

 

Brazil remains at the centre of the Great EM Unwind. Its salutary but now lukewarm macro adjustment implies a lower risk of a sharp and deep recession that could have turned the second derivative of growth positive sooner. A recession at home when Fed-related volatility shows up could create significant financial volatility. 

 

Turkey and South Africa remain at risk because they have shown very little adjustment. Indonesia’s macro adjustment continues, particularly now, and this should continue to reduce its exposure and vulnerability. 

 

Commodity exporters – particularly Russia and Colombia – remain under pressure, driving fundamentals weaker towards a possible change in their model of growth. 

 

And here’s the complete breakdown by risk factor:

But wait, there’s more. The bigger picture problem (i.e. looking beyond the current downturn in commodities and the looming Fed hike) for EMs revolves around slumping global trade, a topic we’ve discussed at length (here, for instance). As WSJ notes, the downturn in trade which many had assumed was merely cyclical, may in fact be structural and endemic:

Central to this emerging-market slump is the unprecedented weakness of world trade, which has now grown by less than global output for the past four years, unique since World War II. Apart from a brief recovery in 2010, global trade volumes since the start of the global financial crisis have fallen well below the levels in the 1990s and early 2000s.

 

What is more, the boost to the global economy from trade has been weakening: A dollar of trade today delivers less than half the boost to global output that it did between 1986 and 2000, according to the World Bank. For emerging-market economies, which have historically been highly dependent on exports, this presents a major challenge.

 

Until recently, most investors assumed this slowdown was primarily cyclical and trade would pick up as developed markets in the U.S. and Europe recovered. 

But it is now clear that there is also a significant structural element to the weakness in trade, reflecting changes in the global economy.

This structural shift in the pattern of global trade has profound implications for the economic models of many emerging markets. Trade has been one of the main engines of higher living standards. In the past, they could rely on currency devaluations to improve their competitiveness and help pull their economies out of the mire. But this time may be different: There may no longer be the demand for what they produce.

So where does all of this leave us? Well, that remains to be seen, but if we truly are in for a prolonged period of lackluster global demand and depressed trade, we could begin to see a wholesale shift in which the markets formerly known as “emerging” quickly descend into “frontier” status and after that, well, cue the “humanitarian aid” packages.

 

end

 

And here is the list in order of countries with the highest default risk:
(courtesy zero hedge)

Which Countries Have The Highest Default Risk: A Global CDS Heatmap

We hardly need to expound on Greece’s near-death economic state: if anyone has missed the surreal tragicomedy of the pas 5 years all we can say is we envy you. Of all countries around the globe, if there is one nation where everyone by now knows is, or should have defaulted long ago, it is the Hellenic Republic.

But when it comes to default risk implied by government bond prices and their inverse “hedge”, credit default swaps, few may be aware that Venezuela’s default probability is orders of magnitude higher. Of course, our readers will be well aware of this: back in December, when its CDS was trading at “only” 2300 bps (or whatever points upfront equivalent it was back then) we said Venezuela CDS are going much, much wider. Little did we know that in just about 8 months they would more than double, and as of last check, Venezuela CDS are just shy of 5000bps suggesting a default is virtually guaranteed.

So aside from these two socialist utopias, who else is on the default chopping block? The CDS heatmap below lays out all the countries which according to the market, are most likely to tell their creditors the money is gone… it’s all gone.

Below, in order of declining default risk, are the ten most likely to follow Venezuela and Greece into the great default unknown:

  1. Ukraine
  2. Pakistan
  3. Egypt
  4. Cyprus
  5. Russia
  6. Brazil
  7. Kazakhstan
  8. Turkey
  9. South Africa
  10. Vietnam

And which are the three countries least likely to default? No surprise, these are Germany, Switzerland, and Sweden. The US is 4th least risky.

Source: Bank of America

end

The high USA dollar will no doubt stop considerable amount of USA products:

 

(courtesy Bloomberg/Wong)

Why Canada May Become a Problem for Janet Yellen

The U.S. currency is yet again rising to a dangerously high level

Federal Reserve Chair Janet Yellen said less than a month ago that she expected the dollar’s drag on the American economy to dissipate. She may not have foreseen that the greenback would surge to an 11-year high against the currency of the U.S.’s biggest trading partner.

As the greenback’s advance against the euro and the yen subsided, its 5 percent rally against the Canadian dollar this quarter may prove to be more detrimental to the world’s biggest economy. The U.S.’s northern neighbor buys about 17 percent of America’s products, more than any other nation, data compiled by Bloomberg show. And shipments already have declined after reaching a record last year.

U.S. exports to Canada have declined from record levels reached last year as the Canadian dollar has weakened against the U.S. dollar.
U.S. exports to Canada have declined from record levels reached last year as the Canadian dollar has weakened against the U.S. dollar.
Source: Bloomberg data

A firm dollar makes American goods relatively more expensive abroad, presenting a hurdle for Fed officials as they prepare to raise interest rates for the first time since 2006.

The central bank’s trade-weighted dollar index is approaching the March high that prompted Yellen at the time to warn the currency is weighing on exports and inflation. The index, which includes only major currencies, gives an almost 13 percent weighting to Canada, trailing only the euro area’s influence.

“Since late June, the speed in the dollar rally is probably equivalent to what we had earlier,” said Charles St-Arnaud, senior economist at Nomura Holdings Inc. in London. “I can hear some investors saying, `Oh yeah we’re back to where we were in March when the Fed started to be worried about the dollar.”’

end

Oil related stories:
Goldman Sachs now warns that storage capacity to house the excess oil is running out:
(courtesy Goldman Sachs/zero hedge)

Crude Carnage Continues As Goldman Warns “Storage Is Running Out”

WTI Crude is back below $45 again this morning – pressing towards 2015 and cycle lows -after Goldman Sachs’ Jeffrey Currie warns ‘lower for longer’ is here to stay, with price risk “substantially skewed to the downside.” His reasoning are manifold, as detailed below, but overarching is oversupply (Saudi Arabia has a challenge in Asia as it battles to maintain mkt share, the Russians are coming, andother OPEC members want a bigger slice) and, even more crucially, storage is running out. As Currie concludes, this time it is different. Financial metrics for the oil industry are far worse.

 

 

As Goldman Sachs’ Jeffrey Currie explains…

1)Although spot oil prices have only retraced to the lows of this winter, forward oil prices, commodity currencies and energy equities/credit (relative to the broad indices) have now all retraced to levels not seen since 2005, erasing a decade of gains. This creates a very different economic environment as the search for a new equilibrium resumes: financial stress is higher, operational stress as defined below is more extreme and costs have declined further due to more productivity gains, a substantially stronger dollar and sharp declines in other commodity prices. These differences reflect not only a further deterioration in fundamentals, but also the financial markets’ decreasing confidence in a quick rebound in prices and a recognition that the rebalancing of supply and demand will likely prove to be far more difficult than what was previously priced into the market. This is all in line with our lower-for-longer view. While we maintain our near-term WTI target of $45/bbl, we want to emphasize that the risks remain substantially skewed to the downside, particularly as we enter the shoulder months this autumn.

2) In January, we argued that one of the key tenets of the New Oil Order was that capital is now the new margin of adjustment. As shale has dramatically reduced time-to-build (the time between when producers commit capital and when they get production) from several years to several months, oil prices now need to remain lower for longer to keep capital sidelined and allow the rebalancing process to occur uninterrupted. This spring’s rally in prices did prove to be self-defeating. Not only did all the capital markets reopen as oil prices rose, but producers began to redeploy rigs and remained under hedged, which is a reflection that the industry simply had not faced enough pain to create real financial stress that would create change.

3)This time it is different. Financial metrics for the oil industry are far worse. Forward oil prices are c.10% lower (at $58/bbl the 3-year forward oil price is at its lowest in a decade). At the same time leverage for the industry is rising as hedge books are much lighter, with 2016 hedge ratios at 9% versus a five-year average of 25%. Energy equity markets relative to the equity indices are at the lowest level since 2005 and at 3-year lows on an absolute basis. Energy high yield as an OAS spread ratio has also pushed above December 2014 highs. Although financial stress is higher, it alone is still unlikely to create the rebalancing needed due to the unique market structure of the New Oil Order, sidelined capital and declining costs.

4) The market structure of the New Oil Order is unprecedented. In January we showed that high-quality producing assets were on average owned by weak balance sheets while strong balance sheets on average owned the lower-quality producing assets. In other words, the IOCs and some NOCs own most of the higher-cost production while E&Ps, particularly US E&Ps, own much of the lower-cost production. Historically, weak balance sheets typically owned high-cost assets and vice versa, creating a linear relationship between lower prices and financial stress, which historically led to more financially motivated supply cuts as prices dropped. Yes, we have seen some of the few companies with weak balance sheets and high-cost assets run into trouble and go into maintenance mode, but they are not sufficient to shift the market balance. In contrast, the weaker balance sheets with high-quality assets issued equity during the spring, when capital markets were open, to buy more longevity by reducing leverage by half a turn. On net, from a financial perspective, the adjustment process is now likely to take longer.

5) Logistical and storage constraints are also tighter this time. We have argued for decades now that modern energy markets mostly rebalance through operational stress. Operational stress is created when a surplus breaches logistical or storage capacity such that supply can no longer remain above demand. Although perceptions this past April were that the market was near operational stress, it is now far closer. We estimate that the industry has added c.170 million barrels of petroleum to crude and product storage tanks since January and c.50 million barrels to clean and dirty floating storage. With increased operational stress in the system versus six months ago, we now attach a substantially higher probability to this being the margin of adjustment than we did in January. While the probability of blowing out storage this autumn is higher, the market will need to balance or adjust before next spring’s turnarounds.

6) Should the market breach logistical and storage capacity constraints, this would kill the storage arbitrage between spot and forward prices and create a significant flattening of the entire forward curve (though front timespreads would likely blowout initially). Historically, once storage capacity is breached across all crude and products, supply must be brought back below demand immediately. To create the rebalancing physical constraints create a collapse in spot prices below cash costs as supply is forced in line with demand (late 1998 is a good example), creating the birth of a new bull market. Breaching crude storage capacity alone is not sufficient, as it simply leads to an increase in refinery runs creating product where storage capacity is available, so both crude and product storage needs to be breached. Further, this only requires breaching capacity in one or two of the key product markets given constraints on refinery product yields. In the current market, the likely candidate is distillate as inventories, particularly outside of the US, are extremely high and margins are weak. As the curve flattens, long-dated oil prices historically have drifted down toward cash prices. As producers face increasing financial stress, covering operating costs and surviving becomes more important than future growth.

7) It is important to separate cash costs from total costs. As oil markets are substantially oversupplied by nearly every measure (see below), the need for new incremental capacity is limited at the margin. New incremental capacity requires prices above ‘total’ costs, defined as fixed (capex) plus variable/cash costs (opex). However, in an environment where the market only needs to produce from existing capacity, prices only need to cover variable/cash costs to keep existing capacity operating. And herein lies the paradox, for the high-cost, strong balance sheet producer, cash costs are $40-$45/bbl versus total costs closer to $75/bbl. In contrast, the low-cost, weak balance sheet producer faces cash costs near $20/bbl with total costs near $55/bbl. As the high-cost production is mostly oil sands and other costly to shut in conventional oil, the stronger balance sheet producers with this production will resist the costs of shutting in, leaving the easier-to-shut, lower-cost production held by the weaker balance sheets as the more likely candidate. This suggests the volatility and risks to the downside are significant. Furthermore, a stronger US dollar, productivity gains and other commodity price declines only creates more cost deflation, via the negative feedback loop, making cash costs a moving target to the downside.

8) Commodity and emerging market currencies have also erased a decade of gains, reflecting the significant macroeconomic imbalances many of these countries are facing, created in part by the sharp decline in all commodity prices. This not only impacts emerging market demand for oil, Latin American demand in particular, but also lowers the costs to produce oil and commodities in these countries. To illustrate the sensitivity of oil cash costs to the Brazilian real (BRL) and Canadian dollar (CAD), we find that a 10% move in BRL or CAD shifts cash costs by 3% and 5% respectively. The BRL and CAD have weakened year-to-date by 31% and 14% respectively. Further, as we argued late last year, 2015 supply growth in regions facing sharp currency depreciation have been revised up since March by the IEA: Brazil (+24 kb/d), North Sea (+65 kb/d) and Russia (+145 kb/d). It is important to emphasize that markets have never seen such a large appreciation in the US dollar at the same time they have seen such a large surplus in the oil market. While it is unprecedented in the current direction, the weakest US dollar ever recorded on a trade-weighted basis was when oil prices peaked above $147/bbl in July 2008. As we have emphasized in all of our research since 2013, it is the same macro forces working in reverse today that pushed markets to the highs during the previous decade. The crude market didn’t go to $147/bbl on oil fundamentals alone, nor would it be collapsing like this on oil fundamentals alone.

9) Nonetheless, fundamentals are weaker today than in 1Q. Global supply is currently up 3.0 million b/d (and averaged up 3.2 million b/d over the past 12 months), driven in large part by a surge in low-cost production from Saudi Arabia, Iraq and Russia. The largest demand growth ever observed was in 2004 when China and the emerging markets kicked off the previous decade’s commodity boom and drove a 3.15 million b/d demand growth number. In 2004 the emerging markets had clean balance sheets in strengthening currencies which reflected their good health. Today, that boom decade has been brought to a halt. These countries are facing large macro imbalances and debt. Not only has emerging market growth slowed, but any benefits from lower prices are mostly behind us now, as the benefits only last 6 to 9 months. We estimate that current oversupply is c.2.0 million b/d versus c.1.8 million b/d in 1H15.

10) The oil industry on average is not earning its cost of capital. The distinction between cash costs and total costs, also applies to ‘well’ versus ‘company’ returns. While the returns at the well can be economical at prices near $50/bbl, the returns for the company can be deeply underwater due to large-scale investments when prices were at $100/bbl. Even assuming an aggressive company decline rate of 25% over the past year, that would make 75% of the assets legacy production. While commodity markets don’t care about legacy fixed costs, and only about today’s cost to bring on a marginal barrel, potential equity and credit investors do care about those legacy costs and what they do to company long-run returns. In general, energy companies at present cannot earn their cost of capital over the long-term (defined as the past 50 years). Long-run returns are 10% versus a cost of capital of 12.5%. In other words, they are wealth-destroying propositions from the get go. The reason for this is the industry constantly invests in new capacity during the investment phase of the super cycle, i.e. high and rising prices, and brings on line this new capacity during the exploitation phase of the super cycle, i.e. low and declining prices.

11) While the supply and demand for the barrels of oil will likely find a balance between now and sometime in 2016 with an increasing likelihood of this being driven by operational stress, this doesn’t mean a sharp rebound in prices will occur quickly as so many other factors will likely weigh on prices. Not only will the macro forces keep prices under pressure, but historically markets trade near cash costs until new incremental higher-cost capacity is needed (even the IEA has revised 2015 non-OPEC output growth from existing capacity up by 265 kb/d since March). In addition, low-cost OPEC producers are likely to expand capacity now that they have pushed output to near max utilization. At the same time Iran has the potential to add 200 to 400 kb/d of production in 2016 and with significant investment far greater low-cost volumes in 2017 and beyond. Iran, like other OPEC countries, needs the revenues through volume. Even Venezuela accepted another $5 billion last week from China to produce oil from older fields. Finally, the capital markets for energy need to be rebalanced through consolidation and capital restructuring. This takes time to achieve. In the previous cycle this took from 1986 to 1998 and ended with the creation of the super majors. Today we expect it to go more quickly, just as we erased a decade in the matter of months, but it will take time.

end

A True Jobs Massacre Spreads in US Oil & Gas

testosteronepit's picture

Wolf Richter   www.wolfstreet.comwww.amazon.com/author/wolfrichter

It’s been tough for US oil companies. And even tougher for their investors. The hero du jour is Marathon Oil.

Wednesday afterhours it reported an eye-popping 48% plunge in revenues in the second quarter and a net loss of $386 million. To stem the bleeding, it slashed capital expenditures by 40% from the prior quarter. “Importantly,” as it said in the press release, it was able to reduce production costs in North America by over 30% per barrel of oil equivalent from a year ago. And it cut is general and administrative costs by more than 20%.

The key to survival in this environment of plunging revenues is conserving cash and slashing expenses, including “workforce reductions,” as the company calls them. And something else….

Marathon proudly said that its global production from continuing operations (excluding Libya) rose 6% from a year ago, with its US production soaring “nearly 30%.” And it’s not backing down either: Total company production would increase 5-7% year-over-year, with a 20% jump in production in the US.

Thus it joined the cacophonous chorus of oil and gas companies that have been bragging about production increases despite the oil glut, despite the oil price plunge, despite the mayhem in the oil markets, just when investors are desperately waiting for the ever elusive production cuts.

BP’s debacle is even worse. Last week, it announced a loss of $6.3 billion and warned of more layoffs to come. It raised the restructuring charges for those layoffs from $1 billion, put forward in December, to $1.5 billion. “We will continue to identify more opportunities for simplification and efficiency,” is how CEO Bob Dudley put it in perfect corporate-speak. And cuts are now coming at “a faster pace.”

Dozens of companies in the oil & gas sector have announced job cuts since last fall, with some of the global players, like Baker Hughes, pushing their layoff numbers into the low five-digits. It has been a relentless litany.

In its June Job Cut Report, Challenger found that US employers had announced 287,672 job cuts during the first half of 2015, up 17% from the same period in 2014, the worst first half since 2010. For a reason:

The first-half surge was due largely to the decline in oil prices, which rippled through the energy and industrial goods sectors. All told, the drop in oil prices was blamed for 69,582 job cuts in the first half of 2015. That is second only to the 86,978 job cuts attributed to “restructuring.”

But the announcements of global companies don’t always make clear how many of these cuts are going to happen in the US. And given the vast US economy, these energy-related job cuts don’t readily stick out in the various reports on the US employment situation.

ADP, in its National Employment Report today, guessed that the economy in July created 185,000 new jobs, including whatever jobs it destroyed in the energy sector. It disappointed those who’d expected 215,000. But that’s still quite a few jobs. And new unemployment claims have been bumping along multi-year lows. So nothing particularly alarming in these numbers.

The Bureau of Labor Statistics figured that the number of jobs in “oil and gas extraction” peaked in October last year at 201,500 and has since fallen 4% to 193,200. Total employment in oil & gas extraction and support activities peaked at 538,000 and has since dropped 7%.

Among the nearly 142 million total non-farm jobs in the US, half a million oil & gas jobs isn’t a big portion. But for folks working in the sector, it’s a different story. On an anecdotal basis, it sounds like this (from David in Texas):

A friend’s son went to work for BP right out of college a couple of years ago for what to my friend was a shockingly high salary. At the moment, he’s still employed there, but we’ll see how long this lasts. Another friend’s son who worked for Baker Hughes has already been laid off.

This has been the pattern: a careful trickle of layoffs here and there, spread out over months, not the mass extinction of jobs that we saw during the Great Recession. And this strategy has one big side effect: by now, hardly anyone pays attention to it anymore.

Moody’s Analytics, in conjunction with the ADP National Employment Report, came up with its own estimates of the bloodletting. Chief economist Mark Zandi told reporters today that the oil & gas sector has been laying off 10,000 to 15,000 workers a month so far this year. Unless the price of oil suddenly experiences a miraculous recovery, layoffs would likely continue for the rest of the year at this rate, it said.

Alas, West Texas Intermediate is now in its eighth week in a row of declines. At $45.21 a barrel, the lowest since March 20, it’s just a hair from setting a new low for this oil bust. Not a whole lot stands in its way.

So if Moody’s estimate for the oil & gas sector pans out, it would translate into a range of 120,000 to 180,000 job cuts this year, in an industry that at the beginning of the year had barely over 500,000 jobs. At the upper end of the range, it would represent the elimination of 36% of the oil & gas jobs in the US. Though it doesn’t stick out in the national figures, it would be a true jobs massacre.

So the oil & gas sector isn’t exactly in a rosy environment, with a number of companies entering a “liquidity death spiral.” Read… Oil Re-Bloodies the “Smart Money”

 

end

Your early Thursday morning currency, and interest rate moves

 

Euro/USA 1.0900 down .0002

USA/JAPAN YEN 124.84 up .066

GBP/USA 1.5507 down .0095

USA/CAN 1.3171 down .0005

Early this Thursday morning in Europe, the Euro fell by 2 basis points, trading now just at the 1.09 level at 1.0900; 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,  an imminent  default of Greece and the Ukraine, rising peripheral bond yields, and flash crashes. 

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 7 basis points and trading just above the 124 level to 124.84 yen to the dollar.

The pound was well down this morning by 95 basis points as it now trades just above the 1.56 level at 1.5507, 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 stopped its descent as it rose slightly by 8 basis points at 1.3187 to the dollar. (Harper called an election for Oct 19)

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).

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 Thursday morning: up by 93.70 or 0.46%

Trading from Europe and Asia:
1. Europe stocks mixed

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

Gold very early morning trading: $1086.45

silver:$14.60

Early Thursday morning USA 10 year bond yield: 2.25% !!!  down 2 in basis points from Wednesday night and it is trading below resistance at 2.27-2.32%

USA dollar index early Thursday morning: 97.98 up 9 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: 2.46% down 4 in basis points from Wednesday

Closing Japanese 10 year bond yield: .43% !! up 3 in basis points from Wednesday

Your closing Spanish 10 year government bond, Thursday, down 2 in basis points

Spanish 10 year bond yield: 2.02% !!!!!!

Your Thursday closing Italian 10 year bond yield: 1.87% down 5 in basis points from Tuesday: 

trading 15 basis point lower than Spain.

IMPORTANT CURRENCY CLOSES FOR Thursday

 

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

Euro/USA: 1.0920  up .0017   (Euro up 17 basis points) 

USA/Japan: 124.74  down .038  (Yen up 4 basis points)

Great Britain/USA: 1.5513  down .0090 (Pound down 90 basis points

USA/Canada: 1.3115 down .0056  (Canadian dollar up 56 basis points)

This afternoon, the Euro rose by 17 basis points to trade at 1.0920.  The Yen rose to 124.74 for a gain of 4 basis points.  The pound fell 90 basis points, trading at 1.5513. The Canadian dollar  rebounded from yesterday’s huge flushing as it gained 56 basis points to 1.3115

Your closing 10 yr USA bond yield: 2.24% down 2 in basis point from Wednesday// ( just below the resistance level of 2.27-2.32%)/

 

Your closing USA dollar index:

97.85 down 4 cents on the day

.

European and Dow Jones stock index closes:

England FTSE down 5.32 points or 0.08%

Paris CAC down 4.62 points or 0.09%

German Dax down 51.20 points or 0.44%

Spain’s Ibex down 25.90 points or 0.23%

Italian FTSE-MIB down 100.72 or 0.42%

 

The Dow down 120.72  or 0.69%

Nasdaq; down 83.50 or 1.62%

 

OIL: WTI 44.69 !!!!!!!

Brent:49.57!!!

 

Closing USA/Russian rouble cross: 64.04 down 1/2  roubles per dollar on the day

end

 

And now for your more important USA stories.

 

Your closing numbers from New York

Dow Dumps Almost 1000 Points From Highs To 6-Month Lows, Crude Carnage Continues

Seemed appropriate…

With 121 S&P 500 members now trading more than 20% off their highs…

No real catalysts today – aside from Hilsenrath talking back Powell’s dovishness, a terrible Challenger Jobs data point, moar crude carnage, and all the story stocks and media firms getting Baumgartner’d… Nasdaq was worst, Dow best but still a loser…

 

The plunge was initially protected by a mysterious bid which failed and then anchored off JPY and WTI Crude…

 

Desperate to get back to VWAP…

 

Which left cash ugly on the day…Dow tested to 6mo lows – just short of 1000 points off the highs… Nasdaq worst on the day…

 

And on the week… Small Caps are the biggest loser…

 

Russell 2000 briefly went red for 2015

 

Energy stock dip-buyers were out en masse….

 

But credit was being dumped…

 

Even as Energy credit risk is soaring – back near 2015 highs…almost 1000bps!

 

VIX Soared on the day back above 14… (after an 11 handle just 2 days ago)

 

Treasury yields tumbled today…leaving 30Y yields lower on the day…

 

The US Dollar drifted very modestly lower… Cable saw a quick dump on BoE comments this morning….

 

Commodities were mixed with gold and silver drifting higher and copper lower…

 

Crude was clubbed again…

 

Charts: Bloomberg

Bonus Chart: Explain this ‘signalling’!!

h/t Jim A

Bonus Bonus Chart: You Are Here…

 end

Today we had a slew of numbers to report to you.

The first significant number is the Challenger Gray layoffs/hirings report :

The Challenger, Christmas Gray report on layoffs is out and in July there was a huge increase in job cuts to the tune of 105,696 from June’s 44,000

(courtesy Challenger/Christmas/Gray/zero hedge)

Job Cuts Soar To Highest Since September 2011 After Mass Army Terminations, Highest YTD Layoffs Since 2009

While we await for the BLS to report another seasonally adjusted Initial Claims report which will be near multi-decade lows, a far more disturbing report was released moments ago by outplacement consultancy Challenger Gray, which has done a far better job of compiling true layoff data, and which reported that in July there was a whopping 105,696, up 136% from the 44,842 job cuts in June, and the highest in nearly four years, or since September 2011, which the last time there were more than more than 100,000 layoffs.

Worse, the July surge brings the year-to-date job cut total to 393,368, which is 34 percent higher than the 292,921 cuts announced in the first seven months of 2014. This represents the highest seven-month total since 2009, when 978,048 job cuts were announced amid the worst recession since the Great Depression.

Finally, this was the worst July for layoffs in over a decade.

And while we expect energy-sector terminations to take center stage in the coming months following the resumed plunge in energy prices, the July surge in layoffs came from an unexpected source: the US Army.

According to Challenger, more than half of the July job cuts were the result of massive troop and civilian workforce reductions announced by the United States Army. The cutbacks will eliminate 57,000 from government payrolls over the next two years.


“When the military makes cuts, they tend to be deep. In fact, the last time we saw more than 100,000 job cuts in September of 2011, it was 50,000 cuts by the US Army that dominated the total. With wars in Afghanistan and Iraq winding down and pressure to cut government spending, the military has been vulnerable to reductions,” said Challenger.

Indeed, some of the biggest job cuts announced in recent years have come from the military and other government agencies. In addition to the 50,000 cuts announced by the US Army in 2011, the United States Air Force announced plans in 2005 to reduce its headcount by 40,000. Between 2002 and 2010, the United States Post Office announced three separate job cuts that affected a total of 90,000 workers.

In the meantime, drone operators will have to find more socially acceptable ways to express their deadly rage: “The transition from the military to the civilian workforce is always challenging, but the economy is in a much better position to absorb this influx of job seekers now, compared to two or three years ago. This does not mean it will be easy for these service men and women, most of whom undoubtedly thought the military would offer career-long job security,” noted Challenger.

“The most difficult part of the transition may be translating one’s military experience into terms that are meaningful to civilian employers. These men and women have skills and experience that are in demand, but they just don’t know how to describe them in a way that non-military recruiters understand. Luckily, there are a growing number of programs and services that help with this and there has been a concerted effort among the nation’s employers to hire former military,” he added.

Well, there is a simple way to “fix” this problem: start more wars, which considering the current situation in Syria, is about to materialize.

The bigger problem is what happens to all those energy sector jobs which were spared in the last moment after oil launched its dead cat bounce earlier this year and which has been fully faded at this moment. In July only 8,878 oil-related jobs were cut, which is a far cry from the 21K monthly peak early in the year. Expect those same numbers to be promptly surpassed.

 end
Initial claims rise a bit this week but in light of the Challenger,Christmas Grey layoffs/hirings report how is the following chart make any sense?

Explain This…

Initial jobless claims rose modestly this week but remain near 40 year lows as hoarding continues, and job cuts are at 4-year highs. So, we ask, just what is going on in this chart?

 

 

Charts: Bloomberg

end

The biggy of the day and it is a real shocker:  The Atlanta Fed which has been pretty good at determining what the real GDP will be has come out and stated that the 3rd quarter GDP will run at only 1%.  As I have been stating for quite some time:  how on earth can these guys raise rates with the economy in the doldrums:

(courtesy Atlanta fed/zero hedge)

GDP Shocker: Atlanta Fed Sees Q3 Growth At A Laughable 1%

The Atlanta Fed’s Q1 and Q2 GDP forecasts were virtually spot on with what the BEA ultimately reported. Which is why if its accuracy persists, not only the Fed, but Wall Street strategists suddenly have a very big headache on their hands.

Moments ago, the Atlanta Fed just released its much anticipated first estimate for Q3 GDP. It was a doozy, at just 1.0%, or more than 2% below the consensus sellside estimate.

If this is confirmed, not only are all rate hike bets off, but one may as well start the countdown to the recession, and more importantly, QE4.

From the Atlanta Fed:

Latest forecast — August 6, 2015

 

The first GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2015 was 1.0 percent on August 6. The model projects that lower inventory investment will subtract 1.7 percentage points from third quarter real GDP growth. Real GDP grew 2.3 percent in the second quarter according to the advance estimate from the U.S. Bureau of Economic Analysis.

 

In short, if confirmed, not only is this a disaster for the economy, but an even bigger disaster for the Fed which has now pegged itself into a rate hike hole, and can only unpeg it by destroying what little credibility it has left.

 

Janet, It Didn’t Work – Personal Finances Confidence Collapses At Fastest Rate In 3 Years

All the hopes and dreams of bringing back the over-debted, over-consuming American Dream had rested upon The Fed’s ability to ‘stimulate’ confidence via pumping equities higher to ‘prove’ everything is awesome. For a few years it seemed to work… until 2015. As Bloomberg’s Consumer Comfort survey shows, the last 2 weeks have seen Americans views about their personal finances collapse at the fastest rate in 3 years – falling to 10 month lows (despite near-record high stock prices).

Personal Finance Comfort collapses to 10 month lows, decouples from stocks…

 

 

 

This is confirmed by Gallup’s economic confidenc collapse to its lowest in 10 months…

 

Janet – it didn’t work!!

 

 

end

 

 

If true: the following could be far reaching!!..it seems that Obama does not want Hillary as the next President.

(courtesy zero hedge)

Hillary Clinton’s FBI Investigation Is A “Criminal Probe”: Post

Following the embarrassing Snafu two weeks ago, in which the NYT reported, then unreported, that Hillary Clinton had sent at least four emails from her personal account containing classified information during her time heading the State Department and as a result both the DOJ and FBI had gotten involved (with lots of confusion over what is active and what is passive voice) many were confused: was or wasn’t the DOJ or FBI involved, and if not, why not? After all, there was sufficient evidence of enough negligence to merit at least a fact-finding mission.

Last night we got a part of the answer, when WaPo reported that what the NYT reported, then unreported, was in fact accurate: “The FBI has begun looking into the security of Hillary Rodham Clinton’s private e-mail setup,contacting in the past week a Denver-based technology firm that helped manage the unusual system, according to two government officials.

Also last week, the FBI contacted Clinton’s lawyer, David Ken­dall, with questions about the security of a thumb drive in his possession that contains copies of work e-mails Clinton sent during her time as secretary of state.”

As a reminder, David Kendall is “a prominent Williams & Connolly attorney who defended former CIA director David Petraeus against charges of mishandling classified information.” That Clinton has resorted to using him reveals just how far she thinks this could escalate.

As the WaPo further added, “the FBI’s interest in Clinton’s e-mail system comes after the intelligence community’s inspector general referred the issue to the Justice Department in July. Intelligence officials expressed concern that some sensitive information was not in the government’s possession and could be “compromised.”The referral did not accuse Clinton of any wrongdoing, and the two officials said Tuesday that the FBI is not targeting her.”

Maybe that’s true, or maybe that’s how the Amazon Post was told to spin the narrative. However, moments ago a far less liberal outlet, came out with its own interpretation of the ongoing FBI escalation involving Hillary, and according to the NY Post, “the FBI investigation into former Secretary of State Hillary Rodham Clinton’s unsecured e-mail account is not just a fact-finding venture — it’s a criminal probe, sources told The Post on Wednesday.”

The feds are investigating to what extent Clinton relied on her home server and other private devices to send and store classified documents, according to a federal source with knowledge of the inquiry.

 

“It’s definitely a criminal probe,” said the source. “I’m not sure why they’re not calling it a criminal probe.

Well, there are several reasons, one of which is that a presidential candidacy would be all but scuttled if they had to fight a criminal probe at the same time as they were trying to convince the rest of the US of their pristine moral character.

The DOJ [Department of Justice] and FBI can conduct civil investigations in very limited circumstances,” but that’s not what this is, the source stressed. “In this case, a security violation would lead to criminal charges. Maybe DOJ is trying to protect her campaign.”

Clinton’s camp has downplayed the inquiry as civil and fact-finding in nature. Clinton herself has said she is “confident” that she never knowingly sent or received anything that was classified.

As reported on July 24, the inspector general told Congress that of 40 Clinton e-mails randomly reviewed as a sample of her correspondence as secretary of state, four contained classified information. Post adds that “if Clinton is proven to have knowingly sent, received or stored classified information in an unauthorized location, she risks prosecution under the same misdemeanor federal security statute used to prosecute former CIA Director Gen. David Petraeus, said former federal prosecutor Bradley Simon.”

Which also explains why she hired his lawyer.

The statute — which was also used to prosecute Bill Clinton’s national security adviser, Sandy Berger, in 2005, is rarely used and would be subject to the discretion of the attorney general.

 

Still, “They didn’t hesitate to charge Gen. Petraeus with doing the same thing, downloading documents that are classified,” Simon said. “The threshold under the statute is not high — they only need to prove there was an unauthorized removal and retention” of classified material, he said.

 

“My guess is they’re looking to see if there’s been either any breach of that data that’s gone into the wrong hands [in Clinton’s case], through their counter-intelligence group, or they are looking to see if a crime has been committed,” said Makin Delrahim, former chief counsel to the Senate Judiciary Committee, who served as a deputy assistant secretary in the Bush DOJ.

 

“They’re not in the business of providing advisory security services,” Delrahim said of the FBI. “This is real.”

To be sure, this may just be the Post trying to stir the pot with its “sources” ahead of what promises to be the most watched republican primary debate in history. But on the off chance Rupert Murdoch’s outlet is accurate, then one wonders why and how did Obama greenlight such an investigation, whose blessing could only come from the very top.

And if the administration has decided to sacrifice Hillary, whose favorability numbers just plunged to the point she may not need outside help to prematurely end her presidential run, just who does the current regime have in mind for the next US president?

end

Well that about does it for today

I will see you tomorrow night

Harvey

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One comment

  1. 5) Killing a mosquito, fly, wasp, roach, ant,
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    Like

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