Good evening Ladies and Gentlemen:
Here are the following closes for gold and silver today:
Gold: $1112.90 down $2.80 (comex closing time)
Silver $15.21 down 18 cents.
In the access market 5:15 pm
First, here is an outline of what will be discussed tonight:
At the gold comex today, we had a poor delivery day, registering 0 notice for nil ounces Silver saw 0 notices for nil oz
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 227.62 tonnes for a loss of 75 tonnes over that period.
In silver, the open interest fell by 6 contracts despite the fact that silver was down in price by 8 cents yesterday. The total silver OI continues to remain extremely high, with today’s reading at 174,865 contracts In ounces, the OI is represented by .874 billion oz or 124% 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 0 notices served upon for nil oz.
In gold, the total comex gold OI rests tonight at 435,603. We had 0 notices filed for nil oz today.
We had no changes at the GLD today / thus the inventory rests tonight at 671.87 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 tune of / Inventory rests at 324.968 million oz.
We have a few important stories to bring to your attention today…
1. Today, we had the open interest in silver rose by 6 contracts up to 174,871 even though silver was down 8 cents in price with respect to yesterday’s trading. Again, we must have had some short covering. The OI for gold fell by 3590 contracts to 432,013 contracts despite the fact that gold was down by $7.50 yesterday. We still have close to 20 tonnes of gold standing with only 15.206 tonnes of registered gold in the dealer vaults ready to satisfy that which stands.
2.Gold trading overnight, Goldcore
3. One story on Greece
4. Two stories on China devaluing their yuan and how this will lead to a huge deflation throughout the globe.
5 Trading of equities/ New York
6. One oil related story
7. COT report
8 European GDP on the 3 largest economies disappoint again
9. USA stories:
i U. of Michigan consumer sentiment disappoints
ii) Industrial production rises only after large downward revisions
iii) Union Pacific laying off many workers due to lousy coal markets.
iv/ This week’s wrap up courtesy of Greg Hunter/USAWatchdog.
i) Official gold advances by 17 tonnes into China
ii) talks break off with respect to South African miners
iii) HSBC and Goldman continue to buy physical gold for their own account
iv) the trading of paper gold is reaching desperation stages according to Dave Kranzler/
Let us head over and see the comex results for today.
August contract month:
|Withdrawals from Dealers Inventory in oz||nil|
|Withdrawals from Customer Inventory in oz||104,030,358 (JPMorgan,Brinks,Manfra,Scotia)|
|Deposits to the Dealer Inventory in oz||nil|
|Deposits to the Customer Inventory, in oz||nil|
|No of oz served (contracts) today||0 contract (nil oz)|
|No of oz to be served (notices)||2502 contracts (250,200 oz)|
|Total monthly oz gold served (contracts) so far this month||3824 contracts(382,400 oz)|
|Total accumulative withdrawals of gold from the Dealers inventory this month||nil|
|Total accumulative withdrawal of gold from the Customer inventory this month||552,907.9 oz|
Total customer deposit: nil oz
JPMorgan has 7.1966 tonnes left in its registered or dealer inventory. (231,469.56 oz) and only 741,358.273 oz in its customer (eligible) account or 23.05 tonnes
We lost 7 contracts or an additional 700 ounces will not stand for delivery. Thus we have 19.676 tonnes of gold standing and only 15.206 tonnes of registered or dealer gold to service it.
August silver initial standings
August 14 2015:
|Withdrawals from Dealers Inventory||nil|
|Withdrawals from Customer Inventory||28,937.307 oz (Brinks,CNT,Delaware)|
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory||559,835.58 (JPMorgan)|
|No of oz served (contracts)||0 contracts (nil oz)|
|No of oz to be served (notices)||16 contracts (80,000 oz)|
|Total monthly oz silver served (contracts)||59 contracts (295,000 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||6,541,582.4 oz|
Today, we had 0 deposits into the dealer account:
total customer deposits: 559,835.800 oz
total withdrawals from customer: 28,937.307 oz
we neither lost nor gained any silver ounces standing in this non delivery month of August.
August 12./ a huge deposit of 4.18 tonnes of gold into the GLD/Inventory rests at 671.87 tonnes
August 7./no change in gold inventory at the GLD/Inventory rests at 667.93 tonnes 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
And now SLV: August 14/no changes in inventory at the SLV/Inventory rests at 324.968 million oz.
August 13.2013: a huge withdrawal of 1.241 million oz/Inventory rests tonight at 324.968 million oz
August 12.2015: no change in SLV inventory/rests tonight at 326.209 million oz.
August 11./ no changes in SLV inventory/rests tonight at 326.209 million oz.
August 7.no changes in SLV/Inventory rests this weekend at 326.209 million oz
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
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. * * * * *
|Gold COT Report – Futures|
|Change from Prior Reporting Period|
|non reportable positions||Change from the previous reporting period|
|COT Gold Report – Positions as of||Tuesday, August 11, 2015|
Our large specs:
Those large specs that have been long in gold added 2986 contracts to their long side
Those large specs that have been short in gold added another 444 contracts to their short side.
Those commercials that have been long in gold pitched 4806 contracts from their long side
Those commercials that have been short in gold added a large 4832 contracts to their short side.
Our small specs;
Those small specs that have been long on gold added 2964 contracts to their long side.
Those small specs that have been short in gold covered 4132 contracts from their short side.
Conclusions: commercials go net short by 9638 contracts which is bearish.
And now for silver:
|Silver COT Report: Futures|
|Small Speculators||Open Interest||Total|
|non reportable positions||Positions as of:||165||134|
|Tuesday, August 11, 2015||© SilverSee|
China’s PBOC Buys 600,000 Ounces Of Gold In July – Annualised 225 Tonnes Per Year
China’s Central Bank Buys 600,000 Ounces Of Gold In July – Annualised 225 Tonnes Per Year
- China Preparing for Resumption of Currency Wars and an International Monetary Crisis
- Obama and Kerry Warn Dollar May “Cease To Be the Reserve Currency of the World”
- Remember Bloomberg Intelligence’s $64,000 Gold Price Target?
- Reuters Global Gold Forum Interviews Alistair Hewitt of World Gold Council
- Gold Trade Turns Bullish on China Currency War in Bloomberg Gold Survey
In a surprise announcement, China’s PBOC announced an increase in their gold reserves by 1.1% in July. The People’s Bank of China, now the world’s biggest gold buyer, increased its gold reserves by over 6000,000 troy ounces to 53.93 million fine troy ounces by the end of July from 53.32 million ounces a month earlier, according to data released by the central bank.
The country last month ended six years of mystery over how much gold reserves it has been accumulating when it revealed a 57 percent jump in reserves over the 2009 to 2015 period – from 1,054 metric tonnes to 1,658 metric tonnes.
The Chinese gold purchases of 19 metric tonnes was more than double the net monthly average that was bought between 2009-2015. During that six years, the PBOC accumulated around 8.4 metric tonnes per month – over the 72 month period. However, as noted by Jan Harvey in the Thomson Reuters Global Gold Forum we do not know if that PBOC buying was “slow and steady, or in chunks.”
The surprise was not the number per se as many had expected such a number but rather the announcement itself as there was a lack of clarity as to whether the PBOC would announce publicly on a monthly basis through the PBOC or would they do it through the auspices of the IMF as most central banks do.
It is possible that China’s rebuff in terms of not being allowed by the IMF to include the yuan in the basket of currencies that comprise the IMF’s reserve assets that are known as special drawing rights (SDR) may have led to then deciding to become more ‘vocal’ and public about their monetary gold reserves.
China seems likely now to adopt the Russian position and strategy of being very public in announcing their gold reserves as they attempt to position the yuan as an alternative reserve currency to the world’s current reserve currency the dollar. China has overtaken Russia to become the country with the fifth-largest gold reserves in the world.
It is important to remember that this is just the increase in gold reserves of the People’s Bank of China (PBOC). We have long pointed out two other entities, besides the PBOC, have also beenbuying gold – the State Administration of Foreign Exchange (SAFE) and the China Investment Corporation (CIC).
These potentially sizeable sources of demand are not included in the World Gold Council and GFMS figures.
Therefore, it is likely that the Council and GFMS underestimate global gold demand. It is important to note this lack of transparency regarding total aggregate Chinese central bank and sovereign fund demand.
China appears to be preparing for a coming currency reset, a resumption of currency wars and a likely coordinated devaluation of leading currencies versus gold. They are also likely hedging the increasing risk of financial and monetary uncertainty, volatility and possibly an international monetary crisis in the coming months.
Their yuan devaluation this week gives them an initial competitive advantage ahead of a coming currency reset.
– Obama and Kerry Warn Dollar May “Cease To Be the Reserve Currency of the World”
U.S. Secretary of State John Kerry warned Tuesday the U.S. dollar’s status as the global currency could be threatened if Congress blocks the nuclear deal with Iran.
The nation’s chief diplomat doubled down on President Barack Obama’s comments last week that scuttling the deal would damage the continuing status of the dollar as the reserve currency, a sentiment “already bubbling out there,” Mr. Kerry said.
President Obama was continuing his push for the Iran nuclear deal, gave a speech at the American University earlier in the week, when he warned
“Moreover, our closest allies in Europe or in Asia, much less China or Russia, certainly are not going to enforce existing sanctions for another five, 10, 15 years according to the dictates of the U.S. Congress because their willingness to support sanctions in the first place was based on Iran ending its pursuit of nuclear weapons.
If, as has also been suggested, we tried to maintain unilateral sanctions, beefen them up, we would be standing alone.
We cannot dictate the foreign, economic and energy policies of every major power in the world. In order to even try to do that, we would have to sanction, for example, some of the world’s largest banks. We’d have to cut off countries like China from the American financial system. And since they happen to be major purchasers of our debt, such actions could trigger severe disruptions in our own economy, and, by way, raise questions internationally about the dollar’s role as the world’s reserve currency. That’s part of the reason why many of the previous unilateral sanctions were waived.”
Mr. Kerry, speaking at a Reuters business event in New York, said if Congress prevents the U.S. from implementing the deal it could put the U.S. at odds with European allies, China and Russia.
“That is a recipe very quickly for the American dollar to cease to be the reserve currency of the world,” Kerry warned business leaders at the event.
Those countries helped broker the agreement, and could resist or reject efforts by the U.S. to impose Iran-related sanctions, potentially threatening the U.S. dollar’s status as the global reserve currency, Mr. Kerry said.
Gold Trade Turns Bullish on China Currency War in Bloomberg Gold Survey
Gold traders and analysts are bullish for the first time in five weeks after China devalued its currency and roiled global markets and saw a flight to safety push gold higher. Indeed, the trade turned the most bullish in three months on the yuan surprise.
We were bullish for the first time in many weeks and a higher close this week will make us positive for next week. The Bloomberg Gold survey results for this week were: Bullish: 18 Bearish: 6 and Neutral: 8.
Today’s Gold Prices: USD 1,116.75, EUR 1002.11 and GBP 715.29 per ounce.
Yesterday’s Gold Prices: USD 1,117.35, EUR 1005.54 and GBP 715.56 per ounce
Gold in USD – 1 Week
Gold and silver fell on the COMEX yesterday – down 0.6% to $1,115.20 and 0.7% to $15.41 per ounce respectively.
This morning, gold is 0.4% higher to $1,120 per ounce. Silver is 0.5% higher to $15.60 per ounce.
Platinum and palladium are 0.2% and 0.8% higher to $998 and $625 per ounce respectively.
Gold reached a 3 week high yesterday as speculators and investors moved back into gold. Short covering and traders going long was seen on the COMEX and investors bought the most gold through ETPs since June this year.
Gold is headed for the biggest weekly gain in three months after China’s weakening of the yuan roiled markets globally, saw sharp falls in stock markets and led to concern of widespread currency devaluations and currency wars.
Prices remain near a three week high today after China’s PBOC announced that it had bought another 19 metric tons of bullion last month. China has added more than 600 tons of gold to its reserves since 2009 to help diversify its foreign-exchange holdings as it seeks to position the yuan as reserve currency.
China’s decision on Tuesday to devalue the yuan sparked concern that a slowdown in the huge and globally important Chinese economy, now the world’s second-largest, is deepening.
Following the biggest monthly drop in two years, gold has risen almost every day so far in August. Gold is up 2.1 percent since the Friday close, ending a seven-week stretch of losses.
China buys another 19 tonnes in July. After its initial revamp in its reserves by 604 tonnes to 1658, its new reserves total jumps to 1677. Also it looks like China has sold another 40 billion of USA treasuries.
(courtesy zero hedge)
Gold Jumps After China Reveals It Bought Another 19 Tons In July
One month ago, when everyone suspected that the PBOC’s dramatic, 57% jump in gold holdings after a 6 year silence, to a “record” 1658 tons would be a “one-and-done” event, meant to facilitate China’s admission into the SDR, we disagreed. This is what we said:
… now that the seal has been finally broken after so many years, and since today’s update indicates that Chinese gold numbers are clearly goal-seeked with a specific policy purpose – to boost confidence – we await for the PBOC to start leaking incremental gold holding data every month (and especially in months when the market crashes) which will bring us ever closer to what China’s true gold holdings are.
One month later,this is precisely what happened, when overnight the People’s Bank of China reported that even as the price of gold dropped once more in the month of July after the epic June drubbing (when China supposedly “bought” over 500 tons of gold), it added another 610,000 ounces of the yellow metal, or 1.1%, bringing its total to 53,930,000 ounces, or 1677 tons of gold.
Our view on China’s disclosure (if not accumulation: this has already happened and now the PBOC is merely picking the right moments to gradually reveal what its true gold holdings are) of gold have not changed: expect every month to see a modest, incremental increase in its gold holdings.
And while last month, the market took China’s announcement as a disappointing update – speculation had been rife that China has over 3,000 tons of gold – today the market is slowly waking up to what we said a month ago, namely that China’s official gold holdings are far greater than what is revealed and that the PBOC will simply keep increasing month after month, now that both FX and gold play a very specific policy role in what everyone now realizes is a global currency war.
Putting what China has just done in very simple context:China announces an increase in its gold holdings of over 58% in the past two months… and then this past week it devalues its currency by nearly 5% in just three days.
Even the most brainwashed Keynesians should be able to figure out what is going on by now.
But while none of this comes as a surprise to us, or our readers, what was perhaps more notable, was the latest plunge in Chinese FX reserves, which tumbled from $3.694 billion to $3.651 billion, suggesting in July China sold, via Belgium, another $40 billion or so in Treasury. Expect confirmation of the recent Treasury selloff when the Treasury releases the next TIC data.
this is good for the supply side of the equation:
Biggest South African gold miners unions say wage talks ‘collapse’
Submitted by cpowell on Fri, 2015-08-14 12:06. Section: Daily Dispatches
By Paul Burkhardt
Friday, August 14, 2015
The two biggest unions at South African gold-mining companies said wage negotiations have broken down, bringing the industry closer to a strike.
“The talks have collapsed in the sense that the Chamber of Mines has gone back to the original offer,” David Sipunzi, secretary general of the National Union of Mineworkers, the largest labor group at gold mines, told reporters in Johannesburg on Thursday. “If the attitude remains the same, we cannot rule out a strike.”
A strike would add to pressure on South Africa’s mining industry, already hurting from lower commodity prices and facing job cuts. A five-month work stoppage at platinum mines helped cut economic growth to 1.5 percent last year, the slowest pace since a recession in 2009. Gold dropped 5.7 percent this year and is trading near a five-year low. …
… For the complete commentary:
(courtesy Max Keiser/Alasdair Macleod/GATA)
On Keiser Report, GoldMoney’s Macleod argues for gold over bank credit
Submitted by cpowell on Fri, 2015-08-14 12:22. Section: Daily Dispatches
8:20a ET Friday, August 14, 2015
Dear Friend of GATA and Gold:
GoldMoney research director joins Max Keiser and Stacy Herbert on “The Keiser Report” this week, arguing that gold offers a better foundation for a monetary system than bank credit. The program is posted at the Russia Today Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
(courtesy Avery Goodman/Seekingalpha/GATA)
Avery Goodman: The ‘big long’ gets bigger as Goldman, HSBC buy more gold
Submitted by cpowell on Fri, 2015-08-14 16:05. Section: Daily Dispatches
12:05p ET Friday, August 14, 2015
Dear Friend of GATA and Gold:
Securities lawyer and market analyst Avery Goodman reports today that Goldman Sachs and HSBC continue to buy gold in metal form for their own accounts, and he construes the scheduled implementation of the “Volcker Rule” in July 2017 to mean that bullion bank attacks on the gold market through naked shorting will much diminish then. Goodman’s commentary is headlined “The ‘Big Long’ Gets Bigger as Goldman and HSBC Gobble Up Tons More Gold” and it’s posted at Seeking Alpha here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
(courtesy Dave Kranzler/IRD)
I got this comment in my email from John Embry this morning in reference to the blatant paper attack on gold after London closed this morning (see graph below):
How do you like these antics after the London close today? I still believe that to be this blatant they must sense real trouble.
John this is pure desperation. An incredible amount of gold was delivered into the SGE the past two weeks. Everyone follows “withdrawals” because that’s what “prince” Koos has them conditioned to watch. But you can’t “withdraw from” without first “delivering into.” You can get delivery numbers daily at the SGE website.
Also this report hit the wires today: Chinese Gold Premium Spikes, Indian Imports Surge.
There was also a report out yesterday showing a huge increase in non-performing loans at the big banks in Q2. I really think the economy hit a wall the last two months. That industrial production report was purely a function of the big downward revisions in May and June that made the “increase” in July look relatively healthy. The IP number was a product of auto industry inventory build-up – cars that won’t get sold.
John, they can try to cover-up the carnage to the economy by pumping up the stock market and smashing the metals, but they can’t hide the coming sub-prime driven debt implosion OR the massive gold-buying going on in China.
1 Chinese yuan vs USA dollar/yuan rises slightly this time to 6.3912/Shanghai bourse: green and Hang Sang: red
Surprisingly China added another 19 tonnes of gold to its official reserves now totaling 1677.
2 Nikkei down 76.10 or 0.37%
3. Europe stocks all in the red /USA dollar index down to 96.45/Euro up to 1.1176
3b Japan 10 year bond yield: rises to 39% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 124.11
3c Nikkei still just above 20,000
3d USA/Yen rate now just above the 124 barrier this morning
3e WTI 42.13 and Brent: 49.21
3f Gold up /Yen up
3gJapan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.
Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.
3h Oil down for WTI and down for Brent this morning
3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund slightly falls to .62 per cent. German bunds in negative yields from 4 years out.
Except Greece which sees its 2 year rate falls to 12.30%/Greek stocks this morning down by 2.43%: still expect continual bank runs on Greek banks /
3j Greek 10 year bond yield rises to : 9.92%
3k Gold at $1119.00 /silver $15.49
3l USA vs Russian rouble; (Russian rouble down 1/4 in roubles/dollar) 64.87,
3m oil into the 42 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 forced to do QE!! as it lowers its yuan value to the dollar.
30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9734 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0876 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 closer to negativity to +.62%
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 2.16% early this morning. Thirty year rate below 3% at 2.82% / yield curve flatten/foreshadowing recession.
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Stock Futures Lower Despite Overnight Calm In Ongoing Currency Wars
After a week of relentless FX volatility, spilling over out of China and into all other countries, and asset products, it was as if the market decided to take a time-out overnight, assisted by the PBOC which after three days of record devaluations finally revalued the Yuan stronger fractionally by 0.05% to 6.3975. And then, as a parting gift perhaps, just as the market was about to close again, the Chinese central bank intervened sending the Onshore Yuan, spiking to a level of 6.3912 as of this writing, notably stronger than the official fixing for the second day in a row. In fact the biggest news out of China overnight is that contrary to expectations, the PBOC once again “added” to its gold holdings, boosting its official gold by 610,000 ounces, or 19 tons, to 1,677 tones (more detail in a subsequent post).
But while the Chinese FX market was positive docile overnight, leading to a modest 0.27% bounce in Chinese stocks, other Asian countries are starting to feel the Asian Currency Crisis of 1997 deja vu effect, most notably Malaysia, whose Ringit plummeted overnight on a series of bad economic and liquidity news (more on that shortly), which in turn is forcing the question: who gets hammered next, and next, and next, and so on.
Asian equity markets were more subdued and traded mixed following a subdued Wall Street close, while the PBoC strengthened the CNY for the first time in 4-days, however the change was significantly less than the prior devaluations from the central bank. Shanghai Comp (+0.3%) outperformed with gains in all 10 sectors and is on course for its best week in since June. Elsewhere, Nikkei 225 (-0.4%) and the ASX 200 (-0.6%) amid underperformance in the energy complex after oil prices fell to 6-years lows.
Still, this masked the turbulence beneath the surface as the Asian stock index sank to its lowest level since January.
US futures have been trading close to the flatline for most of the session, and were near their worst levels, down 5 points, moments ago reflecting what may be a delayed reaction to many of the high-beta story stocks crashing yesterday, and the failure of AAPL’s buyback to lift the stock into the close, more than the macro news which has been generally bullish for strongs, between the Greek 3rd bailout vote, to Europe’s sudden economic slowdown (suggesting further QE may be just over the horizon).
As is typical of a Friday, the final trading session of the week has been somewhat of a calmer affair than others seen this week. European equities trade mixed with reports that the Greek Parliament have voted in favour of the proposed third Greek bailout package. This all comes in the run up to the Eurogroup meeting today at 1400BST which is expected to deliver a similar verdict to that of the Greek’s themselves. In terms of sector specific moves, buying has been relatively broad-based with the only notable laggard being energy names amid the recent selling pressure in WTI and Brent crude futures. Elsewhere, fixed income markets trade in a relatively range bound manner.
In FX markets, the USD-index (+0.2%) trades modestly higher and is subsequently providing some weight on its major counterparts. Elsewhere, NZD has been notably sluggish in the wake of disappointing NZ retail sales ex inflation which printed its slowest increase since Q3 2013 (0.10% vs. Exp. 0.50% Prey. 2.70%).
In the energy complex, both WTI and Brent crude futures trade modestly lower after WTI overnight broke below YTD lows to trade at its lowest level in 6-years and is on for a 7th W/W fall. In metals markets . Gold extended on losses overnight as the USD index saw mild gains and remained near yesterday’s lows amid a quiet overnight session and lack of key events to drive price action. However, the precious metal still remain on course for its first weekly gain in around 2 months after this week’s PBoC devaluation raised concerns and dampened prospects of a sooner Fed rate lift off.
In summary: European shares pare earlier gains to trade little-changed with real estate and basic resources sectors outperforming and oil & gas, telcos underperforming. Asian stocks were mixed as the yuan halted a three-day decline after China’s central bank raised its reference rate for first time since Tuesday’s devaluation. Malaysian ringgit fell most since 1998 as central bank governor says will need to rebuild FX reserves. Greek lawmakers approve rescue package after an all-night session. Turkish lira falls, country looks set for its second general election this year. Euro-zone, French, German, Italian 2Q GDP growth below estimates. Oil heads for seventh weekly drop. The Swiss and Italian markets are the best-performing larger bourses, Swedish the worst. The euro is weaker against the dollar. Greek 10yr bond yields fall; Portuguese yields decline. Commodities decline, with wheat, corn underperforming and natural gas outperforming. U.S. industrial production, capacity utilization, Michigan confidence, PPI, due later
- S&P 500 futures down 0.2% to 2077.3
- Stoxx 600 up 0.2% to 387.6
- US 10Yr yield down 1bps to 2.18%
- German 10Yr yield down 1bps to 0.63%
- MSCI Asia Pacific down 0.2% to 138.2
- Gold spot up 0.2% to $1116.9/oz
17 out of 19 Stoxx 600 sectors rise; real estate, basic resources outperform, oil & gas, telcos underperform
Eurostoxx 50 +0%, FTSE 100 +0.1%, CAC 40 +0.1%, DAX +0.2%, IBEX +0.1%, FTSEMIB +0.2%, SMI +0.5%
- Asian stocks fall with the Sensex outperforming and the ASX underperforming; MSCI Asia Pacific down 0.2% to 138.2
- Nikkei 225 down 0.4%, Hang Seng down 0.1%, Kospi closed, Shanghai Composite up 0.3%, ASX down 0.6%, Sensex up 1.7%
- Euro down 0.14% to $1.1134
- Dollar Index up 0.02% to 96.47
- Italian 10Yr yield down 3bps to 1.76%
- Spanish 10Yr yield down 3bps to 1.93%
- French 10Yr yield down 1bps to 0.94%
- S&P GSCI Index down 0.2% to 365
- Brent Futures down 0.1% to $49.2/bbl, WTI Futures down 0.4% to $42.1/bbl
- LME 3m Copper down 0.3% to $5172/MT
- LME 3m Nickel up 0.7% to $10525/MT
- Wheat futures down 0.7% to 505.5 USd/bu
Bulletin Headline Summary from Bloomberg and RanSquawk
- In what has been a quiet session thus far, European equities trade mixed while Greece approve the third bailout
The PBoC refrained from devaluing the CNY overnight and actually lifted the reference point by 0.05%
Looking ahead, today sees the release of US PPI, Industrial Production and Univ. of Michigan data.
- Treasuries gain, little changed on the week as global stocks mixed, oil extends declines; EM currencies fall as fallout from China’s decision to weaken yuan continues.
- Euro-area economic growth unexpectedly slowed last quarter, rising 0.3% vs 0.4% estimate, as expansion in Germany, France and Italy fell short of estimates
- Greek legislators approved bailout package after all-night debate in Athens; PM Tsipras had to rely on opposition votes for deal that includes sweeping economic reforms and budget cuts mandated by Greece’s creditor institutions
- The yuan halted a three-day slide after China’s central bank raised its reference rate for the first time since Tuesday’s devaluation and said it will intervene to prevent excessive swings
- China’s benchmark stock index capped its biggest weekly gain in two months, led by commodity companies
- After riding a market boom to return almost 6x global industry average in the first five months of this year, Greater China- focused hedge funds crashed to earth with the stock rout in July, their worst month since September 2011
- Goldman agreed to acquire an online banking unit from General Electric Co. that has about $16b of deposits, giving the Wall Street firm access to a cheap source of funding
- Puerto Rico is at risk of running out of cash to fund day- to- day operations and must raise $400m through a bank loan or a sale of short-term securities by November, Victor Suarez, Governor Alejandro Garcia Padilla’s chief of staff, said Aug. 10 in San Juan
- $8.95b IG priced yesterday, $1.7b high yield. BofAML Corporate Master Index holds at YTD wide +164; YTD low 129. High Yield Master II OAS +37 to 604, new YTD wide; YTD low 438
- Sovereign 10Y bond yields mostly lower. Asian, European stocks mixed, U.S. equity-index futures decline. Crude oil and copper lower, gold gains
DB’s Jim Reid concludes the overnight recap
This morning market conditions are almost calm enough to let the roof down. The Yuan has managed to halt a three-day retreat after the PBoC’s fixing strengthened 0.05% versus the previous day’s set. The onshore Yuan is little changed (-0.03%) as a result, while the more freely traded offshore Yuan is +0.25% stronger this morning. Despite that, there’s been some more significant weakness in the Asia FX market where the Korean Won (-0.31%), NZ Dollar (-0.54%), Indonesian Rupiah (-0.11%) and most notably the Malaysian Ringgit (-1.16%) have tumbled, the latter at one stage falling over 2%.
It’s a bit more mixed in equity markets this morning. China bourses have edged higher, led by the Shenzhen (+1.22%), while the Shanghai Comp is up 0.83%. There’s also been a rise for the Kospi (+0.40%) and Hang Seng (+0.16%) however the Nikkei (-0.39%) and ASX (-0.46%) are a tad weaker as we go to print. 10y Treasury yields meanwhile have fallen 1.6bps and Asia credit markets are generally unchanged.
So it feels like calm has broken out over the last 36 hours and the PBoC’s soothing words yesterday did seem to help support a better tone for the most part in markets. Despite this, lasting damage has been done and it’s interesting to look at some of the more notable price movers since the start of the first fixing change for the Yuan this week. Based on Monday’s and Thursday’s closing levels, over the period we’ve seen the onshore Yuan devalue 3.04% and the offshore Yuan fall 4.01%, both at the weakest levels since 2011. Despite a slight recovery yesterday, that’s resulted in a reasonable sell-off across the Asia FX space with the Taiwanese Dollar (-1.81%), Malaysian Ringgit (-1.88%), Indonesian Rupiah (-1.60%), Korean Won (-0.91%) and Aussie Dollar (-0.71%) in particular some of the notable movers. Some of the more China sensitive commodity markets have also been hard hit. WTI has dropped -6.07% in the period, while Brent has fallen -2.36%. Aluminum is -2.78% weaker and Copper has tumbled -2.34%. Gold is unsurprisingly one of the few outliers, bouncing +0.96%. In equity markets meanwhile, we’ve seen a slight rise for the Shanghai Comp (+0.67%) although in truth it’s traded with little conviction, while other bourses in Asia have dropped including the Nikkei (-1.02%), Hang Seng (-2.05%) and Kospi (-0.98%). Some of the more impressive price moves has been in European equities, particularly the more core markets. The Stoxx 600 is down -3.28% over the period, while the DAX and CAC have tumbled -5.09% and -4.01% respectively. The peripherals are also down, but the moves less exaggerated with the IBEX and FTSE MIB -3.22% and -2.55% respectively. In the US the S&P 500 has been pretty choppy, but is down -0.99% this week still. Despite the rebound yesterday, the moves have had a clear impact across the majority of markets. It doesn’t feel like the full ramifications will be known for some time.
US Treasuries have also seen some reasonable moves this week, however for the large part yields are now more or less at where we were at Monday’s close. The benchmark 10y closed Monday at 2.228% and struck a low in yield intraday on Wednesday at 2.0432%. Yields have since moved higher and yesterday, despite the pressure from Oil we saw yields finish 3.7bps higher at 2.186%, so just 4bps off Monday’s closing level. Fed Funds contracts are largely the same with the Dec15 and Dec16 contracts 2bps and 5bps down from Monday. Meanwhile, with the probability of a September move now at 50%, that’s back more or less at where we were on Monday (48%) after a roundabout trip which saw the probability fall as low as 40%.
Even though European equities have been one of the biggest fallers after this week’s events, they bounced yesterday after the better tone filtered through from the Asian session. The Stoxx 600 closed +0.97% while the DAX and CAC ended +0.82% and +1.25% respectively. It was a slightly better session in European credit also where Crossover closed 3bps tighter, although it did pare some more notable moves tighter intraday. Coming off the late rally on Wednesday, US equities seemed to run out of steam a little bit and once again failed to trade with conviction either way. Instead, price action looked more typical of a summer lull as the S&P 500 (-0.13%) closed a touch lower, while the Dow (+0.03%) finished just about in positive territory. Oil markets resumed their decline once again, with WTI (-2.47%) plummeting to close at $42.23/bbl, the lowest settlement now in six and a half years and this morning its hovering dangerously close to $42 in the Asia session with the latest bearish twist coming on the back of Genscape data showing a midweek build-up in inventories at the Cushing delivery point in the US.
Also in the US yesterday’s retail sales probably helped support some of the move higher in yields yesterday. Despite the July headline (+0.6% mom) and ex auto and gas (+0.4% mom) readings printing in line with expectations, it was the upward revisions which garnered more of the attention as we saw the June headline reading revised up 0.3pps and the May reading revised up 0.2pps. Retail control was +0.3% mom during July, but again there was a cumulative 0.4pps added to the prior two months. Business inventories for June (+0.8% mom vs. +0.3%) was better than expected, while the import price index (-0.9% mom vs. -1.2% expected) also surprised to the upside but saw the annualized rate tick down to a weak -10.4% yoy from -9.9% previously. Initial jobless claims were more or less in line (274k vs. 270k) with last week.
Meanwhile, the Atlanta Fed GDPNow model for Q3 was revised even lower to 0.7% from an already low 0.9%. The latest revision came about as a result of the latest wholesale trade data released on Tuesday, which was enough to offset a slight rise from the Wednesday monthly budget statement and yesterday’s retail sales report.
Over in Europe yesterday there was no change to the final July CPI print for Germany at +0.2% mom, with the annualized rate also staying at a lowly +0.2% yoy. CPI in France met expectations at -0.4% mom for the month, while the reading was slightly better than expected in Spain (-0.9% mom vs. -1.0 expected). There was some focus on Greece’s Q2 GDP report yesterday with the +0.8% qoq print a notable beat after expectations of a -0.5% contraction, while there was also a 0.2ppt upward revision for Q1 to flat. It’s hard to see Q3 looking anywhere as near as optimistic however given the capital controls, bank closures and associated turmoil. Elsewhere, in the ECB minutes yesterday the Central Bank noted that ‘while recent market volatility had not materially changed the assessment of the economic outlook, continued elevated uncertainty called for alertness and a readiness to respond, if necessary’. The minutes also cited that ‘the recovery in the euro area was expected to remain moderate and gradual, which was considered disappointing’.
Back to Greece quickly, with a Eurogroup Finance Ministers meeting scheduled for later to sign off on the latest deal, the Greek parliament are due to vote this morning ahead of the meeting. Opposition pressure continues to come in the form of the far-left faction of Syriza after a tense parliamentary debate late last night where the rebel’s leader, Lafazanis, said in a statement that ‘the fight against the new bailout starts today, by mobilizing people in every corner of the country’. Meanwhile the FT is running a story suggesting that the Creditors overseeing the bailout package have expressed ‘serious concerns’ over the sustainability of Greece’s debt load, aligning their views more closely with that of the IMF. The article suggests that this will likely heighten pressure on Germany to back debt relief when such a discussion will likely come to fruition in the autumn.
Before we take a look at the day ahead, a quick sentimental note as today marks the last trading day for a US Treasury note with a 10% coupon. The 10.625% coupon bond is due to mature tomorrow, having initially been issued back in August 1985 as a 30-year bond. At the time it was issued, Ronald Reagan was the US President, Fed Chair Volcker was dampening inflation fears and the Fed Funds rate was at 8%! I wonder when we’ll see the next 10% coupon Government bond issued in a G7 country.
Onto today’s calendar now, there’s plenty of data for us to get through this morning in Europe with Q2 GDP reports for the Euro area, Germany, France and Italy as well as the final July CPI reading for the Euro area. UK construction output data is also expected while the Eurogroup meeting on Greece will be closely watched. There’s plenty of data to get through this afternoon in the US also, starting with the July PPI report before we get industrial production, capacity utilization, manufacturing production and the University of Michigan consumer sentiment print for August.
Is The Currency War Over? China Revalues Yuan 0.05% Stronger
Heading into the China session, offshore Yuan signaled a 1% devaluation was on the cards. Of course, all media eyes were focused on the disaster in Tianjin but after 3 days of what was supposed to a ‘one-off’ adjustment, The PBOC has in fact surprised with a modestly stronger fix at 6.3975 from yesterday’s 6.4010 Fix. That leaves the CNY Fix devaluation to a 4.60% loss in 4 day. Of course, its a bit hypocritical of Americans or Europeans to regard the Chinese as mean and nasty and currency warriors because they’re letting their currency adjust against a constantly-devaluing dollar and euro. The US has been devaluing the dollar for years, but that’s a-ok for Wesrern commentators, apparently. It appears – judging by the opening devaluation and closing intervention – that China is as set on crushing the herd of one-way carry traders as any export-enhancing currency debasement.
- *CHINA SETS YUAN REFERENCE RATE AT 6.3975 AGAINST U.S. DOLLAR
- *PBOC YUAN REFERENCE RATE STRENGTHENS 0.05%
Offshore Yuan signalled some further devaluation was coming… no matter how much The PBOC denies its 10% goal…
Note the last 2 days have seen intervention at the close of the day – shaking out as many carry traders as possible…
Chinese stock futures are rising modestly after the week-long drift lower..
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Finally, here is an interesting Austrian perspective on why China devalued the Yuan (via The Menger Center’s Paul-Martin Foss),
Taking a look at this chart of the Dollar/Yuan exchange rate, you can understand why the Chinese government took the action that it did. The chart is denominated in yuan to dollars. The more yuan per dollar, the weaker the yuan and the stronger the dollar; the fewer yuan per dollar, the stronger the yuan and the weaker the dollar. You can see that the yuan has been continuously strengthening over the past ten years. Remember that as a currency strengthens, exports from that country become more expensive. A good that cost 100 yuan back in 2005 would mean a dollar cost of a little over $12. A 100-yuan good today would cost over $16. That’s why the Chinese government originally tried to keep the yuan pegged to the dollar, so as not to make the exports it relied upon for economic growth more expensive abroad. But after much pressure from the US and other Western countries, the government depegged the yuan, allowing it to trade in a narrow band and appreciate against the dollar.
Remember the dynamic that was going on, too. Chinese firms would export to the United States. US importers would pay Chinese firms in dollars. Those dollars would come back to China, where the exporters wanted to change them into yuan. Now what to do with all those dollars? Well, the Chinese government used them to purchase US Treasury bonds. Of course, the US wanted to take advantage of this, so the Federal Reserve created even more money out of thin air, increasing the money supply, with more and more of those dollars going overseas to purchase Chinese goods. And then the Chinese government would soak up more of the US government’s debt. Cheap goods and our debt is covered? That’s a win-win in any government’s book.
Take a look at the chart of the M2 money supply, the broadest money supply measure the Fed still publishes.
As the M2 money supply increases (devaluing the dollar), it seems that the yuan strengthens against the dollar. If you look at the actual data behind these charts, there’s a -0.91 correlation between M2 and the yuan/dollar exchange rate over the past 10 years. If you strip out the new pegging period from mid-2008 to mid-2010, there’s a -0.96 correlation from mid-2005 to mid-2008, and a -0.85 correlation from mid-2010 to today, which rises again to -0.96 if you remove the data from the interventionist period beginning in early 2014. Yes, correlation doesn’t equal causation, but these numbers aren’t mere coincidence.The US government wanted to take full advantage of the dollar’s position as the world’s reserve currency, exporting dollars to China in exchange for cheap consumer goods, while simultaneously making US exports of capital-intensive goods to China cheaper.
Any American reactions to China’s devaluation moves must be seen as hypocritical. Just as the US government took advantage of the Bretton Woods system to print more dollars than it had gold, it has engaged in a similar beggar-thy-neighbor policy with respect to China, exporting devaluing dollars to China in exchange for Chinese-made goods. It is perfectly understandable that China would rather not have its monetary policy guided by decisions made in Washington. All the hand-wringing in Washington is just for show. American politicians wanted to enjoy the benefits of inflation, getting something for nothing, and they don’t want it to stop. So they try to paint China as the bad guy for reacting to loose American monetary policy. It goes without saying that none of this would be an issue if we could just get government out of the money creation business. But that’s a story for another day.
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As The Mises Institute’s Ryan McMaken sums up:
China has devalued the Yuan for the third day in a row. For many, this has aroused fears of a currency war. But, its a bit hypocritical of Americans or Europeans to regard the Chinese as mean and nasty and currency warriors because they’re letting their currency adjust against a constantly-devaluing dollar and euro. The US has been devaluing the dollar for years, but that’s a-ok for Western commentators, apparently. Now, as Frank Hollenbeck has pointed out, devaluing the currency to favor exporters is a bad idea, but that’s nevertheless what Europe, the US, and Japan have been doing for years – unofficially. The fact that China is now trying to get in on the game is just the expected outcome of the current global monetary race to the bottom…
Food for thought…
(courtesy zero hedge)
What Happens Next?
The last three times Asian currencies collapsed against the US Dollar at this rate, the global financial system was shaken to the core. With China piling on this time, we wonder – what happens next, as a tsunami of deflation is exported towards the shores of the “we’ll hike no matter what” Fed’s American shores…
What happens next?
Note: USDollar strength relative to Asian currencies is indicated by a lower index – i.e this chart implies an USD per “Asian currency” rate – how many USDollars can an “asian currency” unit buy?
A glance at the chart and one might wonder if this time is different… and we break the 18 year trendline.
With Q3 GDP estimates tumbling, we leave it to SocGen’s Albert Edwards to sum up what happens next…
We have long believed that we are only one misstep from outright deflation in the west with core inflation in both the US and eurozone at just 1%. We expect the acceleration of EM devaluations to send waves of deflation to the west to overwhelm already struggling corporate profitability and take us back into outright recession. As investors realise yet another recession beckons, without any normalisation of either interest rates or fiscal imbalances in this cycle, expect a financial market rout every bit as large as 2008.
His conclusion: “Low growth (and low inflation) to prompt more QE – everywhere!“
h/t SocGen’s Albert Edwards
Greek Parliament Approves Third Bailout As Tsipras Support Tumbles, Snap Elections Imminent
Moments ago the Greek parliament, after a dramatic, most likely on purpose, overnight session – because when you are a puppet government of Belgium/Brussels you have to put in extra effort to prove you are “independent” – gave its approval for the third Greek bailout when Tsipras secured votes of more than 151 lawmakers in country’s 300-seat parliament. As on previous cases, the vote passed with substantial opposition support.
Earlier Tsipras urged lawmakers to approve an 85-billion-euro bailout agreement with creditors on Friday, calling it a “necessary choice” for the nation. Addressing parliament before lawmakers vote on the deal, Tsipras said Finance Minister Euclid Tsakalotos faced a battle at a meeting of euro zone finance ministers later on Friday to avert the threat of a bridge loan – which he called a return to a “crisis without end” – being offered to Greece instead of bailout aid.
In terms of numbers, the rebel faction within Syriza is now up to 42, with 43 being seen as the threshold beyond which Tsipras has no choice but to call elections. In other words the Tsipras government now hangs in the fate of just one person.
According to other sources, Tsipras may no longer even have the required minimum support to pass a confidence vote, suggesting snap elections are imminent:
As has been extensively covered before, the legislation spells out the economic overhaul measures govt committed to in exchange for as much as EU86b of loans. And as Kathimerini reported, the third wave of pain in Greece is about to be unleashed: “a barrage of new tax measures are contained in the new bill presented to Greece’s Parliament as a part of the country’s new memorandum. The bill concerns measures which are to be implemented immediately as well as those to be adopted by October 2015 and in the framework of the 2016 budget.
[T]he measures to be passed immediately include diesel fuel tax for farmers going from 66 euros per 1,000 liters to 200 euros/1,000 liters from October 1, 2015, and to 330 euros by October 1, 2016. Farmers’ income tax to be paid in advance will rise from 27.5 percent to 55 percent. Income tax for farmers is set to rise from 13 to 20 percent for 2016 and to 26 percent for 2017.
Freelancers will be subject to a gradual increase from 55 to 75 percent in advanced tax payments for income earned in 2015, increasing to 100 percent in 2016. The 2 percent tax break for single payments on income tax is also being abolished from January 1, 2015.
Private education, previously untaxed, will be taxed at 23 percent, including the tutoring schools (frontistiria) that most Greeks send their children to but excluding preschools. Reduced value-added tax rates for islands are to be abolished completely by the end of 2016, with enforcement staggered across three groups of islands from October 1, 2015 to January 1, 2017.
Interest on expired debts to the state that are payable in 100 installments is to rise from 3 percent to 5 percent on amounts over 5,000 euros. Amounts below 5,000 euros are not subject to interest provided they meet certain conditions.
And so on: once the shock and euphoria from the lingering capital controls passes, and once the Greeks realize that their plight was just dramatically worsened, new elections are assured, and another victory for an “anti-austerity” party is in the cards.
In the meantime, expect some more pre-scripted drama when the German parliament votes to also approve the third bailout as early as next Tuesday.
Finally, even after the German government passes the bailout, which it will, Greece may be without a government as early as next week:
European GDP Unexpectedly Disappoints As All “Big Three” Economies Miss Expectations
Define irony: in a quarter in which Greece was supposed to have been near death (at least according to the worst PMI print in history and of course, judging by the bank lines in front of the capital controlled institutions), yesterday we learned that Greek GDP surged relative to expectations rising by 0.8%, which was what analysts had expected but with a minus sign in front of it.
Then overnight, we got the rest of European GDP, including the big three: Germany, France and Italy. The results were nothing short of a big disappointment.
To wit: Germany Q2 GDP rose by 0.4%, below the 0.5% expected; Italy’s GDP rose by 0.2%, also below the 0.3% expected, but the biggest surprise was France, which did not even rise, and Q2 GDP was unchanged, well below the 0.2% expected, and down substantially from the revised 0.7% GDP growth in Q1.
At the Euroarea level, the result was also a big negative surprise with Q3 GDP rising 0.3%, down from 0.4%, and below expectations. This was the worst GDP print since Q3 2014.
Seasonally adjusted GDP rose by 0.3% in the euro area1 (EA19) and by 0.4% in the EU281 during the second quarter of 2015, compared with the previous quarter, according to flash estimates2 published by Eurostat, the statistical office of the European Union. In the first quarter of 2015, GDP grew by 0.4% in both areas.
Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 1.2% in the euro area and by 1.6% in the EU28 in the second quarter of 2015, after +1.0% and +1.5% respectively in the previous quarter. During the second quarter of 2015, GDP in the United States increased by 0.6% compared with the previous quarter (after +0.2% in the first quarter of 2015). Compared with the same quarter of the previous year, GDP grew by 2.3% (after +2.9% in the previous quarter).
And the full breakdown:
From the WSJ:
The data also highlight the big divergences within the 19 countries sharing the euro, which threaten the region’s prospects for a sustained recovery.
Accelerating GDP growth in Germany was offset by weaker growth in Italy and the Netherlands, while the French economy stagnated.
German GDP growth quickened to 0.4% from 0.3% in the first quarter, falling short of economists’ forecasts of a 0.5% gain. That translates into an annualized rate of 1.8%, according to the country’s statistical agency, Destatis.
* * *
French Finance Minister Michel Sapin, commenting on the weak data, said the country’s economy can still grow enough by the end of the year to start bringing down unemployment and reach the official 1% 2015 GDP target, as the government previously forecast. To achieve that, Mr. Sapin said the government will stick to its policy of tax cuts for businesses, which has proved controversial with the left of the ruling Socialist party.
“We must stay the course,” Mr. Sapin said.
And if Europe strays the course, and GDP goes negative again for the triple or quadruple dip recession, we no longer keep track, then the ECB will have just the dry powder to boost Q€ even more. Which after China’s devaluation, will be just what the ECB will need to do.
As for the surprising Greek GDP boost, take it as a one-time gift for becoming Germany’s latest Mediterranean colony.
Oil related stories:
Oil will continue to falter as rig counts continue to rise:
(courtesy zero hedge)
US Oil Rig Count Rises For 4th Consecutive Week – Highest Since April
While the total rig count remained unchanged at 884, Baker Hughes reported oil rigs rose 2 this week to 672 – its highest since April 2015. This is the 6th rise in the last 7 weeks. There is little to no reaction in crude prices for now…
- *OIL RIGS IN PERMIAN BASIN UNCHANGED AT 252: BAKER HUGHES
- *OIL RIGS IN EAGLE FORD ROSE BY FIVE TO 84: BAKER HUGHES
- *OIL RIGS IN WILLISTON FELL BY TWO TO 70: BAKER HUGHES
- *OIL RIGS IN D-J BASIN ROSE BY ONE TO 25: BAKER HUGHES
- *OIL RIGS IN TEXAS ROSE BY SIX To 389: BAKER HUGHES
Euro/USA 1.1176 up .0019
USA/JAPAN YEN 124.11 down .282
GBP/USA 1.5631 up .0024
USA/CAN 1.3070 up .0007
Early this Friday morning in Europe, the Euro rose by 19 basis points, trading now just above the 1.11 rising to 1.1176; 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 and another Chinese currency devaluation although last night it suprisingly strengthened a tiny .05.
In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. The yen continues to trade in yoyo fashion as this morning it settled up again in Japan by 28 basis points and trading just above the 124 level to 124.11 yen to the dollar.
The pound was up this morning by 24 basis points as it now trades well above the 1.56 level at 1.5631, 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 fell by 7 basis points to 1.3070 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 and especially this week with the fall of the yuan carry trade.
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 Friday morning: down by 76.10. or 0.37%
Trading from Europe and Asia:
1. Europe stocks all in the red
2/ Asian bourses mostly in the red … Chinese bourses: Hang Sang red (massive bubble forming) ,Shanghai slightly in the green (massive bubble ready to burst), Australia in the red: /Nikkei (Japan)red/India’s Sensex in the green/
Gold very early morning trading: $1119.00
Early Friday morning USA 10 year bond yield: 2.16% !!! down 2 in basis points from Thursday night and it is trading well below resistance at 2.27-2.32%
USA dollar index early Friday morning: 96.20 down 16 cents from Thursday’s close. (Resistance will be at a DXY of 100)
Closing currency crosses for Friday night/USA dollar index/USA 10 yr bond: 4 pm
USA/Chinese Yuan: 6.397 down .0012 (down 12 basis points)
Chinado Sparks Bullion’s Best Week In 3 Months; US Stocks, Bonds Shrug
This seemed appropriate…
China’s stock markets had their best week since the crash began…
As Yuan had its biggest weekly drop since 1994…
Which meant massive EURCNH carry unwinds.. leading toEuropean stocks 2nd worst week since December...
Prior to today, the S&P has closed lower on 10 of the last 12 Fridays – this has not happened since 2007…But today – thanks to old news on AAPL and old news on Europe’s bailout… we melted up…
Trannies outperformed on the week, as today’s panic-buying meltup saved the week
In case you wondered what triggered the late-day meltup – it was AAPL, surging on news that they are further ahead with a car…WTF!?
- *APPLE CAR PROJECT MAY BE FURTHER ALONG THAN EXPECTED: GUARDIAN
Biotechs took it on the china again, down 7 days in a row and 4 weeks in a row (which follows the weakest inflows in 11 weeks)… this is the worst 4-week slide since April 2014…
But energy stocks were SOMEHOW the week’s best performers… After 14 straight weeks lower… this was Energy’s best week in over 6 months!!
Although reality is setting in the last 2 days…
VIX smashed back down to a 12 handle…
Treasury markets roundtripped to practically unchanged on the week – having rallied 15-20bps Monday thru Wednesday…
Credit markets dumped this week.. and stocks retraced to them 3 times before the last 2 days meltups…
FX marksts saw some volatility early in the week before China backed off.. leaving the USD lower against the majors (driven by EUR strength from CNH carry unwinds)… USD Index biggest weekly drop in 2 months
But The USDollar had its strongest week against Asian currencies since Lehman…
PMs outperformed industrial commodities this week…
Gold and Silver’s best week in 3 months – even after the clubbing today…
Front-month WTI Crude has now fallen 9 weeks in a row…
Today Industrial production rises but not until significant downard revisions:
(courtesy zero hedge)
Industrial Production Rises Most Since November After Significant Downward Revisions
Thanks to some considerable negative downward revisions, Industrial Production In July rose 0.6% (double expectations of a 0.3% rise) – the biggest MoM rise since November. However, year-over-year IP growth is flat at 1.3% – hovering at its weakest since the last recession. We previously noted the surge in auto inventories-to-sales (Motor Vehicle IP rose 10.6% MoM), which likely spurred this false dawn in IP, however, it is the rise in oil drilling – the first time since September – that raises an eyebrow as entirely unsustainable amid collapsing prices.
Thanks to the revisions, July looks awesome…
Thanks to the panic surge in Auto industrial production…
But YoY growth is flat at its weakest since the recession…
Of course, economists are rapidly extrapolating thisgrowth to support Fed rate hikes… missing the outlier-ness. We await next month’s downward revisions.
University of Michigan consumer sentiment falls short of expectations:
(courtesy U of Michigan consumer sentiment/zero hedge)
UMich Consumer Sentiment Slips As Business Expectations Collapse To 11-Month Lows
It appears the US Consumer is losing faith. August preliminary UMich Consumer Sentiment slipped from July’s 93.1 and missed expectations. This is the 2nd weakest print since November. Longer-term inflation expectations fell back to 2.7% and expectations for household income growth slipped to just 1.6%, but the collapse in business expectations to 11-month lows is the most crucial aspect.
The headline was weak…
But hope is fading fast…
Now it is Union Pacific laying off many as coal shipments collapse.
Obamanomics – Union Pacific Cuts 100s Of Jobs On Coal Shipments Collapse
There will be more Americans tonight newly questioning President Obama’s Clean Power Plan, as NBCNews reports, Union Pacific will cut hundreds of management jobs as the amount of coal shipped by railroads continues to plunge.
Coal carloads down YoY 25 weeks in a row…
Union Pacific spokesman Aaron Hunt said Thursday that the cutbacks were job eliminations, not just temporary layoffs.He wouldn’t confirm a specific number or say where the cuts would fall in the coming months.
The company says severance packages will be available for some who will lose their jobs.
* * *