Oct 2/Silver continues to leave the silver comex/huge jobs disappointment causes gold and silver to shoot northbound/USA labour participation number falls by 579,000 people/USA has 94.6 million people off the labour pool/Brazil loses equivalent to 2% of GDP on dollar swaps/The USA TED spread rises again showing banks loathe to loan to each other/

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold:  $1136.60 up $22.90   (comex closing time)

Silver $15.26.  up 76 cents.

In the access market 5:15 pm

Gold $1137.90

Silver:  $15.24

I wrote the following last night and I guess I was right:

“As an alert to you, tomorrow is the FOMC jobs report.  Although we all know that the results are phony, the bankers always use this opportunity to manipulate gold/silver.  However judging from the poor regional surveys, the job growth number should be quite subdued.”

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

At the gold comex today, on first day notice we had a very poor delivery day, registering 0 notices for nil ounces  Silver saw 7 notices for 35,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 213.08 tonnes for a loss of 90 tonnes over that period.

In silver, the open interest rose by 281 contracts despite the fact that silver was unchanged in price yesterday.   The total silver OI now rests at 157,625 contracts In ounces, the OI is still represented by .788 billion oz or 113% of annual global silver production (ex Russia ex China).

In silver we had 7 notices served upon for 35,000 oz.

In gold, the total comex gold OI rose to 419,016 for a gain of 1937 contracts.  We had 0 notices filed for nil oz today.

We had another huge addition in tonnage  at the GLD to the tune of 1.78 tonnes;  thus the inventory rests tonight at 689.20 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. It sure looks like 670 tonnes will be the rock bottom inventory in GLD gold. It looks to me that China has taken the last amounts of physical gold from the GLD. I guess the only place left for China to receive physical gold will be the FRBNY and the comex.   In silver, we had no changes in silver inventory at the SLV/ Inventory rests at 318.529 million oz.

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

1. Today, we had the open interest in silver rise by 281 contracts up to 157,906 despite the fact that silver was unchanged in price with respect to yesterday’s trading.   The total OI for gold rose by 1937 contracts to 419,016 contracts, despite the fact that gold was down $1.30 yesterday.

(report Harvey)

b) COT report/gold and silver

(report Harvey)

2.Gold trading overnight, Goldcore

(/Mark OByrne)

Asian affairs:

3. a) China  9:30 pm est Thursday night/Friday morning 9:30 Shanghai time/More bad news on China’s mounting non performing debt at the corporate sector.

(zero hedge)

 

European affairs:

none

 

Russia  + USA affairs/Middle eastern affairs

 

4. a)USA scolds Russia for attacks on USA friendly sites in Syria

(zero hedge)

 

4b) Russia:  their job will take only three to 4 months for completion/videos of them bombing ISIS sites

(zero hedge)

 

Global affairs:

 

none

 

EMERGING MARKETS

5a)Brazil in trouble again today.  Before intervention the real dropped to 4.04 to the dollar.  The country engaged in dollar swaps and already they are down almost 2% of GDP which must be added to the budgetary deficit which is 9.6% of GDP

 

(courtesy zero hedge)

 

 

 Oil related stories

 

6a)  Rig count in the uSA falls to levels equal to 2002/crude oil rallies

(zero hedge)

7 USA stories/Trading of equities NY

a) Trading today on the NY bourses 2 commentaries

(zero hedge)

b)  Official results of FOMC meeting: job gains of only 142,000!!

(zero hedge)

c)  Labour Participation falls by 579,000 souls/total people out of labour pool:  94.6 million

(zero hedge)

d) Initial reaction:  gold jumps to $1140./bond yields plummet/stock market plummets/

(zero hedge)

e). USA financial credit default swaps rise on the report/TED spreads rise signalling banks do not want to loan to each other

(zero hedge)

f) Report showing part timers advance in number while full time workers plummet in number.  Also foreign born workers increase in number/native born workers fall in number

(zerohedge/BLS)

g) Waiters and bartenders add 21,000 jobs/manufacturing lost 9,000 jobs

(zero hedge)

h) factory orders drop for the 10th month in a row

(zero hedge)

i) Dennis Gartman does it again as he is blown out of water/he thought the jobs growth would be high/this morning he was probably blown out again just in time for the stock to recover/he states he does not understand what is going on.

(zero hedge)

j) Challenger Christmas layoff report showing top 20 corporate layoff in USA.

k)  Wall Street admits that it rigs credit default swaps as well

(zero hedge)

 

8.  Physical stories

  1. The fall in silver prices has caused a huge demand for silver at the mints.  Now it looks like a silver short squeeze (Reuters)
  2. Dave Kranzler on gold manipulation and on conflict gold purchases (Dave Kranzler/IRD)
  3. Alasdair Macleod talks about the upcoming NIRP in the USA and other developed nations and how this will be a strong purchasing signal for gold.  (Alasdair Macleod)
  4. Koos Jansen writes the ulterior motive for China and Russia to hoard gold/Koos Jansen/Bullion star
  5. Chris Powell of GATA comments on what is the real purpose of central banks entering the gold market (Chris Powell/GATA)
  6. JPMorgan to pay 1/3 of the 1.8 billion fine for rigging credit default swaps (Bloomberg/GATA)

Let us head over to the comex:

The total gold comex open interest rose from 417,079 up to 419,016  for a gain of 1937 contracts despite the fact that gold was down $1.30 with respect to yesterday’s trading.   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 both of these developments continued in earnest. (contraction of total OI and contraction of number of gold ounces standing for delivery).  The new active delivery month we enter is October and here the OI fell bya whopping 955 contracts down to 1876. We had 5 notices filed yesterday so we only lost 950 contracts or  95,000 oz will not stand for delivery.  The November contract rose by 14 contracts up to 169.The big December contract saw it’s OI rise by 2664 contracts from 290,540 up to 293,204. The estimated volume on today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was estimated at 196,885 which is good. The confirmed volume on yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 87,088 contracts.
Today we had 0 notices filed for nil oz.
And now for the wild silver comex results. Silver OI rose by 281 contracts from 157,625 up to 157,906 despite silver being unchanged with respect to yesterday’s price . Since October is not an active month, we will not see a huge contraction in the OI. The bankers continue to pull their hair out trying to extricate themselves  from their silver mess (the continued high silver OI with it’s extremely low price, combined with the banker’s massive physical shortfall) as the world senses something is brewing in the silver arena. We enter the October contract month which saw it’s OI fall by 2 contracts from 47 down to 45 We had 9 contracts filed yesterday so we  gained 7 contracts or an additonal 35, ooo oz will stand for delivery in this non active month of November. The November contract month saw it’s OI rise by 3 contracts up to 44.
The big December contract saw its OI fall by 193 contracts down to 116,810. The estimated number of contracts is 58,307 contracts (regular business hours, 8 20 am to 1:30 pm) is excellent.  The confirmed volume yesterday (regular plus access market) came in at 30,161 contracts which is poor in volume.
We had 7 notices filed for 35,000 oz.

October contract month:

Initial standings

Oct 2.2015

Gold
Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil  nil

 

Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz   nil

 

No of oz served (contracts) today 0 contracts

nil oz 

No of oz to be served (notices) 1876 contracts

187,000  oz

Total monthly oz gold served (contracts) so far this month 126 contracts

(12,600 oz)

Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 2199.25  oz
 Today, we had 0 dealer transactions
Total dealer withdrawals:  nil oz
we had 0 dealer deposits
total dealer deposit:  zero
We had 0 customer withdrawals:
total customer withdrawal:nil  oz
We had 0 customer deposit:

Total customer deposit: nil   oz

***extremely unusual to have no activity of gold on second day notice especially with 6.227 tonnes of gold standing for delivery.

 JPMorgan has a total of 10,777.279 oz or.3352 tonnes in its dealer or registered account.
JPMorgan now has 741,559.509 oz or 23.06 tonnes in its customer account.
.
Today, 0 notices was issued from JPMorgan dealer account and 57 notices were issued from their client or customer account. The total of all issuance by all participants equates to 0 contracts of which 1 notice were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account.
 
To calculate the final total number of gold ounces standing for the Oct contract month, we take the total number of notices filed so far for the month (126) x 100 oz  or 12,600 oz , to which we  add the difference between the open interest for the front month of Oct. (1876 contracts) minus the number of notices served upon today (0) x 100 oz   x 100 oz per contract equals the number of ounces standing.
 
Thus the initial standings for gold for the Oct. contract month:
No of notices served so far (126) x 100 oz  or ounces + {OI for the front month (1876)– the number of  notices served upon today (0) x 100 oz which equals 200,200 oz  standing  in this month of Oct (6.227 tonnes of gold.  This amount is higher than the registered for sale gold sitting at the gold comex. We lost 950 contracts or 95,000 oz of gold that will not stand and no doubt this was cash settled.
We thus have 6.227 tonnes of gold standing and only 5.0277 tonnes of registered gold (for sale gold/dealer gold) waiting to serve upon those standing.
 
Total dealer inventory 161,642.608 oz or 5.0277 tonnes
Total gold inventory (dealer and customer) =6,850,580.604   or 213.08 tonnes)
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 213.14 tonnes for a loss of 90 tonnes over that period.
 
end
And now for silver

October silver Initial standings

Oct 2/2015:

Silver
Ounces
Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory  972,079.610 oz

Brinks,JPM, Scotia

Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 627,750.03 oz

brinks, Scotia

No of oz served (contracts) 7 contracts  (35,000 oz)
No of oz to be served (notices) 38 contracts (190,000 oz)
Total monthly oz silver served (contracts) 27 contracts (135,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil oz
Total accumulative withdrawal  of silver from the Customer inventory this month 3,263,474.6 oz

Today, we had 0 deposit into the dealer account:

Today, we had 0 deposit into the dealer account:

total dealer deposit; nil oz

we had 0 dealer withdrawals:
total dealer withdrawal: nil  oz
We had 2 customer deposits:
 i) Into Brinks: 203,411.83 oz
ii) Into Scotia: 424,338.200 oz

total customer deposits: 627,750.03  oz

We had 3 customer withdrawals:
i) Out of Brinks;  125,335.88 oz
ii) Out of JPM:  301,846.600 oz
iii) Out of Scotia:  544,897.130 oz

total withdrawals from customer: 972,079.610    oz

we had 3  adjustments
 i) Out of Brinks:
65,435.770 oz was adjusted out of the dealer of Brinks and this landed into the customer account of Brinks
 ii) Out of Delaware:
63,682.835 oz was adjusted out of the dealer Brinks and this landed into the customer account of Delaware.
iii) Out of HSBC:
we had 52,699.35 oz was adjusted out of the dealer HSBC and this landed into the customer account of HSBC
Total dealer inventory: 43.563 million oz
Total of all silver inventory (dealer and customer) 163.908 million oz
 *
The total number of notices filed today for the September contract month is represented by 7 contracts for 35,000 oz. To calculate the number of silver ounces that will stand for delivery in Oct., we take the total number of notices filed for the month so far at (27) x 5,000 oz  = 135,000 oz to which we add the difference between the open interest for the front month of September (45) and the number of notices served upon today (7) x 5000 oz equals the number of ounces standing.
Thus the initial standings for silver for the Oct. contract month:
27 (notices served so far)x 5000 oz +(38) { OI for front month of September ) -number of notices served upon today (7} x 5000 oz ,=325,000 oz of silver standing for the Oct. contract month.
we gained 7 contracts or an additional 35,000  ounces of silver will stand for delivery in this non active delivery month.
the comex resumes its huge liquidation of silver from customer inventory and a decline in gold from the dealer side of things (registered)
*** Ladies and Gentlemen: we are having an old fashioned bank run but instead of paper money being removed, it is silver.
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
And now the Gold inventory at the GLD:
oct 2.2015: another addition of 1.78 tonnes of gold inventory at the GLD/Inventory rests at 689.20 tonnes
Oct 1.2015/ a huge addition of 3.28 tonnes of gold inventory at the GLD/Inventory rests at 687.42 tonnes
Sept 30./no change in tonnage at the GLD/Inventory rests at 684.14 tonnes
Sept 29.2015: no change in tonnage at the GLD/inventory rests at 684.14 tonnes
sept 28/another huge addition of 3.87 tonnes of gold into the GLD/Inventory rests tonight at 684.14 tonnes
Sept 25/we had a huge addition of 5.66 tonnes into the GLD/Inventory rests at 680.27 tonnes.
sept 24.2015; no change in gold inventory/inventory rests at 676.40 tonnes
Sept 23.2015: we gained a rather large 1.79 tonnes of gold into the GLD/Inventory rests tonight at 676.40
sept 22/ we had a huge withdrawal of 3.57 tonnes of gold from the GLD/Inventory rests at 674.61 tonnes
Sept 21.2015: no changes in gold tonnage at the GLD/Inventory rests at 678.18 tonnes
Sept 18.2015: NO CHANGES  in gold tonnage at the GLD/Inventory rests at 678.18 tonnes
sept 17.2017: no changes in gold tonnage at the GLD/Inventory rests at 678.18 tonnes
Sept 16/2015:  no change in gold tonnage at the GLD/Inventory rests at 678.18 tonnes
Sept 15./no change in gold tonnage at the GLD/Inventory rests at 678.18 tonnes
Oct 2/2015 GLD : 689.20 tonnes*
* London is having a tough time sourcing gold. I believe that the last few days of additional GLD gold is a paper gold addition and not real physical.
end

And now SLV:

Oct 2.2015: no change in silver inventory at the SLV/inventory rests at 318.529 million oz

Oct 1.2015:another addition of 1,145,000 oz of silver inventory added to the SLV inventory./inventory rests at 318.529 million oz

Sept 30/no change in silver inventory at the SLV/Inventory rests at 317.384 million oz

sept 29.2015: we had another withdrawal of 859,000 oz from the SLV/Inventory rests at 317.384 million oz

sept 28./no change in silver inventory/rests tonight at 318.243 million oz/

Sept 25./we had another 954,000 oz of silver withdrawn from the SLV/Inventory rests this weekend at 318.243 million oz

Sept 24.2015: no change in silver inventory tonight/inventory rests at 319.197 million oz

Sept 23.2015: we had a huge withdrawal of 1.718 million oz at the SLV/Inventory rests at 319.197 million oz

Sept 22/no change in inventory at the SLV/Inventory rests at 320.915 million oz

sept 21.2015: no changes in inventory at the SLV/Inventory rests at 320.915 million oz

Sept 18.2015; no changes in inventory at the SLV/inventory rests at 320.915 million oz

sept 17.2017:no change in inventory at the SLV/rest tonight at 320.915

million oz/

sept 16.2015: no change in inventory at the SLV/rests tonight at 320.915 million oz/

Sept 15./no change in inventory at the SLV/rests tonight at 320.915 million oz

oct 2/2015:  tonight inventory rests at 318.529 million oz***
 ** the jury is still out if the addition of silver is real or paper silver
especially with London in silver backwardation.
end
 
And now for our premiums to NAV for the funds I follow:
Sprott and Central Fund of Canada.(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)
1. Central Fund of Canada: traded at Negative 8.5 percent to NAV usa funds and Negative 8.5% to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 63.4%
Percentage of fund in silver:36.4%
cash .2%( Oct 2/2015).
2. Sprott silver fund (PSLV): Premium to NAV falls to+0.25%!!!! NAV (Oct 2/2015) (silver must be in short supply)
3. Sprott gold fund (PHYS): premium to NAV falls to – .80% to NAV Oct 2/2015)
Note: Sprott silver trust back  into positive territory at +0.25% Sprott physical gold trust is back into negative territory at -.80%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
At 3:30 pm, we receive the COT report.
Let us first head over to the gold COT:

 

Gold COT Report – Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
182,792 106,147 50,513 149,535 222,678 382,840 379,338
Change from Prior Reporting Period
712 -14,808 -5,638 443 16,358 -4,483 -4,088
Traders
133 104 83 48 55 218 212
 
Small Speculators  
Long Short Open Interest  
32,860 36,362 415,700  
879 484 -3,604  
non reportable positions Change from the previous reporting period
COT Gold Report – Positions as of Tuesday, September 29, 2015
Our large specs:
Those large specs that have been long in gold added a tiny 712 contracts to their long side.
Those large specs that have been short in gold pitched a huge 14,808 contracts from their short side and they are glad they did.
Our commercials;
Those commercials that have been long in gold added 443 contracts to their long side.
Those commercials that have been short in gold continued what they did last week as they poured more shorting by adding a whopping 16,358 contracts to their short side.
Our small specs;
Those small specs that have been long in gold added 879 contracts to their long side.
Those small specs that have been short in gold added 484 contracts to their short side.
Conclusion:  commercials go net short by a whopping 15,914
we deserves to go to jail.
and now for our silver COT:
Silver COT Report: Futures
Large Speculators Commercial
Long Short Spreading Long Short
61,556 38,453 17,221 56,932 87,038
1,143 2,899 2,667 688 -520
Traders
82 53 40 40 38
Small Speculators Open Interest Total
Long Short 156,905 Long Short
21,196 14,193 135,709 142,712
267 -281 4,765 4,498 5,046
non reportable positions Positions as of: 136 120
Tuesday, September 29, 2015
Our large specs:
Those large specs that have been long in silver added 1143 contracts to their long side.
Those large specs that have been short in silver added 2899 contracts to their short side  (not happy campers tonight)
Commercials:
those commercials that have been long in silver added 443 contracts to their long side.
Those commercials that have been short in silver covered 520 contracts from their short side.

Small specs;

Those small specs that have been long in silver added 277 contracts to their long side.
Those small specs that have been short in silver covered 416 contracts from their short side.
Conclusions:
commercials go net long by 1206 contracts and thus bullish
Overnight gold/silver trading from Asia and Europe overnight:
courtesy Goldcore/Blog/Mark O’Byrne/Stephen Flood

Silver coin demand is absolutely through the roof” – Perth Mint

If the continuing depression in precious metal prices has a silver lining, it is the enormous surge in demand world-wide for silver.  With most mints & brokers experiencing higher than expected demand for silver coins, many are having to set weekly sales quotas after record coin sales.

According to Nicholson, Ananthalakshmi and Harvey, reporting for Reuters yesterday, this rapid surge in demand for silver is due to unprecedented interest in coins from ‘mom & pop’ buyers in the US. “Dealers and mints trace the supply squeeze to a burst of buying by mom-and-pop investors in the United States, who scrambled to scoop up coins they considered to be at bargain levels after spot silver prices in early July sank to six-year lows.”

In addition, there is a perceived shortage in the market of silver coin supply which, according to a Perth Mint spokesperson, “is in fact a (crunch in) manufacturing capacity.”

With North American mints overwhelmed by orders, investors and collectors were forced to look overseas for increasingly scarce supplies, triggering a domino effect in Europe and Asia.

Read the full article: Silver-coin shortage shows bright side of precious metal collapse

See also our recent blog on “Premiums Rise and Delivery Delays Increase on Silver Bullion Coins” for further analysis.

DAILY PRICES

Today’s Gold Prices: USD 1106.30, EUR 990.86 and GBP 730.21 per ounce.
Yesterday’s Gold Prices: USD 1114.20, EUR 998.66 and GBP 735.69 per ounce.
(LBMA AM)

GoldCore: Silver in USD - 1 Year

Gold closed at $1114.30 down again by $1.70 on the day. Silver slipped to as low as $14.476 but ultimately gained $0.02 overall, closing at $14.56.

As reported previously, the Perth Mint sold a record amount of silver coins in September – more than 3.53 million ounces – according to Reuters. This is about five times higher than the mint’s August sales.

GoldCore: 7 Key Gold Storage Must Haves

Download 7 Key Allocated Storage Must Haves

Mark O’Byrne

end

Silver coin shortage shows bright side of precious metal collapse

Section:

By Marcy Nicholson, A. Ananthalakshmi, and Jan Harvey
Reuters
Thursday, October 1, 2015

The global silver-coin market is in the grips of an unprecedented supply squeeze, forcing some mints to ration sales and step up overtime while sending U.S. buyers racing abroad to fulfill a sudden surge in demand.

The U.S. Mint began setting weekly sales quotas for its flagship American Eagle silver coins in July because it can’t meet demand, and the Canadian mint followed suit after record monthly sales in July. In Australia the Perth Mint sold a record of more than 2.5 million ounces of silver this month, nearly four times more than in August, and has begun rationing supply of a new line of coins this month, a mint official said.

Silver coin demand “is absolutely through the roof,” said Neil Vance, wholesale manager at the Perth Mint. “There seems to be a bit of frenzy as people think there is a shortage of silver. But in fact it is a (crunch in) manufacturing capacity.” …

… For remainder of the report:

http://www.reuters.com/article/2015/10/01/us-silver-collectors-idUSKCN0R..

end

Silver trading after the FOMC annoucement:

 

Silver Spikes To Six-Week Highs On Heavy Volume – Biggest Jump Since Dec 2014

Precious metals are angrily bid this morning (even as copper and crude tumble) after the dismal US jobs data sent the USD reeling and raised expectations for moar QE down the line. Silver is up 5% on the day – the biggest daily jump since Dec 1st 2014 and gold is up 2.2% – its best day since April.

Silver is soaring…

 

and so is gold post-payrolls…

 

Charts: bloomberg

 

(London’s Financial times/GATA)

Financial Times notices that central banks are taking over the world

Section:

Carney on Climate: Central Bankers Stray from Mandate

By Ferdinando Giugliano
Financial Times, London
Wednesday, September 30, 2015

Mervyn King, the former Bank of England governor, said “a successful central bank should be boring.”

Judging from Mark Carney’s surprise intervention in the climate change debate this week, his predecessor’s views are out of fashion at Threadneedle Street.

The governor’s considerations have caught the public by surprise, raising questions over whether a central banker should feel free to opine on topics that are seemingly outside his mandate.

With central bankers in the UK and elsewhere routinely wading into areas of government policy, from corporate governance to structural reforms, critics fear these interventions might be a symptom over-reach by unelected technocrats. …

… For the remainder of the report:

http://www.ft.com/intl/cms/s/0/3ac7e22c-6782-11e5-97d0-1456a776a4f5.html

end

 

Dave Kranzler talks about gold manipulation and conflict gold:

(courtesy Dave Kranzler/IRD)

Dave Kranzler: Gold manipulation and conflict gold

Section:

By Dave Kranzler
Investment Research Dynamics, Denver, Colorado
Thursday, October 1, 2015

The king of high-frequency trading, Nanex’s Eric Hunsader, has been on a crusade lately to expose the problematic and illegal manipulative side of high-frequency/algo-driven trading. Nowhere is the manipulation of any market more blatant and in-your-face illegal than in the paper gold market.

Yesterday morning Hunsader tweeted out this, after the gold was taken down hard in the paper gold market: “I am amazed at how blatant a price manipulation algo is in gold futures this morning. Really affecting prices.”

Gold was smashed at exactly 8:20 a.m. ET when the gold pit at the Comex opened. The initial hit involved the dumping of 2,748 contracts, 274,800 ounces of paper gold, in the first minute of floor trading. The Comex is reporting only 162,221 ounces of “registered,” deliverable gold. Hmmm. … From 8-9 a.m. 29,136 contracts traded, representing 2.9 million ounces of gold traded, most of it in the first 40 minutes after the floor trade.

Without a doubt, the blatant nature of the manipulation reflects the desperation felt by the Fed and the bullion banks to keep a lid on gold given that the Fed is unable to raise interest rates without crashing the system. …

… For the remainder of the commentary:

http://investmentresearchdynamics.com/gold-manipulation-and-conflict-gol…

end

Alasdair writes a terrific commentary describing what will happen when NIRP comes to the USA and other nations.  He states that negative interest rates would certainly push commodity traders to go long, especially gold which is already in backwardation.  NIRP would further exacerbate the situation.

 

a must read..

 

 

(courtesy Alasdair Macleod)

 

 

Alasdair Macleod: NIRP — Its likelihood and effect on commodities

Section:

3:34p ET Thursday, October 1, 2015

Dear Friend of GATA and Gold:

A negative interest rate policy by central banks, GoldMoney research director Alasdair Macleod writes today, would push commodity traders to switch from short to long anticipating flows out of bank deposits and into necessities. Such a reversal, Macleod writes, likely would be especially pronounced in the gold market. Macleod’s commentary is headlined “NIRP, Its Likelihood and Effect on Commodities” and it’s posted at GoldMoney’s Internet site here:

https://www.goldmoney.com/research/analysis/nirp-effect-on-commodities?g…

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

end

 

An extremely important discussion with Koos Jansen on why Russia and China want to hoard official gold:

 

(courtesy Koos Jansen)

 

 

Koos Jansen: Russia, China aim to unseat the world reserve currency

Section:

10:24p ET Thursday, October 1, 2015

Dear Friend of GATA and Gold:

Gold researcher and GATA consultant Koos Jansen notes tonight that China and Russia continue to add to their gold reserves and argues that there is more purpose to this than simple diversification of their foreign-exchange portfolio. That is, Jansen contends, China and Russia went to deny the United States the privilege and power of controlling the world reserve currency. Jansen’s commentary is headlined “Chinese and Russian Central Banks Continue to Add Gold to Official Reserves: 16 and 31 Tonnes in August” and it’s posted at Bullion Star here:

https://www.bullionstar.com/blogs/koos-jansen/chinese-and-russian-centra…

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

end

 

 

 

(courtesy Chris Powell/GATA)

Bron Suchecki: Yet another precious metal manipulation investigation

Section:

8:47a ET Friday, October 2, 2015

Dear Friend of GATA and Gold:

Perth Mint research director Bron Suchecki notes today that more than 20 reviews or investigations of gold market manipulation have been reported since 2013 but only the one involving a trader at Barclays has found such manipulation, and the Barclays case was pretty small.

But Suchecki also acknowledges suspicion “that central banks don’t want regulators delving too deep into how these markets work.”

Indeed, no investigation of the gold market means anything if it does not address these questions:

— Are central banks in the gold market surreptitiously or not?

— If central banks are in the gold market surreptitiously, is it just for fun — for example, to see which central bank’s trading desk can make the most money by cheating the most investors — or is it for policy purposes?

— If central banks are in the gold market for policy purposes, are these the traditional purposes of defeating a potentially competitive world reserve currency, or have these purposes expanded?

— If central banks, creators of infinite money, are surreptitiously trading a market, how can it be considered a market at all, and how can any country or the world ever enjoy a market economy again?

Documentation responsive to these questions can be found here:

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

Suchecki’s commentary is headlined “Yet Another Precious Metal Manipulation Investigation” and it’s posted at the Perth Mint’s Internet site here:

http://research.perthmint.com.au/2015/10/02/yet-another-precious-metal-m…

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

 

end

 

(courtesy Bloomberg/GATA)

JPMorgan said to pay most in $1.86 billion swaps market rig settlement

Section:

By Michael J Moore Hugh Son
Bloomberg News
Thursday, October 1, 2015

JPMorgan Chase & Co. is set to pay almost a third of a $1.86 billion settlement to resolve accusations that a dozen big banks conspired to limit competition in the credit-default swaps market, according to people briefed on terms of the deal.

JPMorgan is paying $595 million, with the lender’s portion of the accord largely based on the plaintiffs’ measure of market share, said the people, who asked not to be identified because the firms haven’t disclosed how they’re splitting costs. The settlement also enacts reforms making it easier for electronic-trading platforms to enter the CDS market, according to a statement Thursday from attorneys for the plaintiffs, which include the Los Angeles County Employees Retirement Association.

Morgan Stanley, Barclays Plc, and Goldman Sachs Group Inc. are paying about $230 million, $175 million, and $164 million, respectively, the people said. Plaintiffs’ lawyers disclosed the approximate size of the settlement in Manhattan federal court last month, saying they were still ironing out details. They updated the total Thursday. …

… For the remainder of the report:

http://www.bloomberg.com/news/articles/2015-10-01/jpmorgan-said-to-pay-m…

end

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

1 Chinese yuan vs USA dollar/yuan falls  a bit in value, this  time at  6.3593/Shanghai bourse:  closed for holiday, hang sang: green 

2 Nikkei closed  up 2.71 or .02%

3. Europe stocks in the green    /USA dollar index up to 96.30/Euro down to 1.1163

3b Japan 10 year bond yield: falls to .327% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 120.19

3c Nikkei now well below 18,000

3d USA/Yen rate now above the important 120 barrier this morning

3e WTI:  45.09 and Brent:  47.75

3f Gold down  /Yen down

3gJapan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund falls  to .554 per cent. German bunds in negative yields from 5 years out

 Greece  sees its 2 year rate rises to 10.57%/Greek stocks this morning up by 0.47%:  still expect continual bank runs on Greek banks 

3j Greek 10 year bond yield falls to  : 8.13%  

3k Gold at $1106.50 /silver $14.44  (8 am est)

3l USA vs Russian rouble; (Russian rouble down 2/3 in  roubles/dollar) 66.32,

3m oil into the 45 dollar handle for WTI and 47 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  (already upon us). 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 .9785 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0975 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 on criminal charges/

3r the 5 year German bund now  in negative territory with the 10 year moving closer to negativity to +.554%/5 year rate negative%!!!

3s The ELA lowers to  89.1 billion euros, a reduction of .6 billion euros for Greece.  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 2.06% early this morning. Thirty year rate below 3% at 2.87% / yield curve flatten/foreshadowing recession.

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

 

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

Calm Before The Payrolls Storm

With China markets closed for holiday until the middle of next week, and little in terms of global macro data overnight (the only notable central banker comment overnight came from Mario Draghi who confidently proclaimed that “economic growth is returning” which on its own is bad for risk assets), it was all about the USDJPY which has seen the usual no-volume levitation overnight, dragging both the Nikkei higher with it, and US equity futures, which as of this moment were at session highs, up 7 points. The calm may be broken, though, as soon as two hours from now when the September “most important ever until the next” payrolls report is released.

And speaking of calm before the “storm”, with the east coast bracing for the landfall Hurricane Joacquin, it may have been much ado about nothing, with Bloomberg reporting that many projections now show the hurricane will actually miss the eastern seaboard.  Joaquin raked parts of the Bahamas with top winds of 130 miles (209 kilometers) per hour, and that will probably last into Friday, the center in Miami said in an 2 a.m. advisory. The storm was 15 miles east-southeast of Clarence Town on Long Island in the Bahamas. It was moving west at 3 mph. The center has shifted its projected track for the storm, predicting it will sweep south and east of Massachusetts’ Cape Cod by Tuesday afternoon, after several more computer forecast models favored a miss by Joaquin.

The strong majority of forecast models are now in agreement on a track farther away from the United States east coast,” Jack Beven, a senior hurricane specialist at the center, wrote in an analysis on Thursday. “We are becoming optimistic that the Carolinas and mid-Atlantic states will avoid the direct effects of Joaquin.”

So with the weather update out of the way, here is a closer look at global markets.

Asian stocks traded mixed amid position squaring ahead of today’s NFP report. ASX 200 (0.0%) was initially led lower by weakness in large banks and mining names after iron ore fell for the 3rd time in 4 sessions. Nikkei 225 (+0.02%) traded mildly higher amid mixed data releases in which household spending rose to its highest in 3-months while there was also an increase in unemployment. Hang Seng (+3.2%) bucked the trend as it played catch up to yesterday’s firm gains in Asia with Casinos outperforming in Hong Kong after a narrower decline in Macau gaming revenues, coupled with reports that China is to support the Macau region. JGBs traded flat in a relatively quiet session, as participants await the US jobs report, while the BoJ conducted market operations to purchase JPY470 Bn in government debt. Barclays brought forward its forecast for BoJ easing to October 30th from April 2016, but sees risk also of possible action in October 7th, while UBS said it sees a 50% chance of the BoJ easing in Q4.

European stocks also traded higher (Euro Stoxx: +1.3%), though given the looming release of the latest US NFP release meant that trade volumes were below the average levels and in turn resulted in somewhat range bounce price action across various asset classes. At the same time, Bunds edged lower since the open, with peripheral bond yield spreads little changed on the day. Financials outperformed on the sector breakdown, particular UK names, following reports that the Financial Conduct Authority (FCA) is launching a consultation on setting a deadline for PPI complaints.

FX markets have seen GBP outperform its major peers, benefiting from the release of the much better than expected UK construction PMI (59.9 vs. Exp. 57.5), while despite the looming risk events, USD/JPY remained bid. Worth noting for JPY, analysts at Barclays brought forward forecast for BoJ easing to October 30th from April 2016, while also highlighting risk of possible action in October 7th. At the same time, analysts at UBS see a 50% chance of the BoJ easing in Q4.

WTI and Brent crude futures trade in positive territory today heading into the NYMEX pit open , however with both commodities still on track to end the week in negative territory. Elsewhere, metals are trading lower in line with the stronger USD as well as the continued growth concerns surrounding China, with the notable exception of palladium , which trades in positive territory on the back of the Volkswagen scandal. Of note, volumes are particularly light today in the run up to the NFP report.

Going forward, market participants will get to digest the release of the latest US NFP report, factory orders, durable goods, as well as any comments on monetary policy by Fed’s Rosengren, Harker, Kocherlakota, Bullard, Mester and Fischer.

Bulletin Headline Summary from RanSquawk and Bloomberg

  • Stocks in Europe traded higher, though the looming release of the latest US NFP release meant that trade volumes were below the average levels
  • GBP outperforms its major peers, benefiting from the release of the much better than expected UK construction PMI
  • As well as US NFP report today’s highlights include US factory orders, durable goods and comments by Fed’s Rosengren, Harker, Kocherlakota, Bullard, Mester and Fischer
  • Treasuries decline, 10Y paring weekly gain, before report forecast to show U.S. economy added 201k jobs in Sept., unemployment rate held at 5.1% and average hourly earnings grew 0.2%.
  • Stocks in Hong Kong rose after China cut passenger-vehicle tax as targeted support for economy; casino operators gained after a report Beijing may unveil measures to support Macau tourism
  • The U.S. and six other nations backing rebels fighting to oust Syrian President Bashar al-Assad called on Russia to cease attacks against the country’s opposition, saying air strikes that have killed civilians risk fueling extremism
  • For a handful of well-known hedge fund managers, 2015 is looking a lot like 2008, when their industry suffered record losses and investor withdrawals
  • Throughout the 2016 presidential primary campaign, Hilary Clinton has taken a markedly less critical view of large financial institutions like Citigroup than Democrats like Elizabeth Warren and presidential rival Bernie Sanders
  • While forecasters haven’t ruled out a U.S. East Coast strike by the Category 4 hurricane pounding the Bahamas with heavy rains and raging surf, more projections are showing Joaquin will miss, the National Hurricane Center said
  • Sovereign 10Y bond yields mostly higher. Asian and European stocks mostly higher, U.S. equity-index futures rise. Crude oil and copper gain, gold falls

US Event Calendar

  • 8:30am: Change in Nonfarm Payrolls, Sept., est. 201k (prior 173k)
    • Change in Private Payrolls, Sept., est. 198k (prior 140k)
    • Change in Mfg Payrolls, Sept., est 0 (prior -17k)
    • Unemployment Rate, Sept., est. 5.1% (prior 5.1%)
    • Avg Hourly Earnings m/m, Sept., est. 0.2% (prior 0.3%)
    • Avg Hourly Earnings y/y, Sept., est. 2.4% (prior 2.2%)
    • Avg Weekly Hours All Employees, Sept., est. 34.6 (prior 34.6)
    • Underemployment Rate, Sept. (prior 10.3%)
    • Change in Household Employment, Sept. (prior 196k)
    • Labor Force Participation Rate, Sept. (prior 62.6%)
  • 9:45am: ISM New York, Sept. (prior 51.1)
  • 10:00am: Factory Orders, Aug., est. -1.2% (prior 0.4%); Factory Orders Ex Trans, Aug. (prior -0.6%)

Central Banks

  • 8:45am: Fed’s Harker speaks in Philadelphia
  • 12:30pm: Fed’s Bullard speaks in New York
  • 1:30pm: Fed’s Fischer speaks at Boston Fed conference; Rosengren, Dudley, Mester, Kocherlakota scheduled to participate

DB’s Jim Reid Completes the overnight event wrap

Its payroll Friday again, and although the employment report is of course crucial to second guessing the Fed, it does seem that there are even bigger global issues at the moment that will exert a stronger short-term influence on the Fed. Nevertheless its always important and given the growth fears at the moment a stronger report would probably be better received this month than in the recent past where strong data would have raised concerns about tighter policy. For now the market will likely be relieved to see some strength. The market and DB is expecting the September print to rise to +200k from +173k in August and for the unemployment rate to remain steady at 5.1% and the average hourly earnings rate to grow by +0.2% MoM (down from +0.3% MoM last time around).

We will revisit our oft-updated PMI/equity performance regressions in more details below as well as the usual recap of key developments but we’ll first take stock at how Asia is responding this morning to the late US rally yesterday. With China onshore equities closed for its week-long National Day holiday, the Hang Seng (+2.7%) and HSCEI (+3.2%) are the two standout performers in what has been generally a positive session for North Asian equities. The better tone in China comes after more stimulus announcements from authorities. First home buyers’ down payment requirements were reduced to 25% from 30% by PBOC. A tax on passenger vehicle purchases were also reduced while a Bloomberg headline also noted that China is studying measures to revive the slump in Macau’s economy. Asian credit markets are also firmer with IG benchmark cash spreads around 2-4bps tighter on the day although volumes are usually on the lower side on a pre-payrolls Friday.

China headlines aside, Mario Draghi’s speech in New York overnight was one of the anticipated events although it offered little insights on ECB’s monetary policy outlook. In his prepared remarks, Draghi highlighted the progress achieved over the last 3 years to stabilize and strengthen the euro area. Emphasizing that the Euro area is crucially relevant for the global economy, he highlighted that growth is returning to Europe after having been a drag on global growth over the last 7-8 years.

With global growth in mind, today’s payrolls comes hot on the heels of yesterday’s global PMIs. Given the falls in both PMIs of late and especially equities we thought we’d revisit our old regressions between PMIs and the YoY change in equity markets to see what’s priced in this simple relationship (see PDF for the table). Interestingly with the exception of Japan and China, equities are now under-performing relative to what the current levels of manufacturing PMIs would suggest. Actual equity performance has been equivalent to PMIs below 50 across the world (apart from in Italy) but only China’s PMI is actually sub-50. We can also see that if PMIs remain at current levels into year-end then there’s decent double-digit upside for US, German, Spanish and UK equities. Whilst the level of PMI’s is hardly the only determinant of equity performance, this analysis adds to the case that markets may have weakened faster than fundamentals in Q3. Obviously it could be that PMIs weaken further in Q4 but we are certainly pricing a move sub-50 across the globe.

The first day of the new quarter started on a strong note but soon soured before a late US rally lifted spirits. Indeed European markets slowly gave away their initial gains with the Stoxx 600 opening the day up 1.5% before ending the day down -0.4%. European credit markets went through a similar pattern with Xover ending the day about 20bps wider from its opening tights. US markets fell with Europe with the S&P500 dipping as much as 1% intraday but ending the day +0.2% higher after a late rally into the US closing bell. The CDX HY index followed a similar path where it was down as much as 0.5pt from its intraday highs before closing the day around 1/8ths of a point higher. The equity and credit market’s struggles as the day wore on were matched in the commodity markets as WTI closed the day down 5% from its intraday high (but closed just around 0.8% lower on the day).

Turning to yesterday’s data there were a number of interesting prints. In Europe we had first September manufacturing PMI data from Spain and Italy and final numbers from Germany, France and the Euro area. The Spanish and Italian reads both came in notably lower than expected at 51.7 and 52.7 respectively, down relatively sharply from 53.2 and 53.8 previously. The French final number was actually revised up slightly to 50.6 (from 50.4) whilst Germany was revised down from 52.5 to 52.3 leaving the euro area aggregate steady at 52.

In the US, initial jobless claims rose to 277k, slightly higher than the 271k expected by street consensus and 10k higher than last week’s reading. Jobs aside, the final Markit US manufacturing PMI was revised up slightly to 53.1. We also saw a notable drop in the September ISM manufacturing reading. The series fell from 51.1 to 50.2 (vs 50.6 expected) to the lowest print since May 2013. Some of the details in the ISM report looked soft to us. Indeed sub-indices of new orders, employment, and prices paid were down 1.6pt, 0.7pt and 1pt to 50.1, 50.5 and 38.0, respectively. The ISM manufacturing index has been declining throughout the summer. With the series barely above expansion territory, readings for the remainder of the year will likely be closely monitored.

Staying on the theme of economics, market sentiment yesterday was perhaps not helped by subdued comments made by World Bank President. Mr Jim Yong Kim told CNBC that global growth will be slow especially in EM and argued that a Fed hike this year would have serious ramifications for EM. His comments came after those from Christine Lagarde of the IMF earlier this week in which she said warned that EM faces a fifth consecutive year of slowing growth. Growth concerns along with uncertainties around Fed policy have been weighing on EM fund flows. The IIF earlier this week said that it expected flows to emerging markets to fall to just US$548bn this year, lower than levels recorded in 2008/09 (FT). The focus on EM is unlikely to go away in a hurry. Indeed the topic will likely be a key agenda for central bankers and finance ministers at the IMF and World Bank annual meeting in Lima next week.

Looking at the rest of the day ahead beyond payrolls, we will also get the New York ISM and US August factory orders (with the number expected to drop to -1.2%). We will also hear from Harker, Bullard and Fischer from the Fed. Eurozone PPI for August is the only notable release from Europe so all eyes will be on Payrolls today.

end

Last Thursday night, early Friday morning Shanghai time:
“It is safe to assume to 2/3 of all Chinese companies will default on their debt”
A little background:  the total of all Chinese debt whether sovereign, local government, personal etc total 31 trillion USA dollars.
The corporate side of things is 22 trillion yen or 3.4 trillion USA.  Macquarie bank analyzed the commodity companies only and found that approximately 2/3 will fail and that over 1/2 cannot pay the interest on their debt.  The Chinese “paper side of things” is blowing up.
(courtesy zero hedge/Macquarie Bank)

Chinese Cash Flow Shocker: More Than Half Of Commodity Companies Can’t Pay The Interest On Their Debt

Earlier today, Macquarie released a must-read report titled “Further deterioration in China’s corporate debt coverage”, in which the Australian bank looks at the Chinese corporate debt bubble (a topic familiar to our readers since 2012) however not in terms of net leverage, or debt/free cash flow, but bottom-up, in terms of corporate interest coverage, or rather the inverse: the ratio of interest expense to operating profit. With good reason, Macquarie focuses on the number of companies with “uncovered debt”, or those which can’t even cover a full year of interest expense with profit.

The report’s centerprice chart is impressive. It looks at the bond prospectuses of 780 companies and finds that there is about CNY5 trillion in total debt, mostly spread among Mining, Smelting & Material and Infrastructure companies, which belongs to companies that have a Interest/EBIT ratio > 100%, or as western credit analysts would write it, have an EBIT/Interest < 1.0x.

As Macquarie notes, looking at the entire universe of CNY22 trillion in corporate debt, the “percentage of EBIT-uncovered debt went up from 19.9% in 2013 to 23.6% last year, and the percentage of EBITDA-uncovered debt up from 5.3% to 7%. Therefore, there has been a further deterioration in financial soundness among our sample.”

To be sure, both the size (the gargantuan CNY22 trillion) and the deteriorating quality (the surge in “uncovered debt” companies) of cash flows, was generally known.

What wasn’t known were the specifics of just how severe this bubble deterioration was for the most critical for China, in the current deflationary bust, commodity sector.

We now know, and the answer is truly terrifying.

Macquarie lays it out in just three charts.

First, it shows the “debt-coverage” curve for commodity companies as of 2007. One will note that not only is there virtually no commodity sector debt to discuss, at not even CNY1 trillion in debt, but virtually every company could comfortably cover their interest expense with existing cash flow: only 4 companies – all in the cement sector – had “uncovered debt” 8 years ago.

Fast forward to 2013 when things get bad, as about a third of all corporations are now unable to cover their annual interest expense, even as the total addressable corporate debt has soared to CNY4 trillion for just the commodity sector.

And then in 2014, everything just falls apart. Quote Macquarie, “more than half of the cumulative debt in this sector was EBIT-uncovered in 2014, and all sub-sectors have their share in the uncovered part, particularly for base metals (the big gray bar on the right stands for Chalco), coal, and steel.”

Compared with the situation in 2013, while almost all sub-sectors did worse in 2014, but things appear to have worsened faster for coal companies as more red bars have moved beyond the 100% critical level for EBIT-coverage.

It means that last year about CNY2 trillion in debt was in danger of imminent default.

The situation since than has dramatically deteriorated.

So are we now? Macquarie again: “Given the slumps in metal and coal prices so far this year, it’s quite likely the curve will have deteriorated further for commodity firms this year, with total debt getting better in the meantime.

In other words, it is safe to assume that up to two-third of Chinese commodity companies are now at imminent danger of default, as they can’t even generate the cash to pay down the interest on their debt, let alone fund repayments.

We fully expect this to be the source of the next market freakout: when the punditry turns its attention away from macro China, which has more than enough problems to begin with, and starts to focus on the cash flow devastation in China at the micro, or corporate, level.

end

 

Russia vs USA  +  Middle Eastern affairs

Needless to say that the rhetoric is heating up between the USA and Russia.  The reason of course, is that the uSA knows that they have been beaten again in this chess match as Putin now controls the skies over Syria.  He will never allow the pipeline to be built from Qatar to Saudi Arabia and onto Syria.

(courtesy zero hedge)

 

“They’re Hopping Mad In The US And Saudi Arabia”: Russian Strikes In Syria Spark Epic Western Media Propaganda Blitz

We are now two days into Russia’s air campaign against anti-regime forces in Syria and both Moscow and the West are rushing to spin the narrative.

The frantic attempt from both sides to shape public opinion has been truly amazing to behold and the sheer amount of coverage speaks to what we said on Thursday about just how important the conflict really is for the Mid-East balance of power.

For the US, portraying Russian airstrikes as supportive of a murderous regime and as an imminent threat to civilians is key, as it allows Washington to explain away the fact that the US and its allies haven’t coordinated their efforts with Moscow. Take the following from CNN for instance, who reports that Russia has made a “strategic blunder” and that by opening an air campaign, Russia risks raising the spectre of the Soviet-Afghan war in the minds of potential jihadists who will supposedly rush into Syria to join the fight:

There is no ambiguity now about Russia’s current tactics in Syria — they are seeking to take over the airspace in the region and be the agenda-setting force on the ground, several senior administration officials told CNN.

 

“Yesterday’s demarche to the U.S. by Russian officials in Baghdad was clear in its intent,” one senior administration official said. “Make sure you don’t have anyone around ISIS targets and get out of the air.”

 

And while U.S. officials have no plans to cede Russia any ground, they also said it appears that Russian President Vladimir Putin made a dramatic chess move that the Russians have not thought through — one official even called it a “strategic blunder.”

 

Had the Russians been clear that they are providing support in Syria to prevent Syrian President Bashar al-Assad regime’s collapse — a scenario that would benefit ISIS — they might have gotten some credit on the world stage.

 

But their very first strikes in the region hit CIA-backed anti-Assad rebel forces, Arizona Republican John McCain, chairman of the Senate Armed Services Committee, said Thursday on CNN’s “New Day.”

 

And U.S. officials note that every bomb against a non-ISIS Sunni target puts them more in bed with Iran and Hezbollah, which are Shiite. U.S. allies in the Persian Gulf warn that this could set off a huge sectarian conflict and that the deeper the Russians get into this, the harder officials believe it will be to get a diplomatic process with the Saudis and others restarted.

 

“It is going to be hugely tempting for the Saudis to start financing their guys again,” another senior administration official said. “Syria will be a magnet for every jihadi, who will rush to fight the Russians, just like they did in Afghanistan. The problem is while this will cause problems for the Russians, it will also mean trouble for the Gulf, when the jihadists come home.”

 

“The Russians can’t be stupid,” another senior administration official said. “This is going to be wildly expensive. And they can’t hold out long. They know in the end there is no future for the guy (Assad) because the whole reason they had to come in is because Assad and his forces were extremely vulnerable. So we are hoping they will come to their senses, stabilize the situation and then we can agree on the Assad piece.”

Now obviously, there are too many absurd statements there to count, but note (again) that Russia has never hid its support for Assad. When Charlie Rose told Putin on national US television that some people believe Russia is in Syria to help Assad, Putin said, quote, “well, you’re right.” On top of that, it’s glaringly obvious to anyone who knows anything about the global balance of power that Russia is there to support Assad and it’s ridiculous for anyone to suggest that Putin isn’t aware of the fact that by supporting the regime, Russia falls squarely on the side of Iran and Hezbollah. It’s also glaringly obvious that ISIS isn’t the only extremist group fighting for control of the country and the notion that the US has now finally managed to identify the “good guys” in Syria after failing to get it right for four years and that now evil Russia is deliberately targeting those good guys simply because they’re the good guys is laughable to the point that one wonders if CNN and others pushed back on being compelled to spin it that way. Additionally, it’s a little late for the US to be concerned about someone inadvertently creating a theatre that in the minds of jihadis will serve as the stage for humanity’s final battle. If Washington was worried about that they might have avoided getting involved in Syria in the first place and they definitely would have avoided training the soldiers who would go on to join the very group that’s perpetuating that idea.

And then here’s WSJ:

The White House challenged Russia’s claim that the airstrikes were targeting Islamic State militants, saying Thursday that Moscow was carrying out “indiscriminate military operations” in areas where the group isn’t operating. A White House official also dismissed the possibility that Russia had inadvertently bombed non-Islamic State areas. U.S. officials say the Russian military bombed one area primarily held by rebels backed by the Central Intelligence Agency and allied spy services.

 

Contrary to claims by the Russian Ministry of Defense, none of the areas that were hit have a known Islamic State presence. At least two of the rebel factions attacked by the Russians—Tajamu Al-Ezzeh and the Central Division—have received weapons including advanced antitank missiles and funding from the U.S. and its allies, according to rebel leaders.

 

The arc that the Russian airstrikes followed begins around the town of Jisr al-Shughour in northern Idlib province near the Turkish border and adjacent to an agricultural area known as the Ghab Plain. It cuts through the central Syrian cities of Hama and Homs and ends at the Lebanese border.

 

Alawites—the regime’s base of support—are concentrated west of the arc in an area that includes Latakia province.

 

Everything east is dominated by the country’s Sunni majority, to which most of those fighting the regime belong.

 

A series of tit-for-tat massacres during the more than four-year conflict have solidified this sectarian fault line.

Yes, the “sectarian fault line” has been solidified and that is a hallmark of Western intervention in the Mid-East. Syria is no different.

And BBC:

Members of the US-led coalition against Islamic State have called on Russia to cease air strikes they say are hitting the Syrian opposition and civilians.

 

In a joint statement on Friday, the US, UK, Turkey and other coalition members said Russian strikes would “only fuel more extremism”.

And best of all there’s Al-Jazeera (which is of course owned by Qatar), who takes it up another notch by suggesting that Russia is now intentionally killing civilians:

Russia accused of striking civilian targets in Syria

 

Activists say warplanes are targeting civilians in areas under control of Western-backed rebels, a claim Russia denies.

For their part, Bloomberg did the American public a favor by laying out the real story, albeit in an article that carries the title “US, Allies Demand Russia Stop Attacks On Syrian Opposition“:

Russian forces are targeting only Islamic State, al-Qaeda affiliated Nusra Front and other terrorist groups, Foreign Minister Sergei Lavrov said Thursday in New York. The Free Syrian Army, a U.S-backed rebel group, was not among the targets and it should have a role in the political process in Syria, he added.

 

“The goal is terrorism,” he said. “And we are not supporting anyone against their own people.”

Assad’s government has been fighting alongside Iranian reinforcements to secure a corridor from the coastal province of Latakia, home to Assad’s Alawite minority, stretching to the capital Damascus, according to Reva Bhalla, vice president for analysis at Stratfor, a geopolitical intelligence and advisory firm based in Austin, Texas. The government has accused Qatar and Saudi Arabia of backing “terror groups,” and dismissed the criticism.

 

“They’re hopping mad in Saudi Arabia, the U.S. And Qatar because of their defeat and the victory of Russia and Syria and the unraveling of the fact that the U.S. and its allies are not serious about fighting” Islamic State, Syrian lawmaker Sharif Shehadeh said by phone from Damascus. “Those who claim to be concerned about the Syrian people are the ones slaughtering the Syrian people through the terrorists.”

There you go. That last passage pretty much says it all.

Meanwhile, the Russian propaganda machine is also in high gear as The Kremlin is jumping at the opportunity to portray Putin as the man who saved the world when no one else was willing to. Here’s Bloomberg again:

Vladimir Putin may have caught the U.S. and its allies off guard by striking Syria, but his propaganda machine was ready.

 

“A hundred dead terrorists,” a news presenter on Russia’s No. 2 network announced early Thursday, just hours after the bombing of what Putin has called “evil-doers” began. She then cut to a correspondent in Syria who lauded the precision of the strikes as aerial footage of the attacks supplied by the Defense Ministry aired.

 

Over on Channel 1, the most-watched station, a parade of politicians, analysts and religious leaders — both Christian and Muslim — rolled by justifying the use of force on both legal and moral grounds. 

 

“This is more than just military strikes against Islamic State,” said the editor of National Defense magazine, Igor Korotchenko, after parliament unanimously authorized the use of force. “We are protecting the values of humanity and taking a stand against the most extreme forms of obscurantism and terror.”

What’s amusing there is that as overstated as it is, that narrative is actually closer to the truth than what’s being fed to the public by the Western media.

In any event, the important thing here is to cut through all of this and extract the bits that help to tell the story of what’s actually taking place in Syria. As we detailed on Thursday, this is effectively a Mid-East coup by Russia and Iran wherein Tehran will replace Riyadh as the regional power broker and Moscow will supplant Washington as the superpower puppet master. And on that note, we close with another excerpt from the WSJ piece cited above:

Iran’s Foreign Ministry welcomed Russia’s military intervention in Syria on Thursday, saying it was the right step to fight terrorism and a move toward bringing stability to the region.

 

“Fighting terrorism effectively requires a strong and serious will and has to be based on cooperation with the governments of Iraq and Syria,” Marzieh Afkham, spokeswoman for the ministry, said according to Iranian media reports.

 

Ibrahim al-Amin, a Lebanese commentator and newspaper editor close to Hezbollah and Iran, said Moscow essentially provided a green light for a counteroffensive against rebels across the political spectrum.

 

“From our side, we can no longer ignore the decision of the axis of resistance, backed by Russia, to not only prevent Assad’s fall but to also weaken all his foes. All his foes without any distinction,” wrote Mr. Amin in the Lebanese daily Al-Akhbar on Thursday.

 

“We must benefit from Russian support to launch tough and decisive battles in several places in Syria,” he added.

 

Before the latest Russian intervention, Iran played a pivotal role propping-up pro-regime militias made up largely of Alawites and Shiites. It has orchestrated thousands of Shiite fighters mainly from Lebanon and Iraq with Hezbollah being in the lead.

 

But thousands of rebels regrouped in several enclaves north of Homs, in towns like al-Rastan and Talbiseh. Russian jets hit both civilian and military targets in these two towns and five surrounding villages, said Rashid al-Hourani, a Syrian army officer from the area who defected to the rebels in 2012.

 

He said the airstrikes were followed with a barrage of artillery fire from several nearby positions where pro-regime Alawite and Shiite militias, including an Iran-backed group known as the Ridha Brigade, have been massing over the past few days.

 

end

 

Russia:  the job will be done in three to four months:

Moscow releases videos of the bombing of ISIS targets

(courtesy zero hedge)

 

Russia Says Syria Air Raids To Last “3-4 Months” As Moscow Releases New Videos Of Strikes

Russian warplanes bombed anti-regime targets in Syria for a third day on Friday, and as we outlined in detail earlier, both the West and Russian media have launched an all-out propaganda blitz in an effort to spin the narrative.

For their part, the US and its allies are clinging to the notion that they are shocked – shocked – that Russia is striking targets unrelated to ISIS. This, apparently, is a direct violation of the unspoken Western policy of allowing any extremists not called “ISIS” to continue to operate on the way to ousting Assad. Of course the US and its regional allies are also fine with ISIS continuing to operate, although because “establish medieval caliphate” probably wasn’t on the list of CIA-approved operational objectives, Washington has to conduct a bombing run or two every once and a while to ensure Frankenstein doesn’t escape the lab.

As for The Kremlin, the fact that the West has managed to create any number of extremists groups on the way to destabilizing the regime in Syria means that rescuing said regime can be pitched as a “war on terror” rather than what it actually is, which is a Mid-East power grab. That is, the narrative for Russia is that when no one else could get the job done, Vladimir Putin entered the phone booth, changed into his Superman outfit, and saved the world from the Sunni extremists who threatened to destroy it. Of course that narrative isn’t entirely accurate either, but as we discussed earlier today, it’s at least closer to the truth than the West’s story. Here’s Russian foreign minister Sergei Lavrov summing it up: “If it looks like a terrorist, if it acts like a terrorist, if it walks like a terrorist, if it fights like a terrorist, it’s a terrorist, right?”

Right.

But don’t tell anyone in Washington that.

In any event, Russia now says its bombing runs in Syria are set to last “three to four months”which is amusing because that basically means that Moscow figures it will take about 100 days to eradicate not only ISIS, but every single armed group battling Assad. Contrast that with the US-led effort to “degrade and destroy” ISIS that has been going on for more than a year with little in the way of concrete results. Here’s Reuters:

Russia estimates its air strike campaign in Syria could last three to four months, the head of the lower house of the Russian parliament’s foreign affairs committee said on Friday.

 

“There is always a risk of being bogged down but in Moscow, we are talking about an operation of three to four months,” Alexei Pushkov, an ally of Russian President Vladimir Putin, told French radio station Europe 1. He added that the strikes were going to intensify.

 

Pushkov was speaking a few hours before Putin was due to meet leaders of France, Germany and Ukraine in Paris for talks about Ukraine which were likely to be overshadowed by the conflict in Syria.

 

Pushkov said the strikes mainly targeted Islamic State forces in spite of reports they had concentrated on opponents to Syrian President Bashar Al-Assad.

 

“The opponents to Bashar are very close to Daesh (Islamic State),” Pushkov said. U.S. sources have said the Russians actually hit facilities of a U.S.-backed group, some of whose rebels received training and support from the CIA.

Pushkov said the U.S.-led coalition had “pretended” to bomb Islamic State forces for a year.

 

“They pretended… Only 20 percent of their (U.S. led coalition) operations produced results, 80 percent of them did not lead to bombardments, they returned to base for different reasons,” Pushkov said.

But make no mistake, there is no “pretending” going on with The Kremlin’s strikes. Here are the latest videos from the Russian MoD:

Here’s more on the bombing runs that the US swears aren’t targeting ISIS (via WSJ):

Russian warplanes made their first incursion into Islamic State’s home base, as Moscow continued a bombardment of Syria that one official said Friday could last for months.

 

Russian aircraft flew 18 sorties in the last 24 hours, attacking 12 Islamic State positions, Russia’s defense ministry said, and destroying command posts, a communication hub and a weapons store.

 

Twelve Islamic State fighters, including two commanders, one from Tunisia and the other from Iraq, were killed near the Islamic State stronghold of Raqqa, said the Syrian Observatory for Human Rights, an opposition-backed monitoring group.

 

Russian aircraft destroyed an Islamic State command post and communications hub in Aleppo province—where rebel groups, the Syrian government and Islamic State all have a strong presence—and hit a field camp in Idlib province, a majority of which is rebel-held, according the Defense Ministry.

 

Russian strikes also hit and destroyed a concealed command post in a district to the southwest of Raqqa, the ministry said.

And as we have said from the beginning, between Russian airstrikes and the increased presence of Iranian ground troops, the various Western-backed rebel groups’ hopes of overthrowing Assad and taking Damascus have effectively been dashed up to and until the US decides it’s prepared to engage Russia directly. Here’s Reuters again:

Already out-gunned and out-manned in Syria’s civil war, U.S.-backed rebels are facing a new and possibly even more serious threat to their survival: Russian air strikes that Washington appears reluctant to thwart.

 

The Obama administration – blindsided by the speed of Moscow’s direct intervention and a Russian target list that included CIA-trained fighters – made clear on Thursday that the it had no desire to increase the risk of an air clash between the former Cold War foes.

 

While Washington took pains to insist it still considered the “moderate” opposition vital to Syria’s future and was not abandoning them, withholding U.S. air cover could further jeopardise beleaguered rebel forces.

 

Obama does have the power to expand the arming of moderate rebels so they can better defend themselves or to set up no-fly zones, as some critics at home have demanded, but U.S. officials note that such measures would carry their own risks of escalating Washington’s involvement.

 

Russian President Vladimir Putin appears to be betting that Obama, wary of seeing the United States pulled into another Middle East war, would be unlikely to respond aggressively.

 

“Mr. Putin reads the Obama administration well,” wrote Aaron David Miller, a former Middle East adviser to Democratic and Republican administrations. “He knows that President Barack Obama never wanted to militarize the U.S. role in Syria.”

Of course if the US is unwilling to draw a line, then this “conflict” is over before it started. The memory of the Soviet-Afghan war is still fresh in Moscow’s mind and The Kremlin has likely learned from its mistakes. Moreover, Russia benefits from Iranian ground support. Thanks to Moscow’s implicit stamp of superpower approval, Tehran (and indirectly Hezbollah) can now play a more visible role in the conflict without worrying about the impact it will have on the optics surrounding the P5+1 deal.

Not to put too fine a point on it, but there are really only two possible outcomes here, i) the US, Saudi Arabia, Israel, and London step up to the plate and finish what they started, or ii) the entire balance of power in the Mid-East is about to shift in a matter of months.

We know who our money is on. Place your bets…

 

 end
More bad news for Brazil:
1. Deficit (as reported earlier this week) is 9.2% of GDP
2. The real was down 2% today before Roussef intervened.  At its low point:  4.04 to the dollar
3. Brazil engaged with foreign exchange swaps and they have now loft 2% of GDP which will further their deficit.
Brazil’s problems is not liquidity but fundamentals.  they are losing usa foreign exchange by the bucketful as investors flee with reckless abandon!
(courtesy zero hedge

A Hapless Brazil Incurs Massive Losses On FX Swaps Amid Currency Carnage

As we’ve documented extensively of late, a host of idiosyncratic political factors have served to exacerbate what was already a very, very bad situation for emerging markets.

This dynamic is most readily apparent in Brazil and Turkey, and although Ankara probably has a leg up in the race for “most at risk from domestic turmoil”, Brazil isn’t far behind as President Dilma Rousseff battles abysmal approval ratings and a recalcitrant Congress in an effort to shore up the country’s finances by convincing lawmakers to sign off on much needed austerity measures.

Meanwhile, a confluence of exogenous shocks that include slumping commodity prices, depressed Chinese demand, the PBoC yuan devaluation, and the threat of an imminent Fed hike have conspired with country-specific political turmoil to send the BRL plunging and that, in turn, has put Copom in what former Treasury secretary Carlos Kawall calls “crisis mode.” 

Of course crises are often costly to combat, especially when you’re an emerging market in the current environment and when it comes to Brazil, the use of alternative measures (like effectively selling dollars in the futures market) to avoid FX reserve liquidation is now weighing heavily on the fiscal outlook. As Goldman noted earlier this week on the heels of the latest monthly budget data, “the overall fiscal deficit is tracking at a disquieting 9.2% of GDP, driven in part by the surging net interest bill, which was exacerbated by the large losses on the central bank stock of Dollar-swaps.” Here’s what Capital Economics had to say after an emergency swaps auction was called by Copom in a desperate attempt to shore up the BRL last week:

First, the size of the planned auctions is reasonably large. Up to $2bn in swaps will be auctioned in total, with auctions so far planned for today and tomorrow (with additional dates presumably added in the future). To put this into context, when the central bank first launched the programme in 2013 the weekly limit on the auctions was $2bn, but by the end it was auctioning less than $200mn a week.

 

Second, we’re not convinced restarting the FX swap programme will do much to stabilise the currency. Indeed, if anything, the initial reaction has been for the real to fall further (it is currently down by 1.8% against the dollar today). Interventions in the currency market rarely have much effect and there are particular issues with using FX swaps as a policy tool. Specifically, if the central bank gets caught on the wrong side of the trade (i.e. the real weakens further), the government will incur a fiscal cost. Losses on FX swap contracts have already inflated the government’s budget deficit by more than 1% of GDP this year, adding to concerns about the fiscal outlook.

 

Finally, the central bank (and government) is clearly becoming spooked by the fall in the real. Generally speaking, while many analysts have worried about the impact of a weaker currency, we have taken the view that it is part of the solution rather than the problem. If currency falls become disorderly, however, that complicates the issue for policymakers. It’s early days, but if the real continues to come under pressure it’s possible that the interest rate tightening cycle could be re-started at next month’s COPOM meeting.

Just how costly has protecting the BRL via swaps been, you ask? For the answer we go to BNamericas:

Brazil’s central bank has already seen losses of almost 2% of GDP as a result of foreign exchange swaps, local paper Valor Econômico reported, citing fiscal data released this week.

 

The program also accounts for about 30% of the increase in gross general government debt incurred in the last year.

 

According to another local paper, Estadão, when looking at the amount spent on both swaps and line auctions, which are contracts to sell dollars with the promise of repurchasing them later with interest, the central bank has already offered 80bn reais to the market in less than one month.

 

In the 12 months leading up to August, the cost of swaps totaled 112bn reais (US$28.0bn), or four times the estimated primary deficit in the 2016 budget. It also exceeded by almost 14 times the primary surplus planned for 2015 (8.7bn reais).

 

This spending represents almost a quarter of the public sector’s interest payment 484bn reais, or 8.45% of GDP in the 12 months leading up to August. The expense also puts pressure on the nominal deficit, which totaled 528bn reais, or 9.21% of GDP, a historical high. When excluding the effect of swaps, the nominal deficit would be 7.26% of GDP, still one of the highest in the emerging world.

Unfortunately for Brazil, “it is not a problem of liquidity, but of fundamentals,” (to quote Barclays), meaning that the pressure on the BRL is likely to continue up to and until the picture improves in terms of commodity prices and until the Rousseff government can prove to the market that plans to get a handle on the deficit are credible. Notably, the currency rallied hard on Friday after Rousseff cut eight ministries, and committed to reduce minister salaries by 10%:

Still, this may ultimately be seen as nothing more than a cosmetic change by the market. But don’t take our word for it, just ask Gustav Gorski, chief economist at Quantitas Gestao de Recursos who, according to Bloomberg, says “the ministerial reform announced today by President Dilma Rousseff is the only way to keep PMDB party in allied base [and] the impact was estimated at 1b reais by planning ministry, which isn’t enough.”

In other words, the pressure on the BRL isn’t likely to abate for long and as outlined above, the irony of using swaps to defend the currency is that it contributes to the very same budget deficit that’s pressuring the FX market in the first place and so because that’s clearly unsustainable, you can expect that in relatively short order, the trajectory shown here…

… will start to look a lot more like the trajectory shown here…

*  *  *

And because we would hate to disappoint anyone…

 end
CRUDE OIL rises after USA rig count collapses to May of 2002 levels:
(courtesy zero hedge)

Crude Surges After US Oil Rig Count Collapses To May 2002 Lows

For the 6th week in a row, Baker Hughes reports a decline in US oil rig counts. With a huge 29 rig drop – the largest in over 5 months – the total oil rig count is 809, the lowest since May 2002. The reaction is a stick-save buying panic surging crude into the green on the day.

Lowets rig cont since May 2002…

 

and the reaction..

Charts: Bloomberg

end
Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/Friday morning

Euro/USA 1.1163 down .0028

USA/JAPAN YEN 120.19 up .368

GBP/USA 1.5149 up .0012

USA/CAN 1.3240 down .0005

Early this Friday morning in Europe, the Euro fell by 28 basis points, trading now just below the 1.12 level falling to 1.1154; 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, Glencore, and the Ukraine,along with rising peripheral bond yields, and the successful ramping of the USA/yen cross,causing  all bourses to  rise.  Last night the Chinese yuan fell in value . The USA/CNY rate at closing last night:  6.3593, (yuan weakened)

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 now trades in a southbound trajectory  as settled up again in Japan up by 50 basis points and trading now just above the all important  120 level to 120.19 yen to the dollar.

The pound was up this morning by 12 basis points as it now trades just below the 1.52 level at 1.5149.

The Canadian dollar reversed course by rising 5 basis points to 1.3240 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  with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade (blowing up)

3. Short Swiss franc/long assets (European housing/Nikkei etc. This has partly blown up (see Hypo bank failure).(blew up)

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: closed up 2.71 or 0.02%

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

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

Gold very early morning trading: $1107.20

silver:$14.47

Early Friday morning USA 10 year bond yield: 2.06% !!! up 1 in basis points from Thursday night and it is trading just above resistance at 2.27-2.32%.  The 30 yr bond yield rises to  2.87 par in basis points.

USA dollar index early Friday morning: 96.30 up 10 cents from Thursday’s close. (Resistance will be at a DXY of 100)

end
This ends the early morning numbers, Friday morning
 
And now for your closing numbers for Friday night:
Closing Portuguese 10 year bond yield: 2.30% down 4 in basis points from Thursday
Japanese 10 year bond yield: .317% !! down 1  basis points from Thursday and extremely low
Your closing Spanish 10 year government bond, Friday, down 4 in basis points. 
Spanish 10 year bond yield: 1.78% !!!!!!
Your Friday closing Italian 10 year bond yield: 1.63% down 5  in basis points from Thursday: trading 15 basis point lower than Spain.
IMPORTANT CURRENCY CLOSES FOR THURSDAY
Closing currency crosses for FRIDAY night/USA dollar index/USA 10 yr bond:  2:30 pm
 Euro/USA: 1.1225 up .0036 (Euro up 36 basis points)
USA/Japan: 119.89 up 0.065 (Yen down 7 basis points)
Great Britain/USA: 1.5193 up .0056 (Pound up 56 basis points
USA/Canada: 1.3191 down .0050 (Canadian dollar up 50 basis points)

USA/Chinese Yuan:  6.3559  down .0065  (Chinese yuan flat/holiday)

This afternoon, the Euro rose by 36 basis points to trade at 1.1225. The Yen fell to 119.89 for a loss of 7 basis points. The pound was up 56 basis point, trading at 1.5193. The Canadian dollar rose 50 basis points to 1.3191. The USA/Yuan closed at 6.3559/China on holiday
Your closing 10 yr USA bond yield: down 4 basis points from Thursday at 2.00%// ( trading below the resistance level of 2.27-2.32%).
USA 30 yr bond yield: 2.83 down 2 in basis points on the day and will be worrisome as China/Emerging countries  continues to liquidate USA treasuries
 Your closing USA dollar index: 95.86 down 24 cents on the day .
 
European and Dow Jones stock index closes:

The Farce Is Complete: Stocks Soar Most In 4 Years As US Job Market Disintegrates

We suspect more than a few traders will need this tonight…

First things first, we have this…

Chinese stocks (trading in US) rose 6.5% today – the biggest day since May 2010:

 

And this  -Today saw an epic squeeze of shorts – “most shorted” surged 5% off the opening lows which is the largest swing we could find on record

 

And finally this: Today was the biggest intraday reversal higher in The Dow since 2011

 

Thanks to this…

With cash indices all ramped into green for the day:

 

But there was only one thing driving US equities today… USDJPY, which got the momo going:

 

And a collapse in VIX finished it off:

 

And US equities (except Small Caps) were ramped all the way into the green for the week, even Trannies

 

But credit was not buying it at the end:

 

Away from the silliness in stocks, everything else was ‘silly’ too:

Treasuries soared at the payrolls print with yields collapsing and flattening across the curve… before Europe closed and the Treasury selling was unleashed…

 

But remained lower on the week:

 

The USD was crushed lower after payrolls but bid back to the moon alice after Europe closed:

 

Commodities were very mixed on the week but industrials soared later in the day after precious metals exploded on payrolls data:

 

But Silver (up 6%) was the big winner from Payrolls:

 

And here is crude on the week… testing and failing at the week’s close…ramping today onthe rig count dcline after tumbling after payrolls

 

The bottom line – The Pure-Play QE Trade is back on… but be careful what you wish for because of reflexivity…

Charts: Bloomberg

 

 end
England FTSE up 57.51 points or 0.95%
German Dax up 43.82 points or 0.46%
Paris CAC up 32.34 points or 0.73%
Spain’s Ibex up 36.30 points or 0.38%
Italian FTSE-MIB up 252.12 or 1.19%
The Dow up 200.36 or 1.36%
Nasdaq; up 80.69 or 1.74%
OIL: WTI:  $45.56    and  Brent:  $48.16
Closing USA/Russian rouble cross: 66.07  down 40/100 roubles per dollar on the day
And now for your more important USA stories.
Your closing numbers from New York
The official release of the Payroll numbers;  a total disaster. As I stated on Thursday, due to the poor regional Fed surveys, we may have a subdued number and it surely was:  only 142,000 jobs were added in September with August revised lower:
(courtesy zero hedge/BLS)

Payrolls Disaster: Only 142K Jobs Added In September Zero Wage Growth; August Revised Much Lower

And so the “most important payrolls number” at least until the October FOMC meeting when the Fed will once again do nothing because suddenly the US is staring recession in the face, is in the history books, and as previewed earlier today, at 142K it was a total disaster, 60K below the consensus and below the lowest estimate.

Just as bad, the August print was also revised far lower from 173K to 136K. And while it is less followed, the household survey was an unmitigated disaster, with 236,000 jobs lost in September.

Putting it into perspective, in 2015 job growth has averaged 198,000 per month, compared with an average monthly gain of 260,000 in 2014. The recession is almost here.

As noted above, the headline jobs print was below the lowest wall street estimate. In other words 96 out of 96 economisseds did what they do best.

The unemployment rate came in at 5.1% as expected but everyone will be focusing on the disaster headline print.

And worst of all, average hourly wages stayed flat at 0.0%, also below the expected 0.2%. Actually, if one zooms in, the change was not 0.0%, it was negative, while weekly earnings actually declined from $868.46 to $865.61.

 

Finally, not only were workers paid less, they worked less, as the average hourly weekweek declined from 34.6 hours to 34.5, suggesting an imminent collapse in economic output.

From the report:

Total nonfarm payroll employment increased by 142,000 in September. Thus far in 2015, job growth has averaged 198,000 per month, compared with an average monthly gain of 260,000 in 2014. In September, job gains occurred in health care and information, while employment in mining continued to decline. (See table B-1.)

 

Health care added 34,000 jobs in September, in line with the average increase of 38,000 jobs per month over the prior 12 months. Hospitals accounted for 16,000 of the jobs gained in September, and employment in ambulatory health care services continued to trend up (+13,000).

 

Employment in information increased by 12,000 in September and has increased by 44,000 over the year.

 

Employment in professional and business services continued to trend up in September (+31,000). Job growth has averaged 45,000 per month thus far in 2015, compared with an average monthly gain of 59,000 in 2014. In September, job gains occurred in computer systems design and related services (+7,000) and in legal services (+5,000).

 

Retail trade employment trended up in September (+24,000), in line with its average monthly gain over the prior 12 months (+27,000). In September, employment rose in general merchandise stores (+10,000) and automobile dealers (+5,000).

 

Employment in food services and drinking places continued on an upward trend in September (+21,000). Over the year, this industry has added 349,000 jobs.

 

Employment in mining continued to decline in September (-10,000), with losses concentrated in support activities for mining (-7,000). Mining employment has declined by 102,000 since reaching a peak in December 2014.

 

Employment in other major industries, including construction, manufacturing, wholesale trade, transportation and warehousing, financial activities, and government, showed little or no change over the month.

Following all this, the December rate hike odds just tumbled to a record low 32%. It was not immediately clear what the December negative rate odds were as of this writing.

end

The labour participation crashes by 579,000 poor souls to 94.6 million.

Participation Rate Crashes To October 1977 Level: Americans Not In The Labor Force Soar By 579,000 To Record 94.6 Million

While the September jobs number was an absolute disaster, here is the real punchline: in September, the people not in the labor force soared by a whopping 579,000 to a record 94.6 million, up from the previous record 94.0, even as number of people employed – according to the household survey used to calculate the “5.1%” unemployment rate – tumbled by 236,000 to 148.8 million.

 

And as a result of this latest surge in people who aren’t working, nor want to work, the participation rate crashed yet again, and sliding from 62.6% to 62.4%, it was the lowest since October 1977.

 

Finally, if anyone is still confused why there is no job growth in the US, here is the answer: the amount of slack in the labor force is simply breathtaking.

end
Initial reaction:

Payrolls Reaction: Hope Dashed As Stocks Dump, Gold Jumps, & Bond Yields Break Critical Support

“Inconceivable.” With the total destruction of the “faith” in The Fed’s pr0mised “recovery,” stocks and bond yields are collapsing. A glance at the crash in fed reigional surveys should have given the market a hint (and credit did) but US equity markets are in free-fall and gold and silver are surging. Treasuries rallied hard on the bursting of the faith bubble with 10Y yields plunged back under 2.00% and 30Y yields broke below the 200-day moving average.

It seems bond had it right all week.. and stocks did not…

 

As stocks plunge…

 

Smashing stocks back into the red for the week…

 

and bond yields are collapsing…

 

Charts: Bloomberg

end

Two important points here:

USA financial credit default risk rises and more important is the rise in the TED spread.

In simple terms, the TED spread is the interest rate charged by a banks to lend to one another/treasury bill rate and both for 3 months.  The higher the TED spread, the riskier it is for banks to loan money to another bank.  The highest TED spread was a spread of 55 points and that was in 2011.  The TED spread has now risen to 35 basis points

(courtesy zero hedge)

 

US Financials’ Default Risk Spikes To 2-Year High

US financials’ stocks are tumbling as ‘investor’ hopes for a rate-hike (and some dream about better earning potential for banks) drag XLF (Financials ETF) back to Oct 2014 lows. However, as have noted before, it is the message of the credit markets that has been correct all along (and stocks continue to catch down) as today’s jobs data (and Glencore asset sales) poke Financials credit spreads to their highest since Oct 2013.

Credit leading the way again…

 

With Morgan Stanley’s CDS rising the most in percentage terms post-FOMC…

 

And TED Spreads have blown to 3 year highs…

 

Charts: Bloomberg

end
And some of the details:
1. Part time addition:  53,000
2. Full time losses:  185,000
3. Foreign born new jobs created:  14,000
4. Native born losses of jobs:  262,000
this states what is really going on behind the labour scene.
(courtesy zero hedge)

The US Has Added Three Times More Foreign-Born Workers Than Native-Born Since December 2007

If you thought the headline jobs print was bad, wait till you see this.

While we will show the quality of the jobs shortly (you guessed it: waiters and bartenders jumped, manufacturing workers tumbled), with the presidential elections, in which immigration has become the key topic coming up, a far more relevant issue is the spread between “native-born” workers (as defined by the BLS), and “foreign-born.” Expect the September data to provide much fodder for the upcoming republican and democratic debates.

But before we show what happened, here is a quick glance at the breakdown between full and part-time jobs in September. According to the BLS, 53,000 part-time jobs were added in September. The offset: a drop of 185,000 full-time jobs. Welcome, once again, to the part-time recovery we first profiled in December 2010.

 

With that out of the way, here is the punchline (which is likely related). While we “know” that a paltry 142K jobs were added according to the Establishment survey, a far more disturbing trend emerges when observing the Household survey, which conveniently breakdown down the number of “native-born” and “foreign-born” workers. In September, the latter rose by 14,000 to 24,928.

That was the good news. The bad news: native-born workers saw their ranks tumble by 262,000!

 

More disturbing, as the following chart shows, after briefly topping their December 2007 level, native-born jobs (blue line below) are now in danger of once again going back into the red. In the meantime, foreign-born workers are steadily increasing (and helping populate all those “part-time” jobs)

 

Finally, this is what the native-vs-foreign born discrepancy looks like since December 2007: in the past 8 years, there has been 300% more foreign-born workers added than native-born.

Prepare to hear much more about this statistics in the coming GOP presidential debates.

Source: Native-Born and Foreign-Born

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Waiters and bartenders add 21,000 to the job scene/manufacturing lost 9000 jobs
add this to the report where most of the gains were part timers, while full timers lost jobs
(courtesy zero hedge)

The Feudal “Recovery” Continues: 21,000 Waiters Added; 9,000 Manufacturing Workers Lost

In our final look at today’s lack of jobs report, we wanted to highlight two quick things.

First, of the 142K jobs added in September, 24K was government jobs, which incidentally was laid out by a scrambling for a silver lining Bank of America as the “positive” in today’s jobs report. To wit: “Government hiring was strong for a fourth consecutive month, with payrolls up a solid 24,000 and averaging almost 29,000 in that time span.” Because more government hiring is what the U.S. needs.

Sarcasm aside, this left just 118K for the private sector. Of this 118K, 78% went to low/minimum-wage paying jobs: Leisure and Hospitality was 30% of the total, adding 35K jobs, 25% was for education and health, more minimum wages, with Retail and Temp Help rounding out the remaining 23% in “gains.”  Meanwhile jobs which actually pay good wages, mining and logging, manufacturing and wholesale trade, all declined in September.

Unfortunately, there are still those – mostly economists and drama majors – who are still clueless about why the US economy is stuck in centrally-planned quicksand or merely doing their best to boost the government propaganda, here is the chart.

 

And since there will still be confusion, here is data so simple, even a 5 year old will get it: in September, the US economy added 21,000 waiters and bartenders and lost another 9,000 manufacturing workers – an economy which is rapidly transitioning to a Feudal state, where nothing is made, and in which the peasantry is increasingly focused on just serving the lords who have all the money.

Finally, since the start of the depression in December 2007, the US economy has added 1.5 million waiters and bartenders and lost 1.4 million manufacturing workers.

 

And that is what a Feudal “recovery” looks like.

Average:
Factory orders drop for the 10th month in a row and this is flashing recession warnings across the USA:
(courtesy USA Factory orders/zero hedge)

US Factory Orders Flash Recession Warning – Drop YoY For 10th Month In A Row

For the 10th month in a row, US Factory Orders dropped year-over-year – the longest streak outside of a recession in history. Against expectations of a 1.2% decline MoM, August dropped 1.7% which is the worst MoM drop since Dec 2014, with a 24% drop MoM in defense new orders and capital goods. Most worrying however is the rise in the inventories-to-shipments ratio once again to cycle highs after a hopeful dip lower in July.

 

 

RECESSION!!!!

 

Charts: Bloomberg

end

Those who bet on a interest rate rise are losing their shirts:
(courtesy zero hedge)

Treasury Yields Are Crashing

Bloodbath for a near record short net Treasury speculative position as rate-hike odds collapse and the entire UST curve plunges. The belly is collapsing 13-15bps (biggest drop in 5Y and 7Y yields since January) and the long-end is dropping significantly.  

 

All yields are now lower on the year with 5Y near 2015 lows (down 42bps since end-Dec).

 end
And Dennis Gartman gets annihilated again:
(courtesy zero hedge)

Is This Why Jobs Crashed

Guess who:

CLAIMS” AND NONFARM PAYROLLS: It’s A Very “Tidy” Correlation Indeed: This wonderful chart, courtesy of TD Securities, shows how almost perfectly jobless claims and non?farm payrolls correlate, and so with “claims” falling as they have, payrolls today could be surprisingly high.

 


 

You guessed it.

end

Yesterday we saw the release of the Challenger/Christmas Gray layoff report.  In the following commentary we see the largest 20 layoff announcements for 2015 and that should have given our pundits clues as to how bad the jobs report was going to be:
(courtesy Christmas, Challenger and Gray report/zero hedge)

If You Work Here, Quit Before You Are Fired: The 20 Largest US Layoff Announcements Of 2015

Earlier today, in the latest laughable attempt to boost confidence in a clearly recessionary economy, the BLS reported that a paltry 277,000 Americans had sought unemployment benefits. Why laughable? Because at the very same time, Challenger Gray which actually tracks layoff notices and announcements, released its own data which starkly contradicted the US department of labor.

As a reminder, what Challenger found was that the third quarter ended with a surge in job cuts, as U.S.-based employers announced plans to shed 58,877 in September, a 43 percent increase from the previous month.

Worse, while one wouldn’t know it by looking at Dept of Labor data, some 205,759 job cuts were announced in the third quarter, making it the largest job-cut quarter since the third quarter of 2009, when planned layoffs totaled 240,233.

So according to one data set people are filing for unemployment insurance near the lowest pace in history, according to the other, in the just concluded quarter, we just witnessed the most terminations in 6 years.

Judging by the economy’s latest trajectory

… we think we know who is telling the truth, and who is desperate to avoid the reality of the wreckovery.

So for those eager to push aside the endless government propaganda and concerned about the rapidly deteriorating economy, here is a list of the Top 20 biggest private-sector job cut announcements of 2015.

We previously profiled the top one, that of Hewlett Packard, as dictated entirely by rising stock-buyback considerations. The same can be said about many of the other corporations, where as long as shareholders continue placing their own immediate interests over thelong-term interests of the underlying business viability, none of these companies are safe to work for.

Our advice: for anyone who is still employed at any of the following corporations, if you can find a job elsewhere (because the “recovery” and all), do it before you too become a seasonally-adjusted pink-slip.

 end
Why not rig CDS prices:  they rig everything else!!!
(courtesy zero hedge)

Wall Street Banks Admit They Rigged CDS Prices Too

Back in June, we noted that a group of investors which included hedge funds, pension funds, university endowments, and others were looking to push forward with a lawsuit that alleged Wall Street had conspired to limit competition in the CDS market.

Of course the whole case was based on what amounts to tautological reasoning.

That is, everyone knows that Markit effectively monopolized the CDS market and because Markit was owned by Wall Street, it was self evident that big banks both monopolized and manipulated the market. 

Amusingly, one of the firms that plaintiffs alleged was kept out of the credit default swap market as a result of Wall Street’s absolute stranglehold was Citadel. As we joked a few months back, this meant that by conspiring to keep the Fed’s plunge protection team shut out in 2008, Markit and Wall Street robbed the world of the chance to see what happens when VIX 90 meets HFT, meets CDS market making.

In any event, earlier this month, the Street agreed to settle for nearly $2 billion and today we learn that none other than JP Morgan – whose offshore, taxpayer sponsored hedge fund at CIO seems to have quite a bit of trouble trading CDX without losing billions – is set to bear the brunt of the pain. Here’s Bloomberg:

JPMorgan Chase & Co. is set to pay almost a third of a $1.86 billion settlement to resolve accusations that a dozen big banks conspired to limit competition in the credit-default swaps market, according to people briefed on terms of the deal.

 

JPMorgan is paying $595 million, with the lender’s portion of the accord largely based on the plaintiffs’ measure of market share, said the people, who asked not to be identified because the firms haven’t disclosed how they’re splitting costs. The settlement also enacts reforms making it easier for electronic-trading platforms to enter the CDS market, according to a statement Thursday from the attorneys for the plaintiffs, which include the Los Angeles County Employees Retirement Association.

 

Morgan Stanley, Barclays Plc and Goldman Sachs Group Inc. are paying about $230 million, $175 million and $164 million, respectively, the people said. Plaintiffs’ lawyersdisclosed the approximate size of the settlement in Manhattan federal court last month, saying they were still ironing out details. They updated the total in Thursday’s statement.

 

The accord averts a trial following years of litigation by hedge funds, pension funds, university endowments, small banks and other investors, who sued as a group. They alleged that global banks — along with Markit Group Ltd., a market-information provider in which the banks owned stakes — conspired to control the information about the multitrillion-dollar credit-default swap market in violation of U.S. antitrust laws.

So yes, even the marks for the financial weapons of mass destruction that helped to destroy the financial universe were (and probably still are) manipulated, meaning that you can’t even bet against something without falling victim to big bank rigging.

Whether or not allowing other players (like Citadel) to enter the market will ultimately be a positive or a negative is anyone’s guess, but the bottom line is that at the end of the day, there wasn’t anything Wall Street didn’t control.

Here is a system that ultimately allows banks to control the pricing for the instruments they use to bet against securities that they themselves create. This is just part and parcel of a never-ending paper wealth creation machine which generates billions in fiat money profits without creating anything in the way of tangible value and before it’s all over, this financialization of the US economy will likely end up bringing the world to its knees unless someone, somewhere puts a stop to the madness.

end

Let’s wrap up this week, with Greg Hunter of USAWatchdog”

(courtesy Greg Hunter/USAWatchdog)

Middle East Chaos &War, Clinton Email Woes, Planned Parenthood Update

4By Greg Hunter’s USAWatchdog.com

The Middle East is spiraling into chaos and war at an alarming rate. It went from a war of words between President Obama and President Putin at the UN on Monday to the Russians bombing targets in Syria just a few days later. The Russians say they are fighting terrorism, and the U.S. says Russia is propping up the Syrian government, and it is bombing the CIA backed so-called moderate rebels. Russia has sent the world’s biggest nuclear armed submarine to the coast of Syria. It reportedly holds some 200 nuclear warheads, and its missiles have more than a 6,000 mile range. It looks like the Russians are in it for the long haul and are drafting 150,000 into the Russian military. Ash Carter, U.S. Defense Secretary, says the Russian plan is “doomed to fail.” I have been saying for years the Russians were not going to allow Assad to be removed from power. It has a strategic port on the Syrian coast in Tartus, and it has spent billions of dollars retrofitting it for nuclear armed ships and subs. Obama looks like a buffoon and failure on the foreign policy stage. Putin looks like he is taking over, and there is not much President Obama is going to do about it.

Meanwhile, Iran has already sent hundreds of troops to Syria. The goal has always been to prop up the Assad government, and the Iranians (Shia) are going to go after Sunni Muslims and terror groups in both Syria and Iraq. This is going to be a very bloody turn for the Middle East. This is going to send the war prospects into hyper-drive as Sunnis from around the region will flock to go in to fight Russia and Iran.

As if there is not enough chaos in the Middle East, Palestinian leader President Mahmoud Abbas says he will no longer abide by any of the peace deals with Israel. Abbas is blaming Israel, which he calls an “occupying power,” for the breakdown. This can only mean increased tension and fighting in Israel. It looks like this entire region will melt down into all-out war. There is no end or peace process in sight.

Hillary Clinton’s email scandal keeps getting worse every week. In the latest news, Russian hackers targeted Hillary’s private email server that she used while she was Secretary of State. My question is how many other countries or hackers tried to break into this server? I find it hard to believe that anyone who wanted to break in would not stop until they got in. This was a secret for years to the American public, but it probably was not a secret to the hackers. It was also coming to light that more and more emails apparently contained classified information. The range of possible felonies for Mrs. Clinton and her staff are stunning. Obstruction of justice, perjury, and mishandling of classified information are just a few that come to mind.

Planned Parenthood keeps defending itself by saying the gruesome undercover videos making deal for baby parts is “deceptively edited.” It denied it has done anything wrong in Congressional testimony this past week. The mainstream media keeps repeating this statement, which I think is a provable lie. Twelve of these undercover videos marked “full content” are available for viewing on the Center for Medical Progress YouTube channel. That is the group that did the investigation into Planned Parenthood’s practices of selling baby body parts. I have also looked at the edited versions and do not see the so-called “deceptive editing.” The media, such as USA Today, has a duty to vet these statements by Planned Parenthood. It should force Planned Parenthood to show the deception. What is on the videos that I saw, edited or not, are top medical doctors employed by Planned Parenthood haggling over the sale of baby body parts. They want to use a sanitized term like “tissue” when it is, in fact, parts such as the eyes, brains kidneys, hearts and lungs. Shame on USA Today for acting like a liberal rag and not vetting statements that appear patently untrue when you look at the videos. I called USA Today for a comment two days in a row and got no response.

Join Greg Hunter as he talks about these stories and more in the Weekly News Wrap-Up.

end

See you on Monday

harvey

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