Good evening Ladies and Gentlemen:
Here are the following closes for gold and silver today:
Gold: $1165.80 up 0.90 (comex closing time)
Silver $15.90 up 4 cents.
In the access market 5:15 pm
First, here is an outline of what will be discussed tonight:
At the gold comex today, we had a very poor delivery day, registering 0 notices for nil ounces Silver saw 0 notices for nil oz.
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 207.65 tonnes for a loss of 95 tonnes over that period.
In silver, the open interest rose by a considerable 524 contracts despite the fact that silver was up by only 5 cents on yesterday. I guess in silver nobody of importance wants to leave the arena. The total silver OI now rests at 159,826 contracts In ounces, the OI is still represented by .799 billion oz or 114% of annual global silver production (ex Russia ex China).
In silver we had 0 notices served upon for nil oz.
In gold, the total comex gold OI fell to 433,629 for a loss of 164 contracts. We had 0 notices filed for nil oz today.
We had no changes in tonnage at the GLD / thus the inventory rests tonight at 687.20 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 315.152 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 a considerable 524 contracts up to 159,826 despite the fact that silver was up by only 5 cents with respect to yesterday’s trading. The total OI for gold fell by 164 contracts to 433,629 contracts, despite the fact that gold was up $8.60 yesterday.
2.Gold trading overnight, Goldcore
8 USA stories/Trading of equities NY
a) Trading today on the NY bourses
c) JPMorgan results.
9. Physical stories
1. Dave Kranzler discusses the upcoming paper gold and silver paper scandal
2, Koos Jansen\
Let us head over to the comex:
October contract month:
|Withdrawals from Dealers Inventory in oz||nil|
|Withdrawals from Customer Inventory in oz nil||32.15 oz Manfra|
|Deposits to the Dealer Inventory in oz||nil|
|Deposits to the Customer Inventory, in oz|| nil
|No of oz served (contracts) today||0 contracts
|No of oz to be served (notices)||1268 contracts
|Total monthly oz gold served (contracts) so far this month||190 contracts
|Total accumulative withdrawals of gold from the Dealers inventory this month||nil|
|Total accumulative withdrawal of gold from the Customer inventory this month||184,991.8 oz|
Total customer deposit: nil oz
***extremely unusual to have no incoming gold on a continual basis especially with 4.8615 tonnes of gold standing for delivery.
October silver Initial standings
|Withdrawals from Dealers Inventory||nil|
|Withdrawals from Customer Inventory||99,917.442 oz
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory|
|nilNo of oz served (contracts)||0 contracts (nil oz)|
|No of oz to be served (notices)||41 contracts (205,000 oz)|
|Total monthly oz silver served (contracts)||62 contracts (310,000 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||7,399,157.2 oz|
Today, we had 0 deposit into the dealer account:
total dealer deposit; nil oz
total customer deposits: nil oz
total withdrawals from customer:99,917.442 oz
And now SLV
oct 13/no change in silver ETF /silver inventory/rests tonight at 315.152 million oz
:oct 12/ no change in the silver ETF/silver inventory rests tonight at 315.152 million oz
Oct 9.2015:/no change in the silver ETF SLV inventory/rests tonight at 315.152 million oz/
Oct 8.2015/no changes in the silver ETF SLV/Inventory rests tonight at 315.152 million oz
Oct 7/a huge withdrawal of 3.243 million oz from the SLV/Inventory rests tonight at 315.152 million oz
Oct 6/no change in silver inventory/inventory rests at 318.395 million oz
oCT 5/we had a small withdrawal of inventory at the SLV of 134,000 oz/and this is also to pay for fees/inventory rests at 318.395 million oz
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
Press Release OCT 6.2015
Sprott Increases Offer for Central GoldTrust and Silver Bullion Trust
Offering an Additional Premium of US$0.10 per GTU Unit payable in Sprott Physical Gold Trust Units
and US$0.025 per SBT Unit payable in Sprott Physical Silver Trust Units
When Announced on April 23, 2015, Offers Represented a Premium of US$3.06 per GTU Unit and US$0.91 per SBT Unit for Unitholders Based on Trading Value and the NAV to NAV Exchange Ratio
Premiums as of October 5, 2015 (including the Increased Consideration) are US$1.14 per GTU Unit and US$0.61 per SBT Unit
Notice of Extension and Variation to be Filed Shortly
Offers Will Now Expire on October 30, 2015 –Unitholders Urged to Tender Now
TORONTO, Oct. 6, 2015 (GLOBE NEWSWIRE) — Sprott Asset Management LP (“Sprott” or “Sprott Asset Management”), together with Sprott Physical Gold Trust (NYSE:PHYS) (TSX:PHY.U) and Sprott Physical Silver Trust (NYSE:PSLV) (TSX:PHS.U) (together the “Sprott Physical Trusts”), today announced that it has increased the consideration payable to unitholders in connection with its offers to acquire all of the outstanding units of Central GoldTrust (“GTU”) (TSX:GTU.UN) (TSX:GTU.U) (NYSEMKT:GTU) and Silver Bullion Trust (“SBT”) (TSX:SBT.UN) (TSX:SBT.U) (the “Sprott offers”).
Unitholders will now receive an additional premium of US$0.10 per GTU unit payable in Sprott Physical Gold Trust units and US$0.025 per SBT unit payable in Sprott Physical Silver Trust units (the “Premium Consideration”), in addition to the units of Sprott Physical Gold Trust and units of Sprott Physical Silver Trust, respectively, being offered on a net asset value (NAV) to NAV exchange basis. Based on trading values and the NAV to NAV Exchange Ratio (as such term is defined in the Sprott offers) at the time Sprott announced its intention to make the Sprott offers on April 23, 2015, the offers reflected a premium of US$3.06 per GTU unit and US$0.91 per SBT unit. The premium as of October 5, 2015, based on trading values, the NAV to NAV Exchange Ratio and the Premium Consideration, represents US$1.14 per GTU unit and US$0.61 per SBT unit, respectively. In connection with this increase in consideration, the expiry time for each Sprott offer is extended to 5:00 p.m. (Toronto time) on October 30, 2015.
“Central GoldTrust and Silver Bullion Trust unitholders have been burdened for too long by a group of trustees committed to protecting the interests of the Spicer family. It is only through the public spotlight that the variety of undisclosed fees paid to supposedly independent trustees has forced public disclosures and hollow justifications. Sprott’s offers to unitholders are compelling and momentum is building as we continue to show the clear advantages of the offers. The response of the GTU and SBT trustees has been to penalize unitholders with the burden of paying for costly lawsuits and expensive advisors to protect the Spicer family and the fees they receive. We are accordingly increasing our offer to compensate unitholders for this abuse of trust, and encourage them to take advantage of this opportunity to exchange their units for an immediate premium, and trade a management committed to entrenchment to one committed to their best interests,” said John Wilson, Chief Executive Officer of Sprott Asset Management.
Added Wilson, “We have provided extensions to the offers so that no unitholders are left without this opportunity to exit an underperforming investment and enter into a high quality security that functions as intended, reflecting the value of the bullion held in the trust. Sprott appreciates the support of GTU and SBT unitholders to date and currently anticipates these extensions will be the final extensions to the Sprott offers.”
As of 5:00 p.m. (Toronto time) on October 5, 2015, there were 8,194,265 GTU units (42.46% of all outstanding GTU units) and 2,055,574 SBT units (37.60% of all outstanding SBT units) tendered into the respective Sprott offers. Total units tendered as of October 5, 2015, do not include pending units which are typically received on the date of expiration.
GTU and SBT unitholders who have questions regarding the Sprott offers, are encouraged to contact Sprott Unitholders’ Service Agent, Kingsdale Shareholder Services, at 1-888-518-6805 (toll free in North America) or at 1-416-867-2272 (outside of North America) or by e-mail at firstname.lastname@example.org.
Gold’s “Bigger Question” Is Where To Store It – Marc Faber
Marc Faber has again encouraged individuals to own physical gold, be wary of possible government confiscation and said that the big question is where to store your gold.
“ … But I would say an individual should definitely own some physical gold…The bigger question is where should he store it?”
“Because I think if we think it through, the failure of monetary policies will not be admitted by the professors that are at central banks.
They will then go and blame someone else for it and then an easy target would be to blame it on people that own physical gold because they can argue, well these are the ones that do take money out of circulation and then the velocity of money goes down … we have to take it away from them.”
That has happened in 1933 in the US…
With our brilliant governments in Europe that follow US policies and with the ECB talking every day to the Federal Reserve, they would do the same in Europe, take the gold away from people.”
Marc Faber is an eloquent advocate of owning physical gold which he describes as being a way to become “your own central bank.” He believes an allocation to physical gold will serve as vital financial insurance and that Singapore is the safest place to own gold in the world today.
Watch the complete interview with Marc Faber on Marcopolis.net.
Marc Faber Webinar on Storing Gold in Singapore
Today’s Gold Prices: USD 1154.40, EUR 1014.95 and GBP 757.16 per ounce.
Yesterday’s Gold Prices: USD 1164.20, EUR 1021.54 and GBP 758.14 per ounce.
Gold in USD – 1 Year
Gold was marginally higher yesterday and finished $5.10 higher, closing at $1162.40. Silver closed at $15.85, up $0.1 for the day. Euro gold rose to €1023 per ounce, platinum gained $16 to $993 per ounce.
Gold & Silver Jump, Rebound From Overnight Asian Dump
As Asia opened last night, gold and silver came under pressure (ahead of China’s biggest Yuan strengthening since November 2014). As US re-awakens from Columbus Day vacation, it appears demand is back (and in heavy volume) for precious metals…
Keith Barron: Rock bottom
Submitted by cpowell on Mon, 2015-10-12 17:31. Section: Daily Dispatches
1:30p ET Monday, October 12, 2015
Dear Friend of GATA and Gold:
Geologist and mining entrepreneur Keith Barron, founder of Aurelian Resources and discoverer of the Fruta del Norte gold deposit in Ecuador, has resumed writing occasional commentary after a break of nine years, in part because he finds the current depression in the junior mining industry similar to the depression just prior to the last boom. Barron’s commentary is headlined “Rock Bottom” and it’s posted at his Internet site, “Straight Talk on Mining,” here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
(courtesy Koos Jansen/GATA))
Koos Jansen: China’s gold imports seem stronger over half year
Submitted by cpowell on Mon, 2015-10-12 17:08. Section: Daily Dispatches
1:08p ET Monday, October 12, 2015
Dear Friend of GATA and Gold:
Gold researcher and GATA consultant Koos Jansen reports today that China’s gold imports appear to have been stronger in the first half of this year than the first half of last year, even as withdrawals from the Shanghai Gold Exchange are starting to seem less correlated to Chinese demand. Jansen’s analysis is headlined “How Much Gold Is China Importing and Does It Still Correlate to SGE Withdrawals?” and it’s posted at Bullion Star here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
(courtesy Craig Hemke/GATA/TF Metals)
TF Metals Report: Cartel banks playing their same old tricks
Submitted by cpowell on Mon, 2015-10-12 16:45. Section: Daily Dispatches
12:44p ET Monday, October 12, 2015
Dear Friend of GATA and Gold:
Analyzing last week’s Bank Participation Report from the U.S. Commodity Futures Trading Commission, the TF Metal Report’s Turd Ferguson notes that — if one is to believe the data, a dubious proposition — the game remains the same with the monetary metals. That is, the bullion banks sell rallies and cover their shorts on declines. This indicates that they — or the central banks behind them — remain very much in control of the markets. Ferguson’s commentary is headlined “Cartel Banks Playing Their Same Old Tricks” and it’s posted at the TF Metals Report here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
(courtesy Lawrie Williams)
is China close to establishing the yuan/gm gold price?\\
(courtesy Lawrie Williams/GATA)
Reports out of China suggest that the currently chairmanless Shanghai Gold Exchange (SGE) is on the verge of announcing a new chief executive in Jiao Jinpu, a senior official from the Chinese Central Bank – the Peoples Bank of China. (The SGE is an arm of the PBoC). The likely appointment of Jiao is seen as the definitive indicator that the SGE is now very close to setting up its much-heralded Yuan gold price benchmarking system to rival that in London and give China more control over gold prices in the future. Whether this will still happen this year, though, is rather less certain despite earlier suggestions that it would. Jiao will have to work fast to achieve this, but undoubtedly the groundwork is already well under way.
But the Chinese have also shown that they don’t hang around in implementing key new economically-oriented entities once the go-ahead decision has been taken and, according to a Reuters report Jiao is seen as a mover and shaker who should be able to move things forward rapidly assuming that the benchmark system process would be high on the agenda.
The SGE has been without a Chairman since the previous incumbent, Xu Luode, was promoted to Executive Vice President of the PBoC – which itself is an indicator of the importance of gold in the central bank’s policies. The Chinese view gold as a vital element in the global economic system and in its generally accepted push to position the Yuan as one of the world’s accepted reserve currencies, and while not necessarily to replace the US dollar as top dog yet it probably does have this longer term ambition and with far faster domestic growth still than is being seen in the Western economies. It would seem to be well on its way to achieving this.
But first it will need a ‘seat at the table’ and the initial goal will be to have the Yuan recognised as a constituent of the US-dominated IMF’s Special Drawing Right ‘currency’ – the revised new make-up of which has now been deferred into the second half of next year. In theory this delay has been seen as creating time to give China’s currency a little more time to meet the necessary criteria to be part of the SDR system, but in practice perhaps another delaying tactic by the US which recognises the potential threat to its global economic dominance.
China does see gold as providing a significant part of the global economic system and would thus like to have a much bigger influence in its pricing. Chinese banks are beginning to be admitted into the new London benchmarking system introduced earlier this year, but probably at a slower rate than the Chinese would like. Even with the Chinese bank participation it is suspicious of the London price setting mechanism as being potentially under the control of the Western bullion banks which it sees as working on behalf of their respective national central banks. A Yuan gold ‘fix’ in Shanghai is reckoned to be a way of influencing the global gold price (probably equally geared towards the interests of the PBoC, although this will be denied.) There are no level playing fields in global economics, and gold is almost certainly no exception in this.
In its article Reuters quoted a reliable Chinese source as commenting: “The exchange [SGE]will continue with the internationalisation of the Chinese gold market. That should not change because it is not just the ex-chairman’s policy but also state policy”. The last sentence perhaps says it all!
this is huge!!!
Dave Kranzler on the brewing scandal in paper gold and silver. Yesterday it was reported that Mitsui is getting out of the precious metals business. They are a huge trading company. Why are they leaving?
also unbeknownst to me, Dupont and Ferro corp left the silver users club. They know something is brewing and had to leave as a member lest they will be charged with collusion.
(courtesy Dave Kranzler/IRD)
Is A Scandal In Paper Gold/Silver Brewing?
We should realize the suppression of the silver price is overwhelmingly a monetary problem rather than an industrial users collusion. Money creators don’t want silver as a competitor to their wealth transferring synthetic currency. So if the SUA (sounds like a hog call) went away completely and the monetary drive to hinder silver remained, we’ve made perhaps ten percent of the necessary progress. But it seems as if the SUA, better connected in its market intelligence than any silver longs, is in position to know what the megabank and central bank price suppressors know well in advance of any silver long price analysts. – Charles Savoie, link below
Yesterday it was not widely reported that Mitsui Group’s Precious Metals Division was pulling out of the London and New York paper gold markets. Curiously, the Company will continue its precious metals operations in Tokyo and Hong Kong.
I had suggested that this was another “signpost” of the world’s growing distrust of the massive paper leverage embedded in the Comex and the LBMA.
A good friend and business colleague emailed me a response to my post yesterday. He is a scrap gold/silver recycler and gemologist. He and I worked on Wall Street together:
This is even bigger than you’re making it out to be. And I do NOT mean that snidely: combined with the Barclays and Deutsche moves, it signals that the financial center of the world is also shifting east. Not just precious metals. Pretty big statement by each of these banks, and big banks [especially Japanese big banks] don’t make moves like this without careful consideration.
I agree with Brian that this is a big statement move, especially by one of the biggest corporations in the world from a country that typically a U.S. vassal.
However, even more interestingly was the comment posted by Charles Savoie on my blog. For those of you who are relatively new (i.e. since 2008) to the precious metals world, Mr. Savoie has been around a long time and used to work with David Morgan. In other words, he has impeccable silver market “pedigree.” Mr. Savoie engages in “slavish” silver market research and left this comment:
The two largest members, Du Pont and Dow Chemical, members since before 1950—pulled out as of early last summer. Tiffany & Company and Ferro Corporation also withdrew. The Mitsui interests have usually also been listed. Someone is attempting to sidestep a scandal. Forgive and forget that they were members? Not in my perspective they remain culpable of collusive price suppression for several generations.
Mr. Savoie presented his cash in an article published and uploaded on the SGTReport in July: The Silver Association Is Shrinking
Something has definitely been occurring out of sight of auditors and all other forms of accountability. I fear that many of the widely read commentators who present analysis that is 100% reliant on the validity of what is being reported by LBMA and Comex banks are missing a much bigger event unfolding. In fact, I believe that the true availability of deliverable physical gold/silver is considerably less than what is being reported by the western bullion banks (and the Fed, ECB, BoE). If I’m right about this, then most of the recent commentary/analysis that has been published is highly misleading.
The elitists always drop small hints to warn us about impending disasters. Warren Buffet warned about 9 years ago that the U.S. was in danger of becoming a nation of serfs. Right now over 50% of the country is dependent on some form of Government transfer payment and nearly 1 in 6 people receive food stamps…I would suggest hat the recent withdrawal of highly prominent banks from the London and NY paper bullion markets is another “hint” of a brewing catastrophe.
On the Comex the paper to deliverable gold ratio has spiked up to the horrifying ratio of 200:1. We can only guess at the true paper to physical ratio of gold in London. Of course, that 200:1 ratio is a guess as well unless you are naive enough to believe the bank-issued Comex inventory reports.
Yes, indeed, a scandal is brewing. And it looks like several rats are folding their hands and running for the exits…
1 Chinese yuan vs USA dollar/yuan rises a bit in value, this time at 6.3415Shanghai bourse: down .17%, hang sang: red
2 Nikkei closed down 203.93 points or 1.1%
3. Europe stocks all in the red /USA dollar index up to 94.91/Euro up to 1.1360
3b Japan 10 year bond yield: falls slightly to .315% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 120.26
3c Nikkei now just above 18,000
3d USA/Yen rate now above the important 120 barrier this morning
3e WTI: 47.64 and Brent: 50.12
3f Gold up /Yen up
3gJapan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.
Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.
3h Oil 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 .572 per cent. German bunds in negative yields from 5 years out
Greece sees its 2 year rate rises to 10,01%/: still expect continual bank runs on Greek banks
3j Greek 10 year bond yield rises to : 7.88%
3k Gold at $116650 /silver $15.95 (10 am est)
3l USA vs Russian rouble; (Russian rouble down 37/100 in roubles/dollar) 62.38
3m oil into the 47 dollar handle for WTI and 50 handle for Brent/ China purchases huge supplies from Saudi Arabia
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 .9611 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0918 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 negativity to +.572%/German 5 year rate negative%!!!
3s The ELA lowers to 87.9 billion euros, a reduction of 1.0 billion euros for Greece. The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”. Next step for Greece will be the recapitalization of the banks and that will be difficult.
4. USA 10 year treasury bond at 2.07% early this morning. Thirty year rate below 3% at 2.90% / yield curve flatten/foreshadowing recession.
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Futures Slump After China Imports Plunge, German Sentiment Crashes, UK Enters Deflation
For the past two weeks, the thinking probably went that if only the biggest short squeeze in history and the most “whiplashy” move since 2009 sends stocks high enough, the global economy will forget it is grinding toward recession with each passing day (and that the Fed are just looking for a 2-handle on the S&P and a 1-handle on the VIX before resuming with the rate hike rhetoric). Unfortunately, that’s not how it worked out, and overnight we got abysmal economic data first from China, whose imports imploded, then the UK, which posted its first deflation CPI print since April, and finally from Germany, where the ZEW expectation surve tumbled from 12.1 to barely positive, printing at just 1.9 far below the 6.5 expected.
As we reported overnight, while Chinese exports declined a better than expected 1.1% in September, ostensibly to validate the government’s decision to devalue the Yuan, it was the crash in imports, which plunged by 17.7% (and down a whopping 20.4% in dollar terms, 50% worse than August), falling or 10 consecutive months, or the longest negative streak in 6 years, that has spooked markets, and ended any temporary goodwill China’s economy may have had when it closed its market for a week at the end of September, which in turn pushed the country out of the market’s subconsciousness, and precipitated the start of the torrid rally in global stocks. As it turned out, nothing had changed, and in fact the Chinese economy was getting even worse.
The commentary was uniformly negative, via BBG:
Nie Wen, Shanghai-based economist at Huabao Trust:
- Many Chinese manufacturers purchase raw material and re-process them before selling them overseas, so low imports growth may mean weak export outlook as well
- Sept. imports data show manufacturing sectors continue to deteriorate while industrial demand is weak, which puts 3Q GDP at risk to fall below 7%
Xu Gao, Beijing-based chief economist at Everbright Securities:
- Sept. imports data reflects weak domestic demand
- Local stock market uncertainties may also lower the confidence in private sectors
- Exports sectors are unlikely to boost growth in China now when global demand hasn’t recovered as earlier expected
- Sees 3Q GDP growth at 6.8% vs 7.0% in 2Q
The confirmation that China’s slump is going nowhere fast, in turn ended the recent rally in EM currencies, and saw both the benchmark EM FX, the Ringit and Rypiah sliding, however it was the confirmation that China’s woes are spreading to Germany, where the Volkswagen scandal is also ravaging the domestic economy, not to mention the refugee crisis, that sent the German ZEW index of expectations plunging from 12.1 to just 1.9.
But while any other country would use this latest slide in the economy (German government GDP forecasts were also cut from 1.8% to 1.7% overnight) to demand even more money printing, the stern Teutonic mentality would not all this and as German Finance Minister Wolfgang Schaeuble said on Tuesday he was not happy about the low interest rate environment, which he said made life difficult, especially regarding pension provisions. “I’m unhappy about the low interest rate,” he said at an engineering conference in Berlin.
“It’s difficult if a normalization of monetary policy is a big risk,” German Finance Minister Wolfgang Schaeuble says. “That almost leads to the conclusion that we’re in a situation like a drug addict.”
It only took you 7 years to figure this out?
And then the cherry on top came from the UK, a country whose Goldman banker-controlled central bank was recently making very loud noises about hiking rates, to announce it just had its first negative CPI print since April as the global exporting of deflation by China and Japan and all of NIRPy Europe of course goes into second gear.
Looking at the market, Asian stocks traded lower following weakness across the commodities complex and discouraging Chinese trade data. Nikkei 225 (-1.1%) and ASX 200 (-1.11%) were led lower by energy names following the around-4% decline in WTI, while mixed Chinese trade figures added to the subdued tone as a narrower than expected decline in exports and the largest trade surplus on record, were offset by a collapse in imports. This saw indecisive trade the in the Shanghai Comp. (+0.2%) where weakness can also be attributed to profit taking following yesterday’s firm gains. Finally, JGBs traded higher as the weakness in Asian bourses
supported fixed income, while the BoJ also entered the market to buy JPY 470 bn of government bonds.
The release of yet another disappointing macroeconomic data out of China, this time in the form of trade balance which showed that China’s imports slid for the 11th straight month, prompted flows away from riskier assets and instead supported Bunds. At the same time, worse than expected ZEW survey expectations (1.9 vs. Exp. 6.5), with economists noting that Volkswagen scandal has dampened the outlook for the German economy, further buoyed flight to quality trade.
Financials underperformed on the sector breakdown, with UBS (-1.30%) and Credit Suisse (-1.40%) shares coming under selling pressure in reaction to source reports suggesting that Switzerland is to put 5% leverage ratio on large Swiss banks. On the other hand, SABMiller shares surged after it was reported pre-market that the key terms of a possible deal with AB InBev have been agreed upon.
In commodities, WTI crude futures remained near yesterday’s lows where it fell around 4% after OPEC downgraded its demand forecast and several large banks remained bearish on prices. Additionally, in what has become a schizophrenic tradition, the IEA’s monthly oil report predicted that the oil surplus in 2016 will persist as demand growth slows, while the Ex-IEA chiuef Tanaka said that oil will price below $100 until at least 2020, contradicting what OPEC said just a day earlier, and ending any hopes for a continuation of the oil rally.
Gold prices retreated from near 3-month highs overnight amid profit taking alongside widespread weakness across the commodities complex. Elsewhere, copper and iron ore prices were also pressured following weak trade figures from China which showed imports slumped about 20%.
In FX, despite benefiting from the aforementioned M&A related flow, GBP’s strength gradually waned and GBP/USD printed fresh session low following the release of softer than expected UK inflation data (CPI Y/Y -0.10% vs. Exp. 0.00%), which according to the ONS was pushed lower by clothing, fuel and gas.
Elsewhere, disappointing trade balance data from China weighed on commodity sensitive currencies, with the likes of CAD, AUD and NZD all weaker heading into the North American crossover. Of note, the BoJ released their minutes overnight, however failed to provide any new insights.
Overnight, Fed’s Lockhard (Voter, Neutral) reiterated that interest rates will be lifted in 2015, while going forward, market participants will get to digest the release of the latest US Fed discount rate minutes, comments from Fed’s Bullard and Dudley.
There is nothing on the economic calendar today, while on the earnings front we get JNJ – which just announced a $10 billion buyback – reporting premarket, while Intel reports after the bell, as does, surprisingly, JPM in a change from its usual reporting time first thing in the morning.
Bulletin Headline Summary from Bloomberg and RanSquawk
- Flight to quality trade dominated the price action in Europe, following disappointing Chinese trade balance release and also worse than expected German ZEW survey
- Despite benefiting from the aforementioned M&A related flow, GBP’s strength gradually waned and GBP/USD printed fresh session low following the release of softer than expected inflation data, which according to the ONS was pushed lower by clothing, fuel and gas
- Going forward, market participants will get to digest the release of the latest US Fed discount rate minutes, comments from Fed’s Bullard and Dudley, as well as earnings by J&J, JP Morgan and Intel
- Treasuries rally overnight after China’s import data missed estimates, sending world equity markets lower; U.S. economic data releases this week include CPI, PPI and retail sales.
- Switzerland’s finance ministry will require the country’s biggest banks to have capital equal to about 5% of total assets after UBS Group AG and Credit Suisse Group AG sought to win easier terms, according to people briefed on the deliberations
- Britain’s inflation rate turned negative for only the second time since 1960 in September, reflecting a weak price backdrop that the Bank of England has warned will persist into 2016
- Anheuser-Busch InBev NV agreed to buy SABMiller Plc for almost 69 billion pounds ($106 billion) to clinch a record industry deal after several rejections, creating a brewer that will account for a third of all beer sales globally
- The $12.9 trillion U.S. government bond market — long considered the deepest and most liquid in the world — is now plagued by more bouts of turbulence than at any time since at least the 1970s
- Global oil markets will remain oversupplied next year as demand growth slows and Iranian exports are poised to recover with the lifting of sanctions, the IEA said
- Since mid-August, investors have poured a record $4.5 billion into the Next Funds Nikkei 225 Leveraged Index ETF, a security designed to rise or fall twice as fast as its namesake equity gauge; the Nikkei 225 Stock Average’s loss over that period comes out to ~21%
- $26.55b IG priced last week, $400m high yield. BofAML Corporate Master Index OAS narrows 1bp to +173, YTD low 129. High Yield Master II OAS narrows 13bp to +613, YTD low 438
- Sovereign 10Y bond yields slightly lower. Asian and European stocks fall, U.S. equity-index futures decline. Crude oil, copper and gold drop
DB’s Jim Reid completes the overnight event summary
It’s straight to China this morning where the latest September trade data is out and it’s made for fairly mixed reading. Bettering expectations, exports were down -1.1% mom in Yuan terms last month, following consensus estimates for a drop of -7.4% and which comes on the back of declines of -6.1% and -8.9% in the two months previously. Imports, however, have slowed considerably (-17.7% mom vs. -16.5% expected), the steepest drop since May. That’s seen China’s trade surplus increase to Rmb378bn (vs. Rmb292bn expected), from Rmb368bn in August. In USD terms it’s largely the same story, with exports (-3.7% mom vs. -6.0%) down but ahead of expectations, and imports (-20.4% mom vs. -16.0% expected) falling sharply and more than expected.
Chinese equity markets are down post the data, although they have generally chopped around this morning. The Shanghai Comp (-0.30%) and CSI 300 (-0.38%) are lower, taking most Asian bourses with them. Japanese markets are on the back foot after returning from yesterday’s public holiday with the Nikkei -1.06%, while the Hang Seng (-0.49%), Kospi (-0.36%) and ASX (-0.55%) are also lower. Oil markets fell sharply following the data, but are still up nearly a percent this morning after sharp falls yesterday (see below). The Aussie Dollar has dropped half a percent, while EM currencies are generally half to a percent lower across the board in Asia this morning.
With Japan on holidays yesterday and the US Treasury market shut for Columbus Day, it was unsurprisingly pretty quiet in markets. Much of the price action in equities was relatively benign. Despite a strong showing in Asia, European equities ran out of steam and closed down a tad with the Stoxx 600 (-0.28%) bringing to an end its run of six consecutive sessions of gains. The S&P 500 (+0.13%) did nudge into positive territory in the last hour of trading, with volumes some 30% lower than the three-month average and with investors no doubt also staying on the sidelines somewhat ahead of earnings releases this week.
The Dow (+0.28%) also closed higher and has now finished in positive territory for the last seven sessions, while the VIX extended its move lower, down another 5% yesterday. The tech space was also in focus following the news of Dell’s agreed takeover of EMC Corp in the largest deal ($67bn) in the sector in history and one which is set to come with a decent slug of debt financing alongside.
US equities managed to shrug off what was a steep leg lower in the Oil complex yesterday following some production numbers out of OPEC. WTI (-5.10%) and Brent (-5.30%) both fell back below $50/bbl after OPEC’s monthly report showed that the cartel produced 31.57m barrels a day in September, the most since April 2012 and up over 100k barrels a day from August. Despite the numbers, OPEC did however revise lower its forecasts for production out of non-OPEC countries this year and next, consistent with the recent EIA report. A comment from OPEC said that the anticipated fall in excess supply in the market should result ‘in more balanced oil market fundamentals’.
In the absence of the US bond market, European yields were largely lower across the board yesterday, 10y Bunds in particular down nearly 4bps to 0.576%. Yields in Italy and Spain were down a couple of basis of points too, however it was a different story in Portugal where both bonds (10y yield +4.1bps) and equities (PSI -2.97%) were notable underperformers relative to the rest of Europe. That appears to be as a result of the news that Portugal’s opposition Socialists Party (PS) are exploring the possibility of joining forces with the radical Left Bloc and hardline Communist Party (PCP) in forming a government following the recent inconclusive election earlier this month (according to the FT). The Socialist Leader, Costa, confirmed the contact with both the Left Bloc and PCP, as did the leader of the Left Bloc who was quoted in Reuters as saying that ‘conditions have been created for a basis consensus on the Left Bloc’s terms for allowing the creation of a government’. While a scenario where by the political scene switches from a centre-right coalition to a more anti-austerity focused Government is by no means certain, it’s a situation worth keeping a close eye on.
Yesterday’s Fedspeak saw both Lockhart and Evans speaking again, largely reiterating their comments from Friday. Lockhart emphasised that October is ‘live’ and that he is comforted by the reduction in volatility in markets recently. However a large part of this is due to the Fed being priced out of the market until next Spring so the argument is a bit circular. Evans confirmed his view that in his mind liftoff in mid-2016 is more appropriate, while Fed Governor Brainard added to this more dovish stance and highlighted the clear uncertainty at present, saying that ‘I view the risks to the economic outlook as tilted to the downside’ and that ‘the downside risks make a strong case for continuing to carefully nurture the US recovery and argue against prematurely taking away the support that has been so critical to its vitality’. The view of the Fed delaying was shared by China’s Finance Minister Lou yesterday, quoted in the Chinese press as saying that the Fed ‘isn’t at the point of raising rates yet and under its global responsibilities it can’t raise rates’.
Looking ahead to what’s a busier calendar today, we’re kicking off this morning in Germany with the final September CPI print. Shortly following this we’ve got more inflation data, this time out of the UK with the September CPI print while RPI and PPI readings will also be due along with the BoE credit conditions and bank liabilities survey. Elsewhere, the October German ZEW survey will also be closely watched. Over in the US the NFIB small business optimism reading for September is the only notable release, while the only Fedspeak due is Bullard, due to speak at 1pm BST. As mentioned, one eye will be on the US earnings too with the highlights being Johnson & Johnson, JP Morgan and Intel.
AsiaPacStocks Tumble After Chinese Trade Data Signals Growing Global Growth Scare
After an initial knee-jerk reaction (perhaps on better-than-expected exports – signalling perhaps the devaluation ‘worked), AsiaPac stocks are tumbling rapidly as the 11th monthly decline in imports (down a stunning 17.7% YoY in Yuan terms) signaling significant domestic weakness (and thus a larger drag on global growth).
As Bloomberg reports,
China’s imports extended the longest losing streak in six years, underscoring the headwinds to global growth from a rebalancing in the world’s second-largest economy and declining commodity prices.
Imports plunged 17.7 percent in yuan terms in September, widening from a 14.3 percent decrease in August and an 11th straight decline. Overseas shipments fell 1.1 percent in September in yuan terms, the customs administration said Tuesday, compared with a 6.1 percent drop in August. The trade surplus was 376.2 billion yuan ($59.4 billion).
The import slide reflects the pressure China’s economic slowdown is having on global growth and this year’s plunge in commodity prices. On the export side, signs of stabilization suggest improved external demand and offers the first indication that the People’s Bank of China’s surprise devaluation of the yuan in August is giving a boost to competitiveness.
“Import growth remained sluggish, suggesting weakening domestic demand, particularly investment demand,”said Yang Zhao, China economist at Nomura Holdings Inc. in Hong Kong. “We maintain our view that GDP growth will decline to 6.7 percent in the third quarter.”
Of course, policymakers are out with more promises…
- *DJ China Customs Spokesman: Weaker Yuan to Help Boost Exports
Which we are sill sound an awful lot like currency manipulation to The US Congress.
This is interesting: a private telecom supply company announced last week that it was going public. Then last night, much to the astonishment of investors, they announced their bankruptcy\
(courtesy zero hedge)
Thousands Of Angry Unpaid Chinese Workers Protest Shocking Bankruptcy Of Major Telecom Supplier
When two weeks ago we reported what may have been the biggest layoff announcement in China’s current economic turmoil, after the second largest coal company Longmay Group announced it would lay off 100,000 – or about 40% of its entire workforce – while dramatic, the news did not shock too many. After all, China’s commodity fiasco (as a reminder, as we first reported, at current commodity prices more than half of Chinese companies do not generate enough cash flow to even cover their interest expense) is known to most and as such rationalization of this kind are only just starting: it is not exactly clear how China will deal with millions of suddenly unemployed workers, but it will only cross that bridge when it comes to it.
Far more disturbing was today’s news from China’s prosperous, and far more high-tech, city of Shenzhen, and specifically major telecom supplier Fu Chang Electronic Technology Co. (also known as Fosunny), which supplies parts to domestic telecommunication giants such as Huawei Technologies Co and ZTE Corp. as well as international telecom companies like Vodafone and AT&T.
The company made headlines last week after reports that it had told clients it was planning to list on the stock exchange. The news couldn’t have been more wrong because on Thursday, instead of going public, the company announced it would be going dark, when it issued a statement saying it was ceasing operations due to liquidity problems resulting from legal and debt issues.
Even more surprising is that Fu Chang wouldn’t be the first – Fosunny is the third supplier of plastic parts to the telecom industry to go bankrupt in the past month, the Global Times said.
The immediate outcome of the announcement, according to IBtimes, was that thousands of factory workers and suppliers staged protests outside the company’s Shenzhen office, where China Business News showed pictures of a line of police in helmets confronting a group of protesters.
The Global Times says that protests started after the Thursday announcement and continued through the weekend, with thousands of people gathered outside the company in the Longgang District of Shenzhen, demanding compensation, according to Chen Li, whose company supplied packaging materials for Fu Chang. Chen told the Global Times on Sunday that the impact on his company may be severe.
“It might even lead to liquidity problems for our company and we might end up going out of business,” he said, adding that Fu Chang owes his company 2.51 million yuan ($395,600).
Fu Chang owes banks 190 million yuan in debt and suppliers 270 million yuan, and it is two months behind on pay for its employees, the National Business Daily reported on Friday. The newspaper also said the shutdown would affect more than 3,800 employees and more than 300 suppliers.
In a troubling sign for China’s supposedly thriving telecom sector, Global Times cited experts as saying such firms “have seen their profit margins squeezed by rising labor costs in southern China, and a slowdown in both international and domestic demand. China’s smartphone sales contracted in the first half of this year, for the first time since 2009, while the country’s overall exports fell more than 8 percent in August, and more than 4 percent in September, compared to last year.”
Labor experts told International Business Times recently that factory workers’ wages have risen in southern Guangdong province in particular, not least because the new generation of better-educated rural migrant workers — the mainstay of China’s labor force over recent decades — is less willing to do mindless production line work. As a result, Guangdong has seen some of its lower value-added companies close, and others move out to cheaper parts of Southeast Asia or inland parts of China.
It is troubling (not so much for the business cycle which demands it but for China’s increasing lack of centralized control) that what was once taboo, namely Chinese corporations defaulting, has now become a practically daily occurrence.
It is even more troubling that China’s cash flow weakness appears to have spread far more rapidly and broadly than even we anticipated, and is impacting industries which most had though would be immune from a hardish landing, if only in the beginning.
But where it is most troubling, is that what recently became the largest market for Apple’s iPhones suddenly appears to be stuttering. And while the Fed can pretend all it wants that there are no substantial and direct connections between China and the US (just don’t tell that to Bravo TV’s Millon Dollar Listing which while thoroughly fake would absolutely not exist without Chinese buyers), if and when the world’s largest company by market cap admits just how bad the Chinese reality is, not even the US government secretly buying up all of AAPL’s excess inventory (remember: Apple is the NSA’s best friend) will save the gargantuan gadget maker which simply can not exist in a world where the marginal consumer, whether in Boston or Beijing, has tapped out.
“Insurgents” Shell Russian Embassy In Syria After Al-Qaeda Calls For Jihad Against Russian Civilians
As the twin blasts that ripped through Ankara on Saturday underscore, being around large gatherings of people who are protesting (peacefully or otherwise) in public places can be dangerous if you’re in a Mid-East war zone. Large crowds make for easy targets and as we’ve seen in Turkey, at least some governments seem to believe that inflicting casualties on civilians is a legitimate tool for shaping public opinion.
With that in mind, consider that on Tuesday, “insurgents” hit the Russian embassy in Damascus as more than 300 people gathered to express their support for Moscow’s intervention in Syria. As AFP reports:
Two rockets struck the Russian embassy compound in Damascus on Tuesday sparking panic as several hundred people gathered to express their support for Moscow’s air war in Syria, AFP journalists said.
Some 300 people had begun to gather for a demonstration backing Russia’s recent intervention in Syria when the rockets crashed into the embassy compound in the Mazraa neighbourhood of the capital, the journalists at the scene said.
There was widespread panic among the demonstrators, who moments earlier had been waving Russian flags and holding up large photographs of Russian President Vladimir Putin.
Here’s a bit of amusing color from ABC:
Some held placards that read: “Thanks Russia” and “Syria and Russia are together to fight terrorism.”
“President Putin’s stances were absolutely positive for Syria,” said 39-year-old civil servant Nizar Maqssoud.
Student Osama Salal, 18, said: “All the West stood against us. Only Russia backed us . we are all here to thank Russia and President Putin.”
Interfax says no one was killed or wounded. And here’s Lavrov: “This is… most likely intended to intimidate supporters of the fight against terror and prevent them from prevailing in the struggle against extremists.”
Meanwhile, the head of al-Nusra, Abu Mohamed al-Jolani, is out raising the spectre of the Soviet-Afghan war on the way to calling for a jihad against Russian civilians. We go back to AFP:
“If the Russian army kills the people of Syria, then kill their people. And if they kill our soldiers, then kill their soldiers. An eye for an eye,” Abu Mohamed al-Jolani, the head of Al-Nusra Front, said in an audio recording released late Monday.
He pledged that Moscow’s air war in Syria, which began on September 30, would have dire consequences for Russia.
“The war in Syria will make the Russians forget the horrors that they found in Afghanistan,” Jolani said, adding: “They will be shattered, with God’s permission, on Syria’s doorstep.”
“Delay the disputes until the demise and smashing of the Western Crusader and Russian campaign on Syrian land,” he said.
“I call on all armed factions to gather the highest number of shells and rockets and to hurl hundreds of rockets every day at the Nusayri villages, just like the scoundrels do to the Sunni villages and towns, to make you taste what our people are suffering,” Jolani said.
Nusayri is a derogatory term for Alawites, considered by Al-Nusra’s extreme interpretation of Islam to be apostates.
“When they will stop attacking our village and cities, we will stop attacking theirs,” he added.
At the risk of overthinking things, both the “incident” in Damascus and the jihad call come at a rather convenient time for the West and its various regional, Sunni allies. President Obama has insisted that Russia will get itself into a “quagmire” in Syria only so far, the gains secured on the ground by Hezbollah and other troops loyal to Iran (with Russian air support) seem to suggest that this may end up being a rather quick victory.
Given that, it’s interesting that a Sunni extremist group which has received support from Assad’s Mid-East enemies should come out and describe the very same quagmire that Obama suggested would unfold. Additionally, lobbing rockets at civilians who are staging a pro-Russia rally might well be construed as a helpful tool in perpetuating the idea that Moscow’s involvement will make things worse for Syrians, another line parroted ceaselessly in the West.
Then again, the suggestion that Russian civilians will be targeted in retailiation for any civilians killed in Syria will only serve to support Putin’s “we must attack them before they come to our homes” pronouncement and thus isn’t likely to dissuade The Kremlin.
One should expect that the anti-Russian pronouncements from the various Sunni extremist groups fighting for control of the country will only increase in the coming days and weeks, and on that note, we suggest you first recall the following line from a leaked diplomatic cable ca. 2006describing the preferred strategy for destabilizing the Assad regime…
— PLAY ON SUNNI FEARS OF IRANIAN INFLUENCE: There are fears in Syria that the Iranians are active in both Shia proselytizing and conversion of, mostly poor, Sunnis. Though often exaggerated, such fears reflect an element of the Sunni community in Syria that is increasingly upset by and focused on the spread of Iranian influence in their country through activities ranging from mosque construction to business. Both the local Egyptian and Saudi missions here, (as well as prominent Syrian Sunni religious leaders), are giving increasing attention to the matter and we should coordinate more closely with their governments on ways to better publicize and focus regional attention on the issue.
…and then consider the following from AP, describing more of Jolani’s jihad call…
The jihadi leader promised to pay 3 million euros ($3.42 million) to whomever kills Assad and 2 million euros ($2.28 million) to whomever kills Hezbollah leader Sheikh Hassan Nasrallah, whose men are fighting along with Assad’s forces.
Euro/USA 1.13600 up .0009
USA/JAPAN YEN 119.87 DOWN .168
GBP/USA 1.5226 down .0109
USA/CAN 1.3008 up .0037
Early this Monday morning in Europe, the Euro rose by 9 basis points, trading now just above the 1.13 level rising to 1.1360; Europe is still reacting to deflation, announcements of massive stimulation, a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, and the Ukraine,along with rising peripheral bond yields, and the failure in ramping of the USA/yen cross above the 120 yen/dollar mark , causing most bourses to fall. Last night the Chinese yuan rose in value. The USA/CNY rate at closing last night: 6.3415 up .0205 (yuan lower)
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 slight northbound trajectory as settled slightly up again in Japan by 17 basis points and trading now just below the all important 120 level to 119.87 yen to the dollar.(and thus the necessary ramp for all bourses failed in propelling bourses)
The pound was down this morning by 109 basis points as it now trades well above the 1.52 level at 1.5226.
The Canadian dollar is now trading down, 37 basis points to 1.3008 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 Tuesday morning: closed down 203.93 or 1.1%
Trading from Europe and Asia:
1. Europe stocks all in the red
2/ Asian bourses mostly in the red … Chinese bourses: Hang Sang red (massive bubble forming) ,Shanghai slighty in the green (massive bubble ready to burst), Australia in the red: /Nikkei (Japan)red/India’s Sensex in the red/
Gold very early morning trading: $1165.50
Early Tuesday morning USA 10 year bond yield: 2.07% !!! down 2 in basis points from Monday night and it is trading well below resistance at 2.27-2.32%. The 30 yr bond yield falls to 2.90 down 2 in basis points.
USA dollar index early Tuesday morning: 94.93 up 4 cents from Monday’s close. (Resistance will be at a DXY of 100)
USA/Chinese Yuan: 6.341 5 up .0205 (Chinese yuan down)
First the NYSE performance today:
Biotechs Bruised & Trannies Trounced As VIX ‘Losing’ Streak Comes To An End
Today’s market analogy… (hint – gets exciting at around 40 seconds)
We dumped (on China data, major CNH weakness into China close, and European data), we pumped (because markets opened in ‘Murica) and we dumped again (when Europe closed and overnight high stops were tagged) on absolutely no news whatsoever…
Ugly day for Trannies, dumped into the close…
Just as we warned…WTF was going on yesterday?
From Friday, The Dow was sustained green for as long as possible as Trannies got trounced…
VIX’s 10-day “losing” streak has come to an end…
VIX is catching ‘up’ to stocks…
As it appears VXX found support having re-filled the Black Monday gap…
Biotechs were battered and broke a key support trendline… (prepare for the Hillary-bashing)
Ahead of the big banks’ earnings, credit markets remain notably more concerned…
Stocks seemed to track Crude perfectly – giving up on USDJPY and bonds After Europe Closed…
With the re-opening of the bond market, buyers returned (as it appears Dell/EMC rate locks have been completed)…
The USDollar trod water for the second day against the majors (despite major AUD weakness)…
But soared 0.4% against Asian FX – its biggest gain in 7 weeks…
Gold and silver gained on the day, jumping at the US open after weakness overnight, while crude and copper slid…
Crude dumped on China trade data then bounced at the US open on algo-idiocy, before fading back… biggest 2-day loss in 2 months…
Gold & Silver dropped on China Trade then ripped after the 8amET witching hour…
Bonus Chart: Rate-hikes are disappearing over the horizon again…
Bonus Bonus Chart: What’s Next? (h/t @StockCats )
what on earth is going on here!!!
these guys are huge !
(courtesy zero hedge)
Fortress Group Halted After Bouncing Back From Overnight Tumble
Following last night’s ‘reports’ that Fortress Investment Grouop will shutter its once colossal macro hedge fund (and Mike Novogratz will leave), FIG shares bounced back into the green after tumbling 10% overnight. However, FIG shares have just been halted, news pending…
We presume this is the “news” that confirms the reports…
JPMORGAN after the bell misses across the board on disappointing results.
(courtesy zero hedge)
JPMorgan Misses Across The Board On Disappointing Earnings, Outlook; Stealthy Deleveraging Continues
Maybe we now know why JPM decided to release results after market close instead of, as it always does, before the open: simply said, the results were lousy top to bottom, the company resorted to its old income-generating “gimmicks”, it charged off far less in risk loans than many expected it would, and its outlook while hardly as bad as it was a quarter ago, was once again dour.
First, the summary results, in which JPM saw $23.5 billion in non-GAAP net revenues, because yes, JPM has a pre-GAAP “reported revenue” item which was even lower at $22.8 billion…
… missing consensus by $500 million, down $1 billion or 6.4% from a year ago.
While the Net Income at first sight seemed to be a beat, printing at $1.68, this was entirely due to addbacks and tax benefits, which amounts to a 31 cent boost to the bottom line, while for the first time, JPM decided to admit that reserve releases are nothing but a gimmick, and broke out the contribution to EPS, which added another $0.05 to the bottom line.
There were two surprises here: first, JPM’s legal headaches continue, and the firm spent another $1.3 billion on legal fees during the quarter – one assumes to put the finishing touches on the currency rigging settlement. Also, as noted above, instead of taking a credit charge, i.e., increasing reserve releases, JPM resorted to this age-old gimmick, and boosted its book “profit” by $450 million thanks to loan loss reserve releases, the most yet in 2015; ironically this comes as a time when JPM competitors such as Jefferies are taking huge charge offs on existing debt. It appears JPM is merely doing what Jefferies did for quarters, and is hoping the market rebounds enough for it to not have to mark its trading book to market.
While the release of reserves helped JPM in this quarter, unless the economy picks up substantially next quarter, JPM’s EPS will be hammered not only from the top line, but also from the long-overdue rebuilding of its reserves which will have to come sooner or later.
Completing the big picture, was something rather troubling we first noticed last quarter: JPM’s aggressive push to deleverage its balance sheet, by unwinding billions in deposits. Indeed, as the bank admits, it has now shrunk its balance sheet by a whopping $156 billion in 2015, driven by a massive reduction in “non-operating deposits” of over $150 billion. Perhaps the US does not need NIRP: it appears banks like JPM are simply saying not to deposits.
Then stepping away from the bank, and looking just at JPM’s most important division, its Investment Bank, there were no major surprises there: Fixed Income Revenue crashed by $854 million Y/Y to $2.933 billion, which however was in line with sellside expectations. The silver lining: equity markets revenue of $1.4 billion posted a modest improvement of $173 million from Q3 2014.
This is how JPM explained it:
- Fixed Income Markets of $2.9B, down 11% YoY, excluding business simplification
- Equity Markets of $1.4B, up 9% YoY, driven by strong performance across derivatives and cash
- Firm loans-to-deposits ratio of 64%, up 8% since year-end
This was up to 61% last quarter, and is indicatively of the end of QE as the fed no longer pumps the company full of deposits without a matching loan increase.
Perhaps the most interesting thing about this slide was JPM’s admission at the very end that it had suffered $232 million in credit costs “reflecting higher reserves driven by Oil & Gas.” Considering this was a decline from the $299MM cost from a year ago, one wonders just how (in)sufficient this will be if and when the oil rebound once again fizzles.
Curiously, despite the most recent tumble in yields, JPM was happy to reported that after NIM rose by 2 bps last quarter, in Q3, “Firm NIM is up 7bps QoQ largely driven by positive mix impact of lower cash balances and higher loan balances.”
Finally, the outlook: while hardly as dour as last quarter when as a reminder JPM said “for 3Q15, expect business simplification to generate YoY negative variance in Markets revenue of 9%, with an associated reduction in expense”, this time the revenue guidance cut is only 2%. We expect this number to prove insufficient if the current market volatility continues.
JPM also said to “Expect 4Q15 YoY core loan growth to continue at 15%+/-.” So a 30% swing from top to bottom.