Gold: $1080.90 down 10 cents (comex closing time)
Silver $14.20 down 2 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 notice for nil ounces. Silver saw 0 notices for nil oz.
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 209.70 tonnes for a loss of 93 tonnes over that period.
In silver, the open interest surprisingly fell by a tiny 660 contracts despite silver being down by 4 cents in yesterday’s trading. The total silver OI now rests at 165,328 contracts In ounces, the OI is still represented by .826 billion oz or 118% 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 by a huge 3940 contracts to 424,047 contracts as gold was down $3.90 yesterday. It seems the modus operandi of the bandits is to liquefy gold/silver OI as be approach first day notice on Monday, November 30. They succeeded in gold but not silver. We had 0 notices filed for nil today.
We had no change in gold inventory at the GLD / thus the inventory rests tonight at 661.94 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. Our 670 tonnes of rock bottom inventory in GLD gold has been broken. 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, after they deplete the GLD will be the FRBNY and the comex. In silver, we had no change in silver inventory to the tune of / Inventory rests at 315.111 million oz.
We have a few important stories to bring to your attention today…
1. Today, we had the open interest in silver fall by a tiny 660 contracts down to 165,328 despite the fact that silver was down by 4 cents with respect to yesterday’s trading. The total OI for gold fell by a considerable 3,940 contracts to 424,047 contracts with gold down $3.90 yesterday.
The bankers are succeeding in lowering the OI as the upcoming big December delivery month approaches. They did not have any luck in silver. First day notice is Monday, Nov 30.
2. a)Gold trading overnight, Goldcore
b) COT report
ii) China doubles margin requirements which will no doubt send stocks plummeting on Monday
iii) the biggest risks to China and the most under reported one (civil unrest)
iv We have been pointing out to you the risk in China due to the mammoth non performing loans. Bloomberg reports that these are rising.
You will recall that Kyle Bass believes that the non performing loans in China is around 10% out of a total of 31 trillion usa. That means 3 trillion usa is non performing or an amount equal to the entire Chinese dollar reserves.
i) In September, we highlighted that the Australian housing bubble was bursting due to Chinese cash controls coupled with Australia’s own controls. This past month the drop in prices have decimated the housing sector in Australia.
(courtesy zero hedge)
9 USA stories/Trading of equities:
i) Retail sales miss badly, second worse this year
ii) When retail sales plummet, generally we are in a recession
iii) retail sales faltering is causing a bloodbath in retail stocks on NYSE and NASDAQ
iv) Fed is now confused by PPI falters badly as there is no “inflation” in the pipeline for the Fed
v) “From China with love!!!”
Deflation is in as inflationary outlook at 35 year lows/U of Michigan
(courtesy U of Michigan survey/zero hedge)
vi) Fed speaks are having a failure to communicate
10. Physical stories
i) Reuters Jan Harvey reports on record gold and silver coin sells despite falls in gold ETF’s
ii UK Telegraph’s Chan talks about a huge buying spree in gold inside China;
iii) 38% of all Hong Kong comex gold leaves the vaults
Let us head over to the comex:
The total gold comex open interest fell from 427,984 down to 424,047 for a loss of 3940 contracts as gold was down $3.90 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. It looks like the latter has stopped. The November contract lost 1 contract down 213 contracts. We had 0 notices filed yesterday, so we lost 1 gold contract or 100 oz of gold that will not stand for delivery in this non active delivery month of November. The big December contract saw it’s OI fall by 9,284 contracts from 203,253 down to 193,969. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was 174,881 which is good. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was very good at 260,174 contracts.
November contract month:
INITIAL standings for November
|Withdrawals from Dealers Inventory in oz||nil|
|Withdrawals from Customer Inventory in oz nil|| 425.500 oz
|Deposits to the Dealer Inventory in oz||nil|
|Deposits to the Customer Inventory, in oz||
|No of oz served (contracts) today||0 contracts|
|No of oz to be served (notices)||213 contracts
|Total monthly oz gold served (contracts) so far this month||7 contracts
|Total accumulative withdrawals of gold from the Dealers inventory this month||nil|
|Total accumulative withdrawal of gold from the Customer inventory this month||89,945.6 oz|
Total customer deposits nil oz
we had 0 adjustments:
November initial standings/First day notice
|Withdrawals from Dealers Inventory||nil|
|Withdrawals from Customer Inventory||13,514.881 oz
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory||
|No of oz served (contracts)||0 contracts (nil oz)|
|No of oz to be served (notices)||31 contracts
|Total monthly oz silver served (contracts)||5 contracts (25,000 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||5,010,357.1 oz|
Today, we had 0 deposit into the dealer account:
total dealer deposit; nil oz
total customer deposits: nil oz
total withdrawals from customer account: 13,514.881 oz
And now SLV
Nov 13/no change in silver inventory at the SLV/inventory 315.111 million oz/
nov 12/surprisingly we had a huge addition of 1.43 million oz of silver into the SLV/Inventory rests at 315.111 million oz/(my bet: it is paper silver not real silver entering the vaults)
Nov 11/no change in silver inventory at the SLV/rests tonight at 313.681 million oz/
Nov 10/no change in silver inventory at the SLV/rests tonight at 313.681 million oz/
Nov 9/no change in silver inventory/rests tonight at 313.681
Nov 6/ we had a very tiny withdrawal of 136,000 oz (probably to pay for fees)/Inventory rests tonight at 313.681 oz
Nov 5/strange no change in silver inventory/rests tonight at 313.817 million oz/
Nov 4/2015: no change in silver inventory/rests tonight at 313.817 million oz/
Nov 3.2015; no change in silver inventory/rests tonight at 313.817 million oz/
Nov 2/a withdrawal of 716,000 oz from the SLV/Inventory rests tonight at 313.817 million oz
Oct 30.no change in silver inventory at the SLV/Inventory rests at 314.532 million oz
Oct 29/a big withdrawal of 1.001 million oz from the SLV/Inventory rests at 314.532 million oz
|Gold COT Report – Futures|
|Change from Prior Reporting Period|
|non reportable positions||Change from the previous reporting period|
|COT Gold Report – Positions as of||Tuesday, November 03, 2015|
|Silver COT Report: Futures|
|Small Speculators||Open Interest||Total|
|non reportable positions||Positions as of:||143||122|
|Tuesday, November 03, 2015||© SilverSeek.com|
it sure looks like our bankers are having a tough time trying to cover their shorts.
Our large specs;
Those large specs that have been long in silver pitched 4803 contracts from their long side
Those large specs that have been short in silver covered 735 contracts from their short side.
Those commercials that have been long in silver added only a tiny 462 contracts to their long side.
Those commercials that have been short in silver covered only 1770 contracts from their short side.
Our small specs;
Those small specs that have been long in silver added 1028 contracts to their long side.
Those small specs that have been short in silver covered 808 contracts from their short side.
conclusions; the crooked bankers are trying to cover but cannot as the longs refuse to shed their silver leaves.
Russia Sees Gold Reserves As “Additional Financial Cushion” In Face Of “External Uncertainties”
– Gold and FX reserves are “additional financial cushion” for state in face of “external uncertainties”
– Russia bought another 77 tonnes of gold in Q3
– Ruble volatility does not create risks for financial stability in Russia
– Russia intends building fx and gold reserves to $500 billion in coming years
– Gold is a “100% guarantee from legal and political risks”
Russian central bank governor, Elvira Nabiullina spoke about Russia’s gold and foreign currency reserves today saying Russia intended building them up to $500 billion in the coming years. More importantly, she confirmed that Russia continues to see gold reserves as an important monetary asset – in her words as a “financial cushion.”
According to Russian news agency TASS, Nabiullina said: “Regarding gold and foreign currency reserves, we have the desired benchmark of $500 billion, and not in the three-year term, it could be 5-7 years and more.”
Reuters reported that Russia does not have a target for the volume of gold in its reserves: “Nabiullina also said the regulator did not have a set target for the volume of gold in its reserves.”
Russia like other central banks, sees gold reserves as a form of monetary hedging and financial insurance: “We believe it is necessary in terms of creating additional financial cushion for the state in the face of such external uncertainties,” Nabiullina said.
Russia and China have been the leading official sector gold buyers over the last 15 years. Russian central bank officials have previously said that Russia views gold bullion as “100% guarantee from legal and political risks”.
Russia is now the seventh biggest holder of gold reserves after the U.S, Germany, the IMF, Italy and France and the rising gold power China. Russia has more than tripled its reserves since 2005 and holds the most gold bars since at least 1993, IMF data shows.
Gold remains a large part of many central banks’ reserves, despite stopping backing paper and the electronic currency with gold in 1971.
Nations globally have been increasing their gold holdings in recent years, a reversal from two decades of selling. China, Kazakhstan, Ukraine and Belarus are among other nations that have been accumulating gold.
Russia has been steadily buying bullion since 2007 and the advent of the global financial crisis. Russia was accumulating gold even prior to tensions with the West and international sanctions over the Ukrainian conflict.
In the event of relations further deteriorating with the U.S., UK and certain EU countries, we would expect Russia to intensify their selling of dollar reserves and accumulation of gold which would be very supportive of gold prices. Indeed, were Russia to become aggressive in this regard and currency wars intensify, Russia may elect to intensify its gold buying which would put pressure on an already strained small, “fractional reserve” physical gold market.
Central bank buying remains strong with banks accumulating an impressive 175.0 tonnes of gold in the third quarter – the second highest quarter of net purchases on record.” Russia was again the largest single buyer with 77 tonnes of gold added to its reserves.
Gold is “additional financial cushion” for all who own it in the face of the considerable “external uncertainties” of today. In the next financial crisis, physical gold held outside the banking system in safe vaults in safe jurisdictions will prove to be a “financial cushion” to individuals, companies, pension funds, family offices, and indeed nations.
Must Read Guide: 7 Key Storage Must Haves
Today’s Gold Prices: USD 1083.75, EUR 1006.60 and GBP 712.08 per ounce.
Yesterday’s Gold Prices: USD 1087.60, EUR 1014.03 and GBP 716.21 per ounce.
Gold prices have slid in 10 of the last 11 COMEX trading sessions (see chart above) after yesterday’s very marginal higher close. Gold has fallen back to the lowest level since early August – half decade lows in dollar terms. It looks very oversold on a few measures and is due a bounce.
As we wrote this week, the upside potential for gold and silver far outweighs the downside risk. On a 5 to 10 year time horizon, the outlook is very positive.
However, in the short term, gold was badly damaged technically again this week and further weakness is quite possible.
$1,000 to $1,050 per ounce on the downside is possible and previous resistance could become support. At the top when gold was over $1,900 and there were some really extreme bullish price calls we warned that gold was due a sharp correction and that gold could replicate the 1970s bull market when gold fell nearly 50%. At $1,085 per ounce, we are near those levels now.
With gold close to a half decade low, we are seeing some of the worst sentiment towards gold from the retail investment public in many years. From a contrarian perspective that suggests that we are close to a bottom.
Gold will likely bottom even before the Fed announces its interest rate policy decision on December 15/ 16. If there is a rate hike gold might see one last bout of weakness. Although that should be shallow and short given the scale of losses in last three weeks.
The Fed matters in the short term but it is only one factor. A far more important factor is actual physical supply and demand and these factors are very supportive for gold (see Gold Bullion Demand Surges 27% In Q3 – New Chinese “Buying Spree”) as we had towards the increasingly important Chinese New Year.
Gold ETF sales offset record demand for coins and bars
Submitted by cpowell on Thu, 2015-11-12 17:54. Section: Daily Dispatches
Wasn’t that why the World Gold Council established the GLD exchange-traded fund — to create a bullion vehicle for shorting and gold price suppression?
* * *
Global Gold Demand Hits More Than Two-Year High in Third Quarter, World Gold Council Says
By Jan Harvey
Thursday, November 12, 2015
LONDON — Global gold demand hit its highest in more than two years in the third quarter as July’s price drop boosted buying of jewellery, coins, and bars, the World Gold Council said on Thursday.
Overall demand reached 1,121 tonnes in the last quarter, up 8 percent year on year to its highest since the second quarter of 2013. The rise was tempered by increased outflows from bullion-backed exchange-traded funds, however.
Bar and coin buying more than tripled in the United States to a five-year high of 32.7 tonnes, and rose 70 percent in China and 35 percent in Europe. That followed a more than 6 percent slide in spot gold prices in July, their biggest monthly drop in two years. …
However, outflows from gold ETFs — popular investment vehicles that issue securities backed by physical metal — increased by 24 tonnes year on year to 65.9 tonnes, helping to offset the rise in demand elsewhere. …
… For the remainder of the report:
UK Telegraph’s Chan talks about a huge buying spree in gold inside China;
Gold price fall and market panic sparks bullion ‘buying spree’ in China
Demand in China jumps as prices fall and markets panic over policymakers’ devaluation of the yuan, while Russia continues to ‘lead the pack’ for central bank purchases
Jessie of Americain Cafe:
About 38% of All the Comex Gold in Hong Kong Left the Warehouses Yesterday
Perhaps it went out for some dim sum.
Roughly 21 tonnes, or 685,652 troy ounces of gold in .999 fine kilo bars, was withdrawn, net of a small deposit of 27,328 ounces, from the Brinks warehouse in Hong Kong yesterday.
To put that into some perspective, that is the same amount of all gold in the entire JPM warehouse in the US.
Now compared to the Comex US, in which very little gold bullion actually changes hands or goes anywhere, that is a huge number. But Hong Kong is typically seeing large inflows and outflows of gold. Because that is how the precious metals market has been manifesting in Asia since about 2007: not with endless chains of paper just changing hands in a grand game of liar’s poker, but with the physical exchange of bullion.
The point of this is that the price discovery in New York is becoming increasingly divergent from the actual physical supply and demand flows of bullion which are taking place in Asia.
And that is a potentially dangerous development, especially with respect to a commodity that is being traded at a leverage in excess of 200:1. And in the face of shrinking inventories of gold available for delivery at current prices in both New York and London.
I have put the most recent report for all the US warehouses registered with Comex below that of Hong Kong.
As the Comex told Kyle Bass, ‘price’ will take care of any imbalances. Yes, just as smoothly as it did when the price of highly levered and risky paper corrected back to reality in 2008.
Are you kidding me? That is what Kyle Bass said. ‘Just give me the gold.’
And if people should choose to stand for physical delivery given the relative scarcity, how much of a price adjustment might be required if they could even find any to be had without an onerous delay and in sufficient numbers?
At the A&P?
How many people, once again, are going to be allowed to walk blindly into another financial buzz saw caused by reckless gambling on Wall Street? Are we willing to repeat the folly of MF Global on a grand scale? Will the rest of the world be so cowed by the Banks as its investors?
1 Chinese yuan vs USA dollar/yuan falls badly in value , this time at 6.3788/ Shanghai bourse: in the red , hang sang:red
2 Nikkei closed down 100.86 or 0.51%
3. Europe stocks all in the red /USA dollar index up to 98.66/Euro down to 1.0788
3b Japan 10 year bond yield: rises to 31.3% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 122.61
3c Nikkei now just above 18,000
3d USA/Yen rate now well above the important 120 barrier this morning
3e WTI: 42.13 and Brent: 46.71
3f Gold up /Yen down
3gJapan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.
Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.
3h Oil 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 .601 per cent. German bunds in negative yields from 6 years out
Greece sees its 2 year rate fall to 6.58%/: still expect continual bank runs on Greek banks
3j Greek 10 year bond yield falls to : 7.27%
3k Gold at $1087.30 /silver $14.37 (8:00 am est)
3l USA vs Russian rouble; (Russian rouble up 11/100 in roubles/dollar) 66.58
3m oil into the 42 dollar handle for WTI and 46 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 1.0013 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0803 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 6 year German bund now in negative territory with the 10 year falls to +.601%/German 6 year rate negative%!!!
3s The ELA lowers to 82.4 billion euros,
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 2.29% early this morning. Thirty year rate above 3% at 3.05% /
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Futures Extend Slide; Europe Has Biggest Weekly Drop In 2 Months; Commodities At 16 Year Lows
For once, the overnight session was not dominated by weak Chinese economic data (which probably explains why the Shanghai Composite dropped for the second day in a row, declining 1.4%, and ending an impressive run since the beginning of November) and instead Europe took the spotlight with its own poor data in the form of Q3 GDP which printed below expectations at 0.3% Q/Q, down also from the 0.4% increase in Q2, with several key economies rolling over including Germany, Italy, and Spain while Europe’s poster child of “successful austerity” saw Q3 GDP tumble 0.5%, far worse than consensus expected.
Ironically, the main source of weakness was a deterioration in exports – this in the continent that has engaged in Q€ and has been jawboning for the past several months, all in an attempt to weaken the Euro and boost exports.
According to the WSJ, “the eurozone economy slowed in the three months to September as exports to large developing economies weakened, a development that makes it more likely the European Central Bank will expand its stimulus programs in December. The slowdown was led by Germany, the currency area’s exporting powerhouse, while Italian economic growth also eased. There were fresh contractions in Greece, Finland and Estonia, while Portugal’s economy stagnated.
Here is a summary of the key European economic datapoints:
- Euro-Area Economy Grew 0.3% in 3Q vs 0.4% Estimate
- French Economy Grew 0.3% in 3Q, Matching Estimate
- German Economy Grew 0.3% in 3Q, Matching Estimate
- Italian Economy Grew 0.2% in 3Q vs 0.3% Estimate
- Portugal 3Q GDP Unchanged Q/q vs Est. +0.4% Q/q
- Spain Oct. Harmonized CPI -0.9% Y/y; Prel. -0.9% Y/y
- Italy Oct. Final HICP +0.3% Y/y; Est. +0.3% Y/y
- Dutch Economy Grows 0.1% in 3Q; Est. +0.4% Q/q
Another problem: with both a rate cut and more QE from the ECB already largely priced in, the weak European data did not boost risk assets, and so the Stoxx Europe 600 Index is on track for its biggest weekly decline in two months.
Every major Western European equity index has dropped. Portugal’s PSI 20 is the worst performing index, with a decline of 5 percent, its biggest of 2015. Earlier this week the government of Pedro Passos Coelho was ousted by a left-wing alliance. The country’s president will decide who to ask to try to form the next administration.
As of this moment both US equity futures and European equities were trading at their lows as follows:
- S&P 500 futures down 0.2% to 2037
- Stoxx 600 down 0.5% to 371
- FTSE 100 down 0.7% to 6137
- DAX down 0.2% to 10766
- German 10Yr yield down 3bps to 0.58%
- Italian 10Yr yield down 3bps to 1.58%
- Spanish 10Yr yield down 2bps to 1.82%
- MSCI Asia Pacific down 1% to 132
- US 10-yr yield down 1bp to 2.3%
- Dollar Index up 0.16% to 98.81
- WTI Crude futures up 0.4% to $41.91
- Brent Futures up 1.6% to $44.75
- Gold spot down 0.1% to $1,084
- Silver spot up 0.2% to $14.33
Global stocks are heading for the third consecutive weekly drop. The explanation, according to Bloomberg: “weak Chinese data and the prospect of a U.S. interest rate hike in December breeds caution among investors.” And yes, this is the same justification given to soaring stocks just a few weeks earlier.
The losing run for the MSCI All Country World Index is the longest since the end of August. The takeaway from the handful of Fed officials who spoke Thursday is rates are likely to rise this year, but the pace thereafter will be gradual. Chinese stocks on the mainland and in Hong Kong sank after data late Thursday showed the country’s broadest measure of new credit tumbled to a 15-month low, demonstrating that rate cuts have yet to ignite borrowing.
A far bigger concern that emerged yesterday, was the renewed rout in the commodity sector: a gauge tracking 22 commodities is on track for a 5th weekly decline. A culmination of the strong dollar and a slowing Chinese economy are battering the Bloomberg Commodities Index, sending it to the lowest in 16 years.
This week alone crude oil has sunk almost 6 percent as U.S. stockpiles expand, while copper has dropped 4 percent on signs of falling demand from China. Gold hasn’t been spared either. This week it’s fallen to its lowest since 2010 as its appeal diminishes with the likelihood of a U.S. rate increase next month. The Bloomberg Commodities Index is set for a fifth yearly drop, its worst run ever.
Back to Asian equity markets, where stocks fell in tandem with yesterday’s global equity rout which saw S&P 500 trade negative YTD, with all three major indices declining by more than 1% amid the sell-off in the commodity complex. Hang Seng (-2.2%) and the Shanghai Comp (-1.4%) traded in the red amid concerns regarding China’s ability to kick start growth in the economy, after Aggregate Financing fell to a 15-month low. Subsequently, adding to the evidence that 6 PBoC rate cuts in the past year have yet to spur a sustained pick up in borrowing. ASX 220 (-1.5%) and Nikkei 225 (-0.5%) was weighed by energy names following the declines in oil prices.
European equities (Euro Stoxx: -0.3%) have traded in negative territory throughout the morning in line with their US and Asia-Pacific counterparts as dampened sentiment remains prevalent across asset classes . While sentiment generally is fairly soft, losses in equities have been capped by the energy and material sectors as the commodity complex benefits from the weaker USD, seeing WTI pare back some of the recent losses to reside around the USD 42.00 handle. In terms of stock specific news, Syngenta (+7.5%) is the notable outperformer after reports of a takeover attempt by ChemChina.
Bunds saw a bid in early European trade , with the assent accelerating through the 21 DMA 156.74 amid the aforementioned risk-off sentiment . Of note the PO/GE 10y spread is 6 wider ahead of DBRS rating review update on Portugal. This is of particular relevance as the DBRS are said to discuss the ongoing Portuguese political uncertainty in a crucial review which might result in its bonds being excluded from the ECB’s QE program if downgraded.
In FX, EUR has seen broad based weakness, with EUR/USD trending lower throughout the session in the continuing downbeat trend after yesterday’s host of hawkish Fed speakers and dovish ECB speakers . The USD index (+0.3%) trades higher to pare some of the losses yesterday while sentiment in Europe was further dampened by the than less than stellar German and Eurozone GDP data (EU GDP SA Y/Y 1.6% vs. Exp. 1.70%).
The only positive news perhaps for now is that WTI has seen a tick higher in European trade, attempting to break through resistance at the USD 42.00 handle. Both WTI and Brent have pared some losses seen in yesterday’s session after DoE’s printed a greater build than expected, however prices remain near 2 month lows.
Gold prices saw some downside overnight in line with the losses seen across the metals complex following the mild recovery in the USD coupled with sharp losses in Chinese bourses , which saw palladium decline 13% on the week which is the most since 2010 and copper trade at 6 %yr lows amid growing concerns over China.
Looking ahead, on the US calendar today we have US retail sales and University of Michigan sentiment as well as comments from ECB’s Mersch and Fed’s Mester.
Top Overnight News:
- Euro-Area Growth Misses Estimates as ECB Ponders More Stimulus: Germany, France GDP each rose 0.3% in 3Q; Italy, Netherlands, Portugal miss economist estimates
- ChemChina Said in Talks to Buy Swiss Agricultural Giant Syngenta: ChemChina offered ~449 francs a share, which values Syngenta at ~41.7b francs ($42b) according to people familiar with matter
- IEA Says Record 3 Billion-Barrel Oil Stocks May Weaken Prices: Oil stockpiles have swollen to a record because of strong production in OPEC, elsewhere
- China to Double Margin Requirement for Stocks Amid Rebound: Requirements will be raised to 100% from 50% starting on Nov. 23, the Shanghai and Shenzhen bourses said in statements
- HSBC Names Axa CEO and Former Diageo Chief to Board Amid Revamp: Bank hired MWM Consulting earlier this year to find new directors, one of whom may eventually succeed Chairman Flint, people familiar said in April
- BOJ Is Said to See GDP Report as Unlikely to Change Price View: Officials acknowledge that risk for prices and economy are skewed to downside
- Cerberus Bests Goldman, JPMorgan to Buy $19.8 Billion U.K. Loans: Comes as Chancellor of the Exchequer Osborne winds down the remnants of Northern Rock to cut the nation’s debt
- Goldman Says Only China Can Rescue Metals as Mine Cuts Won’t: Only a substantial rise in Chinese metals demand is likely to be sufficient to balance copper and aluminum markets
- Extremist ‘Jihadi John’ Targeted in U.S. Airstrike on Syria: Islamic State extremist known as Jihadi John for his roles in videotaped executions of hostages was the target of airstrike; the Pentagon is assessing whether he was killed
Bulletin Headline Summary from Bloomberg and RanSquawk
- European equities (Euro Stoxx: -0.3%) have traded in negative territory throughout the morning in line with their US and Asia-Pacific counterparts as dampened sentiment remains prevalent across asset classes
- Looking ahead, today sees US retail sales and University of Michigan sentiment as well as comments from ECB’s Mersch and Fed’s Mester
- Treasuries rise, headed for weekly gains across the curve as stocks slide amid expectations Fed may increase rates next month.
- Euro-area GDP unexpectedly slowed in 3Q, rising 0.3% vs median expectation for 0.4%; Germany and France’s economies each grew 0.3%, while Italy’s expanded 0.2%
- China moved to contain leveraged wagers on its stock market, raising margin requirements to 100% from 50% starting Nov. 23 as authorities seek to prevent a repeat of the excesses that led to a $5t rout earlier this year
- Only a substantial rise in Chinese metals demand is likely to be sufficient to balance copper and aluminum markets, according to Goldman, which said recent output cut by miners aren’t large enough to rescue prices
- Oil stockpiles have swollen to a record of almost 3b barrels because of strong production in OPEC and elsewhere, potentially deepening the rout in prices, according to the IEA
- Sweden’s finance minister is defending her decision to crank up spending in order to cover the cost of absorbing hundreds of thousands of refugees from the Middle East
- Germany is planning a balanced budget for the second year in a row even as Europe’s biggest economy faces a record influx of refugees; EU6.1b in surplus revenue from 2015 will be shifted to next year to help pay for those costs
- $7.65b IG priced yesterday, $750m HY. BofAML Corporate Master Index OAS +1 to +162, YTD range 180/129. High Yield Master II OAS widens 11bp to +613, YTD range 683/438
- Sovereign 10Y bond yields lower. Asian and European stocks slide, U.S. equity-index futures mixed. Crude oil gains, copper and gold fall
DB’s Jim Reid concludes the overnight wrap
Markets have also been struggling for composure since last Friday’s strong payroll report. It’s not been savage but the S&P500 is down -2,7% from the intra-day highs just after the number was released. Elsewhere the US HY ETF is down 1.7% and10yr UST yields about 10bps higher. Commodities have been worse hit with Oil now down -14% from its early month highs, much of which coming in the past week.
Indeed commodities were under pressure again yesterday as Brent and WTI fell -3.8% and -2.8% respectively. Copper fell -2% to the lowest since July 2009. The S&P 500 (-1.4%) suffered its worst day in 7 weeks. Credit spreads were also wider with secondary US cash bonds 3-5bps wider on the IG side. Sentiment was weighed down by somewhat hawkish Fed speak which clearly did little to ease the anxiety ahead of the December Fed meeting. The commodity weakness was perhaps also an ongoing reflection of the perceived sluggishness in China’s underlying economy.
Indeed central bankers continue to be the main drivers on both sides of the Atlantic. In the US all three Fed speakers yesterday gave indications that the Fed are ready to hike with caveats about the pace of hikes. Even the usually dovish Dudley suggested the conditions for a monetary policy normalization could soon be satisfied and the risks of acting too soon and waiting too long as nearly balanced. Bullard and Evans did not provide much opposition to that even though Evans suggested that increases should be gradual. Bullard said there is ‘no reason to continue to experiment with extreme policy settings’ as labour market is running at the Fed’s target and inflation is only slightly below.
On the other side of the pond Draghi’s comments were dovish and actually helped European stocks rally early in the session but was progressively reversed as the day progressed (Stoxx 600 –1.62%) not helped by Fed speak or the rout in commodities. It’s also not been a vintage European reporting season and yesterday’s earnings tremor came from Rolls Royce (-19.57%) who issued their fourth profit warning in just over a year, during which its guidance suggested that profits would be more than a third below the current consensus estimates. These numbers add to the 84 percent of companies in the STOXX 600 that have reported Q3 results so far, of which 51 percent have met or beaten analyst’s forecasts. However, only 47 percent have beat revenue expectations .
A closer look now at Draghi’s comments yesterday. He was fairly cautious on growth and inflation and noted that the downside risk to global growth and trade are clearly visible. He also added that signs of a sustained turnaround in core inflation have somewhat weakened. Draghi basically signaled that more easing is coming and has added to the other ECB speakers this week. It now seems that an extention of QE and a cut in the deposit rate is inevitable with expectations for the size of the latter growing this week.
Back to markets and the overnight session in Asia hasn’t improved the tone as key benchmark equity indices in Japan (-0.6%), China (-1.1%), Hong Kong (-2.0%) and Korea (-1.0%) are following the weak US lead. The weakness in commodity markets are also not helping. Asian credit spreads are largely following suit with the Asia iTraxx index 4bp wider even though new issues in Asia are generally breaking tighter overnight. Treasuries are little changed with the 2yr and 10yr at around 0.879% and 2.317%, respectively.
Looking at the day ahead we have more Fed speak later today (Mester and Fischer). Data watchers will be reasonably occupied with the release of US retail sales, PPI, business inventories and the first UofM sentiment print. Retail sales being a key barometer of US economic strength. In Europe we will get the advanced reading on Euroland Q3 GDP and the trade balance for September.
Here Is The Biggest, And Most Underreported, Risk Facing China
When it comes to the laundry list of China “hard-landing” risk factors, after many years, even the mainstream media has finally gotten it mostly right:
- a slowing economy crippled by soaring debt, now over 300% of GDP
- an economy which is overly reliant on fixed investment
- an artificially high exchange rate which is adversely impacting exports and impairing trade, in a “beggar thy neighbor” world everyone is rapidly devaluing their own currency
- the feedback loop of plunging commodity prices and highly levered domestic corporation which can not pay their annual interest expense payments at current prices of industrial commodities, leading to surging business failures and defaults
- a burst housing bubble which recently popped (although slowly growing again)
- a burst stock market bubble which recently popped (although slowly growing again)
- Non-performing loans, as high as 20%, and metastssizing across the Chinese banking sector
And much more.
However one risk, perhaps the biggest one, which has so far flown deep under the radar, is also the biggest one – which may explain why so few have noticed it – namely social discontent, resulting from a breakdown in recent “agreeable” labor conditions, wage cuts and rising unemployment, leading to labor strikes and in some cases, violence.
Over the past few months we have chronicled several such incident which suggest that the labor market is rapidly becoming China’s biggest risk factor, such as:
- The “Hard-Landing” Has Arrived: Chinese Coal Company Fires 100,000
- Thousands Of Angry Unpaid Chinese Workers Protest Shocking Bankruptcy Of Major Telecom Supplier.
- And earlier today, 600 Hungry, Angry Chinese Workers “Sleep On The Street” After CEO Disappears With Their Wages
But the best confirmation just how serious the employment situation in China is getting comes courtesy of the China Labour Bulletin website, which tracks the number of largely unreported labor protests and strikes across China.
Presenting exhibit A demonstrating how, quietly, deteriorating employment conditions have become a gaping risk for China’s politburo: the total number of strikes over the past 5 years:
And for those who prefer a hands on experience, here is an interactive tracker of every single reported strike that has been caught by the website over the past 5 years:
We wonder: just how much “more exponential” will China’s “strike chart” have to get before everyone else finally notices?
China Doubles Margin Requirement for Stocks to Curb Leverage
Move is a surprise to investors as index-futures retreat
Shanghai bourse says curbs will reduce systemic risk
China moved to contain leveraged wagers on its stock market, cutting by half the amount of borrowed money investors can use to buy shares, as authorities seek to prevent a repeat of the excesses that led to a $5 trillion rout earlier this year.
Margin requirements will be raised to 100 percent from 50 percent starting on Nov. 23, the Shanghai and Shenzhen bourses said in separate statements after local exchanges closed on Friday. The rule change means that an investor with 1 million yuan ($156,895) in their account is limited to borrowing another 1 million yuan from a broker to buy more shares. Previously, they could borrow as much as 2 million yuan.
While the move is likely to weigh on investor sentiment when mainland markets re-open on Monday, the Shanghai bourse said it will help prevent systemic risks from building in China’s financial system. Surging margin debt helped amplify the record-breaking boom — and subsequent bust — in Chinese stocks earlier this year as ready access to leverage gave the country’s millions of individual investors increased buying power.
Margin financing, which shrank by more than half during the rout, has been rising for six straight weeks as the Shanghai Composite Index bounced back into a bull market. The decision to tighten investor access to the loans comes a week after regulators lifted a freeze on initial public offerings, removing one of the key measures of support for equities.
“That wasn’t expected by the market, so investors will probably react negatively,” said Wu Kan, a Shanghai-based fund manager at JK Life Insurance Co. “The regulators want margin trading to increase in an orderly manner. Brokerages will probably bear the brunt.”
China stock-index futures dropped 1.9 percent in Singapore at 6:31 p.m. local time.
Margin debt and volume rose “rapidly” in recent weeks as some investors bought shares trading at high valuations, the Shanghai exchange said in a post on its Weibo account explaining the rule change. The move will help reduce leverage and ensure “healthy development” of the market, it said.
Officials face an balancing act: if they crimp margin financing too soon, it could derail the bull market and reduce household wealth in an economy increasingly reliant on consumer spending. If they wait too long, the build up of debt could threaten stability in the financial system and magnify the next market downturn.
The Shanghai Composite tumbled 43 percent from its June 12 high through Aug. 26 as investors cut leveraged bets by more than $200 billion. The rout was only halted after the government took unprecedented steps to prop up share prices, including banning major shareholders from offloading shares, ordering state funds to buy stocks and restricting short selling.
While a gauge of 60-day price swings on the equity gauge has dropped from an 18-year high in September, volatility is still the most extreme among global benchmark indexes tracked by Bloomberg.
“Increasing margin requirements is a prudent decision,” said Gerry Alfonso, a sales trader at Shenwan Hongyuan Group Co. in Shanghai. “While in the short term this decision could impact the equity market, in the mid to long run it would help decrease volatility.”
We have been pointing out to you the risk in China due to the mammoth non performing loans. Bloomberg reports that these are rising.
You will recall that Kyle Bass believes that the non performing loans in China is around 10% out of a total of 31 trillion usa. That means 3 trillion usa is non performing or an amount equal to the entire Chinese dollar reserves.
China’s Troubled Credit Swells to Sweden-Sized $628 Billion
In mid-September, when we looked at the Australian housing market, we said that in the aftermath of Beijing’s crack down on capital controls following its August currency devaluation, that “new Chinese ‘regulations’ may just kill Australia’s golden goose of ‘weath creation’ as Aussie’s largest trade partner sees its economy collapse.” More:
While the Aussies themselves proclaimed a “war on cash,” it appears, as AFR reports, that Chinese purchases of Australian property have dropped significantly in the past month, according to agents, as buyers struggle to shift money out of the country following Beijing’s move to tighten capital controls. With Chinese banks now limiting any overseas transfer to USD50,000 – in an effort to control capital outflows – and with China dominating the Aussie housing market, one agent exclaimed, “it has affected 70 to 80 per cent of current transactions and some have already been suspended.”
The results were immediate: “the tighter rules in China come as Sydney recorded its lowest auction clearance rate for the year this past weekend, while Melbourne has now recorded two weekends below the same time last year, according to Corelogic RP Data.”
Two months later, the sudden withdrawal of Chinese hot and laundered money has just popped another housing bubble: perhaps the biggest one of all. London.
Citing Richard Barber, a director at broker W.A. Ellis LLP, a unit of Jones Lang LaSalle Inc., Bloomberg reports that prices of homes valued at 5 million pounds ($7.6 million) or more fell 11.5% on a per square foot basis from the third quarter of 2014. Bloomberg is eager to assign the plunge on “the government’s stamp duty sales tax”, however that has been around for a while and only after the Chinese devaluation was there such a sudden drop in prices.
What changed? Why China’s far more aggressive crackdown on the exporting of hot money, of course. Just like in Australia.
The result has been sharp and acute: sales volumes across all homes in the best parts of central London dropped 14%, the realtor said on Thursday.
“The bubble may already have burst” for the most expensive homes, Barber said. Now, “36 percent of all properties currently on the market across prime central London are being marketed at a lower price than they were originally listed at, with the average reduction in price being 8.5 percent.”
According to the W.A. Ellis report, values across all homes in London’s best central districts rose 1.4 percent during the third quarter to 1,832 pounds a square foot, which means that the one segment most impacted was the one which also happens to be most desirable to offshore (read Chinese “all cash”) clients.
Neither the London housing bubble nor its sudden pop should come as a surprise to central bankers, either in the UK or in China. After all it is their easy money policies, and the creation of tens of trillions in excess deposits in banks via the reserve pathway (deposits which had to be parked in “safe” jurisdictions such as Swiss bank accounts until recently or in London/NY/SF/Vancouver real estate, that caused this.
Sadly, and as usual feigning ignorance for the consequences of their actions, instead of finally admitting they are at fault, these same central bankers decided to take the easy way out and simply blame the market itself.
Case in point BOE chief economist Andrew Haldane, who said on Thursday that the British housing market is “broken.”
According to him, Britain needed to build around 200,000 new homes a year, and that its failure to build much more than half that, largely due to a lack of new public housing, had caused prices to rocket. “The UK housing market is broken,” he said at a meeting hosted by Britain’s Trades Union Congress. “There is a chronic and accumulated imbalance between demand and supply, and it is that which is sending skyward – and has sent skyward – house prices.”
So a “broken market” leading to skyward prices due to lack of public housing (read even more debt creation and misallocation) – not a single word about price indescriminate foreign buyers benefitting from years of ZIRP and China’s 300 debt/GDP, not a single word about why private-sector builders are not building houses in the first place (after all if the demand was there, the private sector would have supplied the good).
Sure – it’s easier to blame the market for being broken – and always in the passive voice – than taking responsibility for being the one whose policies broke it.
And now, with the luxury bubbles in Australia and London popped and soon to be in tatters, we sit back and wait to see how long before it crosses the Atlantic, and such real abominations of the second housing bubble as Million Dollar Listing, can finally meet the fate of Wall Street Warriors.
Brazil Currency Drops As President Agrees To Replace Embattled Finance Minister
Just a day after Dilma Rousseff agreed to approve a 2016 budget bill that preserves the primary surplus target unchanged at BRL43.8b, a win for Joaquim Levy who was against including BRL20b in rebates w/ the PAC program, local newspaper Valor Economico reports that Rousseff has agreed to remove the embattled FinMin.
- Brazil Finance Minister Joaquim Levy’s departure is certain, local newspaper Valor Economico reports citing sources it didn’t name.
- President Dilma Rousseff has not yet decided on replacement, Valor reports
- Former central bank President Henrique Meirelles is strongest candidate
- If Meirelles gets position, he will not have complete freedom on economic policy, Valor reports
And the reaction in the BRL:
Here’s a bit more from Bloomberg out earlier today:
- Rousseff sided w/ Levy and authorized representatives on the joint budget committee to reinforce the 2016 goal: Folha
- Levy has said privately that the market can accept the shortfall this year if govt ensures robust and reliable surplus for 2016: Folha
- People close to Levy said that if he was defeated in discussion, he could’ve taken that as opportunity to leave govt, newspaper says
- Presidential aides said Levy has not presented his resignation, but admit that he has complained to friends and shows he’s tired of constant attacks, according to Folha
- Lula was in Brasilia yday talking to politicians to argue for the govt to replace Levy w/ former BCB Governor Henrique Meirelles: Folha
- Lula thinks impeachment talks could resurface if govt doesn’t change economic policy, according to Folha and Valor
- No one in Rousseff’s inner circle believes she will make a quick decision on FinMin: Folha
Euro/USA 1.0788 down .0020
USA/JAPAN YEN 122.61 up .018
GBP/USA 1.5218 down .0009
USA/CAN 1.3279 down .0005
Early this morning in Europe, the Euro fell by 20 basis points, trading now well above the 1.07 level rising to 1.0788; Europe is still reacting to deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore,and now Nysmark and the Ukraine, along with rising peripheral bond yield. Last night the Chinese yuan down in value (onshore). The USA/CNY up in rate at closing last night: 6.3763 / (yuan down)
In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31/2014. The yen now trades in a southbound trajectory as settled down again in Japan by 2 basis points and trading now well above the all important 120 level to 122.61 yen to the dollar.
The pound was down this morning by 9 basis points as it now trades well above the 1.52 level at 1.5218.
The Canadian dollar is now trading up 5 basis points to 1.3279 to the dollar.
We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;
1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies 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 FRIDAY morning:closed down 100.86 or 0.51%
Trading from Europe and Asia:
1. Europe stocks all in the red (very deeply)
2/ Asian bourses all deeply in the red … Chinese bourses: Hang Sang red (massive bubble forming) ,Shanghai in the red (massive bubble ready to burst), Australia in the red: /Nikkei (Japan) in the red/India’s Sensex in the red/
Gold very early morning trading: $1086.80
Early FRIDAY morning USA 10 year bond yield: 2.29% !!! down 2 in basis points from Thursday night and it is trading well below resistance at 2.27-2.32%. The 30 yr bond yield falls to 3.05 down 4 in basis point.
USA dollar index early Friday morning: 98.66 cents up 10 cents from Thursday’s close. (Resistance will be at a DXY of 100)
This ends early morning numbers Friday morning
“Oil Bears May Not Hibernate” As Inventories Swell To Record 3 Billion Barrels
In true stop-running algo common sense, WTI crude jumped overnight, back above $42 briefly. However, a double whammy of warnings from IEA (of a “massive cushion” of 3 billion barrels worldwide) and the highest volume of supertankers for this time of year since 2013 has sent crude sliding back below $42.
Oil stockpiles have swollen to a record of almost 3 billion barrels because of strong production in OPEC and elsewhere, potentially deepening the rout in prices, according to the International Energy Agency.
This “massive cushion has inflated” on record supplies from Iraq, Russia and Saudi Arabia, even as world fuel demand grows at the fastest pace in five years, the agency said. Still, the IEA predicts that supplies outside the Organization of Petroleum Exporting Countries will decline next year by the most since 1992 as low crude prices take their toll on the U.S. shale oil industry.
“Brimming crude oil stocks” offer “an unprecedented buffer against geopolitical shocks or unexpected supply disruptions,” the Paris-based agency said in its monthly market report. With supplies of winter fuels also plentiful, “oil-market bears may choose not to hibernate.”
Total oil inventories in developed nations increased by 13.8 million barrels to about 3 billion in September, a month when they typically decline, according to the agency.
The pace of gains slowed to 1.6 million barrels a day in the third quarter, from 2.3 million a day in the second, although growth remained “significantly above the historical average.” There are signs the some fuel-storage depots in the eastern hemisphere have been filled to capacity, it said.
And the backlog of SuperTankers continues to surge – to record highs for this time of year…
31 very large crude carriers head to U.S. ports, highest since last May and most for time of year in data going back to 2013, ship tracking information compiled by Bloomberg shows.
Frontline agreed with Ship Finance International Limited to terminate the long term charter for Suezmax tanker Mindanao, and will receive a compensation payment of approximately $3.3 million from Ship Finance for termination of current charter
Following this termination, the number of vessels on charter from Ship Finance will be reduced to 14 vessels, including 12 VLCCs and two Suezmax tankers
The stock buffer is bearish and will probably set a lid on how much higher prices can go in 2016,” Torbjoern Kjus, an analyst at DNB ASA in Oslo, said by phone. “There’s a sizeable risk that we could run totally full,” in terms of storage capacity, he said
Oil crashes into the 40 dollar handle due to swelling of inventories/it is the fastest plunge since Dec 2014:
(courtesy zero hedge)
WTI Crude Tumbles To $40 Handle, Fastest Plunge Since December 2014
Having fallen for 7 of the last 8 days, WTI Crude just traded with a $40 handle for the first time since August 27th. Oil is now down over 14% in the last 8 days, the fastest collapse since December 2014…
This is the fastest 8 day drop since Dec 2014…
As we explained previously, here’s why…
rig count rises sending oil into the dumpster again
(courtesy zero hedge)
Crude Slips As US Oil Rig Count Rises For First Time In 3 Months
The US Oil Rig Count rose 2 to 574 last week. This is the first rise in rig count since mid August, continuing to track the lagged crude price. On top of rising production, surging inventories, and massive excess supply at sea, Crude is fading modestly on the news, hovering around $40.50.
First rig count rise in 11 weeks…
Pressuring crude lower once again…
USA/Chinese Yuan: 6.3735 up .0045 on the day (yuan down)
New York equity performances for today:
Stocks, Commodities & Credit Collapse As Retail Rapture Wrecks Rate-Hike Hype
But “hawkish” was “bullish”?
A Week of turmoiling…
- S&P -3.2% – worst week in 3 months
- Retail -8.2% – worst week in 4 years
- VXX +17.9% – biggest week in over 2 months
- VRX -8% – down 7 of last 8 weeks
- AAPL -6.4% – worst week in 2 months
- Financials -3.2% – worst week in 2 months.
- Copper -3.5% – worst week in 2 months (down 5 in a row)
- WTI Crude -8.7% – worst week since Dec 2014
- HYG -1.7% – worst week in last 7 weeks
- HY CDX +35bps – worst (non-roll) week since Decmber 2014
- Long Bond +0.8% – best week in last 4
- 5Y Yield dropped 5bps – most in over a month today
Futures markets show a clear pattern throughout the week of US session weakness and overnight recovery…
Nasdaq closed very ugly on the day…
Which left Small Caps worst but everything red for the week…
FANG FUBAR since FedSpeak began…
TWTR back below its IPO price…
And Camera-on-a-stick below its IPO price…
Eveything is red since FOMC…
Financials and Energy wewre ugly this week….
As financial stocks catch down to credit once again…
Once again “123” was the number that mattered… As soon as Europe closed, USDJPY ramped to 123.00 dragging S&P Futures with it… and then rolled over…
Trannies caught down to Crude once again…
Stocks are catching down to credit…
Treasury yields closed down notably on the week after consistent early selling and late buying… (with today’s rally the biggest of the week)
The dollar ended the week modestly lower against the majors…
Commodities were a bloodbath this week…notice the similar pattern in the USD and crude…
Gold closed lower for the 4th week in a row – lowest weekly close since Jan 2010…
The Last Two Times Retail Sales Were This Bad, The US Was In A Recession
Earlier today, we sarcastically noted…
It wasn’t meant to be, because, amid the carnage in Macy’s, Nordstrom, and JCPenney…
… not even the US Department of Commerce would be so bold as to suggest retail spending has rebounded.
Sure enough, following a 0.1% dip in September, ‘control group’ retail sales rose just 0.2% (half the expected 0.4% rise). Furthermore, having fallen 0.3% MoM last month, retail sales ex-autos rose just 0.2% (again missing the expected 0.4% gain).
October saw retail sales declines in Motor sales, Electronics, Food and Beverage, Gasoline Sales, and General Merchandise.
Most notable is the drop in year-over-year gains (and downward revisions) to a rise of just 1.7% – the 2nd weakest since the financial crisis.
* * *
But the picture is clearest when excluding the debt bubble-funded auto-spending spree. When one excludes autos, what we find is that the last two times retail sales were this weak, The US was already in recession.
Retail Stocks Are Crashing At The Fastest Pace In Over 4 Years
The S&P Retail Sector ETF is down almost 9% in the last 8 days. That is the fastest collapse in this bellwether industry since August 2011… and it may be about to get a lot worse…
Retail is back to flash crash lows…
Its biggest 8-day drop since August 2011…
And it’s about to get a lot worse…
What Rate Hike: Annual PPI Drops Most On Record Even As Gas Prices Rise In October
Just in case the latest retail sales miss (where every major spending category missed across the board) wasn’t bad enough, moments ago the BLS also reported the October PPI, which also was a disaster if only for the Fed, with the headline print sliding even deeper into deflation at -1.6%, down from -1.1% in September, and missing expectations of -1.2%.
PPI’s excluding the volatile series also missed sharply:
- PPI Ex food and energy up barely 0.1%, Exp. 0.5%, down from 0.8%
- PPI Ex food, energy and trade up 0.4%, Exp. 0.5%, last 0.5%
But the real pain emerged on a year over year basis, where the headline drop was the worst decline in history!
Surprisingly this time it wasn’t energy’s fault, where prices were unchanged at 0.0% in the month, while gasoline prices actually rose 3.8 percent.
This time wholesale deflation was prevalent in most service other categories including apparel, jewelry, footwear, and accessories retailing; loan services; portfolio management; wireless telecommunication services; and health, beauty, and optical goods retailing also declined.
There was a modest rebound in prices for truck transportation of freight which rose 0.3 percent. The indexes for food retailing and deposit services (partial) also increased.
Among goods, over one-third of the October decline in the final demand goods index is attributable to prices for light motor trucks, which fell 1.8 percent. The indexes for chicken eggs, iron and steel scrap, beef and veal, boxed meat, and electric power also moved lower. The indexes for pharmaceutical preparations and corn also advanced.
furnishings, paper, plastics, health, beauty and major household appliances.
Worst of all, the index for final demand less foods, energy, and trade services edged down 0.1 percent in October.
In other words, the Fed can no longer blame “transitory” energy prices for deflation.
And now, check to you Mr. Chairmanwoman and your December rate hike.
Deflation is in as inflationary outlook at 35 year lows/U of Michigan
(courtesy U of Michigan survey/zero hedge)
“Deflationary Mindset” Remains As UMich Survey Shows Inflation Outlook At 35 Year Lows
Last night 6 Fed speakers and all different outcomes:
As in the Cool Hand Luke movie:
“what we’ve got here is a failure to communicate”
“What We’ve Got Here Is A Failure To Communicate”
The Fed goes 6 for 6 today as Bullard, Yellen,Lacker, Evans, Dudley, and Fischer (respectively) all manage to jawbone a looming rate hike without any confirmation of the “well everything must be awesome” meme to satisfy increasingly doubtful stock market worshippers...
- *BULLARD: NO REASON TO CONTINUE EXPERIMENT WITH `EXTREME’ POLICY
- *BULLARD WANTS TO RETURN TO 1984-2007 U.S. MACROECONOMIC SETTING
- *YELLEN: MUST BE MINDFUL OF NEW POLICY TRANSMISSION CHANNELS
- *YELLEN DOESN’T DISCUSS OUTLOOK FOR FED POLICY, ECONOMY IN TEXT
- *LACKER SAYS NOT SURPRISED BY `POPULIST ANGER’ AGAINST FED
- *LACKER SAYS `PLAUSIBLE’ QE HAD SCANT REAL EFFECTS ON ECONOMY
- *EVANS SAYS U.S. FUNDAMENTALS LOOK `PRETTY GOOD’ AT THE MOMENT
- *EVANS: TIMING OF FED LIFTOFF LESS IMPORTANT THAN RATE PATH
- *EVANS FAVORS `SOMEWHAT LATER LIFTOFF’ THAN MANY FED COLLEAGUES
- *EVANS SEEKS SLOWER RATE-RISE PATH THAN 25 BPS EVERY OTHER MTG
- *DUDLEY: IT’S POSSIBLE LIFTOFF CONDITIONS MAY SOON BE SATISFIED
- *DUDLEY: RISKS OF MOVING TOO FAST VS TOO SLOWLY NEARLY BALANCED
- *FISCHER: U.S. ECONOMY WEATHERING HEADWINDS FROM STRONGER DOLLAR
- *FISCHER: OCT. FOMC SIGNALED DEC. RATE RISE MAY BE APPROPRIATE
By the close, December rate hike odds had actually dropped very modestly to 66.0%. If these guys can’t ‘communicate’ with one another, then how are investors (and algorithms) supposed to understand what they are doing?
Let us close with this week’s wrap courtesy of Greg Hunter/USAWatchdog
(courtesy Greg Hunter/USAWatchdog)
See you on Monday
Have a great weekend and
please come back in one piece
bye for now