Gold: $1121.70 up $15.50 (comex closing time)
Silver 14.54 up 30 cents
In the access market 5:15 pm
Please forgive me but I was not feeling well all day and as such I did not have my usual energy to deliver you this commentary.
Today is options expiry on the comex. This coming Friday is options expiry on LBMA and on the OTC. We still have a few days to go but today was a good sign that the banker boys are losing control. For years they always whack on options expiry week! Let us see what happens tomorrow and Thursday.
At the gold comex today, we had a poor delivery day, registering 2 notices for 200 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 199.58 tonnes for a loss of 103 tonnes over that period.
In silver, the open interest fell by 3,716 contracts down to 151,439. In ounces, the OI is still represented by .757 billion oz or 108% 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 rose by 1,121 contracts to 400.948 contracts as gold was up $9.00 with yesterday’s trading.
Today both the gold comex and the silver comex are in severe stress with gold in backwardation up to August.
We had no changes in tonnes of gold inventory into the GLD, / thus the inventory rests tonight at 664.17 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 a huge withdrawal of 953,000 oz in inventory and thus/Inventory rests at 310.653 million oz.
First, here is an outline of what will be discussed tonight:
1. Today, we had the open interest in silver fall by 3716 contracts down to 151,439 despite the fact that silver was up 20 cents with respect to yesterday’s trading. The total OI for gold rose by 1,121 contracts to 400,948 contracts as gold was up $9.00 in price from yesterday’s level.
2 a) Gold trading overnight, Goldcore
3. ASIAN AFFAIRS
i)Late MONDAY night,TUESDAY morning: Shanghai down badly by 6.42% / Hang Sang down. The Nikkei and the rest of Asia closed badly in the red . Chinese yuan down a touch and yet they still desire further devaluation throughout this year. Oil gained a dollar, rising to 30.71 dollars per barrel for WTI and 30.85 for Brent. Stocks in Europe so far are all in the red. Offshore yuan trades at 6.6098 yuan to the dollar vs 6.5801 for onshore yuan. huge volatility is the Chinese markets screams of credit problems; a leaked document suggests that China will not use the lowering of the RRR reserves but instead provide direct yuan injections into the market/POBC injects another 70 billion of liquidity into the markets (see below)
ii)They cook the books? it can’t be so!! The fellow in charge of Chinese GDP is now being probed:
(courtesy zero hedge)
i)Last night, there were rumours that Saudi Arabia would cut oil production if others at the margin would also cut. Bloomberg’s analyst is not buying the story:
i)Do not pay any attention to these bozos:
( Chris Powell/GATA)
iii) The Fed had to give 19 billion dollars to the USA government for additional needs. This puts the net capital for the Fed had only 39 billion dollars. Turk explains that the government’s position is not good as it scrambles for cash wherever it can:
(courtesy James Turk/Kingworldnews)
an extremely important read on gold!!
( Hugo Salinas Price/GATA
USA STORIES WHICH WILL INFLUENCE THE PRICE OF GOLD AND SILVER:
i)The USA service sector economy slumps to the weakest in 130 months:
( zero hedge)
ii) In 44 seconds, Gundlach says it all:
(courtesy zero hedge/Jeff Gundlach/)
Let us head over to the comex:
The total gold comex open interest rose to 400,948 for a gain of 1121 contracts as gold was up $9.00 in price 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. Today, both scenarios held in spades. We are now in the non active January contract which saw it’s OI contract remain constant at 183. We had 0 notices filed yesterday, so we neither lost nor gained any gold contracts that will not stand for delivery in this non active delivery month of January. The next big active delivery month is February and here the OI fell by a monstrous 31,611 contracts down to 114,219. First day notice is Friday, Jan 29.2016. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was 261,429 which is poor considering the huge number of rollovers.. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was also poor at 272,114 contracts. The comex is deeply into backwardation up until August.
December contract month:
INITIAL standings for January
|Withdrawals from Dealers Inventory in oz||nil|
|Withdrawals from Customer Inventory in oz nil||868.05 oz
|Deposits to the Dealer Inventory in oz||nil|
|Deposits to the Customer Inventory, in oz|| 32,350.477 oz
|No of oz served (contracts) today||2 contracts
|No of oz to be served (notices)||181 contracts(18,100 oz)|
|Total monthly oz gold served (contracts) so far this month||15 contracts (1500 oz)|
|Total accumulative withdrawals of gold from the Dealers inventory this month||nil|
|Total accumulative withdrawal of gold from the Customer inventory this month||73474.3 oz|
i) Into Scotia: another of those dubious 32,150.0000 oz
ii) Into Delaware: 200.477 oz
Total customer deposits 32,350.477 oz
we had 4 unbelievable adjustments.
From the Brinks vault:
21,200.69 oz was removed from the dealer and this landed into the customer account of Brinks
From the HSBC vault:
84,881.525 oz was removed from the dealer and this landed into the customer account of HSBC
96.45 oz was removed from the dealer and this landed into the customer account of Manfra.
From Scotia vault:
95,269.145 oz was removed from the dealer and this landed into the customer account of Scotia:
Total removal from dealer to customer: 201,345.420 oz
Here are the number of oz held by JPMorgan:
January INITIAL standings/
|Withdrawals from Dealers Inventory||nil|
|Withdrawals from Customer Inventory||545,981.960 oz
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory||781,137.028 oz
|No of oz served today (contracts)||0 contracts
|No of oz to be served (notices)||23 contracts (115,000 oz)|
|Total monthly oz silver served (contracts)||99 contracts (495,000 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||4,753,912.4 oz|
Today, we had 0 deposits into the dealer account:
total dealer deposit;nil oz
we had 0 dealer withdrawals:
total dealer withdrawals: nil
we had 3 customer withddrawals:
i) Into Brinks: 455,015.97 oz
ii) Into HSBC: 20,635.99 oz
iii) Into Scotia: 40,330.000 oz?????
total customer withdrawals: 545,981.960 oz
total deposits from customer account 781,137.028 oz
we had 0 adjustments:
And now the Gold inventory at the GLD:
Jan 26.no change in gold inventory at the GLD/Inventory rests at 664.17 tonnes
Jan 25./a huge deposit of 2.08 tonnes of gold into the GLD/inventory rests at 664.17 tonnes
most likely the addition is a paper deposit and not real physical
Jan 22/no change in gold inventory at the GLD/Inventory rests at 662.09 tonnes
Jan 21.2016: a huge deposit of 4.17 tonnes/Inventory rests at 662.09 tonnes
most likely the addition is a paper deposit and not real physical
jan 20/ no change in inventory at hte GLD/Inventory rests at 657.92 tonnes
Jan 19/no change in inventory at the GLD/Inventory rests at 657.92 tonnes
jan 15.2016/a huge deposit of 3.86 tonnes of inventory at the GLD/Inventory rests at 657.92 tonnes
I doubt that this is real gold/probably a paper gold addition.
Jan 14/ no changes into inventory at the GLD/Inventory rests at 654.06 tonnes.
JAN 13.2016/another huge deposit of 2.38 tonnes in gold inventory at the GLD/Inventory rests at 654.06 tonnes
JAN 12/no change in inventory at the GLD/Inventory rests at 651.68 tonnes
JAN 11./another 2.09 tonnes of gold addition (deposit) to the GLD/Inventory rests at 651.68 tonnes.again, I doubt that the gold added was physical.
jan 8/another huge addition of 4.46 tonnes of gold into GLD/Inventory rests at 649.59 tonnes
- I highly doubt that the gold added was physical. Gold is severely in backwardation in London and thus almost impossible to source in two days almost 9 tonnes of gold.
Jan 7/a huge addition of 4.16 tonnes of gold into GLD/Inventory rests at 645.13 tonnes
Jan 6/2016/we had a withdrawal of 1.6 tonnes of gold from the GLD/Inventory rests at 640.97 tonnes/
Jan 5/2016: since my last report we had a total of 3.57 tonnes of gold withdrawal from the GLD/Inventory rests at 642.37 tonnes
Jan 26.2016: inventory rests at 664.17 tonnes
And now your overnight trading in gold, TUESDAY MORNING and also physical stories that may interest you:
Revaluation of Gold Coming – Gold Price To $22,000 Per Ounce?
Hugo Salinas Price, Mexican business magnate, investor, and philanthropist and the president of the Mexican Civic Association for Silver, writes today that gold will soon return to its traditional role in the international monetary system.
The current melt-down of the world’s debt bubble is likely to continue in the course of the next months and Salinas believes that the salvaging all debt and derivatives might require a gold price as high as between $22,000 and $50,000 per ounce.
He believes that gold will soon help balance international trade, discipline government budgets, and reliquefy debt that is becoming unpayable.
The secular trend to expansion of credit has morphed into contraction and liquidation. It is my opinion that the new trend is now established and no action by any of the Central Banks (CB) that issue reserve currencies will do anything at all to reverse that trend.
Salinas Price’s commentary is headlined “The Coming Revaluation of Gold” and it’s posted at the civic association’s website, Plata.com.mx, here:
LBMA Gold Prices
26 Jan: USD 1,114.70, EUR 1,028.42 and GBP 785.80 per ounce
25 Jan: USD 1,103.70, EUR 1,020.29 and GBP 773.96 per ounce
22 Jan: USD 1,097.65, EUR 1,012.55 and GBP 769.63 per ounce
21 Jan: USD 1,096.80, EUR 1,006.98 and GBP 774.99 per ounce
20 Jan: USD 1,093.20, EUR 999.73 and GBP 771.08 per ounce
Gold’s “higher close” last week “was positive” said GoldCore – Mineweb
Thai Bargain Hunters Join Asian Gold-Buying Spree as Prices Drop – Bloomberg
Gold Advances as Equity-Market Turmoil, Fed Outlook Lift Appeal – Bloomberg
Chinese Stock Market Plunges over 6% – Bloomberg
Gold reclaims $1,100 level as U.S. stocks, dollar weaken – MarketWatch
The Coming Revaluation of Gold – Moneda De Plata Para México
The Coming Perfect Storm In Silver – SilverSeek
Italian Bank Panic & Bail-In – The Next Domino to Fall – The Dollar Vigilante
China’s Year of the Monkees – Maudlin Economics
Keiser Report: Fine Print Reality vs Big Print Dreams – Max Keiser
Breaking Gold and Silver News Today – Click here
GFMS claims demand for gold is weak, sees price falling this year
Submitted by cpowell on Mon, 2016-01-25 17:43. Section: Daily Dispatches
Gold, Silver Set for More Pain into 2016, Poll Says
By Jan Harvey
Thursday, October 15, 2015
LONDON — Gold prices are expected to post another year of losses in 2016, with more pain still in store for the precious metal this year after a weak third quarter, a Reuters poll showed on Thursday.
The survey of 38 analysts and traders conducted over the last two weeks returned an average gold price forecast for next year of $1,153 an ounce, 8 percent below the forecast returned by a similar poll in July.
This year gold is expected to average $1,165.50 an ounce, down from a forecast last quarter of $1,193 an ounce. In the year to date gold has averaged $1,177 an ounce, but it is expected to slip to $1,125 an ounce in the last quarter.
“The chief drivers for a continued abysmal performance in the gold price are mainly twofold: Fed rate hike expectations and disappointing global physical as well as investment demand,” GFMS analyst Johann Wiebe said. “We expect the gold price to remain under pressure and record a new low before year-end.” …
… For the remainder of the report:
Is GATA good for the monetary metals:
(courtesy Chris Powell/GATA)
Is GATA good or bad for the monetary metals business?
Submitted by cpowell on Mon, 2016-01-25 18:12. Section: Daily Dispatches
1:15p Monday, January 25, 2016
Dear Friend of GATA and Gold:
Our friend T.W. writes:
“I just read GATA’s dispatch about China and the possibility of an international currency reset —
— and I must say I am confused about all this.
“Why have I bought all this gold? I want to make a profit but being 67 years old, I wonder whether I will live to see that. I want to leave my kids some but it sounds as if the government is going to keep this market rigging going forever.
“The dispatch says that in acquiring gold China is aiming to gain control over currency markets just like the West has. Doesn’t China want profit from all that gold it has bought and told its people to buy?
“What is the sense in buying gold only to end up with metal and no profit?
“Please explain this if you can. I am not greedy but would like to make some money for my later years.”
To answer T.W.:
While the huge naked short position in gold that is underwritten by governments implies the profitability of long-term gold ownership, GATA can’t guarantee profit to anyone. Indeed, while GATA is often accused of being permanently bullish on gold, we are also ostracized by most of the monetary metals mining industry for conveying a message the industry is too terrified to address and for telling monetary metals investors what they are up against.
That is, GATA is good for the monetary metals business insofar as we clamor against market rigging by governments, but bad for the business insofar as we tell people that governments will do almost anything to prevent the monetary metals from being seen as money superior to government-issued money.
What investors in the monetary metals are up against is the primary interest of government, which will always be to protect and advance its own power, not to protect and advance human liberty, just as the monetary metals always have been and always will be deadly threats to government power, potential mechanisms of escape from totalitarianism.
GATA can show people how the monetary metals markets are desperately rigged by governments, how supply and demand for the monetary metals are so imbalanced that vast supplies of imaginary metal have to be created on paper to suppress their prices, and how examination of the issue itself must be suppressed, since the price suppression scheme works only if it is largely surreptitious and since the scheme heavily involves government rigging of all other major markets.
But GATA cannot predict what governments will do if enough people ever realize exactly how they are being controlled and cheated. We can only try to convey information to those who dare to receive it and to advocate free markets and limited, transparent, accountable, and democratic government.
Sorry to disappoint, but the world is quite beyond GATA’s control. As we convey information, we can only hope that, at least over the very longest term, the biblical injunction remains in force: “Ye shall know the truth, and the truth shall make you free.”
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
The Fed had to give 19 billion dollars to the USA government for additional needs. This puts the net capital for the Fed had only 39 billion dollars. Turk explains that the government’s position is not good as it scrambles for cash wherever it can:
(courtesy James Turk/Kingworldnews)
Fed’s capital takes a big hit, Turk tells KWN
Submitted by cpowell on Mon, 2016-01-25 18:29. Section: Daily Dispatches
1:30p ET Monday, January 25, 2016
Dear Friend of GATA and Gold:
GoldMoney founder and GATA consultant James Turk tells King World News today that Congress and President Obama have just deprived the Federal Reserve of a huge amount of its capital, pushing the Fed that much closer to technical insolvency if the Fed wasn’t there already. An excerpt from the interview is posted at the KWN blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
an extremely important read on gold!!
(courtesy Hugo Salinas Price/GATA)
Hugo Salinas Price: The coming revaluation of gold
Submitted by cpowell on Tue, 2016-01-26 00:19. Section: Daily Dispatches
7:12p ET Monday, January 25, 2016
Dear Friend of GATA and Gold:
In what is likely his most profound analysis yet, Hugo Salinas Price, president of the Mexican Civic Association for Silver, foresees that the ongoing liquidation of the international reserves of central banks will require an enormous upward valuation of gold and the transformation of the monetary metal back into the primary world reserve currency, replacing the U.S. dollar.
Gold’s return to its traditional role, Salinas Price writes, will quickly balance international trade, discipline government budgets, and reliquefy debt that is becoming unpayable, though salvaging all debt and derivatives might require a gold price as high as $50,000 per ounce.
Salinas Price’s analysis goes farther than similar analysis called to your attention by GATA over the years, particularly by the Scottish economist Peter Millar —
— the U.S. economists Paul Brodsky and Lee Quaintance —
— and the Dutch market analyst Willem Middelkoop:
Salinas Price’s commentary is headlined “The Coming Revaluation of Gold” and it’s posted at the civic association’s Internet site, Plata.com.mx, here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
A dandy tonight from Bill Holter/Holter Sinclair collaboration)
There are no atheists in a foxhole!
And now your overnight TUESDAY morning trades in bourses, currencies and interest rate from Asia and Europe:
1 Chinese yuan vs USA dollar/yuan FALLS to 6.5810 / Shanghai bourse: in the RED down 6.4%/ hang sang: RED
2 Nikkei closed down 402.01 or 235%.
3. Europe stocks IN THE RED /USA dollar index UP to 99.43/Euro DOWN to 1.0819
3b Japan 10 year bond yield: falls to .220 !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 118.19
3c Nikkei now well below 18,000
3d USA/Yen rate now well below the important 120 barrier this morning
3e WTI:: 30.71 and Brent: 30.93
3f Gold up /Yen down
3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.
Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.
3h Oil down for WTI and down for Brent this morning
3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund falls to 0.45% German bunds in negative yields from 6 years out
Greece sees its 2 year rate rise to 13.82%/:
3j Greek 10 year bond yield fall to : 9.37% (yield curve deeply inverted)
3k Gold at $1112.00/silver $14.37 (7:45 am est)
3l USA vs Russian rouble; (Russian rouble up 1 and 9/100 in roubles/dollar) 79.05
3m oil into the 30 dollar handle for WTI and 30 handle for Brent/
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 1.0160 as the Swiss Franc is still rising against most currencies. Euro vs SF is1.0996 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/arrests 10 traders for Euribor manipulation
3r the 6 year German bund now in negative territory with the 10 year falls to + .45%/German 6 year rate negative%!!!
3s The ELA at 75.8 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 1.99% early this morning. Thirty year rate at 2.80% /POLICY ERROR)
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
China Crashes To 13 Month Low After Last Hour Panic Selling; Crude, Futures Tumble Then Surge
It has been another volatile, illiquid, whipsawed session, driven by the only two things that have mattered so far in 2016, China and oil…. and stop-hunting algos of course.
A quick look at the former first reveals that after sliding gradually all session, Chinese stocks puked in the last hour of trading with the China’s Shanghai Composite Index plunging 6.4% to 2,750, the most since the first week of January, and falling to the lowest level since December 2014. The composite has now plunged 22% in 2016 alone and is the world’s worst-performing primary equity index this year.
Among the reasons for the crash was concern about a possible cash squeeze before next month’s Chinese new year holiday as well as further capital outflows amid signs of a slowing economy, Huang Cendong, Shanghai-based analyst at Sinolink Securities, was quoted by Bloomberg as saying. We find that hard to believe, as neither are news.
What is far more accurate is what Wu Kan, a fund manager at JK Life Insurance Co. in Shanghai, said namely that “we are less than two weeks from the spring festival and it seems that most investors have no mood for trading any more.” Indeed, it appears that even the Chinese banana stand traders are tired of participating in a rigged casino and would much rather lose their money on other wholesome activities.
Furthermore, judging by the variety of predictions about what happens to Chinese stocks, such as these:
- China Fund That Beat 98% of Peers Says Time to ‘Buy in Bulk’ -BBG
- The Trader Who Made 6,200% on China Stocks Says Sell Now – BBG
… it is quite clear that nobody has any idea what is going on in China, or what is coming.
One thing that is certain, however, is that the Chinese government will continue intervening if not in stocks then in FX which it did earlier today in the offshore Yuan which had dropped 0.2% against the USD only to see the entire loss recovered after the PBOC intervened via “large-sized Chinese banks.”
The latest Chinese crash, and continued oversupply fears initially sent crude falling below $30 a barrel. The two-day drop in West Texas Intermediate topped 8% after a 21 percent rally on Thursday and Friday, the biggest in over seven years demonstrating just what a volatile pennystock oil has become. Data on Wednesday may show U.S. supplies rose by four million barrels last week, keeping inventories more than 120 million barrels above the 5-year seasonal average. As a reminder, the sliding price of oil hasn’t deterred Saudi Arabia. It won’t reduce its spending on energy projects, the catalyst for yesterday’s bounce.
And then, as if on cue, WTI and Brent both surged back over $30 after a few flashing read headlines carried the latest statement from the Iraq oil minister Adel Abdul Mahdi who told reporters in Kuwait City that Saudi Arabia and Russia are more flexible now on making cuts and cooperating, and that Iraq is ready to cut if others do so. The only problem is that Saudi Arabia has made it very clear it won’t cut until either the marginal producers cut first, or it puts the marginal shale producers out of business.
Furthermore, it will only take algos a few hours to realize that such statements are merely an opportunity for the oil ministers to sell into especially after Angola nnounced it would boost crude exports to 55.8MM B/D in March, and will ship 58 cargoes, equating to 1.8m b/d, according to final loading program obtained by Bloomberg. This is up from 1.69m b/d in Feb., and 1.77m b/d in preliminary plan for March. In other words, the supply glut is not only not improving, but getting worse by the day.
And then this:
- ARAMCO CEO NASSER SAYS OIL MARKET OVERSUPPLIED BY 3M B/D.
For now however that is irrelevant, as algos saw the Iraqi headlines and ran with them, sending oil rebounding sharply from the lows and back into the green for the day, in the process pushing both US equities, which had tumbled more than 1% earlier, back to unchanged, and as now 7 points higher on the day…
… while the US 10 Year which had tumbled as much as 1.94% overnight is back to 2.00%.
At last check, this is where we stood:
- S&P 500 futures up 0.2% to 1874
- Stoxx 600 down 0.8% to 334
- MSCI Asia Pacific down 1.6% to 118
- US 10-yr yield unch at 2.00%
- Dollar Index up 0.02% to 99.38
- WTI Crude futures up 0.9% to $30.55
- Brent up 1.4% to 30.98
- Gold spot up 0.6% to $1,115
- Silver spot up 1.1% to $14.39
Going quickly through the regional markets, Asian stocks traded in firm negative territory following the lacklustre close on Wall St., with sentiment dampened after crude pulled back from its largest 2-day gain in 7 years. Nikkei 225 (-2.4%) was pressured by the oil slump, while telecoms led declines amid losses from index heavyweight Softbank, which continued to suffer from Sprint woes. Elsewhere, the Shanghai Comp (-6.4%) weakened despite the largest liquidity injection conducted in 3 years, as oil weakness dictated sentiment, while outflow concerns also added to the downbeat tone. As a reminder, the ASX 200 was closed today due to Australia Day holiday. Finally, 10yr JGBs traded relatively flat, failing to sustain most its early advances despite weakness in stocks, as participants remain tentative ahead of Friday’s BoJ policy decision.
Top Asian News
- PBOC’s Flood of Cash Keeps Money Rates in Check Before Holiday: China’s central bank conducts most reverse repos in 3 yrs
- China’s Stocks Fall to 13-Month Low Amid Capital Outflow Concern: Shanghai Composite Index plunged 6.4% to lowest close since Dec. 2014
- Hyundai Posts Lowest Profit in Five Years on China Slowdown: Slump in China deliveries overshadowed gains in the U.S., Europe, South Korea; 4Q oper. profit 1.52t won; est. 1.68t won
- Sumitomo Mitsui Profit Unexpectedly Rises 17% on Stock Gains: 3Q net 238.1b yen, est. 192.4b yen
- SK Hynix Profit Misses Estimates on Lower Memory Chip Prices: 4Q oper. profit 988.9b won; est. 1.04t won
- Some BOJ Officials Are Said to See More Easing as Close Call: Kuroda gave no hint of his appetite for more stimulus at Davos
- Hong Kong Feels Squeeze of Slowing China and Rising Rates: Stock selloff and Hong Kong dollar pressure unnerve investors
- Singapore’s 80-Cent Loans Not Cheap Enough for Distressed Funds: Asian secondary loan trading thinnest in decade, says SC Lowy
- Malaysia Brings Najib Probe to Close With No Graft Found: Najib has faced pressure to step down over funding scandal
In Europe, oil has turned around in recent trade, abating the risk off sentiment after both Brent and WTI re-took the USD 30.00 handle aided by comments from the Iraqi oil minister regarding production. European equities have been boosted by a turnaround in the energy sector, which was the laggard by a substantial margin throughout most of European trade today. It has recently turned around however, and lifted European indices off their worst levels.
In spite of a turnaround in risk sentiment, Bunds still trade higher (25 ticks), while the Dax (-0.7%) is lower even though one of its largest companies Siemens (6.4%) upgraded its EPS forecast. As participants await the release of Apple earnings after market today, it’s worth noting that its German
Top European News:
- Lundbeck Said to Explore Options for Alcohol-Dependence Drug: Review may lead to a partnership agreement for Selincro
- Draghi Says ECB Credibility Hinges on Meeting Its Inflation Goal: ECB President says critics ignore risks of doing nothing (Harvey: hogwash!!)
- Philips Earnings Beat Estimates on Jump in Medical Orders: 4Q Ebita ex-items EU842m, est. EU798m; confirms it sees modest comparable sales growth in 2016, expects improvements in the year to be back-end loaded; Philips’s Lumileds Draws Interest, May Get Lower Price, CEO Says
- EasyJet to Intensify Cost Cuts as 2015 Terrorism Hurts Fares: iscal 1Q rev. fell 0.1% on pricing, currencies
- Swiss Watch Exports Decline Amid Smartwatch Encroachment: Dec. exports declined 3.8%, pushing shipments down 3.3% on the yr to CHF21.5b, Federation of the Swiss Watch Industry said
- Dixons Carphone to Accelerate Closings as Sales Beat Estimates: Will reduce outlet numbers by 134 over the next yr as it combines its PC World and Currys stores, while inserting a Carphone Warehouse outlet into each
- Tesco Rapped by Grocery Regulator Over Treatment of Suppliers: Serious Fraud Office criminal probe still hangs over grocer
- U.K. Flirts With Failed Debt Auction as Analysts Wince at Depth: Analysts study chance as Jan. 20 offer barely oversubscribed
- Deutsche Post to Expand Parcel Service to Confront Amazon: Bild
In commodities, WTI crude fluctuated after Monday’s 5.8 percent retreat. Government data due out Wednesday is expected to show U.S. inventories rose by 4 million barrels last week, according to energy analysts. That would be a third week of gains. Oil is down almost 20 percent this year amid concern over brimming U.S. stockpiles, steady output from Saudi Arabia and Russia and the prospect of increasing Iranian shipments after the end of sanctions. Bets that WTI will retreat below $25 a barrel have reached a record high.
Iraq’s oil ministers says Russia and Saudi Arabia are more flexible on cutting oil output and would agree to have an emergency OPEC meeting but says it would be pointless without an upfront agreement on production.
Gold for immediate delivery gained 0.5 percent to $1,112.94 an ounce. It climbed 0.8 percent last week as the turmoil in global stock markets renewed interest in the metal as a store of value.
In FX, haven currencies erased earlier gains. The euro weakened 0.2 percent to $1.0833, while the yen was at 118.29 per dollar. The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, increased 0.1 percent. The won fell for the first time in four days after South Korea reported economic growth of 3 percent for the fourth quarter on a year-on-year basis, retreating from a five-year high. Foreign funds have pulled $2.5 billion from Korean shares so far this year. Russia’s ruble strengthened 0.6 percent, erasing an intraday decline and clawing back some of Monday’s 2.5 percent drop.
EUR/USD drivers are similar balanced, risk off rally against fresh ECB stimulus keeping the pair on the 1.0800’s for the foreseeable future. Oil was back on a USD 29.0 handle to send CAD, RUB, MXN et al all lower again, but recovering well in line with both WTI and Brent reclaiming USD 30.0 on fresh comments (from SA, Russian and Iraq) on production levels.
On the US calendar today we have the November FHFA house price index and S&P/Case-Shiller home price index. Following this will be the flash January services and composite PMI’s, before we get the January consumer confidence reading where current expectations are for no change relative to last month. The Richmond Fed manufacturing index print for January is also due out this afternoon. In terms of central bank speakers, comments from the BoE’s Carney (at 10.45pm GMT) this morning related to the December Financial Stability Report will be worth keeping an eye on. Meanwhile, earnings season rumbles on with 23 S&P 500 companies due to report. The highlight will no doubt be the Apple results which are expected post the closing bell, while Johnson & Johnson (pre-market), AT&T (after-market) and Proctor & Gamble (pre-market) are also due to report.
Bulletin Headline Summary from Bloomberg and RanSquawk
- Treasuries slightly higher overnight as world equity markets selloff, oil mostly steady; week’s U.S. auctions begin today with $26b 2Y notes, WI yield 0.86%, compares with 1.056% awarded in Dec., fifth straight 2Y auction to stop through.
- China’s stocks tumbled to the lowest levels in 13 months amid concern capital outflows will accelerate as the economy slows and support for the yuan eats into the nation’s foreign reserves
- The mismatch between trade data reported by Hong Kong and China widened to the second-highest on record in December, renewing speculation of faked invoices
- According to Bank of America Merrill Lynch, China will steer clear of a hard landing and the government will contain the risks arising from its financial market turbulence
- While stocks are having a chaotic start to the year, investors are pulling money from securities that profit from higher volatility at the same time as short sellers are piling into bets that tranquility will return
- Mario Draghi hit back at critics of his policies, saying the European Central Bank must fulfill its inflation mandate in order to maintain its credibility
- Greece’s next bite of bailout money may turn into a movable feast if PM Alexis Tsipras can’t convince euro-area authorities he’s making good on his promises to fix Greece’s pension system, update its labor markets and close fiscal gaps
- U.K. government bonds have investors bracing for a failed sale. An offering Jan. 20 that attracted the lowest demand in nearly seven years might be a warning sign for buyers who haven’t balked at acquiring all the targeted debt since a March 2009 auction
- Across the U.S., the story is much the same. The world’s economic woes — from China to Russia to South America — are damping sales in the high-end real estate market
- Sovereign 10Y bond yields mostly lower except for Greece which widens 15bp. Asian, European stocks mostly lower; U.S. equity-index futures drop. Crude oil steady, copper and gold rise
Top Headline News:
- Oil has turned around in recent trade, abating the risk off sentiment after both Brent and WTI re¬took the USD 30.00 handle
- FX markets continue to trade in familiar ranges, but clearly to the downside as sentiment is mostly sour
- Today’s highlights include: US S&P/CaseShiller 20-City Index NSA, API Crude Oil Inventories, BoE’s Carney and earnings from the likes of Apple and Johnson & Johnson
- Huntington Bancshares to Acquire FirstMerit for $3.4b: FirstMerit shareholders will receive 1.72 shares of Huntington common stock and $5 in cash for each share that they own
- Staples Shakes Up Management, May Go Without Office Depot: Demos Parneros, Staples’ president of North American stores and its online business, will step down by March 31
- Siemens Raises Outlook as Lower Tax Offsets China, Oil Slump: FY EPS will be between EU6-EU6.40, higher than a previous forecast of EU5.90-EU6.20
- Crane Co. 2016 EPS Forecast Range Below Ests; 4Q Adj. EPS Beats: Sees yr EPS $3.85-$4.15, est. $4.27.
- Obama Seeks to Expand 401(k) Use by Letting Employers Pool Plans: President wants $100m to test more portable accounts
- JPMorgan Reaches $1.42 Billion Deal in Lehman Clearing Case: Lehman said the settlement resolves 2 of the 3 major pieces of litigation with JPMorgan left over from its 2008 bankruptcy
- Paulson Pledges Personal Holdings to Back Firm After Assets Fall: Puts up his hedge-fund interests for credit line
- Traders Are Withdrawing Money From VIX Funds Like Never Before: VIX index of market stress jumps 33 percent in Jan.
- Flexible Workers, AI Keys to Future Success, Accenture Predicts: Companies must invest in AI, training, platforms, says firm
- Einhorn’s Greenlight May Seek SunEdison Sale, Filing Shows: Greenlight says it may propose changes including asset sale
- Retirement Giant Fidelity Now Wants Workers’ Health Insurance: To offer private health exchange for midsized firms
- Nexstar Said to Be Close to $2.3b Deal for Media General: NYP: Agreement is expected to be put on hold when announced, because Media General has already pledged itself to Meredith Corp.: NYP cites one unidentified person familiar
- Tesla’s Musk Says Held High-Level Talks With Chinese Government: Tesla is looking for a Chinese production partner but still “trying to figure that out,” billionaire co. co-founder Elon Musk tells a business conference in Hong Kong
- Verso Files for Chapter 11 Protection in Delaware Today
DB’s Jim Reid concludes the overnight wrap
Global markets spat their dummy out again on Monday as oil tumbled yet again (over -7.5%) after the largest 2-day rally for 7 years. News out of Saudi Arabia proved to be a big driver in the European session, as the world’s largest crude exporter noted that it did not plan to reduce its investment spending on energy projects despite lower oil prices (Bloomberg). The risk-off sentiment once again dragged on equities, as European markets wiped out early gains and closed in marginally negative territory (STOXX -0.62%; FTSE -0.39%; DAX -0.29%) while US equities sold off in line until a weak final hour of trading saw the S&P 500 lose nearly an extra percentage point to close -1.56%.
Asia is following on from the US close with the Nikkei and Hang Seng down -2.4% and -1.8% as we go to print. The Shanghai Comp is around -3% lower and trading at 13 month lows. Oil has continued its slide from yesterday, declining around -2.5%. Just after we went to print yesterday the futures contract hit $32.73. 24 hours later it’s at $29.57 – nearly 10% lower from the highs. With high impact news-flow from China easing for now, Oil has taken over as the main global markets driver at the moment and when you get swings like we’ve seen since last Wednesday evening, sentiment is going to be messy.
Obvious one of the asset classes most in focus over the last few months and one closely tied to the price of Oil has been US credit. Yesterday our US credit strategist Oleg Melentyev published an update which included looking at how the market has rarely been as dislocated (less than 15% of HY trading within 100bps of the overall index – close to the lowest ever) but at least showing signs of fair value re-emerging. As Oleg discusses, HY ex-energy has widened 80bps so far in 2016, and 115bp since early December; currently standing at 667bp. IG ex-energy spreads at 168bp are +17 and +21bps respectively over those time horizons. Both markets have now modestly overshot his targets of 650bp and 155bp respectively. Oleg worries that if credit widens much more it could reach the point of no return and become even more self fulfilling. In the note he also looks at their lead indicators for the default cycle with many of them recently reaching critical levels. So overall value re-emerging but with risk that we could be near a tipping point in some of the market drivers.
Back to markets, data releases out yesterday were largely disappointing and did little to help the risk off sentiment across markets. The German IFO survey data for January missed estimates as the business expectations index fell to 102.4 (vs. 104.2 expected; 104.6 previous) and the business climate index fell to 107.3 (vs. 108.4 expected; 108.6 previous). Data out of Italy was also soft, as retail sales numbers for November posted only +0.3% mom (vs. +0.5% expected) and increased concerns that the country’s economic recovery may already be losing momentum. The UK saw factory orders data for the three months to January dip more than expected as indicated by the CBI order book balance (-15 vs. -10 expected; -7 previous). On a somewhat positive note, optimism about the general business environment increased to -4 (vs. -12 prior) over the same period.
Data out of the US was also negative, as the Dallas Fed Manufacturing Survey reported a sharp drop in broader business conditions, as the general business activity index for January came in at -34.6 (vs. -14.5 expected; -21.6 previous) – the lowest levels since April 2009. Texas manufacturing activity also fell sharply to near recession levels with the production index dropping to -10.2 (vs. 12.7 previous), while the general Company outlook index came in at -19.5 (vs. – 10.5 previous).
Looking at today’s calendar, with no data due in Europe this morning it’s all eyes on the US session where there are a number of releases due. Kicking things off will be the latest housing market data where we’ve got the November FHFA house price index and S&P/Case-Shiller home price index prints both expected. Following this will be the flash January services and composite PMI’s, before we get the January consumer confidence reading where current expectations are for no change relative to last month. The Richmond Fed manufacturing index print for January is also due out this afternoon. In terms of central bank speakers, comments from the BoE’s Carney (at 10.45pm GMT) this morning related to the December Financial Stability Report will be worth keeping an eye on. Meanwhile, earnings season rumbles on with 23 S&P 500 companies due to report. The highlight will no doubt be the Apple results which are expected post the closing bell, while Johnson & Johnson (pre-market), AT&T (after-market) and Proctor & Gamble (pre-market) are also due to report.
Let us begin:
Late MONDAY night,TUESDAY morning: Shanghai down badly by 6.42% / Hang Sang down. The Nikkei and the rest of Asia closed badly in the red . Chinese yuan down a touch and yet they still desire further devaluation throughout this year. Oil gained a dollar, rising to 30.71 dollars per barrel for WTI and 30.85 for Brent. Stocks in Europe so far are all in the red. Offshore yuan trades at 6.6098 yuan to the dollar vs 6.5801 for onshore yuan. huge volatility is the Chinese markets screams of credit problems; a leaked document suggests that China will not use the lowering of the RRR reserves but instead provide direct yuan injections into the market/POBC injects another 70 billion of liquidity into the markets (see below)
(courtesy zero hedge)
Offshore Yuan Drops To 3-Week Lows As China Injects Another $70 Billion Liquidity
Following the afternoon weakness in US equities, Offshore Yuan has been limping lower into the fix, not helped by comments from a MOFCOM researcher that “China is able to withstand currency fluctuations” implicitly warning carry traders to stay away and suggesting the dollar’s dominance would not last long. CNH is now at 3-week lows against CNY, over 300pips cheap – which prompted the major short squeeze last time. Chinese stocks are modestly lower but more worrying is the 7-day slide in Chinese corporate bond yields – the most in 2 months – hinting perhaps that the last bubble standing is bursting.
Having dismissed calls for large scale stimulus, the Year-end liquidity spigot is wide open…
- *PBOC TO INJECT 440B YUAN WITH REVERSE REPOS: TRADERS
Consisting of 360bn 28-day and 80bn 7-day reverse repo.
As PBOC held the Yuan Fix “stable” for the 13th day in a row.
Offshore Yuan continues to weaken and diverge from the “relative” stability of onshore Yuan as MOFCOM resercher Mei Xinyu writes that China is willing and able to stand temporary fluctuations in currency rates to gain independence of its monetary policy,. adding that the Yuan couldn’t be pegged to dollar perpetually since China is the 2nd largest economy in world and a strong position of dollar won’t last long.
Is it us or does that sound a little more like a threat to dollar hegemony than a warning about volatility?
Chinese CDS continue to confirm Offshore Yuan’s implied weakness – the last time CNY remained “stable” in the face of devaluation stress like this was in the pre-amble to August’s collapse…
Finally, we draw attention to the fact that the “last bubble standing” – Chinese corporate bonds – appear to be cracking, having seen yields increase for the last 7 days – the most since mid November…
As Chinese stocks stumble:*HONG KONG’S HANG SENG INDEX FALLS 1.4% IN PREMARKET
None of which should surprise anyone, as BofAML’s David Cui (chief China equity strategist) warned so succinctly:
I expect higher volatility in the markets and a much higher chance of financial system instability in China – debt/GDP ratio will be higher, growth will be slower and there will likely be more shocks to the system. Whether the financial system breaks down or not, I expect the risk of such a breakdown to be the dominant theme for China markets this year.
It’s true that since 2011 every year there had been a round of debates about this, and so far, the financial system has held up reasonably well (even though there had been scares from time to time). Many view the absence of any severe disturbance over the past few years as proof that the government is on top of things and believe that the risk has diminished over time. I think the opposite is true: the government has maintained a superficial stability largely by debt-funded stimulus and ever-greening of bad debts. We believe these have strengthened various implicit guarantees that have in turn generated powerful destabilizing forces beneath the surface – a classic case of short term stability breeding long term instability.
I think there are at least five: the guarantee on GDP growth, on RMB stability, on no sharp fall of the A-share market, on no major debt default and on no large housing price drop. A break of any of these guarantees may potentially destabilize the system in my view. And it’s a matter of time when some of these guarantees will be broken because they are inherently conflicting. For example, to hold up growth, the government has to run fairly loose monetary policy and very aggressive fiscal policy which means that RMB will increasingly come under pressure. The same is true with holding up the A-share market. The government has to borrow money from banks to buy A-shares, which boosts money growth and adds to asset bubble and RMB problems. If it reduces loans elsewhere to compensate, growth and debt may suffer. These are just two examples.
Leading him to forecast that it’s going to be tougher for China’s equity markets this year than last year.
We forecast SHCOMP to decline by about 30% to around 2,600 by yearend, and HSCEI to decline by about 7% to around 9,000.
Our year-end targets had not factored in a credit crunch scenario because the timing of which is difficult to predict. Should it occur, we expect the indices to end below the low bounds of our expected trading ranges, possibly way below (2,200 for SHCOMP and 7,400 for HSCEI).
None of which spell anything but contagion concerns for global levered carry trades.
* * *
And what would a night in Asia be without the Japanese spewing forth more muppetry monetary policy magic…
The Japanese continue to desperately try to jawbone some momentum back into their markets, following this morning’s spurious midnight Japane time headline, here is another:
- *EX-BOJ DEPUTY IWATA SEES CHANCE FOR EASING THIS WEEK: ASAHI
Which popped USDJPY back higher after some early weakness
And then this:
- *AMARI SAYS GOVT SHOULDN’T GUIDE MONETARY POLICY
And here’s why it matters – the correlatiob between USDJPY and world stocks has never been higher…
Well done Central Planners.
They cook the books? it can’t be so!!
(courtesy zero hedge)
Official In Charge Of China’s Cooked GDP Books Probed For “Severe Violations”
Earlier this month, China’s top stock regulator offered to resign after an experiment with a circuit breaker went horribly awry, triggering a series of harrowing selloffs on the SHCOMP that reverberated through world markets.
The fiasco was humiliating for CSRC chief Xiao Gang who two Saturdays ago said elevated volatility in China is the result of an “immature market, inexperienced investors, an imperfect trading system and inappropriate supervision mechanisms.” Apparently at a loss for how to right the ship, Xiao tendered his resignation. Or maybe he didn’t. According to Beijing, reports of his departure “do not conform to the facts,” but what’s clear is that things are not going well at China’s securities regulator which last year embarked on a CNY1.5 trillion effort to halt a dramatic decline in share prices that wiped away the life savings of many an illiterate Chinese day trader.
In the wake of the chaos, Beijing decided to crackdown on those “responsible” for the nefarious “manipulation” that caused Chinese stocks to crash. Of course the real cause of the meltdown was that 80% of the market was dumb retail money and investors were leveraged to the gills, but that didn’t stop Beijing from arresting dozens of people including officials at Xiao’s CSRC where Xi is apparently convinced some “graft” was taking place amid the plunge protection effort.
And while it became readily apparent that no one was safe from the long arm of Xi, one person we did not expect to see land on the list of those who have disappeared into the bowels of the Politburo was NBS chief Wang Baoan.
After all, pretty much all you have to do at the NBS is make sure you don’t deviate too far from the Party’s 7% growth “target”, and your job should be secure, but on Tuesday, an announcement posted on the website of the Central Commission for Discipline Inspection said Wang was being investigated for “severe disciplinary violations.”
As AP notes, the news “came hours after Wang had briefed reporters at a news conference in Beijing about China’s economy in 2015.”
“The surprise announcement is bound to raise new questions about the accuracy of Beijing’s economic statistics,” CNN remarked.
Those statistics are “reliable” Wang told the press on Tuesday just before the graft investigation was announced. Wang also said George Soros’ “hard landing” call should be dismissed as coming from “just one school of thought.”
“Facts.” he chided, “speak louder than words” and the Chinese economy is “tall, rich, and handsome” compared the rest of the world, a play on the “cleanest dirty shirt” meme.
As The Straits Times recalls, “Wang was appointed head of the National Bureau of Statistics in April of last year [and] previously spent about 17 years in various positions in the finance ministry, including as vice-minister.”
The obvious question here is why Beijing wants Wang gone. Was he pushing back against the country’s cooked books? Was he set to reveal something disconcerting about the real pace of growth in the world’s second largest economy? Or perhaps it’s the other way around: maybe China is looking to move towards a more honest reporting system for its economic data and is trying to clean house first – although we doubt it.
It’s also possible Wang is simply the latest high-ranking official to become ensnared in Xi’s “tigers and flies” campaign and the investigation isn’t linked to his oversight of the country’s all-important GDP prints. “Analysts say that given his short tenure at the statistics agency, the corruption allegations are likely to stem from his career at the finance ministry,” FT wrote, earlier today. Still, given the heightened scrutiny on China’s GDP numbers, it seems at least possible that there’s some connection between Wang’s alleged corrupt activities and his management of the country’s manipulated data.
For now, we’ll simply close with the following quote from The Straits Times who reminds us that whatever it is Wang did or didn’t do, we’ve likely seen the last of him.
Internal investigations into high-level party officials operate without judicial oversight. Once announced, they are likely to lead to a sacking followed by criminal prosecution and jail sentence.
France’s Highways Descend Into “Chaos & Lawlessness”
While the media attention is directed to the refugee crisis in Germany, France’s highways in Normandy are descending into complete chaos and lawlessness.
France’s rule of law has ceased to exists in the area around Calais. In Europe highways used to be inaccessible to pedestrian traffic. Nowadays in France immigrants are wandering on the highways, and trucks are being stormed, which has become the “new normal”. As the events are unfolding in France, European mainstream media are ignoring them. Calais has had a migrant problem for more than 10 years, but since last year the situation has been deteriorating rapidly. The governments in Paris, London and Brussels have completely lost control, they are not able to maintain the rule of law and they are miserably failing to protect their citizens.
European and especially English politicians have tried to solve the problem by punishing the victims. European truckers, already at the bottom of the earning pyramid, can be fined up to half of their annual salary when refugees manage to get aboard their trucks.
According to the Telegraph:
“In one case, a lorry driver was issued with a £19,500 fine, despite calling police when he discovered around a dozen people inside his trailer while driving on the M25.
The number of fines issued to hauliers for “clandestine entrants” has more than tripled in just three years, new figures show, with drivers facing on the spot fines of up to £2,000 for each person found inside their vehicles.”
Thanks to the endless spots on youtube those who live outside France can get an idea of what is going on:
The situation on the highways in Normandy, France, December 2015 and January 2016.
Deutsche Bank Declares War On Mario Draghi, Warns Him Any Further QE Will Push Stocks Lower
In what is the first official warning to a central bank to no longer do what has been done so far for seven years, earlier today Deutsche Bank came out with a startling presentation addressed to Mario Draghi, warning him explicitly that any more QE will not only not help stocks (and certainly not DB stock which continues to plumb post-crisis lows on fears it is overexposed to the commodity crunch and potentially such names as Glencore and various other commodity traders), but will actually push equities lower.
Here is the key segment from a report just released by the bank’s European Equity Strategy:
While the outlook for more ECB easing has buoyed equity markets, we think it could turn out to be a negative for risk over the coming months, as it is likely to lead to further dollar strength, which in turn is set to translate into additional downside pressure on the oil price, further balance sheet stress in the US energy space and higher US high-yield credit spreads . Our models suggest that European equities are fairly valued, given the current level of US high-yield spreads. If more dollar strength and weaker oil lead US speculative default rates to rise above the level of around 4% currently priced into the credit market, this could mean more upside risk for HY credit spreads and more downside risk for equities over the coming months.
A lose-lose currency war policy dilemma, you say? Why yes, yes it is:
We see four pathways from ECB easing to further stronger strength: (a) against the backdrop of a Fed that remains committed to its tightening agenda, further ECB easing is likely to lead to more downside of the euro against the dollar; (b) more ECB easing puts pressure on the Bank of Japan to intensify its own easing program; (c) ECB-inspired euro weakness puts upward pressure on the new CNY basket, increasing the likelihood of a renewed Chinese FX devaluation; (d) the more expected ECB easing calms the market in the near-term, the more likely the Fed is to hike again over the coming months, adding to yield support for the dollar.
The key chart:
In other words: “Draghi, back off!”
To be sure, what DB has said is what many others have openly thought but few dares to state: after all in a world in which the Fed is, if only for the time being, out of the easing picture, it was all up to the BOJ, and of course, the ECB whose jawboning last week helped send futures soaring. If the DB thinking catches on, and suddenly any more speculation that the ECB will ease further is perceived as a negative for risk, then all bets are off as the world will have to find an entirely new paradigm with which to justify rising stocks, one which is not predicated upon further easing by non-US central banks.
Of course, the simple implication from DB’s report is that while the ECB should refrain from more QE, the Fed should not only stop hiking but revert to easing more, especially if as we reported previously, China will no longer engage in broad monetary stimulus but instead proceed with targeted liquidity injections via reverse repos.
Here is DB’s plea to Yellen:
“If the Fed abandoned its tightening program, this would lead to a more sustainable rally in the equity market. However, we agree with our US economists that a Fed relent is unlikely in the near-term.“
With the Fed sitting down for its January meeting, it suddenly finds it has many more storm clouds over its head than it had hoped just one month ago when it was confident a rate hike signal would “prove” that all is well. Instead, everything turned to be very, very unwell.
“Gangs” Of “All-Male” Moroccan Migrant Children “Take Over” Stockholm Train Station; Steal, Grope, Beat Women
On Sunday, we learned that despite the best efforts of German cartoonists, some refugees are still having a hard time understanding how to behave at public pools.
European authorities, increasingly desperate to salvage the “yes we can” refugee narrative in the face of mounting evidence that it may be well nigh impossible to integrate two vastly divergent cultures, have scrambled to put together integration guides and design brochures and pamphlets aimed at “explaining” Western European societal norms to the millions of asylum seekers that now call the bloc home.
Most of the integration guides make some reference to the fact that in polite culture, it’s not appropriate to grope women even if they appear, by Mid-East standards anyway, to be scantily clad. On New Year’s Eve, women reported being sexual assaulted by dozens of “Arab” men in Germany, Finland, and Austria among other countries and since then, officials have focused increasingly on what certainly appears to be a kind of “groping” epidemic perpetrated by asylum seekers.
But it’s not just the “groping.” If Bild is to be believed, some refugees recently engaged in what one might call some “shenanigans” at the Johannisbad baths in Zwickau. Here are the rather disconcerting details from a clumsy (yet exceedingly amusing) Google translation ofthe original German:
“According bathrooms GmbH have masturbated refugees when visiting swimming baths in pools and emptied their bowels in the water. They are women in sauna harassed and have tried to storm the ladies’ locker!”
Needless to say, that won’t do anything to calm Europeans’ frayed nerves.
Far-right Dutch politician Geert Wilders even went so far as to suggest that the “Islamic testosterone bombs” be “locked up” in asylum centers for the sake of “the women.”
On Monday, we get the latest bit of migrant news out of Europe, this time from Sweden where “gangs” of Moroccan migrant children have apparently “taken over” the Stockholm train station where, to let The Daily Mail tell it, they are “stealing, groping” and beating women. Here’s the story:
Swedish police warns that Stockholm’s main train station has become unsafe after being ‘taken over’ by dozens of Moroccan street children.
The all-male migrant teen gangs are spreading terror in the centre of the Swedish capital, stealing, groping girls and assaulting security guards, according to Stockholm police.
Members of the gangs, some as young as nine, roam central Stockholm day and night, refusing help provided by the Swedish authorities.
Sweden has seen a dramatic increase in the number of Moroccan under-18s who apply for asylum without a parent or guardian in the past four years, with many later running away from the housing provided to live on the streets in the capital.
Stockholm police estimate that at least 200 Moroccan street children move in the area around the main train station in the centre of the capital, sleeping rough, and living off criminal activity.
‘These guys are a huge problem for us. They steal stuff everywhere and assault security guards at the central station,’ one police officer told SVT.
‘They grope girls between their legs, and slap them in the face when they protest. All police officers are aware of this.
So apparently, dozens of nine-year-olds and preteenagers have effectively taken control of a major transportation hub and transformed it into their own personal crime den where security guards are assaulted on site, women are “groped”, and girls are “slapped in the face” for trying to protect themselves.
“The gangs are made up of orphans who have grown up on the streets of Casablanca and Tanger in Morocco, where authorities estimate there are around 800,000 homeless ‘street children,” the Mail continues, adding that “Swedish migration authorities first reported and increase in Moroccan unaccompanied minors applying for asylum in 2012, when 145 arrived, a number which more than doubled in 2013.”
Some 500 Moroccan children applied for asylum but around a fifth of those who were placed with foster families or put in group homes ran away and “disappeared off the radar.”
It would appear that these missing children are now dug in at the train station where they have brought authorities “to their knees.”
So far, police have attempted to solve the problem by arresting the children for “public drunkenness” in order to “get them off the streets for a while.” Clearly, that isn’t a viable long-term strategy and so, Interior Minister Anders Ygeman now says Sweden is set to round them all up Trump style and ship them back to Morocco, or as Ygeman puts it, “we are in agreement that this is a joint problem for us to solve, and that we both need to find ways of identifying these people and achieve repatriation.”
Of course there’s another solution. Sweden could just post the following cartoons at the train station:
your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/TUESDAY morning 7:00 am
Euro/USA 1.0819 down .0032
USA/JAPAN YEN 118.42 up .187
GBP/USA 1.4232 down .0007
USA/CAN 1.4227 down .0007
Early this TUESDAY morning in Europe, the Euro fell by 32 basis points, trading now just above the important 1.08 level rising to 1.0816; 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, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP and the threat of continuing USA tightening by raising their interest rate / Last night the Chinese yuan was down in value (onshore). The USA/CNY up in rate at closing last night: 6.5810 / (yuan down but will still undergo massive devaluation/ which will cause deflation to spread throughout the globe)
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 up again in Japan by 36 basis points and trading now well below that all important 120 level to 118.42 yen to the dollar.
The pound was down this morning by 7 basis point as it now trades just above the 1.42 level at 1.4232.
The Canadian dollar is now trading up 9 in basis points to 1.4227 to the dollar.
Last night, Asian bourses were down badly, as were European bourses
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 and the yen carry trade also blowing up)
3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.
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 402.01 or 2.35%
Trading from Europe and Asia:
1. Europe stocks all in the red
2/ Asian bourses all in the red/ Chinese bourses: Hang Sang red (massive bubble forming) ,Shanghai in the red by a massive 6.42% (massive bubble bursting), Australia in the green: /Nikkei (Japan)red/India’s Sensex in the red /
Gold very early morning trading: $1111.65
Early TUESDAY morning USA 10 year bond yield: 1.99% !!! down 3 in basis points from last night in basis points from FRIDAY night and it is trading BELOW resistance at 2.27-2.32%. The 30 yr bond yield rises to 2.80 par in basis points from last night. ( still policy error)
USA dollar index early TUESDAY morning: 99.45 up 16 cents from MONDAY’s close.(Now below resistance at a DXY of 100)
This ends early morning numbers TUESDAY MORNING
Last night, there were rumours that Saudi Arabia would cut oil production if others at the margin would also cut. Bloomberg’s analyst is not buying the story:
Not Even Bloomberg’s Analyst Is Buying The “Saudi Production Cuts”
The reason why oil has stormed higher from down over 3% to up well over $30 in the span of hours (and dragging futures higher with it), was – as observed earlier – news that Iraq’s Oil Minister Adel Abdul Mahdi said that both Saudi Arabia and Russia, the world’s biggest oil producers, “are now more flexible about cooperating to cut output as crude prices have fallen to levels that hydrocarbon-rich nations didn’t foresee.”
“This flexibility should be finalized, and we should hear some solid suggestions coming from all parties,” Abdul Mahdi told reporters at a conference in Kuwait City. He didn’t give details about what the increased Saudi and Russian flexibility entailed, nor did he say how he knew about it.
There is one problem with this: it wasn’t the Saudis saying the Saudis should (or would) cut, and in fact, while Aramco’s CEO said that there is an even greater glut than expected at 3MM b/d, he made precisely zero mention of Saudi Arabia cutting production at all in the near future.
And sure enough, moments ago Bloomberg’s own oil strategist, Julian Lee explained that comments that Saudi Arabia, Iraq, Russia have become more willing to consider production cuts need to be viewed with caution.
What else he said:
- Saudi Arabia has said it would cut output as part of broader OPEC, non-OPEC agreement ever since current mkt share policy was introduced. There’s no indication that position has changed.
- Aramco Chairman Khalid Al-Falih said in Davos last wk that country won’t reverse course unless non-OPEC nations play their part in production cuts
- Iraq only willing to reduce output if others also cut
- Russian govt officials continue to say that output reductions would not be effective; Energy Minister Alexander Novak has said several times that artificial production cuts are senseless
- Lukoil’s Leonid Fedun says Russia could work with OPEC if a political decision was taken to cooperate No such agreement exists.
- Parties agree that rising supply has been driven largely by U.S.
Lee concludes by saying that there’s no mechanism in U.S. to coordinate supply cut from large number of independent producers who have duty to their shareholders to maximize revenue. Actually there is a mechanism, if only a short-term one: it is called bankruptcy liquidation, and to get there the Saudis will need to keep the market oversupplied by 3MMb/d for a long, long time to take out said 3 million barrels in excess daily shale supply away from the table.
Crude plunges back to earth after the latest API report showing the biggest inventory build since 199
(courtesy zero hedge)
Portuguese 10 year bond yield: 2.99% down 5 in basis points from MONDAY
(courtesy zero hedge/Jeff Gundlach/)