Gold: $1127.30 down $0.60 (comex closing time)
Silver 14.28 down 6 cents
In the access market 5:15 pm
At the gold comex today, we had a fair delivery day, registering 24 notices for 2400 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 203.02 tonnes for a loss of 100 tonnes over that period.
In silver, the open interest fell by 329 contracts down to 158,110. In ounces, the OI is still represented by .791 billion oz or 113% 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 a huge 5301 contracts to 378,735 contracts as gold was up 11.50 with yesterday’s trading.
We had no changes in gold inventory at the GLD / thus the inventory rests tonight at 681.43 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 changes in inventory, and thus/Inventory rests at 309.510 million oz.
First, here is an outline of what will be discussed tonight:
1. Today, we had the open interest in silver fall by 329 contracts down to 158,110 despite the fact that silver was up 11 cents with respect to yesterday’s trading. The total OI for gold rose by 5,301 contracts to 378,735 contracts as gold was up $11.50 in price from yesterday’s level.
2 a) Gold trading overnight, Goldcore
3. ASIAN AFFAIRS
i)Late MONDAY night,TUESDAY morning: Shanghai UP 2.29% / Hang Sang DOWN. The Nikkei DOWN . Chinese yuan DOWN and yet they still desire further devaluation throughout this year. Oil LOST ,FALLING to 31.72 dollars per barrel for WTI and 32.90 for Brent. Stocks in Europe so far are all in the RED . Offshore yuan trades at 6.6250 yuan to the dollar vs 6.5794 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/JAPAN INITIATES NIRP(LAST THURSDAY NIGHT CREATING HAVOC AROUND THE GLOBE)
ii) The Hong Kong housing bubble suffered a spectacular collapses are sales plunge over 80% as demand dries up completely. Capital controls from the mainland is surely having an effect on Hong Kong housing. If Hong Kong is having this kind of lack of demand in one of the world’s most wealthiest enclaves, one can just imagine what is happening inside the mainland!
( zero hedge)
iii) The biggest ever Chinese corporate takeover: ChemChina purchases the Swiss Syngenta for 43 billion USA
iv) David Stockman comments on the huge scandal in China with respect to a 7 billion USA Ponzi scheme whereby 900,000 investors lost their money.
“Yucheng was raising capital through Ezubo at an annual interest rate of 14 percent and lending it out for 6 percent,” he said. The investor said he couldn’t understand how the company could be profitable (!) considering it was paying more to attract money than it was collecting in interest on loans.”
Also he harps on the damaging effects on NIRP throughout the globe
(courtesy David Stockman/ContraCorner)
v) This is a biggy!! Japan cancels its fixed 10 yr bond auctions due to sub zero rates. The variable rate is still auctionable and yesterday the yield came in at .078%. Now Japan has a problem: where are they going to find bonds to monetize? No question that they will purchase USA bonds in size.
i)This morning European bank stocks are plunging. Since NIRP they are down 40%. NIRP destroys bank profits !
( zero hedge)
ii) Austria has had enough: they will pay migrants 500 euros to go back home. Good luck!
iii)The stock Ferrari on the Milan Stock exchange crashes today down 40%:
( zero hedge)
Coming to a store near you….!!!!
YOU PAY THE CORPORATE FOR THE PRIVILEGE OF BUYING THEIR DEBT:
( zero hedge/Jim Reid/Deutsche bank)
iii)The low oil price is disintegrating conditions in African nations:
iv)The biggest USA energy companies have all been downgraded by and S and P(courtesy zero hedge)
v)Then after the market closed, oil drops further on news of a big API buildup of inventory:
i) KGHM are not happy campers as they slam the LBMA”s manipulated silver fix and rightly so!
ii) Two giants in the field talk about the “big reset”
( Bron Suchecki/Perth Mint/GATA)
USA STORIES WHICH WILL INFLUENCE THE PRICE OF GOLD AND SILVER
ii) ISM NY manufacturing index tumbles the most since August as revenues disintegrate:
iii) Michael Snyder comments on empty shelves, and store closings all across the USA
iv) Negative Interest rate scenarios are already baked in as the Fed uses them in stress tests
v) as stocks were rising 1.8% last week, hedge funds were dumping
vi) A huge warning signal for the USA housing sector
Let us head over to the comex:
The total gold comex open interest rose to 378,735 for a gain of 5301 contracts as the price of gold was up $11.50 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,only the former scenario was in order. We now enter the big active delivery month is February and here the OI fell by 507 contracts down to 3,687. We had 546 notices filed yesterday, so strangely we actually gained 39 contracts or an additional 3900 oz will stand for delivery. The next non active delivery month of March saw its OI rise by 48 contracts up to 1223. After March, the active delivery month of April saw it’s OI rise by 5,956 contracts up to 267,790.The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was 98,051 which is extremely poor. The confirmed volume Friday (which includes the volume during regular business hours + access market sales the previous day was poor at 125,728 contracts. The comex is not in backwardation.
Feb contract month:
INITIAL standings for FEBRUARY
|Withdrawals from Dealers Inventory in oz||nil|
|Withdrawals from Customer Inventory in oz nil||201,351.325 oz Brinks,HSBC,Scotia|
|Deposits to the Dealer Inventory in oz||nil|
|Deposits to the Customer Inventory, in oz|| 297,801.325 oz
|No of oz served (contracts) today||24 contracts( 2400 oz)|
|No of oz to be served (notices)|| 3673 contracts
(367,300 oz )
|Total monthly oz gold served (contracts) so far this month||628 contracts (62,800 oz)|
|Total accumulative withdrawals of gold from the Dealers inventory this month||nil|
|Total accumulative withdrawal of gold from the Customer inventory this month||203,956.5 oz|
Total customer deposits 297,801.325 oz
we had 0 adjustment.
Here are the number of oz held by JPMorgan:
FEBRUARY INITIAL standings/
|Withdrawals from Dealers Inventory||nil|
|Withdrawals from Customer Inventory||nil|
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory||1012.59 oz CNT|
|No of oz served today (contracts)||0 contracts
|No of oz to be served (notices)||108 contracts
|Total monthly oz silver served (contracts)||0 contracts nil|
|Total accumulative withdrawal of silver from the Dealers inventory this month||nil oz|
|Total accumulative withdrawal of silver from the Customer inventory this month||2,054,5724.2 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 1 customer deposits:
i) Into CNT: 1012.59 oz
total customer deposits: 1012.59 oz
total withdrawals from customer account nil oz
we had 0 adjustments:
And now the Gold inventory at the GLD:
Feb 2.2016: no changes in inventory at the GLD/inventory rests at 681.43 tonnes
Feb 1/a massive deposit of 12.20 tonnes of gold inventory/Inventory rests at 681.43
JAN 29/2016/no change in gold inventory at the GLD/Inventory rests at 669.23 tonnes
jAN 28/no changes in gold inventory at the GLD/Inventory rests at 669.23
jan 27/another huge addition of 5.06 tonnes of gold to GLD/Inventory rests at 669.23 tonnes /most likely the addition is a paper deposit and not real physical,especially with gold in backwardation in both London and the comex.
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 THE GLD/Inventory rests at 657.92 tonnes
Feb 2.2016: inventory rests at 681.43 tonnes
And now your overnight trading in gold, MONDAY MORNING and also physical stories that may interest you:
Intraday Precious Metal Returns – Latest Research
Some interesting research looking at intraday precious metal returns has just been published by Brian Lucey, Jonathan Batten, Maurice Peat, Frank McGroarty and Andrew Urquhart in a paper entitled “Stylized Facts Of Intraday Precious Metal Returns”.
The authors note in the paper that has just been published on the Social Science Research Network (SSRN) website, that
“Precious metals are some of the most traded assets worldwide and they also play an important role for investor as well as comprising an important asset for central banks. Given the increased attention precious metals have received in the literature, the intraday dynamics are of great interest.”
They conclude that
“Initially, we show that the volume of trades of precious metals has increased substantially over the last 15 years’ while the bid-ask spread has decreased indicating the increase in efficiency and liquidity of precious metal markets. We also show strong evidence of intraday periodicity of precious metals volume of trades and volatility.
The intraday volume has increased over time, while the intraday bid-ask spread has decreased over time.
We also study interaction between volatility and returns of each precious metal and our correlation analysis shows that returns are negatively correlated with the contemporaneous volatility and the previous 5-minute volatility.
Furthermore, we find bi-directional Granger causality between volatility and returns suggesting that past volatility (returns) offers significant explanatory power in explaining current returns (volatility).”
The paper can be found here
Precious Metal Prices
2 Feb: USD 1,123.60, EUR 1,029.65 and GBP 780.01 per ounce
1 Feb: USD 1,122.00, EUR 1,032.86 and GBP 785.60 per ounce
29 Jan: USD 1,112.90, EUR 1,019.89 and GBP 776.84 per ounce
28 Jan: USD 1,119.00, EUR 1,026.14 and GBP 781.59 per ounce
27 Jan: USD 1,116.50, EUR 1,027.14 and GBP 781.04 per ounce
Most Popular Guides In 2015
Please share our research with family, friends and colleagues who may benefit from being informed by it.
World’s Largest Silver Producer Slams LBMA’s “Manipulated” Fix
Last week’s obvious silver market fix manipulation will not go quietly into the night,as we are sure LBMA would prefer.
But it will not, as BullionDesk.com’s Ian Walker reports, the world’s largest producer of silver, KGHM, has weighed in on last week’s hugely controversial silver price benchmark, which was set some six percent below the prevailing spot price on Thursday.
The LBMA Silver Price – the crucial daily benchmark used by producers and traders around the world to settle silver products and derivatives contracts – was set at $13.58 per ounce on January 28. This was 84 cents below the spot and futures price at the time.
Since this has implications for any transactions based on the benchmark, there is a danger that the credibility of the process will be damaged and that users will seek other prices against which to do business, sources said.
KGHM, one of the largest producers of copper and the single largest producer of silver in the world, called the difference between the prices “very alarming” and called on the London Bullion Market Association (LBMA) to provide an explanation.
“The large discrepancy between the spot price and the fix is very alarming to us especially that it happened twice in a row,” KGHM head of market risk Grzegorz Laskowski told FastMarkets.
“I think the LBMA needs to make every effort to explain why it happened and needs to help to develop a system that would help to avoid these kind of situations in the future,” he added.
The ‘fix’ or ‘benchmark’, as it is now known, is still the global benchmark reference price used by central banks, miners, refiners, jewellers and the surrounding financial industry to settle silver-based contracts.
While some traders continue to use the 24-hourly traded spot price, larger players prefer the snapshot-style daily benchmark to settle bulkier contracts on a traditionally over-the-counter (OTC) market.
The price is set every day by five participants – HSBC, JPMorgan Chase Bank, The Bank of Nova Scotia, Toronto Dominion Bank and UBS – using a system run by CME and Thomson Reuters.
KGHM produced 40.4 million ounces (1,256 tonnes) of silver in 2014, according to The Silver Institute’s annual report.
Willem Middelkoop explains the coming ‘big reset’ to Grant Williams
Submitted by cpowell on Tue, 2016-02-02 03:00. Section: Daily Dispatches
9:58p ET Monday, February 1, 2016
Dear Friend of GATA and Gold:
Singapore fund manager Grant Williams, editor of the “Things That Make You Go Hmmm” letter and proprietor of Real Vision TV —
— has done an excellent interview with Dutch fund manager and author Willem Middelkoop about the trend toward a profound reform of the world financial system that entails a major upward revaluation of gold. The interview, conducted in London just before the recent upturn in the gold price, covers what appears to be a balancing of official gold reserves among the United States, Europe, and China. It also covers the gold price suppression by central banks that is happening in the meantime. Middelkoop has just published an expanded edition of his book “The Big Reset: The War on Gold and the Financial Endgame.”
While the interview is an hour long, it is packed with useful observations and it’s posted in the clear at You Tube here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
As I pointed out to our readers: the 41.99 tonnes of deposit belonged to the UKraine, stolen by the USA and then given to Holland:
(courtesy Bron Suchecki/Perth Mint/GATA)
The release of Federal Reserve Bank of New York’s December gold stocks report provides and opportunity to analyse the progress of this current phase of withdrawals from its custodial stocks. I say “phase” because in recent times there have been periods of concentrated withdrawal activity in between periods of little or no activity, as the chart below from Nick Laird at Sharelynx shows.
It is interesting that these phase seem to correspond with economic turmoil – dot.com crash 2000/1, global financial crisis 2007/8, and today?
Note that during 2000 and 2001 the FRBNY was able to consistently ship out 40 tonnes a month. That works out at 2 tonnes a day over 20 business days a month. Commercial vaults designed for high throughput can do more than that but if you look at this National Geographic documentary on the Federal Reserve you can see it is not suited to high volumes. As I explained in this post, “those who think Germany could put 300 tonnes in a big plane or warship and move it in one or a few days have been watching too many Die Hard movies”. In any case, Germany’s 300 tonnes could therefore have been realistically repatriated in one year.
During 2014 and 2015 we know that Germany repatriated just under 190 tonnes and the Netherlands around123 tonnes. Given the reportednet withdrawals from the FRBNY (back calculated as they only report balance in millions of dollars @ $42.22, I calculate the following delivery schedule.
All figures represent withdrawals, except the one highlighted in yellow, which is a deposit. Note that every figure in this table is a multiple of either a 4.420 tonne or 5.157 tonne “lot”, eg 41.991 = (4.420 x 6 + 5.157 x 3). I have tried a number of possibilities but the above is the only realistic one I can find that fits the reported facts in the lot multiples. Out of this comes two observations:
- Another central bank(s) have been withdrawing metal from the FRBNY but not disclosing it, close to 40 tonnes to-date.
- Someone deposited 41.991 tonnes just as the Netherlands was about to withdraw 123 tonnes.
As the FRBNY is reporting physical custodial stocks, the only explanation for the deposit is either another central bank deposited physical, or the FRBNY moved some of its (ie America’s) gold reserves into the account of another central bank, which could be the result of:
- A new FRBNY lease/swap TO a central bank
- FRBNY repaying gold leased/swapped FROM a central bank in the past
Given how tight-lipped central bankers generally are, we are unlikely to know who the mystery (and coincidental) gold depositor was.
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 6.5793 / Shanghai bourse: in the Green by 2.29 %/ hang sang: RED
2 Nikkei closed down 114.55 or 0.64%
3. Europe stocks IN THE RED /USA dollar index DOWN to 98.93/Euro UP to 1.0916
3b Japan 10 year bond yield: RISES TO .086 !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 10.77
3c Nikkei now just below 18,000
3d USA/Yen rate now well below the important 120 barrier this morning
3e WTI:: 30.71 and Brent: 32.96
3f Gold up /Yen UP
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 0.336% German bunds in negative yields from 7 years out
Greece sees its 2 year rate fall to 11.73%/:
3j Greek 10 year bond yield fall to : 9.31% (yield curve deeply inverted)
3k Gold at $1125.15/silver $14.27 (7:45 am est)
3l USA vs Russian rouble; (Russian rouble down 1 and 78/100 in roubles/dollar) 79.11
3m oil into the 30 dollar handle for WTI and 32 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/expect a huge devaluation imminently from POBC.
JAPAN THURSDAY NIGHT,( JAN 29.2016) INITIATES NIRP
30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning 1.0213 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1149 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 7 year German bund now in negative territory with the 10 year falls to + .336%/German 7 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 1.93% early this morning. Thirty year rate at 2.74% /POLICY ERROR)
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Groundhog Day Trading: Stocks Slide As Oil Plunge Returns; BP Suffers Biggest Loss On Record
It certainly does feel like groundhog day today because while last week’s near record oil surge is long forgotten, and one can debate the impact the result of last night’s Iowa primary which saw Trump disappoint to an ascendant Ted Cruz while Hillary and Bernie were practically tied, one thing is certain: today’s continued decline in crude, which has seen Brent and WTI both tumble by over 3% has once again pushed global stocks and US equity futures lower, offsetting the euphoria from last night’s earnings beat by Google which made Alphabet the largest company in the world by market cap.
Among the drivers for today’s oil weakness was news that Russia pushed their oil output to fresh post-soviet highs amid the recent price slump, as crude output reaches 10.9mln bpd in Jan’16. At the same time JBC said that far from dropping, OPEC output actually rose to 32.42m b/d in Jan vs 32.38m in December.
The oil story was so dominant overnight that not even the surge in Chinese equities did anything to boost sentiment, with the Composite higher by 2.3%. Perhaps a reason for this was that China’s animal spirits are clearing fading, and as reported overnight, margin debt in China’s stock market shrank to the lowest level since December 2014, a sign that the stock market bubble has not only burst but is not coming back: the outstanding balance of margin debt on the Shanghai and Shenzhen stock exchanges dropped for 22 straight days to 897.6 billion yuan ($136.4 billion) on Monday. According to Bloomberg, it fell below the lows reached during a summer rout when the Shanghai gauge tumbled more than 40 percent from mid-June through its August low.
Compounding the bad commodity news was BP’s results, which posted a loss of $6.5 billion: the biggest in its history: 2015 was even worse for the London-based company than its 2010 Deepwater Horizon catastrophe which resulted in a $3.72 billion loss, as the company took charges of more than $40 billion to cover the legal, operational and environmental costs of the Gulf of Mexico oil spill.
Also not helping sentiment was a drop by UBS Group which slid after pretax profit at its investment bank trailed predictions.
“People are very spooked about what they can’t see, and at the moment they can’t see where global growth will come from,” Justin Urquhart Stewart, co-founder of Seven Investment Management in London, told Bloomberg. “In a market like this, less certainty around the U.S. election cycle will add further nerves. The last thing investors need is more background noise.”
A quick summary of where risk stands now:
- S&P 500 futures down 0.7% to 1918
- Stoxx 600 down 1.4% to 336.7
- FTSE 100 down 1.8% to 5953
- DAX down 1% to 9664
- German 10Yr yield down 4bps to 0.32%
- Italian 10Yr yield down 1bp to 1.46%
- MSCI Asia Pacific down 0.9% to 122
- Nikkei 225 down 0.6% to 17751
- Hang Seng down 0.8% to 19447
- Shanghai Composite up 2.3% to 2750
- US 10-yr yield down 2bps to 1.92%
- Dollar Index down 0.04% to 98.97
- WTI Crude futures down 3.4% to $30.54
- Brent Futures down 3.4% to $33.09
- Gold spot down 0.3% to $1,125
- Silver spot down 0.6% to $14.27
Looking at regional markets, we start in Asia where equities traded in mostly in negative territory with yet again oil prices the familiar culprit as hopes over cooperation between OPEC and Non OPEC members in regards to a production cut fades , alongside the tepid lead from Wall Street. As such, the ASX 200 (-1.00%) and Nikkei 225 (-0.6%) were dragged lower by energy names, with the latter also pressured by a stronger JPY. However, the Shanghai Comp (+2.2%) outperformed as the PBoC injected more liquidity into the market via open-market-operations, subsequently providing ample liquidity ahead of the Lunar New Year, while the central bank continued to set a firmer CNY fix. JGBs fell albeit marginally so following a lacklustre auction which drew a lower than prior b/c as well as the widest tail in 10-months.
“It’s still a volatile market,” said Rafael Palma Gil, a Manila-based trader at Rizal Commercial Banking Corp., which oversees about $1.8 billion in assets. “While central banks have become relatively more accommodating, this stance doesn’t remove the concern of a global economic slowdown, with the weakness in China.”
Asian Top News
- Nintendo Profit Falls 36% on Lack of Hit Games, Currency: Wii U, 3DS hardware sales languish despite Splatoon, Mario; 3Q oper. profit +5% to 33.5b yen vs est. 33.2b yen
- Nomura Profit Falls as Firm Postpones Overseas Earnings Goal: 3Q net income 35.4b yen; est. 38.7b yen; bank is on track for sixth straight annual pretax loss abroad
- China Eases Mortgage Down Payment to 20% for First Time Buyers: Will allow banks to cut the minimum required mortgage down payment to 20% from 25% for first home purchases
- PBOC Said to Ask Lenders to Control Wealth Management Funds: China’s central bank has told lenders it will require greater control over the amount of wealth management product funds they give to brokerages and other financial institutions to manage
- Singapore Seizes ‘Large Number’ of Accounts Amid 1MDB Probe: Officials investigate possible money laundering since mid-2015
- Japan Trading Houses Facing $13 Billion Hit on Commodity Misfire: As raw-material prices fall, focus shifts to other businesses
- China’s Top Macro Fund Wagers Against Consumption-Driven Growth: Congrong sees wage growth slowing abruptly in second quarter
- China Hands Investors Risk-Free Returns as IPOs Lure $1 Trillion: Benchmark’s top performers in 2016 are all newly issued stocks
- India Said to Ask Banks at Least $295 Million in Back Taxes: Notices may be issued by April
In Europe, oil once again dictates price action as this week’s continued softness in WTI and Brent translates into weakness in the major indices , led lower by the energy sector. BP is a notable laggard and despite the market being prepared for bad numbers, trades in negative territory by 8.1% after posting Q4 earnings, consequently the FTSE 100 (-1.7%) is a marked underperformer. UBS (-7.9%) also reported earnings today, missing on expectations and warning of further FX headwinds.
European Top News
- Euro-Area Unemployment Falls as ECB Weighs Stimulus Measures: Region’s jobless rate decreased to 10.4% from 10.5% in Nov., est. unchanged at 10.5%; rate at lowest since Sept. 2011
- German Unemployment Rate Falls to Record Low as Job Market Booms: Jobless rate fell to 6.2%, the lowest level since German reunification, from 6.3%; joblessness slid to seasonally-adjusted 2.73m
- Sainsbury Agrees to Buy Home Retail for About $1.9b: Sainsbury will pay about 161.3p in cash and stock per Home Retail share, a 63% premium above the closing price prior to the emergence of discussions, to lead to profit synergies of GBP120m or more
- Danske Bank Unveils $1.3b Share Buyback Program: Said will buy back another DKK9b ($1.3b) in shares; forecast 2016 net profit in line with 2015’s results, before goodwill impairments, 4Q adj. net DKK4.64b vs est. DKK3.74b
- Sanofi, Merck Said to Consider Exiting Vaccine Joint Venture: Sanofi CEO Brandicourt is reviewing the alliance because of a lack of promising assets in the business’s pipeline; venture had sales of about $330m in first half of 2015
- Kuoni Agrees to $1.4 Billion Takeover Bid From EQT Partners: EQT offering CHF370 per B share, 32% above Dec. 30 closing price
- Raiffeisen Shares Jump After Lower Provisions Lift 2015 Profit: Full yr Net income was EU383m compared with loss of EU617m yr ago; profit was better than anticipated because of lower provisions for impairments
- EU Nears Agreement on U.K. Demands After Talks Make Progress: Still ‘outstanding issues’ to resolve, EU President Tusk says
- Fiat Offers New Settings for Diesel Motors to Make Them Cleaner: Carmaker says vehicles have no defeat device to cheat tests, says all its cars comply with emission regulations
In FX, it has been another range bound morning early London, though Asia saw some volatility with AUD/USD swinging up and down in the aftermath of the RBA — which offered little fresh insight overall. However, London markets are testing support levels at .7040, with .7005 seen lower down. USD/JPY lows were extended to 120.33 on Oil losses prompting a knock on effect on stocks, but since consolidating above 120.50.
The euro advanced against all major peers, posting the biggest gains versus the currencies of raw-material producing nations including South Africa’s rand and the New Zealand and Austrian dollars. It climbed 0.2 percent to $1.0913, while the yen appreciated 0.2 percent to 120.79 per dollar.
Malaysia’s ringgit dropped 1.3 percent against the U.S. dollar. Bank accounts related to possible money laundering associated with state-investment company 1Malaysia Development Bhd. were seized by authorities in Singapore and the Swiss Attorney General announced it’s pursuing an investigation into alleged diversion of funds
CAD and other Oil related FX losses contained. USD/CNH pushing through 6.6200.
The Bloomberg Commodity Index, which measures returns from 22 raw materials, fell 0.7 percent, dragged down by falling oil prices. Gold retreated from a three-month high.
WTI and Brent continue to edge lower as North American participants come to their desks, with market expectations of an OPEC- Non-OPEC agreement to cut production waning . Brent is above the USD 33.00 handle, but only just and WTI trades below USD 31.00. Price action in today’s session will likely be dictated too by any further comments from OPEC or energy ministers, if not, then participants will await the release of API Crude Oil inventors to guide price action.
Gold was marginally softer overnight with the precious metal remaining near 3-month highs having touched USD 1,130.11/oz yesterday , near its 200 DMA of USD 1,131.25, while growing confidence in the yellow metal was reflected by holdings of SPDR Gold Trust rising 1.82%. Analysts have noted that this 200 DMA offers an important level of resistance with traders keeping one eye on the jobs report on Friday. Sport gold has retraced some of its gains in recent trade, and has just broken below the 1125.00 level.
Base metals rallied, with zinc climbing to the highest in almost three months, as news of further stimulus in China increased expectations of greater demand from the world’s top commodity consumer.
The move higher, which saw zinc lift 1.3 percent to $1,669 a metric ton and copper push to a three-week high, was amplified by short-covering, according to Citigroup Inc. analyst David Wilson.
In terms of the day ahead, this morning in Europe the focus looks set to be on the labour market reports where we’ll see the latest unemployment rate print for Germany and the Euro area in particular. Euro area PPI is also due out this morning. It’s a much quieter afternoon for data in the US with just the February IBD/TIPP economic optimism reading, along with January vehicles sales data due up. Away from the data we’ll hear from the ECB’s Coeure this morning while later this evening the Kansas City Fed’s George is due to speak on the US economic outlook and monetary policy at 6.00pm GMT. Earnings season continues with 31 S&P 500 companies set to report including Pfizer, Yahoo and Exxon Mobil.
Global Top News:
- Clinton Narrowly Edges Sanders in Iowa; Cruz Upsets Trump: Rubio comes in third in GOP contest marked by high turnout, Clinton’s victory is razor-thin in Iowa Democratic caucus; Iowa Results Slow Clinton’s March Toward the Nomination; Rubio May Consolidate Support as Alternative to Cruz, Trump
- Google Parent To Overtake Apple as World’s Most Valuable Company: Alphabet 4Q adj. EPS $8.67 vs est. $8.09; 4Q rev. ex-TAC $17.3b vs est. $16.9b
- BP Profit Falls 91%, Missing Estimates, as Oil Slump Deepens: 4Q adj. net $196m vs Est. $815m; net loss for the year was $6.5b, the most in at least 30 yrs; adj. profit drops y/y for 6 straight quarters
- Anadarko Cuts Spending as It Seeks to Rebound From Record Loss: Capital budget reduced by almost half to about $2.8b
- UBS Drops as Quarterly Profit Slumps at Wealth, Securities Unit: At the wealth-management unit 4Q pretax profit fell 47% to CHF344m, investment bank had drop of 63% to CHF80m, below estimates of analysts in a Bloomberg survey; raises div. to 85 centimes for 2015 from 75 centimes
- Pentagon Said to Seek 35% Fund Boost for Islamic State Fight: Will seek a 35% increase in funding for the fight against Islamic State in its next budget, bringing the request for U.S. military efforts against the terrorist group to $7.5b
- Goldman Censured by Hong Kong Regulator Over Wing Hang Deal: Goldman Sachs was censured by Hong Kong’s securities regulator for breaching the city’s takeovers code while advising Wing Hang Bank Ltd. on its acquisition by a Singaporean lender
- Google Search Probe by U.S. Should Get New Look, Utah Says: Utah, D.C. urge FTC to revisit case in light of EU complaint
- Fidelity Writes Down Snapchat Holding by 2 Percent: Snapchat had raised funds at $16b valuation last year
- Yahoo’s Employee Ranking Targeted in Mass Termination Lawsuit: Accused in a lawsuit of manipulating employee performance evaluations to justify firing hundreds of workers in order to meet its financial targets
- Monsanto-Created Weedkiller Is Most Used in History, Study Says: About 18.9b pounds of glyphosate have been used globally since sales began in 1974
- Texas Shale Drillers Lure $2b in New Equity to Permian: Drillers in the Permian Basin, the biggest U.S. shale field, have raised at least $2b from share sales over past 8 weeks
Bulletin Headline Summary from RanSquawk and Bloomberg
- WTI and Brent continue to edge lower as North American participants come to their desks, with market expectations of an OPEC/ non-OPEC agreement to cut production waning
- Continued softness in WTI and Brent translates into weakness in the major indices, with BP underperforming following poor Q4 earnings
- Highlights include, API crude oil inventories, dairy whole milk powder auction, comments from ECB’s Coeure and Fed’s George
- Treasuries rise overnight as world equity markets resume slide amid declining oil prices ahead of today’s vehicle sales and ISM reports.
- Australia’s central bank will weigh a strengthening jobs market against the impact of recent global financial turbulence in deciding whether to ease policy further, as bank Governor Stevens and his board kept the cash rate at a record-low 2%
- India’s central bank kept the benchmark repurchase rate at 6.75% for a second straight meeting as it awaits details of the government’s budget later this month, providing support for a currency battered by China-led market turmoil
- China’s central bank said it will allow banks to cut the minimum required mortgage down payment to 20% from 25% for first-home purchases to the lowest level ever as it steps up support for the property market
- China Banking Regulatory Commission Chairman Shang Fulin said at a meeting with lenders last month that banks need to avoid risks that could cause systemic problems for the banking sector
- U.S. Treasury Department will issue an estimated $250 billion in net marketable debt in the January-March quarter, compared with $165 billion estimated three months ago, according to a statement released Monday in Washington
- After seeing their borrowing costs rise to their highest level since 2012, U.S. companies may have at least one ray of hope: yield-starved foreign money managers are now holding a record percentage of U.S. corporate bonds outstanding, according to Federal Reserve data
- Nomura, dragged down by its money-losing business outside Japan, posted a 49% drop in third-quarter profit and said an earnings goal for overseas operations will be reached later than initially targeted
- BP Plc reported a 91% decline in fourth-quarter earnings after average crude oil prices dropped to the lowest in more than a decade; the company’s shares fell the most since August
- Hillary Clinton’s campaign declared victory in the closest- ever Iowa Democratic caucus while Senator Ted Cruz of Texas won the state’s Republican caucuses in an upset over billionaire Donald Trump
- Sovereign 10Y bond yields little changed. Asian, European stocks lower; U.S. equity-index futures drop. Crude oil and gold fall, copper rallies
DB’s Jim Reid concludes the overnight wrap
The relentless rally that we had seen across rates market so far this year finally paused for breath yesterday. European sovereign bond yields edged anywhere from 3 to 6bps higher (10y Bunds were up 3bps to 0.349%) while 10y Treasury yields finished the session up 2.8bps at 1.949% and off the recent cycle lows. In fact bond yields edged higher despite Oil prices trending steadily lower over the past 24 hours. The soft China manufacturing data as well as some chatter of pushback on an OPEC meeting to discuss potential production cuts combined to send WTI down $2 (-5.95%) and back below $32/bbl.
European equity markets closed with losses yesterday although the Stoxx 600 (-0.19%) did manage to stage a bit of a rebound into the close. In fact sentiment improved from the afternoon session in the US as the S&P 500, after being down as much as 1% managed to recoup all of the day’s losses to at one stage trade with a modest gain, before finishing near unchanged (-0.04%) by the closing bell. Dovish comments from Fed Vice-Chair Fischer helped the positive momentum. Fischer warned as to risks of a slowdown in US growth and inflation given recent global developments with risks of a persistent tightening of financial conditions. The Fed official also acknowledged the possibility of the unemployment rate overshooting the longer-run normal level based on FOMC projections.
Looking at markets this morning, aside from China it’s been a broadly weaker start across the region with no sign of that momentum carrying over from the US session last night. The BoJ-inspired rally in Japan has stuttered with the Nikkei currently down -0.64%, while the Hang Seng (-0.74%), Kospi (-0.75%) and ASX (-1.00%) are also lower. The moves aren’t being helped by another 2% drop for Oil, while US equity futures are also down around half a percent despite a bumper set of results from Alphabet which saw shares up over 9% in extended trading last night, leaving the company in pole position to overtake Apple as the world’s most valuable company today. The outlier in markets this morning is in China where the Shanghai Comp is up a sharp +2.33% despite no obvious newsflow. Meanwhile the RBA has left its cash rate unchanged at 2% as expected.
The other main overnight development has come in the US Presidential race, with the Iowa caucus in full swing. In what appears to be a surprising swing (given recent momentum) and with 85% of the votes accounted for in the Republican vote, Texas Senator Cruz looks set to beat Donald Trump after accumulating 28% of votes to Trump’s 24%. Significant also is the performance of third placed Senator Rubio, who has won 23% of votes which appears to be more than expected. Meanwhile it’s a closely thought contest for the Democrats with Clinton leading Sanders by less than 1%. The third Democratic who had been in the race, O’Malley, has dropped out. Expect confirmation of the final votes soon.
Back to markets. Yesterday’s economic data was centered on another disappointing ISM manufacturing print out of the US (48.2 vs. 48.4 expected and the fourth consecutive sub-50 reading). The print was 0.2pts higher than the downwardly revised December data but much was made of the drop in the employment component to 45.9 (-2.1pts) and the lowest since June 2009. This of course comes before Friday’s employment report. Meanwhile the December core PCE print was slightly below expectations at 0.0% mom (vs. +0.1% expected) while the same can be said for the deflator (-0.1% mom vs. 0.0% expected). Personal income was up a slightly better than expected +0.3% mom in December (vs. +0.2% expected) while personal spending missed (0.0% mom vs. +0.1% expected). Meanwhile construction spending notably undershot relative to consensus estimates at +0.1% mom (vs. +0.6% expected).
Moving on. Yesterday we also got some comments from ECB President Draghi who made reference to the effectiveness of recent QE measures, specifically that ‘second-round effects’ were occurring while reiterating that the ‘weaker than anticipated growth in wages together with declining inflation expectations call for careful analysis ahead of the upcoming meeting next month. Draghi also made some comments on the UK and specifically that ‘a solution that would anchor the UK firmly within the EU while allowing the euro area to integrate further would boost confidence’. As far as Brexit negotiations, EU President Tusk is set to send a draft proposal at some point this morning which is set to be the used to form the basis of discussion for EU heads of state at the February 18th/19thsummit around the UK’s future relationship with the EU. Tusk highlighted that good progress has been made with the hope that both sides can come to agreement ahead of a possible UK referendum as early as Jun