Feb 2/At comex still have 13.37 tonnes of gold standing and only 3.51 tonnes of dealer gold to serve upon our longs/Oil drops again into the 29 dollar column/all bourses around the globe down badly (except Shanghai)/Hong Kong having a huge housing crisis as demand dries up/Japan cancels a 10 yr bond auction due to negative yields on a fixed bond issue/European banks plunging badly as NIRP is killing them/In Italy the car equity company Ferrari halted after falling 40%. It recently went public/USA 10 yr treasury bond now at 1.87%/

Gold:  $1127.30 down $0.60    (comex closing time)

Silver 14.28 down 6 cents

In the access market 5:15 pm

Gold $1129.00

Silver:  $14.31

 

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.

(report Harvey)

2 a) Gold trading overnight, Goldcore

(Mark OByrne)

 

 

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

( zero hedge)

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.

(zero hedge)

 

EUROPEAN AFFAIRS

 

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!

( zero hedge)

iii)The stock Ferrari on the Milan Stock exchange crashes today down 40%:

( zero hedge)

GLOBAL ISSUES

 

Coming to a store near you….!!!!

YOU PAY THE CORPORATE FOR THE PRIVILEGE OF BUYING THEIR DEBT:

( zero hedge/Jim Reid/Deutsche bank)

 

OIL MARKETS

iii)The low oil price is disintegrating conditions in African nations:

( Michael Meyer)

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:

 ( zero hedge)
PHYSICAL MARKETS

i) KGHM are not happy campers as they slam the LBMA”s manipulated silver fix and rightly so!

( zero hedge)

ii) Two giants in the field talk about the “big reset”

(courtesy Willem Middlekoop and Grant Williams/GATA)
iii) Bron Suchecki, director of the Perth Mint tries to discover who deposited  the 41.99 tonnes of gold at the FRBNY.  (It  belonged to the UKraine, stolen by the USA and then given to Holland:)

( 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:

( zero hedge)

iii) Michael Snyder comments on empty shelves, and store closings all across the USA

( zero hedge)

iv) Negative Interest rate scenarios are already baked in as the Fed uses them in stress tests

( Wolf Richter/WolfStreet/zero hedge)

v) as stocks were rising 1.8% last week, hedge funds were dumping

(zero hedge)

vi) A huge warning signal for the USA housing sector

( Dave Kranzler/IRD)

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. 

 

Today we had 24 notices filed for 2400 oz.
And now for the wild silver comex results. Silver OI fell by 329 contracts from 158,439 down to 158,110  despite the fact the price of silver was up by 11 cents with respect to yesterday’s trading. The next non active delivery month of February saw its OI fall by 3 contracts down to 108.  We had 0 notices filed on yesterday, so we lost 3 contracts or an additional 15,000  oz will not stand in this non active month of February. The next big active contract month is March and here the OI fell by 2758 contracts down to 104,561. It seems that everyone again remained stationary. The volume on the comex today (just comex) came in at 23,115 , which is poor. The confirmed volume yesterday (comex + globex) was very good at 44,263. Silver is not in backwardation at the comex but is in backwardation in London. 
We had 0 notices filed for nil oz.

Feb contract month:

INITIAL standings for FEBRUARY

Feb 2/2016

Gold
Ounces
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

jpm

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
Today, we had 0 dealer transactions
We had 3  customer withdrawals
i) Out of Brinks:  21,200.655 oz
ii) Out of Scotia: 95,269.145 oz
iii) Out of HSBC: 84,881.525 oz
total customer withdrawals; 201,351.325  oz
we had 0 dealer deposit:
We had 1 customer deposits:
 i) Into JPMorgan:  297,801.325 oz

Total customer deposits  297,801.325   oz

we had 0 adjustment.

 

 

 

Here are the number of oz held by JPMorgan:

 JPMorgan has a total of 7774.663 oz or 0.2418 tonnes in its dealer or registered account.
***JPMorgan now has 699,222.555 or 21.74 tonnes in its customer account.
Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 24 contract of which 0 notice was stopped (received) by JPMorgan dealer and 10 notices were stopped (received)  by JPMorgan customer account. HSBC stopped 0 contracts in its customer account.
 
To calculate the initial total number of gold ounces standing for the Jan contract month, we take the total number of notices filed so far for the month (628) x 100 oz  or 62,800 oz , to which we  add the difference between the open interest for the front month of February (3687 contracts) minus the number of notices served upon today (28) x 100 oz   x 100 oz per contract equals the number of ounces standing.
 
Thus the initial standings for gold for the February. contract month:
No of notices served so far (628) x 100 oz  or ounces + {OI for the front month ( 3687) minus the number of  notices served upon today (28) x 100 oz which equals 430,100 oz standing in this active delivery month of February ( 13.37 tonnes)
We thus have 13.37 tonnes of gold standing and 4.51094 tonnes of registered gold for sale, waiting to serve upon those standing.  The bankers will now do their best in cash settling as there is not enough registered gold to satisfy those that are standing.
Total dealer inventor 145,027.364 or 4.51094
Total gold inventory (dealer and customer) =6,527,213.553 or 203.02 tonnes 
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. 
JPMorgan has only 21.99 tonnes of gold total (both dealer and customer)
end
And now for silver

FEBRUARY INITIAL standings/

feb 2/2016:

Silver
Ounces
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

nil oz

No of oz to be served (notices) 108  contracts

540,000 oz

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

We had 0 customer withdrawal:
 

total withdrawals from customer account nil   oz 

 we had 0 adjustments:

 

 

 

 

 

The total number of notices filed today for the February contract month is represented by 0 contracts for nil oz. To calculate the number of silver ounces that will stand for delivery in February., we take the total number of notices filed for the month so far at (0) x 5,000 oz  = nil oz to which we add the difference between the open interest for the front month of February (108) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing
Thus the initial standings for silver for the February. contract month:
0 (notices served so far)x 5000 oz +(108) { OI for front month of February ) -number of notices served upon today (0)x 5000 oz   equals 540,000  of silver standing for the February. contract month.
we lost 3 contracts or an additional 15,000 oz will not stand for delivery in the non active delivery month of February.
 On Friday, we had a massive 7 million oz leave the dealer; today over 2 million oz leaves the customer account.
Total dealer silver:  28.53 million
Total number of dealer and customer silver:   156.240 million oz
end
The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.There is now evidence that the GLD and SLV are paper settling on the comex.***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:i) demand from paper gold shareholders ii) demand from the bankers who then redeem for gold to send this gold onto China

And now the Gold inventory at the GLD:

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

 

Now the SLV:
Feb 2.2016: no changes in inventory at the SLV/inventory rests at 309.510 million oz/
Feb 1/no change in inventory at the SLV/Inventory rests at 309.510 million oz
JAN 29//we had another change in silver inventory/another withdrawal of 1.143 million oz of silver./inventory rests at 309.510 million oz
JAN 28/no changes in silver inventory at the SLV/Inventory rests at 310.653 million oz
Jan 27.2017: no changes to inventory/rests at 310.653 million oz
Jan 26.2016: a huge withdrawal of 953,000 oz/silver inventory rests tonight at 310.653 million oz
Jan 25.no change in inventory at the SLV/inventory rests at 311.606 million oz
jan 22/we had a 2.0 million oz withdrawal at the SLV/Inventory rests at 311.606 million oz
Jan 21/2015: no change in silver inventory at the SLV/Inventory rests at 313.606 million oz
Jan 20/no change in silver inventory at the SLV/inventory rests at 313.606 million oz
Feb 2.2016: Inventory 309.510 million oz.
1. Central Fund of Canada: traded at Negative 7.9 percent to NAV usa funds and Negative 8.1% to NAV for Cdn funds!!!!
Percentage of fund in gold 63.5%
Percentage of fund in silver:36.5%
cash .0%( feb 2.2016).
2. Sprott silver fund (PSLV): Premium to NAV falls to  -.22%!!!! NAV (feb 2.2016) 
3. Sprott gold fund (PHYS): premium to NAV rises to- 0.86% to NAV feb 2/2016)
Note: Sprott silver trust back  into negative territory at -.22%/Sprott physical gold trust is back into negative territory at -0.86%/Central fund of Canada’s is still in jail.
end

 

 

And now your overnight trading in gold, MONDAY MORNING and also physical stories that may interest you:

 

Trading in gold and silver overnight in Asia and Europe
(COURTESY MARK O”BYRNE)

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”.

 

intraday_precious metals

 

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

Protecting Your Savings In The Coming Bail-In Era

From Bail-Outs To Bail-Ins: Risks and Ramifications

Essential Guide To Storing Gold In Singapore

Essential Guide To Storing Gold In Switzerland

7 Key Storage Must Haves

10 Important Points To Consider Before You Buy Gold

Essential Guide to Tax Free Gold Sovereigns

Please share our research with family, friends and colleagues who may benefit from being informed by it.

Mark O’Byrne

Research Director

Mark OByrne
end
KGHM are not happy campers as they slam the LBMA”s manipulated fix and rightly so!
(courtesy zero hedge)

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.

end
Two giants in the field talk about the “big reset”
(courtesy Willem Middlekoop and Grant Williams/GATA)

Willem Middelkoop explains the coming ‘big reset’ to Grant Williams

Section:

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 —

https://realvisiontv.com/

— 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:

https://www.youtube.com/watch?v=WmuiAY2WiIU

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

 

end

 

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)

 

Feb012016

 

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.

FRBGold03ch3t

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.

FRBNYMove

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:

  1. Another central bank(s) have been withdrawing metal from the FRBNY but not disclosing it, close to 40 tonnes to-date.
  2. 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:

  1. A new FRBNY lease/swap TO a central bank
  2. 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.

 

end

 

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 June.

Before we take a look at today’s calendar, the other notable takeaway from yesterday’s newsflow was the Fed’s latest survey of senior loan officers. The survey, covering Q4, showed that lenders were said to have tightened lending standards on commercial and industrial loans, and expect to tighten further in 2016. The survey did however suggest that banks had moderately eased standards for mortgages and auto loans for households.

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.

Let us begin:

 

ASIAN AFFAIRS

 

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)

 

 

(courtesy zero hedge)

 

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!

 

(courtesy zero hedge)

Hong Kong Housing Bubble Suffers Spectacular Collapse: Sales Plunge Most On Record, Prices Crash

Two months ago, we observed the record plunge in Hong Kong home sales when according to Land Registry data, a paltry 2,826 registered residential transactions were recorded, down 14.4% from October and what we thought was an amazing 41.7% less than in November last year. This was the lowest print in the history of the series.

Little did we know just how bad it would get just two months later.

As we said in our last check on the HK housing market, the weakness was sharp and widespread, with sales of new homes declining to a three-month low. In the primary residential market, the number of home sales also declined 26.4 per cent month on month to 1,023 last month, according to Centaline. The total value reached HK$8.97 billion, down 15.4 per cent from October’s HK$10.6 billion.

Lastly we presented some comments from local analysts, who perhaps unwilling to accept the reality, remained optimistic:

“The fall in transaction volume and value for new home sales due to an absence of big project launches early last month,” said Derek Chan, head of research at Ricacorp Properties. He expects to see an obvious increase in sales of new homes this month given more major projects are due to be offered for pre-sale.  Most of new projects launches will focus in the western New Territories ,” he said.

We concluded in early December that while “optimism is good… if and when this global housing luxury weakness mostly due to the withdrawal of the Chinese marginal “hot money” buyer crosses back into the Chinese border, all bets about the so-called tepid Chinese economic will be off, and since it will be just the moment when China resumes cutting rates, devaluaing its currency and maybe even officially (as opposed to the ongoing unofficial iterations) launching QE, that will be when one should buy commodities, as China does everything in its power to keep the house of $30 trillion in cards from toppling and sending a deflationary tsunami around the entire world.”

So far China has only devalued, and so far there has been no effect on boosting commodity prices; meanwhile the deflationary tsunami is just getting worse as a result of the BOJ entering currency wars most recently by launching NIRP last week.

Which brings us to the latest Hong Kong housing data, and we can now officially say that any optimism about Hong Kong is officially dead.

First, as the chart below show, January Hong Kong home prices tumbled the most since July 2013, and after a 12 year upcycle, prices are now down a whopping 10% from the recent peak just four short months ago. Some analysts expect prices to fall more than 30 per cent by 2017 according to SCMP.

In other words, the bubble has clearly burst.

 

But not only has the Hong Kong housing bubble burst, it has done so in spectacular fashion: asquoted by the SCMP, the local Centaline Property Agency estimates that total Hong Kong property transactions in January were on track to register the worst month since 1991, when it started compiling monthly figures. In other words, the biggest drop in recorded history!

Total transactions are likely to have hit 3,000, it said in a survey released on Sunday. With developers slowing down new launches, only 394 units were sold in the first 27 days of January, 80.3 per cent lower than the 2,127 deals lodged in December. Meanwhile, sales of used homes fell by a fifth to 1,276 deals in January.

A similar picture emerges from another survey by Ricacorp Properties, which shows 2,908 deals were lodged with the Land Registry in the first 28 days of January.

In other words, the market is in shock from the collapse in demand, and has effectively been halted until it regroups as sellers, clearly not desperate to chase collapsing bids, simply withdraw offers.

Sure enough, according to SCMP, “the recent withdrawals of government land sales as a result of poor bids and the return of negative-equity homeowners are adding to strains in a rapidly weakening Hong Kong property market, with analysts saying developers will be forced to cut prices aggressively to stay afloat.”

What is causing this unprecedented collapse? One explanation is the infamous Fed butterfly flapping its rate hike wings and leading to a housing market crash half way around the world:

Analysts said developers slowed down new launches after the US implemented its first interest rate in a decade. Hong Kong commercial banks are expected to follow suit in the coming months, pulling up mortgage rates.

 

“Developers have to offer very attractive prices if they want to find buyers for their flats,” said Derek Chan, head of research at Ricacorp, adding that developers might even have to offer units at prices below the secondary market.

There’s that, or there is the far simpler Chinese response to the Fed rate hike which has sent shockwaves everywhere from the Chinese forex market to the Hong Kong interbank market where liquidity a few weeks ago virtually disappeared overnight as the PBOC tried to crush and squeeze offshore Yuan sellers. It also means that mainland Chinese buyers, suddenly facing a draconian escalation in capital controls, are suddenly unable to park hot money in the HK market.

As for the local housing market expect it to remain in a state of suspended animation for a long time.

Developers are eager to add to their land banks when the market is good but may become more selective in tougher times, especially given the anticipated new supply set to hit the market in the next two to three years, said Chow. “More withdrawals will be seen if the government does not revise the reserved prices.”

And then there was the issue of negative equity mortgages which somehow have appeared despite just a modest 10% correction from all time highs. One can only imagine the kind of leverage involved in these transactions:

The Hong Kong Monetary Authority (HKMA) on Friday announced that the estimated number of residential mortgage loans that are in so-called negative equity had hit 95 as of December, according to its latest survey. The total value of these home loans amounted to HK$418 million.

 

This was the first time the surveyed authorised instiatutions reported negative equity cases since the end of September 2014, said the HKMA.

 

According to HKMA data, the number of homeowners with negative equity – before the phenomenon resurfaced again lately – had fallen to zero from its peak at 105,697 in July 2003 at the height of a property downturn when home prices plunged up to 70 per cent.

Amusingly, last February, the HKMA supposedly tightened the loan-to-value ratio to 60 per cent from 70 per cent for flats under HK$7 million. New owners hence have a 40 per cent equity buffer, said Chow, but said some negative-equity cases would occur among those who have borrowed from non-bank financial companies. That, or the regulations of the monetary authority were simply ignored because, just like in the US in 2005, housing could only go up: just ask Ben Bernanke.

Well, now it is not only not going up, but it is crashing, and if the situation on the margin is this bad in one of the world’s wealthiest enclaves, one can only imagine what is happening in mainland China.

end
The biggest ever Chinese corporate takeover:  ChemChina purchases the Swiss Syngenta for 43 billion USA
(courtesy zero hedge)

In Biggest Ever Chinese Corporate Takeover, ChemChina Set To Buy Swiss Syngenta For $43 Billion

The ink was not yet dry on the seemingly endless Monsanto-Syngenta on again/off again takeover drama, when moments ago in a shocking development the newswires were lit up with news that a new, and very much unexpected, bidder has emerged for the Swiss pesticides giant Syngenta: China National Chemical Corp, or ChemChina as it is known, which according to WSJ and BBG is set to pay $43.7 billion to acquire a piece of Swiss corporate history.

According to Bloomberg, China National Chemical Corp. is nearing an agreement to buy Syngenta for CHF 43.7 billion as the state-backed company extends its buying spree with what would be the biggest-ever acquisition by a Chinese firm, said people familiar with the matter.

More details:

ChemChina, as the closely-held company is known, offered about 470 francs a share in cash to acquire Syngenta and a deal could be announced as early as Wednesday when the Swiss company reports earnings, the people said, asking not to be named as the details aren’t public. That’s 24 percent higher than Syngenta’s last close of 378.40 francs on Feb. 1. Its shares rose 7.1 percent to 405.1 francs as of 1:26 p.m. in Zurich.

 

The deal would help Chairman Ren Jianxin transform ChemChina into the world’s biggest supplier of pesticides and agrochemicals, while snatching an asset coveted by St. Louis-based Monsanto Co. It also underscores the importance China attaches to owning seed and cropcare technology that can boost agricultural output and help feed the world’s biggest population.

Bloomberg notes that if successful, the $43 billion purchase would be the largest acquisition by a Chinese firm, surpassing China Unicom Hong Kong Ltd.’s $29 billion purchase of China Netcom Group Corp. in 2008. It remains to be seen whether Europe’s anti-trust authorities, let alone the Swiss, will greenlight such a massive incursion into the heart of corporate Europe. As a reminder, in recent year major Chinese purchases of both U.S. and Canada-based companies have been frowned upon. Perhaps Europe will decide that it is in its best interest to open its markets to the one country that suddenly is finding it needs to park “hot money” abroad and M&A is just the way to do it.

 

 

end

 

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)

 

Slouching Toward The Dark Side

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Last Wednesday we noted there is something rotten in the state of Denmark, meaning that the world’s great potemkin village of Bubble Finance is unraveling. The evidence piles up by the day.

To wit, now comes still another story about the Red Paddy Wagons rolling out in China. This time they are rounding-up the proprietors of a $7.6 billion peer-to-peer (P2P) lending Ponzi called Ezubao Ltd.

Ezubo investors lined up outside a government office in Beijing last month; having shut down the online peer-to-peer investing platform in December, authorities were reported Monday to have declared Ezubo a Ponzi scheme and arrested 21 suspects linked to it and its parent.Ezubo investors lined up outside a government office in Beijing last month; having shut down the online peer-to-peer investing.

The particulars of this story are worth more than a week of bloviating by the Wall Street economists, strategists and other shills who visit bubblevision the whole day long. That’s because it exposes the rotten foundation on which the entire Red Ponzi and the related world central bank regime of Bubble Finance is based.

Needless to say, these dangerous, unstable and incendiary deformations are not even visible to the Keynesian commentariat and policy apparatchiks. They blithely assume that what makes modern economies go is the deft monetary, fiscal and regulatory interventions of the state. By their lights, not much else matters——and most certainly not the condition of household, business and public balance sheets or the level of speculation and leveraged gambling prevalent in financial markets and corporate C-suites.

As that pompous fool and #2 apparatchik at the Fed, Stanley Fischer, is wont to say—–such putative bubbles are just second order foot faults. These prosaic nuisances are not the fault of monetary policy in any event, and can be readily minimized through a risible scheme called “macro-prudential” regulation.

After all, if the Keynesians had any inkling that debt was a problem they wouldn’t have attempted to radically subsidize it with 84 straight months of ZIRP. In that respect, they might especially have noted that US credit outstanding has soared from $54 trillion to $63 trillion or 17% since the eve of the financial crisis. That is, since the nation’s mountain of debt blew-up the first time around.

So here’s what happened with Ezubao. It’s parent (Yucheng Group) was an equipment leasing operation, having gotten started way back near the dawn of the Red Ponzi. That is, it apparently started about 2012 in the business of supplying rentable equipment and factoring services via the shadow banking system during China’s fixed asset boom.

Yucheng Group was definitely not China’s equivalent of General Electric; it was apparently organized by a gang of military buccaneers who have occupied a certain Chinese speaking province of northern Myanmar.

But by July 2014 the infrastructure boom and leasing demand were cooling so it opened up a new operation in P2P lending. Quicker than a flash it became China’s #2 player in that suddenly flourishing sector, or as the company described it:

Founded in 2012, Yucheng started as one of the pioneers of finance leasing and focused on fulfilling the financing needs at the county level. Yucheng quickly grew its business by expanding into different cities and continued to develop innovative solutions to address their clients’ evolving financing demands. In 2014, Yucheng successfully launched Ezubo.com, a disruptive A2P (asset-to-peer) online platform that bridges borrowers and lenders to facilitate a more efficient transactional process. As of June 2015, Ezubo.com is ranked second in terms of daily average investment amount. Yucheng now sets the industry benchmark by offering a comprehensive range of market leading finance lease and factoring solutions to large and medium-sized companies, international corporations, small and private enterprises to individuals.

Well, not exactly. Ezubao was shutdown on December 8th by Chinese authorities, meaning that in just 18 months it had bilked 900,000 investors of nearly $8 billion in a fraud that was so blatant that it now appears upwards of 95% of investor deposits never were invested at all. Some of the money was just send back to earlier investors, upwards $1 billion apparently went to fund the company’s military adventures in Myanmar and the rest to fund the chairman’s lavish lifestyle.

The company’s leader was perhaps appropriately named Ding Ning, and according to today’s Wall Street Journal,

…….. prosecutors said that Ezubo didn’t invest the money it collected, but rather used it to pay down earlier debt—and to fund lavish lifestyles for Yucheng’s Mr. Ding and several female executives. Mr. Ding allegedly gave one favored colleague a 130 million yuan ($19.7 million) villa in Singapore, a pink diamond worth 12 million yuan, luxury cars and 550 million yuan in cash.

Xinhua said Ezubo employees sought to conceal evidence as prosecutors closed in, at one point burying more than 1,200 accounting books in 80 plastic bags six meters underground in the outskirts of Hefei, the capital of China’s eastern province of Anhui.

Charles Ponzi himself might have been impressed, but apparently not its gullible P2P lenders. As one smaller investor told a Caixin reporter,

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.

No, Ezubao wasn’t a one-off outlier. It reflects the sum and substance of the craziest credit and construction boom in human history. As I noted last week:

China’s construction infrastructure, for example, is grotesquely overbuilt—— from cement kilns, to construction equipment manufacturers and distributors, to sand and gravel movers, to construction site vendors of every stripe. For crying out loud, in three recent year China used more cement than did the United States during the entire 20th century!

That is not indicative of a just a giddy boom; its evidence of a system that has gone mad digging, hauling, staging and constructing because there was unlimited credit available to finance the outpouring of China’s runaway construction machine.

 

 

Or as Jim Kunstler put it this morning,

When so many loans end up networked as collateral in some kind of bet against previous bets against other previous bets, you can be sure that cascading contagion will follow. And so that is exactly what’s happening as China’s rocket ride into Modernity falls back to earth. Like most historical fiascos, it seemed like a good idea at the time: take a nation of about a billion people living in the equivalent of the Twelfth Century, introduce the magic of money printing, spend a gazillion of it on CAT and Kubota earth-moving machines, build the biggest cement industry the world has ever seen, purchase whole factory set-ups, and flood the rest of the world with stuff. Then the trouble starts when you try to defeat the business cycles associated with over-production and saturated markets.

Accordingly, China has become such a den of speculative madness that one giant scam after another literally springs up over night. During about 60 trading days between March and mid-June of 2015, for instance, China’s stock market soared by $4 trillion and margin loans and other speculative capital poured into its 379 million trading accounts literally like lemmings surging toward the sea.

Most of that $4 trillion disappeared in less than 20 trading days through the June/early July crash last year. And not withstanding the subsequent massive stock buying by the authorities and the police state dragnet thrown up against stock sellers, more than $8 trillion has now completely evaporated after January’s wipeout on the Shanghai market.

The P2P lending story is the same. As investors sought alternatives to the sagging real-estate market and volatile stocks, they poured into online peer-to-peer lending platforms with alacrity.

According to the WSJ, there were 2,600 platforms operating at the end of 2015 compared to only 800 twenty-four months earlier. More significantly, the outstanding volume of loans soared from $5 billion to $67 billion during the same period.

That’s right. Another 14X eruption in no time flat——so not surprisingly P2P lending has become one steaming pile of financial crap:

Failed P2P platforms have become so common that the industry data provider Wangdaizhijia Co. keeps a data sheet called “problematic platforms”—a list that by the end of last year had grown to 1,263 platforms from 104 at the start of 2014. Analysts say most are cases of “runaway bosses,” in which senior executives flee as financial problems rise at their firms.

Nor is this the only scam that came to light over the weekend with respect to the Red Ponzi. It turns out that a certain kind of shadow banking system instrument called Directional Asset Management Plans (DAMPs) or Trust Beneficiary Rights (TBRs) have soared from $300 billion in 2012 to $1.8 trillion at present.

Yes, this is another 8X eruption in record time, but it doesn’t take much investigation to see what is going on. Bad loans are literally being vacuumed off bank balance sheets into phony SIV-like entities of Citigroup circa 2007 vintage, and then carried not as loans but “investment receivables”.

And then, presto, the challenges of NPLs, capital support and bad debt charges to the income statements disappear entirely. As explained by one journalistic account,

To provide a buffer against tough times, banks are required to set aside capital against their credit assets – the riskier the asset, the more capital must be set aside, earning them nothing.

Loans typically carry a 100 percent risk weighting, but these investment products often carry a quarter of that, so banks can keep less money in reserve and lend more.

Banks must also make provision of at least 2.5 percent for their loan books as a prudent estimate of potential defaults, while provisions for these products ranged between just 0.02 and 0.35 percent of the capital value at the main Chinese banks at the end of June, Moody’s Investors Service said in a note last month.

At China’s mid-tier lender Industrial Bank Co, for example, the volume of investment receivables doubled over the first nine months of 2015 to 1.76 trillion yuan ($267 billion).

This is equivalent to its entire loan book – and to the total assets in the Philippine banking system, filings showed.

Industrial Bank declined to comment for this story.

Needless to say, there is an endless amount of financial madness where Ezubao, DAMPs and TBRs came from. Yet China is only the tip of the iceberg. If China’s buccaneers and gamblers are slightly more crude, what they are doing is essentially no different than the outpouring of OTC structured finance deals manufactured day in and day out by Goldman Sachs and the rest of the world’s financial market banksters.

And they don’t even compare to the financial scam that is at the very heart of present day central banking.

No one with a passing acquaintance with history and logic could believe that any Ponzi can be sustained for very long; nor is it possible to believe that massive debt monetization via printing press credit and a sustained regime of negative real, and now nominal, interest rates will not eventually end in catastrophe—–most especially in a world where governments positively cannot stop accruing unrepayable and soon unserviceable debt.

Yet after last Friday’s lunatic move to negative interest rates by the BOJ, the Japanese 10-year bond is now trading at just 6 basis points; and it will be in negative territory along with all of the government’s shorter maturities any day now. So why would Mr. Ding Ning not have a go at the blatant Ponzi reflected in Ezubao?

Japan’s work force and population is disappearing into a colossal demographic bust; its fiscal deficit is still upwards of 40% of its annual budget outlays; and its national debt is off the charts. So as its retirees liquidate their savings at an accelerating rate, Japan will desperately need to borrow from the rest of the world to support its old age colony.

Japan Government Debt to GDP

What it has elected to do, however, is trash its currency and ensure that in a few short years its monetary system will collapse. There can be no other result because negative interest rates will cause capital to flee, even as its massive bond purchase programs swallows up most of the public debt, along with an increasing quotient of corporate bonds and even ETFs and stock.

In a word, the utter fools running Japan Inc. have become so befuddled by Keynesian groupthink that they are self-inflicting a monetary Hiroshima on their entire economy and society.

Likewise, the madness of NIRP is probably no longer containable since it already infects the eurozone, Sweden, Switzerland, Denmark, Japan——-and, after last night’s shocking trade report for January, South Korea can’t be far behind. Its exports are now down 18.5% year over year, and have plunged to levels not seen since the bottom of the Great Recession.

Literally speaking, world trade is being asphyxiated by the deflationary burden of the $225 trillion credit bubble created by the Fed and its fellow-traveling convoy of global central banks over the last two decades. And now they are aggressively making matters worse by doubling down on a monumentally failed experiment in crank economics.

Already they have driven nearly $6 trillion of sovereign debt below the zero bound. Even a decade ago every student of economics 101 knew that is a recipe for calamity.

 

Yet now just a few dozen monetary apparatchiks in the world’s major central banks and their shills in the world’s financial casinos are driving the system straight toward the monetary dark side.

What will be uncovered when it finally blows will cause the depredations of Charles Ponzi and Mr. Ding Ning to be reduced to mere footnotes in the annals of monetary infamy.

 

end

 

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.

 

(zero hedge)

 

Behold Unintended Consequences: Japan Cancels 10Y Auction For First Time Ever Due To Sub-Zero Rates

Dear Bank of Japan, how do you spell unintended consequences:

  • PLANNED MARCH SALE OF 10-YEAR JAPANESE GOVERNMENT BONDS THROUGH BANKS TO BE CANCELED AMID EXPECTED BELOW-ZERO YIELDS – NIKKEI
  • JAPAN’S MINISTRY OF FINANCE IS EXPECTED TO ANNOUNCE WEDNESDAY THE FIRST-EVER DECISION TO CALL OFF SALES OF 10-YEAR JGBS- NIKKEI

Here is the full Nikkei report on this absolute stunner of a development:

The planned March sale of 10-year Japanese government bonds through banks to retail investors, municipalities and others will be canceled amid expected below-zero yields following the Bank of Japan’s recent move to adopt negative interest rates.

 

The Ministry of Finance is expected to announce Wednesday the first-ever decision to call off sales of 10-year JGBs.

 

The JGBs in question are sold through Japan Post Bank and regional banks in 50,000 yen ($415) units. The holder can cash out this new type of bond ahead of maturity. With the ministry already having suspended sales of two- and five-year instruments, all sales will end. But variable-rate 10-year JGBs for retail investors will still be offered.

 

Winning bids at the ministry’s auction of 10-year JGBs on Tuesday translated to a record-low average yield of 0.078%. As of Monday, nearly 70% of JGBs on the market already had negative yields, according to the Japan Securities Dealers Association.

 

Corporations and municipalities have started delaying their own issuances. Daiwa Securities Group has dropped plans to set conditions later this week for the issuance of seven- and 10-year straight bonds this month. The brokerage decided to take a fresh look at JGB yields and investor demand and said it has not decided when to proceed.

 

The Nagoya Expressway Public Corp., which had planned to float bonds later this week, has postponed the setting of conditions to next week.

 

Some have gone ahead with plans. Osaka Prefecture issued Monday two-year bonds with a coupon rate of 0.001%. A prefectural official said this was effectively the minimum interest rate, since lower bids were not accepted.

As a reminder, Japan can’t monetize more debt – the only thing that is keeping its yields from spontaneously exploding – unless it can concurrently issue more debt. After all the only reason the BOJ did NIRP is because it already faced a limit on how many bonds it can monetize.

So what next: a complete shutdown of Japan’s debt-funding machinery, which the country with the 250% debt/GDP is entirely reliant upon?

Oops.

Wait, what’s that, policy failure less than 3 days after I announced NIRP? Unpossible.”

 

So… what does the most indebted country in the world do now? Treasurys, of course, are delighted: if Japan can’t buy Japanese debt, it will buy US paper and will do so in size.

And the real question: how is it even possible that Japan can do this without anticipating that its 10Y yields would promptly go sub zero and thus clog up its bond issuance machinery, unless that outcome was precisely the intended one?

end

EUROPEAN AFFAIRS

 

This morning European bank stocks are plunging.  Since NIRP they are down 40%.  NIRP destroys bank profits !

 

(courtesy zero hedge)

 

European Bank Stocks Plunge To Cycle Lows – What NIRP Has Wrought

Coming to Japanese bank stocks soon…

 

 

European bank stocks are down almost 40% from the day Draghi unleashed NIRP in Europe. Today’s plunge takes out recent lows, pushing prices back to almost “whatever it takes” lows.

END
Austria has had enough: they will pay migrants 500 euros to go back home.  Good luck!
(courtesy zero hedge)

 

Austria To Pay Migrants €500 To Go Back Where They Came From

Late last month, we noted that Austrian Foreign Minister Sebastian Kurz was set to cut social benefits for refugees who failed to attend “special integration training courses.”

Austria, like Germany and multiple other countries in the Schengen zone, is struggling to cope with the influx of asylum seekers fleeing the war-torn Mid-East. Of particular concern is the “integration” process whereby those hailing from “different cultures” are having a decidedly difficult time blending into polite Western society.

Austria has sought to ameliorate the problem by providing helpful flyers featuring cartoons that depict acceptable and unacceptable behavior and by offering classes designed to teach migrants “laws and social norms.”

Still, policymakers are skeptical. “Let’s not delude ourselves,” Kurz said in January. “We have an intensive long lasting integration process ahead of us.”

That “intensive, long lasting process” will be mitigated by a plan to deport some 50,000 refugees. “Last year Austria had 90,000 asylum applications,” Kurz told Aargauer Zeitung. “This number is too high for a small country, and measured in terms of population, it is the second highest in Europe after Sweden.

Yes, “the second highest after Sweden” – and we all know how things are going in Sweden.

“We have reached the limit of feasibility,” Kurz explained, in an interview with APA. “I think 50,000 is realistic [in terms of a number to deport].”

As a reminder, Austria has already suspended Schengen, so the deportation announcement doesn’t exactly come as a surprise, especially in light of similar announcements from Sweden and Finland.

What was surprising (not to mention sadly amusing) is Austria’s plan to boost voluntary repatriations. According to a summary of an agreement between the interior, defense and integration ministries published on Sunday, the country will now pay migrants €500 to leave. “Now the government has decided to carry out at least 50,000 deportations over the next four years,” Reuters reports. “It will also offer up to 500 euros ($542) to migrants whose asylum applications have been turned down if they agree to be deported.”

“We are already among the countries with the most deportations,” said Interior Minister Johanna Mikl-Leitner. “But we will increase the rate further.”

As for how the deportations will be carried out, Austria will reportedly load migrants up on C-130 Hercules military aircraft and drop them off in their home countries. Hopefully after landing.

Kurz also says Austria will place an upper limit on the number of asylum seekers it accepts. The cap will amount to no more than 1.5% of the population. “Anything else would overwhelm our country,” Kurz says.

Meanwhile, Angela Merkel is proposing a modified Marshall Plan in an attempt to cope with the problem. “German Chancellor Angela Merkel seeks to raise money for refugee camps in Syria’s neighboring states to add jobs in strategy similar to the Marshall Plan that helped rebuild Germany after World War II,” Bloomberg reports, citing Handelsblatt. “Refugees would get cash for work in camps.”

Countries bordering Syria “like the plan,” Handelsblatt says.

Clearly, the desperation is kicking in. Even if viable, Merkel’s idea will take months (at best) to implement and Austria’s plan to give migrants €500 to take a voluntary C-130 trip back where they came from reeks of desperation.

There was no immediate word on whether refugees could negotiate for larger sums in exchange for an agreement to go back home.

end

The stock Ferrari on the Milan Stock exchange crashes today down 40%:

(courtesy zero hedge)

Ferrari Crashes

Another “no brainer” bites the dust. Ferrari is halted limit down in Milan trading and is crashing in US trading – now down over 40% from its “successful” IPO day highs…

 

Carnage…

 

Or Carnage…

  • *FERRARI SUSPENDED IN MILAN LIMIT DOWN

 

 

Blame The Chinese –

  • *FERRARI 2015 CHINA SALES DOWN 22%, JAPAN UP 33%

end

 

GLOBAL ISSUES

 

Coming to a store near you….!!!!

(courtesy zero hedge/Jim Reid/Deutsche bank)

Paying A Corporation To “Buy” Its Debt? It’s Coming Soon, Jim Reid Warns

As a result of the rush to global NIRP, which now sees central banks and their sovereigns accounting for over 25% of global GDP, amounting to around $6 trillion in government bonds, trading with negative yields, a question has emerged: when will corporate bonds follow this govvie juggernaut and how soon until investors pay not government but companies to borrow?

That is the focal piece in today’s note by our favorite DB credit strategist Jim Reid who muses as follows:

There is starting to be chatter as to what the incentive is to buy Euro corporate bonds at a negative yield if it ever happens. It may well be tested very soon as one consequence of the recent ECB/BoJ hint/action has been the strong rally in global fixed income.

 

A scatter of the European non-financial corporate yield universe (in today’s pdf) shows we have so far resisted such a move (bar 3 bonds with a bid yield a basis point or two sub-zero). There is a perception that investors won’t buy corporates with a negative yield and therefore a deeper rally in Government bonds would be a spread widener. Whilst this makes some sense the evidence of spread behavior as yields have gone lower and lower doesn’t necessarily support this. 1-3yr and 3-5yr Euro AA spreads have been range bound in the last 6 months – a period that 2 and 4 year Bund yields have rallied around 30bp and 40bps respectively and deep into negative territory. So one might have expected some widening if the zero bound was a hard floor for corporates.

 

Our central view is that zero might be a temporary resistance point if Government yields rally further but that at some point the dam will break and corporates will trade on a spread basis and go sub-zero.

 

Obviously this all depends on whether a further deeper rally occurs. At the moment 2 year bunds are at -0.47% and 1-3yr AA spreads at +58bps so we’re getting closer to testing the theory, especially for the tighter bonds in the index.

 

Is Jim Reid right, and will NIRP soon result in paradoxical outcome of companies paying down debt by issuing debt? The answer is a resounding yes, especially if the ECB cuts its deposit rate lower to -0.4% as the market now largely expects, which in turn forces Japan to cut to -0.2%, forces China to devalue more, and so on, as the next deflationary wave is unleashed in the global race to debase.

END
When you start witnessing a huge increase in surging bank risk  (a rising credit default swap) screams that the stock market run is over and it smells of a systemic risk to the system:
(courtesy zero hedge)

Surging Bank Risk Screams The Rebound In Stocks Is Over

BMO’s Mark Steele is a man of few words, preferring pictures to make his points… but they matter:

Let’s just keep it simple. When bank risk breaks to the upside, it’s bad for equities…

European bank risk is breaking out…

 

which has arrested the pullback in U.S. bank risk – which is now soaring…

 

And that bodes ill for global stocks…

 

Stocks have had a nice counter-trend rebound on the back of a counter-trend rebound (from deeply oversold) in the price of oil. That rebound is also fading, with WTI eyeing the $30 mark once again.

We believe portfolios should be structured towards what the market rewards in this environment:

  • As our relative strength breadth heat map points out, that appears to be Utilities and Staples, with a great divide between those sectors and anything else.
  • Equities aside, treasuries look great.

Something systemic this way comes.

end

Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/TUESDAY morning 7:00 am

 

Euro/USA 1.0916 up .0020 (Draghi’s jawboning still not working)

USA/JAPAN YEN 120.77 down 0.083 (Abe’s new negative interest rate (NIRP)

GBP/USA 1.4407 down .0015

USA/CAN 1.3990 up .0036

Early this TUESDAY morning in Europe, the Euro rose by 20 basis points, trading now just above the important 1.08 level rising to 1.0866; 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: 6.5793 / (yuan down and will still undergo massive devaluation/ which will cause deflation to spread throughout the globe)

In Japan Abe went BESERK  with NEW ARROWS FOR HIS Abenomics WITH THIS TIME INITIATING NIRP  (SEE BELOW) . The yen now trades in a slight southbound trajectory as IT settled UP in Japan again by 3 basis points and trading now well ABOVE  that all important 120 level to 120.77 yen to the dollar.

The pound was down this morning by 15 basis point as it now trades just above the 1.44 level at 1.4407.

The Canadian dollar is now trading down 36 in basis points to 1.3990 to the dollar.

Last night, Asian bourses mostly in the red with Shanghai UP 2.29% .  All European bourses were in the RED as they start their morning.

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/and now NIRP)

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 122.47 or 0.71%

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

2/ Asian bourses mostly in the red/ Chinese bourses: Hang Sang RED (massive bubble forming) ,Shanghai in the GREEN by 2,29%  (massive bubble bursting), Australia in the green: /Nikkei (Japan)red/India’s Sensex in the RED /

Gold very early morning trading: $1125.00

silver:$14.27

Early TUESDAY morning USA 10 year bond yield: 1.93% !!! down 2 in basis points from last night  in basis points from MONDAY night and it is trading BELOW resistance at 2.27-2.32%. The 30 yr bond yield rises to 2.74 down 2 in basis points from MONDAY night.  ( still policy error)

USA dollar index early TUESDAY morning: 98.92 down 12 cents from MONDAY’s close.(Now below resistance at a DXY of 100)

This ends early morning numbers TUESDAY MORNING

 

 

OIL MARKETS

 

WTI Crude Crashes Back Below $30

What goes up (on short-squeeze-driven hope and rumors), must come down (on supply, demand reality and denials)…

 

After a 26% spike off the late-January lows, WTI Crude is now down 14% from last Thursday’s highs

 

Turns out – surprise surprise – that most OPEC members are against an emergency meeting!

END
Exxon halts stock buybacks.  Their oil production surges:
(courtesy zero hedge)

Exxon Halts Stock Buybacks As Oil Production Surges

It may not be quite as dramatic as halting a dividend for already profusely sweating investors, but when it comes to the impact on the stock price, buybacks traditionally pack far more punch. Or, as the case may be with what until not that long ago was the world’s biggest company by market cap, and is today set to be eclipsed by Facebook and slide into 5th spot after GOOGL, AAPL, MSFT and FB, no longer pack any punch because as XOM announced in its just released Q4 earnings which beat estimates of $0.64 by 3 cents, starting in Q1, Exxon will no longer repurchase stock simply to prop up its stock price.

From the Q4 earnings release:

During the fourth quarter of 2015, ExxonMobil purchased 9.4 million shares of its common stock for the treasury at a gross cost of $754 million. These purchases included $500 million to reduce the number of shares outstanding, with the balance used to acquire shares to offset dilution in conjunction with the company’s benefit plans and programs. In the first quarter of 2016, the corporation will continue to acquire shares to offset dilution in conjunction with its benefit plans and programs, but does not plan on making purchases to reduce shares outstanding.

What is ironic is that with the stock price trading at $74 in the pre-market, this means that the past 7 years of stock buybacks have effectively been a wash as far as management is concerned, due to the blended average repurchase price of $76.91, roughly 4% above the current stock price.

 

But while the suspension of buybacks is something shareholders will have to stew over, there was more bad news in the Exxon report, this time for Saudi Arabia, because as the chart below shows, not only did the energy giant boost oil production sequentially by 150,000 bpd…

… annual oil production has soared to the highest since 2010.

Hardly validation that the Saudi gambit to crush the marginal oil producer is working.

end
The low oil price is disintegrating conditions in African nations:
(courtesy Michael Meyer)

“Prospects For Social Disintegration Are Huge” As Wave Of Oil Refugees Looms

Authored by Michael Meyer, originally posted at Project Syndicate,

The idea that oil wealth can be a curse is an old one – and it should need no explaining. Every few decades, energy prices rise to the heavens, kicking off a scramble for new sources of oil. Then supply eventually outpaces demand, and prices suddenly crash to Earth. The harder and more abrupt the fall, the greater the social and geopolitical impact.

The last great oil bust occurred in the 1980s – and it changed the world. As a young man working in the Texas oil patch in the spring of 1980, I watched prices for the US benchmark crude rise as high as $45 a barrel – $138 in today’s dollars. By 1988, oil was selling for less than $9 a barrel, having lost half its value in 1986 alone.

Drivers benefited as gasoline prices plummeted. Elsewhere, however, the effects were catastrophic – nowhere more so than in the Soviet Union, whose economy was heavily dependent on petroleum exports. The country’s growth rate fell to a third of its level in the 1970s. As the Soviet Union weakened, social unrest grew, culminating in the 1989 fall of the Berlin Wall and the collapse of communism throughout Central and Eastern Europe. Two years later, the Soviet Union itself was no more.

Similarly, today’s plunging oil prices will benefit a few. Motorists, once again, will be happy; but the pain will be earth-shaking for many others. Never mind the inevitable turmoil in global financial markets or the collapse of shale-oil production in the United States and what it implies for energy independence. The real risk lies in countries that are heavily dependent on oil. As in the old Soviet Union, the prospects for social disintegration are huge.

Sub-Saharan Africa will certainly be one epicenter of the oil crunch. Nigeria, its largest economy, could be knocked to its knees. Oil production is stalling, and unemployment is expected to skyrocket. Already, investors are rethinking billions of dollars in financial commitments. President Muhammadu Buhari, elected in March 2015, has promised to stamp out corruption, rein in the free-spending elite, and expand public services to the very poor, a massive proportion of the country’s population. That now looks impossible.

As recently as a year ago, Angola, Africa’s second largest oil producer, was the darling of global investors. The expatriate workers staffing Luanda’s office towers and occupying its fancy residential neighborhoods complained that it was the most expensive city in the world.Today, Angola’s economy is grinding to a halt. Construction companies cannot pay their workers. The cash-strapped government is slashing the subsidies that large numbers of Angolans depend on, fueling popular anger and a sense that the petro-boom enriched only the elite, leaving everyone else worse off. As young people call for political change from a president who has been in power since 1979, the government has launched a crackdown on dissent.

On the other side of the continent, Kenya and Uganda are watching their hopes of becoming oil exporters evaporate. As long as prices remain low, new discoveries will stay in the ground. And yet the money borrowed for infrastructure investment still must be repaid – even if the oil revenues earmarked for that purpose never materialize. Funding for social programs in both countries is already stretched. Ordinary people are already angry at a kleptocratic elite that siphons off public money. What will happen when, in a few years, a huge and growing chunk of the national budget must be dedicated to paying foreign debt instead of funding education or health care?

The view from North Africa is equally bleak. Two years ago, Egypt believed that major discoveries of offshore natural gas would defuse its dangerous youth bomb, the powder keg that fueled the Arab Spring in 2011. No longer. And to make matters worse, Saudi Arabia, which for years has funneled money to the Egyptian government, is facing its own economic jitters. Today, the Kingdom is contemplating what was once unthinkable: cutting Egypt off.

Meanwhile, next door, Libya is primed to explode. A half-decade of civil war has left an impoverished population fighting over the country’s dwindling oil revenues. Food and medicine are in short supply as warlords struggle for the remnants of Libya’s national wealth.

These countries are not only dependent on oil exports; they also rely heavily on imports. As revenues dry up and exchange rates plunge, the cost of living will skyrocket, exacerbating social and political tensions.

Europe is already struggling to accommodate refugees from the Middle East and Afghanistan. Nigeria, Egypt, Angola, and Kenya are among Africa’s most populated countries. Imagine what would happen if they imploded and their disenfranchised, angry, and impoverished residents all started moving north.

 

The  biggest USA energy companies have all been downgraded by and S and P

(courtesy zero hedge)

Then after the market closed, oil drops further on news of a big API buildup of inventory:
(courtesy zero hedge)
end

Portuguese 10 year bond yield:  2.98% up 5 in basis points from MONDAY

Japanese 10 year bond yield: .086% !! up 3 full  basis points from MONDAY which was lowest on record!!
Your closing Spanish 10 year government bond,TUESDAY up 3 in basis points
Spanish 10 year bond yield: 1.59%  !!!!!!
Your TUESDAY closing Italian 10 year bond yield: 1.49% up 2 in basis points on the day:
Italian 10 year bond trading 10 points lower than Spain.
IMPORTANT CURRENCY CLOSES FOR TUESDAY
Closing currency crosses for TUESDAY night/USA dollar index/USA 10 yr bond:  2:30 pm
 
Euro/USA: 1.0915 up .0018 (Euro up 18 basis points)
USA/Japan: 120.11 down 0.740(Yen up 74 basis points) major disappointment to our yen carry traders
Great Britain/USA: 1.4419 down .0005 (Pound down 5 basis points)
USA/Canada: 1.4036 up 0.0081 (Canadian dollar down 81 basis points with oil being lower in price )
This afternoon, the Euro rose by 18 basis points to trade at 1.0915.
The Yen rose to 120.11 for a gain of 74 basis points even though they entered NIRP.
The pound was down 5 basis points, trading at 1.4419.
The Canadian dollar fell by 81 basis points to 1.4036  as the price of oil price fell  to around $29.91 per barrel/WTI).
The USA/Yuan closed at 6.5794
Your closing 10 yr USA bond yield: down 7 in basis points from MONDAY at 1.87%// (trading well below the resistance level of 2.27-2.32%) policy error
USA 30 yr bond yield: 2.69 down 7 in basis points on the day and will be worrisome as China/Emerging countries  continues to liquidate USA treasuries  (policy error)
 Your closing USA dollar index: 98.88 down 16 in cents on the day  at 2:30 pm

USA 10 yr treasuries now down to 1.90%

 

( ZERO HEDGE)

 

 

 

end
I will see you tomorrow night
Harvey
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