Gold: $1,222.20 down $12.00 (comex closing time)
Silver 15.04 down 42 cents
In the access market 5:15 pm
Let us have a look at the data for today.
At the gold comex today, we had a good delivery day, registering 576 notices for 57,600 ounces on first notice day for gold,and for silver we had 119 notices for 595,000 oz for the active March delivery month.
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 213.10 tonnes for a loss of 90 tonnes over that period.
In silver, the open interest FELL by 457 contracts down to 176,344despite the fact that the silver price was up 25 cents with respect to yesterday’s trading . In ounces, the OI is still represented by .884 billion oz or 126% of annual global silver production (ex Russia ex China).
In silver we had 119 notices served upon for 595,000 oz.
In gold, the total comex gold OI rose by 3,177 contracts up to 473,563 contracts as the price of gold was UP $7.30 with yesterday’s trading.(at comex closing). The small increase in OI was no reason for the bankers to attack today.
We had no changes in the GLD,/ thus the inventory rests tonight at 819.28 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 another huge change, a big deposit of 2.189 million oz into inventory tonight and thus the Inventory rests at 332.578 million oz.
First, here is an outline of what will be discussed tonight:
1. Today, we had the open interest in silver fell by 457 contracts down to 176,176344 despite the fact that the price of silver was UP 25 cents with yesterday’s trading.Investors continue to flock into silver on the dovish Yellen speech where she indicated that she is reticent to raise rates. The total OI for gold rose by 3,179 contracts to 473,563 contracts as gold was UP $7.30 in price from yesterday’s level and we are now entering a new active delivery month.
2 a) Gold trading overnight, Goldcore
2b COT report/
3. ASIAN AFFAIRS
REPORT ON JAPAN SOUTH KOREA AND CHINA
REPORT ON MANUFACTURING FROM THE THREE AREAS
(courtesy zero hedge)
ii)China has now moved from currency wars to protectionism as they now begin to tax all off shore purchases. China wishes that Chinese consumers purchase made in China products:
This is not an April Fool’s report. Draghi is preparing “helicopter” money to consumers without the need for a helicopter. He will provide ECB backed debit cards with almost zero interest charged to the consumers. All losses go the ECB!! Gold anyone?
( zero hedge)
RUSSIAN AND/OR MIDDLE EASTERN AFFAIRS
this will do wonders for the Swedish tourism industry/Easter car burnings
( New Observer On Line)
This does not look good for the Summer Olympics:A sports minister Hilton, just resigned.
( zero hedge)
i)Oil markets tumble after the Saudi state that they will freeze oil production only if Iran joins them. Of course that will never happen;
( zero hedge)
ii)USA rig counts tumble to a 41 yr low
i)As we explained this to you yesterday. A good reason why Shanghai composite does not fall much/regulators buys huge amount of stock
ii)Mark Lundin is disgusted with the huge manipulation orchestrated by our crooked banks (commercials) as they short to drive down the price of gold and then cover their shorts at the lower prices making lots of money in the process:
( Myra Saefong/MarketWatch/Lundin)
iii)Major headwinds coming our way, courtesy of all the major developed central banks and this time the crisis will uproot the purchasing power of those major currencies.
a must read..
( Alasdair Macleod)
iv)Bill Holter’s interview with Sean of SGT
(SGT report/Bill Holter)
v)On several occasions we told you that negative rates will be a huge push for Europeans to buy physical gold.
We were right!!!:
USA STORIES WHICH WILL INFLUENCE THE PRICE OF GOLD/SILVER
i)your official bogus payroll report:
( zero hedge)
ii)The phony news sent the USA dollar higher, which caused all commodities including gold/silver to be whacked again:
Let us head over to the comex:
The total gold comex open interest was up to 473,563 for a gain of3,179 contracts as the price of gold was up $7.30 in price with respect to yesterday’s trading. We are now entering the active delivery month of April. 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 or for that matter an inactive month, and 2) a continual drop in the amount of gold standing in an active month. We certainly witnessed both parts today . In the front month of April we lost 1054 contracts from 6850 contracts down to 5796. We had 58 notices filed so we lost 996 contracts or 99,600 amount of gold ounces that will not stand for delivery. The next non active contract month of May saw its OI rise by 58 contracts up to 2667. The next big active gold contract is June and here the OI rose by 3669 contracts up to 359,425. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was fair at 218,707. . The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 128,442 contracts. The comex is not in backwardation. .
Today we had 576 notices filed for 57,600 oz in gold.
April contract month:
INITIAL standings for APRIL
|Withdrawals from Dealers Inventory in oz||nil|
|Withdrawals from Customer Inventory in oz nil||132.278 oz
|Deposits to the Dealer Inventory in oz||nil|
|Deposits to the Customer Inventory, in oz||nil oz|
|No of oz served (contracts) today||576 contracts
|No of oz to be served (notices)||5220 contracts 522,000 oz/|
|Total monthly oz gold served (contracts) so far this month||634 contracts (63,400 oz)|
|Total accumulative withdrawals of gold from the Dealers inventory this month||nil|
|Total accumulative withdrawal of gold from the Customer inventory this month||40,126.0 oz|
Today we had 0 dealer deposits
Total dealer deposits; nil oz
Today we had 0 dealer withdrawals:
total dealer withdrawals: nil oz
Today we had 0 customer deposit:
total customer deposits: nil oz
Today we had 1 customer withdrawals:
i) Out of HSBC: 132.278 oz
total customer withdrawals; 132.278 oz
Today we had 1 adjustments:
From Brinks: 99.93 oz was adjusted out of the dealer and this landed into the customer account of Brinks. This is likely a settlement(0003 tonnes)
APRIL INITIAL standings
|Withdrawals from Dealers Inventory||nil|
|Withdrawals from Customer Inventory||604,062.520 OZ. brinks,CNT
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory||nil oz|
|No of oz served today (contracts)||119 contracts 595,000 oz|
|No of oz to be served (notices)||844 contracts)(420,000 oz)|
|Total monthly oz silver served (contracts)||121 contracts (605,000 oz)|
|Total accumulative withdrawal of silver from the Dealers inventory this month||nil oz|
|Total accumulative withdrawal of silver from the Customer inventory this month||1,204,219.8 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 0 customer deposits
total customer deposits: nil oz
We had 4 customer withdrawals:
i) Out of Brinks;: 1010.700
ii) Out of CNT: 1015.610 oz
iii) Out of HSBC: 2039.110 oz
iv) Out of JPM 599,997.100 oz
total customer withdrawals: 604,062.52 oz
we had 1 adjustment
i) out of JPMorgan: 585,171.100 oz was adjusted out of the customer account and this landed into the dealer account of JPM
|Gold COT Report – Futures|
|Change from Prior Reporting Period|
|non reportable positions||Change from the previous reporting period|
|COT Gold Report – Positions as of||Tuesday, March 29, 2016|
Our large specs:
Those large specs that have been long in gold added 3436 contracts to their long side
Those large specs that have been short in gold covered a large 7539 contracts from their short side.
Those commercials that have been long in gold pitched 3854 contracts from their long side.
Those commercials that have been short in gold added another 4116 contracts to their short side.
Our small specs
Those small specs that have been long in gold pitched 2139 contracts from their long side
Those small specs that have been short in gold added 866 contracts to their short side.
the commercials are now net short by another 7940 contracts.
The short commercials hold 331,191/480,461 or 68.93% of all the short positions
The commercials on a net short basis, hold: 43.28% of all the contracts.
And now for our silver COT:
|Silver COT Report: Futures|
|Small Speculators||Open Interest||Total|
|non reportable positions||Positions as of:||147||118|
|Tuesday, March 29, 2016|
Our large specs:
Those large specs that have been long in silver pitched 3430 contracts from their long side.
Those large specs that have been short in silver added 5482 contracts to their short side.
Those commercials that have been long in silver pitched a tiny 68 contracts from their long side.
Those commercials that have been short in silver covered a huge 9206 contracts from their short side.
Our small specs:
Those small specs that have been long in silver pitched a tiny 471 contracts from their long side.
Those small specs that have been short in silver covered 255 contracts from their short side.
Conclusions; the commercials surprisingly go net long by 9138 contracts
The short commercials are short 71.27% of all contracts.
The commercials are net short 68,104/175,255 or 38.8% of all contracts.
That is certainly better than last week. Is something bothering the commercials.
And now the Gold inventory at the GLD
April 1/no changes in gold inventory at the GLD/Inventory rests at 819.28 tonnes
MARCH 31/a small withdrawal of 1.19 tonnes/inventory rests tonight at 819.28 tonnes
MARCH 30/no changes in inventory/inventory rests tonight at 820,47 tonnes
March 29/a withdrawal of 3.27 tonnes of gold from the GLD/Inventory rests at 820.47 tonnes. (No doubt we will see a rise in gold inventory with tomorrow’s reading)
March 28/no change in inventory at the GLD/Inventory rests at 823.74 tonnes
March 24.2016: a deposit of 2.08 tonnes of gold into its inventory/and this after a big drubbing these past two days??/Inventory rests at 823.74 tones
March 23/no changes at the GLD today despite the gold drubbing. Inventory rests at 821.66 tonnes
March 22./no changes in inventory at the GLD/Inventory rests at 821.66 tonnes
MARCH 21/another big deposit of 2.68 tonnes/inventory rests tonight at 821.66 tonnes
(and this was done with gold down $10.00 today!!)
March 18.I GIVE UP!! WITH GOLD DOWN TODAY, THE CROOKS OVER AT GLD ADDED ANOTHER IDENTICAL 11.89 TONNES OF PAPER GOLD INTO THEIR INVENTORY.
INVENTORY RESTS THIS WEEKEND AT 818.98 TONNES. IF I WAS A SHAREHOLDER OF THIS ENTITY I WOULD BE VERY WORRIED.
March 17/we had a whopper of a deposit tonight: 11.89 tonnes/with London in backwardation this is nothing but a paper addition/inventory rests tonight at 807.09 tonnes
March 16.2016:/we had a deposit of 2.09 + 2.97(last in the evening) tonnes of gold into the GLD/Inventory rests at 795.20 tonnes
March 15/ no changes in gold inventory at the GLD/Inventory rests at 790.14 tonnes
April 1.2016: inventory rests at 819.28 tonnes
And now your overnight trading in gold, FRIDAY MORNING and also physical stories that may interest you:
By Mark O’Byrne
Gold Prices Rise 16% In Q1 – Best Quarter In 30 Years
– Gold prices gained 16% in Q1 – best quarterly performance since 1986
– Gains due to increasing global financial, macroeconomic and monetary risk
– Stocks come under pressure – Flat in U.S.; Falls in Europe and Asia
– Sterling fell 20% on BREXIT concerns and the euro fell 11% against gold
– Canadian dollar fell 10%, Aussie dollar fell 9% & Swiss franc fell 12% against gold
– Outlook positive as gold and silver remain undervalued
– Reasserted role as safe haven in Q1
Gold prices gained 16% in the first quarter and had their best quarterly performance since 1986. Gold made gains due to continuing ultra loose monetary policies, diminished U.S. rate-increase expectations, worries about global economic growth, both U.S. and global geopolitical concerns and turmoil in markets.
Most of the gains came in the first six weeks of the year when market turmoil was at its worst and sharp falls were seen in stock markets. For the quarter, the S&P recovered from losses and eked out a 0.9% gain, the DJIA was 1.7 percent higher while the Nasdaq 100 fell 2.7% on concerns of a new tech bubble.
European stocks had a torrid quarter with the EuroStoxx 50 shedding 10.3 percent and the DAX down 9%. The Nikkei crashed 13.2% in the quarter as the Japanese economy showed little signs of recovery and indeed looks on the verge of a depression.
The dollar logged its worst quarterly performance since 1990 as the Federal Reserve slowed the expected pace of interest rate hikes, citing worries about the potential domestic impact of very weak global growth.
Sterling was the weakest major currency in the world and the British pound weakened 2.5% against the dollar and % against gold over the course of the quarter as worries about a possible U.K. exit from the European Union led to traders selling sterling aggressively.
All currencies fell in gold terms even ones that were stronger than the dollar. The yen was the strongest major currency in the world despite the struggling Japanese economy. While it rose 7.1% against the dollar, it was 9% lower versus gold.
Sterling fell 20% and the euro fell 11% against gold. The Canadian dollar fell 10%, the Aussie dollar fell 9% and the Swiss franc fell 12% against gold.
Gold started the year at $1,062, €974 and £716 per ounce and finished the quarter at $1,233, €1,080.69 and £860.20 per ounce.
Geopolitical risk intensified with the risk of terrorism and war ever present and gold continued to act as an important hedge against geopolitical risk and indeed currency devaluations.
Further correction and consolidation remains a possibility given the strong gains in the quarter. However, we expect currencies to continue to fall in value versus gold in 2016 and competitive currency devaluations and currency wars are set to return.
Even after recent gains, gold remains 35% below the nominal high in August 2011 and silver some 70% below its nominal high in April 2011. In inflation adjusted or real terms, prices remain even more undervalued. This is especially the case given the negative interest rate monetary backdrop and other significant economic and geopolitical risks.
Gold reasserted its role as a hedging instrument and an important safe haven assetin the quarter. Exactly, when investors needed gold to perform, as stocks and currencies lost value in the quarter, gold outperformed. Once again, it enhanced returns and reduced volatility for those with diversified portfolios.
Gold Prices (LBMA)
01 April: USD 1,232.10, EUR 1,080.69 and GBP 860.20 per ounce
31 Mar: USD 1,233.60, EUR 1,085.50 and GBP 857.62 per ounce
30 Mar: USD 1,238.20, EUR 1,094.12 and GBP 860.23 per ounce
29 Mar: USD 1,216.45, EUR 1,087.71 and GBP 853.04 per ounce
24 Mar: USD 1,216.45, EUR 1,088.75 and GBP 861.89 per ounce
Silver Prices (LBMA)
01 April: USD 15.38, EUR 13.48 and GBP 10.76 per ounce
31 Mar: USD 15.38, EUR 13.52 and GBP 10.68 per ounce
30 Mar: USD 15.38, EUR 13.58 and GBP 10.68 per ounce
29 Mar: USD 15.06, EUR 13.44 and GBP 10.56 per ounce
24 Mar: USD 15.28, EUR 13.70 and GBP 10.82 per ounce
Gold News and Commentary
This 100kg gold coin goes on sale for £3.8m with GoldCore (Telegraph)
Gold scores biggest quarterly gain in nearly 30 years (Marketwatch)
Europeans `Concerned About Future’ Buy Gold, Austrian Mint Says (Bloomberg)
Gold heads for best quarter since 1986 (Bloomberg)
UK deficit balloons to €41bn even as economy grows (Independent)
Silver fund holdings surge most since 2013 as price rally fades (Mineweb via BBG)
“Better Prospects For Gold” – GFMS (Reuters via Yahoo)
Still More Upside For Gold ($1,488): Strategist (CNBC)
Daily Gold and Silver Digest – (Ed Steer)
Investors Warned: Market Turmoil Could Return (Examiner)
Yellen Says “Party On” – Stepek Says “Own Some Gold” (Money Week)
Read More Here
‘7 Real Risks To Your Gold Ownership’ – Must Read Gold Guide Here
Please share our website with friends, family and colleagues who you think may benefit from it.
As we explained this to you yesterday. A good reason why Shanghai composite does not fall much
China’s forex regulator buys $4.2 billion in stocks via new platform
Submitted by cpowell on Thu, 2016-03-31 15:16. Section: Daily Dispatches
By Samuel Shen and Pete Sweeney
Thursday, March 31, 2016
SHANGHAI, China — China’s foreign exchange regulator has bought mainland stocks worth over 27 billion yuan ($4.18 billion) via three low-profile investment firms it controls, the official Shanghai Securities News reported today.
Buttonwood Investment Platform Ltd, 100-percent owned by the State Administration of Foreign Exchange (SAFE), and Buttonwood’s two fully-owned subsidiaries, have bought shares in a total of 13 listed companies, the newspaper reported, citing top 10 shareholder lists in the companies latest earnings reports.
Shanghai Securities News said the investments are part of SAFE’s strategy to diversify investment channels for the country’s massive foreign exchange reserves.
Recent earnings filings show Buttonwood is among the top 10 shareholders of Bank of China, Bank of Communications, Shanghai Pudong Development Bank, Everbright Securities, and Industrial and Commercial Bank of China.
Calls to SAFE were not answered. …
… For the remainder of the report:
Mark Lundin is disgusted with the huge manipulation orchestrated by our crooked banks (commercials) as they short to drive down the price of gold and then cover their shorts at the lower prices making lots of money in the process:
(courtesy Myra Saefong/MarketWatch/Lundin)
Gold Newsletter’s Lundin chides market manipulation by big commercial shorts
Submitted by cpowell on Fri, 2016-04-01 05:28. Section: Daily Dispatches
Gold Scores Biggest Quarterly Gain in Nearly 30 Years
By Myra P. Saefong
MarketWatch.com, New York
Thursday, March 31, 2016
Gold futures settled higher Thursday, scoring their best quarterly performance since 1986 — a year when “Top Gun” was the most popular movie.
Bullion has benefited as the Federal Reserve’s dovish stance on policy has softened the highflying U.S. dollar. …
“Gold’s early-year rally began to lose momentum as March wore on, primarily due to profit-taking and a very large accumulation of short positions by the large commercials segment of paper-gold traders on Comex,” said Brien Lundin, editor of Gold Newsletter.
That “massive” commercial short position — a wager that prices will fall — is currently the “primary impediment” for the gold market, he said. Commercial traders use futures to hedge price against risk tied to their businesses.
“If past form holds true, some of the large entities in the commercial category will hit the market hard with sell orders to drive the price down and collect on their short positions,” said Lundin. …
… For the remainder of the report:
Major headwinds coming our way, courtesy of all the major developed central banks and this time the crisis will uproot the purchasing power of those major currencies.
a must read..
(courtesy Alasdair Macleod)
Alasdair Macleod: A tale of two currencies
Submitted by cpowell on Fri, 2016-04-01 06:10. Section: Daily Dispatches
By Alasdair Macleod
GoldMoney.com, St. Helier, Jersey, Channel Islands
Thursday, March 31, 2016
There is a widespread and growing feeling that financial markets are slipping toward another crisis of some sort.
In this article I argue that we are in the eye of a financial storm, that it will blow again from the direction of the advanced economies, and that this time it will uproot the purchasing power of major currencies.
The problems we face have been created by the major central banks. I shall assume, for the purpose of this article, that a second financial and monetary crisis will not have its origin in the collapse of China’s credit bubble, nor that Japan’s situation destabilises. These are additional risks, the first of which in particular is widely expected, but they are subject to the control of a command economy. They obscure problems closer to home. Instead I shall concentrate on two old-school economies, that of the United States and the Eurozone, where I believe the real dangers lie.
… For the remainder of the commentary:
On several occasions we told you that negative rates will be a huge push for Europeans to buy physical gold.
We were right:
Gold Mint at Europe’s Heart Says Sub-Zero Rates Buoy Sales
Bill Holter’s interview with Sean of SGT
Your early FRIDAY morning currency, Asian stock market results, important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight
1 Chinese yuan vs USA dollar/yuan up to 6.4632 / Shanghai bourse IN THE GREEN, UP 5.61 OR 0.19%/: / HANG SANG CLOSED down 277.78 or 1.34%
2 Nikkei closed down 594.51 or down 3.55% (STILL REACTING TO POOR INDUSTRIAL PRODUCTION/POOR RETAIL SALES/TERRIBLE TANKEN CONFIDENCE INDEX)
3. Europe stocks opened ALL in the RED /USA dollar index down to 94.52/Euro up to 1.1426
3b Japan 10 year bond yield: FALLS TO -.057% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 112.30
3c Nikkei now WELL BELOW 17,000
3d USA/Yen rate now well below the important 120 barrier this morning
3e WTI:: 37.42 and Brent: 39.30
3f Gold DOWN /Yen DOWN
3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.
Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.
3h Oil DOWN for WTI and DOWN for Brent this morning
3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund RISES to 0.151% German bunds in negative yields from 8 years out
Greece sees its 2 year rate FALL to 8.53%/:
3j Greek 10 year bond yield FALL to : 8.77% (YIELD CURVE NOW FLAT)
3k Gold at $1229.90/silver $15.35 (7:15 am est)
3l USA vs Russian rouble; (Russian rouble DOWN 1 AND 06/100 in roubles/dollar) 67.96
3m oil into the 37 dollar handle for WTI and 39 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 ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP
30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9595 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0939 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 STARTS ITS CAMPAIGN AS TO WHETHER EXIT THE EU.
3r the 8 Year German bund now in negative territory with the 10 year RISES to + .151%
/German 8 year rate negative%!!!
3s The Greece ELA NOW at 71.4 billion euros,
The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”. Next step for Greece will be the recapitalization of the banks and that will be difficult.
4. USA 10 year treasury bond at 1.79% early this morning. Thirty year rate at 2.62% /POLICY ERROR)
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Japan Stocks Plunge; Europe, U.S. Futures, Oil Lower Ahead Of Payrolls
For Japan, the post “Shanghai Summit” world is turning ugly, fast, because as a result of the sliding dollar, a key demand of China which has been delighted by the recent dovish words and actions of Janet Yellen, both Japan’s and Europe’s stock markets have been sacrificed at the whims of their suddenly soaring currencies. Which is why when Japanese stocks tumbled the most in 7 weeks, sinking 3.5%, to a one month low of 16,164 (after the Yen continued strengthening and the Tankan confidence index plunged to a 3 year low) it was anything but an April fool’s joke to both local traders.
It wasn’t just Japan: as Bloomberg put it beautifully, “Europe’s equity benchmark was set to erase all of its gains for March in a single day”, while crude oil plunged after Saudi Arabia’s deputy crown prince said the kingdom will only freeze its oil output if Iran and other major producers do so. Copper rose after a gauge of Chinese manufacturing unexpectedly expanded, while shares in Shanghai were little changed.
And speaking of April fools jokes, the Chinese stock market was a tale of two halves: one public selling in the morning session which took the index as much as 2% lower, and central bank buying in the afternoon which closed the SHCOMP modestly in the green. Curiously, it was China’s unexpectedly strong PMI manufacturing surveys which may have led to the early selloff, because if China is finally getting better (it isn’t, it is merely enjoy the effects of the massive January $500+ billion credit impulse; the hangover comes later) then there will be no need for either more stimulus, or more accommodation by the Fed, which as everyone now knows is mostly concerned with China’s economy.
A quick look at global markets this morning reveals that much of the late March euphoria may be over: the MSCI All-Country World Index dropped 0.8 percent at 6:07 a.m. in New York. The Stoxx Europe 600 Index retreated 1.7 percent after wrapping up its third quarterly decline in four on Thursday with a 1.1 percent drop as banks weighed heaviest on the index. Japan’s Topix index tumbled 3.4 percent as the country’s Tankan surveys of business conditions indicated sentiment among large manufacturers was the weakest since mid-2013. Standard & Poor’s 500 Index futures fell 0.4 percent, after U.S. equities ended the first quarter near where they began following a whipsaw ride that saw them rally from the worst-ever start to a year.
But all of that can change in a heartbeat after today’s main event, the March payrolls hits, expected at 205K, but with a well higher whisper number. The question there, as Goldman posited last night, is whether the good news will be good, and a beat will lead to a rally, or it will be “bad” again, and a big beat results in a selloff – the answer will set the mood for market trading and reactions to economic news over the next month.
For now, this is where we stand:
- S&P 500 futures down 0.4% to 2044
- Stoxx 600 down 1.6% to 334
- FTSE 100 down 0.9% to 6119
- DAX down 1.3% to 9839
- German 10Yr yield up less than 1bp to 0.16%
- Italian 10Yr yield up less than 1bp to 1.23%
- Spanish 10Yr yield up 1bp to 1.45%
- S&P GSCI Index down less than 0.1% to 323.3
- MSCI Asia Pacific down 2.3% to 126
- Nikkei 225 down 3.5% to 16164
- Hang Seng down 1.3% to 20499
- Shanghai Composite up 0.2% to 3010
- S&P/ASX 200 down 1.6% to 4999
- 10-yr yield up 3bps to 1.8%
- Dollar Index up 0.02% to 94.6
- WTI Crude futures down 2.3% to $37.60
- Brent Futures down 0.1% to $40.28
- Gold spot up less than 0.1% to $1,233
- Silver spot down 0.2% to $15.40
Top Global News
- Asian markets fall. Japan’s stocks sink most in 7 weeks; Tankan index of confidence among manufacturers at 3-year low
- China’s official manufacturing purchasing managers index rose unexpectedly in March; highest level since Nov. 2014
- Oil trades lower after Saudis announce they will freeze production only if Iran joins
- Musk Unveils Tesla’s $35,000 Model 3 in Push for Mass Market: Battery-powered Model 3 will be rated about 215 miles range. Tesla collects more than 115,000 orders within 24 hours
- Einhorn’s Greenlight Fund Flat in March, Halting ’16 Rebound: Firm is seeking to bounce back from 2015 loss of more than 20%. Average hedge fund is down this year amid stock-market swings
- Anbang Abruptly Pulls Starwood Offer, Clearing Marriott Path: Group cites ‘various market considerations’ for withdrawal. Shareholder vote on Marriott takeover set for April 8
- Yahoo Losing Another Senior Manager Amid Turnaround Effort: Sandy Gould departing after joining Web portal three years ago. Exit follows resignations of several other executives in 2015
- JPMorgan, Wells Fargo Asked by U.S. to Save Records Tied to 1MDB: Requests add to ranks of banks cooperating in global probes. Banks, which include Deutsche Bank, aren’t seen as targets
Looking at regional markets, we find Asia stocks traded lower as participants remained tentative ahead of today’s key NFP jobs data, while Chinese PMI figures also failed to inspire. Nikkei 225 (-3.4%) underperformed following a discouraging BoJ Tankan survey in which Large Manufacturing Index fell to its lowest since Q2 2013, with Panasonic leading the declines after a weak profit outlook. Shanghai Comp (-0.8%) is also negative despite better than expected official and Caixin Manufacturing PMI figures, which lessens the need for further stimulus measures, while the PBoC’s net weekly injection dropped significantly. 10yr JGBs reversed early weakness amid the widespread cautious tone as some analysts noting participants shifting funds into the long-end, while the BoJ’s were also in the market under its massive bond purchase program.
Asian Top News
- China Factory Gauge Unexpectedly Jumps as Stimulus Kicks In: March manufacturing PMI 50.2 vs est. 49.4
- Corporate Sentiment in Japan Slumps to Near Three-Year Low: March large manufacturer Tankan falls to 6 vs est. 8
- Ratan Tata, Unbridled at 78, Meets His Young Self in Startups: Former Tata Group chairman has invested in >25 ventures
- Indonesia to Deploy F-16s to Guard South China Sea Territory: Defense minister Ryacudu comments after incident with China
European equities kick-start the new quarter with losses following the overnight slump in Japanese equities in which the latest Tankan Survey fell to a 3-year low. On a stock specific basis, Zurich Insurance (-8.2%) underperforms this morning after going ex-div, while the iTraxx sub financial index has been showing signs of distress amid weakness in Italian banks throughout much of the week. Gilts have underperformed this morning with participants noting yesterday’s record high deficit the UK could be vulnerable to certain external shocks, such as a Brexit. Elsewhere, bunds have held steady following quarter-end balance sheet adjustments and ahead of the US NFP report, with peripheral yields wider.
European Top News
- BHP Facing Billions in Disaster Payouts Boosts Brazil Staffing: Senior executives deployed to speed settlement, restart mine. Staff increased to 30 from 8, and moved closer to dam site
- Hollande in Search of a Strategy as Plans to Fix France Unravel: President dumps two key policies in a month as party rebels. Polls close to record low as Socialist base deserts Hollande
- Rajoy Struggles for Credibility as Spanish Deficit Misses Target: Shortfall hit 5.2% in 2015 against EU-set target of 4.2%. Commission reiterates concerns about Spanish fiscal record
- Javid to Meet Welsh Steel Workers as U.K. Seeks to Save Plant: UK business secretary cuts short Australia trip due to crisis. About 6,500 jobs threatened in Wales with votes looming
In commodities, oil headed for the first weekly decline since February as OPEC output rose and expanding U.S. stockpiles kept inventories at the highest level in more than eight decades. The Organization of Petroleum Exporting Countries increased supply by 64,000 barrels to 33.09 million a day in March as Iraqi output gained and Iran pumped at the highest level in almost four years, according to a Bloomberg survey of oil companies, producers and analysts.
The warning by Mohammed bin Salman, 30, who’s emerged as Saudi Arabia’s leading political force, leaves the outcome of a meeting between OPEC and other big oil producers this month in question. Iran has already said it plans to boost its production after the lifting of sanctions following a deal to curb the country’s nuclear program.
Crude futures dropped 1.8 percent to $37.66 a barrel in New York on Friday. Copper for three-month delivery in London rebounded from the lowest in almost a month, gaining 0.6 percent, while aluminum and lead rose more than 1 percent. Nickel and tin declined.
In FX, the yen, which typically moves at odds with Japanese shares, gained 0.2 percent to 112.40 per dollar. The currency was the second-best performer in Asia in the first quarter, climbing 6.8 percent. The euro gained 0.2 percent $1.1400. The Bloomberg Dollar Spot Index, a gauge of the greenback versus 10 major peers, was little changed near its lowest level since the end of June.
A Bloomberg gauge tracking 20 developing-nation currencies fell less than 0.1 percent after surging more than 6 percent last month in a record gain.
South Korea’s won led declines on Friday after reaching the strongest in four months on Thursday, when it completed its biggest monthly advance since 2009. The Mexican peso, Turkish lira and Russian ruble slipped at least 0.2 percent. Indonesia’s rupiah and South Africa’s rand bucked the trend, rising 0.6 percent and 0.3 percent.
It’s a busy day in the US where the March employment report will be the headline news, but there is also other important data in the form of the ISM manufacturing for last month which, given the improvement in recent regional readings, is expected to nudge up 1.5pts to 51.5. As well as this we’ll also see construction spending data, the final manufacturing March PMI and the last revision to the March University of Michigan consumer sentiment reading. Finally the latest US vehicles sales numbers get released tonight.
Bulletin Headline Summary from RanSquawk and Bloomberg
- Overnight slump in Japanese equities following lacklustre Tankan data provides the impetus for weakness across EU bourses.
- WTI and Brent crude futures slipped following comments from Saudi Arabia’s Deputy Crown Prince who stated that they will only freeze oil output if Iran joins
- Looking ahead, Highlights include US Change in Nonfarm Payrolls, Manufacturing PMI, U. of Mich. Sentiment and Fed’s Mester (Voter, Soft Hawk)
- Treasuries sell off, global equity markets lower, oil drops in overnight trading; today brings nonfarm payrolls report (est. 205k) and unemployment rate est. 4.9%).
- China’s official factory gauge showed improving conditions for the first time in eight months, suggesting the government’s fiscal and monetary stimulus is kicking in
- Negative interest rates will make next year a difficult one for Japanese lenders and the central bank should examine the impact of the policy before pushing them further below zero, the new head of the country’s banking lobby said
- Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman laid out his vision for the Public Investment Fund, which will eventually control more than $2 trillion and help wean the kingdom off oil; Saudi Arabia will only freeze its oil output if Iran and other major producers do so
- The $3.7 trillion U.S. municipal market earned about 0.3% in March, building on gains of 1.1% and 0.1% in January and February. It’s just the second time since 2002 that the debt has posted three straight positive months to start the year
- U.K. manufacturing grew less than forecast in March, underscoring the uneven nature of the economy as the global slowdown takes its toll on exports
- U.K. house prices increased for a ninth month in March as rental investors rushed to purchase property before a tax increase, Nationwide Building Society said
- Italy’s unemployment rate rose in February as a discount on social contributions for businesses hiring more workers was being phased out, stripping job creation of a key boost with economic growth failing to accelerate
- The Republican National Committee’s biggest challenge is beginning to take shape: how to navigate a scenario in which Trump leads his challengers in votes and delegates heading into the convention, but loses the nomination
- $3.45b IG credit priced yesterday, weekly volume to $19.25b, March $164.055b, YTD $458.305b; $550m HY priced yesterday, WTD 7 deals $8.35b, MTD 29 deals for $22.21b, YTD 54 deals for $37.07b
- Sovereign 10Y bond yields mixed; European and Asian equity markets lower; U.S. equity-index futures drop. WTI crude oil and copper drop, gold moves higher
DB’s Jim Reid concludes the overnight wrap
Welcome to April and the first day of the new quarter. The last three months will be hard to beat for the sheer turbulence, volatility and huge swings in asset prices which swept through markets. The good news is that the positive momentum which started around midway through February continued through much of March and as you’ll see in our performance review at the end, there was a big rebound for the vast majority of risk assets. As usual see the PDF for all the associated charts and tables.
The first day of this month is also a big one for markets with the US employment report for March the highlight this afternoon. Current market expectations for nonfarm payrolls are sitting at 205k which compares to the 242k number we got back in February. The unemployment rate is expected to hold steady at 4.9% and average hourly earnings are expected to rise +0.2% mom during the month. With all the chatter from recent Fed speakers and also Yellen on the importance of evidence of further signs in wage inflation it will be the key to keep an eye on the latter in particular. Our US economists are a little more cautious ahead of today’s release and despite the trend like ADP reading, have a below consensus 175k forecast for payrolls. They note that this would have the effect of lifting the unemployment rate back to 5.0%, while they are also slightly less optimistic with regards to the earnings data (expect average hourly earnings growth of +0.1% mom). They note that their forecast for below-trend employment is consistent with their meagre Q1 real GDP growth projection of 0.5%. Another interesting point they make is that they have noticed a recent tendency for the median consensus forecast for March to overestimate the initially-reported March payroll gain. In fact, they highlight that the median forecast for March has over-predicted the initial payroll figure in five out of the last six years. All this to look forward to this afternoon.
Before we get there though, glancing at our screens this morning bourses in Asia have kicked off April and the second quarter on a down note with Japanese equity markets in particular tumbling sharply lower following a disappointing Q1 Tankan Survey. The Nikkei and Topix are currently -3.06% and -2.94% respectively. Losses have come after the Tankan survey of large manufacturers fell 6pts to 6 last quarter (vs. 8 expected). The outlook index was similarly disappointing (-4pts to 3; 7 expected) while there were softer than expected results for small manufacturers also. The latest figures reflect the difficulty for the industry following the recent strengthening in the Yen and underscore the challenges the BoJ faces.
Bourses are also lower in China this morning with the Shanghai Comp currently -1.42%. That’s despite better news from the latest PMI numbers there. The manufacturing PMI rebounded 1.2pts last month to a better than expected 50.2 (vs. 49.4 expected) which is the first reading above 50 since July last year. The non-manufacturing PMI also improved in March, rising 1.1pts to 53.8. The data has helped boost metals and emerging market currencies in Asia this morning. Elsewhere in Asia we’re also seeing legs lower for the Hang Seng (-1.32%), Kospi (-0.80%) and ASX (-1.64%). Asia and Australia credit indices have generally outperformed this morning.
It was hard to get too excited about much of the price action in markets yesterday with pre-payrolls lethargy and some quarter end positioning seemingly dominating much of the activity. The strong run for US equities this week stumbled into last night’s close with the S&P 500 eventually finishing the day -0.20%. Prior to this European equities posted bigger losses (Stoxx 600 -1.07%) with much of the commentary attributing this to a poor day for Italian banks. An early tumble for WTI also seemingly didn’t help price action there although by the close of play Oil was back to pretty much unchanged on the day and hovering just north of $38/bbl. The USD continues to weaken in the wake of Yellen after closing another -0.27% yesterday meaning it has fallen every day this week. Some of the sharper moves yesterday came in the rates space and specifically for Treasuries where we saw the curve flatten. Much of the reports suggested that this was month/quarter end rebalancing more than anything else but we did however see 10y yields fall over 5bps to 1.770% which means they are back at the lowest level since the end of February.
In terms of yesterday’s economic data, the main takeaway was yet more evidence for further improvement in the US manufacturing data. The March Chicago PMI reading was reported as increasing 6pts last month to a better than expected 53.6 (vs. 50.7 expected) and the second highest reading since last July. Also supportive was the lesser followed ISM Milwaukee which rose 2.5pts to 57.8 in March, meaning it has trended higher for four consecutive months now. Both data points supportive ahead of today’s ISM manufacturing print. Also out yesterday was the latest initial jobless claims data which showed claims rising 11k last week to 276k (vs. 265k expected). Claims have now risen for four consecutive weeks although have now been below 300k for more than a year, the best run since 1973.
Datawise in Europe yesterday, the main focus was on the Euro area CPI data which saw the headline rise one-tenth as expected to -0.1% yoy in March. The core print nudged up two-tenths to +1.0% (vs. +0.9% expected). Away from this and in the UK we got final confirmation of the Q4 GDP reading which was actually revised up one-tenth at the final read to +0.6% qoq. This had the effect of lifting the YoY rate to +2.1% from +1.9%. UK mortgage approvals were also reported as beating (73.9k vs. 73.5k expected) while net lending and consumer credit numbers met market expectations. The only other data to note was some surprisingly soft retail sales numbers out of Germany in February (-0.4% mom vs. +0.4% expected).
Elsewhere, there was yet more Fedspeak for us to digest yesterday with the latest comments coming from NY Fed President Dudley after the closing bell in the US last night. The Fed official echoed Yellen’s comments in so far as the Fed should look to proceed cautiously, while also speaking positively about the progress the US economy has made on employment and inflation objectives. Dudley made few comments with regards to his outlook for further tightening but did note that, should the US economy stay on the current trajectory, then ‘gradual normalization’ is most likely. Prior to this we also heard from Atlanta Fed President Lockhart and Chicago Fed President Evans again. Lockhart said that there is scope for three rate increases this year, but that he doesn’t see a lot of risk of a policy error from a patient and deliberate approach. Meanwhile Evans reiterated his call for two rate hikes this year.
Taking a look at the day ahead now. Kicking off the proceedings this morning in Europe will be the final revisions to the manufacturing PMI’s in Europe (no change expected for the Euro area at 51.4) as well as the first reads for the likes of Spain and Italy. We’ll also get some house price data out of the UK and the latest unemployment rate figure for the Euro area (expected at 10.3%). In the US this afternoon the primary focus will of course be on the aforementioned March employment report however there’s also more important data in the form of the ISM manufacturing for last month which, given the improvement in recent regional readings, is expected to nudge up 1.5pts to 51.5. As well as this we’ll also see construction spending data, the final manufacturing March PMI and the last revision to the March University of Michigan consumer sentiment reading. Finally the latest US vehicles sales numbers get released tonight. Away from the data the latest Fedspeak comes in the form of Mester (due 5.00pm BST) who is due to provide her economic outlook in NY.
i)Late THURSDAY night/ FRIDAY morning: Shanghai closed UP BY 5.61 POINTS OR 0.19% , / Hang Sang closed DOWN 277.78 POINTS OR 1.34% / The Nikkei closed DOWN BADLY BY 595.51 POINTS OR 3.55% . Australia’s all ordinaires CLOSED DOWN 1.64%. Chinese yuan (ONSHORE) closed DOWN at 6.4632. Oil FELL to 37.83 dollars per barrel for WTI and 39.66 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades 6.4736 yuan to the dollar vs 6.4632 for onshore yuan. Japanese INDUSTRIAL PRODUCTION plunges the most in almost 5 years as negative interest rates ARE KILLING BUSINESS./JAPANESE TANKEN CONFIDENCE INDEX PLUMMETS LAST NIGHT. SOUTH KOREA REPORTS BAD MFG DATA. China continues to send it’s positive response to Janet Yellen’s dovish message of keeping USA interest rates on hold. China, after March 20 had caused its yuan to fall badly in value after 3 USA Fed governors were trying to jawbone Yellen into raising rates. She won out against them. CHINA REPORTS BETTER MFG DATA THAN JAPAN AND SOUTH KOREA (SEE BELOW)
FIRST REPORT ON JAPAN SOUTH KOREA AND CHINA
REPORT ON MANUFACTURING FROM THE THREE AREAS:
AsiaPac Data Deluge: China Good, South Korea Bad, Japan Ugly
An avalanche of data from AsiaPac tonighht was a very mixed bag…
South Korean trade data continued to shrink:
- *SOUTH KOREA MARCH EXPORTS FALL 8.2% Y/Y
- *SOUTH KOREA MARCH IMPORTS FALL 13.8% Y/Y
And deflation is wahing ashorer…
- *SOUTH KOREA MARCH CONSUMER PRICES FALL 0.3% M/M
* * *
Japanese data was a disastrophe…Every single aspect of the Tankan survey missed expectations – from Large manufacturing business outlooks to small service business current conditions…
But Finance Minister Aso had some helpful things to say…
- *ASO: CAN SEE SOME WEAKNESS IN ECONOMIC SENTIMENT IN TANKAN (umm, yeah!)
- *ASO: OVER LONGER TERM, AM VERY COMFORTABLE REGARDING ECONOMY (oh ok then, we won’t worry)
So rest easy my friends, Japan is safe to take leveraged long bets on for one more day. Oh one more thing, that whole NIRP, low rates, encourage lending, transmission mechanism thing… FUBAR!!
FinMin Aso had some comments on that too..
- *ASO: BANKS HAVE MONEY, DON’T HAVE ANYONE TO LEND IT TO
So the entire Keynesian model just hit the endgame of debt saturation? That explains why he said this….
- *ASO: MONETARY EASING, FISCAL STIMULUS HAVE LIMITS
Which directly contradicts Kuroda who just yesterday said…
- *KURODA: DON’T THINK THERE IS LIMIT FOR BOJ EASING NOW
So Limits or No Limits? Who cares – just buy moar stuff.
* * *
And then came China…
Cheers were heard from around the world as China’s Services PMI jumped off 7 year lows (from 52.7 to 53.8), however this is still below January’s levels – not exactly an exuberant bounce after a trillion of fresh credit injections…
- *CHINA NON-MANUFACTURING PMI AT 53.8 IN MARCH
And then Manufacturing hit with a big bounce back into expansion…
- *CHINA MANUFACTURING PMI AT 50.2 IN MARCH
This is a major problem for Janet, because if China is back in recovery, then The Fed no longer has to worry about China’s economy when deciding on the next rate hike.
Of course what all this means is that Caixin’s China PMI (due in 30 minutes) will be a miss to baffle everyone with bullshit.
The reaction is “buying” of course…
But China hates it…
And just as predicted…
- *CHINA MARCH CAIXIN MANUFACTURING PMI 49.7; EST. 48.3
And the market realizes that “good” China news is a disaster as it removes a major Fed excuse for not hiking…
SECOND: REPORTS ON CHINA
China Unveils ‘Trumpian’ Tariffs On All Foreign Goods
Having glad-handed with President Obama just this morning, and complained of a “sluggish global economy,” that ironically his credit-fuelled mal-investment maelstrom enabled via its deflationary forces, Chinese President Xi appears to have moved on from currency wars to protectionism as WSJ reportsChina is tightening its grip on cross-border e-commerce, imposing a new tax system on all overseas purchases. While Trumpian tariffs are dismissed as crazy talk by America’s establishment, it seems China took first-mover advantage to boost “Made-in-China” products at the expense of the rest of the world.
The changes, announced by the Finance Ministry last week, include raising the so-called parcel tax that is currently imposed on overseas retail products that e-commerce firms ship into China. On top of that, such goods sent directly to consumers will now be treated as imports and will be subject to tariffs and value-added and consumption taxes, whose rates vary depending on the type and value of goods.
The ministry said the changes, which become effective April 8, are intended to put foreign and domestic products on an equal footing. But industry analysts said the move seems designed to give a boost to “made-in-China” products and could dent a small, but growing market for foreign goods sold by Alibaba Group Holding Ltd., JD.com Inc. and other e-commerce players.
The new levies could dampen some demand, just as an increasing number of retailers world-wide are hoping to sell into China, says Charles Whiteman, senior vice president of client services for MotionPoint, a technology company that helps international retailers sync their e-commerce websites across languages and currencies.
“Increases in prices always have the effect of driving demand down,” but the effect will be “modest,” Mr. Whiteman said. “It probably won’t be too noticeable for branded products,” which consumers are willing to pay a premium for.
The changes in taxes come as the Chinese economy is slowing down and the deceleration is crimping tax revenues. Tax revenues grew 4.8% last year, compared with 7.8% in 2014. Beijing is looking for new sources of growth and revenue, and is trying to guide the economy to rely more on consumption and less on investment and industry. At the same time, Beijing is anxious to build up domestic businesses to provide jobs.
Calculating the impact of the changes on merchandise is difficult given that different categories of goods carry different rates. A company that sells infant formula milk, for example, will pay nearly 12% more in taxes if the sale is under 500 yuan because previous exemptions don’t apply, according to Mr. Tan, the analyst.
Luxury goods like jewelry will see extra taxes between 9% and 17%,while some levies on personal-hygiene and cosmetic products could fall since the changes rescind the previous heavier parcel tax on those products.
So President Obama – what will you do now? Perhaps Mr. Trump is worth talking to for some ideas?
Hong Kong Retail Sales Crash Most Since 1999 As Stocks Soar 14%
The last few weeks have seen Hong Kong’s Hang Seng index surge over 14% which – if one believes the mainstream media – must mean renewed confidence in world economic growth and that everything is awesome. However, that narrative just got destroyed as Hong Kong retail sales in February just crashed by the most since 1999 as fewer Chinese tourists visited the city during the Lunar New Year holiday and as one analyst warned, sales will “continue to fall for the rest of 2016 as all the negative factors won’t be solved in the near term.”
As Bloomberg details, retail sales dropped 21 percent in February to HK$37 billion ($4.8 billion) year on year, according to a statement from Hong Kong’s statistics department. Combining January and February, sales fell 14 percent.
The monthly decline is the worst since January 1999 when sales were also down 21 percent.
“Apart from the severe drag from the protracted slowdown in inbound tourism, the asset market consolidation might also have weighed on local consumption sentiment,” a government said in a statement on Thursday. “The near-term outlook for retail sales will still be constrained by the weak inbound tourism performance and uncertain economic prospects.”
Chow Tai Fook Jewellery Group Ltd., the world’s largest-listed jewelry chain, and Sa Sa International Holdings Ltd. reported slumping sales over the holiday when mainland Chinese tourists to the territory dropped 12 percent during Feb. 7-13. The stock market rout and a slowing Chinese economy have affected consumer sentiment for luxury goods, Chow Tai Fook has said.
Sales of jewellery, watches and clocks, and valuable gifts dropped 24 percent, while those of electrical goods and photographic equipment plunged 27 percent, according to Thursday’s statement.
The government will monitor closely its repercussions on the wider economy and job market, it said, but as Bloomberg adds,
Mainland China tourists “are unlikely to come back in the short term,”said Forrest Chan, an analyst at CCB International Securities Ltd. Hong Kong residents are also consuming less due to stagnant property values and the weak stock market, he said.
“Hong Kong’s retail market will continue to fall for the rest of 2016 as all the negative factors won’t be solved in the near term,” Chan said in a telephone interview.
The Reason Anbang Pulled The Starwood Offer: It Couldn’t Prove It Has The Funds
Several days ago, we explained how China’s bizarro M&A scramble was nothing more than a rushed attempt to park as much capital in the US (and offshore) as possible before Beijing gets wise enough and cracks down on this latest loophole to evade Chinese capital controls, we had this to say about the farcical, and now pulled, $14 billion Anbang offer for Starwood, owner of the W Hotels, Sheraton and St Regis brands:
Seen in this light the recent deal in which a Chinese insurer is seeking to buy one of the world’s biggest hotel chains makes all the sense in the world: big Chinese investors are not seeking to actually generate profits on future M&A, they are merely looking to preserve capital and are doing so by overpaying for acquisitions around the globe.
As such the biggest question, and wildcard in this, and all other Chinese megadeals in the recent record splurge for US assets, was what is the source of financing: after all the last thing Anbang and peers was for the government to start cracking down on just how they were funnelling funds offshore.
As the FT reported moments ago, “Wu Xiaohui, Anbang’s chairman, this week brushed away questions about the source of his funding and warnings from the Chinese insurance regulator by assuring Caixin, a respected Chinese business publication, that Anbang had Rmb1tn in assets.”
Furthermore, Anbang’s pursuit of Starwood came into question last week after a Chinese news outlet reported the country’s insurance regulator may invoke a rule that restricts domestic companies from investing more than 15 per cent of their total assets abroad.
That may have been the gamechanger.
And, as was announced late this afternoon, Anbang unexpectedly pulled its Starwood offer, and for a very specific reason. According to the FT, an investor consortium led by China’s Anbang Insurance has lost the bidding war for Starwood Hotels & Resorts, after failing to demonstrate that it had the financing in place to back up its latest $14bn offer, according to a person directly involved.
This means that either the entire hostel (sic) bid was a sham from the beginning, or Anbang’s chairman Wu Xiaohui and his various “related party” co-owners got a tap on the collective shoulder from the government who told it the jig was up.
Worse, this means that not only is Anbang out of the game and that Starwood has to go back crawling to Marriott hoping the terms of the latest purchase proposal are still valid, but that suddenly China’s M&A spree may be over as fast as it started.
FT adds that the end of Anbang’s pursuit of Starwood “marks the sharpest setback for Chinese bidder who have accounted for a record share of global merger and acquisition activity in 2016.”
It also risks reviving long-held questions in the minds of sellers and their advisors about the seriousness of some Chinese suitors. Anbang’s consortium had shared no details in public about the sources of its financing, and offered no comment on Thursday about whether it had fully funded its offer.
We now know it had no financing in place whatsoever, and either it was the government that stepped in, or Starwood’s stakeholders said they do not accept suitcases full of recently laundered cash as a form of payment.
In any event, those eight items we listed last night in “8 Things The Chinese Are Scrambling To Buy In America“, are now 7, and may soon be 6, 5, 4 and so on.
* * *
There is, of course, a far simpler explanation why Anbang pulled the deal: the entire company is a fraud, as the following NYT profile of its shady internal dealing strongly hints:
He is often compared in the media to Warren E. Buffett. Like the American billionaire, he is leveraging his control of an insurance company to become one of the biggest names in global finance. Like Mr. Buffett, he looks to be acquiring an immense personal fortune. But that is where the comparisons between Wu Xiaohui, the chairman of the Anbang Insurance Group of China, and Mr. Buffett come to a halt.
Mr. Wu has links to some of the most powerful families in China. He married Zhuo Ran, the granddaughter of Deng Xiaoping, China’s former paramount leader in the 1980s and much of the 1990s. That name, uncommon in Chinese, appears in corporate records tied to at least two of the 37 holding companies.
His exact holdings in Anbang are not clear. A close examination of Anbang’s shareholding structure shows that the 37 companies control more than 93 percent of Anbang, while two Chinese state-owned companies own the rest. The 37 shareholders are linked by common phone numbers, email addresses and interlocking ownership, according to company records filed with the Chinese government and available online.
* * *
One Anbang shareholder — a coal mining company in China’s western region of Xinjiang — is owned by another mining company, Zhongya Huajin, that listed a Zhuo Ran as its first legal representative, though that person has since resigned.
Zhongya Huajin shares an official website address with a different Anbang shareholder, a Beijing real estate company. Collectively, those companies own nearly 4.6 billion shares of Anbang, or more than 7 percent. The companies could not be reached for comment, and their common website now contains only links to pornography and gambling services.
Five shareholders list the same legal email address in government filings. Phones at those companies rang unanswered, and a message to that address was not returned.
Calls to Anbang’s listed phone number were not answered. Nobody replied to a list of questions delivered to its Beijing headquarters, with its enormous lobby — the size of several basketball courts — and its large chandelier. An Anbang employee said the company did not answer media questions.
But aside for China’s “legitimate” financial mega-companies being borderline fraud, the country with the $35 trillion in bank “assets” has everything else under control. We promise.
The Trade Wars Begin: China Retaliates To Steel Tariffs With Global Anti-Dumping Duties
When looking back in history, December 23, 2015 may be the date the global trade wars officially began. On that day, as we reported at the time, the U.S. imposed a 256% tariff on Chinese steel imports.
It did so perhaps with good reason: with its local end markets mothballed, China was desperate to dump as much excess capacity as possible offshore with shipments of steel, oil products and aluminum all reaching new highs according to trade data from the General Administration of Customs, and the result was a dramatic drop in US prices.
On the other hand, with Chinese mills, smelters and refiners all producing far more than can be purchased domestically amid slowing domestic demand, as well as the government’s anti-pollution crackdown, China’s decision to ship the excess overseas was also understandable.
As Bloomberg wrote at the time, “the flood of Chinese supplies is roiling manufacturers around the world and exacerbating trade frictions. The steel market is being overwhelmed with metal from China’s government-owned and state-supported producers, a collection of industry associations have said. The nine groups, including Eurofer and the American Iron and Steel Institute, said there is almost 700 million tons of excess capacity around the world, with the Asian nation contributing as much as 425 million tons.”
2016 was expected to get even worse: Colin Hamilton, head of commodities research, said the the price of hot-rolled coil, used in everything from fridges to freight containers, may decline about 13 percent next year. China’s steel exports, which have ballooned to more than 100 million metric tons this year, may stay at those levels for the rest of the decade as infrastructure and construction demand continues to falter.
To be sure, it was India who launched the first shot, when it announced that it plans to step up its protection for debt-laden domestic steelmakers by imposing a minimum price on steel imports among other measures, Steel Secretary Aruna Sundararajan said in December. The import curbs are necessary to ensure a “level-playing field” for Indian companies after restrictions imposed in September failed to stop a decline in prices, she said.
And then it was the US’ turn, when shortly after India unleashed protectionist measures, the US Department Of Commerce announced that corrosion-resistant steel imports from China were sold at unfairly low prices and will be taxed at 256 percent. The move was clearly aimed at China: imports from India, South Korea and Italy would be taxed at lower rates, while imports from Taiwan and Italy’s Marcegaglia SpA would not face anti-dumping tariffs.
We left it off by saying that “now that the US has fired the first trade war shot, it will be up to China to retaliate. It will do so either by further devaluing its currency or by reciprocating with its own protectionist measures against the US, or perhaps by accelerating the selling of US Treasurys. To be sure, it has several choices, clearly none of which are optimal from a game theory perspective, but now that the US has openly “defected” from the “prisoner’s dilemma” game, all bets are off.”
To be sure, just a few weeks later China proceeded with another dramatic devaluation of the Yuan, which may or may not have been accompanied by an aggressive selling of Treasury.
However the missing link was China unveiling its own protectionist response: a necessary and sufficient condition for fully symmetric trade wars.
It did so earlier today when, accused of flooding world markets with cheap steel, it imposed its own anti-dumping duties as high as 46.3% on electric steel products imported from Japan, South Korea and the European Union, the Ministry of Commerce said on Friday.
According to Reuters, the overseas suppliers include JFE Steel Corp, Nippon Steel and Sumitomo Metal Corp and POSCO, the ministry said in a notice posted on its website (www.mofcom.gov.cn). The ministry did not identify any EU supplier.
What is curious is that China, by far the world’s biggest steel producer, imports relatively small quantities of high-end steel products, including electric steel used in power transformers and generators. In other words the move was mostly symbolic, and a confirmation that China now believes it is being treated unfairly enough to where it can demand in-kind protectionism which will only escalate as the end demand to the global supply glut is simply not there.
The tariffs come at a time when the UK is up in arms over the decision by Tata Steel, the owner of much of UK’s steel industry, to sell its local plants in the process liquidating about 15,000 jobs. Tata blamed a flood of cheap Chinese supplies which means now that China has re-escalaed, thousands of newly laid off ironworkers in the UK (and elsewhere) will have a new global target which to blame for their troubles.
We doubt it will end there, because one trade wars begin, the logical consequences of currency wars, they rarely end amicably or on short notice, and on numerous occasions devolve into outright, conventional wars.
This is not an April Fool’s report. Draghi is preparing “helicopter” money to consumers without the need for a helicopter. He will provide ECB backed debit cards with almost zero interest charged to the consumers. All losses go the ECB!! Gold anyone?
(courtesy zero hedge)
Who Needs Helicopters? Draghi Plans “Fool-Proof” ECB-Backed Debit Card
Via Mint’s Bill Blain’s Morning Porridge,
”A common mistake when trying to design something completely fool-proof is to underestimate the ingenuity of complete fools..”
First day of a new quarter, and it feels like we have an answer to the all-important question of the modern age: how many Euro 100 notes can you squeeze into a Chinook (a very big and noisy helicopter). The second part of the question is – what’s the right height to optimally helicopter drop an economy? I discern a disturbance in the force as a mounting number of learned articles discuss these critical issues.
Yet, the answer may be extraordinarily simple.
For the last couple of months rumours have been circulating of “extraordinary” monetary policy discussions within the bowels of the ECB. We’ve been told “radical” new measures will build upon, and complete, the work already achieved over the last 5-yrs by the ECB in supporting European stability and growth. (Growth? Really?)
We’ve heard it all before: the ECB promises much and delivers less..
However, yesterday’s widely circulated leaks from within the Frankfurt behemoth suggest the ECB’s new secured consumer lending programme could be transformational. Yesterday’s ECB leak highlights the gnomes of Frankfurt may have stumbled on the ultimate truth of helicopter economics – you don’t actually need a helicopter.
Apparently, Draghi has even secured grudging support from Wolfgang Schauble for the proposed extension to their Asset Purchase programmes. The leaked preamble guffs about how it “build on the measures announced at the last meeting”. The rest suggests the new consumer asset backed asset purchase programme, CABAPP, will be announced by Draghi following the April 21 meeting – but probably won’t be enacted until early Q4.
While efforts to stimulate lending to Europe’s SME sector through securitisation programmes have proved difficult because of the blocks imposed by regulators on ABS, its certain borrowers will be more receptive to the much simpler new consumer lending finance package.
Following yesterday’s leaks, ECB spokesperson Vabara Hasiin declined to provide further details of the ECB’s plan to directly buy secured consumer lending assets originated through European banks and platform lenders – but by then the cat was out the proverbial bag.
Yesterday’s leaks confirm the ECB’s plans will effectively give Europe’s consumer lenders access to unlimited zero-cost finance – going far further than the free money showered on them by the multiple previous TLTRO financial packages.
Under the proposed scheme, European banks have the option to issue their clients a new branded European Banking Union debit card – which will have a raised ECB logo to make it meet EU regulations for visually-impaired users. Although these will still bear the names and logos of the “originating banks”, these will be directly financed from the ECB on a pass-thru basis. Banks will be paid a minimal fee for “labelling” and originating the new ECB debit cards.
At first glance, it looks like European retail repayment risk goes straight onto the ECB’s books – which would be “extraordinary” indeed. But, one of the cornerstones of the new CABAPP policy will be credit loss control.
While banks will be free to choose the rate they charge new card holders, the actual interest rate will be close to zero. The ECB will make it clear to banks they are expected to stimulate consumer spending through the lowest possible personal lending rates. One earlier proposal was for the ECB to issue its own debit cards off a new Fin-Tech lending platform, but this was opposed by French and Italian regulators on the basis of protecting existing European retail institutions.
German objections to the ECB effectively taking long-dated consumer lending risk were overcome via two points. Firstly, losses will be transferred off the ECB’s balance sheet by the ECB itself buying NPLs off the programme and holding these to maturity on the bank’s banking book. The ECB could then write these off at a stroke of a pen on their imaginary cheque book as an inflation management tool. The second concession to Berlin is the establishment of a new EU-wide Financial Recovery and Advisory Group to be based in Berlin: FRAG.
Of course the ECB’s true genius lies in the creation of digital helicopter money. By making the fixed interest rate on the cards effectively zero, the duration of the debit card loans effectively perpetual, and giving borrowers an interest only repayment option… well… there will effectively be no substantial losses.
The net effect of the new CABAPP policy will be unlimited cheap retail financing for consumers across the EU area. Although we were hoping for the sound of fully-loaded Chinooks and Augustas across Europes, the only sound we’ll hear will be the cha’ching of retail tills.
Although rates will effectively be zero, spending on the cards will be carefully controlled via variable drawdown limits, set on a tiered system. The lowest limits will be set on blue cards which will be available to the bulk of the population, silver cards to those in gainful employment within the Eurozone, gold cards to higher earners and spenders, while the top level Black Cards will be reserved for the EU nomenklatura and their families.
An additional positive effect for the EU is card holders being linked directly to the ECB, creating political advantages by forging close links between Europe’s population closely to their central bank. The leaked documents show a new slogan: “One Europe, One Euro, One Bank, One Banking Union” will be used to market the programme.
Another refinement of the scheme is that it won’t only be open to banks – but also to consumer lending platforms across the EU. This is seen as an effective way of reaching the swathes of European residents not covered by conventional banking. New immigrants will be encouraged to apply for EBU Debit Cards at their entry point – the basis being “high-spending asylum seekers should contribute to Europe’s growth through increased consumption”, according to yesterday’s ECB leak.
The new cards will not be available in the UK.
The Bank of England said ask Boris or Nigel why not. Only joking.. they were miffed they hadn’t thought of it themselves..
RUSSIAN AND/OR MIDDLE EASTERN AFFAIRS
this will do wonders for the Swedish tourism industry/Easter car burnings
(courtesy New Observer On Line)
and special thanks to Robert H for sending this to us.
Sweden: Easter Car Burnings
Nonwhite “immigrant” violence ripped apart the Swedish suburb of Hovsjö in the city of Södertälje, with brick throwing, car burnings, and attacks on police starting over the Easter weekend.
The trouble started on Thursday evening, when police and the fire brigade were called to a burning car in Hovsjö—and were met with nonwhite mobs throwing bricks and setting additional fires.
The riot quickly escalated, with large fireworks also being fired at the police. At least two other vehicles were burned, and another one damaged severely.
The nonwhites set up burning tires on pedestrian overpasses, and bombarded the police with what appeared to be large fireworks.
Södertälje police were forced to request reinforcements from Stockholm, some twenty miles away.
According to the Länstidningen newspaper report of the events, the larger number of police patrol were eventually able to bring the nonwhites under control, although arrest operations carried out past midnight.
Later that night, however, just after two o’clock, two more cars were burned out in a townhouse area in Alby, a municipal area of the Botkyrka Municipality within the greater Stockholm area. Like Hovsjö, Alby is completely overrun with nonwhite “immigrants.”
Stockholm police spokesman Tove Hägg said that police had been deployed all over Alby during the evening, and they had identified a “large gang of youths” who had gathered outside a pizzeria near where the cars had been burned.
The violence continued once again the next evening, with more car torching and mob violence.
Car arson has become a tactic of choice for the nonwhites in the Stockholm area, copying a habit that their cousins in France have had for many years.
The extent of the increase in arson attacks can be seen by the fact that in previous years the fire brigade attended to around 100 such incidents per year.
This does not look good for the Summer Olympics:A sports minister Hilton, just resigned.
(courtesy zero hedge)
Olympics In Doubt As Brazil Sports Minister Quits, Rio Governor Says “This Is The Worst Situation I’ve Ever Seen”
In less than five months, Brazil is expected to host the Summer Olympics.
If you follow LatAm politics, you know that that is an absolute joke. Last summer, the country descended into political turmoil and the economy sank into what might as well be a depression. Nine months later, inflation is running in the double digits, output is in freefall, and unemployment is soaring. On Wednesday, the government reported its widest primary budget deficit in history and less than 24 hours later, the central bank delivered a dire outlook for growth and inflation.
Meanwhile, VP Michel Temer’s PMDB has split with Dilma Rousseff’s governing coalition, paving the way for her impeachment and casting considerable doubt on the future of the President’s cabinet.
On Thursday, we learn that sports minister George Hilton has become the latest casualty of the political upheaval that will likely drive Rousseff from office in less than two months. “Brazil’s sports minister is resigning four months before the country hosts the Olympics, amid continuing uncertainty over the fate of six other cabinet ministers,” The Guardian wrote this afternoon, before noting that earlier this month, “Hilton left his party in an apparent bid to hold onto his job.”
Hilton had been sports minister for just over a year and although we’re sure any and all Brazilian cabinet positions come with lucrative graft opportunities, we imagine Hilton won’t end up regretting his decision to distance himself from the government and from this year’s Summer Olympics.
After all, there are quite a few very serious questions swirling around the Rio games. For instance: Will the water be clean enough for athletes to compete in? Will there be enough auxiliary power to keep the lights on? And, most importantly, will the games take place at all?
Millions of Brazilian citizens have recently taken to the streets to call for Rousseff’s ouster and to protest the return of former President Luiz Inacio Lula da Silva to government. It’s exceedingly possible that if House Speaker Eduardo Cunha can’t manage to get the impeachment job done, the populace will simply march on the Presidential palace.
How any of the above is compatible with hosting the largest sporting event in the history of the world is beyond us and George Hilton apparently has reservations himself. As does Francisco Dornelles, acting governor of Rio de Janeiro. “This is the worst situation I’ve seen in my political career,” Dornelles said this week, referencing the state’s finances. “I’ve never seen anything like it.” Here’s more from AP:
Dornelles didn’t provide numbers, but he said plunging tax income is behind the state’s financial crisis.
Much of Rio’s tax income comes from the Petrobras oil company, which is embroiled in a big corruption probe that has snared several top politicians and businessmen. Last week, Petrobras reported a record quarterly loss of $10.2 billion due to a large reduction in the value of some assets amid lower oil prices.
Dornelles said that it would take a “large effort” for the state to meet all its obligations and that it was looking for credit and other measures to add to diminishing revenues. He suggested that selling state property was one option.
Yes, it will take “a large effort” for Rio to get back on track. Which probably means it’s going to take a similarly “large effort” for Brazil to figure out how to fund the already over budget Olympic Games in August amid an outright economic collapse. Indeed, the country doesn’t even have any idea who the President is going to be when the Olympic torch is lit in August.
At this juncture, the only thing we can say is that we hope the lawyers for all of the advertising partners who just spent a total of $1 billion with NBC’s executive vice president of advertising sales Seth Winter took a good look at the fine print before signing on the dotted line and cutting the checks.
Oil markets tumble after the Saudi state that they will freeze oil production only if Iran joins them. Of course that will never happen;
(courtesy zero hedge)
Oil Tumbles After Saudis Say They Will Freeze Oil Production Only If Iran Joins
And so the great “oil production freeze” rumor, which helped halt oil’s plunge after it hit a 13 year low in early February and forced a 50% short squeeze higher, dies.
Moments ago, Bloomberg released details of a 5-hour long interview with the Saudi deputy Crown Prince Mohammed bin Salman in which he said that the Saudis would freeze production only if Iran joined. “If all countries agree to freeze production, we’re ready,” the deputy crown Prince said, adding that “if there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.”
When asked if Iran needs to join freeze, his response: “without a doubt. If all countries including Iran, Russia, Venezuela, OPEC countries and all main producers decide to freeze production, we will be among them.”
As a reminder, Saudi Arabia is among big producer countries meeting this month in Doha to conclude a plan to freeze output; whether Iran needs to participate hasn’t been clear because country is in process of restoring output after years of sanctions. And while Iran’s oil minister is attending Doha meeting, the country has said that it won’t join a production freeze.
Salman adds that the oil price slump doesn’t pose a threat to Saudi Arabia, as short-term budgetary benefits need to be evaluated against “threat to the lifespan of oil” adding that “for us it’s a free market that is governed by supply and demand and this is how we deal with the market.”
And since we, and the market, both doubt this story is part of an elaborate April fool’s joke, the price of oil just tumbled as suddenly market participants realize they have been manipulated for the past 2 months and that the structural oversupply in the market will persist.
This particular section which is of highest interest to the market and has already pushed the price of Brent and WTI lower, comes as part of a major Bloomberg story which also reveals that Saudi Arabia is “getting ready for the twilight of the oil age by creating the world’s largest sovereign wealth fund for the kingdom’s most prized assets.”
As had been reported some time ago first by the Economist, less than 5% of Saudi Aramco, the world’s largest oil company will be sold publicly in Saudi Arabia, Deputy Crown Prince Mohammed bin Salman says in interview in Riyadh. Salman said the sale will include parent company and other assets from units. The remaining shares of Aramco will be transferred to Public Investment Fund with Aramco transforming into large industrial energy co. from oil/gas comapny.
More details from Bloomberg:
Over a five-hour conversation, Deputy Crown Prince Mohammed bin Salman laid out his vision for the Public Investment Fund, which will eventually control more than $2 trillion and help wean the kingdom off oil. As part of that strategy, the prince said Saudi will sell shares in Aramco’s parent company and transform the oil giant into an industrial conglomerate. The initial public offering could happen as soon as next year, with the country currently planning to sell less than 5 percent.
“IPOing Aramco and transferring its shares to PIF will technically make investments the source of Saudi government revenue, not oil,” the prince said in an interview at the royal compound in Riyadh that ended at 4 a.m. on Thursday. “What is left now is to diversify investments. So within 20 years, we will be an economy or state that doesn’t depend mainly on oil.”
Almost eight decades since the first Saudi oil was discovered, King Salman’s 30-year-old son is aiming to transform the world’s biggest crude exporter into an economy fit for the next era. As his strategy takes shape, the speed of change may shock a conservative society accustomed to decades of government handouts.
Bloomberg adds that the sale of Aramco, or Saudi Arabian Oil Co., is planned for 2018 or even a year earlier, according to the prince. The fund will then play a major role in the economy, investing at home and abroad. It would be big enough to buy Apple Inc., Google parent Alphabet Inc., Microsoft Corp. and Berkshire Hathaway Inc. – the world’s four largest publicly traded companies.
In summarizing the capacity of the fund, Bloomberg writes that the fund has been hiring specialists for markets, private equity and risk management, said Alrumayyan, PIF’s secretary-general and a former chief of Credit Agricole SA-backed Saudi Fransi Capital.
“We’re working now on different fronts,” he said. “Now the government is transferring some of its assets, lands, some of the companies to us. We have different projects in tourism and in new industries that are untapped in Saudi.” The Saudi prince described the overseas investment plan as “very aggressive,” though said PIF would initially be skewed toward domestic assets by the addition of Aramco. “Undoubtedly, it will be the largest fund on Earth,” the prince said. “This will happen as soon as Aramco goes public.”
As Bloomberg notes, the question is whether the reaction to the more than halving in the price of a barrel of crude has come too late, especially given the Saudi influence over the oil market. The country will only freeze output if Iran and other major producers do so, the prince said.
What is, however, clear is that the Saudis have no intention of stopping their plan of putting marginal oil producers out of business by keeping the price of oil as low as possible, and that the ultimate endgame with this new mega investment fund would be purchasing lots of insolvent (shale) assets on the cheap.
For now however, the best news is that the recurring flashing red headlines about imminent oil production freezes (and certainly cuts) are officially over for the foreseeable future, as is the main catalyst that has pushed oil of its 13 year trough lows.
US Rig Count Tumbles To Fresh Record 41-Year Lows
With US crude production starting to drop, the lagged plunge in oil rig counts appears to be having some effect. Baker Hughes reports that the number of US oil rigs dropped 10 to 362 (14th weekly drop of last 15), the lowest since Nov 2009. The total rig count tumbled 14 to 450, fresh record 41-year lows. Crude was leaking lower into the data and rose modestly after.
- BHI: Baker Hughes reports U.S. rig count down 14 to 450 rigs
- *U.S. OIL RIG COUNT FALLS 10 TO 362, BAKER HUGHES SAYS
And the total rig count collapsed to fresh record lows…
Is US production about to cliff dive?
The crude reaction was very muted after heading lower all morning.
Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/FRIDAY morning 7:00 am
Euro/USA 1.1400 up .0021 ( STILL REACTING TO USA FAILED POLICY)
USA/JAPAN YEN 112.24 DOWN 0.278 (Abe’s new negative interest rate (NIRP)a total bust/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP)
GBP/USA 1.4299 DOWN .0065 (STILL THREAT OF BREXIT)
USA/CAN 1.3035 UP.0045
Early THIS FRIDAY morning in Europe, the Euro ROSE by 21 basis points, trading now WELL above the important 1.08 level RISING to 1.1102; 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 NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Chinese yuan was DOWN in value (onshore) The USA/CNY UP in rate at closing last night: 6.4632 / (yuan DOWN /THIS WEEK CHINA RESPONDS IN KIND TO THE USA’S YELLEN’S MESSAGE NOT TO RAISE RATES /
In Japan Abe went BESERK with NEW ARROWS FOR HIS Abenomics WITH THIS TIME INITIATING NIRP . The yen now trades in a SOUTHBOUND trajectory RAMP as IT settled DOWN in Japan by 28 basis points and trading now well BELOW that all important 120 level to 112.27 yen to the dollar. NIRP POLICY IS A COMPLETE FAILURE AND ALL OF OUR YEN CARRY TRADERS HAVE BEEN BLOWN UP/SIGNALS TO THE MARKET THAT THEY MAY DO A U TURN ON NIRP AND INCREASE NEGATIVITY
The pound was DOWN this morning by 65 basis points as it now trades WELL BELOW the 1.44 level at 1.4299.
The Canadian dollar is now trading DOWN 45 in basis points to 1.3035 to the dollar.
Last night, Chinese bourses AND JAPAN were MIXED/Japan NIKKEI CLOSED DOWN 594.51 OR 3.55%HANG SANG DOWN 277.78 OR 1.38% SHANGHAI UP 5.61 OR 0.19% ON LAST HR RESCUE / AUSTRALIA IS LOWER BY 1.64% / ALL EUROPEAN BOURSES ARE STRONGLY 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 HAS BLOWN 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 FRIDAY morning: closed DOWN 594.51 OR 3.55%
Trading from Europe and Asia:
1. Europe stocks ALL IN THE RED AS THEY START THEIR DAY
2/ CHINESE BOURSES MIXED/ : Hang Sang CLOSED IN THE RED. ,Shanghai SLIGHTLY IN THE GREEN/ Australia BOURSE IN THE RED: /Nikkei (Japan)CLOSED/IN THE RED/India’s Sensex in theRED /
Gold very early morning trading: $1231.60
Early FRIDAY morning USA 10 year bond yield: 1.79% !!! UP 3 in basis points from THURSDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield FALLS to 2.62 UP 1 in basis points from WEDNESDAY night.
USA dollar index early FRIDAY morning: 94.52 DOWN 11 cents from THURSDAY’s close.(Now below resistance at a DXY of 100.)
This ends early morning numbers FRIDAY MORNING
And now your closing FRIDAY NUMBERS
Portuguese 10 year bond yield: 2.92% DOWN 2 in basis points from THURSDAY
JAPANESE BOND YIELD: -.059% DOWN 3in basis points from THURSDAY
SPANISH 10 YR BOND YIELD:1.44% PAR IN basis points from THURSDAY
ITALIAN 10 YR BOND YIELD: 1.22 PAR IN basis points from THURSDAY
the Italian 10 yr bond yield is trading 22 points lower than Spain.
GERMAN 10 YR BOND YIELD: .134% (DOWN 2 IN BASIS POINT ON THE DAY)
IMPORTANT CURRENCY CLOSES FOR FRIDAY
Closing currency crosses for FRIDAY night/USA dollar index/USA 10 yr bond: 2:30 pm
Euro/USA 1.1391 UP .0012 (Euro UP 12 basis points/still represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN
USA/Japan: 111.74 DOWN 0.775 (Yen UP 75 basis points) and a major disappointment to our yen carry traders and Kuroda’s NIRP. They stated that NIRP would continue.
Great Britain/USA 1.4213 DOWN .0150 Pound DOWN 150 basis points/(POOR ECONOMIC DATA/ Brexit concern.)
USA/Canada: 1.3019 UP .0.0028 (Canadian dollar DOWN 28 basis points DESPITE THE FACT THAT oil DOWN (WTI = $36.77)
This afternoon, the Euro was UP by 12 basis point to trade at 1.1392 as the markets STILL REACT TO YELLEN’S DOVISHNESS
The Yen ROSE to 111.74 for a GAIN of 78 basis pints as NIRP is a big failure for the Japanese central bank/also all our yen carry traders are being fried.
The pound was DOWN 150 basis points, trading at 1.4213 ( BREXIT CONCERNS/POOR ECONOMIC DATA)
The Canadian dollar FELL by 28 basis points to 1.3019,as the price of oil was down today (as WTI finished at $36.77 per barrel)
the 10 yr Japanese bond yield closed at -.059% UP 2 BASIS points in yield
Your closing 10 yr USA bond yield: UP 1 basis point from THURSDAY at 1.78% //trading well below the resistance level of 2.27-2.32%) HUGE policy error
USA 30 yr bond yield: 2.61 PAR in basis points on the day and will be worrisome as China/Emerging countries continues to liquidate USA treasuries ( HUGE POLICY ERROR)
Your closing USA dollar index, 94.61 PAR IN cents on the day at 2:30 pm
Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for FRIDAY
London: CLOSED DOWN 28.85 POINTS OR 0.47%
German Dax :CLOSED DOWN 170.87 OR 1.71%
Paris Cac CLOSED DOWN 62.82 OR 1.43%
Spain IBEX CLOSED DOWN 120.80 OR 1.38%
Italian MIB: CLOSED DOWN 340.04 OR 1.88%
The Dow was up 107.66 points or 0.61%
Nasdaq up 44.70 points or 0.92%
WTI Oil price; 36.77 at 2:30 pm;
Brent Oil: 37.76
USA dollar vs Russian Rouble dollar index: 67.35 (Rouble is DOWN 46 /100 roubles per dollar from yesterday)AS the price of Brent and WTI OIL FELL
This ends the stock indices, oil price, currency crosses and interest rate closes for today
Closing Price for Oil, 5 pm/and 10 year USA interest rate:
WTI CRUDE OIL PRICE 5 PM: $36.70
USA 10 YR BOND YIELD: 1.77%
USA DOLLAR INDEX:94.59 down 4 cents on the day
And now your more important USA stories which will influence the price of gold/silver
Trading Today in Graph form:
Stocks Spike On “Good Jobs” As Crude Crashes
“Off the lows”…
So this just happened…
Post-Payrolls, stocks faded until the US open, and then took off…
Thanks to Dennis Gartman, The Dow surged 250 points off the lows…
On the day, good jobs was bad news but good ISM was good news…
On the week, Small Caps soared but Trannies were unable to get out green…
Year-to-date, Russell 2000 and Nasdaq remain the red as Trannies outperform…
VIX was battered almost every day…trading to 13.00!
With VIX in control, stocks decoupled from bonds and FX carry….
And Stocks totally decoupled from oil today at the US open…
Despite the equity strength, bonds also surged with yields down 6bps (30Y) to 15bps (5Y) on the week…
The USD Index tumbled most in 2 months to its lowest close since Oct 2015…(driven by a surge in JPY)
The USD Index suffered a “Death Cross” this week – will it be a false alarm like in October?
Gold managed to close the in the green (best week in a month) as crude was clobbered…
This was Crude’s first losing week in 7 weeks – pushing crude to one-month lows…
So on the week – Stocks Up, Bonds Up, Gold Up, Dollar Down, Oil Down…
Bonus Chart: Reminder – You Are Here
your official bogus payroll report:
(courtesy zero hedge)
Payrolls Rise 215K In March, Beat Expectations As Average Hourly Earnings, Unemployment Rise
And so the confusion remains: why did Yellen go uber dove three days ahead of a day in which the BLS reported that in March not only were 215K jobs created, more than the consensus 205K, if below last month’s 245K, but in which average hourly earnings rebounded a solid 0.3%, above the 0.2% expected, and well above last month’s -0.1% decline.
However, the fly in the the ointment was that the unemployment rate picked up modestly from 4.9% to an above expectations 5.0%. This was due to a modest increase in the participation rate to 63% from 62.9%, as 396K new civilians entered the labor force, rising to 159,286K, while 246K new jobs were added (per the Household survey) while people not in the labor force declined by 206K to 93,482K.
Elsewhere manufacturing payrolls dropped 29K, far below the 2K increase expected, and below last month’s -18K. Additionally, the energy recession is finally trickling down with oil and gas extraction payrolls falling 19,200 from a year earlier (chart courtesy of @not_jim_cramer).
And the last notable point: average hourly hours worked were flat at 2 year lows, which bodes poorfly for both productivity growth and for GDP.
On net, the report was better than expected, which means it is “good news” if only for the economy, but will it be good news for the market, which will now start discounting another Fed rate hike all over again.
Indeed, the speculation has already begun that June is once again in play as per Bill Gross, who moments ago said that “June Likely to Be When Fed Makes One of Two Rate Hikes.”
As of this moment, futures are near day lows, so Goldman’s latest forecast that “Good news is good news again” was again wrong.
From the report:
Total nonfarm payroll employment rose by 215,000 in March. Employment gains occurred in retail trade, construction, and health care, while job losses occurred in manufacturing and mining.
Retail trade added 48,000 jobs in March. Employment gains occurred in general merchandise stores (+12,000), health and personal care stores (+10,000), building material and garden supply stores (+10,000), and automobile dealers (+5,000). Over the past 12 months, retail trade has added 378,000 jobs.
Construction employment rose by 37,000 in March. Job gains occurred among residential specialty trade contractors (+12,000) and in heavy and civilengineering construction (+11,000). Over the year, construction has added 301,000 jobs.
Employment in health care increased by 37,000 over the month, about in line with the average monthly gain over the prior 12 months. In March, employment rose in ambulatory health care services (+27,000) and hospitals (+10,000). Over the year, health care employment has increased by 503,000.
Over the month, employment continued to trend up in food services and drinking places (+25,000) and in financial activities (+15,000).
In March, employment in professional and business services changed little for the third month in a row. In 2015, the industry added an average of 52,000 jobs per month.
Employment in manufacturing declined by 29,000 in March. Most of the job losses occurred in durable goods industries (-24,000), including machinery (-7,000), primary metals (-3,000), and semiconductors and electronic components (-3,000).
Mining employment continued to decline in March (-12,000) with losses concentrated in support activities for mining (-10,000). Since reaching a peak in September 2014, employment in mining has decreased by 185,000.
Employment in other major industries, including wholesale trade, transportation and warehousing, information, and government, changed little over the month.
The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in March. The manufacturing workweek edged down by 0.1 hour to 40.6 hours. Factory overtime was 3.3 hours for the fourth month in a row. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.6 hours. (See tables B-2 and B-7.)
In March, average hourly earnings for all employees on private nonfarm payrolls increased by 7 cents to $25.43, following a 2-cent decline in February. Over the year, average hourly earnings have risen by 2.3 percent. In March, average hourly earnings of private-sector production and nonsupervisory employees increased by 4 cents to $21.37. (See tables B-3 and B-8.)
The change in total nonfarm payroll employment for January was revised from +172,000 to +168,000, and the change for February was revised from +242,000 to +245,000. With these revisions, employment gains in January and February combined were 1,000 less than previously reported. Over the past 3 months, job gains have averaged 209,000 per month.
“Good” News Is Bad Again? Commodity Carnage Continues Post-Payrolls
It appears Goldman clients are once again taking a bath. Having proposed that with monetary concerns temporarily sidelined, “good news should be good news for risky assets,” today’s better-than-expected jobs print (following China’s better than expected PMIs) has sent stocks lower, bonds higher, and crack gold and oil…
Stronger USD has sent commodities reeling…
Extending overnight losses from China’s “Good” news…
But bonds are bid as stocks slip lower…
As we pointed out just yesterday, Goldman suggested a “test” forits own progonostication:
…sensing the muppets’ rage if they are all pile driven once more, Goldman provides a useful test to determine if at least this time it will right: that test will be the market’s reaction to tomorrow’s payrolls. Goldman says that as of this moment “good news should be good news for risky assets” – well, tomorrow’s NFP will demonstrate that: if payrolls come in above the 210K consensus, then stocks should surge… assuming Goldman is right.
Put differently, with monetary concerns temporarily sidelined, good news should be good news for risky assets. Tomorrow’s economic calendar will provide an interesting test. We expect US data to be moderately stronger than expected. Consensus forecasts expect nonfarm payrolls to rise 210k vs. 220k for GS (from 242k last month) and ISM manufacturing to rise to 50.5 vs 51.0 for GS (from 49.5 last month).
Alternatively, if payrolls miss big, then the market should tumble. We’ll know if Goldman, which two months ago said to short gold, will finally have at least one correct call.
It appears, once again, the Goldman clients have been Gartman’d…
The bottom line is simple – with China’s recovery back on, and Chinese FX and equity market volatility “under control”, The Fed is left with little excuse for “international developments” and is thus forced to focus on domestic data – which, through various smoke and mirrors, is strong… therefore, for the free-money addicts “good” news is terrible news – especially at a 23x GAAP P/E.
Waiters And Bartenders Rise To Record, As Manufacturing Workers Drop Most Since 2009
On the surface, the March jobs reported was better than expected… except for manufacturing workers. As shown in the chart below, in the past month, a disturbing 29,000 manufacturing jobs were lost. This was the single biggest monthly drop in the series going back to December 2009.
But not all is lost: as has been the case for virtually every month during the “recovery”, virtually every laid off manufacturing worker could find a job as a waiter: in March, the workers in the “Food services and drinking places” category, aka waiters, bartenders and minimum wage line cooks, rose again to a new record high of 11,307,000 workers, an increase of 25K in the month, offsetting virtually all lost manufacturing jobs.
This is how the two job series have looked since the start of 2015.
And here is the longer-term, going back to the start of the crisis in December 2007: please do not “peddle fiction” upon seeing this chart.
Where The March Jobs Were: The Minimum Wage Deluge Continues
In March the US economy added a healthy 215K jobs, beating expectations and more importantly, pushing the average hourly earnings up by 0.3% on the month. Which, however, is curious because a cursory look at the job additions in the month reveals that nearly two-third of all jobs, and the three top categories of all job additions, were once again all minimum wages jobs.
- Education and Health: 51K
- Retail Trade: 48K
- Leisure and Hospitality: 40K
Just these three top sectors (as shown in the chart below) accounted for 65% of all job gains. This “growth” of minimum wage labor took place while some of the highest paying jobs, including mining and logging, manufacturing and transportation and warehousing all posted declines in March. The only silver lining was that construction jobs posted a healthy 37K bounce, while government “workers” added a solid 20K.
And, it bears repeating once again, that in a month in which all sentiment surveys showed a steady rebound in manufacturing, the US economy actually lost the biggest number of manufacturing workers since 2009.
US Manufacturing Surveys Bounce Despite The Biggest Industry Job Losses In 7 Years
Following China’s miraculous PMI jump back into expansion, Markit reports US Manufacturing also roseto 51.5 in March (despite the biggest drop in manufacturing jobs since 2009). As Markit details,output growth is unchanged from February’s 28-month low, and prices charged decline amid further drop in input costs. ISM Manufacturing also jumpedfrom 49.5 to 51.8 – the first ‘expansion’ in 7 months. Finally, we note that ISM Prices Paid exploded higher (from 38.5 to 51.5) – the biggest jump since Aug 2012.
“V”-shaped recovery in ISM Manufacturing
All of which occurred as the manufacturing sector lost more jobs in March than at any time since 2009…
Every ISM Respondent thinks everything is awesome…
- “Unemployment rate is low in our county, making it hard to find workers. We are understaffed and running lots of overtime.” (Plastics & Rubber Products)
- “Business in telecom is booming. Fiber plant is at capacity.” (Chemical Products)
- “Current trends remain steady. No issues with delivery or costs.” (Computer & Electronic Products)
“Capital equipment sales are steady.” (Fabricated Metal Products)
- “Requests for proposals for new equipment [are] very strong.” (Machinery)
- “Government is spending again. Have received delivery orders.” (Transportation Equipment)
- “Things are starting to pick up. Our business is seasonal and it is that time of year.” (Printing & Related Support Activities)
- “Business conditions are stable, little change from last month.” (Miscellaneous Manufacturing)
- “Incoming sales are improving.” (Furniture & Related Products)
- “Our business is still going strong.” (Primary Metals)
But as Markit details, output growth is unchanged from February’s 28-month low, and prices charged decline amid further drop in input costs:
“March’s survey highlights sustained weakness across the US manufacturing sector, meaning that overall growth through the first quarter slowed to its lowest since late-2012. Subdued client spending patterns within the energy sector, ongoing pressure from the strong dollar, and general uncertainty about the business outlook were cited as factors weighing on new order flows in March.
“Meanwhile, price discounting strategies resulted in the first back-to-back drop in factory gate charges for around three-and-a-half years, suggesting another squeeze on margins despite lower materials costs across the manufacturing sector.“
So – to summarize, US manufacturing sector lost mopre jobs in March than at any time since 2009 BUT the managers that were surveyed by ISM and Markit proclaimed expansion is back and this puts all the pressure back on The Fed once again as more excuses are lost for hiking rates.
In 24 Hours Gartman Flips From “Don’t Fight The Fed” To “A Major Downside Turning Point Is Upon Us”
When documenting Gartman’s latest flip-flop yesterday just after 12 pm, in which the “world renowned” CNBC contributor and newsletter writer finally threw in the bearish towel, a position he had stuck withsince March 16. This is what he said:
We may not agree with what Dr. Yellen is proposing… and what she will pursue… or why she is proposing and pursuing it… but it is not our duty to argue and then to take positions openly at odds with her, for as the great, departed and greatly missed Mr. Marty Zweig always said, “Don’t fight the Fed.” We have no actual net long or short position in equities, however.”
We then warned that “the rally may be on its last legs“, and at that exact moment, the S&P topticked its intraday high of the day.
Fast forward to today, when – with condolences to the bears – it appears the downside following today’s “good news is bad news” report may be limited because Gartman has, once again flipped. To wit:
The fact that all ten markets comprising our International Index have fallen is of interest for it is exceedingly rare when such unanimity of direction takes place. However, when it does and especially when it does after sustained moves previously it is usually all the more consequential. The few times that we’ve seen all ten markets move lower have almost always been followed by further and material weakness. Coupling that history with the fact that the CNN Fear & Greed Index had reached 78 at one point late last week and has turned lower, and further given that a goodly portion of the buying this week has been of the short-covering kind following Dr. Yellen’s speech to the Economics Club of New York, and coupling those notions with the fact that the margin levels on the NYSE have turned lower, we arrive at the possibility that a major turning point to the downside is hard upon us.
So… fight the Fed after all? Under other conditions we would speculate that this is just another April fools joke report, but then again, this is Gartman.
Joking aside, we may be in for a range-bound market once again, at least until Dennis goes bullish again, and we would not be at all surprised to see the market levitate (on no volume of course) back to green by the end of the day.
Auto Sales Disappoint Despite Surging Incentives, “Worrisome Trends Are Taking Hold”
Just as we predicted, it seems – despite the “everything is awesome” jobs data – that auto sales exuberance has hit the wall of credit saturation. Despite a surge in incentives in Q1, GM US auto sales rose just 0.6% (drastically lower than 6.0% rise expectations) and Ford rose 7.8% (missing expectations of a 9.4% surge). As J.D.Power notes “there are worrisome trends below the surface”of auto sales and with inventories at levels only seen once in the last 24 years (and tumbling used car prices), the automakers have a major problem if this is anything but ‘transitory’.
It wasn’t just GM and Ford though:
- *FIAT CHRYSLER MARCH U.S. AUTO SALES RISE 8.1%, EST. UP 14%
- *FIAT CHRYSLER HALTED IN MILAN, LIMIT DOWN AFTER FALLING 4.9%
- *HONDA MARCH U.S. AUTO SALES UP 9.4%, EST. UP 16%
- *VOLKSWAGEN OF AMERICA MARCH AUTO SALES DOWN 10.4%
- *TOYOTA MARCH U.S. AUTO SALES DOWN 2.7%, EST. UP 5.6%
U.S. light-vehicle deliveries, aided by low gasoline prices, rising discounts and favorable financing terms, have climbed 3.4 percent this year through February after rising 5.7 percent to a record 17.47 million in 2015. But on a selling-day-adjusted basis, new-vehicle retail sales in March are expected to fall 2 percent from a year ago, according to a joint sales forecast by J.D. Power and LMC Automotive. It would be the first time there has been a year-over-year decline in sales on an adjusted basis since August 2010, Power and LMC say.
What is most troubling however is, as JD Power notes, the worrisome trends below the surface…
Following an exceptional performance in 2015 with strong sales and record average price per vehicle sold, the U.S. automobile market must adopt a more disciplined approach to maintain long term health for the industry, according to a briefing given by J.D. Power here today at the 2016 J.D. Power Automotive Summit.
J.D. Power warns that incentive spending on new vehicles has risen rapidly in the past year and is trending toward recession-era levels for the industry as a whole and has already exceeded recession-era levels on cars.
The analysis, presented as part of the J.D. Power Automotive Summit, which kicks off the National Automobile Dealers Association Convention & Expo, finds that while overall industry retail sales are expected to grow by 300,000 to 14.5 million units in 2016, the growth is being delivered through actions that pose meaningful risks to the long-term health of the industry. Those actions include elevated incentive spending, increased use of extended loan terms, rising loan-to-value ratios and record levels of leasing.
“Overall, auto sales figures continue to post strong results, but when you peel back just one layer beneath the surface, some worrisome trends are taking hold,” said Thomas King, vice president of Power Information Network at J.D. Power. “Chief among the trends is the fact that first quarter sales incentives averaged 9.6% of MSRP, a 70 basis-point increase from last year and are trending toward levels observed at the height of the recession.
“The increased spending, which is due primarily to manufacturers trying to offset a shift in demand from cars to trucks and SUVs, has the potential to reduce future resale value.Significant declines in the value of used cars would disrupt consumers’ ability to buy new vehicles (due to lower trade-in values), while vehicle manufacturers and lenders would have to deal with exposure on their lease portfolios (if off-lease vehicles fail to achieve their expected resale value).”
And this sales weakness is occurring amid a mal-investment-driven excess inventory-to-sales at levels only seen once before in 24 years…
And worse still, used car prices starting to fade rapidly (biggest Feb drop since 2008)…
Falling used car prices means pressure on new car prices as well, which would be a shock to America’s booming auto market.
Well that should do for tonight
I will see you Monday night