Good evening Ladies and Gentlemen:
Gold: $1,246.80 down $12.60 (comex closing time)
Silver 16.32 up 10 cents
In the access market 5:15 pm
Gold $1243.00
silver: 16.22
Let us have a look at the data for today
.
At the gold comex today, we had a GOOD delivery day, registering 45 notices for 4500 ounces for gold,and for silver we had 0 notices for nil oz for the non active April delivery month.
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 214.16 tonnes for a loss of 89 tonnes over that period.
In silver, the open interest rose by a whopping 4,742 contracts UP to 184,800 as the silver price was UP 25 cents with respect to yesterday’s bullish trading. In ounces, the OI is still represented by .924 billion oz or 132% of annual global silver production (ex Russia ex China). We are now at multi year highs in OI with respect to silver
In silver we had 0 notices served upon for NIL oz.
In gold, the total comex gold OI ROSE BY A HUGE 6334 contracts UP to 504,523 contracts as the price of gold was UP $2,70 with YESTERDAY’S trading.(at comex closing).
We had another big change in the GLD, a withdrawal of 5.06 tonnes / thus the inventory rests tonight at 810.08 tonnes. I rather suspect that the bankers need to get their hands on physical quickly and the thus raided the GLD cookie jar No doubt this gold was used in the attack today. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. Our 670 tonnes of rock bottom inventory in GLD gold has been broken. It looks to me that China has taken the last amounts of physical gold from the GLD. I guess the only place left for China to receive physical gold, after they deplete the GLD will be the FRBNY and the comex. In silver,we had a rather strange withdrawal of 1.903 million oz of silver despite silver’s rise. No doubt that this silver was used in the fruitless attempt at knocking down the silver price. Thus the Inventory rests at 334.248 million oz.
.
First, here is an outline of what will be discussed tonight:
1. Today, we had the open interest in silver RISE by 4,742 contracts UP to 184,800 as the price of silver was UP 25 cents with YESTERDAY’S trading.Today, the bankers SUCCEEDED IN THEIR ATTACK ON GOLD BUT NOT SILVER. The total OI for gold rose by 6,334 contracts to 504,523 contracts as gold was UP $2.70 in price from yesterday’s level. THE HIGH OI FOR GOLD WAS THE REASON FOR THE RAID TODAY.
(report Harvey)
2 a) Gold trading overnight, Goldcore
(Mark OByrne)
b) COT report
(Harvey)
3. ASIAN AFFAIRS
i)Late TUESDAY night/ WEDNESDAY morning: Shanghai closed UP 42.99 POINTS OR 1.42% / Hang Sang closed UP 654.27 OR 3.19%. The Nikkei closed UP 452.43 POINTS OR 2.84% . Australia’s all ordinaires CLOSED UP 1.59%. Chinese yuan (ONSHORE) closed DOWN at 6.4714. Oil FELL to 41.48 dollars per barrel for WTI and 44.07 for Brent. Stocks in Europe ALL IN THE GREEN . Offshore yuan trades 6.4851 yuan to the dollar vs 6.4714 for onshore yuan. LAST WEEK:Japanese INDUSTRIAL PRODUCTION plunges the most in almost 5 years as negative interest rates ARE KILLING BUSINESS./JAPANESE TANKEN CONFIDENCE INDEX PLUMMETS/JAPAN HAS NEVER RECOVERED FROM THOSE BAD DATA RELEASES/TODAY THE USA/YEN CROSS RISES TO THE 109 CROSS SETTING OFF GLOBAL TENSIONS WHICH IN TURN IS CAUSING THE SPECIAL MEETING AT THE FED FPR 3 DAYS ENDING TODAY.
REPORT ON JAPAN SOUTH KOREA AND CHINA
a) REPORT ON JAPAN
none today
b) REPORT ON CHINA
ii) China reports good export numbers rebounding from the disastrous February bloodbath. However imports still fall for the 17th straight month.
If China’s economy is improving we must see trade throughout the globe improve. Commodities must flow from the emerging markets and we must also see growth in Europe and the USA. So far not seeing it!
(zero hedge)
iii)However the DATA is clearly cooked. See for yourself:
GLOBAL ISSUES
If we are to see a resurgence in activity inside China we are going to see big changes in three big indices:
i) Baltic Dry Index
ii) China Rail Freight Index
iii)China’s Containerized freight Index
see for yourself: they are totally flat and at the bottom of the scale.
OIL MARKETS
i) The Oil rally fizzles after OPEC sees lower global demand. Bank of America sees 4 possible outcomes out of DOHA:
a) price war
b) no freeze
c) soft freeze
d) hard freeze
the latter two will see Brent at 50 dollars/the first two Brent will be below 40.00
( zero hedge/Bank of America)
iii)Mark our words, nothing substantive will come out of the DOHA meetings:
ivTwo important points in the following article showing lineups of tankers on the seas:
PHYSICAL MARKETS
i) A. the crooked CME opens an account at the crooked Fed:
Question: why, all of a sudden is this necessary?
TWO COMMENTARIES
First: Reuters
Second: Dave Kranzler of IRD
a must read…
( Dave Kranzler IRD/Reuters/GATA)
ii)Bill Murphy of GATA interviewed by Crushthe Street.com
( GATA/CrushTheStreet.com)
iii)Reuters states that China’s yuan gold benchmark fix is to be launched with 18 members.
Only two members will be foreign.
This is the day that I have been waiting for:
( Reuters/GATA)
iv) Bill Holter’s public commentary is entitled: ” Don’t be duped”
(Bill Holter/Holter, Sinclair collaboration)
USA STORIES WHICH INFLUENCE THE PRICE OF GOLD/SILVER
i)Although they beat expectations, JPM’s profit slides 7%. Their trading revenue beat expectations but their loss reserves jumped the most in 6 years:
Not a very good report for our crooked banker, JPM
(courtesy JPMorgan/zero hedge)
ii)The all important USA retail sales disappoints with a 0.3% drop in March led by a huge plunge in auto sales (reported to you earlier). The auto sales reported a drop of 2.1% month over month. The huge drop in used car prices does not bode well for the purchase of new cars:
( zero hedge)
iii) The world’s largest coal company, Peabody Energy files for bankruptcy and now 8,300 jobs are in jeopardy. Strange! last month saw the stock rise from 2 dollars to 6 dollars on a huge short squeeze.
iv) THIS IS ABSOLUTELY SURREAL!!
The NYFED is now going to report on the GDP as well as the Atlanta Fed. It looks to everyone that the Atlanta Fed is way to pessimistic!
( Mish Shedlock)
iv b. We go from the sublime to the ridiculous: Atlanta Fed raises its first quarter GDP despite power retail sales, and a higher inventory to sales ratio. They must have received a tap on the shoulder from Fed Central:
v)Obama to forgive student debt of 400,000 Americans if they are disabled and cannot work:
vi) a.Five banks did not submit credible plans in case of bankruptcy. They have until October to correct. This is the so called “living wills”
vi b.Zero hedge weighs in on this joke on the above report:( zero hedge)
vii)According to the Beige book: no mention of global conditions.Then why didn’t they raise rates?
( zero hedge)
Let us head over to the comex:
The total gold comex open interest ROSE to an OI level of 504,523 for a gain of 6,334 contracts as the price of gold was UP 2.70 in price with respect to yesterday’s bullish 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 233 contracts from 3474 contracts down to 3241. We had 45 notices filed so we lost 188 contracts or an additional 18,800 gold ounces that will not stand for delivery. The next non active contract month of May saw its OI FALL by 102 contracts DOWN to 2753. The next big active gold contract is June and here the OI ROSE by 4,282 contracts UP to 379,527. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was POOR at 175,916 . The confirmed volume YESTERDAY (which includes the volume during regular business hours + access market sales the previous day was poor at 180,194 contracts. The comex is not in backwardation
Today we had 45 notices filed for 4500 oz in gold.
April contract month:
INITIAL standings for APRIL
April 13/2016
| Gold |
Ounces
|
| Withdrawals from Dealers Inventory in oz | nil |
| Withdrawals from Customer Inventory in oz nil | 11,316.80 oz
MANFRA,SCOTIA 352 KILOBARS |
| Deposits to the Dealer Inventory in oz | 4,000.000 OZ
BRINK ??? |
| Deposits to the Customer Inventory, in oz | NIL |
| No of oz served (contracts) today | 45 contracts (4500 oz) |
| No of oz to be served (notices) | 3196 contracts 319,600 oz/ |
| Total monthly oz gold served (contracts) so far this month | 1331 contracts (133,100 oz) |
| Total accumulative withdrawals of gold from the Dealers inventory this month | nil |
| Total accumulative withdrawal of gold from the Customer inventory this month | 90,194.2 oz |
Today we had 1 dealer deposit
i) Into Brinks: 4,000 oz?????
THIS IS NOT DIVISIBLE BY 32.15 OZ AND THEREFORE NOT KILOBARS
HOW COULD A DEPOSIT OF EXACTLY 4,000 OZ.000 OCCUR
THIS IS THE 6TH ENTRY THIS YR BY BRINKS OF EXACTLY 4,000 OZ OR 3500 OZ!!
Total dealer deposits; 4,000.00 oz
Today we had 0 dealer withdrawals:
total dealer withdrawals: nil oz
Today we had 0 customer deposits
Total customer deposits: nil oz
Today we had 2 customer withdrawal:
i) Out of MANFRA: 64.30 oz 2 kilobars
ii) Out of Scotia: 11,252.500 oz (350 kilobars)
total customer withdrawals:11,316.80 oz 352 kilobars
Today we had 0 adjustments:
THE COMEX DATA IS FRAUDULENT. IT IS IMPOSSIBLE TO HAVE EXACT NUMBERS AND ALMOST 95% OF ALL ENTRIES ARE EITHER KILOBARS OR EXACT NUMBERS.
APRIL INITIAL standings
/April 13/2016:
| Silver |
Ounces
|
| Withdrawals from Dealers Inventory | nil |
| Withdrawals from Customer Inventory | 490,173.24 OZ. CNT, Delaware
Brinks |
| Deposits to the Dealer Inventory | nil |
| Deposits to the Customer Inventory | 602,811..440 OZ
Brinks,CNT |
| No of oz served today (contracts) | 0 contracts
nil oz |
| No of oz to be served (notices) | 66 contracts)(330,000 oz) |
| Total monthly oz silver served (contracts) | 123 contracts (615,000 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 | 3,864,991.8 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 2 customer deposits:
i) Into BRINKS: 600,775.990 oz
ii)Into cnt: 2035.45 oz
total customer deposits: 602,811.44 oz
We had 3 customer withdrawal
i) Out of CNT: 100,648.44 oz
ii) Out of Delaware:1004.70 oz
iii) Out of brinks: 388,520.100
:
total customer withdrawals: 490,173.24 oz
we had 0 adjustments
APRIL 8/no changes in tonnage of gold/rests tonight at 819.60 tonnes
APRIL 7/ a huge deposit of 4.17 tonnes of “paper” gold was added to our GLD/Inventory rests tonight at 819.60 tonnes
APRIL 6/a withdrawal of .29 tonnes of gold and probably this was to pay for fees for the custodian and insurance/inventory rests at 815.43 tones
April 5/ a withdrawal of 2.37 tonnes of gold from the GLD/Inventory rests at 815.72 tonnes
APRIL 4/a withdrawal of 1.19 tonnes from the GLD/Inventory rests at 818.09 tonnes of gold
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
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
April 13.2016: inventory rests at 810.08 tonnes
end
And now your overnight trading in gold, WEDNESDAY MORNING and also physical stories that may interest you:
By Mark O’Byrne
Buy Gold ! – HSBC
Buy gold is the call of HSBC technical analysts who are becoming increasingly bullish on gold and increasingly bearish on stocks as reported by Business Insider.
HSBC via Business Insider via Bloomberg
Sentiment towards gold is slowly moving from being extremely negative and bearish to more bullish. HSBC joins a long list of large banks, insurers and investment houses who are now bullish on gold.
HSBC, JP Morgan Chase, Bank of America Merrill Lynch, ABN Amro, UBS, Deutsche Bank, PIMCO and BlackRock head a growing list of investment houses that are recommending an allocation to gold today. Indeed, the world’s largest reinsurer Munich Re is buying gold.
HSBC’s bullish gold call was reported by Business Insider:
“The US dollar price of Gold is in an uptrend with a bullish Elliott Wave structure,”said Murray Gunn, HSBC’s head of technical analysis.
“With momentum turning up we open a long position at a spot reference of $1,260. A stop-loss is set at $1,200 with an initial target of $1,500.”
Gold was trading at around $1,261 an ounce on Tuesday morning.
Gunn’s analysis is formulated based on something called the Elliott Principle, a form of technical analysis that believes investors move between periods of bullish and bearish thinking in a reasonably consistent pattern.
Or as HSBC puts it:
Elliott’s Wave Principle is based on his empirically derived discovery in the 1930s that market prices move in recognizable, repeating patterns and that these patterns reflect a basic natural harmony manifested in the inherent herding behavior of crowds. Elliott discovered that these crowd behavior cycles appeared at every time scale and whilst they were repetitive in structure they were not always repetitive in amplitude or the time taken to form.
By this principle, bullish sentiment moves prices up in five moves of alternating peaks and valleys, eventually pushing prices to a new high. This is followed by three bearish moves pushing prices lower.
Based on his analysis, Gunn believes that gold has hit the bottom of its recent down cycle and the price gains made by the metal over the past few weeks are forming a new, substantial upward trend.
In addition, Gunn is relatively bearish on all major global stock indexes including the S&P 500 and FTSE 100. In terms of sectors, the analysis is significantly bearish on US motorcycle manufacturers, agricultural products, and apparel retail. It is significantly bullish on no sector of US stocks.
Full article on Business Insider
Gold Prices (LBMA)
13 April: USD 1,245.75, EUR 1,100.37 and GBP 875.33 per ounce
12 April: USD 1,259.20, EUR 1,102.15 and GBP 880.18 per ounce
11 April: USD 1,247.25, EUR 1,095.84 and GBP 878.96 per ounce
8 April: USD 1,235.00, EUR 1,085.18 and GBP 877.33 per ounce
7 April: USD 1,237.50, EUR 1,086.07 and GBP 879.70 per ounce
Silver Prices (LBMA)
13 April: USD 15.98, EUR 14.14 and GBP 11.21 per ounce
12 April: USD 15.96, EUR 13.98 and GBP 11.15 per ounce
11 April: USD 15.56, EUR 13.66 and GBP 10.93 per ounce
8 April: USD 15.16, EUR 13.34 and GBP 10.78 per ounce
7 April: USD 15.22, EUR 13.38 and GBP 10.81 per ounce
Gold News and Commentary
Silver Climbs to Five-Month High as Investors Pile Into ETFs (Bloomberg)
Gold steadies below 3-week high, silver hits 5-1/2-month high (Reuters)
Gold books best string of gains in nearly 2 months (Marketwatch)
U.S. runs $108 billion budget deficit in March, Treasury says (Marketwatch)
China’s yuan gold benchmark to launch with 18 members (Reuters)
IMF Warns of Global Stagnation as It Cuts Growth Outlook Again (Bloomberg)
Gold “will pick up a lot of steam”… If central banks exit market (Economic Times)
Swiss banker whistleblower: CIA behind Panama Papers (CNBC)
Bank bail-ins are back, and they begin in Austria (Examiner)
Silver Surges To 8-Month Highs As Hedgers Unwind (Zero Hedge)
Read More Here
Knowledge Is Power. Read Our Most Popular Guides in Recent Months
Eric is driving the bankers crazy as he is taking in 75 million dollars worth of physical silver:
the crooked CME opens an account at the crooked Fed:
The big question is why is this necessary!!
(courtesy Reuters)
This is the day that I have been waiting for:
China’s yuan gold benchmark to launch with 18 members, source tells Reuters
Submitted by cpowell on Wed, 2016-04-13 07:21. Section: Daily Dispatches
By A. Ananthalakshmi
Reuters
Wednesday, April 13, 2016
SINGAPORE — Top Chinese banks and gold miners, along with the world’s biggest jewellery retailer, will be among 18 members taking part in Beijing’s new yuan-denominated gold benchmark, a source familiar with the matter said.
Two foreign banks will also join the benchmark-setting process when it launches on April 19, marking China’s biggest step to become a price-setter for gold.
As the world’s top producer, importer, and consumer of gold, China has balked at having to depend on a dollar price in international transactions, and believes its market weight should entitle it to set the price of gold.
A yuan gold fix is not expected to pose an immediate threat to the gold pricing dominance of London and New York, but it could ultimately give Asia more power, particularly if the Chinese currency becomes fully convertible. …
… For the remainder of the report:
end
A great commentary tonight from Bill:
(COURTESY BILL HOLTER/HOLTER SINCLAIR COLLABORATION)
“DON’T BE DUPED”
My perception of who, what, why, where and when continues;.. I believe even more so, the Panama Papers were and are;… an effort to discredit the “TRUTH BOMB”, financial fraud, election fraud, a bankrupt financial system, false flags (even 9/11). A blockbuster event in my opinion will be dropped from Mr. Putin and China;… now that China has invoked their joint war doctrine. Time will tell as to what the real story is, however the Panama Papers event is not the topic I want to warn you of, “Don’t be Duped” is the HOT BUTTON OF MISDIRECTION, a typical intel operation.
END
Your early WEDNESDAY 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 DOWN to 6.4714 / Shanghai bourse CLOSED UP 42.99 OR 1.42% / HANG SANG CLOSED UP 654.27 OR 3.19%
2 Nikkei closed up 452.43 or UP 2.84% (STILL REACTING TO POOR INDUSTRIAL PRODUCTION/POOR RETAIL SALES/TERRIBLE TANKEN CONFIDENCE INDEX/USA: YEN FALLS SLIGHTLY TO 1.0922)
3. Europe stocks opened ALL IN THE GREEN /USA dollar index DOWN to 94.57/Euro DOWN to 1.1305
3b Japan 10 year bond yield: RISES TO -.084% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 108.66
3c Nikkei now WELL BELOW 17,000
3d USA/Yen rate now well below the important 120 barrier this morning
3e WTI:: 41.46 and Brent: 44.07
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 0.166% German bunds in negative yields from 8 years out
Greece sees its 2 year rate RISE to 12.36%/:
3j Greek 10 year bond yield FALL to : 9.05% (YIELD CURVE NOW DEEPLY INVERTED)
3k Gold at $1241.95/silver $16.03 (7:45 am est)
3l USA vs Russian rouble; (Russian rouble DOWN 6/100 in roubles/dollar) 65.68
3m oil into the 41 dollar handle for WTI and 44 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. TODAY THE USA/YEN COLLAPSES TO 108.33 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS
30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9627 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0882 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 + .166%
/German 9 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 2.61% /POLICY ERROR)
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Futures Jump On Chinese Trade Data; Oil Declines; Global Stocks Turn Green For 2016
With oil losing some of its euphoric oomph overnight, following the API report of a surge in US oil inventories, and a subsequent report that Iran’s oil minister would skip the Doha OPEC meeting altogether, the global stock rally needed another catalyst to maintain the levitation. It got that courtesy of the return of USDJPY levitation, which has pushed the pair back above 109, the highest in over a week, as well as a boost in sentiment from the previously reported Chinese trade data where exports rose the most in over a year, however much of the bounce was due to a favorable base effect from last year’s decline. Additionally, as RBC reported, the 116.5% y/y increase in China’s reported March imports from HK likely reflects the growing trend of “over-invoicing”, which is merely another form of capital outflow.
In other words, which giving the impression that growth is stabilizing, China was really just covering up for even more outflows. Curiously the onshore yuan fell 0.06%, shrugging off the “better-than-forecast” China March exports data, suggesting that at least the FX market may have been paying attention.
Equities, however, were not, and as a result global stocks advanced higher for one more session, wiping out the year’s declines.
Copper and iron ore were among the beneficiaries, while haven assets including the yen and gold retreated.
“The commodity sector is well supported after the good numbers out of China,” said Benno Galliker, a trader at Luzerner Kantonalbank AG in Lucerne, Switzerland. “Most investors were under-invested or were on the downside, they all thought we should see a bigger correction. Everything can turn around if we see negative numbers from the U.S. banks.”
Additionally, European stocks rose for a fourth day, shares in emerging markets climbed to the highest since November, and China’s equities traded in Hong Kong gained the most worldwide, as the Asian nation’s exports surged. Futures on the Standard & Poor’s 500 Index rose half a percent, as investors awaited earnings from JPMorgan Chase & Co.
This is where global markets stand now:
- S&P 500 futures up 0.5% to 2066
- Stoxx 600 up 1.9% to 341.1
- Eurostoxx 50 +2.2%
- FTSE 100 +1.5%
- CAC 40 +2.4%
- DAX +2.3%
- Dollar Index up 0.57% to 94.49
- US 10Yr yield up 1bps to 1.78%
- German 10Yr yield down 1bps to 0.15%
- MSCI Asia Pacific up 1.9% to 130
- Nikkei 225 up 2.8% to 16381.2
- Hang Seng up 3.2% to 21158.7
- Kospi up 0.6% to 1981.3
- Shanghai Composite up 1.4% to 3066.6
- Brent Futures down 0.9% to $44.3/bbl
- WTI Futures down 1.3% to $41.6/bbl
- Gold spot down 0.8% to $1245.1/oz
Global Top News
- China’s Exports Jump Most in a Year, Boosting Growth Outlook: Shipments +11.5%, imports moderate drop to 7.6%
- Oil Extends Losses as Speculation Swirls Over Doha Output Talks: Iran’s oil minister won’t attend freeze meeting, Seda reporter says
- Business Groups Warn ‘Brexit’ Would Hurt Trade and Investment: employer groups from four EU partners urge U.K. to stay in
- Pound’s Rally if Voters Reject ‘Brexit’ Predicted to Be Fleeting: Pioneer, Julius Baer see maximum 4% gain on vote to stay in EU
- Euro-Area Industrial Production Plunges Most in 18 Months
- Panama Prosecutor Raids Mossack Fonseca Office, La Prensa Says: newly created prosecutor carried out inspection yday
- French Govt Maintains Forecast for 1.5% GDP Growth in 2016: sees govt deficit of 3.3% of GDP in 2016 and 2.7% in 2017
- Bilfinger Says CEO Resigns, To Be Replaced in Interim by CFO: confident will be able to appoint new CEO shortly
- McCormick Abandons Bid for U.K.’s Premier Foods Over Price: Premier had rejected three advances from U.S. spice producer
Looking at regional markets, we start with Asia where equity markets took the impetus from a firm Wall St. lead as a resurgence in the commodities complex and firm Chinese Trade data bolstered sentiment. This underpinned large commodity names in the ASX 200 (+1.3%) following oil’s surge to YTD highs on reports Russia and Saudi reached a consensus on an output freeze, while iron ore also climbed towards the USD 60/ton level. Nikkei 225 (+2.6%) advanced above 16000 on JPY weakness with index giant Fast Retailing also gaining after a reduction in Uniqlo prices, while Shanghai Comp (+2.1%) completed the optimistic tone following strong trade figures which showed exports rose 18.7% in CNY terms and expanded by the most in a year in USD terms. Finally, 10yr JGBs were pressured following the heightened risk-appetite across the region which dampened safe-haven demand alongside BoJ operations which attracted more selling interest.
Top Asian News
- PBOC Seen Averting Cash Shortage as $155 Billion Leaves Market: Central bank may extend loans, ease reserve ratio
- Japan’s Economic Recovery Is Still Weak, Says BOJ’s Harada: He sees consumption is probably flat, GDP increasing slightly
- Singapore Set to Skip Easing to Save Tools for Brexit, China: No reason to change policy now, Nomura’s Chan says
- China Steelmaker Misses 3rd Bond Payment as Defaults Spread
- JPMorgan Said to Trim 5% of Jobs at Asia-Pacific Wealth Unit: Bank has cut about 30 jobs at the business
- Wall Street Gives Up on India Funds as JPMorgan Joins Exodus:Goldman Sachs, Morgan Stanley have already exited India funds
European equities are in a bullish mood underpinned by the better than expected China trade data, subsequently dispelling concerns over slowing global growth. Also, gains across Europe has been attributed to the upside in the region’s largest oil producers as energy prices remain near 4-month highs. This had been inspired by yesterday’s source reports that Russia and Saudi Arabia have come to a consensus regarding a freeze in oil production. However, one of the notable underperformers this morning is Tesco (-4.5%) after cautious comments on their near-term outlook despite returning to profit. Elsewhere, Bunds initially bounced back from the softer open amid unwinding of the recent supply concession, coupled with support from redemption flow. Additionally, analysts at IFR note an absence of leveraged selling providing a reprieve for German paper.
Top European News
- Tesco CEO Lewis Gives Reality Check as Turnaround Progresses
- Deutsche Bank Said to Hire Citi’s Boyle to Help Lead Derivatives: Boyle to co-head equity derivatives, run Asia Pacific equities
- Medivation Said to Have Rebuffed Sanofi Takeover Approach: Drugmaker Sanofi hasn’t ruled out hostile bid for U.S. company
- VW Chairman Said to Accept Bonus Cut to Quell Board Unrest: Unions, govt called for reduction in management payouts
- Tata Steel Said to Set May 28 Date for U.K. Ops Sale: FT: Tata Steel plns to close down its UK arm if it is unable to negotiate a viable sale by that date
- RWE Sees U.K. Profit Recovering as It Seeks to Win Back Clients: plans to cut U.K. workforce by 21% after posting 2015 loss
- Fnac Is Studying Possible New Offer for Darty, Le Figaro Says: co. believes that many Darty holders are willing to accept its shares as part of a new offer
- Dassault Aviation CEO Hopes to Sign India Rafale Deal Soon: CEO Eric Trappier speaks on Radio Classique
- Berkeley Wins Approval for 652 Homes in West London Project: The project was approved late Tuesday by Westminster council
- Elekta Names Richard Hausmann New CEO: Hausmann will join May 1 and take over as CEO on June 10
In FX, a morning of correction for USD/JPY, pushing through the 109.09 highs from Friday and on course for a potential test towards 110.00, but progress is slow. That said, the USD index is in recovery mode, and this has been largely facilitated by the EUR/USD push on 1.1300 lower down. A break below here threatens a stop loss sell off, and we suspect this will materialise as USD momentum is building up. EU industrial production was softer than expected, prompting the move down to 1.1307, and the bounce has been minimal at best. The commodity currencies are faring well, with AUD and NZD having reclaimed .77 and .69 respectively, though the former struggling to hold on to better levels. Oil has turned back off the highs post API, and this looks to have given USD/CAD a bid under 1.2750. 1.2800+ a struggle, and will remain so into the BoC later. US retail sales key.
In commodities, heading into the North American crossover, WTI and Brent crude futures trade in modest negative territory. In terms of recent news flow, according to Al Hayat, the Saudi Oil Minister has ruled out cut in crude output, while source reports note that the Iranian Oil Minister is to not attend the Doha meeting which is to no overall surprise. Given that Iran have remained firm in their decision to not take part in the freezing of oil output as they look to increase output to pre-sanction levels. However, conflicting reports later noted that the Iranian Oil Minister has yet to make a decision to attend the April 17th talks.
Some more details on China commodity trade data:
China March crude imports were at 7.68min, which is just off the February record of 8min bpd. China Q1 crude imports rose 13.4% Y/Y to 7.31 min bpd.
China March iron ore imports rose 16.5% to 85.77min tons vs. Prey. 73.61 min tons in February, March copper imports rose to 570k tons vs. Prey. 420k tons in February and China steel products exports rose 23.1 % to 9.98min tons vs. Prey. 8.11min tons in February, according to China customs bureau. Furthermore, China Jan-Mar iron ore imports rose 6.5% Y/Y, Jan-Mar copper imports rose 30.1% Y/Y and Jan-Mar crude oil imports rose 13.4% Y/Y.
Gold prices have been pressured for much of the morning amid the heightened risk-appetite across the region following firm Chinese trade data, allied with the uptick in the USD-index. The aforementioned better than expected Chinese trade figures also bolstered copper and iron ore prices with the latter gaining as much as 5% alongside similar advances in steel.
On today’s calendar we get retail sales numbers there will also be a close eye kept on the March PPI report, while business inventories are also due. Later this evening we’ll see the Fed’s Beige Book released. As highlighted earlier, JP Morgan is the highlight of today’s earnings releases.
Bulletin Headline Summary from RanSquawk and Bloomberg
- European stocks edge higher on the back of firm Chinese trade data, while Tesco underperforms amid cautious profit guidance.
- USD-index pulls away from its recent near 8-month lows to weigh on its major counterparts.
- Looking ahead, highlights include Bank of Canada Rate Decision, US Business Inventories, PPI Final Demand, and Retail Sales.
- Treasuries lower in overnight trading, global equity markets surge higher as Chinese trade data cheers investors; week’s auctions continue with $20b 10Y notes, WI 1.795%; last sold at 1.895% in March, compares with 1.73% in February.
- China’s exports rose 11.5% in dollar terms in March, the most in a year, and declines in imports narrowed, adding to evidence of stabilization in the world’s second-biggest economy
- China’s regulators are considering allowing global investors freer access to the nation’s market
- U.S. coal giant Peabody Energy Corp. filed for bankruptcy on Wednesday, the most powerful convulsion yet in an industry that’s enduring the worst slump in decades
- Russia sees a deal to freeze oil output as possible when it meets other producers including Saudi Arabia this weekend, regardless of Iran’s stance
- The regulator that helps oversee U.K. banks and brokerages proposed changing the process for initial public offerings to reduce favoritism and ensure that investors are better informed
- European Central Bank Governing Council member Klaas Knot called for “patience and reality” over ultra-loose monetary policy as concerns mount over the impact on pensions and savings
- Euro-area industrial production fell 0.8% in February, the most in 18 months, giving up some of the surge seen at the start of the year
- Sovereign 10Y bond yields mixed with Greece +16bp; European, Asian equity markets higher; U.S. equity-index futures rise. WTI crude oil, precious metals drop; copper rally
DB’s Jim Reid concludes the overnight wrap
While earnings season is about to spring into life, the current focus for markets remains on Oil which determined much of the direction yesterday as WTI rallied +4.48% and nearly $2 to close above $42 (at $42.17/bbl to be precise) for the first time since late-November. It’s now rallied a fairly remarkable near-20% off the April lows. All the noise yesterday came from the multiple reports suggesting Russia and Saudi Arabia were in agreement on a production freeze without the participation of Iran. As we move closer and closer to the Doha production meeting this Sunday it’s starting to feel like we’re getting almost daily headlines like this but ultimately much will hinge on Sunday’s outcome. For now though, those moves were enough to drive equity markets to reasonable gains yesterday. The S&P 500 finished +0.97% while in Europe the Stoxx 600 closed with a +0.53% gain. In credit Main and Crossover iTraxx indices ended 1bp tighter, while the US outperformed after CDX IG closed nearly 2bps tighter.
Speaking of credit markets, Valeant was back in the limelight last night when after the closing bell we got the announcement that the company has received a notice of default from one of its largest bondholders. According to the WSJ, Centerbridge Partners have filed the notice, which given their roughly 25% issue bondholding in Valeant allows them to do so. This comes after Valeant had reportedly breached a provision in its docs for failing to disclose its 10k report. A 60-day grace period now starts in which Valeant will have to file its annual report, and if not may be forced to repay bondholders. Valeant’s shares were down up to 3% in extended trading, although it’ll be interesting to see how the bonds trade when markets kick into gear this morning, particularly given its relative size in the US HY market as one of the biggest issuers.
Switching over to the latest in Asia now where we’ve got some important Chinese trade numbers to sink our teeth into. The data makes for relatively supportive reading, with exports rising +11.5% yoy in USD terms last month and more than expected (+10.0% expected), which comes after that sharp decline in the prior month (-25.4% yoy). The rate of decline for imports has slowed meanwhile to -7.6% yoy (vs. -10.1% expected) from -13.8%. While favourable base effects appear to be playing a role, the export print is still the highest in over a year, while in CNY terms the data showed a similar trend.
Markets have reacted positively to the data, with Chinese equity markets currently rallying. The Shanghai Comp is +2.20%, while the CSI 300 is +2.30%. Elsewhere we’ve seen the Nikkei (+2.64%) bounce with further weakness for the Yen, while the Hang Seng, Kospi and ASX are up between 1 and 2%. Credit markets have tightened while base metals have also been given a boost post the numbers.
Recapping the rest of yesterday now. Along with the moves for Oil, base metals put in a strong performance with notable gains for Copper (+2.21%), Iron Ore (+4.59%), Aluminium (+1.62%) and Zinc (+4.15%). Unsurprisingly it was commodity-sensitive currencies which led the way, while the big rally for the Yen finally took a pause for breath with the currency closing -0.56% weaker which was the first time it has weakened this month. Meanwhile sentiment was sapped in rates markets where we saw the vast majority of core government bond markets weaken (10y Treasury yields in particular closing 5bps higher at 1.777%).
There was also some fairly mixed Fedspeak for us to digest after we heard from a number of officials. Some of the more cautious commentary was from Harker and Kaplan (both non-voters) with the former in particular saying that his current considerations ‘make me a bit more conservative in my approach to policy, at least in the very near term’ and that ‘it might be prudent to wait until the inflation data are stronger before we undertake a second rate hike’. This was in contrast to San Francisco Fed President Williams who said that assuming there are no surprises in the data, then he see’s two to three rate hikes as being reasonable. Richmond Fed President Lacker played up recent improvement in the inflation numbers which makes a ‘persuasive case for increasing the target range for the federal funds rate’, although Lacker did balance this with his view that a gradual pace of tightening is still appropriate for now.
Elsewhere, the IMF was also the focus of some attention after the Fund cut its global growth forecast for this year to 3.2% from the previous 3.4% forecast made in January. In its semi-annual World Outlook which was published yesterday, the IMF made mention to the fact that there has been a renewed episode of global asset market volatility and some loss of growth momentum in the advanced economies, as well as headwinds for emerging markets.
Further downside risks remain in their view, while the fund also made mention to the possibility of the UK leaving the EU as causing ‘severe global damage’ and an ‘extended period of heightened uncertainty.’
Just wrapping up the data yesterday, in Germany there were no surprises to the final revisions for the March CPI report which was confirmed at +0.8% mom and +0.3% yoy. The inflation docket out of the UK showed a slightly higher than expected CPI print of +0.4% mom (vs. +0.3% expected) which had the effect of lifting the YoY rate two-tenths to +0.5%, while retail prices also came in a touch above consensus (+0.4% mom vs. +0.3% expected). In the US the NFIB small business optimism reading declined an unexpected 0.3pts last month to 92.6 (vs. 93.5 expected) which is the lowest now since February 2014. The import price index came in at a slightly lower than expected +0.2% mom (vs. +1.0% expected), while the March Monthly Budget Statement revealed a modestly wider than expected deficit ($108bn vs. $104bn expected).
Looking at the day ahead now, this morning in Europe and shortly after we go to print we’ll get the final confirmation of the March inflation data for France. Shortly following this will be the February industrial production report for the Euro area (where expectations are for a fairly lowly -0.7% mom reading), while we’ll also receive the Bank of England’s latest credit conditions and bank liabilities survey. Stateside this afternoon, as well as those retail sales numbers there will also be a close eye kept on the March PPI report, while business inventories are also due. Later this evening we’ll see the Fed’s Beige Book released. As highlighted earlier, JP Morgan is the highlight of today’s earnings releases.
end
ASIAN AFFAIRS
i)Late TUESDAY night/ WEDNESDAY morning: Shanghai closed UP 42.99 POINTS OR 1.42% / Hang Sang closed UP 654.27 OR 3.19%. The Nikkei closed UP 452.43 POINTS OR 2.84% . Australia’s all ordinaires CLOSED UP 1.59%. Chinese yuan (ONSHORE) closed DOWN at 6.4714. Oil FELL to 41.48 dollars per barrel for WTI and 44.07 for Brent. Stocks in Europe ALL IN THE GREEN . Offshore yuan trades 6.4851 yuan to the dollar vs 6.4714 for onshore yuan. LAST WEEK:Japanese INDUSTRIAL PRODUCTION plunges the most in almost 5 years as negative interest rates ARE KILLING BUSINESS./JAPANESE TANKEN CONFIDENCE INDEX PLUMMETS/JAPAN HAS NEVER RECOVERED FROM THOSE BAD DATA RELEASES/TODAY THE USA/YEN CROSS RISES TO THE 109 CROSS SETTING OFF GLOBAL TENSIONS WHICH IN TURN IS CAUSING THE SPECIAL MEETING AT THE FED FPR 3 DAYS ENDING TODAY.
FIRST REPORT ON JAPAN SOUTH KOREA AND CHINA
a) JAPAN ISSUES
none today
b) CHINA ISSUES
China reports good export numbers rebounding from the disastrous February bloodbath. However imports still fall for the 17th straight month:
(courtesy zero hedge)
Chinese Stocks, Yuan Rally After Exports Rebound From February Bloodbath, Imports Fall For 17th Month In A Row
After February’s bloodbath in Chinese trade data, expectations were for a scorching hot rebound in March. With PBOC’s Yuan ‘basket’ devaluation accelerating throughout this period it should not be surprising that Yuan-based China exports soared and imports beat expectations (but fell 1.7% – extending the losing streak to 17 months in a row). For now, oil and stock (US and China) prices are rising in reaction to this “good” news. Offshore Yuan is drifting stronger against the dollar.
Yuan has been plunging against China’s largest trading partners…
And so maybe Jack Lew has a point when he complains about competitive advantage…
- *CHINA’S MARCH TRADE SURPLUS 194.6 BILLION YUAN
- *CHINA’S MARCH EXPORTS RISE 18.7% Y/Y IN YUAN TERMS
- *CHINA’S MARCH IMPORTS FALL 1.7% Y/Y IN YUAN TERMS
USD-based data looks similar…
All driven by what China’s customs spokesman said was a “low base” as Bloomberg’s Tom Orlik notes, China’s March export bounce reflected more base effect than increased demand.
And under the covers…
- *CHINA JAN-MAR COPPER IMPORTS RISE 30.1% Y/Y
- *CHINA JAN.-MAR. CRUDE OIL IMPORTS UP 13.4%
What will Mr.Trump think of all this?
The Chart Proving That China’s Trade Data Has Never Been This Fake
The narrative is set – today’s rally is predicated on “strong” Chinese trade data. So what happens when one chart explodes that narrative as totally fallacious for three simple reasons…
First, the data is clearly cooked… As Bloomberg’s Tom Orlik notes, China’s March imports from Hong Kong soared an implausible 116% YoY! As it is clearly disguising capital flows…
Trade mis-invoicing as a way to hide capital flows remains a factor. In the past, over-invoicing for exports was used as a way to hide capital inflows.
The latest data show the reverse phenomenon, with over-invoicing of imports as a way of hiding capital outflows.
Does this look “real”?
Second, there is the base effect which EVEN CHINA warned would be a factor:
But beware two factors; the government itself has warned that the base line from March 2015 is low. A reminder that observers shouldn’t get complacent about the downward pressures still threatening China’s economy.
And then finally, there’s the figures themselves, can they be trusted?
But did anyone really need an excuse to buy the record highs in stocks, or send Trannie sup 3% on the day? Of course not!
end
GLOBAL ISSUES
If we are to see a resurgence in activity inside China we are going to see big changes in three big indices:
i) Baltic Dry Index
ii) China Rail Freight Index
iii)China’s Containerized freight Index
see for yourself: they are totally flat and at the bottom of the scale.
About That “Surge” In The Baltic Dry Index
Some ‘entertainers’ among the mainstream media have proclaimed the recent dead-cat-bounce in The Baltic Dry Freight Index as representative of some renaissance in China and thus the world’s trade.. and thus why one should “buy buy buy” stocks. However, three quick points of note suggest this is nothing but noise as the index flounders around record lows.
First, at 555, The Baltic Dry has just managed to rebound to its previous all-time historical lows from 1986… impressive eh?
Second, we have seen this historical pattern before…
And third, as the chart above shows, both China’s Containerized Freight Index and China’s Rail Freight Index have collapsed to record lows amid this ‘rebound’ strongly suggesting that whatever this bounce is predicated on, it is perhaps merely indicative of adesperate unwind of the malinvestment boom and thus floods the world with a renewed deflationary impulse (just as we saw in US Import Prices).
OIL MARKETS
The Oil rally fizzles after OPEC sees lower global demand. Bank of America sees 4 possible outcomes out of DOHA:
i) price war
ii) no freeze
iii) soft freeze
iv) hard freeze
the latter two will see Brent at 50 dollars/the first two Brent will be below 40.00
(courtesy zero hedge/Bank of America)
Oil Rally Fizzles After OPEC Sees Lower Global Demand; BofA Says “Reduce Risk Into Doha”
The ridiculous headline risk that is whipsawing oil showed up this morning yet again. WTI slid as much as $41.26 earlier on news that Iran’s Oil Minister Bijan Zanganeh would not be attending the April 17 meetings in Doha, however just moments later it was reported that Iran’s OPEC Governor Kaempour will be attending and losses were largely erased; which is ironic as Zanganeh’s symbolic absence assures Iran’s noncompliance, which as both Saudis and Kuwait have said previously is a key requirement for any deal.
Elsewhere, BofA released a report saying to “Reduce risk heading into the Doha meeting.” The bank has developed four possible scenarios, and say that freeze or no freeze, due to a drop in US supplies and rising global demand the oil market is already rebalancing and project oil prices to trade on average above $50/bbl next year.
Truth be told, there is hardly any information on what will be discussed at Doha this Sunday. So in this note we develop four possible scenarios: back to a price war, no output freeze, a soft output freeze, and a hard output freeze with some enforcement mechanism. In our view, the last two scenarios would send Brent prices above $50/bbl in relatively short order, while the first two outcomes could lead to a price drop below $40/bbl. Having said all that, the global oil market is rebalancing, freeze or no freeze, due to a drop in US supplies and rising global demand. Stocks are set to draw structurally starting in 4Q16, in our estimates. So we still project oil prices to trade on average back above $50/bbl next year.
However, politics could trump economics introducing a bearish outcome as a possible scenario if Saudit Arabia doesn’t play ball, which could see oil retrace to the $30-35/bbl range. Incidentally Saudi Arabia hit the wires this morning with reports Oil Minister Ali al-Naimi said “an outright production cut is out of the question, forget about this topic”.
In the very near-term, however, a bearish outcome in Qatar is a possible scenario. While we see room for cooperation between OPEC and Russia, we also acknowledge that Doha could end up being a repeat of the December OPEC meeting. In other words, Middle East politics could once again trump oil economics. So should Saudi announce an additional output expansion in response to Iran’s return to market, Brent prices could retrace to the $30-35/bbl range. But even under our base case of “no output freeze”, long positioning is sufficiently stretched to warrant a near-term pullback below $40/bbl. Given the uncertainty, we advocate reducing longs ahead of Doha.
This is where it gets interesting because as BofA notes, Russian oil production is set for a decline sequentially from Q1 due to lack of investment and accelerating field decline rates, meaning that in their view, any cuts would have to come from the Saudi’s, and based on comments this morning this seems like a very remote possibility.
There is one saving grace perhaps that there could be a deal made to freeze output. Russia and Saudi Arabia have middle ground in that below $50/bbl they both are impacted on the current account / revenue side of things.
In summary, BofA has set four possible outcomes that come out of the Doha meetings, with no production freeze being the most likely outcome, but price war being possible as well – both bearish for oil.
* * *
Finally, and most important, is that in its latest monthly market report, OPEC warned about what is surely the biggest wildcard of all: global demand for oil, which OPEC now sees declining further. The now defunct cartel sees 2016 demand growth ~1.2m b/d vs previous estimate of 1.25m b/d due to to slowing economic expansion in emerging markets, warmer weather and the removal of fuel subsidies.
Cited by Bloomberg, OPEC believes that weakness in Brazil’s economy, the removal of fuel subsidies in the Middle East and milder winter temperatures in the northern hemisphere could prompt further cutbacks, the group said.
“Current negative factors seem to outweigh positive ones and possibly imply downward revisions in oil demand growth, should existing signs persist going forward,” the organization’s Vienna-based secretariat said in its monthly market report. “Economic developments in Latin America and China are of concern.”
Perhaps this is just posturing in hopes of actually bringing the parties together to reach an agreement to freeze output. However if BofA’s most likely scenario plays out, and demand continues to fall, who knows how far we fall. If that’s the case, it may be a good time to check in with the Dallas Fed and ensure they aren’t telling banks how to handle energy loan exposure.
Crude Extends Losses After Bigger Than Expected Inventory Build Trumps Production Slowdown
After a significant draw the previous week, API reported a large 6.22mm build overnight, now confirmed by DOE with a 6.63mm build. Cushing was expected to see a considerable draw due to the outage at TransCanada’s Keystone crude pipeline outage and was almost triple expectations (-1.76mm vs -610k exp). A larger than expected draw in gasoline inventories and build in Distillates was also evident asProduction data fell for the 11th week of the last 12 to the lowest since Oct 2014. Oil prices are tumbling…
Genscape:
- Cushing -1mm
API:
- Crude +6.22mm (+1mm exp.)
- Cushing -1.93mm (-800k exp.)
- Gasoline -1.58mm
- Distillates -530k
DOE:
- Crude +6.63mm (+733k exp.)
- Cushing -1.76mm (-610k exp.)
- Gasoline -4.23mm (1.42mm exp.)
- Distillates +505k (+233k)
As Bloomberg’s Javier Blas notes, U.S. refineries are processing record amounts of crude oil for the time of the year — and from here until late July is all up. The strong refinery intake should reduce the crude glut, but risk exacerbating an overhang in middle distillates like diesel. U.S. crude oil stocks traditionally start to decline at the end of April, as refineries ramp-up activity ahead of the driving season. But with current stocks well above the previous 5-years range, it will take months (or even years) to work through the glut.
So inventories up but production continues to slide…
Crude is tumbling – extending API losses…
The only silver lining in the report was the .42MM drop in gasoline stocks, which however are still at record high levels for this time of the year.
Why the drop? According to DOE estimates, Americans have been driving. A lot. In fact, according to the following Reuters chart, for the period of the past week, there has never been more gasoline supplied to the US domestic market.
Russia Refutes Its Own Rumor, Says Doha Deal Will Have Few Detailed Committments
Yesterday, Russia said there was a virtual deal assured with Saudi Arabia to “freeze” production (at record levels) that did not require Iran’s participation. And now, it appears the Russians are walking that confident “hope” back. Russia’s energy minster just told a briefing that the Doha “freeze” deal would be “loosely-framed with fed detailed commitments.”
Not exactly what the market was hoping for…
And finally, the incessant bullshit on mainstream media that “everyone” is short oil into the Doha weekend is utter tripe – in fact Oil ETF shorts are at the lowest level in 4 months.
This weekend is setting for some chaos indeed as Oil ETF holders are now at their most bullishly net-positioned since early December.
Stunning Photos Of Huge Oil Supertanker Lines Forming “World’s Biggest Traffic Jam”
“It may be the world’s biggest traffic jam.”
– Reuters
Last week we revealed what we thought was a “shocking photo” of nearly 30 oil tankers caught in a traffic jam off the Iraqi coast, an indication of just how much excess oil is currently parked offshore.
To be sure, the record offshore storage is a problem because with the front-end contango collapsing, DB warned just several weeks ago when comparing the current level of floating storage (157.3 million barrels) versus that in early February (126.6 million barrels), that there may be an additional 31 million barrels of inventory to be drawn down between now and the next inventory trough over the next several months. It calculated that “depending on the duration of drawdown (three months or six months) this could mean anywhere from 165-330 kb/d of incremental supply.”
But the photo above, meant to do DB’s thesis justice, was nothing in comparisons to what Reuters would reveal today.
Because as ports struggle to cope with a global oil glut, huge queues of supertankers have formed in some of the world’s busiest sea lanes, where some 200 million barrels of crude lies waiting to be loaded or delivered, Reuters reports today.
The vessels, filled with oil worth around $7.5 billion at current market prices, would stretch for almost 40 km (25 miles) if formed up in one straight line.
Something not quite so theoretical, and yet almost identical taking place right now, is shown in the photo below, which shows VLCC supertankers traveling between India and Southeast Asia, courtesy of Reuters.
And while the market is for now clearly ignoring the unprecedented accumulation of oil in offshore storage, a bearish indicator of just how much oil will hit markets if and when prices continue rising or when collapsing contango makes it no longer economic to hold for many it is an all too real daily existence. As Reuters reports, one captain with more than 20 years at sea said his tanker had been anchored off Qingdao in northeastern China since late March and was unlikely to dock before the end of this week, a frustrating delay of more than three weeks.
“We’ve stayed here a long time,” he said, requesting anonymity because he is not authorized to speak to the press, but added that another kind of jam was helping to alleviate the boredom. “We have a piano, drums, crew who play guitar – they are not professional but they are coming good. We have more than 1,000 DVDs so there is no need to watch the same one 20 times.”
As we first showed last week in the photo above, the worst congestion is in the Middle East, as ports struggle to cope with soaring output available for export.
It’s not just the Persian Gulf though: shocking sights can be seen in in Asia, where many ports have not been upgraded in time to deal with ravenous demand as consumers take advantage of cheap fuel.
“It’s the worst I’ve seen at Qingdao,” said a second tanker captain waiting to offload at the world’s seventh busiest port, adding that his crew was killing time doing maintenance work.
Ralph Leszczynski, head of research at shipbroker Banchero Costa, in Singapore, said the snarl-up was “one of the worst tanker traffic jams in recent years“. The cause was “a perfect storm of red-hot demand from new entrant refineries in China and port infrastructure in the Middle East and Latin America that is unable to cope”, he said.
Perhaps in retrospect it is not so much “ravenous demand”, as soaring supply with no place to deliver the oil to. According to ship tracking data, 125 supertankers with the capacity to carry oil to supply energy-hungry China for three weeks, are waiting in line at ports. The combined daily cost is $6.25 million, based on current ship hire rates of around $50,000-a-day. It is also why Swiss energy trading companies such as Vitol and Trafigura have had a bumper year, one which has offset their pure-play commodity exposure losses.
“It messes up port schedules, catering schedules, crew schedules and the schedules of delivering the transported goods,” said one shipping logistics manager in Singapore. “It also raises the cost for pretty much everyone involved.”
For dealers, a month-long delay can turn a profitable trade into a painful loss. “If you’ve bought 100,000 barrels of crude at $40 (a barrel) that’ll cost you $4 million,” said one oil trader. “And if you’ve calculated another 1.5 million bucks for a month’s worth of shipping, but you end up paying double that because your ship is stuck in port congestion, then that can seriously mess up everything from your schedule to your arbitrage profitability.” In other words, for every Vitol that is making a killing on the contango, someone is losing.
Here Reuters gets to the heart of the matter with the explanation why oil shipping lanes now look like parking lots:
“at the heart of the congestion is an unprecedented rise in global oil production… as soaring output has pulled down oil prices by as much as 70 percent since 2014. That has helped spur demand from China’s independent refiners, freed from government restrictions on imports just last year and gorging on plentiful crude, putting extra pressure on ports.”
The unprecedented number of ships at sea filled with cargo and just waiting for the signal to offload is also causing congestion between the main producer and consumer hubs.
Almost all supertankers heading to Asia pass by Singapore or adjacent facilities in southern Malaysia, the world’s fuel station for tankers and also a global refinery and ship maintenance hub.
Shipping data shows that some 50 supertankers are currently anchored in or close to Singaporean waters for refueling, maintenance or waiting to deliver crude to refineries or be used as floating storage.
This can be seen in the following Reuters photo of oil tankers lining up on the eastern coast of Singapore.
As well as the following Marinetraffic map.
For sailors stuck a queue of anchored tankers, one of the biggest problems is simply wiling away the time, Reuters adds.
“Some of the ships are well-equipped for their crews, but many aren’t,” said a Filipino sailor who left a very large crude carrier (VLCC) in March after a voyage to China. “On my last one, we had no regular internet … only an old TV with a couple of old DVD movies. The food is terrible and while waiting to offload we did pretty hard maintenance work. The sort of stuff you can’t do when the engine is running.”
Captain Alan Loynd, who spent more than 25 years at sea and is now a marine consultant, said long port delays were rare, but could be tedious and isolating when they happened.
And unlike in previous eras, having a couple of beers to break the monotony is usually out of the question.
“The chances of getting ashore are remote,” he said. “A lot of ships are now dry, so there’s no alcohol on board.”
Unfortunately for Capitan Loynd and so many of his peers, the dry period will last a lot longer because as even more supply is unleashed, as land-based storage fills up and as every incremental producer rushes to stash millions of barrels on whatever ships they can charter just to let them float at sea.
Unless of course, the short-end contango flips and becomes a huge cash burn for the owners of all that oil to keep all their not so precious cargo seaborne. In that case those tens of millions of barrels will promptly find their way to the market, which will then unleash an unprecedented period of wholesale dumping as the liquidation scramble to find a buyer at any price, pushes oil prices to fresh new lows.
Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/WEDNESDAY morning 7:00 am
Euro/USA 1.1305 DOWN .0078 ( STILL REACTING TO USA FAILED POLICY)
USA/JAPAN YEN 109.22 up 0.526 (Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER
GBP/USA 1.4251 DOWN .0013 (STILL THREAT OF BREXIT)
USA/CAN 1.2797 UP .0028
Early THIS WEDNESDAY morning in Europe, the Euro FELL by 78 basis point, trading now WELL above the important 1.08 level FALLING to 1.1305; 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 Shanghai composite was UP 42.99 POINTS OR 1.42%/ Hang Sang UP 452.43 OR 2.84 % / AUSTRALIA IS HIGHER BY 1.59% / ALL EUROPEAN BOURSES ARE IN THE GREEN, 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 WEDNESDAY morning: closed UP 452.43 OR 2.84%
Trading from Europe and Asia:
1. Europe stocks ALL IN THE GREEN AS WE START THE DAY
2/ CHINESE BOURSES / : Hang Sang CLOSED IN THE GREEN . ,Shanghai CLOSED IN THE GREEN / Australia BOURSE IN THE GREEN: /Nikkei (Japan)CLOSED IN THE GREEN/India’s Sensex in the GREEN /
Gold very early morning trading: $1241.25
silver:$16.01
Early WEDNESDAY morning USA 10 year bond yield: 1.79% !!! UP 2 in basis points from TUESDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield RISES to 2.61 UP 2 in basis points from MONDAY night.
USA dollar index early WEDNESDAY morning: 94.57 up 52 cents from TUESDAY’s close.(Now below resistance at a DXY of 100.)
This ends early morning numbers WEDNESDAY MORNING
end
And now your closing WEDNESDAY NUMBERS
Portuguese 10 year bond yield: 3.23% DOWN 21 in basis points from TUESDAY
JAPANESE BOND YIELD: -.073% UP 3 in basis points from TUESDAY
SPANISH 10 YR BOND YIELD:1.46% DOWN 8 IN basis points from TUESDAY
ITALIAN 10 YR BOND YIELD: 1.30 DOWN 8 IN basis points from TUESDAY
the Italian 10 yr bond yield is trading 16 points lower than Spain.
GERMAN 10 YR BOND YIELD: .128% (DOWN 4 IN BASIS POINT ON THE DAY)
end
IMPORTANT CURRENCY CLOSES FOR WEDNESDAY
Closing currency crosses for WEDNESDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/2:30 PM
Euro/USA 1.1273 DOWN .0109 (Euro DOWN 109 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY
USA/Japan: 109.26 UP 0.573 (Yen DOWN 57 basis points)
Great Britain/USA 1.4200 DOWN .0056 Pound DOWN 56 basis points/
USA/Canad 1.2822 UP 0.0055 (Canadian dollar DOWN 55 basis points with OIL (WTI AT $41.51
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This afternoon, the Euro was down by 109 basis points to trade at 1.1273 as the markets REACTED TO THE STRONGER DOLLAR
The Yen FELL to 109.26 for a LOSS of 57 basis points as NIRP is STILL a big failure for the Japanese central bank/also all our yen carry traders are being fried!!.
The pound was DOWN 55 basis points, trading at 1.4200
The Canadian dollar FELL by 55 basis points to 1.2822, WITH THE HUGE LOSS IN WTI TODAY: $41.52
the 10 yr Japanese bond yield closed at -.076% UP 3 BASIS points in yield
Your closing 10 yr USA bond yield: DOWN 1 basis points from TUESDAY at 1.76% //trading well below the resistance level of 2.27-2.32%) HUGE policy error
USA 30 yr bond yield: 2.58 DOWN 2 in basis points on the day ( HUGE POLICY ERROR)
Your closing USA dollar index, 94.81 UP 75 CENTS ON THE DAY/4 PM
Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for WEDNESDAY
London: CLOSED UP 120.50 POINTS OR 1.93%
German Dax :CLOSED UP 264.63 OR 2.71%
Paris Cac CLOSED UP 144.40 OR 3.32%
Spain IBEX CLOSED UP 274.40 OR 3.21`%
Italian MIB: CLOSED UP 720.79 OR 4.13%
The Dow was UP 187.03 points or 1.06%
NASDAQ UP 75.33 points or 1.55%
WTI Oil price; 41.54 at 2:30 pm;
Brent Oil: 43.90
USA DOLLAR VS RUSSIAN ROUBLE CROSS: 66.30 (ROUBLE DOWN 67/100 ROUBLES PER DOLLAR FROM YESTERDAY) AS THE PRICE OF BRENT AND WTI FELL.
END
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: $41.63
BRENT: 44.25
USA 10 YR BOND YIELD: 1.76%
USA DOLLAR INDEX:94.05 up 5 cents on the day
END
And now your more important USA stories which will influence the price of gold/silver
Trading Today in Graph form:
Squeezenado Sends Stocks Soaring To 2016 Highs As Crude Crumbles
Remember, the stock market is not the economy… Collaping retail sales, soaring inventory-to-sales ratiosm and entirely fictitious China trade data…
Can mean only one thing…
The biggest 2-day short squeeze in 6 months…
Which has sent Trannies and Small Caps up most this week…
Nasdaq and Small Caps remain red for the year… but are at their highest close for 2016…
With Trannies roaring today… but everythiong slowed after Europe closed…
The late day pump was as AdParlor walked back its earlier comments on ad spend reduction in Facebook)…
Bonds & Stocks decoupled after the macro data…
Oil & Stocks decoupled today…
Treasury yields rolled over today after the dismal economic data…
The US Dollar Index surged today on EUR, JPY weakness…
The strong dollar sent gold lower but silver surged; copper also popped (because China is awesome) and crude slipped because Doha deal is a farce…
Silver pushed closer to taking out that 6-month high…
What Happens Next?
Charts: Bloomberg
Bonus Chart: 5 of the last 6 times that shorts have been squeezed this much this fast, stocks have stalled dramatically.
END
Although they beat expectations, JPM’s profit slides 7%. Their trading revenue beat expectations but their loss reserves jumped the most in 6 years:
Not a very good report for JPM
(courtesy JPMorgan/zero hedge)
JPM Q1 Profit Slides 7%; Trading Revenue Beats; Loss Reserve Jumps Most In 6 Years – Full Summary
Going into today, everyone’s attention was focused on the JPM earnings report, the first big bank to report, on concerns about the profitability of the banking sector. And sure enough, as the chart below shows, going into JPM’s earnings announcement, EPS expectations had been drastically cut to account for what was clearly set to be a painful quarter for banks.
Which is probably why there was a sigh of relief, when moments ago JPM reported that it had beat expectations of a $1.25 print, when it announced $1.41 in adjusted EPS, with total revenue sliding by $700 MM to $24.1 billion but also beating lowered expectations of $23.8 billion. The largest U.S. bank by assets reported a profit of $5.52 billion, or $1.35 a share before 6 cents in adjustments, a drop of 6.7% compared to the profit of $5.91 billion, or $1.45 a share, in the same period of 2015.
Where the market was particularly pleasantly surprised, was that despite the drop in markets trading revenue of -13% to $5.718BN and the slide in investment banking revenue -19% to $2.417B. And while FICC trading revenue slid by $557 million, or 13% YoY, to $3.6 billion, this was well above the estimate $3.23BN print. On the other hand, investment banking revenue of $1.2 billion missed estimates of a $1.36 billion print.
This was JPM’s commentary on the results:
Banking revenue
- IB revenue of $1.2B, down 24% YoY driven by lower debt and equity underwriting fees, partially offset by higher advisory fees
- Lending revenue of $302mm, down 31% YoY, reflecting mark-to-market losses on hedges of accrual loans and lower gains on securities received from restructurings
Markets & Investor Services revenue
- Markets revenue of $5.2B, down 11% YoY
- Fixed Income Markets down 13% YoY, reflecting an increase in the Rates business which was more than offset by lower performance across other asset classes
- Equity Markets down 5% YoY
- Securities Services revenue of $881mm, down 6% YoY
- Credit Adjustments & Other, a loss of $336mm, on wider credit spreads
Expense of $4.8B, down 15% YoY, primarily driven by lower compensation and lower legal expense
But even as trading revenues were modestly better than expected, the one item everyone was looking for was to see how much additional reserves JPM would build in light of the deterioration in the energy sector. Here, JPM reported that it had built Oil and Gas reserves by $529 million, a key component of the the $773 million in wholesale credit costs.
JPM also reported that within its investment bank, it took out Credit costs of $459mm, primarily reflecting higher reserves driven by Oil & Gas and Metals & Mining, while credit costs in its commercial bank rose by $304 million also driven by O&G reserves.
Finally, at the firm wide level, $JPM reported 14.0B of loan loss reserves at March 31, 2016, down $0.1B from $14.1B in the prior year, reflecting improved credit quality in Consumer offset by increases in Wholesale, reflecting the impact of downgrades in the Oil & Gas and Metals & Mining portfolios.
However, perhaps reminding that not all is well, JPM’s consolidated loan loss reserve was a material $439 million greater than the preceding quarter and the biggest reserve build in six years, since Q1 of 2010.
Finally, here is JPM’s outlook:
- Expect 2016 net interest income to be up ~$2B+ YoY
- Expect 2016 noninterest revenue to be ~$50B, market dependent
- Expect 2016 adjusted expense to be $56B+/-
- Expect 2016 net charge-offs to be ?$4.75B, with the YoY increase driven by both loan growth and Oil & Gas
- Expect Securities Services revenue to be ~$875mm per quarter for the remainder of 2016, market dependent
Full JPM presentation below
end
The all important USA retail sales disappoints with a 0.3% drop in March led by a huge plunge in auto sales (reported to you earlier). The auto sales reported a drop of 2.1% month over month. The huge drop in used car prices does not bode well for the purchase of new cars:
(courtesy zero hedge)
US Retail Sales Tumble Into Recession Territory Driven By Auto Sales Plunge
After stumbling sideways around unch MoM for 3 months, US retail sales tumbled 0.3% in March (considerably worse than the 0.1% MoM gain expected) confirming BofA’s credit card data as we warned. March’s print is practically the weakest month since Feb 2015 and is unlikely to get much better given the dismally weak start to April, as we noted here. After 3 months of low-base bounce in YoY retail sales, March saw it collapse back to just 1.7% YoY – deep in recession territory.
March Retail Sales plunge…
The string of misses for Control Group Retail Sales continues…
As Auto Sales collapse 2.1% MoM… which should not surprise since US Auto Sales (SAAR), via WARD’s Automative Group, tumbled 3.5% YoY to end March – the biggest YoY plunge since July 2009(pre-Cash-for-Clunkers)…
and perhaps just as problematic, Restaurants tumbled 0.8% – where all the hiring has been.
and if you are hopeful about April, Johnson-Redbook reported a 2.8% plunge in Same-Store-Sales – the worst start to an April since 2005.
Finally, as Goldman notes,weakness in auto sales and production could be an unwelcome headache for the manufacturing sector. Growth in auto output has accounted for 40% of the increase in manufacturing production since January 2012, not including spillovers to related sectors (Exhibit 4).
The total effect is likely bigger, as spillovers from auto manufacturing can be significant:
- producing $1 of motor vehicle output requires $1.8 dollars of output from all other industries – the highest “multiplier” of any sector in the economy (according to the BEA’s input-output accounts).
Although prospects for the manufacturing sector have started to look brighter, a pullback in motor vehicle activity could limit the extent of any rebound.
Q1 GDP Double Whammy: Business Inventories Slide, Sales Tumble
As inventories met expectations of a modest 0.1% drop MoM in February but sales tumbled 0.4%.
Auto inventories rose 1.3% – the most since Sept 2015 (but sales were unchanged as opposed to +1.4% in Sept 2015). The breakdown is ugly across the board…
Q1 GDP takes a double whammy as not only did inventories drop (and recent gains were revised lower) but sales tumbled.
Atlanta Fed Stuns GDP Watchers, Revises GDP Higher Despite Retail Sales, Inventory Miss
Following today’s triple whammy of economic misses, in which first retail sales both declined and misses, and then both business inventories and sales declined from downward revised numbers, AtlantaFed watchers were certain that the keeper of the GDP Nowcast would cut its GDP estimate from 0.1% to zero or even negative.
However, this did not happen. Perhaps due to another tap on the shoulder, or as a result of the NY Fed’s own competing service now trying to steal the limelight with its own 1.1% GDP forecast, moments ago the Atlanta Fed stunned everyone when it announced that instead of revising its concurrent GDP tracker lower,it actually pushed it up from 0.1% to 0.3%.
This is what it said:
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.3 percent on April 13, up from 0.1 percent on April 8. After this morning’s retail sales report from the U.S. Bureau of the Census, the forecast for first-quarter real consumer spending growth increased from 1.6 percent to 1.8 percent.
What makes this particularly curious is that even Goldman Sachs, which keeps a concurrent tally of GDP components and revises it after every major data point, revised its GDP estimate down from 0.9% to 0.8%: “Details of the retail sales report were slightly negative for our tracking estimate of Q1 GDP growth: we revised down by one tenth to +0.8% (qoq ar).”
Stocks, enthused by this curious interpretation of today’s economic data, just took out intraday highs.
end
Peabody, World’s Largest Coal Producer Files Bankruptcy; 8,300 Jobs In Jeopardy
One month ago we were quite amused by what at that time was one of the most ridiculous short squeezes we have ever seen when the stock of Peabody Energy, exploded higher from $2 to about $6 in days on… nothing.
Many scratched their heads at this move as nothing fundamentally had changed in the company’s deteriorating operations, and its bonds are among the most distressed issues trading currently. The move was even more bizarre when just a few days later Peabody warned it may file for bankruptcy protection imminently.
And earlier today, it did just that, when in a historic event, one which is perhaps the lowlight of the sad demise of the US coal industry, U.S. coal giant Peabody Energy, the world’s largest coal producer, which employs 8,300 workers, filed for bankruptcy on Wednesday, the most powerful convulsion yet in an industry that’s enduring the worst slump in decades. The stock has finally responded accordingly.
The company filed Chapter 11 petitions for most of its U.S. entities in U.S. Bankruptcy Court in St. Louis Wednesday, listing $10.1 billion in debt. All of Peabody’s mines and offices are continuing to operate and are expected to continue doing so for the duration of the process.
In the bankrutpcy statement Peabody lamented its sad fate: “The factors affecting the global coal industry in recent years have been unprecedented,” Peabody said in the statement. “Still, multiple third-party estimates project that both the U.S. and global coal demand will stabilize. Coal currently fuels approximately 40 percent of global electricity and is expected to be an essential source of global electricity generation and steel making for many decades to come.”
But it is rapidly dropping, as nat gas use soars as a cleaner alternative.
The company listed debt totaling $10.1 billion and assets of $11 billion in its court filing. To help it fund operations in bankruptcy, the company has agreed to $800 million DIP loan arranged by Citigroup. The bankruptcy leaves uncertainty around Peabody’s $1.47 billion in environmental liabilities. Under a federal law enacted in 1977, mining companies must post surety bonds or other collateral that cover future mine cleanup costs unless their balance sheets are strong enough to qualify for an exemption known as “self-bonding.”
A brief timeline of the venerable company comes courtesy of Bloomberg: founded in 1883 by 24-year-old Francis S. Peabody with $100, a wagon and two mules, the miner is now the largest private-sector coal company in the world, with customers in 25 countries and about 8,000 employees, according to its website. It joins at least four other coal companies that have sought bankruptcy as the industry endures its worst downturn in decades – a result of tougher environmental policies, a flood of cheap natural gas and a global glut of metallurgical coal that’s dragged prices for steelmaking component to the lowest in more than 10 years.
BTU’s default is just the beginning: “The outlook for coal players remains bleak,” said Sandra Chow, a Singapore-based credit analyst who tracks coal producers at CreditSights Inc. “Any recovery remains a long way from here.”
The immediate reason for the bankruptcy is that the price of metallurgical coal has tumbled about 75% since its 2011 peak. That’s been particularly painful for Peabody, which spent $4 billion in 2011 to acquire Australia’s MacArthur Coal Ltd. in an effort to expand its sales of the steelmaking component. No Australian entities are included in the filings, and Australian operations are continuing as usual, according to the statement.
U.S. coal production peaked in 2008, at 1.17 billion metric tons. In recent years, it’s plunged and may fall to 752.5 million in 2016, the Energy Information Administration projected in its monthly Short-Term Energy Outlook released Tuesday.
In an indication of how quickly the underlying fundamentals can shift, as recently as October 2014, Peabody executives were optimistic, saying the worst might be over and investors were encouraged that coal pricing may have hit a bottom. The worst was not over, and the uptick never came.
Last year Peabody began cutting jobs and looking to sell assets. The planned sale of its New Mexico and Colorado assets was terminated after the buyer was unable to complete the transaction, according to Wednesday’s statement.
Full bankruptcy filing below
end
THIS IS ABSOLUTELY SURREAL!!
The NYFED is now going to report on the GDP as well as the Atlanta Fed. It looks to everyone that the Atlanta Fed is way to pessimistic!
(courtesy Mish Shedlock)
Fed vs. Fed: New York Fed To Issue Its Own GDP Nowcast; Atlanta Fed Too Pessimistic?
Submitted by Mike “Mish” Shedlock
Fed vs. Fed: New York Fed To Issue Its Own GDP Nowcast; Atlanta Fed Too Pessimistic?
It’s Fed vs. Fed in the Nowcasting business. The New York Fed has decided to issue a FRBNY Nowcast, clearly in competition with the Atlanta Fed GDPNow forecast.
The Atlanta Fed has the name GDPNow trademarked.
The Atlanta Fed provides its updates following major economic reports. In contrast, the New York Fed will deliver its version every Friday starting April 15.
We have a sneak peek of this Friday’s Fed vs. Fed battle already.
FRBNY Nowcast
GDPNow History
The above from Sufficient Momentum (For a Recession).
Current Scorecard
- Atlanta: 0.1
- New York: 1.1
I commend the New York Fed for providing much needed entertainment value. Any other regions want to get in on the act?
It Begins: Obama Forgives Student Debt Of 400,000 Americans
Joining the ranks of “broke lawyers” who can cancel their student debt, “Americans with disabilities have a right to student loan relief,” now according to Ted Mitchell, the undersecretary of education, said in a statement. Almost 400,000 student loan borrowers will now have an easier path to a debt bailout as Obama primes the populist voting pump just in time for the elections.
On top of “the student loan bubble’s dirty little secret,” here is another round of student debt relief…as MarketWatch reports,
The Department of Education will send letters to 387,000 people they’ve identified as being eligible for a total and permanent disability discharge, a designation that allows federal student loan borrowers who can’t work because of a disability to have their loans forgiven. The borrowers identified by the Department won’t have to go through the typical application process for receiving a disability discharge, which requires sending in documented proof of their disability. Instead, the borrower will simply have to sign and return the completed application enclosed in the letter.
If every borrower identified by the Department decides to have his or her debt forgiven, the government will end up discharging more than $7.7 billion in debt, according to the Department.
“Americans with disabilities have a right to student loan relief,” Ted Mitchell, the undersecretary of education, said in a statement. “And we need to make it easier, not harder, for them to receive the benefits they are due.”
About 179,000 of the borrowers identified by the Department are in default on their student loans, and of that group more than 100,000 are at risk of having their tax refunds or Social Security checks garnished to pay off the debt. Often borrowers losing out on these benefits aren’t even aware that they’re eligible for a disability discharge, said Persis Yu, the director of the Student Loan Borrower Assistance Project at the National Consumer Law Center.
“Borrowers just frankly don’t know about this program,” she said. “In the past it’s been incredibly complicated to apply and that process has been getting better over time, but some people just assume that it’s not going to work.” The letters will help make more borrowers aware of their rights, Yu said.
* * *
So it’s a start – “broke lawyers” , “the poor” and “disabled Americans” get student debt relief. What about models that suddenly become too ugly to work? Or Petroleum Engineers no longer able to work because of The Fed’s over-indulgent easy money creating a glut in oil prices? Don’t they have a right to relief from their student debt? Seems like not granting students debt relief would violate all of their “safe spaces” – so cancel it all! Student Debt Jubilee here we come.
As we detailed previously, however, this is a drop in the bucket…
Borrowers hold $1.2 trillion in federal student loans, the second-biggest category of consumer debt, after mortgages. Of that, more than $200 billion is in plans with an income-based repayment option, according to the Department of Education and Moody’s Investors Service. For taxpayers the loans are “a slow-ticking time bomb,” says Stephen Stanley, a former Federal Reserve economist who’s now chief economist at Amherst Pierpont Securities in Stamford, Conn.
The Congressional Budget Office estimates that, for loans originated in 2015 or after, the programs will cost the government an additional $39 billion over the next decade.
So that’s a $39 billion taxpayer loss just on loans originated this year or later, and that could very well rise as schools begin to figure out that they can effectively charge whatever they want for tuition now that the government is set to pick up the tab for any balances borrowers can’t pay (which incidentally is precisely what we said in March).
Consider that, then consider how much of the existing $200 billion pile of IBR debt will have to be written off and add in another $10 billion or so to account for for-profit closures and it’s not at all unreasonable to suspect that taxpayers will ultimately get stuck with a bill on the order of $100 billion by the time it’s all said and done and that’s if they’re lucky – if the “cancel all student debt” crowd gets its way, the bill will run into the trillions.
* * *
And finally, as a reminder, if things don’t change, Student Debt could be $17 trillion by 2030…
Student Loan Debt is a cancer for our society. This misconception that getting a college education equals a steady career has been dashed by the recession. For-profit colleges pray on undereducated and low-income individuals. Text book prices have risen exponentially while the cost of a quality education has as well.
This industry of education is going backwards, and will one day burst.
Living Wills’ of 5 Banks Fail to Pass Muster
Photo
A JPMorgan Chase bank branch in Manhattan. Credit Mark Lennihan/Associated PressFive giant banks — including JPMorgan Chase and Bank of America — failed to fulfill a crucial regulatory requirement that Congress introduced after the 2008 financial crisis to help make large financial institutions less of a threat to the wider economy, federal banking regulators said on Wednesday.
Congress demanded that big banks regularly provide regulators with careful plans for how they would enter bankruptcy in an orderly fashion.
But the Federal Reserve and the Federal Deposit Insurance Corporation found that the plans of five banks were “not credible” or “would not facilitate an orderly resolution” under the United States bankruptcy code.
The other banks that submitted plans that did not pass muster with both the Fed and the F.D.I.C. were Wells Fargo, Bank of New York Mellon and State Street.
The five banks have until Oct. 1 to fix their plans, also known as living wills.
If, after any such adjustments, the Fed and the F.D.I.C. are still dissatisfied with the living wills, they can impose restrictions on the banks’ activities or make them raise their capital levels, which in practice means using less borrowed money to finance their business. If after two years the regulators think the plans are still deficient, they have the power to require the banks to sell off assets and businesses, with the aim of making them less complex and simpler to unwind in a bankruptcy.
The failure of the banks to file satisfactory plans is likely to add fuel to the debate over whether some banks are “too big to fail,” meaning that their collapse would pose such a threat to the wider economy that taxpayers would have to step in to bail them out.
The too-big-to-fail issue has been a topic in the presidential race, and proponents of breaking up the banks will most likely seize on the deficient living wills as evidence that the banks are still too big and complicated.
“Obviously we were disappointed,” Marianne Lake, JPMorgan’s chief financial officer, said of the decision on Wednesday. “The most important thing is that we work with our regulators to understand their feedback in more detail.”
The regulators’ announcement came on the same day that JPMorgan announced a decline in both profit and revenue for the first quarter. Other large banks will report their quarterly results this week.
In a statement, Wells Fargo also said it was disappointed and added, “We understand the importance of these findings and we will address them as we update our plan by the Oct. 1, 2016, deadline identified by the agencies.”
State Street said that the regulators had noted improvements in its resolution plan from previous ones and that it too hoped to address the deficiencies by Oct. 1.
Still, the rejection of the living wills is a blow to the senior managers of the five banks. One of their jobs since the crisis is to maintain good relations with regulators. The banks’ boards of directors may decide to press management on why the living wills fell short, especially after the banks had months to get the plans in order — and were told in 2014 that earlier living wills were lacking.
Other banks fared better.
Citigroup, despite having sprawling global operations, submitted a plan that mostly satisfied both regulators, a significant achievement for the bank.
The F.D.I.C. determined that the plan of Goldman Sachs was not credible, but the Fed did not reach that conclusion. Conversely, the Fed found that Morgan Stanley’s living will was not credible, while the F.D.I.C. did not make that determination.
Both Goldman and Morgan Stanley have to address the perceived weaknesses, but because only one of the regulators judged the plans not to be credible, the two firms are not subject to the strict remedial requirements that the five banks that fell short must now follow.
During the financial crisis, the chaos of Lehman Brothers’ bankruptcy helped stoke panic in the global financial system. Congress, in passing the Dodd Frank Act of 2010, wanted to make it possible for banks to fail, but in an orderly way. While that goal would be hard to achieve, given the panic that is always likely to exist when a large bank is collapsing, the living wills seek to make it easier for bank regulators to oversee a bankruptcy.
The regulators on Wednesday gave some details on why banks fell short. JPMorgan, according to the regulators, did not have sufficient models for estimating how it would keep money flowing to its significant operations during a bankruptcy resolution. Bank of America, the regulators said, had a shortcoming in its plan to wind down its portfolio of derivatives, the financial instruments that banks and investors use to make wagers and hedge risks.
“The F.D.I.C. and Federal Reserve are committed to carrying out the statutory mandate that systemically important financial institutions demonstrate a clear path to an orderly failure under bankruptcy at no cost to taxpayers,” the chairman of the F.D.I.C., Martin J. Gruenberg, said in a statement. “Today’s action is a significant step toward achieving that goal.”
The two agencies are still assessing the resolution plans filed by four big foreign banks that do substantial business in the United States: Barclays, Credit Suisse, Deutsche Bank and UBS.
end
Zero hedge weighs in on this joke of a report:
(courtesy zero hedge)
Federal Regulators Accuse Banks Of Not Having Credible Crisis Plans, Would Need Another Bailout
Perhaps the biggest farce to result from the Dodd-Frank legislation designed to “rein in” banks was the ridiculous notion of “living wills” – a concept that makes zero sense in an environment where the failure of even one bank assures a systemic crisis and could – as the Lehman financial crisis showed – lead to the collapse of all other interlinked financial institutions.
Which is why we were not surprised to read this morning that federal regulators announced that five out of eight of the biggest U.S. banks do not have credible plans for winding down operations during a crisis without the help of public money.
Which is precisely the point: now that the precedent has been set and banks know they can rely on the generosity of taxpayers (with the blessing of legislators) why should they even bother planning; they know very well that if just one bank fails, all would face collapse, and the only recourse would be trillions more in taxpayer aid.
As Reuters writes, the “living wills” that the Federal Reserve and Federal Deposit Insurance Corporation jointly agreed were not credible came from Bank of America, Bank of New York Mellon, J.P. Morgan Chase, State Street, Wells Fargo. What is more impressive is that the Fed and FDIC found any living will to be credible.
Also amusing: it was only the FDIC which alone determined that the plan submitted by Goldman Sachs was not credible while the Goldman-dominated Fed gave its blessing; alternatively, the Federal Reserve Board on its own found that the plan of Morgan Stanley – Goldman’s arch rival in investment banking – not credible. Citigroup’s living will did pass, but the regulators noted it had “shortcomings.”
“The FDIC and Federal Reserve are committed to carrying out the statutory mandate that systemically important financial institutions demonstrate a clear path to an orderly failure under bankruptcy at no cost to taxpayers,” FDIC Chairman Martin Gruenberg said in a statement. “Today’s action is a significant step toward achieving that goal.”
None of the eight systemically important banks, which the U.S. government considers “too big to fail,” fared well in the evaluations. However, a bank has to fix deficiencies only if the two regulators jointly determine its plan does not have the potential to work.
“Each plan has shortcomings or deficiencies,” said FDIC Vice Chairman Thomas Hoenig in a statement. “No firm yet shows itself capable of being resolved in an orderly fashion through bankruptcy. Thus, the goal to end too big to fail and protect the American taxpayer by ending bailouts remains just that: only a goal.”
Banks whose living wills are deficient can be subject to more stringent regulation such as requirements to have more capital or restrictions on growth. If they do not fix the identified problems within two years, they can be forced to divest assets.
How seriously did banks take this finding? Earlier today JPM confirmed its intentions to to increase capital return in the first half following the board’s approved of an incremental $1.9b in share buybacks. Because why worry: there are “living wills”, and if that fails, there is always a bailout.
Source: FDIC
end
The official beige book report:
(courtesy Wall Street Journal)
Economy Expanded in Most of the Country, Fed Beige Book SaysReport cites firming labor markets, rising wage pressures, and modest increases in consumer spending
April 13, 2016 2:04 p.m. ET
WASHINGTON–Most regions of the U.S. saw their economies expand, supported by firming labor markets, rising wage pressures and modest increases in consumer spending, the Federal Reserve said Wednesday.
The Fed found nearly all of its 12 regions reported growth, according to its regional survey of economic conditions known as the beige book.
The report paints a brighter picture of the economy compared with earlier in the year, but Federal Reserve officials are not expected to raise rates at their next policy meeting on April 26-27.
Nearly 75% of economists surveyed by The Wall Street Journal expect the Fed to leave rates unchanged in April, and to raise them in June.
The latest beige book covers the period from late February through April 7. Eleven out of 12 districts said growth expanded over that period, and most said business contacts expect a similar pace of growth going forward.
Write to Anna Louie Sussman at anna.sussman@wsj.com and Eric Morath at eric.morath@wsj.com
end
According to the Beige book: no mention of global conditions.Then why didn’t they raise rates?
(courtesy zero hedge)
According To This Beige Book The Fed Should Be Hiking Rates Now
Perhaps its a remnant from 2014 and 2015, but the first thing we noticed when skimming through the April Fed Beige Book is that “weather” continues to play an impact on the US economy: after declining from 26 mentions of the word “weather” in the January beige book, down to 17 in March, April saw a fractional pick up, with 18 cases of the word appearing in the just released Fed report.
Also notably, after three mentions of “stock market”in the March beige book, the April one did not resort to blaming the market for anything even once. Most curious, however, was that after the Fed admitted it is only focusing on “global” conditions in its latest statement, and with 11 mentions in the March edition, in April the Fed used “global” just twice.
We find this a very odd lack of mentions for the one key factor that the Fed supposedly is most focused on. So what did the Beige book focus on instead? Here are the key highlights:
- Reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand in late February and March, though the pace of growth varied across Districts.
- Most Districts said that economic growth was in the modest to moderate rangeand that contacts expected growth would remain in that range going forward.
- Consumer spending increased modestly in most Districts and reports on tourism were mostly positive.
- Labor market conditions continued to strengthen and business spending generally expanded across most Districts.
- Demand for nonfinancial services grew moderately overall. Manufacturing activity increased in most Districts.
- Construction and real estate activity also expanded.
- Credit conditions improved, on net, in most Districts.
- Low prices weighed on energy and mining output as well as prospects for agricultural producers. Overall, prices increased modestly across the majority of Districts, and input cost pressures continued to ease
A glowing picture of a healthy economy some would say. So why is the Fed not hiking?
And then there was the Fed’s take on wage growth, arguably the most important domestic economic “data” from the data-dependent Fed. This is what it said in January:
Overall, wage pressures remained relatively subdued, as evidenced by reports from Philadelphia, Atlanta, Chicago, and Kansas City. Just two Districts–New York and San Francisco–indicated some acceleration in upward wage pressures.
Wages improved in March:
Wages generally increased, as most Districts experienced slight to strong wage growth. However, the Kansas City, Richmond and Atlanta Districts reported flat wage growth. St. Louis noted strong wage growth as fifty-six percent of contacts, the highest in two years, reported that wages were above year-ago levels. Cleveland, Richmond, Atlanta, Chicago, St Louis, Minneapolis, and San Francisco reported positive wage growth among high-skilled workers, especially for occupations in the technology, high-skilled manufacturing, aerospace and defense, financial services, and professional technical sectors.
Fast forward to April where we now read that wages increased in all districts except Atlanta.
Wages increased in all but one District (Atlanta), and several Districts reported signs of a pickup in wage growth over the last survey period.New York, St. Louis, Minneapolis, and San Francisco reported moderate wage growth, while wage pressures were characterized as mild in Chicago, mostly contained in Kansas City, and stable in Atlanta. The strongest wage pressures were for occupations where labor shortages are pressing and turnover is elevated. Contacts in the Boston, Cleveland, and St. Louis Districts cited sizeable wage increases for workers in fields such as information technology services and skilled construction and manufacturing trades. In addition, some firms in Philadelphia indicated that they had raised their starting wages in order to attract higher quality workers, and Chicago noted an increase in the number of contacts who raised wages for low-skilled entry-level workers.
The summary: modest to moderate growth, increasing consumer spending, stronger labor market conditions, improving labor market conditions, and most importantly, rising wages almost across the board. And virtually no mention of “global” conditions (and certainly no mention of China). So what excuse will the Fed use not to hike in April again?
Well that about does it for today
I will see you tomorrow night
Harvey
harveyorganblog.com 