April 21/Bankers orchestrate another raid, offer a huge 16,000 short non backed gold contracts in a span of 5 minutes/ in silver they offer 7500 contracts/Chinese official plan is to stiff suppliers: they are behind by 192 days late/Saudis state that they will have to recalibrate their relationship with the USA/Volkswagen agrees to a 10 billion dollar settlement on the emission fraud/

 

Good evening Ladies and Gentlemen:

Gold:  $1,249.00 down $4.20    (comex closing time)

Silver 17.09  down 4 cents

In the access market 5:15 pm

Gold $1248.80

silver:  17.02

 

I WROTE THE FOLLOWING YESTERDAY:

“Today(Tuesday) the boys  disappointed me.  Not for the lack of trying as they tried whacking gold/silver in normal trading hours but to no avail.  However in the access market THIS (Tuesday) AFTERNOON they raided knocking gold down to $1243 and silver 16.94.  It will be a slug fest tomorrow”
And it surely was a slug fest with the bankers firing on all cylinders trying to knock gold and silver down. During the night silver started to take off reaching its zenith at $17.60. Gold, this time was beating to the silver drum as our ancient metal of kings took off in sympathy rising to $1271.00 before the crooks lowered the boom on both metals. In gold
just around the comex opening, 16,000 contracts were offered in 5 minutes (16.00 million oz or 498 tonnes of gold or 22.6% of global annual production (ex Russia ex China) who do not export any of their precious metals. Silver saw 7500 contracts offered or  37 million oz which is 5.2% of global annual production.
The boys are burning the midnight oil trying to figure out what to do. There is no question that both gold and silver OI’s increased with today’s trading. The reading of OI for tomorrow will represent today’s trading finality.

Let us have a look at the data for today

.

At the gold comex today, we had a good delivery day, registering 171 notices for 17,100 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 224.15 tonnes for a loss of 79 tonnes over that period.

 

In silver, the open interest fell by 1927  contracts DOWN  to 192,583 DESPITE THE FACT THAT the silver price was UP 16 cents with respect to WEDNESDAY’s bullish trading. In ounces, the OI is still represented by .963 billion oz or 138% 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 3.484 contracts UP to 506,814 contracts even though the price of gold was only UP $0.20 with WEDNESDAY’S TRADING(at comex closing).Upon seeing that huge OI number in gold, the boys started their pounding of gold throughout the night and into trading today. That started today’s huge slug fest!!

We had no changes in gold inventory at the GLD, thus the inventory rests tonight at 805.03 tonnes.The boys loading  gold into and/or removing gold at the GLD must be getting dizzy at the sheer pace of transactions!!   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’s SLV,we had no change in silver inventory.  Thus the inventory rests at 334.724 million oz.

.

First, here is an outline of what will be discussed tonight:

1. Today, we had the open interest in silver rise by 946 contracts up to 194,510 as the price of silver was UP 16 cents with WEDNESDAY’S trading. The gold open interest rose by A LARGE 3,483 contracts  WITH GOLD’S RISE OF 20 CENTS YESTERDAY. Somebody big is standing FOR SILVER and surrounding the comex with paper longs ready to ponce once called upon to take out physical silver.

(report Harvey)

2 a) Gold trading overnight, Goldcore

(Mark OByrne)

3. ASIAN AFFAIRS

i)Late  WEDNESDAY night/ THURSDAY morning: Shanghai closed DOWN BY 19.69 POINTS OR 0.66%  /  Hang Sang closed UP 385.94 OR 1.82%. The Nikkei closed UP 457.08 POINTS OR 2.70% . Australia’s all ordinaires  CLOSED UP 1.09%. Chinese yuan (ONSHORE) closed DOWN at 6.4770.  Oil ROSE  to 44.25 dollars per barrel for WTI and 45.84 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.4823 yuan to the dollar vs 6.4770 for onshore yuan.

REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) REPORT ON JAPAN

i)David Stockman delves into two countries finances: First Japan and then China!!

With respect to Japan, he states correctly that they will default on its bonds in the future namely through its demographics.  They are in a hopeless situation.

However the most important part of his commentary is China where he discusses, the latest Chinese folly of increasing production of steel  (the so called iron rooster stimulus plan).  What he comments on is the fact that the POBC has basically given their OK to stiff suppliers as unpaid bills are now at record level times.

Pay no attention to the rise in commodity prices as the world’s economy is going nowhere

( David Stockman/on Japan and China)

b) REPORT ON CHINA

ii)George Soros echoes Kyle Bass on China’s inevitable hard landing:

Also Bank of America is frightened on the increase in bond defaults on SOE’s and what can happen if these defaults are on the increase as the state lets them die!

( George Soros/zero hedge)

4.EUROPEAN AFFAIRS

i)As expected ECB keeps rates unchanged and they begin their corporate bond buying./strangely the Euro rises:( zero hedge)

ii)No new bazookas which causes the Euro to rise, the yield on the German bunds to rise. The USA not happy as they need more stimulus from ECB to keep asset prices up

( zero hedge)
iii)the lunatics are running the asylum:  the EUR badly reverses.

So let me get this straight:  First gold is hit along with silver and then the USA rises against the Euro?
makes perfect sense in this crazy world:
( zero hedge)

5.RUSSIAN AND MIDDLE EASTERN AFFAIRS

i)The smoking gun: Document 17 which links the Saudi Embassy to 9/11.  They funded the pilot training:

(courtesy zero hedge)

ii)The Saudis claim that they must recalibrate their relationship with the USA. Actually, they both are in an unhappy marriage and they cannot divorce.  The Saudi’s need the USA protection and the USA needs the Saudis to hold all of the uSA treasuries.  It is an unholy alliance despite probable Saudi involvement in 9.11

(courtesy zero hedge)
iii)The war of words between Russian and the USA continue:  Russia will respond

with “all necessary means’ to any NATO intimidation:  NOT GOOD
(courtesy zero hedge)

6.GLOBAL ISSUES

This is totally nuts:  Sweden’s Riksbank unexpectedly boosts their QE program by 45 billion kroner while the consensus was for zero increase.  They kept their NIRP at -50%. However what these guys wanted was to lower the Kroner.  Instead it jumped to 0.8% higher than the euro. Go figure…

(courtesy zero hedge)

7.PHYSICAL MARKETS

i) Gold and silver trading early trading:  both skyrocketing! I promised you a slug fest and that is what we got with gold and silver trying to deliver a knock out punch.  Then the banksters respond trying to keep our precious metals in check!

(courtesy zero hedge)

ii)The banksters response!!  they knock gold/silver down

( zero hedge)
iii)MANIPULATION TO THE HIGHEST DEGREE/WHAT CROOKS!!

THEY UNLOAD 16,000 CONTRACTS IN 5 TO  10 MINUTES???? AND 7500 SILVER CONTRACTS.
(courtesy zero hedge)
iv)a must read: a trader believes that central banks are buying commodities to elevate asset prices( Peter the trader/zero hedge)

v)Craig Henke talks about the open interest on gold, silver, and platinum at the comex and compares it with total mine production.  ( I do the same calculations as Craig with respect to silver but I remove Russia and China;s production as they do not export any of their silver).

an excellent commentary…
(courtesy Craig Hemke/TFMetals Report)
vi) Very important!!  As David Stockman states, that the rise in commodities does not indicate any real increase in demand globally.  He emphasized correctly that the Chinese decided to counter the USA 256% tariffs on steel by increasing production dramatically (this has been labelled the iron rooster stimulus)  and negating the world’s plea to shut down excess capacity.
(zero hedge)
vii)A great commentary from Steve St Angelo on Chinese hoarding of silver. Remember for centuries China has always seen a silver loving nation. China is not allowed to export silver!( Steve St Angelo/SRSRocco report)

USA STORIES WHICH WILL INFLUENCE THE PRICE OF GOLD/SILVER

i)With all of those layoffs and the initial jobless claims crash?

( zero hedge/BLS)

ii)What a joke:  the Philly Mfg Fed index after last month;s surprising rise plummets back into contraction mode..so much for the phony data,,

( Philly Fed mfg index/zero hedge)
iii)The misery is over for the one time darling on the USA stocks:  SunEdison files for bankruptcy:

( zero hedge)

iv)This is going to hurt:  Volkswagen agrees to a 10 billion dollar plus settlement in their emission scandal.

(courtesy zero hedge)

Let us head over to the comex:

The total gold comex open interest ROSE CONSIDERABLY to an OI level of 506,814 for a GAIN of 3,483 contracts as the price of gold UP ONLY $0.20 with respect to YESTERDAY’S TRADING.  We are now entering the active delivery month of April. For the past two years, we have strangely witnessed two interesting developments with respect to the gold open interest:  1) total gold comex collapse in OI as we enter an active delivery month or for that matter an inactive month, and 2) a continual drop in the amount of gold standing in an active month. We certainly witnessed both parts today . In the front month of April we lost 111 contracts from 1814 contracts down to 1703.  We had 95 notices filed yesterday so we LOST  16 CONTRACTS or an additional 1600 gold ounces will NOT stand for delivery. The next non active contract month of May saw its OI fall by 66 contracts down to 2800. The next big active gold contract is June and here the OI rose by 1507 contracts up to 378,957. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was VERY GOOD at 275,180 . The confirmed volume YESTERDAY (which includes the volume during regular business hours + access market sales the previous day was poor at 177,684 contracts. The comex is not in backwardation.

Today we had 171 notices filed for 17,100 oz in gold.

 

And now for the wild silver comex results. Silver OI FELL by a considerable 1927 contracts from 194,510 DOWN to 192,583 DESPITE THE FACT THAT the price of silver was UP 16 cents with YESTERDAY’S TRADING.  We are now in the next contract month of April and here the OI fell by 0 contracts remaining at 6. We had 0 notices filed on YESTERDAY so we NEITHER  gained NOR LOST ANY SILVER OUNCES THAT will stand for delivery in this non active month of April.   The next active contract month is May and here the OI FELL by 12,429 contracts DOWN to 70,955. This level is exceedingly high AS WE ONLY HAVE 1  week before first day notice on Friday, April 29.The volume on the comex today (just comex) came in at 165,196, which is HUMONGOUS  AND NOT MANY ROLLOVERS. The confirmed volume yesterday (comex + globex) was ALSO HUMONGOUS at 129,527. Silver is not in backwardation. London is in backwardation for several months.
THE HIGH OPEN INTEREST FOR THE ENTIRE COMPLEX PLUS THE HIGH OI FOR THE FRONT MAY CONTRACT MUST BE SCARING OUR BANKERS TO NO END. 
 
We had 0 notices filed for NIL oz.
 

April contract month:

INITIAL standings for APRIL

Initial Standings for April

April 21/2016

April 21/2016

Gold
Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil  201.489 oz (JPM)

 

Deposits to the Dealer Inventory in oz  

NIL

 

Deposits to the Customer Inventory, in oz  12,442.437 OZ

HSBC

 

No of oz served (contracts) today 171 contracts
(17,100 oz)
No of oz to be served (notices) 1532 contracts 153,200 oz/
Total monthly oz gold served (contracts) so far this month 2611 contracts (261,100 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 108,855.3 oz

Today we had 0 dealer deposits

 

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

total dealer deposits: 0

Today we had 1 customer deposit:

i) Into HSBC: 12,442.437 oz

total customer deposit:  12,442.437 oz

Today we had 1 customer withdrawals:

i) Out ofJPMorgan;  201.489 oz

total customer withdrawal:201.489  oz

Today we had 1 adjustment:

 

Out of Delaware:

 

2,627.67 oz was adjusted out of the customer and into the dealer

 

Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 171 contracts of which 55 notices was stopped (received) by JPMorgan dealer and 51 notices were stopped (received)  by JPMorgan customer account. 
To calculate the initial total number of gold ounces standing for the Mar contract month, we take the total number of notices filed so far for the month (2611) x 100 oz  or 261,100 oz , to which we  add the difference between the open interest for the front month of April (1703 CONTRACTS) minus the number of notices served upon today (171) x 100 oz   x 100 oz per contract equals the number of ounces standing.
 
Thus the initial standings for gold for the April. contract month:
No of notices served so far (2611) x 100 oz  or ounces + {OI for the front month (1703) minus the number of  notices served upon today (171) x 100 oz which equals 414,300 oz standing in this non  active delivery month of April (12.886 tonnes).
We lost 16 contracts or 1600 oz will not stand.
Since the comex allows GLD shares to be used for settling, it may take quite a while for the physical gold to enter the comex vaults.  So far I have seen little evidence of any settling of contracts but I will continue to monitor it for you. 
 
We thus have 12.886 tonnes of gold standing for April and 17.174 tonnes of registered gold for sale, waiting to serve upon those standing.  The bankers are still doing their best in cash settling as there is not enough registered gold to satisfy those that are standing.
We now have partial evidence of gold settling for last months deliveries We now have 12.886 tonnes (April) +2.2311 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12,17,18) + March 31: 1.2470 and then  April 1,2: – .0006 tonnes  and today .3203  = 19.94 tonnes still standing against 17.174 tonnes available.  .
 
Total dealer inventor 551,823.822 oz or 17.164 tonnes
Total gold inventory (dealer and customer) =7,206,446.029 or 224.15 tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 224.15 tonnes for a loss of 79 tonnes over that period. 
 
JPMorgan has only 21.15 tonnes of gold total (both dealer and customer)
 end
And now for silver
 

APRIL INITIAL standings

 april 21

Silver
Ounces
Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory  

nil

Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory nil

 

No of oz served today (contracts) 0 contracts

NIL  oz

No of oz to be served (notices) 6 contracts)(30,000 oz)
Total monthly oz silver served (contracts) 189 contracts (945,000 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 6,704,691.0 oz

today we had 0 deposits into the dealer account

total dealer deposit: nil oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil

we had 0 customer deposit:

 

Total customer deposits: nil oz.

We had 0 customer withdrawals

 

:

total customer withdrawals:  nil  oz

 
 

 

 we had 0 adjustments

 

The total number of notices filed today for the April contract month is represented by 0 contracts for NIL oz. To calculate the number of silver ounces that will stand for delivery in April., we take the total number of notices filed for the month so far at (189) x 5,000 oz  = 945,000 oz to which we add the difference between the open interest for the front month of April (6) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the April. contract month:  189 (notices served so far)x 5000 oz +(6{ OI for front month of April ) -number of notices served upon today (0)x 5000 oz  equals 975,000 oz of silver standing for the March contract month.
we neither gained nor lost any silver ounces standing in this non active delivery month of April.
 
Total dealer silver:  31.957 million
Total number of dealer and customer silver:   151.804 million oz
The open interest on silver is now at multi year highs and silver is slowly disappearing from the comex vaults.
The total dealer amount of silver remains at multi year low of 31.957 million oz.
 
end
And now the Gold inventory at the GLD
April 21/no change in gold inventory/rests tonight at 805.03 tonnes
April 20/no change in gold inventory/rests tonight at 805.03 tonnes
April 19./we had a huge withdrawal of 7.43 tonnes from the GLD/Inventory rests tonight at 805.03 tonnes
April 18.2016/a huge addition of 6.38 tonnes of gold  in gold inventory at the GLD/Inventory rests at 812.46
April 14/another big change in gold inventory at the GLD/, a withdrawal of 3.26 tonnes/Inventory rests at 806.82 tonnes
April 13./another withdrawal of 5.06 tonnes of gold from the GLD/no doubt this gold was used in the raid/Inventory rests at 810.08 tonnes
April 12/another huge withdrawal of 2.67 tonnes of gold from the GLD and again despite the rise in gold. The boys must be desperate to get their hands on some physical.
Inventory rests at 815.14 tonnes.
April 11. We had a huge withdrawal of 1.79 tonnes of gold despite the rise in gold. No doubt whatever physical gold the GLD had just went over to China/inventory rests tonight at 817.81 tonnes

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

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

April 21.2016:  inventory rests at 805.03 tonnes

end

 

Now the SLV Inventory
April 21/no change in silver inventory/rests at 334.724 million oz/
April 20/no change in inventory/rests at 334.724 million oz
April 19./we had a huge inventory deposit of 1.437 million oz/inventory rests at 334.724
April 18./no change in inventory at the SLV. Inventory rests at 333.297 million oz
April 15./we had a withdrawal of 951,000 oz of silver from the SLV/Inventory rests at 333.297
April 14./no change in inventory at the SLV/Inventory rests at 334.248 million oz
April 13/a strange withdrawal of 1.903 million oz with silver rising in price??/Inventory rests at 334.248 million oz
April 12.no change in silver inventory/rests tonight at 336.151 million oz
April 11.2016; a huge addition of 1.427 million oz of “paper” silver entered the SLV/Inventory rests at 336.151 million oz
APRIL 8/no changes in silver inventory/rests tonight at 334.724 million oz
APRIL 7/no change in silver inventory/rests tonight at 334.724 million  oz
April 6/no change in silver inventory/Inventory rests at 334.724 million oz
April 5/ a deposit of 2.146 million oz of silver into the SLV/Inventory rests at 334.724 million oz/
.
April 21.2016: Inventory 334.724 million oz
.end
1. Central Fund of Canada: traded at Negative 5.1 percent to NAV usa funds and Negative 5.1% to NAV for Cdn funds!!!!
Percentage of fund in gold 61.4%
Percentage of fund in silver:38.7%
cash .-.1%( April 21.2016).
2. Sprott silver fund (PSLV): Premium to rises rises to +0.33%!!!! NAV (April21.2016) 
3. Sprott gold fund (PHYS): premium to NAV  rises.+87% to NAV  ( April21.2016)
Note: Sprott silver trust back  into posittive territory at -25%% due to purchase of 75 million dollars worth of silver/Sprott physical gold trust is back into positive territory at +.87%/Central fund of Canada’s is still in jail.
It looks like Eric Sprott got on the nerves of our bankers as they lowered the premium in silver to +.33%.  Remember that Eric is to get 75 million dollars worth of silver in a new offering.
 
 
 end

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

Trading in gold and silver overnight in Asia and Europe
 

 

Gold Price Set To Push Higher As Inflation Picks Up – RBC

The gold price is set to move higher in the coming months as inflation picks up according to new research from RBC.

“Analysis suggests a -0.5% real rate would imply a $1,380/oz gold price and a -1.0% real rate $1,546/oz” — that’s according to RBC’s April 10 Global Gold Outlook note, which takes a look at how lower real interest rates, coupled with a dovish Fed will impact the gold price.

gold-price-inflation-1RBS via Value Walk

Consumer prices in the United States rose 0.9% year-on-year in March of 2016, indicating that inflation is reemerging after a long period of dormancy. This should have sparked a more hawkish tone from Federal Reserve policymakers. However, the recent significant global volatility in January and February has left the path for rate hikes in 2016 much more uncertain and led to a sudden dovish turn by the FOMC.

And with inflation picking up, but the Fed unable to hike because of global macro issues, RBC speculates that there are now growing parallels to the 1970s when external pressures and fragile growth rates did not allow the Fed to hike. This was also notably a time of strong gold price appreciation.

See full analysis from RBC on Value Walk here

Gold Prices (LBMA)
21 April: USD 1,257.65, EUR 1,113.21 and GBP 877.01 per ounce
20 April: USD 1,247.75, EUR 1,098.09 and GBP 867.45 per ounce
19 April: USD 1,241.70, EUR 1,095.18 and GBP 867.01 per ounce
18 April: USD 1,237.70, EUR 1,095.02 and GBP 872.45 per ounce
15 April: USD 1,229.75, EUR 1,092.16 and GBP 867.46 per ounce

Silver Prices (LBMA)
21 April: USD 17.32, EUR 15.31 and GBP 12.05 per ounce
20 April: USD 16.97, EUR 14.93 and GBP 11.81 per ounce
19 April: USD 16.62, EUR 14.67 and GBP 11.57 per ounce
18 April: USD 16.20, EUR 14.33 and GBP 11.41 per ounce
15 April: USD 16.17, EUR 14.33 and GBP 11.40 per ounce

 

Gold News and Commentary

Silver ends at highest level since May; gold barely budges (Marketwatch)
Gold steadies as dollar firms; silver hits 11-month high (Reuters)
Silver Climbs to Highest Since May After Entering Bull Market (Bloomberg)
Chinese Gold Mining Giant Targets Overseas Buys as Demand Gains (Bloomberg)
Trader: Gold is about to break out—here’s why (CNBC)

Silver Prices May Be Ready to Shine (US News)
Silver is finally catching up to gold (Business Insider)
Why Are The Chinese Stockpiling Silver? Big Price Move Coming? (Gold Seek)
War on Savings: The Panama Papers, Bail-Ins, and the Push to Go Cashless (Ellen Brown)
Why One Analyst Believes Gold Could Hit $3,000 (Gold Seek)

Read More Here

 

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Read Our Most Popular Guides in Recent Months

Mark O’Byrne
Executive D.

-END-

 

Gold and silver :  both skyrocketing early this morning. I promised you a slug fest and that is what we got with gold and silver trying to deliver a knock out punch.  Midmorning the banksters respond trying to keep our precious metals in check!

(courtesy zero hedge)

Gold & Silver Are Soaring (again)

Gold has topped $1270 this morning as faith in Draghi falters, pushing back to one-month highs but once again it is silver that is grabbing the headlines, soaring above $17.50 and pushing to 11-month highs (now up 9 of the last 11 days). The buying started in China once again as hording continues but other catalysts include solar demand, central bank fragility, and gold-silver technicals.

Gold tops $1270 – one month highs…

But Silver is soaring…

Pushing silver to 11-month highs…

end
The banksters response!!
(courtesy zero hedge)

Precious Metals Puke

What goes up… must not be allowed to…

end
MANIPULATION TO THE HIGHEST DEGREE/WHAT CROOKS!!
THEY UNLOAD 16,000 CONTRACTS IN 5 TO  10 MINUTES???? AND 7500 SILVER CONTRACTS.
(courtesy zero hedge)

Precious Metals Puke – ‘Someone’ Dumps $2 Billion Of Gold Into Futures Markets

What goes up… must not be allowed to…

Someone just decided this was the perfect time to dump over $2 billion worth of notional paper gold onto the markets…

Over 16,000 gold contracts (and 7,500 silver) were dumped in that 5/10 minutes segment.

It appears Draghi did not like the impression of his impotence that precious metals were suggesting.

It appears the Gold/Silver ratio at 72x was a big buying opportunity?

 

 

end

 

A great commentary from Steve St Angelo on Chinese hoarding of silver. Remember for centuries China has always seen a silver loving nation. China is not allowed to export silver!

(courtesy Steve St Angelo/SRSRocco report)

 

Why Are The Chinese Stockpiling Silver? Big Price Move Coming?

Steve St. Angelo April 20, 2016 – 4:31AM

It looks like something big may happen to the silver market and the Chinese are preparing for it. After China launched it’s new Yuan Gold Fix today, the prices of the precious metals surged. At one point today, silver was up 5%. Silver is now trading at the $17 level, a price not seen in over a year.

Even though gold has taken center stage today due to Chinese rolling out there new Yuan Gold fix, something quite interesting has been taking place in the silver market over the past six months. While Comex silver inventories have been declining from a peak of 184 million oz (Moz) in July 2015 to 154 Moz today, silver stocks at the Shanghai Futures Exchange have been doing the exact opposite. And in a BIG WAY:

Shanghai Futures Exchange (SHFE) silver inventories bottomed on August 20th 2015 at 233 metric tons (mt), or 7.5 Moz. However, silver inventories at the SHFE began to really pick up in 2016 as they surged to 802 mt in Jan from 596 mt in December. This continued at a more rapid pace during the next few months reaching a staggering 1,706 mt today (54.7 Moz).

Thus, silver inventories at the SHFE have more than tripled in less than six months. Why have the Shanghai Futures Exchange silver inventories jumped this much in such a short time? Do the Chinese know something we don’t?

To give you an idea just how much the SHFE silver inventories have grown, let’s compare it to largest bullion bank Comex silver inventories in the world… JP Morgan. There’s been a lot of talk about the huge buildup of silver on JP Morgan’s Comex inventories. Here a chart of JP Morgan’s Comex silver inventories, courtesy of Nick Laird at Sharelynx.com:

JP Morgan started accumulating silver right at the price of silver topped at $50 in 2011. In April 2012, JP Morgan had about 4 Moz of silver in its inventories. JP Morgan’s silver inventories continued to grow as the price of silver declined to a low of $14. Today, JP Morgan holds 69.4 Moz of silver in its Comex warehouses.

However, the Shanghai Futures Exchange silver inventories surged at a much more rapid rate. If we take a look at the chart below, you will see what I mean:

It took four years for JP Morgan to build their silver inventories from 4 Moz to 69.4 Moz today, whereas the SHFE silver stocks jumped from 7.5 Moz to 54.7 Moz in only eight months. And remember, most of the silver inventory gains at the SHFE came in the past four months.

Part of the reason for the increased silver stocks at the Shanghai Futures Exchange was probably due to the Chinese government abolishing the ban on silver concentrate imports in November 2015. According to the article, China abolishes ban on silver concentrate ore imports, unwrought bismuth exports :

China has abolished its ban on imports of silver concentrate ore and its refined concentrates, as well as exports of unwrought bismuth effective November 10, the Ministry of Commerce said in a directive posted on its website Tuesday.

MOC said the abolition is due to those products having complied with the country’s industrial policy, do not belong to high-energy consuming and high polluting sectors, as well as having comparatively high technological content.

Regardless, the Shanghai Future Exchange silver inventories have never been this high before. The highest level they reached was 1,143 metric tons back in May 2013. For whatever reason, the SHFE is accumulating a lot of silver, and quickly.

As I mentioned in my previous article, Record Breaking Silver Factors In 2015 Can Make 2016 Quite Interesting:

India and China plan on adding a lot of Solar Power by 2020-2022. India plans to reach 100 gigawatts by 2022 and China 100 gigawatts by 2020. That will take a lot of silver.

Either way, China is accumulating a lot of silver compared to the net exports years ago. If the new Chinese yuan gold fix is going to put a lot of pressure on the U.S. Dollar in the future, mainstream investors may need to start protecting themselves now before it may be too late to acquire silver at a reasonable price.

-END-

 

This trader has got it right:  central banks are buying commodity contracts like oil land food to keep asset prices higher despite the poor fundamentals.  This trader offers his own conspiracy theory that all central banks are acting in unison to increase inflation and raise asset prices so they can get out of the mess they created..

a must read

(courtesy Peter the trader/zero hedge)

 

 

One Commodity Trader Writes: “What Is Happening Has Absolutely No “Reasonable” Explanation”

One commodity trader writes in with some very unique observations. From trader “Peter”

* * *

The insanity has now fully spilled into the commodity markets – a market which I professionally made a transition to after the 2008 crisis from the financial markets, simply because I believed it was a market that would still function according to true fundamentals…

I guess that only lasted so long…

The commodity markets have been prone to excessive speculation for years, but at the end, the thought of specializing in something “tangible” that EVENTUALLY would have to revert back to true supply and demand fundamentals made all the sense in the world.  Specially with the true circus that the financial markets have become since 2008…

* * *

From: XXXXXXXXXX
To: “Peter”
Sent: Wednesday, April 20, 2016 1:35 PM
Subject: volume totals today

774K of soybeans traded today and that would be a record by nearly 160K contracts as yesterday set the record at 615K.

Over 88K Jly/Nov traded today and 97K May/Jly traded.  Unheard of non-roll numbers.

Meal volume was 270K and we have to think that was a record as well but not 100% on that one.

Lots of ideas around to try and explain the move: from commercial short hedgers blowing out, Chinese pricing, product switching from Argentina to the US.

Not really sure if all or any of this is true but it was quite a wild session

* * *

From: “Peter”
Sent: Wednesday, April 20, 2016 2:41 PM
To: XXXXXXXXXX
Subject: RE: Some staggering volume totals today

Man… I would be VERY surprised if this was due to any of the reasons people are mentioning…

Chinese pricing – I am very positive it does have something to do with it, but for the overnight session – not the daytime.
Commercial hedgers blowing out – very possibly adding to the mess – but no way commercial volume takes us to these levels of ridiculousness in total volume…
Product switching from ARG – yep, because we REALLY need to ration our 400+ mb bean stocks… LOL

This is way past insane, ridiculous, etc…

The “fundamental” reasons people are trying to ping to this are simply a nice “window dressing”…

There is nothing else that can explain this other than you know what? 

Here comes my Very-REAL Conspiracy Theory: the stupid FED and other Central Bankers around the world acting in unison to artificially raise inflation so that they can hopefully get out of the F’ing mess they got themselves into with this low/negative rate BS.  Call me crazy, and I am not a “conspiracy theorist” – but what is happening has absolutely no “reasonable” explanation.  So I have to think outside the box…

The FED and other Central Banks have already destroyed the equity and other macro-financial markets… it is now turn for the commodities markets…

I am serious … I really am… I wish I was just being sarcastic… but pause for a moment and think about what is written above…

What explains the move in Crude? Ok, I could try and put some sort of “rationality” on the initial move from $26 – $40 (as crazy as it was), but the action in the oil market since Sunday’s “about face” in Doha?  No way anything other than pure, simple and outright manipulation can explain these last 3 days of action in the crude oil market… nothing…

How about the fact that the main drag on the inflation figures has been what? What? FOOD & ENERGY…

So is it so crazy to think that Central Bankers all got together in early 2016 and came up with the following equation???

ARTIFICIALLY RAISE COMMODITY VALUATIONS = HIGHER ARTIFICIAL INFLATION = CLAMORING FOR RATES TO BE RAISED = CENTRAL BANKS HAVING A “SUCCESSFUL” END TO THE CLUSTERFCK THEY GOT THEMSELVES AND THE REST OF ALL OF US INTO WITH THEIR “ZIRP” AND “NIRP” EXPERIMENTS…

Who or what has the power to produce such volume in such short amount of time?????? Not the powerful Chinese, not the commercials, not even the “regular” hedge fund crowd… This is much bigger than that Chris… much bigger…

When you pause and think about what I just wrote – it will not sound that crazy after all…

I truly wish I was joking…

I also wish I could let go of my natural makeup of focusing on “fundamentals” and just go long everything… but I don’t believe I can… and I am frankly and idiot for it…

Don’t write this off as some crazy conspiracy… Think about it… it is almost scary how much sense it makes…
At the end of the day… it is what it is…

Peter

 

end

Craig Henke talks about the open interest on gold, silver, and platinum at the comex and compares it with total mine production.  ( I do the same calculations as Craig with respect to silver but I remove Russia and China;s production as they do not export any of their silver).
an excellent commentary…
(courtesy Craig Hemke/TFMetals Report)

TF Metals Report: Fun with Comex open interest

Section:

8p Wednesday, April 20, 2016

Dear Friend of GATA and Gold:

The TF Metals Report’s Turd Ferguson warns again today that open interest in Comex gold futures is again at the point that usually precedes a price smash by the big investment banks. His commentary is headlined “Fun with Comex Open Interest” and it’s posted at the TF Metals Report here:

http://www.tfmetalsreport.com/blog/7576/fun-comex-open-interest

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

 

end

 

Very important!!  As David Stockman states, that the rise in commodities does not indicate any real increase in demand globally.  He emphasized correctly that the Chinese decided to counter the USA 256% tariffs on steel by increasing production dramatically (this has been labelled the iron rooster stimulus)  and negating the world’s plea to shut down excess capacity.

 

Why Commodities Are Selling Off (And What It Means For Demand)

Every market participant has pondered the shenanigans occurring in many commodities in recent weeks asIron ore, Rebar, Copper, and Steel prices have all gone parabolicWe warned that this was not real demand-driven but purely credit-fuleed malinvestment here, and today, as Credit Suisse notes, we seem to have got confirmation as these metals are tumbling after China raises margins/commission on metal futures.

Credit Suisse explains:

Some metal commodity turn negative after china apparently increase the commission for some metal futures. 

DCE raises margin requirement on iron ore contracts which is hitting gold, silver, copper, rebar etc (Lion Shi) –unconfirmed

They are indeed, for example one of the biggest beneficiaries of the recent parabolic move such as rebar.

Iron Ore:

And Copper:

Indeed, this is the biggest drop in over a month for Rebar – since the last parablic squeeze:

Credit Suisse then adds that

If true, it will have the bears saying something like “see, we were right that commodity prices were just up on liquidity recently pumped into the system rather than real demand, China is telling us that with this move.”

It appears that was correct and this chart inevitably will revert.

Since Dec 23rd 2015 when the US imposed a 256% tariff on Chinese steel imports, composite steel prices have soared almost 50% even as exports have slipped…

As inventories continue to drop.

So soaring prices were not a signal of soaring demand after all as yet another credit-engineered bubble that needs to be burst by the government central-planners that created it, before it too gets out of hand. Perhaps China realized that enabling its zombie steel mills to produce at record output levels (as credit markets begin to shut) may have unintended consequences after all – i.e. a bigger glut, especially compared to ‘real’ demand.

\end

Your early THURSDAY 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 6.4770 / Shanghai bourse  CLOSED DOWN 19.69  OR 0.66% / HANG SANG CLOSED UP 385.94 OR 1.82% 

2 Nikkei closed UP 457.08 or 2.70%%/USA: YEN FALLS TO 109.75)

3. Europe stocks opened ALL IN THE RED /USA dollar index DOWN to 94.45/Euro UP to 1.1310

3b Japan 10 year bond yield: FALLS   TO -.111%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 109.75

3c Nikkei now JUST BELOW 18,000

3d USA/Yen rate now well below the important 120 barrier this morning

3e WTI::  44.25  and Brent: 45.87

3f Gold UP   /Yen UP

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.

3h Oil UP for WTI and UP 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 0.221%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate RISE to 12.67%/: 

3j Greek 10 year bond yield FALL to  : 9.23%   (YIELD CURVE NOW DEEPLY INVERTED)

3k Gold at $1258.90/silver $17.36 (7:45 am est) BROKE RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble UP 13 /100 in  roubles/dollar) 65.29

3m oil into the 44 dollar handle for WTI and 45 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 .9718 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0991 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  + .221%

/German 8 year rate negative%!!!

3s The Greece ELA NOW a 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 1.86% early this morning. Thirty year rate  at 2.68% /POLICY ERROR)

5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.

(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)

Futures, Crude Unchanged Ahead Of Draghi As Parabolic Move In Steel, Iron Ore Continues

 

One day after stocks were this close from hitting new all time highs on what have been either ok earnings, if looking at non-GAAP data, or atrocious earnings, based on GAAP, and where any oil headline is now immediately translated as bullish by the oil algos, so far futures are relatively flat, while European stocks were at their moments ago in anticipation of the latest ECB announcement due out in just one hour.  However, unlike last month’s “quad-bazooka”, this time the market expects far less from Draghi.

“Having pulled put the monetary bazooka in March, the market is sensibly expecting no further policy measures from the ECB,” said Michael Ingram, a market strategist at BGC Partners in London. “Investors are understandably reticent in making big bets ahead of what is on paper, likely to see policy makers firmly on hold.”

Draghi will come and go, but attention will remain on oil and all other commodities, where the Bloomberg Commodity Index headed for a five-month high, spurred by gains from metals to soy beans, and weighing on government bonds.

Nowhere was the ongoing surge more obvious than in the construction complex, where steel reinforcement bars jumped to a 19-month high in Shanghai, buoyed by an improving Chinese property market, supporting the Australian dollar. As seen on the chart below, both iron ore and steel have gone parabolic this year despite, as reported previously, China’s increase in steel output to record highs. “You’ve got a tight market, you’ve got momentum, and you’ve got this fundamental driver for steel in the government boosting the infrastructure and housing side of things,” Chris Weston, chief market strategist at IG Ltd. in Melbourne told Bloomberg. “The rebar price is really leading the iron ore price at the moment.”

 

Following yesterday’s latest surge in oil which saw WTI overtake the “Gartman doomsday” level of $44, it has since leveled off while Brent fluctuated near $46 a barrel after data showed U.S. production slipped and Iraq said talks to freeze output may occur next month.

Commodity gains boosted the outlook for inflation, sending German bund yields to a four-week high. Sweden’s krona rose after the Riksbank expanded bond buying less than some investors expected. Metal increases boosted European miners, while most industries on the Stoxx Europe 600 Index declined.

“The rally in commodities is making people a bit more positive,” Robin Bhar, an analyst at Societe Generale SA in London, told Bloomberg. “The base metals are gaining on a view that the industrial cycle is strengthening. There’s broad-based buying in commodities, and that suggests that sentiment is starting to turn. This would have drifted across into mining shares and energy stocks.”

Meanwhile in stocks, Europe’s Stoxx 600 slipped 0.5%, after closing at its highest level since January. Miners in the gauge are heading for six-month high. Carmakers rallied, boosted by a 5.1 percent jump in Volkswagen AG after a person familiar with the matter said it agreed to set aside at least $10 billion to resolve civil claims by the U.S. government and lawsuits by American car owners over diesel vehicles rigged to cheat pollution controls.

The MSCI Asia Pacific Index was 1.2 percent higher. Japan’s Topix index climbed 2 percent to a two-month high, buoyed by prospects the Bank of Japan will boost stimulus at a monetary policy review next week. The authority is likely to increase asset purchases, Goldman Sachs Group Inc. analysts wrote in a report published Wednesday. Mitsubishi Motors Corp. tumbled by the 20 percent daily limit in Tokyo after the automaker said it manipulated fuel-economy tests.

S&P 500 index futures were unchanged, indicating U.S. equities will hold a four-month high as investors assess earnings before making a break for fresh all time highs. General Motors Co., Microsoft Corp. and Visa Inc. are among companies announcing quarterly results Thursday.

Where Markets Stand Now

  • S&P 500 futures up less than 0.1% to 2100
  • Stoxx 600 down 0.4% to 350
  • FTSE 100 down 0.5% to 6379
  • DAX up 0.1% to 10434
  • German 10Yr yield up 6bps to 0.21%
  • Italian 10Yr yield up 6bps to 1.46%
  • Spanish 10Yr yield up 7bps to 1.6%
  • S&P GSCI Index up 0.2% to 353.2
  • MSCI Asia Pacific up 1.2% to 134
  • Nikkei 225 up 2.7% to 17364
  • Hang Seng up 1.8% to 21622
  • Shanghai Composite down 0.7% to 2953
  • S&P/ASX 200 up 1.1% to 5273
  • US 10-yr yield up less than 1bp to 1.85%
  • Dollar Index up 0.1% to 94.59
  • WTI Crude futures down 0.2% to $44.07Brent Futures down 0.3% to $45.67
  • Gold spot up 1.1% to $1,258
  • Silver spot up 2.5% to $17.39

Global Top News

  • Draghi Can Argue Glass Is Half Full as ECB Pumps Up Stimulus: unemployment is falling and euro-area growth is continuing
  • Oil Trades Near 5-Month High as U.S. Crude Production Declines: U.S. crude output falls to lowest since Oct. 2014: EIA
  • VW Said to Pay At Least $10 Billion in U.S. Cheating Deal: carmaker’s plan covers lawsuit claims by government, motorists
  • Qualcomm Forecasts Are In Line on Progress in China Dispute: stock falls on concern chipmaker may lose Apple orders
  • AmEx Profit Beats Estimates as Purchases Climb; Shares Rise: revenue advances 1.6% to $8.09b, in line with estimates
  • Yum Brands Profit Tops Estimates as China Unit’s Sales Gain: company raises its annual forecast for operating profit
  • Vale Profit Prospects Bolstered by Record Output in Iron Rally: iron output of 77.5m tons is highest for first quarter
  • Wal-Mart to Cut Board to 12 Directors as Four Members Retire: board to maintain independent majority at 67% of its members
  • BHP Expects Iron Ore Prices to Drop as More Supply Swamps China: co. sees mergers and acquisitions as being unlikely
  • Sony Operating Profit Misses Forecast on Smartphone Slump: co. revises outlook ahead of April 28 earnings announcement
  • Saudi Arabia Mulls Dual Listing, Traded Fund for Aramco IPO: kingdom seeking ways to broaden investor base for huge IPO
  • Companies reporting earnings today include Alphabet, Microsoft, Verizon, Visa, Starbucks, GM

Looking at regional markets, stocks in Asia continued to trade higher as energy continued to drive sentiment following yesterday’s near 4% advance in oil on speculation of a possible producers meeting in May. This saw the energy sector outperform in the ASX 200 (+1.1%) with several firm earnings reports also underpinning sentiment. Nikkei 225 (+2.7%) led the region amid a weaker JPY to climb back above 17000, while Shanghai Comp (-0.7%) is also positive after a larger liquidity injection by the PBoC, although overheating credit concerns capped gains. JGBs saw mixed trade with 10yr JGBs mildly lower amid strength in Japanese stocks, while yields in the super-long end declined with the 30yr yield at fresh record lows. Furthermore, today’s 20yr auction was better received but failed to provide lasting support.

Top Asia News

  • Soros Says China’s Debt-Fueled Economy Resembles U.S. in 2007-08: Surging new credit is warning sign, Soros says
  • The 54% Rally in Steel Prices That Points to China’s Rapid Shift: Iron ore, steel demand getting better, Credit Suisse says
  • Japanese Funds Return to Overseas Bonds After Two Weeks of Sales: Purchases total net 844.7b yen in latest week, MOF says
  • Hony Capital Is Said to Raise $2.7 Billion for Yuan-Dollar Fund: Will be first dual-currency fund raised by large PE firm
  • Hong Kong Stocks Scorn Economic Gloom as Bull Market Approaches: MSCI gauge of city’s shrs has rallied 17% since January low
  • ‘Shameful’ Mitsubishi Fraud Risks Pushing Carmaker to Brink: Data manipulation affects ~625,000 minicars in Japan
  • ‘Black Box’ India States Thwart Modi Moves to Lower Debt Costs: Nomura sees deficits of major states widening to 3.3% of GDP

Equity specific news has taken focus so far in European hours, with macro news relatively light as participants await the ECB rate decision and press conference later today. In terms of European equities, this morning has been mixed in terms of indices, with Euro Stoxx higher by around 0.25%. Earning season appears in full flow, with Ericsson lower by around 10% after announcing a profit warning pre-market, with the likes of Pernod Ricard also among the worst performers after a pre-market earnings update. Separately, Volkswagen are the best performing stock in Europe today after agreeing a deal with the US regarding the emissions scandal.

Bunds have grinded lower throughout the session so far, with a number of analysts attributing the move below 163.00 to technical selling and positioning ahead of the ECB meeting later today. The commodity complex has seen WTI trade in a relatively tight range this morning in the wake of the significant gains seen so far this week, with the US benchmark remaining above the USD 44/bbl level.

European Top News

  • Novartis Profit Falls as Blockbuster Cancer Drug Sales Drop: company reiterates full-year forecast for sales and earnings
  • Ericsson Shares Drop Most in Year After Sales Miss Estimates: competition from Nokia, Huawei putting pressure on margins
  • Billionaire Slim Said to Weigh Stake Sale of Dutch Carrier KPN: sale could attract phone companies, such as Orange
  • SABMiller Sales Advance on Gains in Africa, Latin America: organic beer volumes rise 3% in fourth quarter
  • Pernod Ricard Suffers China Setback as Scotch Demand Ebbs: sales in China unexpectedly dropped 5% on weak New Year orders
  • Anglo’s Refined Platinum Output Drops as All Forecasts Kept: quarterly diamond production fell 10% as De Beers cut supply
  • Fnac Bids $1.1 Billion for Darty, Countering Steinhoff Offer: investors would receive 145 pence in cash or share alternative
  • U.K. Retail Sales Fall More Than Forecast; Budget Target Missed: U.K. retail sales fell for a second month in March
  • Sweden Fights Currency Market With More Monetary Stimulus: Riksbank to increase quantitative easing program by SK45 bln
  • Hapag-Lloyd Said to Be in Merger Talks With Competitor UASC: cos. said to be in talks as they fight increasing competition
  • Italy Bank Fund Approved by Regulator, Reaches Money Target: Atlante fund exceeded goal of raising EU4b

In FX, fresh EUR sales seen ahead of the ECB meeting today, where little change is expected to the current measures in place, but all the focus on the following press conference — from which we saw the huge FX moves in March. Moves lacking any momentum though as yet, and through 1.1300, fresh lows are met with snapbacks to highlight indecision. UK retail sales were the key data release, coming in weaker than expected, but were offset by lower public borrowing requirements. GBP was sold into the release aggressively, but after a reluctant dip under 1.4300, we are back in the mid 1.4300’s. Ongoing consolidation in the commodity linked currencies, with USD/CAD finding some support ahead of 1.2600 and now edging back towards 1.2700. WTI
(Jun) is still trading on a $44.0 handle — just — but near term calm is enough ease CAD strength for now. USD/JPY continues to hold off 110.00, but is equally well bid on modest dips, with positive equities and the BoJ meeting next week lending some support

In commodities, WTI may have met a key resistance level of USD 44/bbl (which is also the 50% retracement from the Apr’15 highs to the Feb’16 lows) after yesterday’s strong rally after OPEC announced they are set to call another meeting to revive output freeze/cut talks. Also of note today sees the release of the EIA natural gas with the previous result at -3 this comes after NatGas futures have slightly retraced after declines in recent months . Gold has been moving higher and has now broken a key resistance level of USD 1257.90/oz, also Silver has been making strong gains breaking through the USD 17.50/oz this morning , this comes amid broad-based strength across commodities which also saw copper and iron ore extend on gains, with Dalian iron ore futures hitting limit-up at a 19-month high alongside Shanghai rebar’s 7% advance, following supply cuts by large industry names.

The US calendar picks up notably today. We kick off with the Chicago Fed national activity index, Philly Fed manufacturing survey and the latest initial jobless claims data, before there’s more house price data in the form of the FHFA house price index, before concluding this afternoon with the Conference Board’s leading index (where a +0.4% mom gain is expected). The BoE’s Carney is due to speak again this afternoon, while it’s a bumper day for earnings across the pond. 37 S&P 500 companies are scheduled to report including Alphabet, General Motors, Verizon, Microsoft and Schlumberger.

Bulletin Headline Summary from Bloomberg and RanSquawk

  • European equites trade in a relatively tentative manner ahead of the ECB rate decision and press conference with Bunds slipping below 163.00
  • Ahead of the ECB, FX moves are currently lacking any momentum with fresh lows in EUR/USD met with snapbacks, thus highlighting indecision
  • Focus going forward though will remain on the ECB, although other highlights include Philadelphia Fed business outlook and possible comments from BoE’s Carney
  • Treasuries rise during overnight trading, a continuation of the late afternoon selloff in New York amid rising commodities and equities; ECB policy announcement due at 7:45am ET, followed by press conference at 8:30am.
  • With no new measures expected at Thursday’s meeting, Mario Draghi may use his press conference to point to signs that negative rates, free bank loans and a 1.7 trillion-euro ($1.9 trillion) bond-buying program should be enough to revive euro-area inflation
  • Swedish policy makers delivered a little more stimulus and made a few predictions about the future though all they can do now is hope ECB President Mario Draghi doesn’t upend everything for those outside the euro zone struggling to protect their currencies
  • Bank of Japan Governor Haruhiko Kuroda’s concerns about a rising yen are shared by senior officials at the central bank, according to people familiar with the discussions
  • Gold may advance to as much as $1,400 an ounce over the next 12 months, according to BNP Paribas SA, which cited rising investor concern about the efficacy of central banks’ policies to sustain growth
  • Global investors have cheered the recent signs of economic pickup in China. Andrew Colquhoun is unimpressed. The head of Asia Pacific sovereigns at Fitch Ratings sees the growth spurt, fueled by a resurgence in borrowing, threatening to wreak havoc on the financial system
  • Billionaire investor George Soros said China’s debt-fueled economy resembles the U.S. in 2007-08, before credit markets seized up and spurred a global recession; said China’s March credit-growth figures should be viewed as a warning sign

(Harvey:  see Soros’s  comments below)

  • China’s top fixed-income fund manager said she may cut holdings of onshore corporate notes after defaults surged in the world’s third-biggest debt market
  • U.K. retail sales posted their biggest monthly decline in more than two years in March as Britons bought less of everything from food to clothing; Office for National Statistics also revealed that debt as a share of the economy rose
  • Sovereign 10Y bond yields higher; European, Asian equity markets mostly lower; U.S. equity-index futures rise. WTI crude oil, metals mostly higher

DB’s Jim Reid concludes the overnight wrap

Welcome to ECB meeting day, 6 weeks on from Draghi’s policy bazooka. In the PDF today we’ve updated our performance review chart to track global assets since this point. Of particular interest to us is where European assets are in the mix. When we last ran this nearly two weeks ago returns for European assets had been relatively weak post-ECB with many of the areas of the market Draghi had tried to help having underperformed. The last 14 days have seen a marked turnaround in sentiment however and now all of the European assets we look at are back in positive territory over the relative time frame. In bond markets Bunds have returned just shy of 1% with Spanish bonds now catching up and matching on a total return basis. BTP’s are just in positive territory (+0.3%) but have underperformed with the Italian banking concerns. Performance for equity markets has been strong with the Stoxx 600 now up +4% which is a marked turnaround from -3% of two weeks ago. Regionally it’s the DAX (+7%) which leads the way (and ahead of the S&P 500 which is up +6%), followed closely by the peripheral bourses of Portugal (+6%), Greece (+6%) and Spain (+5%) with the FTSE MIB (+3%) lagging behind. European banks have staged a huge turnaround of late also and are now positing a +2% gain, which is an +11% or so swing from two weeks ago. It won’t come as much surprise to hear that EUR credit has continued to remain well supported with EUR HY (+4%), EUR IG Non-Fin (+2%) and EUR Fin Sub (+2%) all in low single digit return territory and out-performing bunds. That said it’s interesting to see that EUR credit has generally underperformed its US counterparts by a percent or so, reflecting the lower energy exposure over a period of a large rally in Oil prices (WTI +11%).

Perhaps of most interest to us today will be evidence of any logistical progress on the corporate bond purchasing program (CSPP). Since the announcement date details for the program have been thin with the hope that today will bring greater clarity around the potential size, split between primary and secondary markets and the finer details around bond eligibility. It might still be too early to hear much though. A report from Michal Jezek in my team, which we attach the link below to, shows that ECB eligible eurozone bonds initially outperformed post the ECB CSPP announcement and in the two weeks or so after. However since then they have underperformed non-eurozone bonds almost to the same magnitude. The turnaround has coincided with a higher beta global rally over the last two weeks or so, so that’s certainly helped the performance of the generally wider higher beta non-eurozone issues. We also provide a list of the top and bottom 100 bonds by performance since the ECB announcement.

Outside of the ECB today the main topic for markets continues to be Oil which is clearly the dominant driver for price action at the moment. Last night saw WTI close +3.77% at $42.63/bbl and so eclipsing the highest price for the year. That means Oil is now just over +13.5% up from the post-Doha early Monday morning lows now, or nearly $5. It’s worth noting that we roll onto the June contract today which is currently trading around $44/bbl this morning (and unchanged). Yesterday the early concerns from the announcement of the end of the Kuwait oil strike was quickly forgotten about post the latest EIA data which showed inventory levels coming in lower than expected and which appeared to be enough to fuel the rally. Later on we also saw headlines filter through suggesting that OPEC and other crude producers could meet as soon as next month in Russia in a bid to restart production freeze talks according to Iraq’s deputy oil minister.

With little other news flow, the rally in Oil has seen most markets in Asia this morning get off to a solid start. It’s Japan which is currently leading the way with the Nikkei +2.51%, while elsewhere there are decent gains for the Hang Seng (+1.79%), Kospi (+0.63%) and ASX (+0.91%). Bourses in China are back to flat after initially opening in the red while credit markets in Australia and Asia are generally a couple of basis points tighter.

In fact it was a broadly better day for commodities all round yesterday. The rest of the energy complex rallied in vain, while base metals also bounced (Aluminium +2.21%, Copper +0.91%, Nickel +0.59%). Iron ore also rallied another 3% and has quietly surged over 11% this week alone to the highest level since June last year. A big rise in Chinese steel demand has coincided with the rally, while the supply side of the equation has also been given a boost with production reports from the big mining names this week (BHP, Rio Tinto and Vale) all hinting at lower production guidance this year and next.

As a result of gains in the commodity space, along with another decent day for financials, it ended up being another positive day for risk markets generally yesterday. European equity markets rallied back from a weak open, with the Stoxx 600 closing +0.43% for its third consecutive daily gain. A late dip into the close meant gains were more modest in the US (S&P 500 +0.08%) but the Dow and S&P 500 continue to extend the recent highs. US credit markets were the big outperformer. In the CDS space CDX IG closed nearly 3bps tighter and to the strongest level since August last year, while in the cash market we saw US HY energy spreads finished nearly 30bps tighter and are all of a sudden over 60bps tighter in two days. Earnings reports appeared to be less of a factor driving markets yesterday but we’ve got a number of tech heavyweights reporting today as well as the first hint of earnings in the energy sector when Schlumberger report after the close – it’ll be worth keeping an eye on those numbers.

There wasn’t a whole lot of economic data for us to digest yesterday. The only data we did get in the US was in the form of more housing data, although in contrast to some of the softer reports earlier this week, yesterday’s existing home sales print of +5.1% mom was ahead of expectations (+3.9% expected) with the annualized rate ticking up 5.3m from 5.1m in February. Treasury yields moved higher and the benchmark 10y (which rose 6bps) finished at 1.846% and the highest yield since March. Interestingly, we also noted that the Bloomberg US financial conditions index was up nearly 6bps yesterday, indicative of easing of financial conditions, with the current level suggesting that conditions are now easier than when the Fed moved to hike back in December.

The rest of the economic data of interest yesterday was in the UK with the latest employment readings. The unemployment rate was reported as holding steady at 5.1% in February as expected, while the change in employment growth of 20k in the three months to the end of Feb was less than hoped for (60k expected). Of perhaps most importance was the softer than expected earnings data. Average weekly earnings including bonuses printed at +1.8% yoy, well below expectations (+2.3% expected) and down three-tenths from the prior month. That said there was no change in the earnings data stripping out the effect of bonuses.

Taking a look at the day ahead, the highlight this morning datawise will likely be the March retail sales numbers for the UK, while French confidence indicators are also due out. The aforementioned ECB meeting is due at 12.45pm BST with President Draghi due to speak shortly after, while the Riksbank will also hold their own policy rate decision (no move expected). Over in the US the calendar picks up notably today. We’ll kick off with the Chicago Fed national activity index, Philly Fed manufacturing survey and the latest initial jobless claims data, before there’s more house price data in the form of the FHFA house price index, before concluding this afternoon with the Conference Board’s leading index (where a +0.4% mom gain is expected). The BoE’s Carney is due to speak again this afternoon, while it’s a bumper day for earnings across the pond. 37 S&P 500 companies are scheduled to report including Alphabet, General Motors, Verizon, Microsoft and Schlumberger.

ASIAN AFFAIRS

i)Late  WEDNESDAY night/ THURSDAY morning: Shanghai closed DOWN BY 19.69 POINTS OR 0.66%  /  Hang Sang closed UP 385.94 OR 1.82%. The Nikkei closed UP 457.08 POINTS OR 2.70% . Australia’s all ordinaires  CLOSED UP 1.09%. Chinese yuan (ONSHORE) closed DOWN at 6.4770.  Oil ROSE  to 44.25 dollars per barrel for WTI and 45.84 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.4823 yuan to the dollar vs 6.4770 for onshore yuan.

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) JAPAN ISSUES

David Stockman delves into two countries finances: First Japan and then China

With respect to Japan, he states correctly that they will default on its bonds in the future namely through its demographics.  They are in a hopeless situation.

However the most important part of his commentary is China where he discusses, the latest Chinese folly of increasing production of steel  (the so called iron rooster stimulus plan).  What he comments on is the fact that the POBC has basically given their OK to stiff suppliers as unpaid bills are now at record level times.

Pay no attention to the rise in commodity prices as the world’s economy is going nowhere

(courtesy David Stockman/on Japan and China)

 

On The Impossibility Of A Soft Landing

While the robo-traders play tag with the chart points, it is worth considering how it will all end. After all, at today’s close the broad market (S&P 500) was valued at 24.3X LTM earnings per share. That is, valuations are in the nosebleed section of history, but financial history has tumbled into the sub-basement of future possibilities.

Stated differently, every first year spread-sheet jockey knows that what drives LBO models and NPV calculations is the assumed terminal year growth rate. Get imaginative enough about the possibilities out there, and you can come up with a swell return on today’s investment even if the next few years look a little rocky—-or even alot so.

So never mind that earnings have fallen five straight quarters and at $86.53 per share are now down 18.5% from their September 2014 LTM peak. Also ignore the fact that this quarter will be down 10% and that there is no rational basis for a rebound any time soon.

But somewhere behind the robo-machines which line the casino there is a corporals guard of carbon units buying what Wall Street is dumping. And whether they know it or not, at 24.3X they are betting on one whopping big terminal growth rate on the far side of the deflationary turmoil now afflicting the global economy.

Here’s the thing, however. The current deflationary wave is not a one-time detour which will pass in due course. Per the above analogy, we do not have merely two years of bad numbers in a 10-year LBO model with a robust terminal value at the end.

What we have, instead, is merely the initial shock waves from the actions of central banks which are trashing the joint. Lurking on the other side, therefore, is unfathomable risk, not extraordinary growth.

In a word, the stock market is not worth even 15X its current earnings or 1300. At length, the carbon units out there catching today’s bouncing dead cats will thank their lucky stars if their losses are only 40% from here.

The historical dead-end ahead is dramatically evident in the case of the BOJ and its lunatic detour into NIRP. And Japan is only following central bank policies recommended by Keynesians from the West and which are being followed, except for small nuances of degree, by the ECB and the Fed as well.

The very last place on earth that can afford negative interest rates, however, is Japan. It’s an old age colony lapsing toward fiscal bankruptcy. In hardly a few years it will desperately need buyers for its government bonds who don’t count their wealth in yen.

Yet Kuroda-san has just reiterated to the Japanese parliament that he can go deeper into NIRP if necessary or buy more securities under QEE——even if that turns out to involve upwards of $50 billion per year of ETFs in lieu of scarce Japanese government bonds.

And “scarce” is hardly an adequate term. The BOJ is now buying more than 100% of Japan’s new fiscal debt issues, and those in turn account for nearly 50% of current spending. Yet after the madmen at the BOJ have purchased their monthly quotas, there are few bonds left to be found.

So the 10-year government bond is trading at negative 13 basis points. It has become so scarce that there is occurring a comical chase for yield in what remains of the Japanese government bond market. To wit, in order to find “positive” yield Japanese institutional investors are racing out towards the very end of the yield curve, where they are scooping up 40-year bonds at a yield of just 29 basis points.

That’s just plain hideous. Here is what the old age colony on the Pacific Rim looks like 40 years from now. Already baked into the demographic cake is a40% reduction in the size of Japan’s working age population.

Japan’s current working age population of 75 million is already staggering under the weight of current taxation and high living costs. But when it reaches just 45 million by 2060 the math will become prohibitive.

Japan’s Demographic Dead End

In other words, the cult of ultra-low interest rates and the specious Keynesian axiom that prosperity can always be had with more debt is literally destroying Japan’s capacity for rational governance. In fact, what Japan needs is just the opposite of NIRP—–that is, high interest rates and unusually strong rewards for deferral of current consumption.

In preparation for its built-in demographic time bomb, for example, Japan’s politicians should be running fiscal surpluses. And they might be far more inclined if they faced the proverbial posse of bond vigilantes, not a herd of desperate bond managers chasing 29 basis points of yield into financial oblivion.

Likewise, Japan’s households should be salting away extra-ordinary amounts of savings, but just the opposite has occurred. By 2015 Japan’s famed high rate of household savings, which had been nearly 20% in the early 1980s, had hit the zero bound.

So at some point not too far down the road Japan Inc. will need to borrow from foreigners, but there will be no takers at 29 basis points for 40 year debt owed by a an old age home that was once a nation. In short, Japan’s financial system is virtually guaranteed to collapse, making trillions of government debt worthless, among much other carnage.

Yes, the BOJ might even cancel the trillions of JGBs it holds when the crisis becomes desperate in some Keynesian rendition of the Debtors Jubilee. But that’s just the point—-the mayhem on the other side does not bespeak a world in which terminal growth rates merit a 24.3X multiple.

Indeed, when Japan becomes the first to default from too much Keynesian goodness, no sovereign bond on the planet will be investible at anything near today’s absurdly low yields. So the embedded losses in the world’s bond markets are already in the tens of trillions.

The ridiculous state of Japan’s government bond market is explained more fully in a nearby post, yet there is nothing extraordinary about it. It’s all part of the daily fare emanating from all points on the planet.

Another such dead-end is found in the story on the mother of all payables stretches now happening in the Red Ponzi. Struggling under $30 trillion of unpayable financial debt accrued during what amounts to a historical heartbeat of frenzied borrowing, China’s businesses are now coping with the inexorable morning-after deflation by means of a time-tested maneuver of last resort.

To wit, they are attempting to pay their bankers by stiffing their suppliers. As shown below, payables now average an incredible 192 days in China’s business system. And that’s why its whole house of cards is likely to collapse with a bang, not a Beijing managed whimper. At some point, this daisy chain of billions of unpaid claims will far exceed even the capacity of China’s state-deputized bankers and its growing fleet of paddy wagons to keep in line.

-1x-1 (2)

Indeed, this surge in payables has two untoward implications. The first is that the myth of Beijing’s capacity for omniscient and unfailing economic governance will be shattered. All along, it has been a case of mistaken identify—–a failure by Wall Street propagandists of “growth” to understand that doping out trillions of credit through a state controlled banking system merely funds recordable spending and delivers fixed assets; it does not generate efficient growth or sustainable wealth.

But the red suzerains of Beijing are already proving in spades that when the music of credit expansion finally must stop, they will have no clue about what to do or capacity to execute if they did. In that respect, it now appears that in the first quarter China’s banking system generated new credit at a $4 trillion annual rate or nearly 40% of GDP.

In turn, China’s so-called “iron rooster” was given a new lease on life as a result of even more artificial demand for capital investment and infrastructure that is already massively overbuilt. Accordingly, during March, China’s steel production hit an all-time high, causing prices to temporarily rise, and closed mills to re-open.

So much for the credit restraint promised by China’s central bank and for the 150 million tons of capacity closures announced by the apparatchiks in Beijing a few months back. In lashing itself to Mr. Deng’s printing presses, the Chinese communist party made a pact with the financial devil. But now it is far too late to stop the Ponzi, meaning that another central bank driven debt implosion is fully scheduled and waiting to happen.

And it won’t be contained within the boundaries of the Middle Kingdom. In a post we entitled “Red Ponzi Imploding—-How It Will Turn The EM Into A Wasteland”, author Douglas Bulloch explained,

Massive Chinese infrastructure investment created the temporary illusion of wealth while global debt levels grew relentlessly. The commodity curse then undermined real economic progress around the world, as elites chased diminishing surplus for patronage and popularity. This has left producers exposed; one – Venezuela – rapidly becoming a wasteland. In other countries, what limited democracy there was has been hollowed out, leaving Russia in a state of egregious industrial and demographic decline, and Brazil confirming stereotypes about Latin American corruption. All because the orders are drying up and the money has run out. Both Brazil and Russia are facing the possibility of imminent collapse. India, by contrast, is its own story, a perpetual tale of slow promise that plays tortoise to China’s hare.

The only real story behind the BRICs was always just the ‘C,’ as in China, and the huge investment boom that powered commodity prices towards the fantasy of a ‘super-cycle’ – another word we don’t hear much anymore – drove the whole world mad. There was money for social programs in Brazil to lift up the poor, money for Putin’s new model army in Russia to restore imperial prestige, and money for the Olympics and World Cup in both countries. Then there was money for London palaces, money for Panamanian bank accounts, money for small wars and some leftover for the supposed institutions of a ‘new world order,’ since deferred.

Now, China’s policy dilemma belongs to everyone. Having spent 15 years sucking consumption and investment from everywhere, China now has a productive capacity it cannot possibly sustain, and faces a world reluctant any longer to make up for the deficiencies in Chinese demand. It therefore confronts a build up of debts it will struggle to pay and investors who expect a return they may not receive.

Only the most dunderheaded bull could argue that the US economy is decoupled from the entirety of China and the great EM supply chain which has feasted on its excesses. But for want of doubt, just consider its implications for another deflationary Q1 earnings announcement from this morning.

To wit, Coca-Cola (KO) reported that Q1 sales were down 4% from prior year and net income fell by more than 5%. But it’s not trading at 27X earnings because the punters think America’s aging baby-boomers are going to suddenly reacquire a yearning for Coke. Instead, it trades at current nosebleed levels because they believe that the inhabitants of China and the EM in their billions will get hooked on KO’s sugary fizz.

Needless to say, even a hint that the great China/EM credit boom of the last 20 years is rolling-over into a deflationary slump would swiftly drain the fizz out of the KO stock price. That’s because what lies beneath is deflationary financial results flattered by the wildly inflationary PEs now extant in the casino.

During the last four years, Coke’s sales and net income have steadily declined. Yet its PE has surged from an already hefty 17X to 27X. That is, going backwards it generated $50 billion of higher market cap.

KO Market Cap Chart

KO Market Cap data by YCharts

As we said, mind the terminal growth assumption. The warning signs are everywhere that what lies on the other side is not a world of 24.3X valuations.

end

b) CHINA ISSUES

George Soros echoes Kyle Bass on China’s inevitable hard landing:

 

(courtesy George Soros/zero hedge)

 

George Soros Warns “China Resembles US In 2008”, Hard Landing “Practically Unavoidable”

China’s credit growth in March (and $1 trillion surge in total social financing in Q1) is a “warning sign” according to billionaire George Soros, “because it shows how much work is needed to stop the slowdown.” Speaking at an event in new York this evening, Soros commented on “troubling developments” in China, the anti-corruption drive’s impact on capital outflows and the real-estate bubble “feeding on itself.” His conclusion, rather ominously, was that despite all the naysayers and fiction-peddlers, China “resembles US in 2007-8,” before credit markets seized up and spurred a global recession.

As Bloomberg reports, Billionaire investor George Soros said China’s debt-fueled economy resembles the U.S. in 2007-08, before credit markets seized up and spurred a global recession.

China’s March credit growth figures should be viewed as a warning sign, Soros said at an Asia Society event in New York on Wednesday. The broadest measure of new credit in the world’s second-biggest economy was 2.34 trillion yuan ($362 billion) last month, far exceeding the median forecast of 1.4 trillion yuan in a Bloomberg survey and signaling the government is prioritizing growth over reining in debt.

 

[ZH – f one adds up the Total Social Financing injected in the first quarter, one gets a stunning $1 trillion dollars in new credit, or $1,001,000,000,000 to be precise, shoved down China’s economic throat. As shown on the chart below, this was an all time high in dollar terms, and puts to rest any naive suggestion that China may be pursuing “debt reform.” Quite the contrary, China has once again resorted to the old “growth” model where GDP is to be saved at any cost, even if it means flooding the economy with record amount of debt.

 

With China’s debt/GDP already estimate at 350%, how much longer can China sustain this stunning debt (and by definition, deposit) growth continue?]

 

Soros, who built a $24 billion fortune through savvy wagers on markets, has recently been involved in a war of words with the Chinese government. He said at the World Economic Forum in Davos that he’s been betting against Asian currencies because a hard landing in China is “practically unavoidable.” China’s state-run Xinhua news agency rebutted his assertion in an editorial, saying that he has made the same prediction several times in the past.

Soros then went on to note that China’s capital outflow is a growing phenomenon driven by the nation’s anti-corruption campaign, which makes people nervous and spurs them to pull money out, and added that…

China’s decoupling of the yuan from the U.S. dollar can help rebalance the currency.

 

The linking to a basket of currencies is a “very positive, healthy” development for world.

Finally in an ironic twist for a man who has all too often used the press for his own ends…

China’s lack of a free press is “troubling development”.

Of course one should bear in mind that Soros is among those who are betting heavily on the eventual devaluation of The Yuan against the USD, and as we noted previously, the cracks are starting to show… As the Chinese corporate bond market begins to break…

 

At least 64 Chinese firms have postponed or scrapped planned note sales this month, six times more than the same period a year earlier.

And as BofA’s David Cui explains, if poorly handled, they may cause significant financial instability…

Since 2015, eight SOE bond issuers have run into repayment problems; four since February. We believe that the sharply accelerating pace and the growing chance of genuine defaults are largely behind the recent widening of credit spreads (Bond yield rising, credit spread widening & impact on stocks, Apr 15). In our view, any major SOE bond default would be difficult for the financial system to handle – as it is unexpected, it could lead to panic selling/a credit crunch (2016 Year-Ahead: what may trigger financial instability, Jan 3). At this stage, we expect that most problematic SOE bonds, if not all, will get largely bailed out. But this is a key risk that we need to monitor for the equity market outlook.

Chart 1 shows the dates when the potential defaults were first reported vs. the credit spread of 5Y AA-rated enterprise bonds (more details on the bonds, Table 1). Among the eight, Tianwei, Erzhong, Sinosteel, China Coal Huayun and China Railway Materials are central SOEs; Guangxi Nonferrous, Yun Feng and Dongbei Special Steel are local ones. The media reported that some of these SOEs actively sought defaults in order to lessen their debt burdens – a few even reshuffled their assets in preparation (Caixin, Apr 18). This clearly raises the chance of genuine defaults in the bond market’s mind, in our view.

 

Based on our assessment, the dynamics among the key stakeholders are as follows: some SOEs want to default; many local governments may lack the financial resources to save their SOEs from defaulting; the central government has the resources (after all, it can print), but needs to balance short-term financial stability with moral hazard concerns; the bond underwriters, many of them banks that lend to the same SOEs, need to balance financial interests against the risk of reputation damage and potential lawsuits; bond holders may go on a buying strike to force bail-outs.

At this stage, we expect the central government and the bond underwriters to largely come up with the money to prevent any significant default of SOE bonds. It appears to us that, leading up to the 19th Party’s Congress in late 2017 (when a new group of leaders will be officially announced), a top priority of the central government is to prevent a financial crisis. For banks, the cost of bail-outs could be hidden for quite some time, so the incentive for them to suppress defaults is strong, in our view. Actually, there was at least one case in which a listed bank used its WMP under management to cover a defaulting bond ((Shadow banking default, pace accelerated sharply since mid-2015, Apr 7).

If our expectation is right, the bond market could calm down as soon as it sees signs that bail-outs are the likely scenario. This would kick the can down the road, using liquidity to paper over a solvency issue.

If, against our current expectation, the government/underwriters keep in mind:

Implicit guarantee & contagion risk: SOEs default on loans all the time, but banks don’t “panic” unless there is a deposit run. However, the same stability cannot be maintained as easily in the shadow-banking sector. The shadow-banking sector is largely a market where greed, fear and herd mentality reign supreme. For years, bond buyers believed that bonds issued by any government-related entity, including SOEs and LGFVs, were bullet-proof. If this perceived “implicit” guarantee is broken, at a minimum, credit spreads would widen sharply and, at the worst, panic selling could develop, generating a negative spiral. Moreover, contagion risk could be high: if this “promise” is broken, will the market still believe in perceived government guarantees elsewhere, including those on RMB, the A-share market or housing prices?

 

Expensive valuation: before the latest widening, credit spreads for AAA and AA+ rated LGFV bonds and enterprise bonds (largely SOEs’) were very narrow, at between 50-100pbs. As a result, the risk of holding on to these bonds is asymmetrical, unless one believes that the government will lower the risk-free rate significantly going forward (Bond yield rising, credit spread widening & impact on stocks, April 18). As a result, the market is biased toward selling at the moment, by our assessment.

 

Leverage: the more transparent part of bond leverage is via repos and structured funds, which appear manageable at this stage (Bond market: leverage & potential defaults, 23 Oct 2015). However, a risk is that there could be significant amount of hidden leverage. Anecdotally, some banks provide loans to WMPs under their management to buy bonds, so the WMPs can achieve the “promised” returns to WMP buyers (currently, around 4% p.a.)

 

A lack of transparency: the most important buyers of bonds in China include WMPs managed by banks, brokers and fund subsidiaries, banks themselves, money market funds and bond mutual funds, and insurers. While risk responsibility is clear-cut for most bond buyers, it is not so for the WMPs. Legally speaking, WMP buyers own the downside risk. However, the way that WMPs are sold in China has led many buyers to believe that these products are essentially term deposits. As a result, if financial institutions decide to pass on some of the default losses to these buyers, they may stop buying en masse, essentially generating a “bank” run in the shadow-banking sector (Risk of bank-run WMPs is rising, Feb 28). By the way, if the financial institutions, including banks, allow some SOE bonds to default, they will most likely pass on at least some of the losses. If they have to bear the losses themselves, they’d be much better off bailing out the bonds in stealth before the defaults, both financially and politically.

Even without a panic, if the bond market becomes more cautious as a result of SOE bond defaults, there could be negative implications on credit flow, credit cost, economic growth, commodity demand, the RMB and the stock market.

end

EUROPEAN AFFAIRS

As expected ECB keeps rates unchanged and they begin their corporate bond buying./strangely the Euro rises:

(courtesy zero hedge)

ECB Keeps Rates Unchanged, Says Corporate Bond Buying Has Begun: EUR Jumps

As was widely expected, moments ago the “sleepy” ECB announced that all its three key rates remain unchanged: “the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively.” There was one notably addition: the ECB announced it has “started to expand our monthly purchases under the asset purchase programme to €80 billion” as was also expected considering the tremendous rip in European corporate bonds.

Full statement:

At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively.

Regarding non-standard monetary policy measures, we have started to expand our monthly purchases under the asset purchase programme to €80 billion. The focus is now on the implementation of the additional non-standard measures decided on 10 March 2016. Further information on the implementation aspects of the corporate sector purchase programme will be released after the press conference on the ECB’s website.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

For Draghi’s presser, check back in 45 minutes.

The initial reaction in the EUR appears to be modest disappointment, as the EUR jumps to session highs.

end
No new bazookas which causes the Euro to rise, the yield on the German bunds to rise. The USA not happy as they need more stimulus from ECB to keep asset prices up
(courtesy zero hedge)

Euro, Bund Yields Spike As Draghi Does Not Reveal Any New Bazookas

While expectations were for nothing new, it appears positioning was for moar as Draghi’s lack of bazooka-ness has sent European stocks lower as EUR spikes against the USD and German Bund yields soar…

EUR surging…

Bank of America is not happy at this move…

EUR move higher may not last and there is nothing new so far in Draghi’s words that would justify it, BofAML strategist Athanasios Vamvakidis writes in e-mailed comments.

Statement dovish, consistent with recent tone; it shouldn’t have sustained market impact. Emphasis is on open ended policies for as long as it takes.

Bund yields spiking…

As once again they overshot…

We’re gonna need a Draghi jawbone speech tomorrow to save the world.

end
the lunatics are running the asylum:  the EUR badly reverses.
So let me get this straight:  First gold is hit along with silver and then the USA rises against the Euro?
makes perfect sense in this crazy world:
(courtesy zero hedge)

Massive Intraday Reversal Slams EUR Lower

First in precious metals and now in FX, a very visible hand strikes again…

Draghi disappointment turns to EUR-selling euphoria instantly! Makes perfect sense.

end

 

RUSSIAN AND MIDDLE EASTERN AFFAIRS

 

The smoking gun: Document 17 which links the Saudi Embassy to 9/11.  They funded the pilot training:

 

(courtesy zero hedge)

The Smoking Gun: “Document 17” Links Saudi Embassy In Washington To Sept 11

With the topic of Saudi Arabia’s involvement in the Sept 11 attack on everyone’s lips, if certainly not those of president Obama who is currently in Riyadh where he is meeting with members of Saudi royalty in what may be his last trip to the Saudi nation as US president, many have been clamoring for the information in the suddenly notorious “28-pages” (following the recent 60 Minutes episode) to be released to the public so the US population can finally relegate all those “conspiracy theories” surrounding the real perpetrator behind the Sept 11 terrorist attack to the “conspiracy fact” pile.

It won’t have to wait that long.

As The Times writes today, new evidence has come to light of a definitive link between Saudi Arabian officials and the 9/11 terrorist attacks “further raising tensions as President Obama travels to the kingdom.”

According to the report, Ghassan Al-Sharbi, a Saudi who became an al-Qa’ida bomb maker, is believed to have taken flying lessons with some of the 9/11 hijackers in Arizona but did not take part in the attacks on New York and the Pentagon that killed 3,000 people in 2001.

He was captured in Pakistan in 2002 and has since been held at Guantanamo Bay. According to a US memo, known as document 17, written in 2003 and quietly declassified last year, the FBI learnt that he had buried a cache of papers shortly before he was captured.

Think of “Document 17” as a mini version of the “28 pages” whose content has yet to be revealed. The document was written by two US investigators examining the possible roles of foreign governments in the attacks.

One detail leapt out at the FBI agents from the papers that Sharbi had tried to hide: his US flight certificate was in an envelope from the Saudi embassy in Washington.

A car pulls into the Saudi Arabian embassy in Washington, AP Photo

 

And there is your smoking gun, which has been fully available to the US government for the pat 13 years. It should have also been available to the American public.

Understandably, Brian McGlinchey, the activist who uncovered document 17, asked a simple question: “The envelope points to the fundamental question hanging over us today: to what extent was the 9/11 plot facilitated by individuals at the highest levels of the Saudi government?”

Here is the problem. As the Times puts it, “president Obama is expected to meet on Wednesday with King Salman, whose kingdom is under pressure from low oil prices, an emboldened Iran and Washington’s tougher stance. The Saudi government threatened last week to dump $750 billion in US Treasury securities and other American assets if congress passes a bill that would clear a path for the families of 9/11 victims to file lawsuits against the kingdom.”

In other words, Obama will not ask any questions of King Salman, let alone the “fundamental” one.

So perhaps it is time to get a president who will ask the question: Hillary Clinton and Bernie Sanders, the Democratic presidential candidates, backed the bill, which Mr Obama has signaled he will veto. Donald Trump and Ted Cruz, the leading Republicans in the race, have warned Saudi Arabia that its relationship with the US must change. “Friends do not fund jihadists that are seeking to murder us,” Mr Cruz said.

SO even as all of Obama’s potential replacements have at least promised to investigate further, we wonder: just why is Obama so terrified of the US public getting access to the truth?

If he is so worried about the Saudi liquidation threat, he shouldn’t be: after all the Fed would be deliriously happy at the opportunity to monetize another $750 billion in assets and inject three-quarters of a trillion in fresh “reserves” aka liquidity into the system.

Meanwhile, Obama has other problems: the US president also faces calls to release a redacted 28-page portion of a joint congressional report on the 9/11 attacks, produced in 2002 and thought to link senior Saudi figures to the plot. He suggested on Monday that a decision was imminent.

We are confident his “decision” in this matter will be to likewise prevent the truth from emerging, because as Congressman Thomas Massie, a Republican from Kentucky, said: “I had to stop every couple of pages … to rearrange my understanding of history.” No further comment necessary.

Meanwhile the lies go on.

Bob Graham, a former chairman of the US senate intelligence committee, has alleged that Saudi Arabia was the principal financier of 9/11. “The effect of withholding [the pages] has been to embolden Saudi Arabia to be a continuing source of financial and human terror resources,” he said.

Document 17, written by Dana Lesemann and Michael Jacobson, will deepen suspicions. Ms Lesemann is said to have been sacked from the 9/11 commission after she circumvented her boss to access the 28 pages.

Mr Jacobson was the principal author of the 28 pages, and document 17 hints at his suspicions. “How aggressively has the US government investigated possible ties between the Saudi government and/or royal family and the September 11th attacks?” it asks.

The answer: not at all. It’s about time the American people asked why not.

end

 

The Saudis claim that they must recalibrate their relationship with the USA.
Actually, they both are in an unhappy marriage and they cannot divorce.  The Saudi’s need the USA protection and the USA needs the Saudis to hold all of the uSA treasuries.  It is an unholy alliance despite probable Saudi involvement in 9.11
(courtesy zero hedge)

In “Unprecedented Snub”, Saudi Arabia Demands “Recalibration Of Relationship” With U.S.

As Obama concludes his fourth and supposedly final meeting to Saudi Arabia as U.S. president, the White House was quick to explain where relations with the Saudi Kingdom lay, and as CNN reported this morning, moved to tamp down suggestions that ties with Saudi Arabia are fraying, with administration officials saying that President Barack Obama “really cleared the air” with King Salman at a meeting Wednesday.

Which is strange because that is not how the other side saw it: even as White House officials stressed that the leaders made progress, a prominent member of the Saudi royal family told CNN “a recalibration” of the U.S.-Saudi relationship was needed amid regional upheaval, dropping oil prices and ongoing strains between the two longtime allies.

There is going to have to be “a recalibration of our relationship with America,” former Saudi Intelligence Chief Prince Turki Al-Faisal told CNN’s Christiane Amanpour. “How far we can go with our dependence on America, how much can we rely on steadfastness from American leadership, what is it that makes for our joint benefits to come together,” Turki said in a significant departure from usual Saudi rhetoric. “These are things that we have to recalibrate.”

The prince made his “unprecedented” in the words of CNN, comments as Obama landed in Riyadh “to a reception that social media critics termed a snub, but U.S. officials strongly disputed.” The Saudi government dispatched the governor of Riyadh and Foreign Minister Adel Al-Jubair to shake Obama’s hand, a departure from the scene at the airport earlier in the day when King Salman was shown on state television greeting the leaders of other Gulf nations on the tarmac.

A U.S. official said Salman’s absence upon arrival was not taken as a snub and noted that Obama rarely greets foreign leaders when they land in the U.S. for meetings. Obama went immediately to the Erga Palace to meet the King shortly after landing, but the perceived slight on his arrival was seen as one more sign that a relationship long lubricated by barrels of oil is encountering friction.

Fawaz Gerges, an expert on Islamic-Western relations at the London School of Economics, called their current dynamic “an estrangement” but not a break that would end U.S. involvement in the Middle East.

CNN adds that statements after the meeting made clear that deep differences remain on several of these points, with the two sides agreeing to disagree and a U.S. official characterizing the encounter as the start of a discussion rather than a venue for solutions. However, as we expected, none of the core issues that have emerged in the past few days, were even brought up: the two leaders glossed over some of the thorniest matters, including a Saudi threat to dump U.S. assets if Obama signs into law a bill that could make the kingdom liable for damages stemming from the September 11 terror attacks.

So what was addressed? According to Reuters, Obama allayed Gulf countries’ fears over Iranian influence and encouraged them to douse sectarian tensions in an effort to confront the threat posed by jihadist militants like Islamic State. The same Islamic State which the same administration admitted had been initially funded by Saudi Arabia.

Meanwhile, tensions remain high: Most of the GCC states, which also include Kuwait, Qatar, Bahrain and Oman, have been bitterly disappointed in Obama’s presidency, during which they believe the United States has pulled back from the region, giving more space to Iran.

They were also upset by Obama’s remarks in a magazine interview that appeared to cast them as “free-riders” in U.S. security efforts and urged them to “share” the region with Tehran.

There was the usual made for TV drama, with CNN adding that “for all the crosscurrents buffetting U.S.-Saudi relations, analysts and former officials say the two countries aren’t at the end of a love affair so much as in an unhappy marriage in which both sides, for better or worse, are stuck with each other.”

“Despite all these differences, Saudi Arabia and America are not getting divorced,” said Bruce Riedel, director of the Intelligence Project at the Brookings Institution and a former CIA official. “We need each other.”

Which is also why none of the much demanded revelations by the US public about Saudi involvement in the Sept 11 bombing will ever be revealed.


U.S. President Barack Obama meets with Saudi King Salman at Erga Palace 
upon his arrival for a summit meeting in Riyadh, Saudi Arabia April 20, 2016

end
The war of words between Russian and the USA continue:  Russia will respond
with “all necessary means’ to any NATO intimidation:  NOT GOOD
(courtesy zero hedge)

Russia Threatens U.S., Will Respond With “All Necessary Means” To Any NATO Intimidation Attempts

Last week, the US Navy and Air force were livid when Russian fighter jets first buzzed the US missile destroyer USS Donald Cook in the Baltic Sea, and just days later flew within 50 feet of a US recon planealso flying over the Baltic Sea, which some interpreted as a Russian warning to Poland. The U.S. escalated and complained vocally to Russia (even if Obama did not mention the incident during his phone call with Putin last week).

However, if anyone was expecting Russia to politely apologize to the U.S. for last week’s two “flybys”, they would be drastically disappointed, because as Reuters reported overnight, it was Russia who accused the United States on Wednesday of intimidation by sailing a U.S. naval destroyer close to Russia’s border in the Baltics and warned that the Russian military would respond with “all necessary measures” to any future incidents.

Speaking after a meeting between NATO envoys and Russia, their first in almost two years, Moscow’s ambassador to NATO said the April 11 maritime incident showed there could be no improvement in ties until the U.S.-led alliance withdrew from Russia’s borders.

“This is about attempts to exercise military pressure on Russia,” the envoy, Alexander Grushko, said. “We will take all necessary measures, precautions, to compensate for these attempts to use military force,” he told reporters.

Earlier, U.S. Ambassador to NATO Douglas Lute pressed Russia about the incident, warning it had been dangerous. The United States has said the guided missile destroyer USS Cook was on routine business near Poland when it was harassed by Russian jets.

“We were in international waters,” a NATO diplomat reported Lute as telling Grushko during the NATO-Russia council meeting.

That is not how Russia saw it however. As a reminder, Russia has been quite vocal about NATO expanding ever closer to its borders, and in many ways the Russian action was perhaps to be expected following thestriking announcement at the end of March that NATO had changed its Eastern European doctrine from “Assurance” to “Deterrence.”

Despite what officials said was a calm and professional meeting, the public comments highlighted the state of tension that persists between the two sides, and which escalated following the US-led presidential coup in Ukraine, followed by Moscow’s annexation of Crimea in March 2014, culminating with the resignation of Ukraine’s US puppet prime-minister Yatseniuk.

And while Russia’s chief concern has been NATO’s expansion and modernization since the Cold War, which is likely to include a military build-up in eastern Europe with a rotating, multinational force in Poland and the Baltics, NATO says its move is in direct response to previous Russian actions, alleging that the plans are a proportionate response to Russian aggression following Moscow’s annexation of Crimea, and the alliance had no forces in eastern Europe before the Ukraine crisis.

Poland and other NATO members in the Baltics worry about an increase in the Russian military presence in its Kaliningrad enclave, where Russia is positioning longer-range surface-to-air missiles. Ironically, when Russia positioned missiles in proximity to Poland in 2013, it stated that the move was once again in response to NATO expansion.

So while the narrative goes in circles, the military build ups on both sides continue, while “close call” incidents become increasingly frequent.

As Reuters adds, the session of the NATO-Russia Council, which last met in June 2014, had been called in part to assuage Russia’s concerns that it feels threatened by NATO. But core differences clearly remained afterwards. NATO envoys had expressed concern about Russia’s so-called snap exercises, where thousands of Russian troops carry out war games without any prior warning. “That is clearly destabilizing,” a NATO diplomat said, ignoring that NATO engages in comparable exercises.

Stoltenberg said NATO members had rejected Grushko’s description of the crisis in eastern Ukraine as a civil war. “In the meeting, it was re-confirmed that we disagree on the facts, on the narrative and the responsibilities in and around Ukraine,” Stoltenberg said after the meeting.

“Many allies disagree when Russia tries to portray this as a civil war. This is Russia destabilizing eastern Ukraine, providing support for the separatists, munitions, funding, equipment and also command and control,” he said.

“So there were profound disagreements,” he said.

However one wants to dub the Ukraine “situation”, one thing is clear: for a vast majority of Dutch voters, Ukraine’s entrance into an expanded European Union is a non-starter, which in effect kills the underlying stated public reason behind Ukraine’s “almost bloodless” revolution of 2014.

end

 

GLOBAL ISSUES

 

This is totally nuts:  Sweden’s Riksbank unexpectedly boosts their QE program by 45 billion kroner while the consensus was for zero increase.  They kept their NIRP at -50%. However what these guys wanted was to lower the Kroner.  Instead it jumped to 0.8% higher than the euro. Go figure…

(courtesy zero hedge)

 

Sweden’s Riksbank Unexpectedly Boosts QE To Weaken Currency; Krona Jumps

In a surprise move, earlier today Sweden’s Riksbank announced that it would expand the country’s QE program by another 45 billion kroner – consensus was for no increase – while keeping its rate at the already record negative -0.50%. “With continued expansionary monetary policy abroad, there is a risk that the krona will appreciate earlier and faster than in the forecast,” the Riksbank said.

Even more surprising was the currency reaction: instead of weakening the SEK, the currency strengthened and initially traded as much as 0.8 percent higher against the euro, but gains were pared to 0.3 percent as of 11:26 a.m. in Stockholm. The move was another indication of just how inverted cause and effect relationships have become in a world in which traders try to front and in this case back-run central bank announcements.

The extra purchases will add to an existing 200 billion-krona QE program targeting about one-third of Sweden’s nominal government bonds by the end of June. Riksbank Governor Stefan Ingves has resorted to unprecedented stimulus as the bank has failed to reach its 2 percent inflation target for about half a decade. But policy makers are torn over how best to deploy their toolbox as the property market overheats.

This is what the Riksbank said:

The Riksbank’s monetary policy has contributed to stronger economic activity and rising inflation. But although inflation is rising, the upturn is fitful. At the same time, there is still uncertainty over global developments and monetary policy abroad is very expansionary. To safeguard the rising trend in inflation, monetary policy in Sweden needs to continue to be expansionary. The Executive Board has decided to purchase government bonds for a further SEK 45 billion during the second half of 2016. This will reduce the risk of the krona appreciating faster than in the forecast and of a break in the upturn in inflation. The purchases cover both nominal and real government bonds, corresponding to SEK 30 and SEK 15 billion, respectively. The repo rate is at the same time held unchanged at -0.50 per cent. There is still a high level of preparedness to make monetary policy even more expansionary if this is needed to safeguard the inflation target.

Apparently the market did not agree with the Riksbank’s assessment, and as a result of the surprising strengthening in the SEK, The krona remains the strongest performer, besides the yen, of the 10 currencies tracked in Bloomberg Correlation Weighted Indexes over the past year.

As Bloomberg noted, “Sweden’s Riksbank just put its monetary policy cards on the table in the hope that the European Central Bank won’t blow its best intentions to smithereens.

Swedish policy makers delivered a little more stimulus and made a few predictions about the future. But ultimately, all they can do now is hope ECB President Mario Draghi doesn’t upend everything for those outside the euro zone struggling to protect their currencies.

 

What the Riksbank does next “depends to a large extent on the ECB,” said Knut Hallberg, an analyst at Swedbank. “If they breathe a word of being prepared to do more, then the pressure on the Riksbank will rise again.”

Andreas Wallstroem, an economist at Nordea Bank AB, said his “main scenario is that we will see no additional easing measures from the Riksbank in this cycle.” Nordea forecasts the first rate increase will come in the second quarter of next year. “However, as we don’t see that inflation will rise to the 2 percent target within the forecast horizon, further easing measures cannot be ruled out.”

“The pressure could mount already this afternoon should the krona strengthen on the back of the ECB decision,” he said. The Frankfurt-based bank is due to publish its rate decision later today, with economists surveyed by Bloomberg predicting no change.

As Bloomberg adds, Sweden is enjoying an economic boom with growth rates in excess of 4 percent. A number of analysts have questioned what impact more easing will have on an economy steaming ahead at such a pace.

The Riksbank is “caught between a domestic economy that is booming while uncertainty in the rest of the world and the financial markets will continue to exert pressure on the Swedish krona and inflation,” said Joergen Kennemar, an economist at Swedbank. “In particular, the more expansive stance of the ECB, but also the Fed, could force the Riksbank to reverse its course of a scale-back monetary policy. Thus, if the ECB and the Fed prevail, the pressure will again arise late this year or early next year.”

Finally, here was Goldman’s take:

  • Contrary to our expectations, the Riksbank has extended the QE program by a further SEK45bn during the second half of 2016 (SEK30bn of nominal government bonds and SEK15bn of real government bonds).
  • Given the economic and inflation outlook, we had expected the Riksbank to tolerate a weaker currency (up to EUR/SEK 9.10-9.05) and to refrain from taking any action at this stage. However, the Riksbank’s announcement today shows that the threshold for a faster appreciation of the currency is lower.
  • The initial market reaction has seen the SEK appreciate, contrary to what the Riksbank had hoped to achieve.
  • The only possible explanation for this, beyond positioning, is that the market thinks the central bank is now running out of bullets in its attempt to control the pace of SEK appreciation.
  • The Riksbank has shown that it continues to be worried about the pace of appreciation. As we have written elsewhere, we do not rule out that the central bank could cut rates further or even engage in opportunistic interventions in the currency market. So, at these levels, tactically we do not see much value in going long the currency. That said, the trend is for the SEK to appreciate, and we would therefore see any depreciation as a window of opportunity to take the other side.

The move may be accentuated depending on what the ECB announces in just over half an hour.

end

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

Euro/USA 1.1310 UP .0008 ( STILL REACTING TO USA FAILED POLICY)

USA/JAPAN YEN 109.75 DOWN 0.114 (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 1.4377 UP .0037 (STILL THREAT OF BREXIT)

USA/CAN 1.2651 UP .0005

Early THIS THURSDAY morning in Europe, the Euro ROSE by 8 basis points, trading now WELL above the important 1.08 level RISING to 1.1310; 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 NIRPand NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Shanghai composite was DOWN 19.69 POINTS OR 0.66%/ Hang Sang UP 385.94 OR  1.82%   / AUSTRALIA IS HIGHER BY 1.09% / ALL EUROPEAN BOURSES ARE DEEPLY  IN THE RED as they start their morning/

We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade (blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this THURSDAY morning: closed UP 457.08 OR 2.70%

Trading from Europe and Asia:
1. Europe stocks IN THE RED  THEY START THEIR DAY

2/ CHINESE BOURSES / : Hang Sang CLOSED IN THE GREEN . ,Shanghai CLOSED IN THE RED/ Australia BOURSE IN THE GREEN: /Nikkei (Japan)RED IN THE GREEN/India’s Sensex IN THE RED /

Gold very early morning trading: $1259.40

silver:$17.35

Early THURSDAY morning USA 10 year bond yield: 1.86% !!! UP 2 in basis points from WEDNESDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield RISES to 2.68 UP 2 in basis points from WEDNESDAY night.

USA dollar index early THURSDAY morning: 94.45 DOWN 10 cents from WEDNESDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers THURSDAY MORNING

 

end

 

And now your closing THURSDAY NUMBERS

 

Portuguese 10 year bond yield:  3.20% UP 6 in basis points from WEDNESDAY

JAPANESE BOND YIELD: .114% DOWN 2 in   basis points from WEDNESDAY

SPANISH 10 YR BOND YIELD:1.60% UP 7 IN basis points from WEDNESDAY

ITALIAN 10 YR BOND YIELD: 1.46  UP 6 IN basis points from WEDNESDAY

the Italian 10 yr bond yield is trading 14 points lower than Spain.

GERMAN 10 YR BOND YIELD: .239% (UP 9 IN BASIS POINT ON THE DAY)

END

 

IMPORTANT CURRENCY CLOSES FOR THURSDAY

 

Closing currency crosses for THURSDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/3:30 PM

 

Euro/USA 1.12934 DOWN .0008 (Euro DOWN 8  basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 109.46 down .395 (Yen UP 40 basis points)

Great Britain/USA 1.4327  DOWN .0008 Pound DOWN 8 basis points/

USA/Canad 1.2727 UP 0.0081 (Canadian dollar DOWN 81 basis points with OIL (WTI AT $43.44

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was DOWN by 8 basis points to trade at 1.1294

The Yen fell to 109.46 for a loss of 40 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 8 basis points, trading at 1.4327

The Canadian dollar FELL by 81 basis points to 1.2727, WITH WTI OIL AT:  $43.44

The USA/Yuan closed at 6.4740

the 10 yr Japanese bond yield closed at -.114% UP 2 BASIS  points in yield/AND THIS IS GETTING DANGEROUS!~!

Your closing 10 yr USA bond yield: UP 3  basis points from WEDNESDAY at 1.87% //trading well below the resistance level of 2.27-2.32%) HUGE policy error AND THE DOW FALLS BADLY??

USA 30 yr bond yield: 2.69 UP 3 in basis points on the day ( HUGE POLICY ERROR)

Your closing USA dollar index, 94.60 UP 5 CENTS ON THE DAY/4 PM

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates forWEDNESDAY

London:  CLOSED DOWN 28.82 POINTS OR 0.45%
German Dax :CLOSED UP 14.44 OR 0.14%
Paris Cac  CLOSED DOWN 9.09  OR 0.20%
Spain IBEX CLOSED UP 50.00 OR 0.55`%
Italian MIB: CLOSED UP 74.60  OR 0.40%

The Dow was down 113.75 points or 0.63%

NASDAQ down 2.24 points or 0.05%
WTI Oil price; 43.47 at 3:30 pm;

Brent Oil: 44.76

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  66.62 (ROUBLE DOWN  1 AND.49 ROUBLES PER DOLLAR FROM MONDAY) AS THE PRICE OF BRENT FELL 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:  $43.39

BRENT: 4.474

USA 10 YR BOND YIELD: 1.87%

USA DOLLAR INDEX:94.65 UP  10 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:

When Doves Die: Stocks, Bonds, Oil Slump As Silver Pumps’n’Dumps

Stocks suffer their biggest down day in 2 weeks…

 

It all looked so hopeful early this morning as those pajama-players bid us back to cycle highs…and then it all fell apart…

 

As metals were smacked lower by a China margin hike…

 

Dow lost 18,000, S&P lost 2,100 but Trannies were the worst on the day…Nasdaq managed tro get green at the death…

 

The last few minutes saw a Dow 18k hunt as VIX was slammed again…and WTYF was that at the close – total fail to clam VIX to get Dow >18k

 

And Dow and S&P rapidly caught down to Nasdaq’s weakness on the week…

 

Energy and Financials were red today but so were Utes…

 

Banks weakened today -= is time to catch down to yield curve reality?

 

And investors flooded out of AAPL (back into bear market territory), rushing into the ‘safety’ of Biotechs again…

 

Stock index and VIX ETFs have decoupled again…

 

Treasuries were also dumped today (a message from The Saudis? or heavy rate locks as issuers cramble to take advantage of recent market openness) – notable steepening today…

 

The USD Index plunged (as Draghi disappointed and EUR surged) then shot back higher as algos panic-sold EUR when Draghi uttered the magic word – “more”…USD Indexc ended the day unch (and week)

 

Here’s a close up of EURUSD – just for fun, try trading that…Stops run top and bottom…

 

Crude fell on the day (topping around 815ET) but gold and silver managed to hold small gains as the entire commodity complex was smacked lower around 9amET…

 

Gold and Silver have had a turbulent week…

 

As the Gold/Silver ratio jerked higher for the first time in over 2 weeks…

 

Charts: Bloomberg

 

end

 

With all of those layoffs and the initial jobless claims crash?

(courtesy zero hedge/BLS)

Initial Jobless Claims Crashes To Lowest Since 1973

Dear Janet – it doesn’t get any better than this…

At 247k, initial jobless claims are the lowest since November 1973 – how does that compute given the “fear and anger” among America’s electorate?

We assume Intel’s layoffs will be seasonally-adjusted out of this time series?

end
What a joke:  the Philly Mfg Fed index after last month;s surprising rise plummets back into contraction mode..so much for the phony data,,
(courtesy Philly Fed mfg index/zero hedge)

Philly Fed Dead-Cat-Bounce Dies, Plunges Back Into Contraction

Remember March and all those hopefull regional fed survey bounces? They are over! Philly Fed just printed -1.6, back into contraction for the 8th month of last 9, missing expectations of a +9.0 print. Every subcomponent weakened (aside from prices paid and received) but what saved the headline from further collapse was an unexpected surge in optimism for six-months ahead (right after the election?).

Spot the odd data point out…

The full breakdown shows everything weaker (except for prices paid)

The diffusion index for current activity decreased from 12.4 in March to -1.6 this month.

The index had turned positive last month following six consecutive negative readings. The current new orders and shipments indexes also fell this month. The percentage of firms (23 percent) reporting a rise in new orders was exactly offset by the percentage reporting a decline. The current new orders index decreased from 15.7 to zero this month, while thecurrent shipments index fell precipitously, from 22.1 to -10.8. The unfilled orders and delivery time indexes suggested weakness, as both indexes were in negative territory this month. Firms continued to report overall declines in inventories.

The survey’s indicators of employment corroborate weakness in the other broad indicators this month. The employment index decreased 17 points and registered its fourth consecutive negative reading. Nearly 62 percent of the firms reported no change in employment this month, but the percentage reporting decreases rose from 17 percent in March to 27 percent this month. Firms reported a notable decline in average work hours: The index decreased 22 points and returned to negative territory after last month’s first positive reading in three months.

But, of course, hope is soaring as current conditions collapse…

The survey’s future indicators bucked the trend of weakening current indicators this month.

The diffusion index for future general activity increased from a reading of 28.8 in March to 42.2 this month. This is the highest reading for the index in 15 months (see Chart 1). The largest share of firms (51 percent) expect an increase in activity over the next six months, while only 9 percent expect declines. The future indexes for new orders and shipments also moved higher this month, increasing 10 points and 7 points, respectively. The future employment index also increased, from 6.3 to 14.2. More than 25 percent of the surveyed firms expect to increase employment levels over the next six months. This is slightly higher than the 22 percent that increased employment last month. The indexes for future prices paid and received edged higher this month, increasing 12 points and 8 points, respectively.

So to summarize – every current indicator is pointed to further weakness but for some reason, everything will be fixed in six months? How has that optimism worked out previously?

end
The misery is over for the one time darling on the USA stocks:  SunEdison files for bankruptcy:
(courtesy zero hedge)

The SUNE Finally Sets: SunEdison Files For Bankruptcy

It’s over. After months of arguing that everything will be ok as investors flee the troubled company, it is now officially over:

  • *SUNEDISON FILES FOR BANKRUPTCY AFTER ACQUISITION BINGE

Bloomberg reports that SUNE admits $50 billion in liabilities.

The company reported between $10-50 billion in assets and $10-50 billion in debt.

Not a great day for David Einhorn…

As part of its filing, SunEdison reports its has obtained a $350MM DIP loan:

WHEREAS, the Company, as borrower, has requested that one or more potential financing sources (which may include certain lenders or noteholders under certain of the Company’s existing secured indebtedness) (collectively with any agent, arranger and letter of credit issuer under any DIP Facility (as defined below), the “DIP Lenders”) arrange, backstop and/or provide one or more debtor-in-possession superpriority credit facilities, including (i) a new money term loan facility (the “DIP NM TL Facility”), which may include a roll-up of up to $350 million aggregate principal amount of the Company’s existing second lien loans and second lien convertible notes, to the extent required by the applicable DIP Lenders and authorized by the Bankruptcy Court (the “DIP TL Roll-Up Facility”), and (ii) a roll-up or refinancing of the Company’s existing first lien letter of credit facility (up to an amount equal to the full principal amount outstanding thereunder, any unused commitments thereunder and the face amount of issued and undrawn letters of credit thereunder) to provide for the extension and renewal of existing letters of credit (and, to the extent agreed by the applicable DIP Lenders, the issuance of new letters of credit thereunder) and/or additional letter of credit facilities to provide for the issuance of new letters of credit and/or backstop or replacement of existing letters of credit (collectively, the “DIP LC Facility” and collectively with the DIP NM TL Facility and DIP TL Roll-Up Facility, the “DIP Facilities”) subject to exceptions and limitations to be set forth in any orders of the Bankruptcy Court concerning any of the DIP Facilities (the “DIP Financing Orders”);

*  *  *

end

 

This is going to hurt:  Volkswagen agrees to a 10 billion dollar plus settlement in their emission scandal.

(courtesy zero hedge)

US Government “Agrees In Principle” With Volkswagen’s $10 Billion-plus ‘Sorry-We-Cheated’ Compensation Plan

udge Charles Breyer has confirmed that Volkswagen’s $10 billion-plus plan to resolve claims by the U.S. government and lawsuits by American car owners over its pollution-cheating debacle has been ‘agreed in principle’ by the Justice Department and various other US agencies. The plan covers at least 480,000 cars in the US and over 600 lawsuits offering consumers flexibility including buybacks and “substantial compensation.”

  • *JUDGE BREYER SAYS VW, U.S. PARTIES HAVE AGREEMENT IN PRINCIPLE
  • *BREYER COMMENDS ‘DEFINITE MOMENTUM’ IN RESOLVING MATTER
  • *JUDGE EMPHASIZES CONTINUED NEED FOR CONFIDENTIALITY IN TALKS
  • *JUDGE ASKING FOR PUBLIC TO WAIT FOR FINAL SETTLEMENT

As Bloomberg reports,

Volkswagen AG has reached an agreement in principle with U.S. regulators and car owners as it struggles to contain the damage from its emissions-cheating scandal.

The automaker negotiated the plan for at least 480,000 affected vehicles in the U.S. with environmental regulators after a federal judge who’s overseeing more than 600 lawsuits said that fixing the polluting cars or getting them off the road has to be the first step in resolving the consolidated cases.

Further headlines have emerged:

  • *VW DIESEL JUDGE SAYS HE’S PLEASED PARTIES HAVE CONCRETE PLAN
  • *BREYER SAYS ACCORD GIVES CONSUMERS OPTIONS INCLUDING BUYBACKS
  • *PLAN AFFECTS MOST CARS, ALSO ALLOWS FOR LEASE RETURNS: JUDGE
  • *VW JUDGE SAYS EMISSIONS DEAL OFFERS ‘SUBSTANTIAL COMPENSATION’
  • *BREYER SAYS FUND WILL BE SET UP FOR REMEDIATION EFFORT
  • *JUSTICE DEPT., GOVERNMENT AGENCIES HAVE SIGNED OFF ON DEAL
  • *VW ATTORNEY SAYS COMPANY WANTS TO WIN BACK CUSTOMER CONFIDENCE
  • *JUDGE SETS JUNE 21 DEADLINE FOR PARTIES TO FINE-TUNE AGREEMENT

As Bloombergf detailed previously,

The parties reached the accord ahead of a Thursday deadline set by a federal judge for the carmaker to say how it would fix the vehicles. Volkswagen has been negotiating with U.S. environmental regulators on an acceptable solution. Judge Charles Breyer said that fixing the almost 600,000 vehicles or getting them off the road would be the first step to any settlement. The stock rose as much as 7.5 percent in Frankfurt.

An agreement with U.S. authorities would be a milestone for Volkswagen as it seeks to emerge from the seven-month-old scandal. The German carmaker has been battling to appease regulators and regain customers’ trust after admitting in September that it rigged the exhaust systems of 11 million diesel-powered cars worldwide to pass official emissions tests. The crisis led to the departure of Chief Executive Officer Martin Winterkorn and caused Volkswagen to delay releasing its 2015 earnings due to uncertainty over the costs of the scandal.

“A far-reaching agreement covering the vast majority of potential financial impacts from the U.S. market would clearly be positive news for VW as this would clearly reduce uncertainty for the future,” Marc-Rene Tonn, an analyst with Warburg Research, said in a note.

*  *  *

So now we know the cost of a decade of decepton.

end
After hours, two big bombshells!
Nasdaq futures are plummeting which will no doubt set the stage for tomorrow. It also looks like the income narrative for the entire S and P is in trouble!
(courtesy zero hedge)

Nasdaq Plunges After Microsoft Misses Top And Bottom Line; Google Tumbles On Poor Earnings

Google, pardon Alphabet, may have just killed the strong earnings narrative.  Moments ago advertising behemoth (with various ancillary services) GOOGL reported Q1 earnings and sales, and both were a miss.

  • ALPHABET 1Q ADJ. EPS $7.50, EST. $7.96
  • ALPHABET 1Q REV. EX-TAC $16.5B, EST. $16.6B

Virtually every other data point was also a miss:

  • ALPHABET 1Q AGGREGATE PAID CLICKS UP 29%, EST. UP 32%
  • ALPHABET 1Q ADJ. OPER NET $6.84BB, EST. $6.75B
  • ALPHABET 1Q AGGREGATE COST-PER-CLICK DOWN 9%, EST. DOWN 11%
  • ALPHABET 1Q CAPITAL EXPENDITURES $2.43B, EST. $2.65B

The stock, which last year repriced higher in a dramatic fashion following blowout late year quarter, has just retraced most of its gains.

 

Worse, with Microsoft also reporting and missing…

  • MICROSOFT 3Q ADJ. EPS 62C, EST. 64C
  • MICROSOFT 3Q REVENUE $20.5BN, EST $22.1BN

… and sliding…

 

Not only is the FANG complex all sliding,

 

… but the entire Nasdaq future is getting monkeyhammered after hours.

 

And in case that was not enough, Starbucks is also sliding on a sales miss, while Visa was also sharply lower on earnings as well as not a single major company is green after reporting results this afternoon.

 

end

 

See you tomorrow night

And to our all our Jewish friends out there,

a very happy Passover

Harvey

 

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