May 4b/Open interest rises an astonishing 17,000 contracts and 65,000 contracts in 4 days/China again reissues warning to the USA not to raise interest rates or else they will hugely devalue/ that sends bourses southbound around the globe/Huge rise inthe price of pork in China may set off citizen anger and may lead to huge protests/UK bubble bursts as condominium builders offering a 20% discount/Aeropostale goes belly up/

Good evening Ladies and Gentlemen:

Gold:  $1,273.30 down $17.40    (comex closing time)

Silver 17.28  down 19 cents

In the access market 5:15 pm

Gold $1281.80

silver:  17.38

Let us have a look at the data for today

 

.

At the gold comex today we had a POOR delivery day, registering 0 notices for NIL ounces for gold,and for silver we had 143 notices for 715,000 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 228.04 tonnes for a loss of 75 tonnes over that period

.

In silver, the open interest fell by 1022 contracts down to 198,237 as the price was silver was down by  19 cents with respect to yesterday’s trading. In ounces, the OI is still represented by just under 1 BILLLION oz i.e. .991 BILLION TO BE EXACT or 141% of annual global silver production (exRussia &ex China) We are now within spitting distance of all time highs for OI with respect to silver

In silver we had 143 notices served upon for 715,000 oz.

In gold, the total comex gold OI ROSE BY AN EARTH SHATTERING 17,273 CONTRACTS UP to 565,774 contracts DESPITE THE FACT THAT THE PRICE OF GOLD WAS DOWN $4.00 with YESTERDAY’S TRADING(at comex closing).

We had a small addition  in tonnes of gold inventory at the GLD at .6 tonnes; thus the inventory rests tonight at 825.54 tonnes.  .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 a large withdrawal of 1.553 million oz  in silver .  Thus the inventory rests at 337.261 million oz.

.

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

1. Today, we had the open interest in silver fall by 1,022 contracts down to 198,237 as the price of silver was DOWN  19 cents with YESTERDAY’S trading. The gold open interest ROSE by A GIGANTIC 17,273 contracts DESPITE THE FACT THAT  gold FELL by $4.00 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. Also the bankers are resolute in supplying non backed gold paper but they do not want to supply more silver paper. It sure looks like the bankers are getting scared with respect to silver as it looks like they are capitulating as the start to cover their shortfall. With respect to gold, they are not fearful and supply as much paper as there are trees ready to be sacrificed

(report Harvey).

 

2 a) Gold trading overnight, Goldcore

(Mark OByrne/off today

2b)  Gold trading earlier this morning;  Gold pierces 1300 dollars again before the bankers try their raid

2c) FRBNY gold movement report

(Harvey)

3. ASIAN AFFAIRS

i)Late  TUESDAY night/ WEDNESDAY morning: Shanghai closed DOWN 1.371 PTS OR 0.05%  /  Hang Sang closed DOWN 151.11 OR 0.73%. The Nikkei closed FOR HOLIDAY  . Australia’s all ordinaires  CLOSED DOWN 1.54% Chinese yuan (ONSHORE) closed DOWN at 6.5035.  Oil ROSE  to 43.75 dollars per barrel for WTI and 45.12 for Brent. Stocks in Europe DEEPLY IN THE RED . Offshore yuan trades  6.5135 yuan to the dollar vs 6.5035 for onshore yuan.CHINA FIRES ANOTHER SHOT ACROSS THE BOW BY LOWERING ITS YUAN (SEE BELOW)

REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) REPORT ON JAPAN

 

Japan temporarily intervenes the lowering the yen but to no avail

( zero hedge)

b) REPORT ON CHINA

i) China again sends a strong message to the USA not to raise the USA dollar or else the POBC will devalue the yuan hugely: that message sent all bourses into the dumpster immediately.

( zero hedge)

ii)Pork prices have risen considerably this past year and it threatens social unrest as pork is a stable in all Chinese diets.  Thus  to prevent disorder, the bosses of China has unleashed their own strategic porcine reserve to lower prices:

( zero hedge)

4.EUROPEAN AFFAIRS

i)Europe just made a deal with the devil:  Here comes the Turkish flood as the EU now allows travel to 80 million Turks

( zero hedge)_

ii)It begins:  the war on paper currency official begins with the ECB’s removal of the EU 500 note.  This will be the start of new aggressive NIRP policies:

( zero hedge)
iii)oh!!oh!! this will be trouble for the UK as housing bubble just blew up.  They are offering discounts of 20% on newly constructed condo s trying to get rid of them:

(courtesy zero hedge)
ivThis is funny!!  The poll numbers for a BREXIT have increased since the Obama visit.  They are stating:  “keep sending Obama over” as the Brexit odds have risen above staying in the EU!!

( zero hedge)

5.RUSSIAN AND MIDDLE EASTERN AFFAIRS

The Turkish Lira plummets 4.5% to 2.95 to the dollar as Erdogan wants to usurp more power from the Prime Minister Davutoglu.  The market does not like it:

(courtesy zero hedge)

6.OIL ISSUES

Bankruptcies in the uSA shale continue to rise

(courtesy Reuters)

7.PHYSICAL MARKETS

i)Central banks would love the technology behind Bitcoin.

( UKTelegraph/Jeremy Warner/GATA)
ii)John Embry notes that investors of mining shares are no longer scared by the antics of the bullion banks with their raids:( John Embry/Kingworldnews)

8..USA MARKETS AND ITS INFLUENCE ON GOLD/SILVER

i)Another retailer goes bust:  Aeropostale.  The reason for all of these retail bankruptcies is probably two fold:

a) bricks and mortal stores cannot compete against on line stores

b) the consumer is tapped out

( zero hedge)

ii)This is a surprise:  the ever bullish ADP report from Mark Zandi shows that employment growth is the worst in 3 years as the job creation machine stalls:

( Mark Zandi/ADP/zero hedge)

 

iii)Falling USA productivity is putting a huge dent into profitability:
( zero hedge)
iv)A sure sign that the economy is in trouble when you see both exports and imports plummet:  the USA trade deficit tumbles to 40 billion from 47 billion dollars.

( zero hedge)
v)Although we had a small upwards blip in factory order last month, it is still well below last yr as these declines are now in their 17th month:

( zero hedge)
vi)The uSA service side of things is better as the service PMI rebounds, but still the report highlights fragility in the uSA economy:

( zero hedge)
vii)Durable goods orders tumble for the 14th straight month and signifies huge problems in the USA manufacturing sector:

( zero hedge)
viii)Let us conclude tonight with this great interview with Michael Pento and Greg Hunter of USAWatchdog

( Greg Hunter/Michael Pento)

Let us head over to the comex:

The total gold comex open interest ROSE TO A GIGANTIC  OI level of 565,774 for a GAIN of 17,273 contracts DESPITE THE FACT THAT THE PRICE OF GOLD WAS DOWN $4.00 with respect to YESTERDAY’S TRADING. We are now entering the NON active delivery month of MAY. For the past two years, we have strangely witnessed two interesting developments and we have generally seen two phenomena happen respect to the gold open interest:  1) total gold comex collapses in OI as we enter any delivery month  and 2) a continual drop in the amount of gold standing in that month as that month progresses. The month of May saw its OI fall by 11 contracts down to 1771. We had 26 notices filed  YESTERDAY so we surprisingly gained 15 contracts or an additional 1500 oz will stand for delivery.The next big active gold contract is June and here the OI rose by 5585 contracts up to 404,887. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was good at 32805. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was good at 249,302 contracts. The comex is not in backwardation.

Today we had 0 notices filed for NIL oz in gold.

 

And now for the wild silver comex results. Silver OI FELL by 1022 contracts from199,259 DOWN to 198,237 as the price of silver was DOWN BY  19 cents with YESTERDAY’S TRADING. For the first time in over 2 years, we have not witnessed a liquidation of open interest as we ENTERED first day notice .  The next active contract month is May and here the OI FELL by 261 contracts DOWN to 1866. We had 174 notices filed YESTERDAY so we lost 87 contracts or 435,000 oz of silver will not stand for delivery in this active month of May. The next non active month of June saw its OI FALL by 69 contracts DOWN to 550  OI.The next big delivery month is July and here the OI fell by 1099 contracts up to 137,297. The volume on the comex today (just comex) came in at 55,016 which is extremely high. The confirmed volume ON FRIDAY (comex + globex) was AGAIN HUGE AT 6,624. 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  143 notices filed for 715,000 oz.
 

MAY contract month:

INITIAL standings for MAY

Initial Standings for MAY
May 4.
Gold
Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil  15,002.12 OZ

SCOTIA, HSBC

JPM

Deposits to the Dealer Inventory in oz 2599.93 OZ

BRINKS

Deposits to the Customer Inventory, in oz  69,501.815 OZ

 

 

SCOTIA

No of oz served (contracts) today 0 contracts
(NIL oz)
No of oz to be served (notices) 1771 CONTRACTS

177,100 OZ

Total monthly oz gold served (contracts) so far this month 52 contracts (5200 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month  16,575.20 OZ

Today we had 0 dealer deposit

 

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

Today we had 1 customer deposits:

 

ii) Into Scotia:  69,501.815. oz

total customer deposit: 69,501.815 OZ

Today we had 3 customer withdrawalS:

i) Out of Scotia; 8037.500 oz  250KILOBARS

II) Out of jPMorgan: 5421.372 oz

iii) Out of HSBC: 1,543.248 oz

Total customer withdrawals:  15,002.10 oz

Today we had 1 adjustment:

i) Our of brinks:

48,225.000 oz  ( 1500 kilobars) was transferred out of the customer and into the dealer account of Brinks.  (But no settlement on the comex gold contracts)

 

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 0 contract of which 0 notices was stopped (received) by JPMorgan dealer and 0 notices were stopped (received)  by JPMorgan customer account. 
To calculate the initial total number of gold ounces standing for the MAY contract month, we take the total number of notices filed so far for the month (52) x 100 oz  or 2600 oz , to which we  add the difference between the open interest for the front month of MAY (1771 CONTRACTS) minus the number of notices served upon today (0) x 100 oz   x 100 oz per contract equals 182,300 oz, the number of ounces standing in this non active month.  This number is huge for May. Let us see if this number remains constant throughout themonth
 
Thus the initial standings for gold for the MAY. contract month:
No of notices served so far (52) x 100 oz  or ounces + {OI for the front month (1771) minus the number of  notices served upon today (0) x 100 oz which equals 182,300 oz standing in this non  active delivery month of MAY(5.6702 tonnes).
WE GAINED 15 CONTRACTS OR 1500 OZ WILL  STAND FOR DELIVERY
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 5.6702 tonnes of gold standing for MAY and 17.997 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 5.6236 TONNES FOR MAY + 12.3917 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 last week April 16 .3203 and April 22 .(0009 tonnes) + april 29  .205 tonnes  = 25.799 tonnes still standing against 17.997 tonnes available.  .
 
Total dealer inventor 578,614.083 tonnes or 17.997 tonnes
Total gold inventory (dealer and customer) =7,386,271.420 or 229.74 tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 229.74 tonnes for a loss of 73 tonnes over that period. 
 
JPMorgan has only 20.97 tonnes of gold total (both dealer and customer)
May is not a very good delivery month and yet 5.6 tonnes of gold is standing.  What is different from other months is that the bankers cannot over any fiat to those standing. They want the real stuff.
 end
And now for silver
 

MAY INITIAL standings

 May 4.2016

Silver
Ounces
Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory  612,994.788 oz

CNT,jpm,Scotia

Deposits to the Dealer Inventory 571,885.400 oz CNT
Deposits to the Customer Inventory 30,358.500 oz

CNT

No of oz served today (contracts) 143  CONTRACTS

715,000 OZ

No of oz to be served (notices) 1723 contracts

8,615,000 oz

Total monthly oz silver served (contracts) 1370 contracts (6,850,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil oz
Total accumulative withdrawal  of silver from the Customer inventory this month  1,423,250.2 oz

today we had 1 deposits into the dealer account

i) into the dealer CNT;  571,885.400 oz

total dealer deposit: 571,885.400 oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil

we had 1 customer deposit:

i) Into CNT:  30,358.500 oz

Total customer deposits: 30,358.500 oz.

We had 3 customer withdrawals

i) Out of CNT  4937.198 oz

ii) Out of jpm:  600,000.400 oz

iii) Out of Scotia: 8,057.190

:

total customer withdrawals:  612,994.788  oz

 
 

 

 we had 1 adjustment

i) Out of CNT:  34,997.76 oz was adjusted out of the customer and this landed into the dealer account of CNT

The total number of notices filed today for the MAY contract month is represented by 143 contracts for 715,000 oz. To calculate the number of silver ounces that will stand for delivery in May., we take the total number of notices filed for the month so far at (1370) x 5,000 oz  = 6,850,000 oz to which we add the difference between the open interest for the front month of MAY (1866) and the number of notices served upon today (143) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the MAY contract month:  1370 (notices served so far)x 5000 oz +(1866{ OI for front month of MAY ) -number of notices served upon today (143)x 5000 oz  equals 15,465,000 oz of silver standing for the MaY contract month.
WE LOST ANOTHER 87  CONTRACTS OR 435,000 OZ WILL NOT STAND AS THEY WERE CASH SETTLED.
 
Total dealer silver:  28.582 million
Total number of dealer and customer silver:   152.056 million oz
The open interest on silver is still close an all time high with the record of 206,748 being set in the last week of April. The registered silver (dealer silver) is now at multi year lows as silver is being drawn out and heading to China and other destinations. 
The total dealer amount of silver is now at a multi year low of 28.582 million oz.
end
And now the Gold inventory at the GLD
May 4/ we had a small deposit of .6 tonnes of gold into the GLD/inventory rests at 825.54 tonnes
May 3/no change in gold inventory at the GLD/Inventory  rests at 824.94 tonnes
May 2/a hugechange in gold inventory at the GLD a deposit of 20.80/Inventory rests at 824.94 tonnes
April 29/no change in gold inventory at the GLD/Inventory rests at 804.14 tonnes
April 28/we gained 1.49 tonnes of gold at the GL/Inventory rests at 804.14
April 27/no change in gold inventory at the GLD/rests at 802.65 tonnes
aPRIL 26/ a withdrawal of 2.38 tonnes of gold/inventory rests at 802.65 tonnes
April 25.2016: no change in gold inventory/rests tonight at 805.03 tonnes
April 22/ no changes in gold inventory/rests tonight at 805.03 tonnes
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
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

May 4.:  inventory rests tonight at 825.54 tonnes

end

Now the SLV Inventory
May 4/we had a good size withdrawal of 1.553 million oz from the SLV/Inventory rests at 337.261 million oz
May 3: we had another huge deposit of 1.807 million oz/inventory rests at 338.814 million oz
May 2/a huge in silver inventory at the SLV/a deposit of 1.49 million oz/Inventory rests at 337.007 million oz
April 29.2016/no change in silver inventory at the SLV/Inventory rests at 335.580
April 28/no change in silver inventory at the SLV/Inventory rests at 335.580 million oz
April 27/we had another addition of 856,000 oz into the SLV/Inventory rests at 335.580
aPRIL 26/no change in silver inventory at the SLV/Inventory rests at 334.724 million oz.
April 25.2016/ No change in silver inventory/rests tonight at 334.724 million oz.
April 22/ no changes in silver inventory/rests tonight at 334.724 million oz
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
.
May 4.2016: Inventory 337.261 million oz
end
 
 
1. Central Fund of Canada: traded at Negative 5.9 percent to NAV usa funds and Negative 6.0% to NAV for Cdn funds!!!!
Percentage of fund in gold 61.4%
Percentage of fund in silver:37.2%
cash .+1.4%( May 3.2016).
2. Sprott silver fund (PSLV): Premium to  FALLS to -.63%!!!! NAV (MAY 4.2016) 
3. Sprott gold fund (PHYS): premium to NAV  falls.0.48% to NAV  ( MAY 4.2016)
Note: Sprott silver trust back  into NEGATIVE territory at -.630%% /Sprott physical gold trust is back into positive territory at +0.48%/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 -.63%.  Remember that Eric is to get 75 million dollars worth of silver in a new offering.
 
 
 end
FEDERAL RESERVE BANK OF NEW YORK GOLD REPORT
Federal Reserve bank of NY:  amount of earmarked gold shipped out:
We just received the FRBNY figures for gold:
March FRBNY earmarked gold:  7995 million dollars worth of gold at $42.22 dollars per oz
April FRBNY earmarked gold:  7981 million dollars worth of gold at $42.22 dollars per oz
Total amount of gold shipped out:  14 million dollars @ 42.22 per oz
Thus $14 million divided by $42.22 =  331,596 oz of gold or 10.314 tonnes of gold shipped
Obviously this is headed for Germany.  This is the first shipment of gold since Nov 2015:

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
Mark O’Byrne (goldcore)/Steve St Angelo
Please read the SRSRocco report on silver..a must

Silver Bullion Market Has Key New Player – China Replaces JP Morgan

The silver bullion market has a key new player – Enter the Dragon. The Shanghai Futures Exchange in China is replacing JP Morgan bank and its clients as the most significant new source of demand according to a very interesting blog with some great charts and tables published by SRSrocco Report yesterday.

JP-Morgan-vs-SHFE-Silver-Inventories-NEw

According to the report:

The days of JP Morgan controlling the silver market may be numbered as a new player in the silver market has arrived.  For the past several years, JP Morgan held the most silver on a public exchange in the world.  While the LBMA may hold (or did hold) more silver, their stockpiles are not made public.

Regardless, JP Morgan held the most silver at nearly 74 million oz (Moz) in its warehouse, up until recently.  Over the past two month, JP Morgan’s silver inventories have fallen nearly 7 Moz to 67.1 Moz today:

JP-Morgan-Silver-Stocks-050316

As I mentioned in my previous article, Why Are The Chinese Stockpiling Silver? Big Move Coming?, JP Morgan increased their silver inventories from 4 Moz in April 2011 to 69.4 Moz April 19, 2016.  However, the Shanghai Futures Exchange silver inventories surged from 7.5 Moz in August 2015 to 54.7 Moz on April 19, 2016:

Basically, JP Morgan added an average 16.3 Moz of silver each year for the past years, whereas the Shanghai Futures Exchange added nearly 7 Moz per month. Furthermore, the majority of gains came since the beginning of 2016.  Again, here is my previous Shanghai Futures Exchange silver stock chart from the article linked above:

Shanghai-Futures-Exchange-Silver-Stocks-2015-2016-NEW

As we can see from this chart dated April 19th, the Shanghai Futures Exchange more than tripled their silver inventories since November 2015.  What is even more interesting is the continued buildup over the past two weeks.  Here is an updated chart based on data for May 3rd:

Shanghai-Futures-Exchange-Silver-Stocks-050316.NEW

Over the past two weeks, the Shanghai Futures Exchange added another 179 metric tons (mt) or 5.8 Moz.  Now, if we update the JP Morgan and Shanghai Futures Exchange silver stock chart (from above) we have the following:

JP-Morgan-vs-SHFE-Silver-Inventories-050316

Here we can see that JP Morgan’s total silver inventories have declined from 69.4 Moz to 67.2 Moz, while the Shanghai Futures Exchange silver stocks have increased from 54.7 Moz to 60.6 Moz.  If the Shanghai Futures Exchange continues to add silver at this rate, it will surpass JP Morgan in a two to three weeks.

Comex Registered Silver Inventories Drop Nearly 4 Million Ounces Yesterday

When the CME Group published the recent silver inventory change on the Comex yesterday, nearly 4 Moz were transferred from the Registered to Eligible Category.  The majority of the transfer came from the CNT Depository at nearly 3.5 Moz with 485,325 oz from HSBC:

Comex-Silver-Inventories-050316

Some analysts say these transfers really don’t mean much if the overall inventories stay the same.  That may be true, but there was some reason the CNT Depository transferred 3.5 Moz of silver from their Registered Inventories to the Eligible.

That being said, the Chinese are adding a lot of silver to their Shanghai Futures Exchange warehouses.  The build from 7.5 Moz in August 2015 to over 60 Moz of silver in the beginning of May puts JP Morgan’s four-year inventory growth to shame.

For whatever reason, silver inventories at the Shanghai Futures Exchange warehouses are increasing at a rapid pace while the Comex silver stocks continue to decline.  Comex silver inventories were over 180 Moz in July 2015 and are now only 151 Moz.  This is quite interesting as the Shanghai Futures Exchange inventories started to build from 7.5 Moz in August 2015 to the 60.6 Moz today.

It will be interesting to see how the exchange inventories and price action of silver play out over the next several months.

Enter the Dragon ! See SRSrocco report here


Week’s Market Updates
Is Craig Wright The Creator Of Bitcoin? Frisby and Matonis On ‘Satoshi Nakamoto’

Gold “Chart of The Decade” – Maths Suggest $10,000 Per Ounce Says Rickards

Property Bubble In Ireland Developing Again

Silver Bullion “Momentum Building” As “Supply Trouble Brewing”

Gold News and Commentary
Investors Boost Gold Assets in World’s Top ETF by Most Since `11 (Bloomberg)
Gold hovers below 15-mth peak as dollar firms on US rate talk (Reuters)
Gold at Two-Year High Smothers Demand in Second-Biggest User (Bloomberg)
Gold snaps 6-session win streak as dollar rises (Marketwatch)
Global factory growth nearly stalled in April: PMI (Reuters)

Japan’s Abenomics ‘dead in the water’ after US currency warnings (Telegraph)
Central banks conspire to harvest Bitcoin’s revolutionary technology (Telegraph)
True fascination of bitcoin is not its mystery inventor (Guardian)
Brink of economic collapse — How did this happen? (Profit Confidential)
What comes next – Krugman’s fiscal equivalent of war (Stockman)
Read More Here

Gold Prices (LBMA)
04 May: USD 1,280.30, EUR 1,114.18 and GBP 883.59 per ounce
03 May: USD 1,296.50, EUR 1,118.15 and GBP 881.32 per ounce
29 April: USD 1,274.50, EUR 1,119.45 and GBP 873.80 per ounce
28 April: USD 1,256.60, EUR 1,106.45 and GBP 861.43 per ounce
27 April: USD 1,244.75, EUR 1,100.79 and GBP 853.58 per ounce

Silver Prices (LBMA)
04 May: USD 17.18, EUR 14.96 and GBP 11.86 per ounce
03 May: USD 17.49, EUR 15.10 and GBP 11.92 per ounce
29 April: USD 17.85, EUR 15.67 and GBP 12.22 per ounce
28 April: USD 17.35, EUR 15.29 and GBP 11.92 per ounce
27 April: USD 17.34, EUR 15.34 and GBP 11.87 per ounce

Mark O’Byrne
Executive Director
Published in Market Update
end
And here is the full report of Steve St Angelo as reported above by Mark O’Byrne
(courtesy Steve St Angelo)

Stand Aside JP Morgan, A New Player In The Silver Market Has Arrived

Via SRSroccoReport.com,

The days of JP Morgan controlling the silver market may be numbered as a new player in the silver market has arrived.  For the past several years, JP Morgan held the most silver on a public exchange in the world.  While the LBMA may hold (or did hold) more silver, their stockpiles are not made public.

Regardless, JP Morgan held the most silver at nearly 74 million oz (Moz) in its warehouse, up until recently.  Over the past two months, JP Morgan’s silver inventories have fallen nearly 7 Moz to 67.1 Moz today:

JP-Morgan-Silver-Stocks-050316

As I mentioned in my previous article, Why Are The Chinese Stockpiling Silver? Big Move Coming?, JP Morgan increased their silver inventories from 4 Moz in April 2011 to 69.4 Moz April 19, 2016.  However, the Shanghai Futures Exchange silver inventories surged from 7.5 Moz in August 2015 to 54.7 Moz on April 19, 2016:

JP-Morgan-vs-SHFE-Silver-Inventories-NEw

Basically, JP Morgan added an average 16.3 Moz of silver each year for the past years, whereas the Shanghai Futures Exchange added nearly 7 Moz per month.  Furthermore, the majority of gains came since the beginning of 2016.  Again, here is my previous Shanghai Futures Exchange silver stock chart from the article linked above:

Shanghai-Futures-Exchange-Silver-Stocks-2015-2016-NEW

As we can see from this chart dated April 19th, the Shanghai Futures Exchange more than tripled their silver inventories since November 2015.  What is even more interesting is the continued buildup over the past two weeks.  Here is an updated chart based on data for May 3rd:

Shanghai-Futures-Exchange-Silver-Stocks-050316.NEW

Over the past two weeks, the Shanghai Futures Exchange added another 179 metric tons (mt) or 5.8 Moz.  Now, if we update the JP Morgan and Shanghai Futures Exchange silver stock chart (from above) we have the following:

JP-Morgan-vs-SHFE-Silver-Inventories-050316

Here we can see that JP Morgan’s total silver inventories have declined from 69.4 Moz to 67.2 Moz, while the Shanghai Futures Exchange silver stocks have increased from 54.7 Moz to 60.6 Moz.  If the Shanghai Futures Exchange continues to add silver at this rate, it will surpass JP Morgan in a two to three weeks.

Comex Registered Silver Inventories Drop Nearly 4 Million Ounces Yesterday

When the CME Group published the recent silver inventory change on the Comex yesterday, nearly 4 Moz were transferred from the Registered to Eligible Category.  The majority of the transfer came from the CNT Depository at nearly 3.5 Moz with 485,325 oz from HSBC:

Comex-Silver-Inventories-050316

Some analysts say these transfers really don’t mean much if the overall inventories stay the same.  That may be true, but there was some reason the CNT Depository transferred 3.5 Moz of silver from their Registered Inventories to the Eligible.

That being said, the Chinese are adding a lot of silver to their Shanghai Futures Exchange warehouses.  The build from 7.5 Moz in August 2015 to over 60 Moz of silver in the beginning of May puts JP Morgan’s four-year inventory growth to shame.

For whatever reason, silver inventories at the Shanghai Futures Exchange warehouses are increasing at a rapid pace while the Comex silver stocks continue to decline.  Comex silver inventories were over 180 Moz in July 2015 and are now only 151 Moz.  This is quite interesting as the Shanghai Futures Exchange inventories started to build from 7.5 Moz in August 2015 to the 60.6 Moz today.

It will be interesting to see how the exchange inventories and price action of silver play out over the next several months.

 

end

Central banks would love the technology behind Bitcoin.
(courtesy UKTelegraph/Jeremy Warner/GATA)

Central banks conspire to harvest bitcoin’s revolutionary technology

Submitted by cpowell on Tue, 2016-05-03 21:57. Section: 

By Jeremy Warner
The Telegraph, London
Tuesday, May 3, 2016

For someone who says he shuns the limelight, Craig Wright has chosen an oddly high profile way of laying claim to the title of digital genius behind the Bitcoin phenomenon.

If he wanted to keep his identity secret, did he really need to hire a public relations consultancy to broadcast it to the world, or to provide an elaborate series of “proofs” that he is indeed Satoshi Nakamoto, the pseudonym by which the Bitcoin mastermind has long been known? …

The real significance of bitcoin is not its value as a digital currency but the algorithm that lies behind it — a technology called blockchain. What this in essence does is allow payments to be made without reference to a centralised ledger. Instead of relying on a trusted third party to clear and settle any given transaction, the blockchain provides a so-called “distributed ledger,” where the transaction becomes widely recorded by all users and therefore verified in multiple form. Blockchain thereby renders existing payments systems pretty much obsolete.

In itself, this is revolutionary enough. Santander InnoVentures, the Spanish bank’s fintech investment fund, recently estimated that blockchain could save lenders $20 billion a year in cross-border settlement payments alone. Another study by Autonomous Research estimated that the cost of clearing and settling securities in G7 countries was $54 billion a year. Theoretically, blockchain could obviate all these costs. …

… For the remainder of the commentary:

http://www.telegraph.co.uk/business/2016/05/03/central-banks-conspire-to…

 

end

 

John Embry notes that investors of mining shares are no longer scared by the antics of the bullion banks with their raids:

 

(courtesy John Embry/Kingworldnews)

Mining share buyers aren’t scared by bullion banks, Embry says

Submitted by cpowell on Tue, 2016-05-03 22:07. Section: 

6:05p ET Tuesday, May 3, 2016

Dear Friend of GATA and Gold:

Sprott Asset Management’s John Embry today tells King World News that bullion banks seem more desperate than ever to contain the rise of the monetary metals but buyers of gold and silver mining shares haven’t been scared off. Embry’s interview is excerpted at the KWN Internet site here:

http://kingworldnews.com/when-the-global-ponzi-scheme-is-exposed-there-i…

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

 

end

Your early WEDNESDAY morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight

 
 

:

1 Chinese yuan vs USA dollar/yuan DOWN to 6.5035 (huge devaluation) / Shanghai bourse  CLOSED DOWN 1.371 OR 0.05%  / HANG SANG CLOSED DOWN 151.11 OR 0.73%

2 Nikkei closed FOR HOLIDAY /USA: YEN RISES TO 106.72

3. Europe stocks opened ALL IN THE RED  /USA dollar index UP to 93.25/Euro DOWN to 1.1488

3b Japan 10 year bond yield: FALLS   TO -.124%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 107.04

3c Nikkei now WELLBELOW 17,000

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

3e WTI::  43.75  and Brent: 45.12

3f Gold DOWN  /Yen DOWN

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

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

3h Oil 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 FALS to 0.219%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate RISE to 10.53%/: 

3j Greek 10 year bond yield RISE to  : 8.77%   (YIELD CURVE NOW DEEPLY INVERTED)

3k Gold at $1276.50/silver $17.22(7:45 am est) BROKE RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble UP 26 in  roubles/dollar) 66.09

3m oil into the 43 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 TRADES TO 106.72 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 .9556 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0981 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 FALLS to  + .219%

/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 1.79% early this morning. Thirty year rate  at 2.65% /POLICY ERROR)

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

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

 

Global Stocks Slide As Dollar Continues Rising: Has The “Pricing In” Of Trump Begun

While there was no unexpected overnight central bank announcement unlike yesterday’s surprise by the RBA which unleashed volatility havoc in the FX market, which promptly spilled over into all asset classes, overnight stocks around the world saw another leg lower without a tangible catalyst, while EM currencies fell to a one-month low after two Fed presidents raised concern investors had become too complacent in their belief that U.S. interest rate raises will stay on hold. Or perhaps all that is happening is that after ignoring Trump, the market is starting to finally price in the possible reality of the Donald in the White House (although as Jeff Gundlach pointed out, Trump would be a far better president for the economy and the market than Hillary or Bernie).

Equity market sentiment seems to be rolling over globally as the wind begins to come out of the oil price rally,” said Angus Nicholson, market analyst at IG in Melbourne. “Given the move in commodity prices, the materials and energy sectors are set for a difficult session.”

The dollar has climbed against all its 16 major peers since Monday’s close as Atlanta Fed President Dennis Lockhart called a June rate increase “a real option,” while San Francisco’s John Williams said he would support such a move at the next meeting provided the U.S. economy stayed on track. While both are non-voting members of the Federal Open Market Committee, the outlook for Fed policy is under scrutiny with data on nonfarm payrolls due at the end of the week.

“While the probability of a hike next month is very low, I do think the market is underpricing the chances of a hike after that,” Michael Wang, a strategist at hedge fund Amiya Capital told Bloomberg. “And to that extent emerging markets may be vulnerable.”

As the chart below shows, the market is clearly unprepared for a rate hike and is pricing in a 90% chance of no Fed move next month.

As a result, stocks in Europe and developing nations fell for a fourth straight day while Asian shares have now fallen for the 6th session, their longest losing streak since the February lows. The dollar extended Tuesday’s recovery from the weakest level in almost a year, while Russia’s ruble tumbled the most in more than a week and Malaysia’s ringgit dropped to the lowest since March. After briefly bouncing on yesterday’s API inventory data, oil resumes its decline before official DOE stockpile data scheduled for release Wednesday that’s forecast to show a fuel glut is expanding.

Europe’s Stoxx 600 Index was down 0.6% with all industry groups in the red. Anheuser-Busch InBev NV slid 3.1% after reporting sales and profit growth that missed estimates. BHP Billiton Ltd. tumbled after it was named in a $44 billion law suit over a dam rupture in Brazil that caused deaths and severe environmental damage. In the green were Siemens, Europe’s largest engineering company, up 0.6% and Societe Generale which rose 3.8% after both reported better earnings than analysts forecast.

The MSCI Emerging Markets Index of stocks fell 1 percent to the lowest in almost a month. Russia’s Micex Index dropped 1.1 percent as trading resumed following a two-day holiday. The Hang Seng China Enterprises Index fell 0.6%, dropping for a third day, and the Shanghai Composite Index slipped less than 0.1 percent. US equity futures were down 0.7%, after dropping 0.9% in the last session.

Market Wrap

  • S&P 500 futures down 0.7% to 2042
  • Stoxx 600 down 0.5% to 334
  • FTSE 100 down 0.6% to 6147
  • DAX down 0.4% to 9883
  • German 10Yr yield up less than 1bp to 0.21%
  • Italian 10Yr yield up 5bps to 1.5%
  • Spanish 10Yr yield up 5bps to 1.61%
  • S&P GSCI Index down less than 0.1% to 348.2
  • MSCI Asia Pacific down 0.9% to 128
  • Nikkei 225 closed
  • Hang Seng down 0.7% to 20526
  • Shanghai Composite down less than 0.1% to 2991
  • S&P/ASX 200 down 1.5% to 5271
  • US 10-yr yield down less than 1bp to 1.79%
  • Dollar Index up 0.12% to 93.06
  • WTI Crude futures down 0.1% to $43.60
  • Brent Futures down less than 0.1% to $44.95
  • Gold spot down 0.6% to $1,279
  • Silver spot down 0.5% to $17.33

Global Top News

  • JetBlue and Bombardier Said to Resume Talks on C Series Order: Agreement would follow recent purchase of 75 jets by Delta
  • Aeropostale Files for Bankruptcy in Latest Retailer Meltdown: Changing tastes, fast-fashion rivals prove too much for chain
  • Takata Survival Seen Getting Harder With Wider Air-Bag Recalls: Co.’s talks with U.S. regulators could lead to recall of millions of additional vehicles
  • Altice Gets Approval From FCC to Acquire Cablevision Systems: Co. is pleased with decision, sticks with plans to complete deal in 2Q
  • Trump Nomination All But Certain After Indiana Win, Cruz Quits: Sanders surprises Clinton with defeat in Democratic race
  • Pfizer Said to Approach Medivation on Potential Buy: Reuters
  • Hellman & Friedman Said Near $7.5b Purchase of MultiPlan: WSJ
  • Target to Overhaul Rules, Fines to Quicken Supply Chain: Reuters
  • TSMC to Make Processors for New Apple Products: Comm. Times

Looking at regional markets, Asia stocks traded lower following Wall St.’s losses as growth concerns and commodity weakness dampens sentiment. ASX 200 (-1.5%) saw losses in energy and basic materials after WTI crude futures fell below USD 44/bbl and iron ore decline over 4%, while index heavyweight BHP Billiton also underperformed after Brazil filed a USD 43b1n civil lawsuit against Co.’s Samarco JV. Chinese markets were also weighed by the commodity declines, although the Shanghai Comp (-0.1 %) has fared better than its peers after the PBoC continued to provide liquidity into the interbank market with another CNY 100bIn injection. As a reminder, Japanese markets remain closed for Greenery Day

Asian Top News

  • PBOC Opens Taps to China Policy Banks in Bid to Sharpen Stimulus: Lending for policy banks now approved at start of each month
  • Indonesia Growth Fails to Pick Up in Setback to Jokowi Reforms: 1Q GDP increases 4.92% y/y vs est. 5.07%
  • Hong Kong Bank Funds Said Frozen for Some Tangled in 1MDB Probe: Individuals affected probed by authorities outside Malaysia
  • Xi’s Silk Road Dream for China Hits a Speed-Bump in Thailand: S.E. nation rejects offer of financing for rail project
  • Mobius Says Buy Commodity Stocks as Rebound’s Just Beginning: Templeton Emerging Markets adding holdings of China producers
  • Ayala Land Says 1Q Profit Rose 14% Y/y, Spent 23.4b Pesos: 1Q sales +8% to 26.97b pesos

In Europe, equities trade modestly in the red after a slew of earnings updates from notable large caps dictated the state of play. The underperformer of the morning has been the FTSE 100 with shares of mining heavyweight BHP Billiton tumbling after reports that Brazil have filed a USD 43b1n lawsuit against the Co., while the DAX moved south of 9950 having tripped below yesterday’s low.

From a fixed income perspective, Bunds initially edged lower with yields rising and as such the curve notably bear steepened. Additionally, German paper underperformed relative to USTs given the large amount of supply expected hitting the market with government bond auctions from France, Germany and the UK totalling around EUR 14bIn. However, with the auctions now out the way, Bunds have pared much of their opening losses to head into the North American open around the 163.00 level.

European Top News

  • Shell Quarterly Profit Beats Estimates on Refining Earnings: Company cuts billions more dollars from capital spending plan
  • AB InBev First-Quarter Sales Miss Estimates on Brazil: U.S. sales to retailers fell 0.3% on adjusted calendar basis
  • Credit Suisse Sells Debt Assets to TPG Arm for $1.27 Billion: Sale results in charge of about $100m for Credit Suisse
  • Societe Generale Beats Profit Estimates, Plans Deeper Cuts: Bank announces additional cost cuts of EU220m
  • Siemens Quarterly Profit Beats Estimates on Power Orders: Cost-savings goal lifted to as much as EU950m this year
  • Adidas Decides to Sell Golf Division to Focus on Clothing: Talks planned for disposal of TaylorMade, Adams and Ashworth
  • Euro-Area Economy Starts Quarter in a ‘Low Gear,’ Markit Says: Composite PMI at 53 in April, services gauge at 53.1

In FX, the dollar appreciated 0.1 percent to $1.1486 per euro and advanced 0.2 percent to 106.79 yen. Japanese Finance Minister Taro Aso said Tuesday, when the currency reached an 18-month high, that the government is monitoring speculative foreign-exchange trades and will respond if needed. The yen has strengthened more than twice as much as any other major currency in the past week as the Bank of Japan unexpectedly refrained from adding to stimulus at a policy review.

The MSCI Emerging Markets Currency Index fell for a third day, sliding 0.7 percent. Malaysia’s ringgit dropped 1.4 percent, the most since September, and South Korea’s won weakened 1.2 percent. “The market is grasping the view that the dollar probably fell a little too much, and a rebound could be ahead, and this seems to have deteriorated sentiment towards emerging-market assets including the won,” said Jeon Seung Ji, a currency analyst in Seoul at Samsung Futures Inc.

Risk sentiment is steady as a result, and enough to keep the JPY pairs in tight ranges for now. USD/JPY tested 107.50 higher up, but clearly rejected this, but on the downside, the recent USD revival means there is no rush to test the mid 105.00’s again just yet. EUR/USD buyers from 1.1470 — previous resistance, but no convincing come-back as yet. Data-wise, EU services were a touch off expectations, more so retail sales. UK construction PMIs were also below forecasts, but to limited effect.

In commodities, WTI and Brent have both traded flat for the session after falling in recent days. The level to look for in WTI on the downside would be USD 43.28/bbl as this could provide some support, and if this level breaks, the next notable level is USD 41.80/bbl. Also in the commodities sector Gold prices retreated further away from the USD 1300/oz level and on a technical note the key support level to look out for is the USD 1272.00 level, Silver has also come off highs and now resides at the 23.6 fib level at USD 17.27/oz also the RSI is showing a slight bullish divergence which could mean a brief relief move to the upside. Elsewhere copper and iron ore also saw lacklustre trade amid global growth concerns and also weighed as USD recovered from near 16-month lows.

On the US calendar,  it is a busy session kicked off by the April ADP employment change print (195k expected) which will be closely watched ahead of payrolls on Friday. The March trade balance is then due to be released, followed by Q1 nonfarm productivity and unit labour costs data. Later on today we’ll then get those services and composite PMI’s, followed imminently by the ISM non-manufacturing reading for April. Expectations are for a modest pick-up to 54.8 which if true will confirm the biggest spread between the ISM series since January. March factory orders data is also due along with any final revisions to the durable and capital goods orders data.

Bulletin Headline Summary from RanSquawk and Bloomberg

  • European equities have spent much of the session in the red, while Bunds have pared much of their opening losses in the wake of a slew of European auctions
  • USD-Index continues to grind higher ahead of the North American crossover, paring some of the recent heavy losses
  • Today’s highlights include US ADP Employment, Services PMI, US Factory Orders and ISM Non-Manufacturing and DoE crude oil inventory report
  • Treasuries steady in overnight trading as global markets and precious metals sell off; U.S. Treasury will release quarterly refunding announcement at 8:30am ET.
  • Low interest rates are helping to reduce euro-area public debt, but rigorous enforcement of European Union fiscal rules is also needed to bring the burden down by a “sizable” amount, the European Central Bank said
  • Chinese debt investors are turning bearish at just the wrong time for the nation’s corporate borrowers, which face a record 3.7 trillion yuan ($571 billion) of local bond maturities through year-end
  • China’s central bank is turning on the credit taps to its policy banks as it seeks to support the economy by channeling credit to designated areas of the government’s choosing
  • Record-low interest rates and wild market swings are eroding profit at Europe’s banks, with no end in sight. From UBS’s wealth-management unit to Commerzbank’s consumer-lending business, income is shrinking as margins get squeezed and clients avoid trading
  • Societe Generale SA reported an unexpected increase in first-quarter profit, boosted by consumer banking, and announced plans to deepen cost cuts at its investment bank. The shares jumped
  • Donald Trump became the presumptive Republican presidential nominee on Tuesday after driving his top challenger, Texas Senator Ted Cruz, from the race with a crushing Indiana primary win
  • Sovereign 10Y yields mixed; European and Asian equity markets drop (Japan closed); U.S. equity-index futures fall. WTI crude oil drops, metals lower

DB’s Jim Reid concludes the overnight wrap

Small ash clouds gathered over markets yesterday as it was back to risk-off mode as investors contemplated a number of variables all of which contributed to a distinctly weaker tone through the session. FX volatility has been a big theme of late and yesterday was case in point with some sharp and wild moves across key currencies. Indeed the intraday ranges for the Euro, Yen and Sterling were 1.04%, 1.07% and 1.63% respectively. The Euro in fact touched 1.162 yesterday matching the highs of August last year, while the Yen was as strong as 105.55 at one stage and the strongest in 18-months. As a result the Dollar index broke below 92 in early trading (and so nearing 2014 levels) before swinging back to a late session gain (of +0.34%) before the close of play. Still, the range topped 1.20% and if we look further afield at EM currencies there were losses of at least 1.50% for currencies in Turkey, Brazil, Mexico, South Africa and Colombia. The RBA rate cut also contributed to a near 2.5% decline for the Aussie Dollar.

Also not helping was a weaker session for commodities. WTI continued its slide after falling -2.52% and is now back below $44/bbl having traded as high as $46.78 intraday at the back end of last week. That earlier softer than expected manufacturing data in China also contributed to a poor day for base metals with the likes of Copper (-2.57%), Aluminium (-2.74%) and Iron Ore (-4.27%) all falling heavily. Even Gold (-0.39%) went against its usual safe haven status. So that saw mining and energy names get heavily hit, while banks stocks also had a day to forget after disappointing earnings reports out of UBS and Commerzbank saw their share prices tumble 8% and 10% respectively and so lead the sector broadly lower.

By the close of play the Stoxx 600 was down -1.66%, while the S&P 500 closed out the day with a -0.87% loss and so more than wiped out Monday’s gains. The index has now retreated on three out of the last four sessions and it appears that the rally which has essentially been going since mid-February is losing momentum. Credit markets mirrored the weaker performance for risk. In Europe the iTraxx Main and Crossover indices ended 3bps and 10bps wider (with financials indices hit harder) while in the US the CDX IG index closed over 3bps wider. Rates markets were the biggest beneficiaries yesterday. 10y Treasury yields were nearly 8bps lower and closed back below 1.80% for the first time in two weeks, while similar maturity Bund yields rallied to the tune of nearly 7bps.

This morning in Asia we’ve seen bourses largely follow that weak lead from the US last night and trade in the red for the most part. The Hang Seng (-1.19%), Kospi (-0.62%) and ASX (-1.05%) in particular are down the most, while losses for bourses in China have generally been more modest. The Shanghai Comp is down -0.22% currently. Markets in Japan are still closed for a public holiday, although the Yen is actually half a percent weaker this morning and bucking the recent trend.

With no data released overnight, the other big focus this morning is the US Presidential Election race. After Trump secured the Indiana primary, the big news since is the announcement that Ted Cruz has decided to withdraw from the Republican race and so all but confirms Trump as the Republican nominee. Sanders defeated Clinton in the Indiana primary for the Democratic race, but it looks unlikely to stop Clinton now likely facing off against Trump.

Moving on. Despite the still lowly probability (12%) being priced into a rate hike by the Fed in June, some attributed yesterday’s reversal in the US Dollar off the lows to the comments from Fed officials yesterday. Both San Francisco Fed President Williams and Atlanta Fed President Lockhart stuck to the Fed script by not ruling out the possibility of a move next month. Lockhart said specifically that ‘I would put more probability on it being a real option’ and the ‘communication of committee participants and members between now and mid-June obviously should try to prepare the markets for at least a realistic range of possibilities’. Meanwhile, Williams went as far as to say that should inflation continue to rise towards the Fed’s target and growth rebounds towards his 2% target for the year, then ‘it would be appropriate’ to ‘go that next step’ in hiking in June.

In fact we’ve heard from Lockhart again overnight and while the bulk of his comments reinforced those made during the day, he also added that the uncertainty stemming from the Brexit referendum ‘has some potential to loom large as we approach the June meeting’. June is all of a sudden looking like a big month for markets and it’s worth highlighting that in the time between June 15th and June 26th, we’ll have the FOMC meeting (on the 15th), BoJ meeting (on the 16th), BoE meeting (on the 16th), UK EU referendum (on the 23rd) and a possible Spain election on the 26th. In the background we’ll also have the ECB starting their corporate bond purchases, with their success likely to be a big factor in credit markets in June and beyond.

Elsewhere, despite the weaker day for markets yesterday the economic data out of the US was actually fairly reasonable. The IBD/TIPP economic optimism reading in May firmed 2.4pts to 48.7 (vs. 46.5 expected) and so reaching the highest level in a year. Meanwhile vehicle sales rose last month. Total vehicle sales increased to an annualised rate of 17.3m (vs. 17.4m expected) having plummeted to 16.5m in March. Domestic vehicle sales printed at 13.5m (vs. 13.4m expected), a rise of 500k. Finally the ISM NY was up a fairly robust 6.6pts to 57.0.
In Europe the main data of note was out of the UK where the April manufacturing PMI came in at a disappointing 49.2 – the first sub 50 reading for 3 years. That represented a decline of 1.5pts from March after expectations had been for a rise to 51.2. Elsewhere the Euro area PPI reading printed higher than expected last month at +0.3% mom (vs. 0.0% expected).

Looking at today’s calendar, this morning in Europe the calendar is dominated by the release of the April services and composite PMI’s. We’ll get the final revisions for the Euro area, Germany and France as well as the data for the peripheral countries. Euro area retail sales are also worth keeping an eye on today. Meanwhile it’s a packed calendar across the pond this afternoon. Kicking things off will be the April ADP employment change print (195k expected) which will be closely watched ahead of payrolls on Friday. The March trade balance is then due to be released, followed by Q1 nonfarm productivity and unit labour costs data. Later on today we’ll then get those services and composite PMI’s, followed imminently by the ISM non-manufacturing reading for April. Expectations are for a modest pick-up to 54.8 which if true will confirm the biggest spread between the ISM series since January. March factory orders data is also due along with any final revisions to the durable and capital goods orders data. Away from the data we’re due to hear from the Fed’s Kashkari, while the ECB’s Weidmann is also scheduled to speak today. Earnings wise we’ve got 38 S&P 500 companies scheduled to report with the highlights being Kraft Heinz and Metlife. In Europe we’ll get earnings reports from 29 Stoxx 600 companies including Royal Dutch Shell. So plenty to keep us busy.

end

ASIAN AFFAIRS

i)Late  TUESDAY night/ WEDNESDAY morning: Shanghai closed DOWN 1.371 PTS OR 0.05%  /  Hang Sang closed DOWN 151.11 OR 0.73%. The Nikkei closed FOR HOLIDAY  . Australia’s all ordinaires  CLOSED DOWN 1.54% Chinese yuan (ONSHORE) closed DOWN at 6.5035.  Oil ROSE  to 43.75 dollars per barrel for WTI and 45.12 for Brent. Stocks in Europe DEEPLY IN THE RED . Offshore yuan trades  6.5135 yuan to the dollar vs 6.5035 for onshore yuan.CHINA FIRES ANOTHER SHOT ACROSS THE BOW BY LOWERING ITS YUAN (SEE BELOW)

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) JAPAN ISSUES

Japan temporarily intervenes the lowering the yen but to no avail

(courtesy zero hedge)

Did The Bank Of Japan Just Step In To Sell Yen?

Just another central bank intervention in what is now a daily occurrence?

Standard 75 pip vertical ramp after NY hours…and before Japan opens:

Tick:

Notably heavy volume in futures:

Stop run? One wonders what the half life of this move will be?

END

b) CHINA ISSUES

China again sends a strong message to the USA not to raise the USA dollar or else the POBC will devalue the yuan hugely: that message sent all bourses into the dumpster immediately.

(courtesy zero hedge)

US Futures Tumble After China Devalues Yuan By Most Since August Collapse

The ‘odd’ regime shift in the relationship between USDJPY and US equities continues overnight. Following some visible-handedness and follow-through momentum, Yen is weakening against the USD – normally a big flashing green sign for risk-on pajama traders butChina’s biggest Yuan devaluation in 9 months (since the August turmoil) seems to have stolen the jam out of the bull’s donut as US equity futures extend losses, AsiaPac credit risk jumps, and USD strength is weighing on crude prices.

China sent another strong message tonight...

Weighing on US equities…

Despite Yen weakness…

end
Pork prices have risen considerably this past year and it threatens social unrest as pork is a stable in all Chinese diets.  Thus  to prevent disorder, the bosses of China has unleashed their own strategic porcine reserve to lower prices:
(courtesy zero hedge)

China Unleashes SPR (Strategic Porcine Reserve) As Pork Price Surge Threatens Social Unrest

As we detailed recently, in addition to its sub-prime debt crisis, China is dealing with an issue that is just as troubling, if not more so: Porkflation. Due to a drop in global production of pig meat, pork prices in China have been skyrocketing at both the wholesale and retail levels.

Retail prices

And wholesale prices

As we also noted previously, Pork’s role in CPI is also being felt (factors heavily into the CPI basket), as China’s broad-based CPI is creeping up.

Porkflation is a very delicate, and very concerning issue for China. The massive amounts of layoffsthat China has experienced as a result of a slowing economy has already lead to some social unrest, andpork prices exploding higher for those unemployed will only add fuel to that simmering fire. Social unrest is something that we’ve been discussing for quite some time as a critical risk factor in China, something that the mainstream media continues to overlook (primer here). As a reminder, the number of strikes that China has experienced has significantly grown over the years, and a growing social unrest is something that the government does not want to deal with, especially as the economy implodes and needs to be the focus for now.

As such, Beijing has announced that it will release 3.05m kilograms of frozen pork reserve into the capital’s market between May 5 and July 4, in an attempt to lower prices.

The impact on prices may be short lived however, as China may not have the sows to be able to continue the subsidy.

China’s total sow stock has fallen…

Evan as pork imports have climbed to record levels, going back to 2008.

With that said, one can understand why China won’t be implementing a broad based economic stimulus any time soon that would push inflation even higher (RRR cuts or QE). Instead, in an effort to not completely push the citizenry into panic mode, injecting credit piecemeal into the economywill be the path forward – for now.

end

EUROPEAN ISSUES

Europe just made a deal with the devil:  Here comes the Turkish flood as the EU now allows travel to 80 million Turks

(courtesy zero hedge)_

Here Comes The Turkish Flood: EU Commission Backs Visa-Free Travel For 80 Million Turks

Earlier this week we observed that in what may be Europe’s latest mistake, the European Union is about to grant visa-gree travel to 80 million Turks: a key concession that Erdogan obtained as a result of the ongoing negotiations over Europe’s refugee crisis which has pushed Turkey into the key player spotlight. And then, overnight, the European Commission officially granted its support to a visa-free travel deal with Turkey after Ankara threatened to back out of a landmark migration deal. It proposed to lift visa requirements by the end of June.

The decision was confirmed by European Commissioner for Competition Margrethe Vestager on Twitter.

“The European Commission is today proposing to… lift the visa requirements for the citizens of Turkey,” Vestager tweeted.

The deal is not yet done: EU governments and the European Parliament still have to approve visa-free travel for Turkey, however this looks larely like a formality. As we explained before Turkey holds all the chips and if this key condition is not approved, Turkey will merely start releasing the millions of pent up refugees behind its borders.

As a reminder, in April, Turkey threatened to back out of the migration agreement with the EU, unless travel rules were eased for Turkish citizens when entering the EU. The deal went into effect on March 21. The agreement stated that Ankara promised to accept repatriated refugees from Greece with no EU entry permits, in exchange for sending the same number of vetted Syrian refugees. In return, Turkey would be given up to €6 billion in European funding over the next five years.

“Turkey has made impressive progress, particularly in recent weeks, on meeting the benchmarks of its visa liberalization roadmap. There is still work to be done as a matter of urgency, but if Turkey sustains the progress made, they can meet the remaining benchmarks,” EC Vice President Frans Timmermanssaid.

That’s why the European Commission is “putting a proposal on the table which opens the way for the European Parliament and the member states to decide to lift visa requirements, once the benchmarks have been met,” he added.

As RT reported, according to the adopted document, visa-free travel will apply to all EU member states except for Ireland and the UK, who have their own visa requirements, and to the four Schengen-associated countries (Iceland, Liechtenstein, Norway and Switzerland).

The exemption concerns only short stays of up to 90 days (in any 180-day period) for business, tourist or family purposes, among others. The visa exemption does not provide for the right to work in the EU,” the document said. Good luck, however, trying to track down those millions who are about to enter Europe and work, well, illegally.

The EC also proposed to strengthen a “suspension mechanism” to make it easier for EU member states “to notify circumstances leading to a possible suspension and enabling the Commission to trigger the mechanism on its own initiative.”

Among entry conditions for accessing the Schengen area for Turkish citizens will be “the need to be able to prove their purpose of travel and sufficient subsidence means,” the paper added.

Meanwhile, earlier on Wednesday Turkish Foreign Minister Mevlut Cavusoglu said Ankara is about to complete the work on visa-free travel to the EU for its citizens, the country’s NTV channel reported.

The news about possible visa-free travel between Turkey and EU made headlines on Monday. An EU official told Reuters that Turkey has fulfilled 65 requirements, which means the number of conditions satisfied doubled in less than two weeks. As of the end of April, Turkey had reportedly met less than half of the conditions required.

Amusingly, also on Monday the Turkish cabinet adopted a bill allowing visa-free travel for all EU citizens, including Greek Cypriots. Though visa requirement will be lifted for all Greeks in Cyprus, a Turkish official stressed to Reuters that Ankara doesn’t recognize Cyprus. “This doesn’t mean the recognition of Cyprus. If the EU abolishes visas for Turkish citizens, then we will also abolish visas for the remaining EU countries,” the official said on condition of anonymity. “Right now, Greek Cypriots can already travel to Turkey, but we are issuing their visa on a separate paper. With this new arrangement they won’t need a visa.”

In summary: Europe made a deal with the proverbial devil in the face of Erdogan. And now it must live with the consequences.

END
It begins:  the war on paper currency official begins with the ECB’s removal of the EU 500 note.  This will be the start of new aggressive NIRP policies:
(courtesy zero hedge)

The War On Paper Currency Officially Begins: ECB Ends Production Of EU500 Bill

Following the denial in February that this action is in any way about reducing cash, The ECB has made its decision on the EUR500 Bill:

  • *ECB ENDS PRODUCTION AND ISSUANCE OF €500 BANKNOTE
  • *ECB SAYS ISSUANCE OF EU500 NOTE TO STOP AROUND THE END OF 2018
  • *ECB SAYS OTHER EURO BANKNOTES WILL STAY IN PLACE
  • *ECB: EU500 CAN BE EXCHANGED AT CEN BANKS FOR UNLIMITED TIME

And just like that the second highest denominated European bank note in circulation (after the CHF1000 Bill) is dead…

And so now, everyone rushes into the CHF 1000 note.

So what, big deal, eliminate it. The people will still have 5, 10, 20, 50, 100 and 200 euro bills right.

As we wrote previously, the answer is not that simple at all. Recall that the €500 note is the second highest currency denomination in G10, after the CHF1,000 note. More importantly, the total value of €500 notes in circulation amounts to €306.8bn and has been rising as shown in this BofA chart:

Furthermore, as a share of the value of total euros in circulation, the €500 note is the second-highest, after the €50 note.

This is what we said in February:

In other words, if overnight the €307 billion worth of €500 bills were eliminated, the notional value of the entire amount of European physical currency in circulation would decline by 30% to €700 billion!

And there you have it: while it may not be banning all European cash outright, we are confident the ECB would be delighted if one third of it was to start, while pretending to be fighting financial crime, terrorism, corruption and drug dealers. 

Of course, what Europe would be truly doing is setting the scene for ever more aggressive NIRP, and by removing the highest denomination bank notes, it would make evading negative that much more difficult and costly (albeit would certainly favor gold).

That’s not all: as Bank of America pointed out, abolishing the €500 note may even end up even weakening the European currency:

… we would expect that abolishing a note that represents almost 30% of the total Euros in circulation would be negative for the currency, keeping everything else constant. The share of the €500 note in the total value of Euros in circulation has been falling since 2009 and this has coincided with a weakening Euro in real effective terms. This is not evidence of causality, but we should not ignore it.

If we are right, the Euro will weaken, primarily against the USD and the CHF. The USD is the most liquid currency and we would expect it to capture a large share of the drop in the demand for the Euro as a store of value. However, the CHF could also benefit, having the largest note denomination in G10 economies. Indeed, the CHF1000 note is already very popular, representing more than 60% of the CHF  notes in circulation, unless the SNB follows the example of the ECB and also abolishes the CHF1000 note.

BofA is right, unless of course, in this global race to the bottom where every central bank tit has other central bank tats as a direct response, first the SNB “scraps” the CHF1000 bill, and then the Federal Reserve follows suit and listens to Harvard “scholar” and former Standard Chartered CEO Peter Sands who just last week said the US should ban the $100 note as it would “deter tax evasion, financial crime, terrorism and corruption.”

Go ahead and cut, then: after all who really needs the Benjamins, right? Well, here’s the thing:

Chart of value of currency in circulation, excluding denominations larger than the $100 note. Details are in the Data table above.

As the Treasury chart above shows, $100 bills account for for $1.08 trillion of the $1.38 trillion total in circulation. So should the Fed react to the ECB’s “scrapping” of the €500 bill, which accounts for 30% of the value of currency in circulation, then the Fed would respond in kind, by eliminating 78% of all paper currency in circulation by value.

Not a bad way to launch a global ban on paper currency ahead of a global NIRP regime, and all, of course, in the name of fighting “tax evasion, financial crime, terrorism and corruption.”

 end
oh!!oh!! this will be trouble for the UK as housing bubble just blew up.  They are offering discounts of 20% on newly constructed condo s trying to get rid of them:
(courtesy zero hedge)

As UK Housing Bubble Bursts, Barclays Unleashes 100% LTV Mortgages Again

Just a month after the UK’s luxury housing bubble burst, it appears the nice friendly bankers at Barclays are looking for some scapegoats to flip their condos to.

In London, as Bloomberg reported, demand has slumped so badly that developers are offering discounts of up to 20% for their newly constructed homes. And just as the case was in Manhattan, it’s a result of the UK putting in a speed bump. The UK recently increased taxes on those deemed to be purchasing a second home, specifically designed to slow the pace of overseas investment.

According to Bloomberg, the U.K. government’s plan to increase sales taxes on second homes in Britain will also apply to people who live abroad.

From April, buyers of second homes and buy-to-let properties in the U.K. will be subject to stamp-duty sales tax that’s 3 percentage points higher than those who are buying a home to live in, U.K. Chancellor of the Exchequer George Osborne announced in November. In deciding whether an individual is purchasing an additional home, the government will also consider assets outside the U.K., according to a consultation document published on Monday.

 

“This means that if someone is purchasing their first or only property in England, Wales or Northern Ireland, they may pay the higher rates if they own property outside these areas,” the document shows.

 

Demand from overseas buyers has contributed to a jump in London house prices, and off-plan sales abroad helped developers finance projects including Battersea Power Station. House prices in the city rose 7.7 percent in the year through October, according to the Office for National Statistics.

The takeaway then is that the housing recovery has been driven primarily by a steady flow of foreign investment, and not necessarily the underlying economic fundamentals improving…

And so bankers are looking to kep the ponzi dream alive by any means possible.

In what appears like a desperate act of rearranging deck chairs on the titanic (or dancing while the music is playing like in 2007/9), The Daily Mail reports, Barclays has brought back the 100 per cent mortgage – the first major bank to do so since the last financial crisis

Its decision will give hope to first time buyers, who can get a three-year fixed rate deal at 2.99 per cent without putting up their own cash.

 

Until now buyers would need to give the bank at least a five per cent cash deposit based on the purchase price.

 

Such 100 per cent mortgages were axed after lenders were criticised for making irresponsible loans – and Barclays itself narrowly avoided a bail-out after the financial crash in 2008.

 

Rachel Springall, a spokesman for website Moneyfacts.co.uk, said that Barclays’ large high street presence is likely to make it particularly attractive to those struggling to raise a deposit.

 

She said: ‘At 2.99% the three-year fixed mortgage is reasonably priced, but buyers must be aware that their parents or guardians must deposit the full 10% of the property price and they will not have access to this money for three years.

 

‘Guarantor mortgages spread the risk among both the buyer and the depositors so they should not be taken on lightly.’

 

The lender has also increased the maximum amount homebuyers can borrow as a multiple of their income.

 

Those earning more than £50,000 a year will be able to borrow up to 5.5 times their annual income, up from 4.4 per cent at present. And a buyer with no deposit could get a three-year fixed rate mortgage at just 2.99 per cent.

Zero per cent deposit mortgages have not been offered since the financial crisis. These risky home loans used to be widely sold by lenders, but were withdrawn after the collapse of Northern Rock in September 2007. What could go wrong?

Mortgages which let people borrow more than the value of their home were dramatically scrapped in 2008.

 

Before Christmas in 2007, a third of lenders offered mortgages of 100 per cent or more.

 

Some including failed bank Northern Rock offered 125 per cent deals.

 

Experts said there were two reasons for the retreat – lenders themselves were struggling to raise money for loans, and they were also worried about handing it over to the highest-risk borrowers.

 

Brokers London & Country said that before the financial crisis the number taking out 100 per cent mortgages ‘more than doubled’ in the last year of deals.

 

Before the crash there were a record 155 such mortgages on offer.

 

They let people escape the cycle of trying to save while paying for rented accommodation.

 

But if prices begin to fall, or they lose their jobs, they would face disaster.

But hey, the bank will have flipped its mortgages into the securitization market by then.. and besides, Denmark is paying people to take out mortgages. Welcome to the new abnormal.

end
This is funny!!  The poll numbers for a BREXIT have increased since the Obama visit.  They are stating:  “keep sending Obama over” as the Brexit odds have risen above staying in the EU
(courtesy zero hedge)

Pro-Brexit Leader Jokes “Keep Sending Obama Over” After Surge In Polls

Who could have seen this coming? Having told the British public in so many words, “Vote No To Brexit, Vote Yes To Undemocratic Superstate!” it appears President Obama’s unwanted presence in the UK-EU Referendum debate has backfired beautifully. As FreeBeacon reports, Arron Banks, the British entrepreneur leading a grassroots effort to leave the European Union urges Americans to “keep sending Obama over,” as ‘Brexit’ odds have risen above plunging ‘Bremain’ odds since the President paid a visit to the Queeen.

 

 

Brexit leaders are thrilled President Barack Obama came out against them, because they are seeing a bounce in the polls.

“I think it’s hugely important geopolitically because the European Union is developing into a kind of United States of Europe, and that’s something the British are naturally pretty anti,” Arron Banks told the Washington Free Beacon. “And it’s really come down to the point where most of our laws are now being made in Brussels—65 percent. Our ultimate court is in France and we’ve got open borders to 500 million people. So clearly immigration is a massive issue, it’s not dissimilar to a lot of the stuff they are discussing with Trump, in the sense of [how] some of these issues resonate.”

Banks said the American equivalent of being in the European Union would make Congress in Toronto, the Supreme Court in Havana while having a completely open border to Mexico.

Banks criticized Obama for his recent trip to London, where he threatened that leaving the European Union would cause the U.K. to “be in the back of the queue,” in terms of trade. The phrase led many to speculate the president was given talking points from Prime Minister David Cameron.

“He basically said if you leave the European Union you’ll go to the back of the trade queue,” Banks said. “Number one, we don’t particularly like being threatened in our home doorstep. Number two, everyone was slightly confused why he used the word queue and not line. It led to a lot of discussion whether he had just been given it to read. So I think he was briefed obviously by the British government, and it was a favor.”

“But since his appearance polls have actually gone in the other direction,” Banks added. “We need to hear more from him, really. Send him back for another go, we’d be delighted to see him again.”

Banks is optimistic about the referendum vote, despite close polling, because core supporters of Brexit tend to be more energized. A new poll following Obama’s visit saw Brexit gaining support over the Remain campaign, 51 to 49 percent.  The Free Beacon asked Banks what Americans can do if they are sympathetic to his cause.

“Keep sending Obama over,” he said.

Average:

RUSSIAN AND MIDDLE EASTERN AFFAIRS

The Turkish Lira plummets 4.5% to 2.95 to the dollar as Erdogan wants to usurp more power from the Prime Minister Davutoglu.  The market does not like it:

(courtesy zero hedge)

Turkish Lira Plunges Most Since 2008 As Yet Another Political Crisis Appears Imminent

Just two days ago, a veteran executive of Turkey’s ruling Justice and Development Party (AKP) party said that neither an early election nor an extraordinary party congress is on the agenda amid rising speculation over the party’s highest decision-making body’s move to remove the authority to appoint provincial party officials from Prime Minister Ahmet Davutoglu.

As Hurriyet reported on May 2, the 50-seat Central Decision and Executive Board’s decision, which was made with the support of 47 members on April 29, has been widely considered as one of the clearest signs yet of tensions between President Recep Tayyip Erdo?an, the founding leader of the party who wants an executive presidency, and Davutoglu, who would be sidelined if the country’s parliamentary system were to be replaced.

“We just held our congress recently. We have Turkey’s problems and things we have to fulfill on our agenda. Neither congress nor early elections are on our agenda. The elections will be held in 2019,” AKP Deputy Chair Mehmet Ali Sahin said in an interview with NTV on May 2.

Sahin’s remarks were in response to a comment by main opposition Republican People’s Party (CHP) leader Kemal Kilicdaroglu, who suggested there were signs indicating preparations by the ruling party, which secured a single-party government in the Nov. 1, 2015, early elections to govern Turkey for four years, for yet another snap election. The AKP’s party congress was held in September 2015.

In other words, anything suggesting the cracks between the PM and the president are getting wider would be seen as confirmation that Turkey is suddenly embroiled in a bitter, behind the scenes scandal.

Indeed, Sahin downplayed talk of an internal crisis in relation with the MKYK decision and said, “Nobody should expect the AKP to shoot itself in the foot.” “If they want to go to early elections, then they should table their own proposal for this,” Sahin said.

Sadly for Turkey, and for those long the Turkish Lira, it appears that the fissures were indeed as bad as some had speculated because moments ago Bloomberg blasted the following:

  • TURKEY’S AK PARTY SAID TO PLAN CONVENTION IN 15 DAYS

Bloomberg adds that Turkish Prime Minister Ahmet Davutoglu will take the ruling party to an extraordinary congress amid a widening rift over leadership with President Recep Tayyip Erdogan, according to a person familiar with the matter.  Davutoglu to hold a press conference Thursday at 11am, CNN- Turk reports.

Davutoglu had met with Erdogan in Ankara today to ask that the president respect the prime minister’s authority and allow him to do his job; Davutoglu was said to be considering an extraordinary convention to vote on AK Party leadership should he not be able to reach agreement with Erdogan at the meeting, the person said

The implication is that the prime minister, Davutoglu, who has been engaging in crisis talks with Erdogan over the past weeks, may be about to resign but not before he creates a major rift within the AKP. For those unfamiliar with the back story, here is the FT:

Recep Tayyip Erdogan, Turkish president, held crisis talks on Wednesday with Ahmet Davutoglu, his handpicked prime minister, in an effort to resolve a deepening rift that has spooked financial markets and fuelled speculation that Mr Davutoglu could be about to resign. The possibility that Mr Davutoglu,who has become frustrated by Mr Erdogan’s attempts to limit his independence, may quit helped to drive Turkish stocks 2 per cent lower on Wednesday.

 

 

The prime minister, a soft-spoken academic-turned politician, has proven to be an effective negotiator with the EU, but incapable of outmanoeuvring Mr Erdogan’s supporters in both the media and parliament. Wednesday’s meeting in Ankara was described by one person close to Mr Davutoglu as an “urgent crisis”.

 

On Friday, while Mr Davutoglu was overseas, the ruling AK party stripped him of the ability to choose local and provincial leaders. This deprived him of a vital source of influence over the party’s rank and file, who remain loyal to Mr Erdogan, the most popular leader Turkey has had in more than half a century.

 

Mr Davutoglu, who addressed parliament on Wednesday with uncharacteristic brevity, hinted at his own resignation. He said that he was prepared to shun, “with the back of my hand, any job that a mortal would not think of leaving”.

Needless to say, the PM was unhappy at this attempt to more of his control, an action that was clearly spearheaded by none other than Erdogan.

The market’s reaction was immediate.

Upon confirmation that a major schism is developing within the AKP, the Lira crashed a whopping 4.5%, margining out countless longs, and plunging the most since October 2008.

 

FX traders’ plight aside, if the convention is confirmed, it means that Turkey is about to be swallowed in yet another bitter political crisis, which will likely result in Erdogan concentrating even more power, unless of course he is stopped which in turn would meat more rioting, more civilian casulties, and even less media freedom to describe one nation’s collapse into a despotic, authoritarian state.

Ultimately, should Turkey end up with a political vacuum, then suddenly the fate of millions of refugees will become very unclear; and if those refugees start making their way to Europe once again then the implications for Merkel and the rest of Europe’s leaders will be dire.

Average:

OIL ISSUES

Bankruptcies in the uSA shale continue to rise

(courtesy Reuters) and special thanks to Robert H for sending this to us:

 

http://www.reuters.com/article/us-usa-shale-telecoms-idUSKCN0XV07V?il=0

U.S. oil industry bankruptcy wave nears size of telecom bust

By Ernest Scheyder and Terry Wade

HOUSTON The rout in crude prices is snowballing into one of the biggest avalanches in the history of corporate America, with 59 oil and gas companies now bankrupt after this week’s filings for creditor protection by Midstates Petroleum MPOY.PK and Ultra Petroleum UPL.NL.

The number of U.S. energy bankruptcies is closing in on the staggering 68 filings seen during the depths of the telecom bust of 2002 and 2003, according to Reuters data, the law firm Haynes & Boone and bankruptcydata.com.

Charles Gibbs, a restructuring partner at Akin Gump in Texas, said the U.S. oil industry is not even halfway through its wave of bankruptcies.

“I think we’ll see more filings in the second quarter than in the first quarter,” he said. Fifteen oil and gas companies filed for bankruptcy in the first quarter.

Some oil producers appear to be holding on, hoping the price of crude stabilizes at a higher level. In February, oil slumped as low as $27 a barrel from peaks above $100 a barrel nearly two years ago. U.S. crude has recovered somewhat, and on Tuesdaywas trading a little below $44 a barrel. [O/R]

Until recently, banks had been willing to offer leeway to borrowers in the shale sector, but lately some lenders have tightened their purse strings.

A widely predicted wave of mergers in the shale space has yet to materialize as oil price volatility makes valuations difficult, and buyers balk at taking on debt loads until target companies exit bankruptcy.

The telecom and energy boom-and-bust cycles have notable parallels. Pioneering technology brought an influx of investment to each industry, a plethora of new, small companies issued high levels of debt, and a subsequent supply glut sapped pricing just as demand fell sharply.

Neither this crash nor the telecom crack-up in the early 2000s rival the housing and financial bust in 2007-2009 in terms of magnitude and economic impact. But losses for energy investors in the stock and bond markets in the last two years are significant. It remains unclear how long it will take to get through the worst of the declines, and who will be left standing when it is over.

A 60 percent slide in oil prices since mid-2014 erased as much as $1.02 trillion from the valuations of U.S. energy companies, according to the Dow Jones U.S. Oil and Gas Index .DJUSEN, which tracks about 80 stocks. This has already surpassed the $882.5 billion peak-to-trough loss in market capitalization from the Dow Jones U.S. Telecommunications Sector Index in the early 2000s.

In the debt market, there are also signs that lots of money could be lost this time around, especially in high-yield bonds.

During its boom, U.S. oil and gas companies issued twice as much in bonds as telecom companies did in the latter part of the 1990s through the early 2000s.

Between 1998 and 2002, about $177.1 billion in new bonds were sold in the U.S. telecommunications sector; less than 10 percent were junk bonds. U.S. oil and gas companies sold about $350.7 billion in debt between 2010 and 2014, the peak years of the oil-and-gas boom, with junk bonds making up more than 50 percent of all issuance, according to Thomson Reuters data.

(Reporting by Ernest Scheyder and Terry Wade; Editing by David Gaffen and David Gregorio)

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

Euro/USA   1.1488 DOWN .0013 ( STILL REACTING TO USA FAILED POLICY)

USA/JAPAN YEN 106.72 UP 0.065 (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 1.4491 DOWN .0056 (STILL THREAT OF BREXIT)

USA/CAN 1.2758 UP .0058

Early THIS WEDNESDAY morning in Europe, the Euro FELL by 13 basis points, trading now WELL above the important 1.08 level RISING to 1.1281; Europe is still reacting to deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Shanghai composite  CLOSED DOWN 1.371 PTS OR 0.05% / Hang Sang CLOSED DOWN 151.11 OR  0.73%   / AUSTRALIA IS LOWER BY 1.54%  / ALL EUROPEAN BOURSES ARE ALL 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 ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

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

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

The NIKKEI: this WEDNESDAY morning: closed FOR HOLIDAY 

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

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 151,11 PTS OR 0.73% . ,Shanghai CLOSED  DOWN 1.37 OR 0.05%/ Australia BOURSE IN THE RED: /Nikkei (Japan) CLOSED FOR HOLIDAY/India’s Sensex IN THE RED

Gold very early morning trading: $1276.55.

silver:$17.21

Early WEDNESDAY morning USA 10 year bond yield: 1.79% !!! PAR in basis points from TUESDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield RISES to 2.65 PAR in basis points from TUESDAY night.

USA dollar index early WEDNESDAY morning: 93.25 UP 31 cents from TUESDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers WEDNESDAY MORNING

END

And now your closing WEDNESDAY NUMBERS

Portuguese 10 year bond yield:  3.16% UP 7 in basis points from TUESDAY

JAPANESE BOND YIELD: -0.124% DOWN 1/10 in   basis points from TUESDAY

SPANISH 10 YR BOND YIELD:1.61% UP 5 IN basis points from TUESDAY

ITALIAN 10 YR BOND YIELD: 1.50  UP 4 IN basis points from TUESDAY

the Italian 10 yr bond yield is trading 11 points lower than Spain.

GERMAN 10 YR BOND YIELD: .204% PAR IN BASIS POINTS ON THE DAY

 

 

END

IMPORTANT CURRENCY CLOSES FOR WEDNESDAY

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

Euro/USA 1.1495 DOWN .0003 (Euro =DOWN 3  basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 106.93 UP 0.267 (Yen DOWN 27 basis points As MARKETS TANK BADLY

Great Britain/USA 1.4498  UP .0049 Pound UP 49 basis points/

USA/Canada 1.2863 UP 0.0162 (Canadian dollar DOWN 162 basis points with OIL rising a bit(WTI AT $43.90)

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was DOWN by 3 basis points to trade at 1.1495

The Yen FELL to 106.93 for a LOSS of 27 basis points as NIRP is STILL a big failure for the Japanese central bank/

The pound was UP 49 basis points, trading at 1.4498

The Canadian dollar FELL by 162 basis points to 1.2863, WITH WTI OIL AT:  $43.90

The USA/Yuan closed at 6.4970

the 10 yr Japanese bond yield closed at -.124% PAR IN BASIS  points in yield/

Your closing 10 yr USA bond yield: DOWN 1/3  basis points from TUESDAY at 1.787% //trading well below the resistance level of 2.27-2.32%) HUGE policy error

USA 30 yr bond yield: 2.649 DOWN 1/10 in basis points on the day ( HUGE POLICY ERROR)

Your closing USA dollar index, 93.18 UP 20 CENTS ON THE DAY/4 PM

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

London:  CLOSED  DOWN 75.57 OR 1.19%
German Dax :CLOSED DOWN 98.52 OR 0.99%
Paris Cac  CLOSED DOWN 47.75  OR 1.09%
Spain IBEX CLOSED DOWN 110.60 OR 1.26%
Italian MIB: CLOSED DOWN 31.14 OR 0.17% (BANKING CRISIS)

The Dow was down 99.65  points or 0.56%

NASDAQ down 37.58 points or 0.79%
WTI Oil price; 43.90 at 4:30 pm;

Brent Oil: 44.77

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  66.58 (ROUBLE DOWN 22/100 ROUBLES PER DOLLAR FROM YESTERDAY) 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:  $44.36

BRENT: 44.89

USA 10 YR BOND YIELD: 1.77%

USA DOLLAR INDEX:93.27 up 21 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

Stocks Slump, Dollar Jumps After China Sends Message To Fed

But but but Tim Cook said AAPL was “optimistic” about China!!!

 

China started the shenanigans by devaluing the Yuan fix by the most since the August collapse…sending a loud and clear message to The Fed – if you normalize rates (and strengthen the USD) we will unleash ‘wealth-destroying’ volatility…

 

European stocks stumbled once again as Italian bank risks surge…

 

“Most Shorted” stocks fell for the 2nd day in a row – the biggest 2-day drop in 3 months…

 

Trannies & Small caps bearing the brunt of the most shorted weakness…

 

With Nasdaq leading the way (down over 6% year-to-date), S&P 500’s 2-day tumble has plunged it back to the verge of red for 2016 (joining Small Caps yesterday). Gold (up 20.7%) and the Long Bond (Up 7.8%) remain the best performers year-to-date as The Fed rate-hike appears to have sparked a flight to safety not a rush to recovery…

 

Just as S&P 500 cash nears 2043.94 (remember 2100?), VIX was smashed lower to save the world…

 

But Bonds & Bullion remain 2016’s biggest gainers…

 

As perhaps fear of the “W” remains…

 

It seems we better get Tim Cook on CNBC again tonight…

 

Financials continue to slide and Energy stocks ended notably lower despite a small green close in crude…

 

HYG (high Yield bonds) broke back below their 200DMA..

 

Treasury yields ended the day lower by in a very narrow range

 

The US Dollar rose again (2nd day on a row after 6 straight days lower) led by commodity currency collapse (CAD/AUD down over 2% on the week)..

 

Crude managed a panic-bid into the NYMEX close to end green but in general commodities weakened with the stronger USD (copper, iron ore, rebar were hammered)

 

Charts: Bloomberg

end

 

Another retailer goes bust:  Aeropostale.  The reason for all of these retail bankruptcies is probably two fold:

i) bricks and mortal stores cannot compete against on line stores

ii) the consumer is tapped out

(courtesy zero hedge)

 

Aeropostale Files Chapter 11: Latest Retail Bankruptcy After American Apparel, Cache, Wet Seal And Quiksilver

Teen retailer Aeropostale, a company once seen as a competitor to Abercrombie & Fitch, filed for Chapter 11 bankruptcylisting assets of $354 million and liabilities of $390 million. The company experienced an atrocious fiscal 2015, reporting a net loss of $136.9 million in a year in which sales declined 18%.

Soon after reporting full year results, the company had its stock delisted from the NYSE, and overnight filed for bankruptcy in order to “optimize its store footprint, access additional tools to shed or renegotiate burdensome contracts, resolve its ongoing disputes with Sycamore partners, and achieve long-term financial stability.”

The retailer has secured a $160 million commitment from Crystal Financial, LLC to provide DIP financing, and has an initial plan to close 154 out of roughly 800 stores.

The decline was swift. The brand was established in 1987, went public in 2002, and by 2010 it had a market cap of nearly $3 billion. However, by January 2015 the company of 21,000 employees had posted losses in its last three fiscal years, and with 2015 being the fourth consecutive year of losses, its market cap imploded to just $2.9 million.

Two issues that accelerated the bankruptcy filing involve clothing supplier MGF Sourcing. MGF tightened payment terms earlier this year, moving to pre-pay instead of N60, squeezing the cash flow of the firm. Aeropostale also accuses MGF of limiting the availability of its merchandise, thus entering into a breach of contract dispute with a key supplier.

MGF is owned by Sycamore partners, who is also an Aeropostale lender. As part of the terms of a $150 million loan deal with Sycamore, Aeropostale signed a 10-year supply agreement with MGF in 2014.

Aeropostale’s filing marks yet another mall-based retailer who has had to file for bankruptcy recently. The WSJ reports that 55% of U.S. retailers who filed for bankruptcy since 2005 ended up liquidating and permanently going completely out of business, versus just 5% in other industries.

This is how the company’s CFO justified the reason for the filing in the just filed affidavit in support of the bankruptcy motion:

The Debtors’ operations have generally been profitable during the past thirty years; however,declining mall traffic, a highly promotional and competitive teen retail environment, and a shift in customer demand away from apparel to technology and personal experiences all contributed to the Debtors’ declining financial performance. These pressures were not unique to the Debtors; a number of other retailers, including competitors such as American Apparel, Caché, Wet Seal, Quiksilver, and Pacific Sun, have all recently filed for bankruptcy after facing similar market conditions.

In response to their declining revenues and continued financial difficulties, the Debtors embarked on a series of initiatives to restructure and streamline their businesses. Since early 2014, the Debtors have engaged in a comprehensive effort to restructure the P.S. from Aéropostale  business, closing 126 P.S. from Aéropostale stores primarily located in shopping malls, to focus on P.S. from Aéropostale stores in off-mall locations. In an effort to right-size the Debtors’ Aéropostale store base and optimize their real estate portfolio, the Debtors embarked on a review of their lease terms and retained a real estate consulting firm to investigate the economics of accelerated lease buyouts, as well as to identify opportunities for negotiating more competitive rents across the Debtors’ real estate portfolio.

The Debtors closed 122 Aéropostale stores in the United States and Canada during fiscal year 2014. The Debtors closed an additional 50 stores in fiscal year 2015.  Another initiative on which the Debtors embarked in 2016 was the creation of a two-store format, splitting the Debtors’ stores between a factory format and a traditional mall format. The factory stores are geographically positioned to capture broader and growing demographics and appeal to the Debtors’ most loyal customer base. They are located primarily at outlet malls and more value focused B and C mall locations and predominately offer the Debtors’ core merchandise, including logo-bearing merchandise. The mall format stores are located primarily in higher-end, or A and B, malls and are focused on more updated, classic merchandise with fewer logo-bearing products. The mall stores will serve as a showcase for the Debtors’ brands and products and will serve as a feeder of merchandise for the factory stores and the Debtors’ online retail operation. The Debtors have implemented the factory store model in 460 stores and have experienced strong initial results, while trends in the mall format stores have also improved as a result of the repositioned merchandise assortment. Additionally, the Debtors have developed additional brands for the 2016 back-to-school season that they anticipate will perform strongly in the mall stores. The Debtors have also reduced corporate headcount and taken various other strategic actions geared toward improving profitability, generating approximately $35 million to $40 million in estimated annualized pre-tax savings for fiscal 2016.

In February 2016, Sycamore Partners stepped up its efforts that seem designed to orchestrate a precipitous chapter 11 filing. On February 5, 2016, Sycamore’s representative on the Debtors’ Board of Directors, Kent Kleeberger resigned from the board. Additionally, Lemur LLC (“Lemur”) another affiliate of Sycamore, which had acquired approximately eight (8) percent of the Debtors’ common equity in the summer/fall of 2013, sold its equity stake in early 2016.

And regarding the tainted MGF relationship:

On March 18, 2016, MGF delivered a purported notice of default under the Sourcing Agreement to the Debtors asserting that the Debtors’ refusal to accept delivery or pay for orders under the terms unilaterally set forth in MGF’s previous letters constituted a material breach of the terms and conditions of the Sourcing Agreement. MGF reserved its right to terminate the Sourcing Agreement following the fifteenth business day after the delivery of the notice of default. Although the Debtors dispute the allegations contained in the notice of default as well as MGF’s right to terminate the Sourcing Agreement based on those allegations, the notice was another act that hastened the commencement of these cases by the Debtors.

Between April 1, 2016 and April 8, 2016, due to an immediate need for inventory, the Debtors made preferential payments to MGF of approximately $15.8 million in order to induce MGF to ship goods that were past due. MGF delivered some, but not all, of the outstanding inventory of the Debtors.

The Debtors engaged in settlement discussions with Sycamore and MGF on April 8, 2016. Subsequently, on April 20, 2016, MGF delivered a second notice of default under the Sourcing Agreement to the Debtors again asserting that the Debtors’ refusal to accept delivery or pay for orders under the terms set forth in MGF’s previous communications constituted a material breach of the terms and conditions of the Sourcing Agreement. Under extreme duress due to their critical needs for inventory, on April 22, 2016, the Debtors made an additional preferential payment to MGF of approximately $10.1 million and MGF delivered additional merchandise.

The significant delays by MGF and L&F in shipping product to the
Debtors resulted in less product being available in the Debtors’ stores for the peak spring break
and Easter break sales period. The actions of MGF caused a disruption in the Debtors’ supply
chain and a corresponding negative impact on the Debtors’ liquidity. I would estimate, based on
historical performance, that the Debtors’ lost in excess of $5 million in sales due to these delays. If MGF continues to delay delivery of product to the Debtors, the Debtors may suffer further
losses in sales.

MGF’s actions placed the Debtors at risk of violating the $70 million minimum liquidity covenant in the Prepetition Term Loan Agreement, which was provided by a different affiliate of Sycamore. A default under the Prepetition Term Loan Agreement would have triggered a cross-default under the Prepetition ABL Agreement, and defaults under both agreements would have jeopardized the Debtors’ ability to obtain inventory for their stores and otherwise operate their businesses. To restore access to inventory, which is the lifeblood of any retail business, and to otherwise maintain the ability to operate their businesses, the Debtors commenced the Chapter 11 Cases.

But of course the simplest explanation is that this is merely the latest retail bankruptcy for just one reason: the US middle class can no longer afford to splurge on clothing as much as it did in the past.

The full filing (pdf)

 

end

 

This is a surprise:  the ever bullish ADP report from Mark Zandi shows that employment growth is the worst in 3 years as the job creation machine stalls:

(courtesy Mark Zandi/ADP/zero hedge)

Zandi’s “Job Creation Machine” Stalls As ADP Employment Growth Worst In 3 Years

Against expectations of a 195k gain, ADP reported just 156k job growth in April with manufacturing losing jobs once again and services job growth clowing quickly to catch down to such negative indicators as ISM Services Employment. This is the worst headline print since April 2013. From last week’s job-creation-machine firinmg on all cylinders, Mark Zandi is now more cautious – The job market appears to have stumbled in April. Job growth noticeably slowed, with some weakness across most sectors. One month does not make a trend, but this bears close watching as the financial market turmoil earlier in the year may have done some damage to business hiring.”

Overall this is the worst print since April 2013…

As Servcies jobs start to fade…

Manufacturing lost jobs once again (after a brief bounce)…

Goods-producing employment dropped by 11,000 jobs in April, down from a downwardly revised 5,000 in March. The construction industry added 14,000 jobs, which was down from March’s 18,000. Meanwhile, manufacturing lost 13,000 jobs after being revised down to -3,000 the previous month.

Service-providing employment rose by 166,000 jobs in April, down from 189,000 in March. The ADP National Employment Report indicates that professional/business services contributed 27,000 jobs, down a bit from March’s 31,000. Trade/transportation/utilities grew by 25,000, well down from the 42,000 jobs added the previous month. Financial activities added just 4,000.

Last month Mark Zandi said “the economy is doing very well, ignore GDP…All indications are that the job machine will remain in high gear.” Now he seems to be questioning that a little quickly.

“Despite the softest overall monthly jobs added in three years, small businesses remained an engine for job growth in April,” said Ahu Yildirmaz, VP and head of the ADP Research Institute. “Smaller businesses are less susceptible to global conditions, such as low commodity prices and the strong dollar, that may have caused larger businesses to ease up on hiring.”

Mark Zandi, chief economist of Moody’s Analytics, said, “The job market appears to have stumbled in April. Job growth noticeably slowed, with some weakness across most sectors. One month does not make a trend, but this bears close watching as the financial market turmoil earlier in the year may have done some damage to business hiring.”

Full Breakdown…

<br />
ADP National Employment Report: Private Sector Employment Increased by 156,000 Jobs in April<br />
http://www.adpemploymentreport.com/2016/April/NER/images/infographic/mai...” width=”598″ />

end
Falling USA productivity is putting a huge dent into profitability:
(courtesy zero hedge)

US Worker Productivity Slumps At Worst Rate In 23 Years

Despite a very modest beat of expectations US worker productivity fell for the 2nd quarter in a row (down 1.0% vs 1.3% QoQ), the two-quarter-average output per hour is down 1.4% – the worst slump since 1993Unit labor costs rose by a better than expected 4.1% (helped by a downwardly revised 2.7% rise in Q4), the highest since Q4 2014.

America’s productivity slump is the biggest in nearly a quarter century…

As Bloomberg notes, the confluence of falling productivity, higher labor costs and an economic slowdown are putting a dent in companies’ bottom lines, with earnings among S&P 500 Index members projected to slip for the fourth straight quarter.

As we detailed previously, there are numerous reasons for this plunge in worker-productivity, from perverted inventives not to work to unintended consequences of monetary policy enabling zombies, but perhaps the most critical driver is exposed in the following dismal chart…

51% of total time spent on the Internet is on mobile devices – in 2015, first time ever mobile is #1 – to make a total of 5.6 hours per day snapchatting, face-booking, and selfying…

Source: @kpcb

So, while every effort can be made by Ivory Tower academics to solve the problem of American worker productivity, perhaps it can be summed up simply as “Put The Smart-Phone Down!”

As we detailed previously, adjusting for the WWII anomaly (which tells us that GDP is not a good measure of a country’s prosperity) US productivity growth peaked in 1972 – incidentally the year after Nixon took the US off gold.

The productivity decline witnessed ever since is unprecedented. Despite the short lived boom of the 1990s US productivity growth only average 1.2 per cent from 1975 up to today. If we isolate the last 15 years US productivity growth is on par with what an agrarian slave economy was able to achieve 200 years ago.

In addition, the last 15 years also saw an outsized contribution to GDP from finance. If we look at the US GDP by contribution from value added by industry we clearly see how finance stands out in what would otherwise have been an impressively diversified economy.

With hindsight we know that finance did more harm than good so we can conservatively deduct finance from the GDP calculations and by doing so we essentially end up with no growth per capita at all over a timespan of more than 15 years! US real GDP per capita less contribution from finance increased by an annual average of 0.3 per cent from 2000 to 2015. From 2008 the annual average has been negative 0.5 per cent!

In other words, we have seen a progressive (pun intended) weakening of the US economy from the 1970s and the reason is simple enough when we know that monetary policy broken down to its most basic is a transaction of nothing (fiat money) for something (real production of goods and services).Modern monetary policy thereby violates the most sacred principle in a market based economy; namely that production creates its own demand. Only through previous production, either your own or borrowed, can one express true purchasing power on the market place.

The central bank does not need to worry about such trivial things. They can manufacture the medium of exchange at zero cost and express purchasing power on the same level as the producer. However, consumption of real goods and services paid for with zero cost money must by definition be pure capital consumption.

Do this on a grand scale, over a long period of time, even a capital rich economy as the US will eventually be depleted. Capital per worker falls relative to competitors abroad, cost goes up and competitiveness falls (think rust-belt). Productive structures cannot be properly funded and the economy must regress to align funding with its level of specialization.

In its final stage, investment give way for speculation, and suddenly finance is the most important industry, pulling the best and brightest away from every corner of the globe, just to find more ingenious ways to maximise capital consumption.

As the slave economy got perverted by incentives not to work, so does the speculative fiat based economy, which consequently create debt serfs on a grand scale.

end
A sure sign that the economy is in trouble when you see both exports and imports plummet:  the USA trade deficit tumbles to 40 billion from 47 billion dollars.
(courtesy zero hedge)

US Trade Deficit Tumbles As Overall Imports Plunge, Even As Oil Imports Continue To Rise

In a surprising development, the U.S. monthly international trade deficit decreased substantially in March 2016 from $47.0 billion in February (revised) to $40.4 billion in March, below the $41.2 billion expected, as exports declined by a modest $1.5 billion, a 0.9% drop to $176.62BN from $178.16BN in Feb. At the same time imports outright plunged by $8.1 billion, down 3.6% in March to $217.06BN from $225.13BN in Feb. Curiously this happened just as Canada announced a trade deficit of C$3.4 billion, the widest on record. In March, the US trade deficit excluding petroleum was $37.48 billion.

The previously published February US deficit was $47.1 billion. The goods deficit decreased $6.0 billion from February to $58.5 billion in March. The services surplus increased $0.5 billion from February to $18.1 billion in March.

The breakdown:

Exports

  • Exports of goods and services decreased $1.5 billion, or 0.9 percent, in March to $176.6 billion. Exports of goods decreased $1.8 billion and exports of services increased $0.3 billion.
  • The decrease in exports of goods mainly reflected decreases in consumer goods ($1.6 billion) and in industrial supplies and materials ($0.8 billion). An increase in capital goods ($1.0 billion) was partly offsetting.
  • The increase in exports of services mainly reflected increases in travel (for all purposes including education) ($0.2 billion) and in transport ($0.1 billion), which includes freight and port services and passenger fares.

Imports

  • Imports of goods and services decreased $8.1 billion, or 3.6 percent, in March to $217.1 billion. Imports of goods decreased $7.9 billion and imports of services decreased $0.2 billion.
  • The decrease in imports of goods mainly reflected decreases in consumer goods ($5.1 billion) and in capital goods ($1.6 billion).
  • The decrease in imports of services was more than accounted for by a decrease in transport ($0.4 billion).

Goods by geographic area (seasonally adjusted, Census basis)

  • The deficit with China decreased $6.2 billion to $26.0 billion in March. Exports increased $0.1 billion to $8.5 billion and imports decreased $6.1 billion to $34.4 billion. Which is also surprising considering China said its net surplus with the US jumped.
  • The balance with the United Kingdom shifted from a deficit of $0.5 billion in February to a surplus of $0.5 billion in March. Exports increased $0.6 billion to $4.8 billion and imports decreased $0.3 billion to $4.4 billion.
  • The surplus with Saudi Arabia decreased $1.2 billion to $0.1 billion in March. Exports decreased $0.9 billion to $1.4 billion and imports increased $0.3 billion to $1.3 billion.

Finally, looking only at just the suddenly rising US oil imports alone, March crude oil imports increased to $6.71b from $5.9b last month, representing 75.4% of total petroleum imports.

  • March non-crude petroleum imports widened to $2.2b from $2.1b m/m; 24.6% of total petroleum imports
  • Crude oil imports averaged 7.819m b/d in March compared to 7.404m b/d in Feb.
  • Oil imports from OPEC rose to 43.9% of the total
  • Oil imported from Canada and Mexico was 43.6% of total in March vs 49.6% in Feb.
  • Petroleum deficit in real dollars at $8.05b in March
  • Petroleum exports rose in real dollars to $9,193b in March after $9,033b in Feb.
  • Oil imports from Saudi Arabia rose 18.5m barrels

Keep a close eye on US oil imports because if as the pundits say US shale production is indeed declining, the US will have no choice but to revert to its old model of importing its oil needs at least until such time as shale is once again back online.

end
Although we had a small upwards blip in factory order last month, it is still well below last yr as these declines are now in their 17th month:
(courtesy zero hedge)

The Manufacturing Recession That Won’t Go Away: Factory Orders Rebound From 5 Year Lows, Decline For 17 Months

In 60 years, the US economy has never suffered a 17-month continuous YoY drop in Factory orders without being in recession. Which begs the question: are we in one now. Moments ago the Department of Commerce confirmed that in March, US factory orders – despite rising 1.1% sequentially and above the 0.6% expected –  declined for 17th consecutive month on an annual basis, dropping 4.2% from a year ago.

The silver lining: at $458 billion, the dollar amount was a modest rebound from February’s downward revised $453 billion, which as we noted last month was the lowest print in the past 5 years.

end

The uSA service side of things is better as the service PMI rebounds, but still the report highlights fragility in the uSA economy:
(courtesy zero hedge)

US Services Data Rebounds But Jobs, Backlogs “Highlight Fragility” Of US Economy

espite a modest rise in April’s headline Services PMI print to 52.8 (from 52.1) the details under the surface paint a different picture (remaining weaker than its post-crisis average of 55.6). The rate of employment growth was the weakest seen since December 2015 as backlogs of work declined for the ninth consecutive month, which is the longest continuous period of depletion since the survey began in late-2009.   ISM Services data also beat expectations, rising to 55.7 despite a drop in business activity and backlogs. As Markit warns, “the fragility of growth is highlighted by inflows of new business rising at a rate only marginally above the post-recession low.”

April data highlighted a sustained recovery in overall business conditions across the U.S. service sector, led by faster growth of activity and incoming new work. However, the rate of job creation slipped down to its weakest so far in 2016 amid a lack of pressure on operating capacity and subdued confidence regarding the business outlook. At the same time, squeezed pricing power remained evident in April, with average tariffs broadly unchanged despite input cost inflation accelerating to its fastest since August 2015.

The Services sector (ISM and PMI) are both still lower than Dec 2015 (Fed rate hike) levels…

ISM Servcies Employment subindex suggests some pain ahead for payrolls…though it bounced back this month…

The breakdown is mixed…

  • Business activity fell to 58.8 vs 59.8 prior month
  • New orders rose to 59.9 vs 56.7
  • Employment rose to 53.0 vs 50.3
  • Supplier deliveries unchanged at 51.0 vs 51.0
  • Inventory change rose to 54.0 vs 52.5
  • Prices paid rose to 53.4 vs 49.1
  • Backlog of orders fell to 51.5 vs 52.0
  • New export orders fell to 56.5 vs 58.5
  • Imports rose to 54.0 vs 53.0
  • Inventory sentiment fell to 61.0 vs 62.5

ISM Respondents were mixed…

“Severe non-skilled labor shortage is hurting the construction industry.”(Construction)

“Business is holding steady, revenue is almost as anticipated and costs are lower which is helping to maintain current profitability.” (Finance & Insurance)

“We expect our business condition to improve in Q2 as compared to Q1. Typically, Q1 is our slowest period and business activity picks up later through the year.” (Health Care & Social Assistance)

“Very favorable cost conditions all around.” (Accommodation & Food Services)

“In higher education we are gearing up for the summer conference season. This impacts (increases) the spend in our service category and drives income from many campuses.” (Educational Services)

“Recent upturn in oil prices is creating a slightly more positive outlook for those in the energy industry, but has not been enough to initiate hiring or spending.”(Professional, Scientific & Technical Services)

“Business is still improving. Trucking has tightened due to produce hauling season.” (Wholesale Trade)

“Heading into a slower season, but cautious optimism of modest gains from same period last year.” (Retail Trade)

But as Markit concludes,

“The PMI surveys show the economy continuing to pick itself up after the stagnation seen in February, with growth accelerating for a second successive month in April. However, the rate of expansion remains tepid, reliant on sluggish growth in services as manufacturers report a stalling of production.

“The surveys are consistent with economic growth picking up from the 0.5% seen in the first quarter to a mere 1.0% at the start of the second quarter, suggesting the bounce-back from the weak start to the year is far from impressive.

The fragility of growth is highlighted by inflows of new business rising at a rate only marginally above the post-recession low seen in March, and optimism about the year ahead also remains close to a post-recession low.

“The drop in confidence seen so far this year is beginning to hit the labour market, with thesurvey signalling 160,000 extra jobs being created in April, down from an average of 200,000 in the first three months of the year.

Charts: Bloomberg

END
Durable goods orders tumble for the 14th straight month and signifies huge problems in the USA manufacturing sector:
(courtesy zero hedge)

Core Durable Goods Orders Tumble For 14th Month To Lowest Since 2013

As the avalanche of data comes to an end for today, following factory orders, durable goods final data for March paints an ugly picture of the US manufacturing economy. Not only did Core Durable Goods Orders drop 1.4% YoY – the most since Dec 2015 – but the overall level fell to its lowest since Dec 2013.

The 14th straight month of YoY declines has not occurred absent an overall US economic recession, and this is the first 27-month decline since Lehman…

Charts: Bloomberg

end
Let us conclude tonight with this great interview with Michael Pento and Greg Hunter of USAWatchdog
(courtesy Greg Hunter/Michael Pento)

Most Dangerous Stock Market in History-Michael Pento

Michael PentoBy Greg Hunter’s USAWatchdog.com

Money manager and financial expert Michael Pento says every corner of the globe is in economic trouble. Pento contends, “I think we are going to have a global synchronized collapse amongst the developed world economies: Europe, Japan, the United States and China, and you should be hedging against this market. Don’t forget, we have the most overvalued, most dangerous stock market in the history of the world. . . . Record valuations sit on top of an unprecedented earnings and revenue recession. The only thing we have left is the promise of ZIRP, QE and negative interest rates that don’t work. All they do is inflate asset prices. You should be short the market, and you should be long precious metals.”

Pento, who wrote a book titled “The Coming Bond Market Collapse,” says the global bond market is also in trouble, and recently defaulted Puerto Rican bonds is just the beginning of trouble. Pento explains, “This is a great fact, and you are only going to get this on USAWatchdog.com. We (U.S.) have a debt to GDP ratio that is well over 100%. The total debt of the world is 230% debt to GDP. Global debt is up $60 trillion since 2007, but here’s the data point you are only going to get here. Did you know our debt (U.S.) is growing at 3.44 times GDP? That has never happened before. Go to the . . . Federal Reserve and look it up for yourself. Our debt in the United States is rising at 3.44 times GDP. That is astronomical. That is added to the $19.3 trillion we already have. We are Puerto Rico. We are Japan. All we have is a central bank. If the Fed ever started to raise interest rates, our debt would become unserviceable. Interest rates would go back to double digits very quickly, and the economy would implode. That’s why you are probably not going to get any more interest rate increases in 2016, maybe one at the most, and that’s why the dollar is going lower.”

On Inflation, Pento says, “We have printed enough for this to go hyperbolic. We have plenty of excess reserves. We have already hit our core (Fed) inflation target. We are already up 2.2% year over year. If you want to be honest, we already have the condition much like the 1970’s of stagflation. . . . The Federal Reserve promised us we were on the road to recovery. They said we would be growing at 3% and we are growing at 0%. They said they could raise interest rates and normalize the Fed Funds Rate, and they can’t do it. The dollar index went up to 100 on the belief that this was going to be the case, and it is absolutely not true. That’s how the market is losing faith in the value of the dollar. We are in a condition of stagflation, make no mistake about it.”

Are we also in a recession too? Pento says, “They can do this indefinitely until inflation becomes intractable. In the United States, we are running up on 90 months of 0% interest rates, and what do we have for that? Fourth quarter GDP was 1.4%, and that was bad enough, but first quarter has a zero handle. It was 0.5%. That’s what we get for blowing up the Fed’s balance sheet to $4.5 trillion? That’s what we get for manipulating bond yields down to 0% for 90 months? We are virtually in a recession. If we are not in a recession, we are in a flat line or dead line economy, and it’s zero.

Join Greg Hunter as he goes One-on-One with Michael Pento of Pento Portfolio Strategies.

(There is much more in the video interview.)

end

Well that is for all for today

I will see you tomorrow night

h

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