The main risk over the weekend was that markets, which have now dropped for three consecutive weeks the longest negative streak since January, would focus their attention on the latest batch of negative Chinese economic news released over the weekend, which missed expectations across the board, most prominently in Retail Sales (10.1% vs. Exp. 10.6%, down from 10.5%) and Industrial Production (6.0% vs. Exp. 6.5% down from 6.8%), and following Friday’s disappointing new credit loan data, would sell off as the Chinese slowdown once again becomes a dominant concern. However, after some initial weakness, the risks were all but gone when first the USDJPY jumped on another round of deflationary Japanese economic data (PPI Services -4.2%, Exp. -3.7%) which led to renewed hopes of more BOJ easing and a jump in the USDJPY and thus US futures.

Shortly thereafter a bearish report on oil by Goldman was misreported as bullish on oil prices (Goldman explicitly stated that the global rebalancing is taking longer than expected, but recent supply disruptions have taken off more oil from the market than expected, as a result of which Goldman cut its 2017 forecast prices while pushing up near-term expectations, a move that will also assure that 2017 prices are lower as more near-term production comes online.

With few upside anchors, traders and analysts quickly focused on oil as the driver of risk on strength: “The firmer oil price is helping emerging-market equities today despite the weaker China data over the weekend,” said Michael Wang, a strategist at hedge fund Amiya Capital LLP. “Oil is being driven by what’s happening in Nigeria at the moment – that’s changed sentiment towards Brent and has brought an expected recovery forward,” said John Meyer, an analyst at broker SP Angel Corporate Finance LLP in London. “Rising oil prices tend to support the commodities complex.”

As a result of the confusion, Brent rose to a six-month high, leading a rebound in commodities and boosting the ruble and mining companies, as supply disruptions in Nigeria added to production woes, while WTI was trading above $47 for the first time since November. Precious metals rallied with aluminum and commodity producers climbed, while almost all of the other industry groups in the Stoxx Europe 600 Index fell. Irish bonds advanced, outperforming their euro-area peers, while the Polish zloty strengthened after favorable reports from Moody’s Investors Service. Asian stocks rose from a one-month low.

And so, after last week’s US market losses and renewed recession concerns, the selloff was halted courtesy of the pickup in raw-materials prices which, as Bloomberg wrote, provides support for global equities after about $1.8 trillion was wiped off the value of the securities in the first two weeks of May amid weaker economic data and disappointing earnings reports.

“Concerns over the strength of the global economy are back on investors’ minds,” said Jasper Lawler, a London-based analyst at CMC Markets Plc. “The resources and oil sectors have been outperforming since the February low and both of them are performing OK today. But they need to continue to outperform for us to have a sustained rally.”

Elsewhere, China’s central bank issued a weekend statement saying monetary policy would continue to support growth, after data on new lending, retail sales, industrial production and fixed-asset investment missed economists’ estimates. A Friday report showing a jump in American retail sales bolstered the case for the Federal Reserve to raise interest rates.

Across global stock markets, the Stoxx Europe 600 Index declined 0.4 percent, falling for a third time in four days. German and Swiss markets were among those shut for the Whit Monday holiday, and volume of shares changing hands was about 45 percent lower than the 30-day average. Almost all industry groups in the Stoxx Europe 600 Index dropped after Chinese reports on new lending, retail sales, industrial production and fixed-asset investment missed economists’ estimates. The volume of Stoxx 600 shares changing hands was 44 percent lower than the 30-day average as German and Swiss markets were among those shut for a holiday

The MSCI Emerging Markets Index added 0.2 percent after falling as much as 0.4 percent. Benchmark gauges in Russia, Poland, South Africa and the Philippines climbed at least 0.9 percent. Shenzhen and Hong Kong stocks climbed amid speculation the start date of an exchange trading link between the two cities will be announced this week.

Futures on the S&P 500 Index expiring next month added 0.1% after the gauge completed a third weekly decline, its longest streak since January.  Announced stock buybacks dropped 38 percent to $244 billion in the last four months, the biggest decline since 2009, data compiled by Birinyi Associates and Bloomberg show. Is the buyback spree officially coming to an end?

Global Market Snapshot

• S&P 500 futures up less than 0.1% to 2045
• Stoxx 600 down 0.4% to 333
• FTSE 100 down 0.3% to 6121
• S&P GSCI Index up 0.9% to 364.9
• MSCI Asia Pacific up 0.4% to 126
• Nikkei 225 up 0.3% to 16466
• Hang Seng up 0.8% to 19884
• Shanghai Composite up 0.8% to 2851
• S&P/ASX 200 up 0.6% to 5359
• US 10-yr yield up 1bp to 1.71%
• German 10Yr yield down less than 1bp to 0.12%
• Italian 10Yr yield up less than 1bp to 1.48%
• Spanish 10Yr yieldunchanged at 1.6%
• Dollar Index up 0.02% to 94.63
• WTI Crude futures up 2% to $47.13
• Brent Futures up 1.9% to $48.74
• Gold spot up 0.7% to $1,282
• Silver spot up 1.2% to $17.32

Top Overnight News

• Konecranes Soars After Deal to Buy $1.3 Billion Terex Unit
• Uber China Rival Didi Said to Consider U.S. IPO in 2017
• Oil Climbs to Highest Since November as European Shares Retreat
• Fed May Push Back Rate Hike With Brexit, U.S. Election: Pimco
• Lawsuits Mount as Energy Transfer’s Williams Takeover Unravels
• Saudi Arabia, Bahrain Ratings Cut by Moody’s on Lower Oil Prices

Looking at the overnight regional markets, Asia shrugged off the early cautious tone from Friday’s losses on Wall Street and poor Chinese data over the weekend, with Nikkei 225 (+0.3%) initially outperforming on reports that PM Abe will postpone the April 2017 sales tax hike despite Chief Cabinet Secretary Suga later denying these claims. Japanese exporters were also bolstered by JPY weakness amid increased hopes for BoJ action after declining PPI figures, however the Nikkei pared gains as JPY reclaimed some ground against the USD. ASX 200 (+0.6%) was led higher by the health care sector after PM Turnbull announced a resolution to the funding dispute with pathologists. Shanghai Comp (+0.8%) was in positive territory Industrial Production, Retail Sales & lending figures missing expectations as the data increases hopes for future measures. 10yr JGBs saw subdued trade with prices in mildly negative territory amid the risk-on sentiment in Japan with participants side-lined ahead of this week’s key Japanese GDP data and the upcoming 5yr/20yr bond auctions.

Top Asian News

• China Slowdown Shows Debt Addiction Will Be Tough to Shake: Industrial output, retail, investment all missed estimates
• Singapore Home Sales Fall as Mortgage Curbs Cool Housing Demand: Developers sold 745 units last month versus 843 in March
• Bank of Singapore Sees Asia Rich Shift to Paying Fees for Advice: Wealth managers to rely less on transaction-based fees
• Thailand’s Economy Expands More Than Expected in First Quarter: 1Q GDP Expands 3.2% y/y vs est. +2.8%
• Emerging Currencies at March Low on Rallying Dollar, Weak China: S. Korean won leads decline followed by Malaysia’s ringgit
• Bonds Trounce Stocks as Aussie Yield Latest to Drop to a Record: Australian 10-year bond yield drops to record 2.22%
• Uber China Rival Didi Said to Consider U.S. IPO in 2017: Didi said to raise $3 billion in current round of funding
• Konecranes Buys Terex Unit for $1.3 Billion After Merger Dropped: Zoomlion interested in buying remaining Terex business

In Europe, the week has kicked off in a subdued fashion in terms of both newsflow and volumes with much of Europe away for Whit Monday. The European equity indices that are open this morning (with the likes of DAX and SMI closed) have spent the morning in the red, weighed on by the downside seen in the US on Friday, combined with the miss on Exp. seen from Chinese data over the weekend Despite the negative trade seen in much of Europe, the energy and materials sectors trade in the green, with the former benefitting from the upside seen in WTI and Brent.  Fixed income markets have also been impacted by low liquidity, with Bunds relatively unchanged on the day. However, today has seen the long end underperforming, with the steepening in the yield curve attributed by some to the upside seen in oil.

Top European News

• Philips Lighting IPO Could Raise as Much as $1.1 Billion: To sell stock at EU18.50-EU22.50 a share, values business at as much as EU3.38b, expected to start trading May 27
• Telecom Italia Raises Cost-Cut Target to $1.8 Billion by 2018: Almost tripled its target for reducing expenses to EU1.6b by 2018; cuts will include EU800m in operating costs and EU800m in capital spending
• Lonmin Turns Cash-Positive as Cost Cuts Meet Higher Platinum: Net cash was $114m at March 31, compared with net debt of $185m at Sept. 30; has cut 5,400 jobs to stay alive
• ICAP to Become NEX Group to Begin Life After Voice Broking: Will be called NEX once it completes the sale of its voice- broking business to Tullett Prebon, transforming itself into a specialist in electronic markets and post-trade services.
• Carney Defying Brexit Critics Sees U.K. in Early 1990s Quandary: Defended the Bank of England against critics furious at his warnings about the dangers posed by a European Union exit; British Business Sees Brexit Effect as Growth Forecasts Cut

In FX it is a very quiet start to the week, with plenty of data ahead. The Bloomberg Dollar Spot Index held near its highest close since March as the greenback gained 0.3 percent versus the Japanese yen. U.S. retail sales climbed in April by the most in 13 months and a gauge of consumer confidence surged in early May to an almost one-year high, reports showed Friday. Perhaps due to market holidays in Europe, both Asia and early London have seen some extremely range bound trade in the FX majors, but the fact that we have seen limited follow through from the strong US retail sales number on Friday suggests the USD may be in for some consolidation ahead of the FOMC minutes on Wednesday.

AUD/USD has found a base in the mid .7200’s ahead of the RBA minutes in the overnight session ahead, but USD/CAD has seen limited downside despite WTI piercing $47.0. EUR/USD lows under 1.1300 have held in today’s session so far, as has the Cable zone from 1.4350-20, though we did eat into this a little either side of the weekend. EUR/GBP is threatening to push higher though, but this is more likely to send EUR/USD higher again rather than Cable lower in the current climate. USD/JPY is a trade many are staying away from given the erratic risk sentiment in the market. The mid 108.00’s holding for now, but the quest for 110.00 held off as equities struggle.

In Commodities, Brent rose 1.8 percent to $48.70 a barrel at 10:48 a.m. in London, reaching the highest since November, after Friday’s 0.5 percent loss. China’s refineries processed crude at record rates in April, helping ease a supply glut as the number of active rigs in the U.S. declines. West Texas Intermediate climbed 1.8 percent to $47.06. Goldman Sachs raised its oil-price forecast for the second half to $50, from a March estimate of $45.

Aluminum rose 0.3 percent in London after weekend data showed China’s primary output of the metal slipped 1.2 percent in April from a year earlier. Gold added 0.6 percent after data showed holdings in exchange-traded funds increased to the highest since 2013. Silver gained 1.1 percent. Platinum gained 0.3 percent to $1,054.92 an ounce as the industry gathered in London for the annual Platinum Week meeting. The metal may climb 20 percent by the end of next year, according to a Bloomberg survey of 12 traders and analysts.

It’s a particularly quiet start to the week today with no data of note due out of Europe and just Empire manufacturing and the NAHB housing market index of note in the US session this afternoon.

Overnight Media Digest from Bloomberg and RanSquawk

• European market closures for Whit Monday have led to subdued trade in the region with equities lower in what has been a relatively quiet session
• WTI crude futures have reclaimed USD 47.00 while Brent eyes USD 49.00 alongside GS backtracking on some of their bearish oil calls
• Looking ahead, highlights include US Empire Manufacturing Data and Fed’s Kashkari (Non Voter, No Stance)
• Treasuries slip during overnight trading, led by 2Y, with rise in Asian equities amid report Japanese Prime Minister Abe will postpone a 2 percentage point increase in the sales tax and Chinese data missed estimates, creating the possibility of more stimulus.
• China’s run of disappointing April data underscore the bind facing policy makers seeking to cut capacity from the worst- performing sectors and curb credit excesses in recovering ones without stalling the economy
• A sudden plunge by Chinese stocks in Hong Kong had traders scrambling to find a trigger for the slump that coincided with a surge in futures volumes.
• Holdings in gold exchange-traded funds have now surged by a quarter, with investors taking advantage of lower prices over the past two weeks to enlarge stakes on rising concern about central bank policy making worldwide
• Investors are fleeing and volumes are falling due to extreme valuations amid global uncertainties related to monetary policy and political decisions made in wake of the 2007-2009 financial crisis. It’s a flight that’s creating a negative feedback loop
• Swedish hedge fund Informed Portfolio Management is disregarding risks from a potential Brexit and political turmoil from Brazil to South Africa, instead using an approach of looking at fundamentals and placing narrow bets on how assets perform against each other
• Mark Carney defended the Bank of England against critics furious at his warnings about the dangers posed by a European Union exit, and described the British economy as facing similar uncertainty to the early 1990s.
• Sovereign 10Y yields mixed; Asian equities higher while European stocks mostly lower; U.S. equity-index futures higher. WTI crude oil and precious metals rise

DB’s Jim reid concludes the overnight wrap

China will dominate the headlines for different reasons this morning after a soft monthly batch of data released over the weekend. Industrial production grew +6.0% yoy in April (vs. +6.5% expected) and +5.8% ytd (vs. +6.8% yoy in March and +5.8% in Jan-March). Growth of fixed asset investment edged down from +10.7% for Jan-March to +10.5% (vs. +11.0% expected) for Jan-April, with implied monthly growth slowing from +11.2% yoy in March to +10.1%. Nominal growth of retail sales also dropped to +10.1% yoy (vs. +10.6% expected), from +10.5% in March and +10.2% in Jan-Feb.

The property market remained firm though and DB’s Zhiwei Zhang suggests that Q2 growth could still be stronger than Q1 as funds available for investment continued to improve. However net-net (adding in the weak M2 number from Friday), our economists think the risks to their 7% Q2 forecast is to the downside partly because the authorities seems to be shifting from aggressive easing to neutral earlier than expected. Their forecasts for Q3 and Q4 remain at 6.6% and 6.4% respectively.

Markets this morning initially opened a touch weaker in China, but have since bounced back along with other bourses in Asia having been supported by a decent rebound in Oil. Indeed the Shanghai Comp is currently +0.23% after initially falling as much as -0.80%, while elsewhere the Nikkei (+1.33%), Hang Seng (+1.22%), Kospi (+0.10%) and ASX (+0.54%) are also up. Stocks in Japan (Nikkei) are also being helped by a report suggesting that Japan’s government might be considering a delay in the sales tax hike. Meanwhile credit markets are a bit more mixed, while WTI has rallied +1.34% and more than wiped out Friday’s loss to hover just south of $47/bbl. There’s been little in the way of data this morning although it is worth highlighting some rating action from the weekend when Moody’s downgraded a number of Gulf nations including Saudi Arabia (by one notch to A1), in light of lower oil prices.

Moving along. Last week saw markets finish on a somewhat mixed note on Friday. European equities had initially closed with some modest gains (Stoxx +0.47%) which was enough to see the majority of bourses end with a positive return week. That said a bounce for the US Dollar (Dollar index +0.49%) following the much better than expected retail sales data weighed on assets in the US. The S&P 500 eventually closed -0.85% and as a result finished with three consecutive daily declines to take in into negative territory (-0.51%) over the five days.

There was a fair bit of focus going into that retail sales data given some of the soft department store earnings from earlier in the week, so it came as a bit of a surprise to see headline sales print at +1.3% mom for April, a big gap over the +0.8% consensus. All of the other component groups beat as well. Ex autos printed at +0.8% mom (vs. +0.5% expected), ex auto and gas at +0.6% mom (vs. +0.3% expected) and the control group an impressive +0.9% mom (vs. +0.4% expected). The surge in headline sales was actually the most in a single month in 13 months (and included upward prior month revisions) with auto sales a big contributor to the surge, although in fairness the vast majority of categories did report growth.
In terms of how markets responded, that data kick-started the rally for the Dollar while US 2y Treasury yields also marched higher, at one stage touching 0.784% (and 4bps off the lows) before giving up that move into the close to finish close to unchanged on the day at 0.746%. 10y yields, while also temporarily moving higher, actually closed 5.2bps lower at 1.701% meaning the yield curve had interestingly bull flattened by the end of the day. Meanwhile, the odds of a June rate hike ended the day unchanged at 4% based on futures pricing (did get up to 6% at one stage) with a July hike currently at 17% which is also unchanged relative to prior to the data. Those moves also came despite comments from the Fed’s Williams who said that 2-3 rate hikes this year may still make some sense. That said the data did, however, help to lift the Atlanta Fed’s Q2 GDP forecast up to 2.8% from 2.2%, although in contrast the NY Fed’s Q2 GDP forecast is sitting at a much lower 1.2% (from 0.8%).

That wasn’t the only other data out on Friday however. There were also some positive signs to take from the provisional May reading for the University of Michigan consumer sentiment data. The headline index rose an impressive 6.8pts to 95.8 (vs. 89.5 expected) which is the highest level since June last year. The expectations component was actually up 9.9pts at 87.5 (vs. 78.0 expected) while the current conditions component rose 1.9pts to 108.6 (vs. 106.0 expected). That said the data did show a decline in 1y inflation expectations to the tune of three-tenths to 2.5%, although 5-10y inflation expectations nudged up one-tenth to 2.6%. Elsewhere, headline PPI came in a touch lower than expected at +0.2% mom (vs. +0.3% expected) with the core up +0.1% mom as expected. Finally business inventories rose a greater than expected +0.4% mom in March (vs. +0.2% expected).

Prior to this in Europe it was all about the GDP reports. Regionally we saw Germany print a slightly better than expected +0.7% qoq for Q1 (vs. +0.6% expected) with YoY growth now slated at +1.3%. Italy’s Q1 GDP growth came in in-line at +0.3% qoq although the reading for the wider Euro area was revised down a modest one-tenth to +0.5% qoq (in actual fact from 0.55% to 0.52%), with Spain producing the fastest rate of growth (+0.8% qoq) of the core countries.

Last week was a bumper one for new issuance in credit markets. Indeed over the five days last week just over €21bn of corporate issuance was priced in the European market across 30 tranches. Adding in a further €8bn of financials and just over €12bn of SSA issuance meant the €42bn of issuance was the fourth busiest week this year. This week looks set to be a tad lighter in Europe but the forecast range is still €8bn-€12bn. It was much the same in the USD market too where some $50bn was priced. With a bumper deal from Dell already announced and expected to price this week, it’s expected to be another busy week. While we’re with credit, a reminder that we published a Credit Bites at the back end of the week on whether there is now a resistance at zero yields for corporate bonds in Europe.

i)Late  SUNDAY night/ MONDAY morning: Shanghai closed UP  BY 23.75 PTS OR 0.84%  /  Hang Sang closed UP 164.62 OR 0.84%. The Nikkei closed UP 54.19 POINTS OR 0.33% . Australia’s all ordinaires  CLOSED UP 0.56% Chinese yuan (ONSHORE) closed DOWN at 6.5225.  Oil ROSE to 47.14 dollars per barrel for WTI and 48.84 for Brent. Stocks in Europe  MOSTLY IN THE RED . Offshore yuan trades  6.54640 yuan to the dollar vs 6.5225 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE REMAINS CONSTANT.

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) JAPAN ISSUES

end

b) CHINA ISSUES

For the past 5 years, a massive 110 billion USA has left China to buy USA real estate:

(courtesy zero hedge)

 

What Capital Controls? Chinese Buyers Flood US Real Estate Market With $110 Billion

We’ve chronicled extensively the capital flight taking place out of China and into anything that is perceived to hold value as fears that the yuan will devalue persist (here, here, and here). We’ve have also covered the massive debt bubble that has been created during China’s ferocious attempt to prove those who say a hard landing is inevitable wrong. George Sorosand Kyle Bass also agree that China will inevitably have to devalue its currency in order to soften a crash landing, certainly not without its consequences.

We know that Chinese buyers have taken over the Canadian real estate market, and we’ve witnessed the massive amount of corporate M&A being done in the name of preserving shareholder capital. Now we’re able to learn, courtesy of a study done from the Asia Society and Rosen Consulting Group, just how much individual wealth has been poured into the United States real estate market over the past few years.

According to the study (which excludes most purchases by companies and trusts), Chinese buyers have invested a massive $110 billion into the US real estate market between 2010-2015. The $110 billion is broken out into two parts, commercial and residential real estate, absorbing $17 billion and $93 billion respectively. Furthermore, despite the speculation that China will find a way to clamp down even harder on capital controls, the study estimates that for the second half of this decade the number will likely double to $218 billion.

Geographical areas of concentration were New York, Los Angeles, San Francisco, and Seattle, with Chicago, Miami, and Las Vegas also seeing significant investment as well. The impact of course is that real estate prices are being significantly distorted as Chinese buyers are paying huge premiums to ensure deals go through. According to the study,last year Chinese buyers paid on average $832,000 per home in the US, while the overall average for all foreign purchases was just $499,600.

As China continues to flood its economy with new loans, albeit down recently, and the subprime debt bubble gets ready to burst, the race to perceived safety is on for those Chinese buyers fortunate enough to have capital to preserve. As the study suggests,billions more will find its way out of China before the government truly puts a stop to it once and for all.

Average:

0

EUROPEAN ISSUES

Something is going on with DB.  They are now offering 5% yields if they lock up their money for 3 months!!  This is going on with the ECB policy of NIRP!!

(courtesy zero hedge)

Liquidity Problems? Deutsche Bank Offers 5% Yields If Depositors Lock Up Their Money For Three Months

One of the reasons why central banks around the globe have flooded the financial system with trillions in excess reserves is to make sure that banks no longer have to rely on potentially fleeting short term deposits (and is also why negative interest rates have become the norm in so many part of the world, that $10 trillion in bills and bonds now trade with a negative yield). As a result of years of such central bank policy, banks – mostly in Europe – no longer need to compete with each other for deposits: after all why offer tempting deposit rates in an age of NIRP when banks can get all the liquidity they need straight from the ECB and in some cases even get paid on it.

Furthermore, the whole point of NIRP is to slowly unleash negative, not positive, interest rates in order to discourage savings.

Which is why we were surprised to find that in a promotional offer by Europe’s biggest, and by many accounts most insolvent, bank, Germany’s Deutsche Bank is not only not rushing to penalize depositors, on the contrary it is offering its Belgian clients a 5% gross return for new €10,000 – €50,000 deposits if this money is locked up for the next three months. The offer is only valid for the next 40 days, until June 24.

Why the offer? All else equal it would appear as if Deutsche Bank suddenly needs liquidity quite urgently (but only enough per person so that in a worst case scenario the amount is fully insured by the government) with a 3 month lock up; so urgently it is willing to pay sn interest which is higher than on some European junk bonds.

It begs the question: how is it that DB can’t get a far, far cheaper deal in the bond market, or using short-term unsecured funds?

Here is Deutsche Bank’s offer to Belgian clients to open a DB Invest Plus account (google translated):

Open a term account and get 5% gross annual Deutsche Bank will always offer the best offer on the market. Therefore, you can now 3 months 5% gross annualized receive when you open a DB Invest Plus deposit account.

An excellent opportunity to increase your returns

Deutsche Bank, you may be demanding for money. Proof? Stop by one of our Financial Centers. You now get a clear 3 months 5% gross per annum for new amounts from 10,000 to 50,000 euros, if you go for June 24, 2016 opens a DB Invest Plus deposit account (subject to early closing).

Please note that this promotion is only valid for the injection of fresh money, ie amounts previously never been in an account with Deutsche Bank AG Branch Brussels were (between 10,000 and 50,000 euros per person and per family and only at the Financial Centers Deutsche Bank AG Branch Brussels. offer reserved for Belgian residents).

5% in all simplicity

You receive a guaranteed rate of 5% gross per annum for 3 months for each new deposit of 10,000 to 50,000.

5% and a maximum efficiency

After deduction of withholding tax of 27% 1 provides the DB Invest Plus deposit account (a deposit account under Belgian law) a net return of 3.65% per annum for 3 months (fees apply to physical persons residing in Belgium).

5% in any flexibility

This account is designed for people who do not need immediate or within three months of their money and are looking for a fixed interest returns.To be clear: after 3 months will release your money and you can do whatever you want.

Which is certainly a great guaranteed return in this age of ZIRP/NIRP day and age; however the question is: why does Deutsche Bank need this money so urgently, and especially over the next three months.

And while we were pondering this, we noticed a new addition to the generic risk factors boilerplate language, where in addition to the usual stuff, we now see a warning about the infamous “bail in.”

In case of bankruptcy or risk of bankruptcy of financial institution, the saver is at risk of losing their savings or may be subject to a reduction / conversion into shares (bail-in) of the amount of the claim that he has the financial setting on top of the amount covered by the double German guarantee scheme for deposits.

We wonder if DB will be alone in going against the ECB’s grain with such scandalously high rates, or if this turns out to be a systemic issue and suddenly every other bank will likewise rush to attract deposits at a time when the ECB would like nothing more than to have a minus sign in front of the 5%.

Finally, we must admit that we are especially amused by the google translator’s twisted humor when it comes to captioning the picture this especially enticing offer appeared on.

end

A great synopsis of the folly between the Troika and Greece:

(courtesy Mish Shedlock)

Pure Troika Idiocy – The Greek Debt Slavery Regime Through 2059

Submitted by Michael Shedlock via MishTalk.com,

Irreconcilable Positions

Greece owes the Troika over €11 billion in bailout repayments through the end of July. Greece is unable make those payments unless the Troika releases the funds.

Position 1: “We need a big debt restructuring, no more kicking the can,” says Greece’s Minister of State.

Position 2: Germany offers a possibility of unspecified debt relief, at a future point in time, only if necessary. First, Greece must make another round of budget cuts on top of the pension cuts its just made.

Greece has caved in every time, and in the most humiliating ways. Greece even caved in on pension cuts last week.

Why should anyone believe Greek demands now?

Please consider Greek Bailout Deal Must Have Concrete Debt Relief, State Minister Says.

Greece will not accept a bailout deal without a concrete agreement for debt relief from the country’s European creditors, a top aide to Prime Minister Alexis Tsipras said.

“We want real solutions, not interim solutions,” Nikos Pappas, Greece’s Minister of State, said in an interview Friday after several days of talks with senior U.S. officials. “No more kicking the can down the road.”

Without fresh bailout funds, Greece faces bankruptcy in July at the latest. That could revive risks across the eurozone, which is already grappling with a migration crisis, a movement in the U.K. to leave the European Union and the rise of populist parties across the continent.

European powerhouse Germany is pushing Greece and the IMF to accept another bailout agreement based on possible debt relief in the future. The fund, trying to regain credibility it lost in the first two failed Greek bailouts, is taking a firm stand on debt restructuring.

“There are disagreements between the IMF and our European partners,” Mr. Pappas said. “But we have made our position clear that we need a big debt restructuring.…There should be no delay.”

U.S. Treasury Secretary Jacob Lew said Friday he’s pushing Germany to accept some form of restructuring. “I have very much communicated to all the parties that debt relief is necessary,” he said.

But Mr. Lew signaled that the IMF and Greece would also need to compromise. The IMF is pressing for Greece to commit to wage and pension cuts if the country doesn’t meet its budget targets in the coming years. Athens has instead said it would approve across-the-board reductions in spending, a proposal the fund says isn’t credible.

Are Greek Threats Credible?

Greek threats are not credible. Greece has little say in this matter. Nor does U.S. Treasury Secretary Jacob Lew.

However, there is a major difference this time. The IMF wants debt haircuts or it threatens to back out of the deal.

Germany’s insistence all along is the IMF must remain a partner.

This is a battle between the IMF and Germany. No one else’s opinion counts.

Greece Short-Term Debt Timeline

Can Greece come up with €11,235,558,147 in June and July?

Of course not. That is not the way the “bailout” works.

In practice, the Troika gives Greece the money and Greece hands the money right back to the Troika plus a tiny bit extra from now until 2059.

The repayment calculation assumes Greece can maintain a budget surplus of 3.5% of GDP from 2017 until then, a ridiculous belief to say the least.

Greece Long-Term Debt Timeline

Total Debt Owed

• EFSF: €131 Billion
• Eurozone Governments: €53 Billion
• Private Investors: €36 Billion
• ESM: €25 Billion
• ECB: €20 Billion
• Treasury Bill Holders: €15 Billion
• IMF: €14 Billion

Synopsis

1. Greece needs to come up with €11,235,558,147 thru the end of July.
2. Under the current “bailout” scheme, Greece needs to repay nearly  €300 billion between now and 2059.
3. Starting 2017, Greece is supposed to run a primary account surplus of 3.5% through 2059.
4. The IMF proposes a primary surplus of 1.5%. That proposal, stand-alone would stretch debt payments well beyond the already ridiculous 2059 date.
5. In conjunction with a new primary surplus target of 1.5%, the IMF threatens to back out of the whole deal unless there is debt relief.
6. Realistically, Greece is not going to maintain a primary surplus of 1.5% either.
7. Germany does not want debt relief and its constitution does not allow transfer mechanisms.
8. The ECB which is owed €20 billion, most of that due in the next three years, cannot allow debt relief on its portion.
9. Merkel does not want another crisis on top of the Greek refugee crisis she has now.
10. The EU does not want another crisis ahead of the Brexit vote.

Another Greek Bluff? An IMF Bluff?

On its own, Greek demands are meaningless, unless this isn’t a bluff.

Would Greece walk away this time after what we have seen in the past? Is Greece secretly printing Drachmas?

Regardless, something has to bend (or break), if the IMF genuinely sticks to its guns.

If the IMF does back out, would Germany enforce the terms of the deal as demanded by the third bailout?

There are a lot of questions here and no one really knows how far Germany will bend or how firm the IMF will be.

Another Can-Kicking Exercise?

Despite Greece’s demand “We need a big debt restructuring, no more kicking the can”, the most likely outcome is a trivial debt restructuring “can kicking” compromise to get past the Brexit vote.

“Likely” and “guaranteed” are not the same. There are other forces in play: the refugee crisis, Brexit, Merkel’s declining popularity.

Unless Greece is willing to return to the Drachma, this squabble is between Germany and the IMF.

After seeing one can kicking exercise after another, after another, for years on end, and after the amazing cave-in by the Greek government that lead to the third bailout, no one seems remotely concerned this effort will fail.

Perhaps this is the effort that fails or at least leads to a major position change by Germany. The outcome may come down to this question:

Is the IMF bluffing, or is it serious?

end

Over 300 chief executives of British companies are backing a BREXIT stating that the EU are stifling their growth and they are correct!.

(courtesy zero hedge)

UK Establishment Stunned As Over 300 CEOs Back Brexit: “Business, Not Government, Creates Wealth”

In a shocking slap in the face for UK PM Cameron, more than 300 business leaders are calling on Britain to vote to leave the European Union, saying that the country’s “competitiveness is being undermined by our membership.”As The Telegraph reports, the letter, signed bysome of Europe’s most senior business executives, claims Brussels “red tape stifles growth” and a Brexit would “create more jobs” exclaiming that “it is business – not government – which generates wealth.”

Perhaps this explains why Cameron, Osborne, Obama, and almost every other establishment politician and lackey has embraced ‘Project Fear’ when it comes to Brexit, proclaiming World War 3’s imminence and all the worst parts of the bible will occur should the great unwashed masses exercise their right to vote for democracy (as opposed to a tyrannical superstate).

In an attempt to redress the balance after the Bank of England and the International Monetary Fund last week warned that a Brexit would damage Britain’s economy, theletter in the Telegraph is signed by 306 business leaders in a personal capacity (and also signed by hundreds of people linked to small and medium-sized businesses). In total the backers of the letter are from businesses employing hundreds of thousands of members of staff.

SIR – Britain is the fifth biggest economy in the world and, on current projections, will overtake Germany to become Europe’s powerhouse. Britain is America’s largest inward investor, and our openness and dynamism mean we attract more inward investment than any other European country.

Three of the world’s top 10 universities are British, we speak the international language of business, our legal system is trusted round the world and we have an unrivalled reputation for innovation and creativity.

These are just some of the reasons we believe that Britain is world-class. However, we also believe that Britain’s competitiveness is being undermined by our membership of a failing EU.

Year-on-year the EU buys less from Britain because its economies are stagnant and millions of people are unemployed. According to Mervyn King, the former governor of the Bank of England, the euro “might explode”. Brussels’ red tape stifles every one of Britain’s 5.4 million businesses, even though only a small minority actually trade with the EU.

It is business – not government – which generates wealth for the Treasury and jobs for our communities. Outside the EU, British business will be free to grow faster, expand into new markets and create more jobs. It’s time to vote leave and take back control.

Signatories of the letter include Peter Goldstein, a founder of Superdrug, Steve Dowdle, the former vice president Europe of technology firm Sony, David Sismey, a MD of Goldman Sachs and Sir Patrick Sheehy, the former chairman of British American Tobacco.

The polls remain very close… 

Finally, no lesser luminary than Lord Farmer, the former Treasurer of the Conservative Party, writes:

“Warnings of disaster if we leave are misguided. Britain, the world’s fifth-biggest economy, should be confident that others will want to trade freely with it especially if, like the EU, they already do so. Europe has a surplus of nearly £70bn with us and no reason to put up barriers.

“Nor will EU countries want to restrict their access to the London markets. Canary Wharf alone does more business than Frankfurt and we are Europe’s financial outlet to the world. Everyone benefits when London booms.

“We can see the possibility now for a bright new beginning. By voting to leave, we will be taking back democracy and this will benefit everyone.By ending a decades-old deception, we will be leading the way for the continent to become more democratic and less intrusive. Brussels will moan, but I suspect the peoples of Europe will be pleased.”

The choice, as it appears to us is simple:

Vote Yes To Brexit, Regain Sovereignty, or

Vote No To Brexit, Saying Yes To Undemocratic Superstate!

end

RUSSIAN AND MIDDLE EASTERN AFFAIRS

The USA continues to agitate Russia:

(courtesy zero hedge)

Here We Go Again: Yet Another U.S. Spy Plane Brushes Russian Border

Here we go again. After all of the incidents that have taken place over the last few months between the U.S. and Russia, capped by NATO moving 4,000 troops to the Russian border, one would assume that the antagonizing would stop, at least for the time being.

Then again, the U.S. will do whatever it pleases.

As Sputnik reports, yet another U.S. surveillance plane flew close to the Russian border earlier today, although as of right now it is not clear if it was again intercepted by a Russian flanker.

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Baltic Watch ‎@BalticWatch

USAF RC-135V 64-14844 c/s ELGIN33 airborne over southern Baltic sea. Prob. intercepted by Flanker. Transponder is on.

5:14 AM – 15 May 2016

At least this time it appears that the reconnaissance plane had its transponder on,which Russia had in no uncertain terms suggested takes place if the U.S. plans to continue to fly near its borders.

What the end game is regarding all of this isn’t exactly clear, but one thing is certain, and that is the US continues to agitate Russia on purpose, something we touched upon last week when we noted that Russia has gone so far as to warn of a “nuclear war” in response to the US launch of an ICBM-missile defense shield which was finally activated in Romania after many years of delays this past week.

 

 end

The USA is continually losing control over Russian and other eastern nations.  Despite sanctions the Russian bond yields are now below pres sanction levels:

(courtesy zero hedge)

The End Of Hegemony? Russian Bond Yields Plunge Below Pre-US Sanctions Levels

With Russian stocks among the best performing in 2016 – and up dramatically since The White House issued its “sell” rating…

It appears another key element of American’s hegemony is also breaking down. When the US (and its European vassal states) unleashed sanction on Russia in July 2014, it sent bond yields spiking from 9% to over 14% as political and social risks were priced in (as demanded by Treasury). However, despite the ongoing sanctions and the pressure (whether implicit or explicit from Washington) on oil prices, Russian bond yields have disobeyed America and are back below 9% – the lowest level of risk since before sanctions were imposed.

As Bloomberg reports, the political risk associated with Russian sanctions has disappeared from benchmark government bonds.

Yields on local-currency notes due in 10 years have fallen to 8.84 percent amid a recovery in oil and confidence the central bank is closer to meeting inflation targets.

That’s less than the 8.99 percent rate reached the day after the U.S. blocked some of the biggest state companies from capital markets in response to Moscow’s involvement in the Ukraine conflict.

With The Fed’s impotence on show for all to see, did The Treasury’s jawboning and Washington’s control over the world just lose its power?

end

Saudi Arabian is not going to be happy with this release from one of the 9.11 commission members, John Lehman. He states that there were 6 Saudi officials working in the ISA that supported the 9/11 attack and most importantly:

“our report should never have been read as an exoneration of Saudi Arabia,”

He is calling for the 28 redacted pages to be declassified and released in full

(courtesy Charles Kennedy/ OilPrice.com))

9/11 Commission Member: 6 Saudi Officials Supported Terror Attack

Submitted by Charles Kennedy via OilPrice.com,

Six Saudi officials are believed to have actively supported al-Qaida members in the run-up to the 9/11 attacks on America, former 9/11 Commission member and investigator John Lehman has disclosed.

Lehman, who was a member of the 9/11 Commission between 2003 and 2004, said there is documented evidence against employees of the Saudi Ministry of Islamic Affairs, and specifically against individuals who worked for the Saudi Embassy in the U.S., Saudi charities and the Saudi government-funded King Fahd Mosque in California.

“There was an awful lot of participation by Saudi individuals in supporting the hijackers, and some of those people worked in the Saudi government,”said Lehman, stressing that these individuals had strong ties with the Saudi government in Riyadh.

The issue is resurfacing now as pressure builds to release the 28 pages of the 9/11 Commission investigation that had been redacted. Lehman’s disclosure of this information to the media is expected to increase this pressure.

Lehman’s disclosures also come at a time when the long-standing relationship between the U.S. and Saudi Arabia is being questioned and re-evaluated.

The Commission member’s disclosures contradict previous statements from other Commission members.

The Commission’s chair and vice chairs, former Republican New Jersey Gov. Tom Kean and former Democratic Rep. Lee Hamilton of Indiana, released a statement in April saying that“only one employee of the Saudi government was implicated in the plot investigation.”

Still, Lehman—former Navy secretary under Ronald Reagan–stressed that “we have found no evidence that the Saudi government as an institution or senior Saudi officials individually funded the organization.”

Despite that, “our report should never have been read as an exoneration of Saudi Arabia,” Lehman said, referring to the final document of the commission issued in 2004.

He also implored the pubic to remember that 15 of the 19 9/11 attackers were from Saudi Arabia. He is now calling for a new, thorough investigation into the extent of Saudi involvement. But more immediately, Lehman is calling for the remaining 28 pages of the redacted 9/11 Commission report to be declassified—a move that could spur along the already partial break in U.S.-Saudi relations.

end

EMERGING MARKETS

Venezuela is in complete anarchy:

4 stories from zero hedge:

(Story No 1)

Scenes From The Venezuela Apocalypse: “Countless Wounded” After 5,000 Loot Supermarket Looking For Food

Over the last several years we have documented with clockwork regularity Venezuela’s collapse into failed state status, which was cemented several weeks ago when news hit that “Venezuela had officially run out of money to print new money.”  At that point the best one could do was merely to step back and watch as local society and civilization turned on itself, unleashing what would ultimately turn into Venezuela’s own, sad apocalypse.

Last night we showed what Caracas, looks like this week:

As we wrote then these are simply hungry Venezuelans protesting that their children are dying from lack of food and medicine and that they do not have enough water or electricity. As AgainstCronyCapitalism added, this is a country with more oil than Saudi Arabia, and the government has stolen all the money and now they bottleneck peaceful protesters and threaten them with bombs (or haul them to prison and torture them).

As pure desperation has set in, crime has becomes inevitable. A man accused of mugging people in the streets of Caracas was surrounded by a mob of onlookers, beaten and set on fire, who published a pixeled-out but still graphic video of the man burning as mob justice is now the supreme arbiter of who lives and who dies:

“Roberto Fuentes Bernal, 42, was reportedly caught trying to mug passersby in the Venezuelan capital, and before police arrived at the scene, the crowd took the law into their own hands.” The video can be seen here.

Now, in the latest shocking development, Venezuela saw a new wave of looting this week that resulted in at least two deaths, countless wounded, and millions of dollars in losses and damages.

According to Panampost, on Wednesday morning, a crowd sacked the Maracay Wholesale Market in the central region of Venezuela.  According to the testimonies of merchants, the endless food lines that Venezuelans have been enduring to do groceries could not be organized that day.

As time went by, desperate Venezuelans grew anxious over not being able to buy food. Then they started jumping over the gates and stormed the supermarket.

“They took milk, pasta, flour, oil, and milk powder. There were 5,000 people” one witness told Venezuela outlet El Estímulo.

People from across the entire state came to the supermarket because there were rumors that some products not found anywhere else would be sold there.

As a result of the massive crowd, the authorities were unable to preserve the peace. “There were 250 people for each National Guard officer… lots of people and few soldiers. At least one officer was beat up because he tried to stop the crowd,” another source told El Estímulo.

Other food dispensaries run by the government were also looted by the people.

Far from the promised socialist paradise, as the massive group of people moved, an entrance gate collapsed under the weight of the crowd, leaving several wounded.

The image below shows a human stampede over rice.

View image on Twitter

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Sumarium ‎@sumariumcom

#TOP La “estampida humana” en el Luvebras La Florida por arroz regulado http://sumarium.com/el-motin-en-luvebras-la-florida-por-arroz-regulado/ …

9:45 AM – 11 May 2016

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Over the last two weeks, several provinces have hosted scenes of looting in pharmacies, shopping malls, supermarkets, and food delivery trucks. In several markets, shouts of “we are hungry!” echoed. On April 27, the Venezuelan Chamber of Food (Cavidea)reported that the country’s food producers only had 15 days left of inventory.

PanamPost adds that lootings are becoming an increasingly common occurrence in Venezuela, as the country’s food shortage resulted in yet another reported incident of violence in a supermarket — this time in the Luvebras Automarket located in the La Florida Province of Caracas.

Venezuelans lost control this week when offered small portions

Videos posted to social media showed desperate people falling over each other trying to get bags of rice. One user claimed the looting occurred because it is difficult to get cereal, and so people “broke down the doors and damaged infrastructure.”

In the central province of Carabobo, residents ransacked a corn warehouse located in the coastal city of Puerto Cabello. They reportedly broke down the gate because workers were giving away small portions.

“There’s no rice, no pasta, no flour,” resident Glerimar Yohan told La Costa, “only hunger.”

* * *

Social Collapse Is Inevitable

With the economy dead, the only thing remaining is to watch as society implodes. To that end, Oscar Meza, Director of the Documentation Center for Social Analysis (Cendas-FVM),said that measurements of scarcity and inflation in May are going to be the worst to date. “We are officially declaring May as the month that [widespread] hunger began in Venezuela,” he told Web Noticias Venezuela. … “As for March, there was an increase in yearly prices due to inflation — a 582.9 percent increase for food, while the level of scarcity of basic products remains at 41.37 percent.”

“We are officially declaring May as the month that hunger began
in Venezuela,” says an NGO that measures inflation and scarcity

Meza said the trigger for the crisis is the shortage of bread and other foods derived from wheat.

“Prices are so high that you can’t buy anything, so people don’t buy bread, they don’t buy flour. You get porridge, you see the price of chicken go up and families struggle … lunch is around 1,500 bolivars… People used to take food from home to work, but now you can’t anymore because you don’t have food at home.”

The is why, Español Ramón Muchacho, Mayor of Chacao in Caracas, said the streets of the capital of Venezuela are filled with people killing animals for food. “Muchacho reported that in Venezuela, it is a “painful reality” that people “hunt cats, dogs and pigeons” to ease their hunger.”

Subsquently, Muchacho warned that Caribbean islands and Colombia may suffer an influx of refugees from Venezuela if food shortages continue in the country.

“As hunger deepens, we could see more Venezuelans fleeing by land or sea to an island,” Muchacho said.

And that is how all socialist utopias always end.

* * *

Meanwhile, as civil war appears inevitable, as we reported last night there are factions vying to oust Maduro, but signs that he may hang on and force his population to endure more of this socialist nightmare. One can only hope that these shocking scenes remain relegated to the streets of offshore socialist paradises, although Americans should always prepare for the worst in case they eventually manage to make their way into the country.

END

Story No 2: Maduro declares a State of Emergency!  (no kidding)

(courtesy zero hedge)

Maduro’s Last Stand: Venezuela Declares State Of Emergency

From extending the weekend, to rationing electricity, to running out of money to print money, we’ve been covering the real-time events that have occurred in Venezuela as it devolved into a completely failed state.

Sadly, last night as starving citizens looted marketplaces in search of food, we predicted that a civil war was almost inevitable, and that Nicolas Maduro would do what he could to hang on for dear life (literally). Today we learn, with his entire socialist utopia literally crumbling beneath him, Venezuelan president Maduro has declared a 60-day state of emergency.

Additionaly, as a last ditch effort to extend whatever is left of his time as president, Maduro is trying to drum up sympathy claiming that the United States was responsible for the chaos in his country.

“Washington is activating measures at the request of Venezuela’s fascist right, who are emboldened by the coup in Brazil.” Maduro said.

Maduro gave no further details on the “threats” that led him to declare the state of emergency, but the idea of a coup was naturally downplayed by opposition lawmaker Tomas Guanipa.

“Today Maduro has again violated the constitution. Why? Because he is scared of being recalled.” Guanipa opined.

*  *  *

Unfortunately for the people of Venezuala, whatever turn this saga takes will be ugly to say the least…

If people needed yet another textbook example of how socialist utopias ultimately end, Venezuela would be a good place to start.

end

Story no 3:  USA officials are concerned at a complete Venezuelan meltdown

(courtesy zero hedge)

“There’s A Crisis Coming” US Officials Increasingly Concerned At Venezuelan Meltdown

 As Venezuela gives the world a first hand look at how socialism ends, the U.S. is growing more and more concerned about how everything is going to play out once the meltdown is complete.

The concern of course is valid, as at this point, the immediate future looks quite grim. Looters have taken to the streets, clearing supermarket shelves of all available food as the country begins to starve, and in order to try and preserve the what little time he has left, president Maduro recently declared a 60-day state of emergency.

According to Reuters, senior U.S. officials doubt that President Maduro will be able to complete his term, which ends after elections in late 2018. As the U.S. kicks around possible scenarios for how this will all end, from a referendum vote to military coup, one thing is becoming more and more certain: “You know there’s a crisis coming.”

The United States is increasingly concerned about the potential for an economic and political meltdown in Venezuela, spurred by fears of a debt default, growing street protests and deterioration of its oil sector, U.S. intelligence officials said on Friday.

In a bleak assessment of Venezuela’s worsening crisis, the senior officials expressed doubt that unpopular leftist President Nicolas Maduro would allow a recall referendum this year, despite opposition-led protests demanding a vote to decide whether he stays in office.

But the two officials, briefing a small group of reporters in Washington, predicted that Maduro, who heads Latin America’s most ardently anti-U.S. government and a major U.S. oil supplier, was not likely to be able to complete his term, which is due to end after elections in late 2018.

They said one “plausible” scenario would be that Maduro’s own party or powerful political figures would force him out and would not rule out the possibility of a military coup. Still, they said there was no evidence of any active plotting or that he had lost support from the country’s generals.

The officials appeared to acknowledge that Washington has little leverage in how the situation unfolds in Venezuela, where any U.S. role draws government accusations of U.S.-aided conspiracies. Instead, the administration of President Barack Obama wants “regional” efforts to help keep the country from sliding into chaos.

“You can hear the ice cracking. You know there’s a crisis coming,” one U.S. official said. “Our pressure on this isn’t going to resolve this issue.”
A crisis isn’t “coming”, to be clear it has already arrived. Following the state of emergency, which extended a decree granting Maduro extended powers to act in the face of a deep economic crisis, the president threatened to take over idle factories and jail their owners who are trying to “sabotage the country” by halting production. Of course, “sabotage” may be the wrong word to use. Last month, Empresas Polar, the country’s largest food and beverage distributor, shut down its last beer plant due to its inability to access dollars needed to pay foreign suppliers. Perhaps Maduro forgot that the currency exchange process is controlled by the government.

Further evidence of deterioration comes from the fact that Caracas is filled with both pro-government and anti-government crowds arguing back and forth whether or not the 1.8 million signatures collected in favor of a referendum are valid enough to move forward with.

“If you obstruct the democratic way, we do not know what could happen in this country. Venezuela is a bomb that could explode at any moment.” Said opposition leader Henrique Capriles.

On the other side of things, Maduro ally Jorge Rodriguez claims there will be no recall referendum, as “they got signatures from dead people, minors and undocumented workers.”

As the crisis deepens, the protests and violent clashes will intesify. To survive, Maduro is taking the only path available right now, which is to grab as much power as possible and try to hang on until the bitter end.

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Michael Welling ‎@WellingMichael
No more fear. Thousands protest in streets of Venezuela against dictatorship. #SOSVenezuela
10:30 AM – 12 May 2016
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* * *

As an added bonus for readers, we remind everyone that the world’s favorite banker stepped up back in 2014 to become Venezuela’s loan shark as the country was on its way to liquidating whatever assets it could in order to generate cash flow. At that time, Goldman Sachs purchased $4bn worth of oil debt (for 41% of its value) from Venezuela that was owed by the Dominican Republic in the ultimate example of factoring. We find ourselves wondering just what else Goldman managed to get themselves into prior to Venezuela’s complete implosion.

end

Story no 4:  the failed Tinaco -Anaco Railway Line where China extended loans of 37 billion dollars to Venezuela.  There is nothing left of the project as looters stole everything. China may initiate default proceedings

(courtesy zero hedge)

The Tinaco-Anaco Railway Line: A Look At How China Overextended In A Failed Venezuela

With nearly $37 billion loaned to Venezuela since 2008, China (via its China Development Bank) had long been a source funding for the socialist country. It was easy to see how a partnership between the two would be mutually beneficial, as China would have a closer relationship with the country that as of 2015 supplied 4%-5% of its oil import needs, while Venezuela would have a virtual piggy bank to fund projects such as infrastructure.

One project the two countries partnered on was touted as South America’s first high speed train. The Tinaco-Anaco Railway, a $7.5 billion project that was supposed to have a consortium of Chinese companies display to the world their engineering and construction capabilities. A glorious 300 mile long railway was to be built in Venezuela, moving 5 million passengers and 9.8 million metric tons of cargo a year, at speeds of up to 135mph. Today, however, the project is dormant. All that ended up on display, however, is simply a broken down arch that is at the entrance of the railroad workers complex. A symbol of both a failed Venezuelan state, and a carefree China lending program.

AP explains

It was once billed as a model of socialist fraternity: South America’s first high-speed train, powered by Chinese technology, crisscrossing Venezuela to bring development to its backwater plains. Now all but abandoned, it has become a symbol of economic collapse — and a strategic relationship gone adrift.

 

Where dozens of modern buildings once stood, cattle now graze on grass growing amid the rubble of the project’s gutted and vandalized factory. A red arched sign in Chinese and Spanish is all that remains of what until 16 months ago was a bustling complex of 800 workers.

 

That’s when the project’s Chinese managers quietly cleared out.

 

As with many unfinished politically motivated projects dotting Venezuela — government critics call them “red elephants” — the decaying infrastructure contrasts with the railway’s promising beginnings.

 

A decade ago then-President Hugo Chavez dreamed up the Tinaco-Anaco railway as a way to populate the plains and attract development from long-dominant coastal areas. Stretching 300 miles (468-kilometers), it was intended to move 5 million passengers and 9.8 million metric tons of cargo a year at speeds up to 135 miles (220 kilometers) per hour.

 

Chavez turned to China, one of his closest ideological allies, for engineering and financing for the project, part of a $7.5 billion deal that has made Venezuela the world’s top recipient of Chinese loans. A consortium of state-run companies led by China Railway Group Ltd, the world’s largest train maker, was tasked with carrying out construction.

 

But completion is four years overdue, and work, when it happens at all, has slowed to a crawl. At one barracks facility visited by The Associated Press, half a dozen workers huddled under the shade of a giant cement mixer, while two shirtless managers lounged at a control panel smoking cigarettes.

 

Nowhere are the project’s declining fortunes more visible than in Zaraza, a sweltering crossroads town of 75,000 where what used to be an arena-sized factory churning out concrete railroad ties was located. In government news reels from 2013, the complex can be seen towering over manicured lawns and outdoor basketball courts where Chinese and Venezuelan workers socialized.

 

Shortly after the last Chinese managers left in January 2015, a mob of local residents — some of them armed — ransacked the site and hauled away everything of value. First to go were power generators, computers and air conditioners on the back of pick-up trucks. Vandals then tore apart dozens of buildings to scavenge for metal siding, copper wiring and ceramic tiles, some of which are now on sale at roadside stalls.

 

Jesus Eduardo Rodriguez, who owns and lives on the sprawling ranch where the factory was built, said the plundering lasted two weeks.

Several witnesses who declined to be named for fear of reprisals said the looting took place in plain view of National Guard troops, who they allege were on the take and working in collaboration with the town’s pro-government mayor, Wilfredo Balza, which is why the incident never garnered media attention.

 

Balza did not return repeated phone calls and text messages seeking comment and was said to be unavailable when AP journalists visited City Hall.

 

“They destroyed everything,” said Rodriguez, who eventually moved giant cinder blocks to cut off road access to the derelict property, which had become a haven for criminal gangs. “We just came to the house and almost cried, watching what they were doing.”

 

E-mails to China Railway in Beijing went unanswered and the company didn’t comment despite phone calls and two visits to its office in Caracas

In a poetic turn of events, just as Goldman Sachs was trying to capitalize on Venezuela’s failing economy, China was starting to walk away from it. While China has been working with Venezuela on restructuring debt, with oil prices continuing to struggle, a default may be imminent given what is taking place in the country today.

It remains unclear what the vampire squid’s current exposure to the failed Latin American state is, but it would be safe to say say that Goldman unloaded all its risk long before most realized how terminal Venezuela’s endgame truly was.

end

Today, we have country in country, South Africa, as it seems that the Finance  Minister is to arrested.  He is trying to stop massive corruption in his country and Zuma want to put an end to his rant!

(courtesy zero hedge)

The Rand Is Crashing As South African FinMin Arrest Looms

The last 2 days have seen South African Rand plunge 5% relative to the USDollar, back to 2 month lows, after reports that police are set to arrest Finance Minister Pravin Gordhan over alleged irregularities at the nation’s revenue service.

As Bloomberg reports,

Gordhan is aware of plans to arrest him and described them as an effort to thwart his campaign to end government corruption, Beeld newspaper reported on Monday.

 

President Jacob Zuma’s office on Sunday denied the minister would be arrested,rejecting a report in the Johannesburg-based Sunday Times newspaper that a special police unit investigating Gordhan has sent prosecutors the docket of its probe of his alleged involvement in a special agency set up within the national revenue service.

But it seems the market is less confident…

 

“We’re looking at a tough trajectory for USD-ZAR going into the second
half of the year as the bearish political narrative in South Africa only
coincides with chinks in the global macro armor,” said Roxana Hulea, an
emerging market strategist at Societe Generale in London.

 

“We certainly
haven’t seen the last episode of the long-drawn battle, but it should
be clear to the markets that Gordhan’s continuity is not a given fact.”

 

“People are getting tired of the circus and investors don’t like uncertainty,” said Warrick Butler, head of emerging market spot trading at Standard Bank in Johannesburg. “The emerging market universe has been a loser again today. The rand is the poor cousin because of the politics.”

Of course, don’t forget the ZARpocalypse warning…

 

end

OIL ISSUES

Two more USA energy companies go bust:  Breitburn and Sandridge.

As they enter Chapter 11 they will emerge with lower costs:

(courtesy zero hedge)

 

Two More US Energy Companies Go Bankrupt: Breitburn, Sandridge File Chapter 11

Just days after the latest two shale casualties filed for bankruptcy protection when both Linn Energy and Penn Virginia announced prepackaged Chapter 11, moments ago Sandridge announced it too was entering bankruptcy court when it filed a voluntarily petition under Chapter 11 in U.S. Bankruptcy Court for Southern District of Texas to consummate a pre-arranged reorganization.

This follows just hours after Breitburn Energy Partners announced it had filed Chapter 11 as it hopes to negotiate a restructuring of its balance sheet in court, continuing talks with creditors that began a month ago, CEO Hal Washburn said in a release.

Combined the two filings would push the total YTD defaulted bond tally higher by another $7.4 billion, as a result of $4 billion in Sandridge debt and $3.4 billion for Breitburn. According to a Reuters tally, some 28 publicly traded North American oil and gas producers have sought bankruptcy protection since early 2015

As the WSJ writes, Breitburn’s decision to file for bankruptcy was made when it became “abundantly clear that those negotiations could not be concluded and an appropriate restructuring consummated on an out-of-court basis” in time to avert a cascade of defaults that would have squeezed Breitburn’s liquidity, James Jackson, chief financial officer of a Breitburn subsidiary, wrote in a court filing.

About $3 billion of Breitburn’s debts are bank and bond debt, topped by $1.25 billion in loans from lenders led by Wells Fargo Bank, NA. Breitburn is carrying $650 million of senior secured second-lien bonds and $1.1 billion in unsecured bonds. Breitburn said it has been in talks with bondholders about a balance-sheet restructuring. The company has lined up $75 million in bankruptcy financing, and is in talks with senior lenders about bankruptcy emergence financing.

Breitburn’s hedging assets, contracts that cushion the company’s cash holdings against price volatility, will be a central factor in restructuring talks, according to the court papers. The company estimates proceeds of its hedging agreements could be up to $500 million. Outside bankruptcy, hedges are “a significant source of liquidity.”

In bankruptcy, however, a dispute is brewing with Breitburn’s senior lenders, many of whom are also counterparties to the hedge agreements. The company hopes negotiations will avoid litigation over the question of whether it is entitled to use the hedging proceeds, according to court papers. Meanwhile, Breitburn has come to terms with senior lenders on financing arrangements that will support normal operations in bankruptcy.

As the WSJ adds, the Los Angeles company joined a crowd of oil-and-gas firms in bankruptcy, including Linn Energy LLC, which also attracted investors with partnership tax benefits. In April, Breitburn suspended distributions to preferred investors and skipped bond interest payments. Distributions to common shareholders were cut, then suspended last year, as Breitburn took steps to get its finances in line with plunging oil prices.

Citing the “prolonged decline in commodity prices,” Mr. Washburn said Breitburn’s existing debt is unsustainable. In papers filed in the U.S. Bankruptcy Court in New York, Breitburn reported assets of $4.7 billion and debts of $3.4 billion as of March 31.

Shares of the energy exploration and production company have plummeted over the past year, as the price of oil sank and losses mounted. Breitburn’s estimated proven reserves, which were valued at $4.5 billion at the end of 2014, were worth only $1.3 billion as of the end of 2015.

* * *

Today’s other filer, Sandridge, listed total assets of $7.01 billion and total debt of $4 billion as of March 31 in a court filing. SandRidge, which has been in talks with creditors on a restructuring deal, said last Wednesday it would not be able to file financial results for the quarter ended March 31 on time.

As Bloomberg adds, Sandridge entered into an agreement with holders of ~98% in principal amount outstanding under reserve-based lending facility (RBL), 79% in principal amount of 2nd lien notes, 55% in principal amount senior unsecured notes. The agreement contemplates RBL facility and the equitization of ~$3.7b other funded indebtedness. Sandridge’s pro forma capital structure will consist of $425m in 1st lien RBL debt (maturing in 2020), $300m in mandatorily convertible debt.

The company projects having “ample” liquidity to fund ongoing operations, capital programs throughout Chapter 11/upon emergence, without need for debtor-in-possession financing or other added capital.

In other words, both Breitburn and Sandridge plan on continuing operations under bankruptcy, as has largely been the case for all other recent chapter 11 defaults.

 

 end

As the price of oil rose, the hedgers decided to hedge their bets.  Hedging activity is at 5 yr highs.  If the price of oil falls, this will probably be quite deleterious to the banks:

(courtesy zero hedge)

Oil Driller Hedges Soar To Five Year Highs

One recurring theme observed throughout the oil rally since the February 13 year lows, has been increasingly more aggressive hedging action by producers, who are willing to give up upside gains in order to protect from yet another swoon lower in prices. And, as Goldman cautions in its latest note on ongoing imbalances in the oil market, “the rally in long-dated prices has taken prices to levels ($50/bbl in 2017) where hedging activity is ramping up which suggests it will soon stall.”

This can be seen in the following chart of overall hedging activity by oil explorers which as of this moment is the highest since mid-2011.

Overnight Bloomberg confirmed this trend when it reported that producers and merchants increased their short position in WTI by 3.8% for the week ended May 10 to the highest since September 2011. It adds that “oil producers are taking advantage of the rebound in crude markets to lock in protection against another slump. They increased their bets on falling prices to the highest level in 4 1/2 years as U.S. inventories of stored oil remained near an 87-year high, while a natural disaster in Canada and militant attacks in Africa curtailed output. Negative sentiment among the group expanded for a third consecutive week, the longest streak since February.”

Energy companies from EOG Resources Corp. to Chesapeake Energy Corp. used financial instruments such as futures, swaps and collars to guard against another fall in prices. West Texas Intermediate oil, the benchmark U.S. crude, has gained more than 75 percent since hitting a 12-year low in mid-February.

As Again Capital’s John Kilduff chimes in producers “have been getting more and more active in hedging ever since the first initial jump,” adding that they “appear to be drawn to this market as everyone tries to stay alive through the downturn.”

For now, however, the market is less focused on what oil producers themselves are expect from the future price of oil, and far more concerned with transitory oil disruptions in the crude market as highlighted by Goldman, and which as we observed earlier, has taken out about 1.5 million barrells from the market for the time being.

 

At some point in the coming days, attention will return to oil hedging, which appeared to be finally driving prices last week, although today’s news have pushed oil to fresh 6 month highs. “The failure to rally on bullish news was a bearish indicator, at least for a handful of sessions,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “The market still looks relatively overbought.”

As Evans adds, “Some subset of managed accounts have been trying to pick a top in crude. We’ve been rallying for months so the question is, ‘Are we in the middle or late stages of the rally?'”

Our own view is one we shared a month ago: the price action this summer will closely follow that of the summer of 2015, at which point all the relentless hedging will allow US production to be unleashed, and crush Goldman’s near-term rebalancing thesis, and lead to millions more barrels coming online, potentially at the same time as all the temporary oil market disruptions are also normalized. Unless, of course, some central bank openly admits it will begin monetizing oil in which case all bets are off.

On the other hand, one oil and gasoline prices anniversary their base effect and start rising, it will be interesting to watch the Fed and central banks respond as energy prices suddenly spike, sending various CPI indicators far higher and forcing a return of the infamous tightening language.

Average:

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

Euro/USA   1.1325 UP .0024 ( STILL REACTING TO USA FAILED POLICY)

USA/JAPAN YEN 108.85 UP .389 (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 1.4361 UP .0007 (STILL THREAT OF BREXIT)

USA/CAN 1.2905 DOWN .0029

Early THIS MONDAY morning in Europe, the Euro ROSE by 24 basis points, trading now WELL above the important 1.08 level FALLING to 1.1367; 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 UP BY 23.75 PTS OR 0.84% / Hang Sang CLOSED UP 54.10 OR  0.33%   / AUSTRALIA IS HIGHER BY 0.56% / 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 MONDAY morning: closed UP 54.19 OR 0.33% 

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

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 164.62 PTS OR 0.84% . ,Shanghai CLOSED  UP 23.75 OR 0.84%/ Australia BOURSE IN THE GREEN: /Nikkei (Japan) CLOSED IN THE GREEN/India’s Sensex IN THE GREEN

Gold very early morning trading: $1282.55

silver:$17.33

Early MONDAY morning USA 10 year bond yield: 1.708% !!! PAR in basis points from FRIDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield FALLS to 2.556 PAR in basis points from FRIDAY night.

USA dollar index early MONDAY morning: 94.56 PAR from FRIDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers MONDAY MORNING

END

 

And now your closing MONDAY NUMBERS

Portuguese 10 year bond yield:  3.14% DOWN 2 in basis points from FRIDAY

JAPANESE BOND YIELD: -.104% UP 1/4 in   basis points from FRIDAY

SPANISH 10 YR BOND YIELD:1.60% PAR IN basis points from FRIDAY

ITALIAN 10 YR BOND YIELD: 1.47  PAR IN basis points from FRIDAY

the Italian 10 yr bond yield is trading 13 points lower than Spain.

GERMAN 10 YR BOND YIELD: .143% UP 2  IN BASIS POINTS ON THE DAY

END

 

IMPORTANT CURRENCY CLOSES FOR MONDAY

 

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

 

Euro/USA 1.1318 UP .0017 (Euro =UP 17 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 108.99 UP 0.532 (Yen DOWN 53 basis points )

Great Britain/USA 1.4391 UP .0035 Pound UP 35 basis points/

USA/Canada 1.2901 DOWN 0.0033 (Canadian dollar UP 33 basis points with OIL FALLING a bit(WTI AT $47.84).

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was UP by 17 basis points to trade at 1.1318

The Yen FELL to 108.99 for a LOSS of 53 basis points as NIRP is STILL a big failure for the Japanese central bank/

The pound was UP 35 basis points, trading at 1.4391

The Canadian dollar ROSE by 33 basis points to 1.2901, WITH WTI OIL AT:  $47.84

The USA/Yuan closed at 6.5285

the 10 yr Japanese bond yield closed at -.104% UP 1/4 IN BASIS  points in yield/

Your closing 10 yr USA bond yield: UP 5  IN basis points from FRIDAY at 1.748% //trading well below the resistance level of 2.27-2.32%) HUGE policy error

USA 30 yr bond yield: 2.593 UP 4 in basis points on the day ( HUGE POLICY ERROR)

Your closing USA dollar index, 94.54 DOWN 3 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 MONDAY

London:  CLOSED UP 12.90 OR 0.21%
German Dax :CLOSED FOR HOLIDAY
Paris Cac  CLOSED DOWN 7.71  OR 0.18%
Spain IBEX CLOSED DOWN 39.40 OR 0.45%
Italian MIB: CLOSED UP 7.57 OR 0.04%

The Dow was UP 175.39  points or 1.00%

NASDAQ UP 57.79 points or 1.22%
WTI Oil price; 47.84 at 4:30 pm;

Brent Oil: 48.99

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  64.89 (ROUBLE UP 55/100 ROUBLES PER DOLLAR FROM YESTERDAY) AS THE PRICE OF BRENT FELL AND WTI FELL

TODAY THE GERMAN YIELD ROSE TO .143  FOR THE 10 YR BOND

.

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:47.85

BRENT: 49.05

USA 10 YR BOND YIELD: 1.751%

USA DOLLAR INDEX: 94.56 DOWN 1 cent

 

END

And now your more important USA stories which will influence the price of gold/silver

Trading Today in Graph form;  VERY IMPORTANT FOR YOU TO VIEW ALL THE CHARTS TODAY

Investors Dump Bonds, Bullion For Safety Of Biotech Stocks After Dismal China Data

A broad-based miss across the spectrum of Chinese data with loan growth collapsing was just what the bullish algos needed to BTFD at Sunday night’s open…

 

You knew it was going to be an odd day after China’s flash-crash overnight…

 

Deja vu all over again from last Tuesday…No Volume meltup off VWAP

 

Futures show the day’s reality best…

 

Nasdaq and Small Caps led the way today..

 

As VIX was smashed back to a 14 handle…

 

Shorts squeezed out of the gate but stopped as Europe closed…

 

AAPL shares gained over 4% – the best day in 4 months – after Tim Cook’s selfies and Buffett’s buying (as every other hedgie dumps to him)…

 

“Investors” dump bonds and bullion for the safe haven of Biotech stocks…best 2 days in 6 weeks…

 

Good job the consumer is spending… oh wait…

 

Treasury yields rose today – long-end underperforming…

 

But remains entirely decoupled from Atlanta Fed’s newly revised exuberant model projections…

 

The USD Index ended the day practically unchanged as JPY weakness offset commodity currency strength…

 

Even JPY wasn’t buying the stock move…

 

Shortly after US stocks opened, it appears someone decided it was an opportune time to dump commodities en masse.. note that Gold actually ended the day green – even after its clubbing

 

Crude soared on a day when Goldman downgraded it despite every idiot on TV trying to call Goldman’s note bullish…oh and Nigeria

 

But gold and silver saw another vertical price shift – puke…

 

Charts: Bloomberg

end

 

The State of ILLINOIS is in one complete mess.  It still cannot pass a budget bill:

(courtesy zero hedge)

Incompetence Personified: Illinois Has Devolved To One-Off Funding Bills As It Still Can’t Pass A Budget