June 7/Huge addition of 1.456 million oz into the SLV/Silver dealer (registered) inventory at all time lows of 22 million oz / June deliveries in gold now at close to 49 tonnes of gold and no doubt will surpass what was standing on first day notice//USA to stop all imports of Chinese steel into the uSA due to supposed hacking/China will strike back!/

Good evening Ladies and Gentlemen:

Gold:  $1,244.40 DOWN $0.20    (comex closing time)

Silver 16.37  DOWN 5 cents

In the access market 5:15 pm

Gold $1244.00

silver:  16.40

 

i) the June gold contract is an active contract and the second biggest delivery month of the year following December. Friday night, the bankers first day delivery issuance to our longs to be settled on June 1 was huge: the number was  3,508 gold notices for 350,800 oz or 10.9 tonnes of gold. On day two, we had another huge number of gold notices filed at 2281 for 228100 oz or 7.09 tonnes of gold.On day 3,THURSDAY, we had another whopper of 1969 notices for 196,900 oz or 6.12 tonnes.FRIDAY, saw another huge 1026 notices filed for 102600 oz (3.19 tonnes). Then on Friday night we had a whopping 2981 notices filed for Monday totaling 2981 contracts for 298100 oz. Then last night we had another huge notice filing to the tune of 1118 contracts for 111,800 oz Thus in 6 days a total of 12,883 notices have been filed for 1,288,300 oz or 40.071 tonnes.. WHAT IS MORE FASCINATING WAS THE FRONT JUNE MONTH  INCREASED IN NET OI BY 678  CONTRACTS LAST THURSDAY(67,800 OZ).  ON FRIDAY IT INCREASED BY 78 CONTRACTS OR 7800 OZ AND YESTERDAY IT INCREASED BY 264 CONTRACTS OR 26400 OZ. AND THEN TODAY IT INCREASED BY 284 CONTRACTS. FOR 28,400 OZ. THE ENTITY STANDING DOES NOT WANT FIAT AND IT SURE LOOKS LIKE A SOVEREIGN IS STANDING FOR GOLD.

Let us have a look at the data for today

.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 269.55 tonnes for a loss of 33 tonnes over that period

 

In silver, the total open interest FELL by 1543 contracts DOWN to 193,365 DESPITE THE FACT THAT THE PRICE OF SILVER WAS UP by 8 cents with respect to YESTERDAY’S trading.In ounces, the OI is still represented by just under 1 BILLION oz i.e. 0.966 BILLION TO BE EXACT or 138% of annual global silver production (ex Russia &ex China)

In silver we had 0 notices served upon for nil oz.

In gold, the total comex gold OI fell by a CONSIDERABLE 3,611 contracts DOWN to 492,648 DESPITE THE FACT THAT the price of gold was UP $4.50 with YESTERDAY’S trading (at comex closing).

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

With respect to our two criminal funds, the GLD and the SLV:

WITH RESPECT TO GLD

We had a small change, a withdrawal of .29 tonnes  in inventory from the GLD/Inventory rests at  881.15 tonnes.  The small change is probably to pay for fees.

And now for SLV

We had a large change in inventory, a deposit of 1.456 million oz into the SLV Inventory/Tonight it rests  at 338.725 million oz.

Both the GLD and SLV are massive frauds as they have no metal behind them!

.

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

1. Today, we had the open interest in silver FALL by 1543 contracts DOWN to 193,365 despite the fact that the price of silver was UP by 8 cents with YESTERDAY’S trading. The gold open interest FELL by 3,611 contracts DOWN to 492,648 as gold was UP $4.50 YESTERDAY.

(report Harvey).

 

2 a) Gold trading overnight, Goldcore

(Mark OByrne/

2b)  Gold trading earlier this morning;

(Mark OByrne

3. ASIAN AFFAIRS

i)Late  MONDAY night/ TUESDAY morning: Shanghai closed UP  BY 1.95 PTS OR 0.07% /Hang Sang closed UP 290.02 OR 1.42%. The Nikkei closed UP 95.42 POINTS OR 0.58% Australia’s all ordinaires  CLOSED UP 0.20% Chinese yuan (ONSHORE) closed UP at 6.5621 Oil ROSE to 49.97 dollars per barrel for WTI and 51.04 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.5714 yuan to the dollar vs 6.5621 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS) 

REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) REPORT ON JAPAN

With Europe’s corporate bonds trading at a yield of 1.0% due to Draghi’s continual buying of debt, we now see Japan issuing a 3 year bond yielding .001%.  Thus an investor purchasing a 1,000 dollar equivalent bond would receive 3 dollars over that 3 yr period, enough to buy a cup of coffee

( zero hedge)

b) REPORT ON CHINA

i)China’s real unemployment is around 12.9% almost triple the official number of 4%

( zero hedge)

 

ii)See how some people are exporting dollars out of China:

( zero hedge)
iii)  A biggy!!!
Oh Oh this is not good:  Obama seeks a total ban on Chinese steel due to their hacking
of commercial secrets. I have no doubt now that China will attack the comex by taking delivery of just about every ounce of gold they can:
(courtesy Mish Shedlock)

4. EUROPEAN AFFAIRS

i)German 10 yr bunds hit an all time low of .048% as the Dow rises??Generally we see a flock to safety of bunds when stocks plummet but to see stocks rise and bund yield collapse just does not make sense

( zero hedge)

 

ii)this is very problematic for Merkel who faces elections next next year: 69,000 crimes committed in Germany in the first quarter by migrants;

5.RUSSIAN AND MIDDLE EASTERN AFFAIRS

i)Another bomb blast in Istanbul Turkey killing 11 people of which 7 were police officers.  The target was police officers riding on a bus.  Either ISIS or the PKK were responsible.

( zero hedge)

ii)Just what Europe needs: Either they get huge numbers of refugees or huge numbers of Turkish migration and more terrorist attacks on European soil:

Erdogan issues another threat to Europe: give EU visa status to 80 million Turks or else he will release all the refugees

6.GLOBAL ISSUES

Taiwanese exports is a terrific bellwether for global trade  (along with Caterpillar).Today they record their 16th straight month of export declines.

( zero hedge)

7.OIL ISSUES

i)For a while Iran could not find ships to export their oil.  Now they have and that should put a damper on oil prices:

( zero hedge)

 

ii)Oil retreats a bit after an unexpected inventory build in both gasoline and distillates

( zero hedge)

8.EMERGING MARKETS

none today

 

9. PHYSICAL STORIES

i)A very important commentary from James Turk.  He is pounding the table that inflation is back despite the weaker economy.  This suggest stagflation similar to what we witnessed back in the 1970’s.

( zero hedge)

 

ii)The Bank of Montreal is setting up a fund containing only allocated gold.  Believe it or not they warn against other banks who do the following:

” the fund seeks to eliminate “derivatives risk (i.e., the use of unallocated gold, gold certificates, exchange-traded products, derivatives, financial instruments, or any product that represents encumbered gold),” as well as “’empty vault risk’ or gold bullion lending risk (i.e., the practice of the gold custodian lending, pledging, hypothecating, re-hypothecating, or otherwise encumbering any of the investors’ underlying gold bullion).”

I guess we will never see this in the USA:

( Bank of Montreal/GATA/Chris Powell)

 

iii)Copper crashed today from 2.10 per lb down to 2.06.  The global economy is in trouble:

( zero hedge)

 

iv)a very important commentary tonight from Lawrie Williams as he touches on the BREXIT , the poor jobs report and thoughts from grant Williams of Hmmm fame)

( Lawrieongold)

10.USA STORIES WHICH MAY INFLUENCE THE PRICE OF GOLD/SILVER

i) For the second quarter in a row, USA worker productivity dropped .6% quarter over quarter.Unit labour cost rose 4.5% q/vs output falling .6% which implies a 3.9% rise in compensation. This continues to hurt the manufacturing base  as mfgers seek other jurisdictions to make stuff.

( zero hedge)

iii)Valeant posts a loss for the first quarter and more importantly guides earnings lower.This once darling on Wall Street is surely having their problems. Huge number of hedge funds have this company in their portfolios.

( zero hedge)

 

iv)Not only will some face huge increases in the premiums next year but also 100,000 will be left without insurance altogether in Colorado due to Obamacare:

( zero hedge)

Let us head over to the comex:

The total gold comex open interest FELL to an OI level of 492,648 for a LOSS of 3,611 contracts AS THE PRICE OF GOLD WAS UP $4.50 with respect to FRIDAY’S TRADING.  WE HAVE ENTERED THE SECOND BIGGEST DELIVERY MONTH OF THE YEARTHAT IS JUNE, A VERY ACTIVE MONTH. 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. IN THE MONTH OF MAY THE LATER HAD STOPPED. DURING THE MAY WE DID WITNESS A GRADUAL RISE IN AMOUNT STANDING AND THE AMOUNT STANDING AT THE CONCLUSION OF THE MONTH FINISHED AT ITS ZENITH..  IN JUNE, ON FIRST DAY NOTICE WE HAVE CERTAINLY WITNESSED THE FORMER, A HUGE LOSS OF TOTAL OPEN INTEREST CONTRACTS FOR THE ENTIRE GOLD COMEX COMPLEX . IN A VERY SURPRISING TURN OF EVENTS  AGAIN TODAY, THE JUNE OPEN INTEREST ROSE WHICH CERTAINLY SUGGESTS A MAJOR ENTITY IS STANDING AND MOSTLY LIKELY A SOVEREIGN LIKE CHINA

The FRONT gold contract month of June saw it’s OI fall to 3986 for a loss of 2687 contracts. We had 2981 notices filed yesterday, so we GAINED AGAIN 284 contracts or 28400 additional oz standing FOR METAL. The next active contract month is July and here we saw it’s OI FALL by 40 contracts DOWN to 2340. The next big active contract month is August and here the OI FALL by 2,859 contracts DOWN to 355,411. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was POOR at 136,604. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 174,222 contracts. The comex is not in backwardation.

Today we had a another monstrous 1118 notices filed for 111800 oz in gold.(3.47 tonnes)

 

And now for the wild silver comex results. Silver OI FELL by 1543 contracts from 194,908 DOWN to193,365 DESPITE THE FACT THAT the price of silver was UP BY 8 cents with YESTERDAY’S TRADING. The front month of June saw it’s OI fall by 0 contracts REMAINING AT 348. We had 0 notices filed yesterday, so we neither lost nor gained any ounces that will stand for delivery. The next big delivery month is July and here the OI fell by 2,145 contracts DOWN to 115,987. The volume on the comex today (just comex) came in at 45,686 which IS VERY GOOD. The confirmed volume YESTERDAY (comex + globex) was very good at  50,462. Silver is not in backwardation . London is in backwardation for several months.
 
We had 0 notices filed for nil oz.
 

JUNE contract month:

INITIAL standings for JUNE

June 7.
Gold
Ounces
Withdrawals from Dealers Inventory in oz   nil OZ

 

Withdrawals from Customer Inventory in oz  nil  160.75oz

BRINKS, MANFRA

5 KILOBARS

Deposits to the Dealer Inventory in oz 11,252.000 OZ

?? BRINKS

Deposits to the Customer Inventory, in oz   NIL
No of oz served (contracts) today 1118 contracts
(111,800 oz)
No of oz to be served (notices) 2868 contracts

286,800 oz

Total monthly oz gold served (contracts) so far this month 12,883 contracts (1,288,300 oz)

(40.071 TONNES SO FAR)

Total accumulative withdrawals  of gold from the Dealers inventory this month   1400.01 OZ
Total accumulative withdrawal of gold from the Customer inventory this month  82,286.4 OZ
SMALL ACTIVITY AGAIN INSIDE THE GOLD COMEX TODAY

Today we had 1 dealer DEPOSIT

i) into Brinks 11,252.500

total dealer deposit:  11.252.500 0z

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

 

Today we had 0 customer deposits:

Total customer deposits;  nil OZ

Today we had 2 customer withdrawals:

I) OUT OF MANFRA:  128.60 OZ  4 kilobars

II) OUT OF BRINKS: 128.60  4 kilobars

total customer withdrawals:  160.75 OZ  5 kilobars

Today we had 1 adjustment

First adjustment:

AT the BRINKS facility: (INTO DEALER ACCT)

 

We had 2443.400 oz leave the customer account of Brinks and enter the dealer account of Brinks

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 1118 contracts of which 450 notices was stopped (received) by JPMorgan dealer and 453 notices was stopped (received)  by JPMorgan customer account. 
To calculate the initial total number of gold ounces standing for the JUNE contract month, we take the total number of notices filed so far for the month (12,883) x 100 oz  or 1,288,300 oz , to which we  add the difference between the open interest for the front month of JUNE (3986 CONTRACTS) minus the number of notices served upon today (1118) x 100 oz   x 100 oz per contract equals 1,570,100 oz, the number of ounces standing in this active month.  This number is EXTREMELY huge for JUNE.  THE AMOUNT STANDING FOR GOLD IN MAY HELD THROUGHOUT THE MONTH AND ACTUALLY INCREASED AS THE MONTH PROCEEDED. AND IT SURE LOOKS LIKE IT WILL HAPPEN AGAIN IN JUNE.  THE BANKERS JUST RECEIVED THEIR MINSKY MOMENT!! 
 
Thus the INITIAL standings for gold for the JUNE. contract month:
No of notices served so far (12,883) x 100 oz  or ounces + {OI for the front month (3986) minus the number of  notices served upon today (1118) x 100 oz which equals 1,570,100 oz standing in this   active delivery month of JUNE (48.836 tonnes).
WE GAINED 284 CONTRACTS OR AN ADDITIONAL 28,400 OZ  IS STANDING FOR THE PHYSICAL GOLD.
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 48.836 tonnes of gold standing for JUNE and 51.04 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 6.889 TONNES FOR MAY + 48.836 TONNES FOR JUNE + 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 + May 5:  3.799 and May 6: 1.607 tonnes – MAY 12  .0003- May 18: 1.5635 tonnes-May 19/   2.535 tonnes-May 27 .0185 – .024 TONNES MAY 31 -jUNE 4: .5044   = 65.539 tonnes still standing against 51.04 tonnes available.
 Total dealer inventor 1,640,963.321 tonnes or 51.04 tonnes
Total gold inventory (dealer and customer) =8,666231.817 or 269.550 tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 269.55 tonnes for a loss of 33 tonnes over that period. 
 
JPMorgan has only 22.79 tonnes of gold total (both dealer and customer)
JPMorgan now has only .900 tonnes left in its dealer account.
 
 end
HUGE ACTIVITY INSIDE THE SILVER COMEX AS WELL
And now for silver
 

June initial standings

 June 7.2016

Silver
Ounces
Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory  9,890.02 oz

Delaware

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

 

No of oz served today (contracts) 0 CONTRACTS 

nil OZ

No of oz to be served (notices) 348 contracts

1,740,000 oz

Total monthly oz silver served (contracts) 202 contracts (1,010,000 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  12,103,073.5 oz

today we had 0 deposit into the dealer account

total dealer deposit:NIL oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil

we had 0 customer deposit:

 

Total customer deposits: nil oz.

We had 1 customer withdrawals

ii) Out of Delaware:9890.02  oz

:

total customer withdrawals:  9890.02 oz

 
 

 

 we had 1 adjustment

 

ii) Out of CNT;  639,041.541 oz was adjusted out of the dealer and this landed into the customer account of CNT

 

LOOKS LIKE WE ARE HAVING A BANK RUN AT THE SILVER COMEX 
The total number of notices filed today for the JUNE contract month is represented by 0 contracts for nil oz. To calculate the number of silver ounces that will stand for delivery in JUNE., we take the total number of notices filed for the month so far at (202) x 5,000 oz  = 1,010,000 oz to which we add the difference between the open interest for the front month of JUNE (348) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the JUNE contract month:  202 (notices served so far)x 5000 oz +{348 OI for front month of JUNE ) -number of notices served upon today (0)x 5000 oz  equals  2,750,000 of silver standing for the JUNE contract month.
We neither lost nor gained any silver ounces standing for this non delivery month of June.
 
Total dealer silver:  22.482 million  (RECORD LOW INVENTORY)
Total number of dealer and customer silver:   153.164 million oz
The total open interest on silver is NOW moving away from an all time high with the record of 207,394 being set May 18.2016. 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 shear movement of silver into and out of the vaults signify that something is going on in silver.
end
And now the Gold inventory at the GLD
june 7/ a tiny withdrawal of .29 tonnes of inventory/probably to pay for fees/Inventory rests at 881.15 tonnes
June 6/no change in gold inventory at the GLD/Inventory rests at 881.44 tonnes
June 3/ We had two big  sized deposits of 4.46 tonnes early this morning and then another 6.24 tonnes late tonight/ new GLD total: 881.44 tonnes  (total: 10.7 tonnes)
June 2/no change in gold inventory at the GLD.Inventory rests at 870.74 tonnes
June 1.2016/ a good sized deposit of 2.08 tonnes/Inventory rests at 870.74 tonnes
May 31/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 868.66 TONNES
May 27/no change in gold inventory at the GLD/Inventory rests at 868.66 tonnes
May 26./no change at the GLD/Inventory rests at 868.66 tonnes
May 25./no change in gold inventory at the GLD/Inventory rests at 868.66 tonnes
MAY 24/ a good sized withdrawal of 3.86 tonnes of paper gold from the GLD/Inventory rests at 868.66 tonnes
May 23./this is rather impossible: another huge deposit of 3.26 tonnes into the GLD with the price of gold down again today?/inventory rests at 872.52 tonnes
May 20/what!!!A MONSTER DEPOSIT OF :8.92 TONNES OF GOLD INTO THE GLD INVENTORY/AND WITH GOLD DOWN $2.80??/INVENTORY RESTS AT 869.26
May 19/ANOTHER HUGE DEPOSIT OF 4.46 TONNES OF GOLD INTO THE GLD/iNVENTORY RESTS AT 860.34 TONNES
May 18 /no changes in inventory at the GLD/Inventory rests at 855.89 tonnes.
May 17/ we had a huge deposit of 4.76 tonnes of gold into the GLD/Inventory rests tonight at 855.89 tonnes/in the last two and 1/2 weeks we have added 50 tonnes of gold and this most likely was all paper gold addition..
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

June 7.:  inventory rests tonight at 881.15 tonnes

end

Now the SLV Inventory
june 7/ we had a huge addition (deposit) of 1.456 million oz into the SLV/Inventory rests at 338.725 million oz/
June 6/no change at the SLV/Inventory rests at 337.299 million oz/
June 3/ a huge deposit of 1.56 million oz was added to the SLV inventory/new inventory rests at 337.299 million oz
June 2/no change in silver inventory at the SLV/Inventory rests at 335.739 million oz
June 1/no change in silver inventory at hte SLV/inventory rests at 335.739  million oz
May 31/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 335.739 MILLION OZ
May 27/no change in silver inventory at the SLV/Inventory rests at 335.739 million oz/
May 26./ no change in silver inventory at the SLV/Inventory rests at 335.739 million oz
May 25./no change in silver inventory at the SLV/Inventory rests at 335.739
MAY 24/no change in inventory at the SLV/Inventory rests at 335.739 million oz
May 23./we had a small withdrawal of 285,000 oz and that generally means payment of fees.Inventory rests at 335.739 million oz
May 20/WE HAD A GOOD SIZED DEPOSIT OF 951,000 OZ INTO THE SLV/INVENTORY RESTS AT 336.024 MILLION OZ
May 19/no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz
May 18/no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz/
May 17/no change in silver inventory at the SLV/Inventory rests at 335.073 million oz/
.
June 7.2016: Inventory 338.725 million oz
end

NPV for Sprott and Central Fund of Canada

will update on this site later tonight/

1. Central Fund of Canada: traded at Negative 4.1 percent to NAV usa funds and Negative 4.2% to NAV for Cdn funds!!!!
Percentage of fund in gold 61.9%
Percentage of fund in silver:37.7%
cash .+1.4%( June 7/2016). /
2. Sprott silver fund (PSLV): Premium FALLS  to +0.27%!!!! NAV (June 7.2016) 
3. Sprott gold fund (PHYS): premium to NAV  falls TO +0.88% to NAV  ( June 7.2016)
Note: Sprott silver trust back  into POSITIVE territory at +27% /Sprott physical gold trust is back into positive territory at +0.88%/Central fund of Canada’s is still in jail.
 
 
 

END

 

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

Trading in gold and silver overnight in Asia and Europe
Mark O’Byrne (Goldcore)

Gold Prices Surge After Very Poor Jobs Number, Growing Risk Of BREXIT

Gold prices surged nearly 3% after the very poor jobs number on Friday, have maintained those gains and appear to be consolidating as concerns about the U.S. economy and BREXIT deepen.

goldprices_MU_BREXITGold Prices in USD – 1 Week (GoldCore)

Gold was marginally higher yesterday and 2.7% higher last week breaking a run of recent weekly losses and a 5% loss in May.

BREXIT concerns are gaining momentum after three recent polls suggested that the ‘leave’ side are gaining an advantage and a BREXIT looks more likely.

An ITV poll showed 45% for “Leave” and 41% for “Remain.” A survey by global market research company TNS showed 43 percent backing an EU exit, and 41 percent wanting to stay in. An online poll showed 48 percent supported leaving the EU, while 43 percent were in favor of remaining and 9 percent were undecided, according to ICM.

This is leading to concerns about a coming period of market volatility and turmoil. This should support gold and silver and indeed lead to gains on safe haven demand.

Sterling fell versus gold 1.2% yesterday – from £857 to £867.66 per ounce after the polls showed UK citizens favoured leaving the EU. That revived concerns the BREXIT referendum on June 23 will throw global markets into turmoil and severely undermine confidence in the already vulnerable, nascent EU super state.

The pound also dropped to a three-week low versus the dollar after the polls. While the pound pared its earlier declines, a gauge of anticipated swings against the dollar in the next month surged to the highest in at least seven years. One-month implied volatility in pound dollar trading rose above 22 percent, the highest since February 2009.

Gold has given up some of those gains since as sterling has recovered and as odd ‘fat finger’ trades helped sterling bounce overnight. Gold in sterling terms had risen 5.5% since the start of last week (May 30), due to increasing BREXIT concerns and the poor jobs number in the U.S.

Markets participants are preparing for turmoil. “The result is going to be announced at an awkward time, in the middle of the night,” said Joe Rundell, head of trading at ETX according to the BBC. “And we expect that whatever the result there will be significant movements on the FTSE 100, the sterling markets and in gold.”

Gold rallied 2.8% percent back above $1,245 on Friday after the very poor jobs number saw traders sell risk assets especially equities and allocate to safe haven assets.

The May employment report showed Americans returned to the labour market at their slowest pace in almost six years. The US non farm workforce added only 38,000, jobs missing the forecast of 160,000 and indicating that the US is in recession or heading to recession. Additionally, the March and April figures were revised 22,000 and 37,000 lower respectively.

Federal Reserve Chair Janet Yellen looks set to stay uber dovish and maintain ultra low monetary policies due to concerns about the U.S. economy, global economy and indeed BREXIT.

Yellen said at the weekend that the risk of Brexit is also weighing on the Fed’s interest rate decision. She warned that a UK vote to leave the European Union could badly impact the U.S. and global economy and affect the timing of the next interest rate rise. Market participants are concerned that the fragile U.S. and global recovery is spluttering and even a very small interest-rate increase of 25 basis points could derail the U.S. and global economies and lead to a recession.

A vote for BREXIT should see gold and silver rise sharply on a safe haven bid in futures markets and safe haven demand for bullion. A vote to remain would be expected to see gold and silver fall as risk appetite comes back into the market supporting equities and sterling. However, price weakness in the precious metals would likely be short term given the current strong supply and demand fundamentals for them.

Recent Market Updates
– Silver – Perfect Storm Brewing in the Market
– Martin Wolf: There Will Be Another “Huge” Financial Crisis
– Silver Price To Surge 800% on Global Industrial and Technological Demand

– BREXIT Gold Diversification As Vote Fuels Market Uncertainty
– Gold Forecasts Revised Higher – Citi Says “Buy the Dip”
– Gold Should Rise Above $1,900/oz -“Get In Now!”
– World’s Largest Asset Manager Suggests “Perfect Time” For Gold

Breaking News and Commentary
Pound slides as polls show Brexit support, as Yellen hints at US rate rises – Bloomberg
Gold holds near two-week highs as cautious Yellen hurts dollar – Reuters
Asian Stocks Rise as Commodities in Bull Market – Bloomberg
Gold Futures Rise as Bets Mount That Fed Will Delay Rate Rise – Bloomberg
Gold futures close at 2-week high as Yellen ‘plays charades’ – Marketwatch

Cable Plunges After “Leave” Voters Overtake “Remain” In Latest Brexit Poll – Bloomberg
Bank of Montreal warns against other banks in gold business – Reuters via GATA
Massive Explosions Cripple Nigerian Oil Industry – Traders DNA
Why Big Job Misses Are Likely to Continue – Financial Sense
US Jobs Report: Rocket Fuel For Gold – 321 Gold
Read More Here

Gold Prices (LBMA AM)
07 June: USD 1,241.10, EUR 1,091.42 and GBP 851.02 per ounce
06 June: USD 1,240.55, EUR 1,092.67 and GBP 859.08 per ounce
03 June: USD 1,211.00, EUR 1,086.63 and GBP 839.34 per ounce
02 June: USD 1,215.50, EUR 1,085.32 and GBP 842.10 per ounce
01 June: USD 1,216.25, EUR 1,090.00 and GBP 841.77 per ounce

Silver Prices (LBMA)
07 June: USD 16.31, EUR 14.36 and GBP 11.18 per ounce
06 June: USD 16.40, EUR 14.47 and GBP 11.39 per ounce
03 June: USD 16.10, EUR 14.45 and GBP 11.17 per ounce
02 June: USD 15.98, EUR 14.27 and GBP 11.07 per ounce
01 June: USD 15.95, EUR 14.30 and GBP 11.04 per ounce

END

 

A very important commentary from James Turk.  He is pounding the table that inflation is back despite the weaker economy.  This suggest stagflation similar to what we witnessed back in the 1970’s.

 

(courtesy zero hedge)

 

Inflation is back, ‘stagflation’ is coming, Turk tells KWN

Section:

5:41p ET Monday, June 6, 2016

Dear Friend of GATA and Gold:

Inflation has come back even as another worldwide recession is beginning, promising a return to the “stagflation” of the 1970s, GoldMoney founder and GATA consultant James Turk tells King World News today. Now as then, Turk adds, gold and silver will offer protection to investors. An excerpt from the interview is posted at the KWN Internet site here:

http://kingworldnews.com/james-turk-we-just-witnessed-a-huge-wakeup-call…

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

 

 

END

 

The Bank of Montreal is setting up a fund containing only allocated gold.  Believe it or not they warn against other banks who do the following:

 

” the fund seeks to eliminate “derivatives risk (i.e., the use of unallocated gold, gold certificates, exchange-traded products, derivatives, financial instruments, or any product that represents encumbered gold),” as well as “’empty vault risk’ or gold bullion lending risk (i.e., the practice of the gold custodian lending, pledging, hypothecating, re-hypothecating, or otherwise encumbering any of the investors’ underlying gold bullion).”

 

I guess we will never see this in the USA:

(courtesy Bank of Montreal/GATA/Chris Powell)

 

Bank of Montreal warns against other banks in gold business

Section:

6:50p ET Monday, June 6, 2016

Dear Friend of GATA and Gold:

A year ago February, Bank of Montreal announced plans to start a physical gold fund —

http://www.reuters.com/article/us-bank-of-montreal-gold-idUSKBN0L80BQ201…

— and today the bank filed a prospectus with the U.S. Securities and Exchange Commission signifying intent to stock the fund with $500 million of gold, to denominate the shares in ounces, to vault the metal at the Royal Canadian Mint, and to give investors the option of withdrawing their investment in real metal:

http://www.sec.gov/Archives/edgar/data/927971/000121465916012033/d63160s…

The prospectus provides a few interesting and even amusing details:

— It cautions that the “official sector” is active in the gold market and can affect prices, an acknowledgment that will never make it into any reports by mainstream financial news organizations.

The fund will not insure its assets, trusting the Royal Canadian Mint to protect them.

— The fund is structured separate from the Bank of Montreal so that its assets will not be vulnerable to claims by creditors against the bank.

— And — the amusing part — the fund seeks to eliminate “derivatives risk (i.e., the use of unallocated gold, gold certificates, exchange-traded products, derivatives, financial instruments, or any product that represents encumbered gold),” as well as “’empty vault risk’ or gold bullion lending risk (i.e., the practice of the gold custodian lending, pledging, hypothecating, re-hypothecating, or otherwise encumbering any of the investors’ underlying gold bullion).”

Imagine — a bank warning against the shady practices in the gold market of other banks. While that’s something else that will never make the mainstream financial news organizations, at least the word is getting around anyway.

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

 

end

 

Copper crashed today from 2.10 per lb down to 2.06.  The global economy is in trouble:

(courtesy zero hedge)

 

Copper Is Crashing After Huge Spike In Inventories

Copper futures are tumbling by the most in 2 months (testing back towards 4 month lows) after the biggest two-day increase in copper stockpiles monitored by LME since 2004.

Dr.Copper is sick…

 

As LME Copper inventories explode higher…

 

As Bloomberg details,

Copper held in Asian warehouses tracked by the London Metal Exchange jumped 50 percent in the past two days, the most in seven years.

 

 

Supplies are moving to Singapore, South Korea and Taiwan from China, where stockpiles tracked by the Shanghai Futures Exchange have almost halved since mid-March.

 

Base metals are still trading at “relatively low levels,” Jens Naervig Pedersen, a senior analyst at Danske Bank in Copenhagen, said by e-mail. “Uncertainty over the outlook for global manufacturing is outweighing the positive effect of the lower dollar,” he said.

Whether this is more CCFD unwinds or the hangover from the massive speculative bubble of the last 3 months is unclear but the inventory spike in almost without precedent.

This plunge in copper prices is especially notable as the reflation trade appears to have got hold of China commodities once again with Dalian up over 3% overnight, Rebard up over 2% and Shanghai Iron Ore up almost 3%.

 

end

 

a very important commentary tonight from Lawrie Williams as he touches on the BREXIT , the poor jobs report and thoughts from grant Williams of Hmmm fame)

(courtesy Lawrieongold)

Jobs, Brexit and Gold – the unholy trio that are upsetting the Fed applecart

As maybe I’ve mentioned before, of the plethora of supposedly independent information and reports which come through to me in my daily emails, one I will always read assiduously is Grant Williams’ Things that make you go hmm… twice monthly (usually) newsletter.  Not only does he take a pretty jaundiced view of much of what passes for mainstream economic analysis and media comment, but he expresses his opinions forthrightly and with good humour as anyone who has attended one of his conference presentations will be well aware.

Grant is both a Singapore-based fund manager and very well followed commentator on geopolitics and economics and he occasionally touches on gold as a part of this terrific coverage in his subscription-based newsletter.  He makes you sit up and think – and understand that much of what data is released by governments, central banks and government funded economists is more akin to some of the claptrap often put out by junior mining and exploration companies (and some bigger ones too) and their PR companies in trying to hoodwink investors by putting a strong positive spin on financial and drilling results which often, on deeper analysis, should be suggesting quite the opposite.

His latest newsletter, entitled ‘The 60 Second Excitement’ looks in some depth, inter alia, at the latest U.S. non farm payroll figures, the possibility of a Brexit (Britain leaving the European Union) and their combined effect on the gold market, gold stocks and the gold price should the initially unexpected materialize – as it has already done with the U.S. jobs figures.

Let’s take all these in order:

Firstly the latest U.S. jobs statistics which showed an increase in non-farm payroll figures for April of only 38,000 – hugely below the consensus expectation of 160,000 – coupled with also reducing the figures for the prior two months as well.  Yet in Fed terms the positive spin was that the overall unemployment rate fell to 4.7% (below the Fed 5% target),  but conveniently ignoring the incontrovertible fact that according to government stats this relatively low unemployment rate has only been achieved by an ever-continuing rise in the percentage of people who have somehow withdrawn from the labour market altogether.  One is thus drawn to John Williams’ (no relation to Grant or myself – we Williamses seem to be getting around!) Shadow Stats, which looks at such government statistics more in the way they used to be calculated before goalposts were moved (several times in some cases).  According to Shadow Stats the U.S. unemployment rate is, in reality, is somewhat north of 20%, which would seem confirm reality rather than manipulated government statistics.

Prior to the latest jobs announcement observers had seen the likelihood of the Fed raising rates 25 basis points in June much more likely and gold had been suffering as a consequence.  After the jobs announcement the likelihood of a June rate rise receded substantially, although some observers feel a July rate rise still on the cards if U.S. economic data between now and then looks supportive – and if the U.K votes to stay in the European Union in the referendum on June 23rd.  Others think September, or even later, will see the next Fed rate rise.  Undoubtedly the Fed has talked itself into imposing another rate increase this year, or perhaps two, just to maintain what little credibility it may have left in its ability to really jumpstart the U.S. economy and promote sustainable growth.

But now back to Brexit.  As we have pointed out here before there’s a substantial underswell amongst the British public of anti-EU feeling.  Whether this will express itself in a Brexit vote remains uncertain – a set of opinion polls published today (so after the latest TTMYGH newsletter was written) – suggest that the Brexit vote may indeed carry the day, although the high powered government-based Remain propaganda machine may yet prevail.  But if the Brexit option does emerge triumphant in just over 2 weeks’ time, with its decidedly uncertain, and almost certainly immediately negative impact on the U.K. economy, there are a growing number who believe the impact on the whole European Union concept – and even on the global economy – could actually be even more severe.

There has been a huge ‘project fear’ campaign unleashed on the U.K. electorate by the Remain camp, but as Grant Williams points out all the statistics being put about predicting doom and gloom for the U.K. economy as a whole and for the wealth of the person in the street, are totally unquantifiable – much as the positive spin on some drilling results from exploration juniors could be equally speculative but on the positive side.  Not that the pro-Brexit campaigners are not equally guilty of disseminating unquantifiable statistics and suppositions of their own.

So what has all this to do with gold?  Gold tends to thrive on uncertainty and the Fed’s dithering over rate increases, growing concerns about whether the U.S. economy is actually growing, and the potential effects of a Brexit should it come about – which looks to be much more of a possibility now than it did only a couple of weeks ago, are all uncertainties gold could thrive on. Add to that the apparent beginnings of a downturn in global gold production and doubts about continuing supply availability, coupled with what has been enormous gold ETF demand so far this year, and this is all gold supportive.  True, Asian demand has slipped.  Indeed this fall in demand from the East coupled with the huge ETF demand shows there has been something of a reversal in gold flows with more flowing into the Western gold ETFs than into India and China combined.  But virtually no-one believes that Asian demand will not pick up again – quite probably later this year and if this is accompanied by a continuation of ETF inflows the doubts about availability of unattributable (i.e. freely available physical gold) will multiply.

Grant Williams also points to another supportive phenomenon in the performance of gold stocks which have been hugely outstripping the rise in the metal price, and which have been remaining relatively strong even through the recent correction in the gold price.  Some of the biggest gold stocks of all have more than doubled and the most significant gold stock indexes and ETFs have been outstanding performers vis-à-vis the gold price itself.  Gold stocks are often the precursors of significant moves in the gold price rather than just being followers.

But while the TTMYGH newsletter highlighted just the three factors noted above, Grant Williams goes on to end with the comment: There are plenty more (such factors).  He mentions China, the upcoming US elections, the explosion in corporate debt levels and perhaps the biggest problem of all—unfunded pension liabilities—which will all have a big part in determining what kind of outcome the world gets as the ghosts of 2008 return.  You have been warned.

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

 
 

:

1 Chinese yuan vs USA dollar/yuan  UP to 6.5621 ( REVALUATION NORTHBOUND  /CHINA HAPPY CONCERNING USA DOLLAR DEVALUATION/OFFSHORE YUAN WIDENS TO 6.5714) / Shanghai bourse  CLOSED UP 1.95 OR 0.07%  / HANG SANG CLOSED UP 298.02 OR 1.42%

2 Nikkei closed UP 95.42 OR 0.58% /USA: YEN RISES  TO 107.76

3. Europe stocks opened ALL IN THE GREEN  /USA dollar index DOWN to 93/89/Euro DOWN to 1.1359

3b Japan 10 year bond yield: FALLS  TO -.119%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 107.76

3c Nikkei now WELL BELOW 17,000

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

3e WTI::  49.97  and Brent: 51.04

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 RISES to 0.082%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate RISE to 8.41%/: 

3j Greek 10 year bond yield RISE to  : 7.39%   (YIELD CURVE NOW COMPLETELY INVERTED)

3k Gold at $1239.75/silver $16.30(7:45 am est)  RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble UP 33 in  roubles/dollar) 64.95-

3m oil into the 49 dollar handle for WTI and 51 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 109.08 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 .9670 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0985 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 IN LAST LEG OF ITS CAMPAIGN AS TO WHETHER EXIT THE EU.

3r the 8 Year German bund now  in negative territory with the 10 year RISES to  + .082%

/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 1.732% early this morning. Thirty year rate  at 2.549% /POLICY ERROR)

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

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

S&P Nears All Time High, Global Stocks Rally As Dovish Yellen Unleashes Animal Spirits

Stock whisperer Yellen said all the right things yesterday, when she sounded more optimistic than pessimistic on the economy but while the economy is “strong” it is most likely not strong enough to weather a rate hike in the immediate future. As a result, the S&P 500 climbed toward a record on Monday (and continued rising overnight) after Yellen said she expects to raise interest rates only gradually and held off from specifying any timeframe, a shift from her May 27 stance that a move was probable “in the coming months.” This was interpreted that both a June and July rate hike are now off the table, with September odds rising modestly.

And in a world where a hawkish Fed is bullish but a dovish Fed is even more bullish, stocks took their cue from Janet and sprang higher first in the US, and then across the globe, rallying with emerging markets because as Bloomberg put it, Yellen won’t “derail the recovery with a premature interest-rate increase.” If by premature BBG means a second hike one in a decade, then yes. 

Of course, what Yellen really meant is to give algos a green light to trigger all stops at the new 2016 highs, and then to continue to the fresh all time high in the S&P500, which as of this moment is less than 1% away, and will likely be taken out today.

Thanks to Yellen, the MSCI All Country World Index headed for its strongest close since April, led by gains in energy companies and raw-materials producers. Emerging-market stocks and currencies advanced for a fourth day. The Bloomberg Commodity Index snapped a four-day gain that had pushed it to a bull market. The South Korean won surged the most in six years, and the currencies of Australia and India also rose after the nations’ central banks kept interest rates unchanged. The pound advanced as a poll showed the campaign to keep Britain in the European Union ahead. The odds of a rate hike by July dropped to 22 percent in the futures market, after halving to 27 percent on Friday as a report showed U.S. jobs growth in May was the weakest in almost six years. S&P 500 futures advanced 0.3%, indicating U.S. equities will extend gains on Monday that were propelled by Yellen’s remarks, and close at new 2016 highs, if not new all time highs entirely.

“It seems likely that we will get at most one rate hike this year and that’s positive for equities and commodities,” said Ric Spooner, chief analyst at CMC Markets in Sydney. “Of the beaten-down commodities, the oil market is the best place. We’re already seeing supply cutbacks.”

While a Brexit will ultimately not be allowed, analysts continue to pay attention to the latest polls out of the UK. According to the latest Times/YouGov poll, 43% would vote to remain in EU and 42% would vote to leave. ORB/Telegraph poll showed 48% would vote to remain in EU and 47% would vote to leave. Furthermore, the Telegraph wrote: Leave campaign closes gap to narrowest margin yet as latest poll shows Brexit vote will go down to the wire.

“While polls suggest the ‘‘remain’’ campaign has established at least a modest lead, one persistent concern has been that low turnout could skew the result in the direction of those who care most about the issues surrounding Brexit,” JP Morgan’s Allan Monks says in note. “Turnout could prove decisive, however, in a very close outcome.”

Finally, for commodity watchers, WTI advanced 0.4% to $49.90 a barrel, having risen above $50 earlier in the session. API data later on Wednesday is forecast to show crude stockpiles dropped for a third week, declining by roughly 3 million barrels. The reason for the latest leg higher in oil was the dollar weakness in the past 24 hours. Also, Eni SpA said 65,000 barrels a day of supply was halted Friday after a militant attack in Nigeria.

Market Snapshot

  • S&P 500 futures up 0.3% to 2115
  • Stoxx 600 up 1.3% to 347
  • FTSE 100 up 0.7% to 6315
  • DAX up 1.5% to 10278
  • German 10Yr yield down less than 1bp to 0.09%
  • Italian 10Yr yield down 2bps to 1.45%
  • Spanish 10Yr yield down 4bps to 1.48%
  • S&P GSCI Index up 0.2% to 379.6
  • MSCI Asia Pacific up 1% to 131
  • Nikkei 225 up 0.6% to 16675
  • Hang Seng up 1.4% to 21328
  • Shanghai Composite up less than 0.1% to 2936
  • S&P/ASX 200 up 0.2% to 5371
  • US 10-yr yieldunchanged at 1.74%
  • Dollar Index down 0.11% to 93.8
  • WTI Crude futures up 0.5% to $49.95
  • Brent Futures up 0.6% to $50.87
  • Gold spot down 0.3% to $1,242
  • Silver spot down 0.9% to $16.32

Top Global News

  • Clinton Clinches Nomination, Becoming First Woman to Lead Ticket: Hillary Clinton secured the delegates required to claim the Democratic presidential nomination Monday, according to the Associated Press; Obama, Sanders Said to Speak as Endorsement of Clinton Planned
  • Verizon Bidding $3b for Yahoo Assets, WSJ Reports: co. will bid $3b for Yahoo’s main internet assets, the WSJ reported, seeking to edge out AT&T, TPG and other potential buyers
  • Samsung Said to Consider Bendable-Screen Phones for 2017: co. considering introducing 2 new smartphone models that will feature bendable screens, including a version that folds in half like a cosmetic compact
  • Lotte Chemical Offers Plan to Buy Axiall to Diversify: offer to buy polyethelene maker Axiall as South Korean based petrochemical co. seeks to build on its takeover of Samsung Group’s chemicals arm
  • GM CEO Says ‘Undervalued’ Carmaker Can Sustain Profit Long Term: Barra sees GM breaking even in 10 million-unit U.S. market
  • Raytheon Says $1b Cyber Contract Confirmed After Protests: co. will keep contract that affects more than 100 agencies
  • Ralph Lauren holds first investor day, expected to give 1Q, FY2017 forecasts; Ralph Lauren Said to Plan to Cut Up to 10% of Jobs: WWD
  • Merck’s Patent Win Over Gilead Reversed Over False Testimony: judge throws out $200m jury verdict in hepatitis C case
  • Oil Holds Near 10-Month High as U.S. Stockpiles Seen Declining: U.S. inventories estimated to drop 3 million barrels last week
  • Zillow Settles Suit With Murdoch’s News Corp. Over Trulia: Zillow to pay Murdoch’s Move $130m in settlement
  • Tropical Storm Colin Knocks Out Power as It Moves Across Florida: some areas already soaked with rain, experiencing high winds

Looking at regional markets, Asia stocks traded mostly positive following Fed Chair Yellen’s comments which were “cautiously optimistic” on the economy, yet dovish at the same time, and dampened the likelihood of an imminent rate hike as she omitted mentioning a timeframe. Energy dictated sentiment in the ASX 200 (+0.2%) and Nikkei 225 (+0.6%) as both indices coat-tailed on the gains seen in oil prices, with the latter also supported by a bout of JPY weakness. Chinese markets traded mixed as the Hang Seng (+1.4%) advanced on strong property and automaker sales while the Shanghai Comp (+0.1%) lagged after the PBoC kept its liquidity injections reserved ahead of its holiday closures beginning on Thursday. 10yr JGBs traded marginally lower as gains in stocks dampened demand for safer assets, while a stronger 30yr auction in which the b/c rose from prior and tail in price narrowed, also failed to lift demand for 10yr JGBs.

Top Asia News

  • China to Give $38 Billion RQFII Quota to U.S. in First-Ever Move: U.S. gets largest Chinese investment quota after Hong Kong
  • Rajan Holds India Rate as Speculation Swirls on His Future: RBI to stay accommodative as inflation uncertainties abound
  • Australia Holds Rate; Lack of Policy Guidance Spurs Currency: Traders pare bets to 46% for an August cut from 64% Monday
  • Everbright Shuts China Hedge Fund After Returns Stumble in Rout: Firm will reallocate funds’ assets to another China strategy
  • Australian Regulator Starts BBSW Civil Proceedings Versus: ASIC starts legal proceedings in the Federal Court in Melbourne

European equities have taken the firm lead from Asian bourses with the Euro Stoxx 50 firmly in the green (+1.3%) after comments from Fed Chair Yellen which were optimistic on the economy while also dampening the likelihood of an imminent rate hike. Additionally, upside in equities this morning has been further bolstered by the upside in crude prices with WTI edging towards USD 50/bbl. Bunds have traded relatively flat despite the increased risk-on tone across the region, as well as the slew of supply expected to hit the market (Approximately EUR 9.6bIn) with German paper benefiting from the aforementioned Yellen comments. Additionally, peripheral bonds have been notable outperformers to lead Euro-area yields lower.

Top European News

  • Euro-Area Economy Grows Faster as Consumer Spending Gathers Pace: 1Q GDP increases 0.6% vs. May 13 reading of 0.5%; expansion driven by household consumption, investment
  • German Industry Output Recovers in April on Investment Surge: production expanded 0.8% versus estimated 0.7% increase
  • Shell Deepens Spending Cuts, Promises More Savings From BG: trims expected 2016 capex by $1b to $29b; free cash flow, return on capital to rise at $60-a-barrel oil
  • Deutsche Bank Is Only Thing Missing From Germany’s Biggest Deal: bank said not to advise on, finance Bayer’s Monsanto bid
  • Brexit Is No Issue for U.K. Stocks With Traders Doubting Polls: British equities near cheapest of year versus global shares; Brexit Threatens to Destroy 18 Months of Swiss Toil in a Stroke

In FX, the Aussie strengthened almost 1 percent versus the greenback, having been little changed prior to the Reserve Bank of Australia’s policy meeting. The authority refrained from giving any guidance on whether it will consider adding to May’s interest-rate cut. India’s rupee gained 0.3 percent, reaching a three-week high after central bank Governor Raghuram Rajan left borrowing costs unchanged as widely expected. The pound was 1.1 percent higher, the strongest gain since March 17. Sterling has fluctuated in recent weeks, depending on which side of the EU referendum argument was gaining momentum. Sterling’s climb comes after it dropped in early trading Monday, as three polls were released showing more Britons favor quitting the EU than staying. Two more surveys that came later the same day showed slim leads for the “Remain” camp. The Bloomberg Dollar Spot Index slipped 0.2 percent, set for its weakest close since May 11 based on closing prices. The yuan fell for a second day after the People’s Bank of China weakened its daily reference rate by the most in a week.

In commodities, the Bloomberg Commodity Index declined for the first time in a week, having ended Monday more than 20 percent higher than its January low. A four-year bear market that pushed raw materials to the lowest level in a quarter century has drawn to an end after supply constraints drove a recovery from soybeans to zinc. Gold slipped 0.3 percent, trimming this month’s advance to 2.3 percent. Zinc fell 0.1 percent on the London Metal Exchange, retreating from its highest close since July 2015. Copper fell 1.5 percent, while aluminum was little changed. Aluminum prices are likely to decline as smelters in China, the biggest producer, restart capacity to take advantage of thicker margins, Goldman Sachs Group Inc. said in a report Monday. West Texas Intermediate crude oil advanced 0.2 percent to $49.81 a barrel, having climbed 2.2 percent to a 10-month high on Monday. U.S. government data due Wednesday is forecast to show crude stockpiles dropped for a third week, trimming a glut. Eni SpA said 65,000 barrels a day of supply was halted Friday after a militant attack in Nigeria.

Bulletin Headline Summary from RanSquawk and Bloomberg

  • European equities trade higher across the board in a continuation of the dovish sentiment seen yesterday and overnight in Asia
  • Once again we see GBP taking centre stage, swinging higher today as EU polls from the Times and the Telegraph now showing the Remain camp showing a small lead
  • Looking ahead, highlights include API Inventories and potential comments from ECB’s Makuch and Knot
  • Treasuries little changed overnight as global equities and WTI oil rally; week’s auctions begin with $24b 3Y notes, WI 0.97%; sold at 0.875% in April, was biggest stop through by a 3Y since 2009.
  • June is out. July might be too soon. The Federal Reserve’s next interest-rate increase is coming, but even September isn’t a sure bet. That’s the message investors and economists are taking from Chair Janet Yellen’s remarks Monday
  • A Federal Reserve interest-rate increase would be good for China because it would signal demand is rising and the U.S. economy is improving, People’s Bank of China Deputy Governor Yi Gang said at a briefing
  • China’s foreign-exchange reserves slipped to the lowest level since late 2011 as a rallying dollar ate into the value of its holdings. The world’s largest currency hoard fell by $28 billion to $3.19 trillion in May
  • Euro-area GDP grew 0.6% in 1Q, faster than previously estimated, driven by investment and a pickup in consumer spending, according to the European Union’s statistics office
  • German industrial production rebounded in April to 0.8% from -1.1% in March in a sign that Europe’s largest economy is benefiting from a pick-up in investment
  • Even before Mario Draghi starts his corporate-bond buying program on Wednesday, he’s pushed down borrowing costs in Europe toward unprecedented levels. The average yield on investment-grade company notes in euros tumbled to 1.002%
  • Saudi Arabia approved its National Transformation Program, a key part of a blueprint to prepare the kingdom for the post- oil era. The plan outlines a number of initiatives to be undertaken by different ministries
  • House Financial Services Committee Chairman Jeb Hensarling wants to cut a deal with U.S. banks: Raise several hundred billions of dollars in additional capital and Washington will let you break free from a litany of burdensome rules
  • With Democrats in six states still to make their choices on Tuesday, the Associated Press said that its count shows Clinton had secured the number of pledged delegates and superdelegates required to claim the Democratic nomination

DB’s Jim Reid concludes the overnight wrap

Well it looks like the round trip in Fed tightening expectations is pretty much complete now with Yellen’s straight bat approach yesterday bringing the focus back to the data while at the same time also keeping full optionality on the table. Rewind ten days or so ago when Yellen said at Harvard University that a rate hike might be appropriate in the coming months, well yesterday any mention of timing was rightly avoided and instead the mantra of ‘further gradual increases in the federal funds rate will probably be appropriate’ was provided. It did feel like the ‘probably’ part of that by itself came across as a little bit softer in nature though.

Indeed there was a familiar balancing act feeling to the tone with the Chair clearly trying to balance the nervousness of Friday’s employment report with trying not to read too much into one piece of data. While the Fed Chair said that ‘I see good reasons to expect that the positive forces supporting employment growth and higher inflation will continue to outweigh the negative ones’, Yellen also made mention to recent signs in job creation bearing ‘close watching’ with the Friday jobs report being described as ‘disappointing’ and ‘concerning’. She also listed a number of ‘considerable and unavoidable’ uncertainties which may have the potential to affect the outlook and path ahead. This appeared to include doubts about the resiliency of domestic demand as well as potential ‘significant economic repercussions’ from this month’s Brexit referendum and also the ‘considerable’ challenges in China.

In fact Yellen interestingly offered a number of relevant questions herself without actually answering them, instead saying that ‘my colleagues and I will be wrestling with these and other related questions going forward’. The end result of all that was decline in summer tightening expectations though, albeit not quite to the extent as that seen post payrolls on Friday. June (2%) is now more or less completely out of play, while the probability of a hike in July is back down to 22% this morning after finishing at 27% on Friday. Further afield September is currently sitting at 42%.

Interestingly risk assets in the US had another resilient day. US equities dipped temporarily but the S&P 500 still ended up +0.49% (and at one stage hit a high for the year) although it was the outperformance for credit markets which caught the eye with CDX IG rallying to the tune of 3bps. Oil markets appeared to be a helping hand there as WTI rebounded just over 2% to edge back up close to $50/bbl as more supply disruption concerns in Nigeria and price hikes in Saudi Arabia dictated moves in energy markets. It was a quieter day for the US Dollar with the Dollar index (-0.14%) ending with a much more modest move lower, while over in the Treasury market yields backed up a couple of basis points higher.

This morning in Asia and China aside the majority of bourses appear to be following that positive lead from the close in the US last night. Indeed the Nikkei (+0.36%), Hang Seng (+0.61%), Kospi (+0.93%) and ASX (+0.50%) are all up although in China the Shanghai Comp (-0.33%) and CSI 300 (-0.28%) have failed to hold onto early gains. It’s not entirely obvious what’s causing the move lower in China although the lack of direction may in part reflect investors waiting for the latest foreign reserves data due out at some point this morning.

FX markets have also been the subject of some early focus this morning. The Aussie Dollar is +0.45% after the RBA left rates on hold as expected. Meanwhile Sterling (+0.76%) has rebounded well on the back of another Brexit poll late last night. The YouGov run poll for the Times newspaper has the remain camp with a 1 point lead over the leave camp at 43% to 42%. Elsewhere, the Associated Press is reporting that Hilary Clinton has now secured enough delegates to claim the Democratic nomination. That comes ahead of tonight’s six scheduled primaries, including California.

Back to China where yesterday our China Chief Economist Zhiwei Zhang published part four of his China tail series report. In it he highlights that China’s government has started to tighten credit control which is starting to feed through to financial markets with a slowdown in corporate bond issuance being felt. Zhiwei thinks that the government’s strategy is to contain the build-up of leverage within the financial sector and bolster direct financing through policy banks. In his view this could lead to a divergence in the second half of this year with property sector investment likely to slow. Overall Zhiwei believes tightened credit will leader to slower growth in the next half year, putting depreciation pressure on the RMB, while he also expects property prices to soften.

Moving on. As well as those comments from Fed Chair Yellen yesterday, we also heard from a couple of her colleagues. Atlanta Fed President Lockhart, who is usually fairly centrist in his views, said that he doesn’t personally see a lot of cost to being patient to the July meeting and that ‘I think we can be watchful and see how things develop over the next few weeks’. Meanwhile Boston Fed President Rosengren (usually dovish) said that the latest jobs report was disappointing and that ‘it will be important to see whether the weakness in this report is an anomaly or reflects a broader slowing in labour markets’.
Elsewhere yesterday, the calendar was a lot lighter for economic data with the only release coming out of the labour market again with the labour market conditions index reading for May. The data showed the index declining another 1.4pts to -4.8 (vs. -0.8 expected) and as a result touching the lowest level since 2009. It’s not clear how much weight the Fed give to the data series but with the index declining at a relatively fast rate since the turn of the year, it may start to make a few heads turn.

The European session yesterday was fairly quiet although risk assets did manage to rebound following Friday’s weakness. The Stoxx 600 finished up +0.33%, although much like in the US it was the performance for credit markets which stood out with Main and Crossover rallying 3bps and 9bps tighter respectively. Data in the region didn’t add much to the debate. The Sentix investor confidence reading for the Euro area bounced 3.7pts to 9.9 (vs. 7.0 expected) while German factory orders declined more than expected in April (-2.0% mom vs. -0.5% expected).

END

ASIAN AFFAIRS

i)Late  MONDAY night/ TUESDAY morning: Shanghai closed UP  BY 1.95 PTS OR 0.07% /Hang Sang closed UP 290.02 OR 1.42%. The Nikkei closed UP 95.42 POINTS OR 0.58% Australia’s all ordinaires  CLOSED UP 0.20% Chinese yuan (ONSHORE) closed UP at 6.5621 Oil ROSE to 49.97 dollars per barrel for WTI and 51.04 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.5714 yuan to the dollar vs 6.5621 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS) 

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) JAPAN ISSUES

With Europe’s corporate bonds trading at a yield of 1.0% due to Draghi’s continual buying of debt, we now see Japan issuing a 3 year bond yielding .001%.  Thus an investor purchasing a 1,000 dollar equivalent bond would receive 3 dollars over that 3 yr period, enough to buy a cup of coffee

(courtesy zero hedge)

Toyota Issues Bond At A 0.001% Coupon, Japan’s Lowest Ever

With just one day left before the ECB officially begins buying corporate bonds, the financial world is awestruck by what Mario Draghi has achieved by unleashing an unprecedented demand for ECB-backstopped corporate credit (something we previewed back in March in “BofA Explains Why The ECB Will Be Forced To Buy Junk Bonds“).  AsBloomberg writes overnight, the average yield on investment-grade company notes in euros tumbled to 1.002% on Monday, according to Bank of America Merrill Lynch index data. That’s the lowest in more than a year and a smidgen away from dropping below 1%.

The last time yield on IG paper fell below 1% was last year when Draghi expanded the bond-purchase program, dropping as low as 0.93% in March 2015, before climbing as high as 1.58% in September. Yields are down from around 4.5% at the height of the sovereign-debt crisis in 2011 and 7.3% in 2008, the highest in data going back to 1996.

“The ECB is distorting the market,” said David Riley, head of credit strategy at BlueBay Asset Management LLP in London. “There’s a shock associated with yields falling below 1%.” They will likely fall much lower courtesy of Mario Draghi, whose central bank is actively seeking to crowd out investors and make it even tougher to find yield.

More:

Draghi, the ECB president, has been shaking European debt markets since 2012, when he pledged to do “whatever it takes” to save the euro and presented a bond-buying program dubbed Outright Monetary Transactions. He shocked markets with an interest-rate cut in November 2013, and has lowered borrowing costs three more times since then, pushing the ECB’s main rate to zero for the first time ever in March.

 

Companies benefiting from the lower borrowing costs are issuing bonds at an increasing clip. More than 50 billion euros ($57 billion) were sold in the single currency in May, the second-busiest month on record. Air Liquide SA, the investment-grade French industrial gas maker, issued 3 billion euros of bonds on Monday, with just one of five parts of the deal priced with a coupon above 1 percent, according to data compiled by Bloomberg.

 

 

Not everyone is delighted by the ECB’s repricing of the corporate bond market: “we’re on strike when it comes to euro investment-grade paper,” said Gordon Shannon, a portfolio manager at TwentyFour Asset Management LLP, which oversees 6.3 billion pounds ($9.1 billion). “The program has ground spreads down so much that we can’t bring ourselves to buy. We’re buying instead sterling and dollar investment-grade paper, and high-yield bonds.”

Others agreed: “the prospect of average yields below 1 percent is very scary,” said Juan Esteban Valencia, a credit strategist at Societe Generale SA in Paris. “Investors are being pushed outside their comfort zone to sectors like high-yield debt, where they may not have expertise.”  Fear not, Juan, if there is a hiccup in the junk bond market as a result of investor herding, the ECB will simply backstop the high yield space, problem solved.

Bloomberg’s assessment of constant central bank intervention is accurate: “Bond markets around the world are being distorted as central banks step up cheap-money policies to bolster growth and prevent deflation. About $10.4 trillion of government bonds globally have negative yields, with Japan “by far the largest source,” according to a June 2 Fitch Ratings report.”

How this chapter in manipulated markets will end is still unclear, however with central banks backstopping virtually every asset class, it is difficult to see a happy ending especially if and when the much desired inflation materializes and central banks are forced to step back.

In response, some investors are pushing back and even the most conservative firms are turning to speculative-grade debt, traditionally among the riskiest of fixed-income assets. Others have no choice and investors looking for higher yields have been sent searching the world over for decent returns.

Places such as Japan, where overnight a Toyota Motor unit sold yen bonds with the lowest coupon ever for a Japanese company. Toyota Finance Corp issued 20 billion yen ($186 million) of notes at a yield of 0.001%, according to a filing with the nation’s Finance Ministry. That’s the lowest coupon ever for a regular bond by a domestic company that isn’t backed by the government, according to data compiled by Bloomberg.

By way of context, Toyota, the world’s largest automaker, last month sold 60 billion yen of debt including 20-year bonds paying a yield of 0.343%. The bond is already trading at a premium to par.

Once again, the record low yield merely reflects the unprecedented monetary stimulus by central banks everywhere, something that is happening even as the narrative blasts daily stories of a “recovery.”

The Bank of Japan has sent yields on Japanese government bonds below zero for notes out to 10 years since adopting a negative-rate policy in January, increasing demand for corporate debt. Average yields on Japanese company bonds dropped to 0.17 percent on Monday from 0.33 percent a year earlier. At this rate of negative compounding, Japan’s debt will pay itself off in a few thousand years.

Tags

b) REPORT ON CHINA

China’s real unemployment is around 12.9% almost triple the official number of 4%

(courtesy zero hedge)

China’s Real Unemployment Rate Is Three Times Higher Than The Offical Number

When it comes to fake data, China is in a class of its own: between fabricated export and import numbers (where hundreds of billion in capital flight are hidden), to massaged, goalseeked GDP “data”, Chinese economic reporting has become a laughing stock across the developed world. Just last night,we showed a Goldman analysis according to which China was also misrepresenting its broadest credit aggregate, Total Social Financing, by hundreds of billions if not more as it was not accounting for shadow banking flows that did not end up in the economy.

And now, based on a new report by Fathom Consulting, it appears that China is also dramatically misreporting what may be the one most critical for social stability metric, its unemployment rate, which when stripped away of the political propaganda, is more than three times greater than the officially reported rate.

According to Fathom, China’s underemployment Indicator has tripled to 12.9% since 2012 even while the official jobless rate has hovered near 4% for five years.

Here Bloomberg confirms what we said last year, namely that the risk of a social upheaval as a result of millions of newly unemployment workers in a “deregulated economy”, is why China quickly went back to its old ways unleashed the recent record amount of debt. To wit: “the weakening labor market may explain China’s decision to uncork the credit spigots and revive old growth drivers in an effort to stabilize the world’s no. 2 economy.”

Leaders have stressed that keeping employment stable is a top priority. Fathom’s data shows that while mass layoffs haven’t materialized, the number of people not working at full capacity or hours has increased.  “The degree of slack has surged in recent years,” analysts at the London-based firm wrote. “China has a substantial hidden unemployment problem, in our view, and that explains why the authorities have come under so much pressure to re-start the old growth engines.”

Leaders of the world’s most populous nation have promised to slash excess capacity in coal mines and steel mills while at the same time ensuring that the economy grows by at least 6.5 percent this year. Across the nation, state-backed ‘zombie’ factories are being kept alive by local governments to keep a lid on any social unrest. To keep the plants ticking over, employees in some cases have been asked to work half the time for half the pay.

Meanwhile, the official registered unemployment gauge is notorious for not changing during economic cycles. In other words, just like most other Chinese economic indicators, it is a total fabrication. It’s compiled from the number of people who register at local governments for unemployment benefits, which excludes most of the nation’s more than 270 million migrant workers. Another official jobless rate, just as useless, based on surveys into major cities and supposed to be more accurate, stayed at about 5.1% as of April. That’s also little changed in the past two years.

Though official data show employment weathering a slowdown, any deviation from that would touch a nerve for top Communist Party officials. “Job insecurity is a key driver of social instability – something that China’s authorities need to avoid at all costs,” Fathom wrote.

Another issue: just like in the US, productivity has become a major threat to China’s economy and as a result Beijing’s top officials are also concerned about waning productivity growth. That’s been “particularly weak” in the services sector, which absorbs most labor, the consultancy says.

Oddly enough, the same situation is taking place in the US – one could ask if the BLS is taking hints from China’s National Bureau of Statistics or vice versa.

While growth slowed last year to 6.9%, the weakest in 25 years, Fathom estimates it was just a fraction of the official pace: 2%. This also means that unless China manages to continue creating $1 trillion in new debt every quarter – an amount equal to about 10% of its GDP – to keep the local population semi-employed and content, it is only a matter of time before Beijing biggest fear, social instability, materializes.

end
Oh Oh this is not good:  Obama seeks a total ban on Chinese steel due to their hacking
of commercial secrets. I have no doubt now that China will attack the comex by taking delivery of just about every ouunce of gold they can:
(courtesy Mish Shedlock)

Obama Administration Protectionism Goes “Nuclear” – Seeks “Total Ban” On Chinese Steel

Submitted by Michael Shedlock via MishTalk.com,

Protectionists are on the cusp of a “Pyrrhic victory” over China.

No one will like the results when it happens.

A huge global trade war is on the horizon, regardless of whether Hillary or Trump wins the election.

The die is cast: US Steel Given Green Light to Seek China Import Ban.

The US has given the go-ahead for the country’s largest steel producer to seek a ban on imports from Chinese rivals, in the first known case in which trade sanctions could be used in retaliation for alleged China government-backed hacking of commercial secrets.

 

In a decision last week the US International Trade Commission gave the go-ahead for the case to proceed, setting the stage for a legal battle that experts say will probably take more than a year for an administrative judge to decide.

 

This timeframe could lead to a decision related to arguably the US’s most important commercial relationship early in the next president’s first term. Under the law, US presidents are given 60 days to block ITC decisions on Section 337 cases, although according to the ITC “such disapprovals are rare”.

 

“We strongly believe that Chinese steel producers have engaged in illegal unfair methods of competition, which have created a force with which no market economy can compete,” Mario Longhi, the company’s president and CEO, said in a statement welcoming the ITC decision. “We remain confident that the evidence will prove the Chinese steel producers engaged in collusion, theft and fraud and we will aggressively seek to stop those responsible for these illegal trade actions.”

 

Trade experts say that the case also represents the potential escalation of what has been a creeping protectionism in recent years with steel a growing target of anti-dumping cases.

 

But a wholesale ban on US imports of Chinese steel would be materially different and could set a protectionist tone for the next US presidency, said Simon Evenett, a professor of international trade at the University of St Gallen in Switzerland, who oversees the Global Trade Alert, a monitoring service for protectionist measures.

 

“The big thing is really the potential scale of this case versus the pin pricks that we have seen unleashed over the past nine months,” Mr Evenett said.

 

“This should be setting off alarm bells,” he said. “It is really a nuclear option.”

Nuclear Option

US Steel

Stacked Deck

A total ban would indeed be a nuclear option. Trump would embrace it. Hillary would support it.

The US even greased the wheels in advance. On May 30, the US refused to accept the reappointment of a South Korean judge who the US fears may rule in favor of China in trade disputes.

I wrote about greased wheels in Stacked Deck: US Bullies WTO, TPP Revisited.

European Trade Mess

The EU is still coming to grips with inane sanctions on Russia that did more harm to the EU than Russia. Austria, France, Italy, Hungary, Greece, and Portugal have had enough of sanctions that have backfired due to a collapse in exports.

For details, please see Merkel Ready to Kiss and Make Up with Putin?

Stunning Idiocy

Also see Pater Tenebrarum’s exceptional post on the Stunning Idiocy of Steel Tariffs.

Candlemakers Petition

The statement by Mario Longhi, US Steel CEO “We strongly believe that Chinese steel producers have engaged in illegal unfair methods of competition, which have created a force with which no market economy can compete,” is nothing but a self-serving lie for the benefit of US Steel and the detriment of everyone else, especially consumers and the US auto industry.

If China is “dumping” steel at cheap prices we should be thankful. Free steel would be even better. Everyone’s standard of living would immediately rise.

Trade protectionists are just like candle makers bitching and moaning about free energy from the sun.

The Candlemakers’ petition is a well-known satire of protectionism written and published in 1845 by the French economist Frédéric Bastiat as part of his Economic Sophisms. In the Candlemakers’ petition, the candlemakers and industrialists from other parts of the lighting industry petition the Chamber of Deputies of the French July Monarchy (1830–1848) to protect their trade from the unfair competition of a foreign power: the Sun.

The entire debate over “fair trade” is intellectually dishonest. Fair trade is free trade. Period.

Election Campaign Flashback

In 2011, the US put huge tariffs on Chinese-made tires (to the detriment of consumers and the auto industry). China responded with anti-dumping tariffs on GM.

I wrote about that in Proposal to Stop “Free Sunlight” Gains Support From Mitt Romney.

Here we go again, this time with Donald Trump, Hillary Clinton, and President Obama all waving protectionist flags.

Should the US carry through with the plan, expect a “Pyrrhic victory” over China.

end

end
Here is how some people are exporting dollars out of China:
(courtesy zero hedge)

China Capital Outflow Crackdown: “Surprisingly Plump” Man Busted With $74,000 Strapped To His Waist

end

EUROPEAN AFFAIRS

German 10 yr bunds hit an all time low of .048% as the Dow rises??

Generally we see a flock to safety of bunds when stocks plummet but to see stocks rise and bund yield collapse just does not make sense

(courtesy zero hedge)

Bund Yields Drop To New All Time Low As Dow Rises Above 18,000

As stock algos push indices ever higher in their inevitable push for all-time-highs, investors are flooding into developed market bonds sending German 10Y Bunds to a new record low 4.8bps (following Aussie record lows overnight) and dragging US Treasury yields drastically lower.

Dow surges to 18,000…

 

As Bund yields collapse to record lows..

 

And Treasuries follow…

 

As global bonds hit record lows…

 

 

Charts: bloomberg

Migrants Responsible For 69,000 Crimes In Germany In The First Quarter: Police Report

In the latest development that is certain to raise the heat under Merkel’s cabinet and may lead to even higher support for Germany’s anti-immigrant AfD party, Reuters reports that migrants in Germany committed or tried to commit some 69,000 crimes in the first quarter of 2016, according to a police report “that could raise unease, especially among anti-immigrant groups, about Chancellor Angela Merkel’s liberal migrant policy.”

The report from the BKA federal police showed that migrants from northern Africa, Georgia and Serbia were disproportionately represented among the suspects. Absolute numbers of crimes committed by Syrians, Afghans and Iraqis – the three biggest groups of asylum seekers in Germany – were high but given the proportion of migrants that they account for, their involvement in crimes was “clearly disproportionately low”, the report said. In other words, just because there was so many of them, it is difficult to give a clear picture of the criminal recidivism resulting from the latest immigrant wave. The report gave no breakdown of the number of actual crimes and of would-be crimes, nor did it state what percentage the 69,000 figure represented with respect to the total number of crimes and would-be crimes committed in the first three months of 2016.

The silver lining: the report stated that the vast majority of migrants did not commit any crimes.

Still, the report, the first of its kind, is sure to prompt many question. It is the first time the BKA has published a report on crimes committed by migrants containing data from all of Germany’s 16 states, so there is no comparable data.

The report showed that 29.2% of the crimes migrants committed or tried to commit in the first quarter were thefts, 28.3% were property or forgery offences and 23% offences such as bodily harm, robbery and unlawful detention. Drug-related offences accounted for 6.6% and sex crimes accounted for 1.1%.

In a widely publicized indicent in Cologne at New Year, hundreds of women said they were groped, assaulted and robbed, with police saying the suspects were mainly of North African and Arab appearance. Prosecutors said last week three Pakistani men seeking asylum in Germany were under investigation after dozens of women said they were sexually harassed at a music festival.

And in confirmation of the tit-for-tat nature of the escalation between the local population and immigrants, earlier today we learned that a large fire ripped through a refugee center housed in an exhibition hall in Dusseldorf on Tuesday. All 280 residents were thought to be safe, the fire service said. TV footage showed plumes of black smoke billowing into the air at the facility on the site of the west German city’s trade fair, Reuters said. It was not immediately clear what caused the blaze.

As a reminder, there has been a record influx of more than a million migrants into Germany last year and concerns are now widespread about how Europe’s largest economy will manage to integrate them and ensure security. Furthermore, should Turkey follow through with its blackmail of Europe and unleash more of the over 1 million refugees currently held behind its borders, it is assured that these number will spike in the coming months as another wave of foreign immigrants lands inside Germany.

Tags

RUSSIAN AND MIDDLE EASTERN AFFAIRS

Another bomb blast in Istanbul Turkey killing 11 people of which 7 were police officers.  The target was police officers riding on a bus.  Either ISIS or the PKK were responsible.

(courtesy zero hedge)

11 Killed, 36 Wounded After Deadly Bomb Attack In Istanbul Targeting Police

A bomb was placed inside a car and detonated as a bus carrying riot police passed during rush hour traffic in Istanbul today, killing seven police officers and four civilians, and leaving 36 wounded.

The explosion occurred on a busy intersection near an Istanbul University building, forcing officials to cancel exams. The blast caused the police bus to overturn from the force, and a nearby hotel was gutted and the windows were blown out – fortunately the hotel was closed and had no guests.

“Seven law enforcers and four civilians have died in the attack,” Istanbul Governor Vasip Sahin told reporters. “Thirty-six people have been injured, three are in critical condition.” Citing a police source, Turkish broadcaster NTV reported that some 14 people have been injured in the attack, eight law enforcers among them.

Foreign minister Melvut Cavusoglu condemned the attack, which occurred on the second day of the holy Muslim month of Ramadan. “They are cold-heartedly exploding bombs on a Ramadan day” Cavusoglu added. No group immediately claimed responsibility for the attack, and Istanbul governor Vasip Sahin wouldn’t comment on who may be behind the attack.

An Istanbul court has imposed a temporary ban on coverage of a number of details regarding the bomb attack, TASS reported, citing a statement from Turkey’s Supreme Council for Radio and Television. The ban has been introduced in order to “maintain public order, protect territorial integrity and prevent crime.” It concerns coverage of the ongoing investigation, footage showing the victims and those injured, police transcripts of talks, and demonstration of materials related to the suspects. The ruling covers all Turkish media. Similar measures were taken during previous terrorist attacks in Turkey.

A fresh wave of explosions has hit Turkish cities in recent months, including major urban areas.

A car stuffed with explosives detonated near military barracks in Istanbul in May, injuring eight people. The Turkish military blamed the attack on Kurdish fighters. In March, 37 people were killed in a bombing near public bus stops in the Turkish capital, Ankara.

As the WSJ explains

Tuesday’s attack was the fourth major bombing in Istanbul this year. Two of them targeting tourists and two hitting security forces. The spike in violence has led to a sharp dip in tourism, a mainstay of the economy.

The rebels of the Kurdistan Workers’ Party, or PKK, have been targeting police and military personnel with bombs since July, when a fragile peace process between the rebels and the government collapsed.

Islamic State group has also been blamed for a series of deadly bombings in Turkey, which is part of the U.S.-led coalition against IS.

An estimated 500 Turkish security personnel have been killed in attacks or in conflict with the Kurdish rebels, according to the military, which claims to have killed 4,900 PKK militants in operations in Turkey and northern Iraq, where the group has a major bastion. Turkish warplanes regularly raid PKK bases in northern Iraq.

Limited access to conflict areas in the southeast has made it difficult to verify casualty figures.

The PKK is fighting for autonomy for Turkey’s Kurds in the southeast of the country. The decadeslong insurgency against the Turkish state is a conflict that has claimed 40,000 lives. The group is considered a terrorist organization by Turkey and its allies.

Last month, eight people were wounded in Istanbul after a car bomb similarly targeted a military vehicle near the entrance of a garrison as the evening rush hour began.

* * *

Taiwanese exports is a terrific bellwether for global trade  (along with Caterpillar).Today they record their 16th straight month of export declines.

(courtesy zero hedge)

 

Global Trade Bellwether Taiwan Posts 16 Straight Months Of Sliding Exports

Taiwan’s exports fell 9.6% y/y in May, marking the 16th straight month of decline. The results were slightly better than estimates of a 9.9% fall, however significantly worse than April where exports fell 6.5% y/y. Imports also fell 3.4% y/y, leaving a $3.5 billion trade surplus for May.

The declines highlight a slowing global economy, specifically in China which is a significant trading partner with Taiwan. We have highlighted for some time that there have been massive amounts of layoffs in China, and the impact is now making its way to the broader global economy. Countries exporting to China will continue to face headwinds, because as we pointed out yesterdaythe real unemployment rate in China is 12.9%, triple the official reported rate.

As Reuters adds, the near double-digit per cent fall in the data, a gauge of world appetite for high-tech gadgets, comes amid easing expectations for a US rate rise and reinforces the view Taiwan’s central bank will likely cut rates for the fourth straight meeting this month as economic growth slows. “There is little chance exports in June can grow,” said Yeh Maan-Tzwu, director of statistics department with the finance ministry, which issued the data on Tuesday. “But the decline will certainly narrow.” Taiwan’s exports in May fell 9.6 per cent from a year earlier, the 16th month of decline. It was better than the 11 per cent contraction forecast in a Reuters poll, but deepened from April’s 6.5 per cent fall.

Tuesday’s performance showed persistent weakness in key markets, as declines in shipments bound for China and the United States were both down, but the drops were less than April.

However, the fall in exports to Japan nearly doubled in May to 8.9 per cent, from April, while growth in exports to Europe slowed sharply to 2.1% compared with just over 10% previously.

“There is little chance exports in June can grow,” said Yeh Maan-Tzwu, director of the statistics department with the finance ministry, which issued the data. “But the decline will certainly narrow.”

Exports of electronics components in May fell 1.6 percent from a year earlier, while information, communication and audio-video goods were off 5.5 percent. Optical equipment, which includes displays, were down 23.5 percent.

China’s slowdown and concerns the global smartphone industry is losing momentum have darkened the outlook for Taiwanese manufacturers.

“This year the world economy and the semiconductor market are very like last year – rather depressed,” Morris Chang, chairman of Taiwan Semiconductor Manufacturing Co told shareholders at the company’s annual meeting on Tuesday, even as he maintained business growth for his firm, the world’s largest contract chipmaker.

 

OIL ISSUES

 

 

 

 

For a while Iran could not find ships to export their oil.  Now they have and that should put a damper on oil prices:

 

(courtesy zero hedge)

Iran Oil Exports Soar As Offshore Tanker Armada Comes To Tehran’s Rescue

Back in mid-April, when Iran was desperate to start exporting the millions of barrels it was pumping each day out of the ground, it found it has an unexpected problem: not only did it not have enough spare tankers, but few if any shipping companies were willing to move the cargo.

There were two key reasons for this.

  • The first hurdle was residual U.S. restrictions on Tehran which are still in place and prohibit any trade in dollars or the involvement of U.S. firms including banks – a major hurdle for the oil and tanker trades, which are priced in dollars. As a result, by mid-April only eight foreign tankers, carrying a total of around 8 million barrels of oil, had shipped Iranian crude to European destinations since sanctions were lifted in January. That equates to only around 10 days’ worth of sales at the levels of pre-2012, when European buyers were purchasing as much as 800,000 barrels per day (bpd) from the OPEC producer.  Michele White, general counsel with Intertanko, an association which represents the majority of the world’s tanker fleet, said: “We have witnessed a reluctance by our members generally to return to Iranian trade given the prohibition on use of the U.S. financial system – essentially no U.S. dollars.”
  • The second and far bigger problem, were implicit Saudi Arabian threats for shippers not to transact with Iran or risk losing Saudi business. “It’s seen as an unknown risk,” said one shipbroker. “No one wants to disrupt their relationship with the Saudis.” Iran admitted as much. A senior Iranian government official, who declined to be named due to the sensitivity of the matter, acknowledged his country was finding it difficult to hire foreign tankers. “We are working on the problems. There are various issues involved, financial, banking and even insurance. It has improved a little bit since the lifting of sanctions but we still face serious problems.” Asked if this and the need to modernize some of the domestic fleet was holding back exports, he said: “Of course it does.”

As Reuters said at the time, Iran’s problems may not be resolved any time soon, adding that two other sources with other leading oil tanker operators echoed the above concerns and said they were not doing Iran deals at the moment.

Fast forward a little over a month later, and somehow all the issues have been resolved.

According to an update from Reuters, more than 25 European and Asian-owned supertankers are shipping Iranian oil, allowing Tehran to ramp up exports much faster than analysts had expected following the lifting of sanctions in January. As noted above, “Iran was struggling as recently as April to find partners to ship its oil, but after an agreement on a temporary insurance fix more than a third of Iran’s crude shipments are now being handled by foreign vessels.”

It appears that, whether with or without outside pressure, Saudi Arabia relented.

 “Charterers are buying cargo from Iran and the rest of the world is OK with that,” said Odysseus Valatsas, chartering manager at Dynacom Tankers Management. Greek owner Dynacom has fixed three of its supertankers to carry Iranian crude.

And while some international shipowners still remain reluctant to handle Iranian oil, however, due mainly to some U.S. restrictions on Tehran, increasingly more are discovering the necessary loopholes to buy Iran’s discounted oil and ship them onward to their end destinations, pocketing a profit spread in the process.

Reuters data shows that at least 26 foreign tankers with capacity to carry more than 25 million barrels of light and heavy crude oil, as well as fuel oil, have either loaded crude or fuel oil in the last two weeks or are about load at Iran’s Kharg Island and Bandar Mahshahr terminals. The resumption of international shipping of Iranian oil has been made possible by an increase in interim, limited, insurance cover by “P&I clubs” – maritime mutual associations that provide “protection and indemnity” insurance to shippers.

Among the main reasons for the stalled shipping was that the International Group of P&I Clubs, which represents the world’s top 13 ship insurers, increased the amount covered by so-called “fall-back” shipping insurance from 70 million to 100 million euros ($113.36 million) in April. “In the first days after lifting sanctions only Iranian ships were loaded in the country, mainly due to several problems in finding insurance/reinsurance,” said Luigi Bruzzone of ship broker Banchero Costa.

And yet, despite a world glutted with oil, the discounted Iranian product led to a prompt resolution: “The strong interest of the market in these trades pushed all the stakeholders to solve all the problems … and almost all P&I Clubs have granted their insurance.”

Some further details on the insurance roadblock from Reuters:

The “fall-back” cover is designed to offset any shortfall in payments from U.S. reinsurers, who are still not allowed to deal with Iran. “We are not surprised to see the increase in Iranian cargoes given the progress made by the P&I clubs and obviously the increase in Iranian production,” said Brian Gallagher, head of investor relations at leading Belgian tanker owner Euronav, which itself is not involved in Iran yet.

“We’re interested in such trade … (but) it will still take time for Iran to be fully integrated as there remain restrictions around dollar denominated transactions.”  Indeed, while the partial lifting of sanctions means foreign tankers can now transport Iranian oil, risks remain because large accidents might not be fully covered. As a result, insurers say many first-tier oil shippers, many of them publicly listed such as Euronav, Teekay Group or Frontline, still shy away from carrying Iranian oil.

If the fall-back cover is exhausted in an incident, Andrew Bardot, executive officer at the International Group of P&I Clubs, said that costs like “collision and cargo liabilities, will not be covered, and will remain with the shipowner”. A single Very Large Crude Carrier (VLCC) supertanker costs around $90 million, and the costs of a large oil spill can reach into the billions of dollars.

“The limitations of the ‘fall-back’ cover – together with other continuing restrictions, for example those relating to the U.S. dollar and use of the U.S. financial system – however have discouraged a number of shipowners, and in particular the large shipping groups, from resuming trade with Iran in which they were previously engaged,” said Bardot.

So with the logistical hurdles resolved, and with international vessels supporting Iran’s own tanker fleet, traders said that its oil exports was now close to pre-sanction levels of around 2.5 million barrels per day (bpd).  “Iran has ramped up harder and faster than expected,” Citi analysts said.

Which means that the disrupted supply as a result of the fire in Canada, or the mysterious, outside-supported Nigerian militants such as the NDA, would be promptly replaced with Iran oil, which would put further pressure on Canada and Nigeria to restore full output over fears of losing long-standing customers to Iran. 

Iran’s oil exports were between 2.1 and 2.3 million bpd in April and May, up from 1.3 million bpd a year ago, when Iran was shut out of the European market and dependent on limited shipments to Asian buyers. Asia is the main destination for crude shipped by foreign vessels, with India, China and Japan the biggest takers, but at least four international tankers are also heading for Europe.

India, in particular, is taking a lead role as its demand soars and refiners such as Essar Oil, Reliance Energy, Hindustan Petroleum Corp, and Bharat Petroleum Corp enjoy good ties with Iran. The non-Iranian companies currently chartered to carry its oil include Chinese state controlled shipper China Shipping Development, PetroVietnam and Japan’s Idemitsu Kosan.

Greek, Turkish and Seychelles-owned tankers are also shipping Iranian crude.

As a reminder, the key catalyst for the recent ramp in crude was Goldman turning bullish on oil due to near-term supply disruptions, which at least in the case of Canada are promptly getting resolved.

As such, it would not be at all surprising that with the world back to an oversupplied market, anywhere to the tune of 1-1.5 mmb/d, once the peak summer driving season ends, and as all the excess oil still scramble to find a home, that we will see a rerun of the summer of 2015, when oil flatline at $60 until mid-July, at which point it proceed to promptly crumble. That, as regular readers will recall, is also Morgan Stanley’s thesis: namely that the summer of 2016 is merely a rerun of last year, and the price action will follow suit.

 

END

 

Oil retreats a bit after an unexpected inventory build in both gasoline and distillates

(courtesy zero hedge)

 

Crude Slides After Unexpected Inventory Build In Gasoline, Distillates

For the 3rd week in a row, crude inventories saw a drawdown (API reports -3.56mm vs -3mm expectations) and so did Cushing (-1.3mm vs -900k exp) but crude is slipping as both Distillates and Gasoline saw unexpected builds. This is the first build in Distillates in 8 weeks.

 

API

  • Crude -3.56mm (-3mm exp)
  • Cushing -1.3mm (-900k exp)
  • Gasoline +760k (-100k exp)
  • Distillates +270k

First build in distillates in 8 weeks…

 

And the reaction was an initial slide but quick bounce back…

 

Eyes wide open for DOE data tomorrow.

 

Charts: Bloomberg

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

 

Euro/USA   1.1359 DOWN .0003 ( STILL REACTING TO USA FAILED POLICY

USA/JAPAN YEN 107.76  UP 0.314 (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 1.4584 UP.0132 (LESS THREAT OF BREXIT)

USA/CAN 1.2779 DOWN  .0034

Early THIS TUESDAY morning in Europe, the Euro FELL by 3 basis points, trading now WELL above the important 1.08 level FALLING to 1.1359; 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 1.95 PTS OR 0.07% / Hang Sang CLOSED UP 298.02 OR  1.42%   / AUSTRALIA IS HIGHER BY 0.20%/ EUROPEAN BOURSES ARE ALL IN THE GREEN  as they start their morning/

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

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

2, the Nikkei average vs gold carry trade ( 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 TUESDAY morning: closed UP 95.42 OR 0.58% 

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

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 298.02 PTS OR 1.42% . ,Shanghai CLOSED UP 1.95 OR 0.07%/ Australia BOURSE IN THE GREEN: /Nikkei (Japan) CLOSED IN THE GREEN /India’s Sensex IN THE GREEN

Gold very early morning trading: $1241.30

silver:$16.32

Early TUESDAY morning USA 10 year bond yield: 1.732% !!! UP 1 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 RISES to 2.549 PAR in basis points from MONDAY night. (SPREAD GOES AGAINST THE BANKS)

USA dollar index early TUESDAY morning: 93.89 DOWN 12 CENTS from MONDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers TUESDAY MORNING

END

 

And now your closing TUESDAY NUMBERS

Portuguese 10 year bond yield:  3.12% DOWN 8 in basis points from MONDAY

JAPANESE BOND YIELD: -0.118% DOWN 1/3  in   basis points from MONDAY

SPANISH 10 YR BOND YIELD:1.46%  DOWN 6 IN basis points from MONDAY

ITALIAN 10 YR BOND YIELD: 1.42  DOWN 5 IN basis points from MONDAY

the Italian 10 yr bond yield is trading 4 points lower than Spain.

GERMAN 10 YR BOND YIELD: 0.05% DOWN 3  IN BASIS POINTS ON THE DAY

 

END

 

IMPORTANT CURRENCY CLOSES FOR TUESDAY

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

Euro/USA 1.1361 DOWN .0002 (Euro =DOWN 2 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 107.33 DOWN .112 (Yen UP 11 basis points )

Great Britain/USA 1.4546 UP.0092 ( Pound UP 92 basis points/(STILL BREXIT CONCERN)

USA/Canada 1.2763 DOWN 0.0050 (Canadian dollar UP 50 basis points  AS OIL  IS RISING (WTI AT $50.43).

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was DOWN by 2 basis points to trade at 1.1361

The Yen ROSE to 107.33 for a GAIN of 11 basis points as NIRP is STILL a big failure for the Japanese central bank/

The pound was UP 92 basis points, trading at 1.4546( BREXIT FEARS DECREASE )

The Canadian dollar ROSE by 50 basis points to 1.2763, WITH WTI OIL AT:  $50.43

The USA/Yuan closed at 6.5710 FALLING WITH THE USA DEVALUATION

the 10 yr Japanese bond yield closed at -.118% DOWN  1/3   IN BASIS  points in yield/

Your closing 10 yr USA bond yield: DOWN 1  IN basis points from MONDAY at 1.714% //trading well below the resistance level of 2.27-2.32%)

USA 30 yr bond yield: 2.53 DOWN 2 in basis points on the day ( HUGE POLICY ERROR)

BANKS NEED THE LONGER BOND HIGHER IN YIELD: INSTEAD THE SPREAD LESSENS.

Your closing USA dollar index, 93.83 DOWN 19 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 TUESDAY

London:  CLOSED UP 11.18 OR 0.18%
German Dax :CLOSED UP 166.60 OR 1.65%
Paris Cac  CLOSED UP 52.48  OR 1.19%
Spain IBEX CLOSED UP 71.00 OR 0.80%
Italian MIB: CLOSED UP 350.49 OR 1.99%

The Dow was UP 17.93.  points or 0.10%

NASDAQ DOWN 11.5 points or 0.25%
WTI Oil price; 50.43 at 4:30 pm;

Brent Oil: 51.45

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  64.66 (ROUBLE UP 62/100 ROUBLES PER DOLLAR FROM YESTERDAY) EVEN THOUGH THE PRICE OF BRENT FELL AND WTI FELL

TODAY THE GERMAN YIELD FALLS TO 0.050  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:50.44

BRENT: 51.50

USA 10 YR BOND YIELD: 1.717%

USA DOLLAR INDEX: 93.85 DOWN 5 cents

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

end

 

For the second quarter in a row, USA worker productivity dropped .6% quarter over quarter.Unit labour cost rose 4.5% q/vs output falling .6% which implies a 3.9% rise in compensation. This continues to hurt the manufacturing base  as mfgers seek other jurisdictions to make stuff.

(courtesy zero hedge)

 

American Worker Productivity Drops (Again)

For the second quarter in a row, US worker productivity fell in Q1 (down 0.6% QoQ). Outside of 2015’s weather-driven debacle, this is the weakest two quarter tumble in productivity since Q4 2012. Unit labor costs rose 4.5% QoQ in Q1 (revised up from 4.1%) as output actually fell 0.6% (implying a 3.9% rise in compensation). This is the 3rd quarterly drop in output in a row.

Must be the weather…

 

As we detailed previously, the US became an unsustainable service sector based economy from the 1970s onwardwhen service sector employment diverged from manufacturing without a corresponding boost in productivity. Even Alan Greenspan has warned that America is “in trouble basically because productivity is dead in the water…”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

 

Valeant posts a loss for the first quarter and more importantly guides earnings lower.This once darling on Wall Street is surely having their problems. Huge number of hedge funds have this company in their portfolios.

(courtesy zero hedge)

 

Valeant Shares Plunge Again After Company Slashes Guidance

The bad news for Valeant shareholders just keeps coming.  After repeatedly cutting its guidance in the past several months, earlier today VRX once again cut guidance dramatically, sending shares plunging by 10% in the premarket. In its just released Q1 results, which missed non-GAAP EPS expectations of $1.37 by 10 cents, the company took the knife to its latest set of full year 2016 projections.

  • Total Revenue updated to $9.9 – $10.1 billion from $11.0 – $11.2 billion
  • Adjusted EPS (non-GAAP) updated to $6.60 – $7.00 from $8.50 – $9.50
  • Adjusted EBITDA (non-GAAP) is updated to $4.80 – $4.95 billion from $5.60 – $5.80 billion

Valeant’s new CEO Joseph Papa blamed the collapse on an ongoing “significant disruption” in the business: “The first quarter’s results reflect, in part, the impact of significant disruption this organization has faced over the past nine months. This has been a difficult period for Valeant and its stakeholders, and while there are some challenges to work through in certain business operations in 2016, such as our U.S. dermatology unit, the majority of our businesses are performing according to expectations.”

Valeant shares have plunged nearly 90% since their peak last August amid a series of concerns, including the price increases, its accounting practices, a brush with potential debt default, and investigations by Congress, the Justice Department and securities regulators. They are now back to just above their multi-year lows.

While the drugmaker in April filed its long-delayed annual report, “defusing the danger of a debt default and positioning the company for a fresh start after concern over its accounting and business practices”,  Tuesday’s first-quarter report confirmed that while VRX may have put its solvency concerns aside for the time being, its operations continue to struggle; the release comes before a July 31 deadline required for Valeant to avoid defaulting on its debt agreements.

As the WSJ adds, investors are now watching closely for signs of what kind of profitability Valeant can deliver as it steps away from big acquisitions and hefty drug-price hikes. The earnings report Tuesday is the second since questions about the drugmaker’s relationship with mail-order pharmacy Philidor Rx Services LLC sparked a free fall in the stock and an unraveling of the once Wall Street darling.

“While we recognize that we did not meet the timeline for filing our first quarter results, with our filing expected this week, we will be current in our financial reporting,” said Chief Executive Joseph Papa, who took the helm last month. Still, he noted that the first quarter’s results reflect “the impact of significant disruption this organization has faced over the past nine months.”

In all for the quarter ended March 31 Valeant posted a loss of $373.7 million, or $1.08 a share, compared with a profit of $97.7 million, or 29 cents a share, a year earlier. Adjusted earnings fell to $1.27 a share from $2.05. Revenue rose 9.3% to $2.37 billion.

Following a congressional crackdown on the company’s pricing practices, last month, Valeant said it would expand discounts for a pair of its heart drugs following heavy scrutiny over its pricing tactics, further putting revenues and margins under pressure. Under the changes, effective immediately, hospitals are eligible for a rebate of at least 10% but up to 40% based on the volume of drugs bought during a quarter. The program covers cardiac-care drugs Isuprel and Nitropress, which Valeant acquired in February of 2015 and quickly raised their prices by 525% and 212%, respectively.

 

END
Not only will some face huge increases in the premiums next year but also 100,000 will be left without insurance altogether in Colorado due to Obamacare:
(courtesy zero hedge)

Nearly 100,000 Left Without Insurance In Colorado Due To Obamacare

We have covered the complete disaster that is Obamacare in great detail recently, frompremiums skyrocketing in 2017, to the largest US Health Insurer throwing in the towel on Obamacare exchanges, and even Insurance companies suing the government over subsidies the government promised if the firms lost money as a result of being in the exchange.

And now for the most recent Obamacare debacle we look to Colorado, where more than 92,000 people will be losing their Obamacare health care coverage in 2017. Four large health insurers – UnitedHealthCare, Humana Insurance, Rocky Mountain Health Plans, and Anthem Blue Cross and Blue Shield – will either not be offering individual plans or reducing offerings in 2017, leaving individuals scrambling to find another plan.

From the Colorado Division of Insurance

As noted in a May 13 release, UnitedHealthcare and Humana Insurance will not offer individual plans in 2017, which impacts approximately 20,000 consumers in Colorado (UnitedHealthcare – 10,549; Humana – 9,914). In addition, Rocky Mountain Health Plans (RMHP) determined that it will reduce individual plan offerings for 2017, offering individual plans only in Mesa County, only via its Monument Health affiliate. Approximately 10,000 people currently enrolled in an individual RMHP plan will have to find another plan for 2017.

 

In addition, Anthem Blue Cross and Blue Shield decided it will not offer its PPO (Preferred Provider Organization) individual plans for 2017, which impacts 62,310 people. However, Anthem will continue to offer HMO (Health Maintenance Organization) individual plans statewide, and these plans will be available to all consumers affected by the PPO decision.

 

All of these companies will continue to offer their small and large group plans for employers.

 

Rocky Mountain Health Plans has been a key player in the mountain areas and Western Slope, and its departure from the individual market will leave many areas with only one on-exchange insurance company — Anthem Blue Cross and Blue Shield’s HMO division – for individual plans.

 

“I’d rather these companies continued in the individual market,” noted Commissioner Salazar. “But in the larger picture, what’s taking place is a market correction; the free market is at work. And it is important to recognize that this is a market correction taking place on a national scale, not just in Colorado. While it was good initially to have so many companies offering so many individual plans, this could be an indication that there were too many options for the market to support.”

 

“It’s also important to highlight that we are not seeing this market correction in the small group market,” continued the Commissioner. “In many ways, that market seems to be stable.”

 

Number of People Impacted

 

Around 92,000 people with individual plans from UnitedHealthcare, Humana Insurance, RMHP and Anthem will need to find other coverage for 2017 during open enrollment, Nov. 1, 2016–Jan. 31, 2017. This represents approximately 20 percent of the 450,000 Coloradans who get their insurance through the individual market, either through the state exchange, Connect for Health Colorado, or off the exchange. Those 450,000 consumers with plans in the individual market represents approximately 7.7 percent of Coloradans. At least 51 percent of people in Colorado, around 2.8 million, continue to get their health insurance through an employer.

“Companies are still figuring it out – where to sell, how to sell, how to price – which is why we’re seeing some companies pull back on individual plans or requesting significant increases” said Insurance commissioner Marguerite Salazar.

To add to the misery, most of those remaining on the exchange are asking the board to approve steep price increases, which is consistent with what we’ve seen across the board with Obamacare proposals for 2017. Golden Rule is seeking a 40.6% rate hike while Rocky Mountain HMO wants to raise rates by 34.6%, and Colorado Choice is asking for a 36.3% jump.

Rate hikes, just like in every other market, are being justified by saying that “the people enrolled in individual plans have used more healthcare services and with greater frequency than expected.” – there’s a surprise, so everyone else is now paying for this with significantly increased premiums. Isn’t socialism fun?

Senator Cory Gardner (R-CO) said that “it’s time for the president to admit Obamacare is a disaster for the American people. When the president rammed his partisan health care law through congress, he repeatedly promised the American people that if you like your plan, you can keep it. President Obama and those that supported this law are now silent as 92,000 Coloradans must find a new insurance plan.

Jonathan Lockwood, executive director of the free-market group Advancing Colorado said that “Coloradans get sucker punched harder year after year by skyrocketing health care costs that we were promised would come to an end under Obamacare” – no no Jonathan, we’re afraid everyone was sucker punched.

 

end

 

Well that is all for today

A reminder, I will probably not be able to deliver a commentary on Thursday.

If I have time, I will just do the comex data

all the best

h.

 

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