July 5/Gold on a tear!!Swiss bonds are in negative territory from 40 yrs out/Italian banks in serious trouble/Renzi orders that shorting of Monte di Paschi is not allowed/Deutsche bank continues to slide/Three British property funds stop redemptions as confidence falters in Gr. Britain/

Good evening Ladies and Gentlemen:

Gold:  $1,356.40 UP $19.70    (comex closing time)

Silver 19.87  UP 33 cents

In the access market 5:15 pm

Gold: 1357.00

Silver: 19.97


And now for the July contract month

For the July gold contract month,  we had a huge 1,019 notices served upon for 101,900 ounces.  The total number of notices filed so far for delivery:  4019 for 401900 oz or 12.50 tonnes

In silver we had 326 notices served upon for 1,630,000 oz.  The total number of notices filed so far this month for delivery:  682 for 3,410,000 oz

Let us have a look at the data for today


Starting last night on several occasions the bankers tried knocking gold down .  At first gold was whacked to 1238.00 but it quickly recovered and by comex trading time it was already in positive territory.  Not to be undone, the bankers again whacked gold down to 1244 and again like the Duracell battery rabbit, the gold price rose again. It was the high open interest on gold (as well as silver) that are bothering our bankers.  Both gold and silver are within spitting distance of their all time highs in OI  Tomorrow’s OI reading (for today’s trading) will be astronomical especially for gold and I can see another raid coming as the bankers are getting quite desperate.


Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 293.85 tonnes for a loss of 9 tonnes over that period


In silver, the total open interest rose by a considerable 3139 contracts up to 214,668, AND STILL CLOSE TO AN  ALL TIME RECORD. THE OI ROSE AS THE  PRICE OF SILVER GALLOPED HIGHER BY 96 CENTS IN FRIDAY’S TRADING.In ounces, the OI is still represented by just over 1 BILLION oz i.e. 1.073 BILLION TO BE EXACT or 153% of annual global silver production (ex Russia &ex China).  The bankers are running FOR THE HILLS as they saw silver jump immediately into the $19 handle today.

In silver we had 326 notices served upon for 1,630,000 oz.

In gold, the total comex gold ROSE BY A WHOPPING  19,580 contracts with gold’s RISE in price ON FRIDAY to the tune of $18.30.


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




Surprisingly we had no changes in gold inventory./

Total gold inventory rest tonight at: 953.91 tonnes


No changes in silver inventory at the SLV

Inventory rests at 333.544 million oz.

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

1. Today, we had the open interest in silver rose by 3139 contracts UP to 214,668 as the   price of silver galloped higher by 96 cents with Friday’s trading. The gold open interest rose by a huge 19,580 contracts up to 640,815 as  the price of gold ROSE by $18.30 ON FRIDAY.

(report Harvey).


2 a) Gold/silver trading overnight Europe, Goldcore

(Mark OByrne/zerohedge


i)Late  MONDAY night/TUESDAY morning: Shanghai closed UP 17.78 POINTS OR 0.60% / /Hang Sang closed DOWN 308.48 OR 1.46%. The Nikkei closed DOWN 106.47 POINTS OR 0.67% Australia’s all ordinaires  CLOSED DOWN 0.98% Chinese yuan (ONSHORE) closed DOWN at 6.6634 /Oil FELL to 47.88 dollars per barrel for WTI and 49.11 for Brent. Stocks in Europe ALL IN THE RED EXCEPT LONDON . Offshore yuan trades  6.6873 yuan to the dollar vs 6.6634 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS AS MORE USA DOLLARS LEAVES CHINA’S SHORE 



Thursday night the 40 yr bond yield in Japan is yielding .05%.  Now Kuroda has very little positive yielding debt to buy.  Not only that but he is running out of bonds to buy and probably by the middle of 2017, he will have zero to buy.


i)The following is an extremely important paper and a must read..

Meijer was talks about Europe’s biggest risk and this is Italy as this country has 30% of all the EMU’s bad debt and only 10% of its GDP/  Yet that is not the world’s biggest problem. He then goes into the failed policies of Abenomics .  They have a huge deflation problem as witnessed by again household spending coming to a complete stop. It’s total DEBT to GDP is 400% and that is contributing to its deflation.  The rising yen is choking off any hope of a recovery..But that is not the major problem that will grip the globe: it is China!!

We pointed out to you the huge increase in POBC injection of capital in January. This week they announced another huge increase in paper stimulation for the month of June to the tune of 4 trillion yen or equiv 316 billion USA!  China’s money supply has grown by 71% and yet its economy has grown by 6%.  Clearly the yuan must drop by 30 to 50% and that will cause western prices and wages to drop precipitously

a must read..

( R Meijer/Automatic Earth Blog)

ii)Although difficult to follow, it seems that China is becoming good at hiding capital outflows from its country trying to hide the true picture of its financial mess.  In Q1  they supposedly had an outflow of 123 billion USA.  The true outflow:  500 billion.

It sure looks like Kyle Bass is correct!

( Goldman Sachs/zero hedge)



Trouble this weekend as Italy’s Renzi states that he will defy Brussels and provide direct aid to his ailing banks.  In the last few days, we have seen the devastation morph from a 40 billion euro bailout, to a 150 billion emergency loans and then emergency loans with support from the pension funds. The risk of course, is the entire credibility of the European Monetary Union and bank depositors fleeing the Italian banking scene!.

( zero hedge)


The 360 billion euro bad debt on the books of Italian banks is weighing in on the woes of the country.  Now we learn, that Monte de Paschi has received an ECB letter telling them to sell 10 billion euros worth of soured notes. With nobody to sell do, this is going to be very problematic:

( zero hedge)

iii)MONDAY:  U.K.

Is this a repeat of Bear Stearns 2007? The UK’s largest property fund has just halted redemptions as its fears a vicious circle is upon them as they cannot raise cash fast enough to fund those redemptions.

( zero hedge)

iv)Monday afternoon  GERMANY

Deutsche bank continues it’s slide:

( zero hedge)


The bank of England is scared that UK confidence is falling:  thus it unveils first easing measures after the BREXIT vote

(courtesy zero hedge)

vi)The pound crashes!! as fears in Gr. Britain property fund redemptions


vi)  a.First on the weekend, we had UK’s Standard Life Reality fund halt redemptions. Now the dominoes start to fall a la Bear Stearns:  UK Aviva Property Fund halts redemptions due to lack of immediate liquidity: the real estate sector is huge in Gr Britain!!

(zero hedge)


b)Then late in the afternoon M and G Property Fund suspends redemptions:

( zero hedge)

vii)Tuesday Switzerland

If this does not tell you that the entire global system is smashed to smithereens, then nothing does: Swiss bond yields are negative for 50 years out!!

( zero hedge)

vii)Tuesday morning:  Italy and their banks;

 It sure looks like Italy will have  a bank run:
( zero hedge)

vii b  Tuesday afternoon:  Italian bank collapse continues unabated:

( Saxo/zerohedge)

vii c)Then to cap off today’s trading in Europe, Italy bans the short selling of imploding stock Monte de Paschi( zero hedge)



Hungary will hold a referendum on Oct 2 to halt the inflow of migrants:

(courtesy zero hedge)



The CLSA warns everyone that the global economy was struggling long before BREXIT:  A good summary:

(courtesy zero hedge/CLSA)


i)The avengers twitter account is suspended following its move to a new website.  It is possible that whoever is funding this organizaiton has had enough and stopped. Oil is on its way down

( zero hedge)

ii)West Texas intermediate falls into the 46 dollar handle with a huge unexpected build in Cushing Oklahoma:

( zero hedge)

iii)Then crude crashes some more as East Coast gas inventories are at record levels;


none today



(zero hedge)


It seems that Chinese day traders are responsible for silver’s rise and the bankers who supplied silver paper short: after falling from 21 dollars to $19.50 it resumed it’s rise back to over 20 dollars per oz.

( zero hedge)

ii)”Gold should be owned for what gold represents, not what the price is”Grant Williams..a must view interview

( Grant Williams/Mauldin Economics)

iii)Chris Powell talks about gold suppression:

( Goldseek/Chris Powell)

iv)The “500 tonnes of gold” added to global gold holdings show a rise in investor concern.That is an understatement.  However much of this added gold is paper and not physical!

( Bloomberg)

v)The legendary Jim Grant on gold:

( James Grant/Mauldin Economics)

vi)Swiss capital’s Kiener believes in the next 18 months bond yields will crash and gold will hit record highs. I strongly believe he is correct:

( Tan/Kiener/CNBC)

vii)On Monday, Chinese buyers were the guys to drive the silver prices higher:

( Wall Street Journal/Hoyle)

viii) Von Greyerz states that gold has outperformed both currencies and stocks

(Von Greyerz/Kingworldnews)

ix)Mints around the world are on fire with record demand;

( Ronan Manly/Bullionstar.com

x)Canada’s and the USA Mint produce over 81 million oz of silver coins  and they have to import a total of 34 million oz to meet demand

( Steve St Angelo/SRSRocco report)


i)David Stockman goes all out on Stanley Fischer who claims that the data coming in “looks good”

(David Stockman/ContraCorner)

ii)Here is another cost that is soaring:  child care costs!

( zero hedge)

iii)In an successful economy you must have a good manufacturing sector:  Today the USA factory orders collapse to the longest streak in USA history:

( zero hedge)


iv)As expected no charges against ‘above the law’, Clinton!

( zero hedge)


Let us head over to the comex:

The total gold comex open interest ROSE to an OI level of 640,815 for a huge gain of  19,580 contracts AS THE PRICE OF GOLD ROSE CONSIDERABLY BY $18.30 with respect to FRIDAY’S TRADING. We are now in the non active month is July.  We  are again witnessing the same scenario as in May and June whereby the front delivery month increases in OI standing for metal. We  had a very large 1019 notices served upon our commercials late Friday night for Tuesday delivery.  Somebody big is continually standing for the gold metal. The open interest for the front July contract stands at 2070 for a loss of 2915 contracts. We had 3000 notices filed on Thursday night for July 1 delivery, so we gained 85 contracts or an additional 8500 oz will stand for delivery in this non active month of July. The next big active contract month is August and here the OI ROSE by 11,164 contracts up to 440,422  as this month starts its wind down until first day notice for the August contract, Friday,July 29/2016: 4 weeks away. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was GIGANTIC at 490,982. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was very good at 249,046 contracts. The comex is not in backwardation.

Today, we had a huge 1019 notices filed for 101,900 oz in gold

And now for the wild silver comex results. Total silver OI ROSE by A CONSIDERABLE 3139 contracts from 211,529 up to 214,668.  We are still close to the new all time record high for silver open interest set on June 24.     The front active delivery month is July and here the OI fell BY 518 contracts down to 1989. We had 0 notices served on Friday so we lost 518 contracts or 2,590,000 silver ounces that will not stand for delivery as they no doubt were cash settled. The next non active month of August saw it’s OI RISE by 14 contracts up to 393. The next big active month is September and here the OI rose by 3005 contracts up to 159,362.   The volume on the comex today (just comex) came in at 252,258 which has to be an all time record. The confirmed volume YESTERDAY (comex + globex) was excellent at 97,497. Silver is not in backwardation . London is in backwardation for several months.
We had 326 notices filed for 1,630,000 oz. in silver

JULY contract month:

INITIAL standings for JULY

July 5.
Withdrawals from Dealers Inventory in oz   nil OZ
Withdrawals from Customer Inventory in oz  nil  NIL OZ


Deposits to the Dealer Inventory in oz NIL
Deposits to the Customer Inventory, in oz   85,199.65 OZ



No of oz served (contracts) today 1019 notices 

101,900 oz

No of oz to be served (notices) 1051 contracts

105,100 oz

Total monthly oz gold served (contracts) so far this month 4019 contracts (401,900 oz)

(12.50 tonnes)

Total accumulative withdrawals  of gold from the Dealers inventory this month   NIL
Total accumulative withdrawal of gold from the Customer inventory this month   32135.037 OZ

Today we had 0 dealer DEPOSIT

total dealer deposit:  NIL   0z

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

Today we had 2 customer deposits:

i)INTO HSBC:  69,124.65 OZ

ii) Into Scotia: 16,075.000 oz (500 kilobars)

Total customer deposits; 85,199.65   OZ

Today we had 0 customer withdrawal:

Total customer withdrawals: nil oz

Today we had 1  adjustments:


ii) Out of HSBC:  91,630.35 oz were transferred out of the CUSTOMER and into the DEALER


Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 1,019 contracts of which 0 notices was stopped (received) by JPMorgan dealer and 618 notices was stopped (received)  by JPMorgan customer account. 
To calculate the initial total number of gold ounces standing for the JULY contract month, we take the total number of notices filed so far for the month (4019) x 100 oz  or NIL oz , to which we  add the difference between the open interest for the front month of JULY (2070 CONTRACTS) minus the number of notices served upon today (1019) x 100 oz   x 100 oz per contract equals 507,000 oz, the number of ounces standing in this active month. 
Thus the INITIAL standings for gold for the JULY. contract month:
No of notices served so far (4019) x 100 oz  or ounces + {OI for the front month (2070) minus the number of  notices served upon today (1019) x 100 oz which equals xxx oz standing in this non   active delivery month of JULY  (15.769 tonnes).
We gained 8500 additional oz of gold that will stand for delivery in this non active month of July.
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 now have partial evidence of gold settling for last months deliveries We now have 6.889 TONNES FOR MAY + 49.09 TONNES FOR JUNE +  15.505 TONNES FOR JULY + 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 ; june 10 -.0008 / June 22:0.48 tonnes /June 23: 0489 tonnes, June 24..018; june 29 .036 tonnes; JUNE 30 2.49 /july 1 17.78 tonnes = 45.654 tonnes still standing against 44.76 tonnes available.
 Total dealer inventor 1,439,038.811 tonnes or 44.76 tonnes
Total gold inventory (dealer and customer) =9,447,347.424 or 293.85 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 293.85 tonnes for a loss of 9 tonnes over that period. 
JPMorgan has only 25.70 tonnes of gold total (both dealer and customer)
JPMorgan now has only .900 tonnes left in its dealer account.



And now for silver

JULY INITIAL standings

 July 5.2016

Withdrawals from Dealers Inventory NIL
Withdrawals from Customer Inventory  2032.52oz




Deposits to the Dealer Inventory NIL
Deposits to the Customer Inventory  620,779.85  oz


No of oz served today (contracts) 326 CONTRACTS 

(1,630,000 OZ)

No of oz to be served (notices) 1663 contracts

(8,315,000 oz)

Total monthly oz silver served (contracts) 682 contracts (3,140,000 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  684,998.9 oz

today we had 0 deposit into the dealer account

total dealer deposit:NIL oz

we had 0 dealer withdrawal:


total dealer withdrawals:  NIL oz

we had 1 customer deposit:

i) Into HSBC:  620,679.85 OZ

Total customer deposit: 620,679.85 oz

We had 1 customer withdrawals


i) Out of Delaware: 2032.52 oz


total customer withdrawals:  2032.52  oz



 we had 0 adjustment


The total number of notices filed today for the JULY contract month is represented by 326 contracts for 1,630,000 oz. To calculate the number of silver ounces that will stand for delivery in JULY., we take the total number of notices filed for the month so far at (682) x 5,000 oz  = 3,140,000 oz to which we add the difference between the open interest for the front month of JULY (1989) and the number of notices served upon today (326) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the JULY contract month:  682 (notices served so far)x 5000 oz +{1989 OI for front month of JULY ) -number of notices served upon today (326)x 5000 oz  equals  11,455,000 oz  of silver standing for the JULY contract month.
We lost 518 contracts or 2,590,000 oz will not stand and most likely they were cash settled.
Total dealer silver:  24.662 million (close to record low inventory  
Total number of dealer and customer silver:   151.672 million oz
The total open interest on silver is NOW NEAR its all time high with the record of 218,979 being set June 24.2016.  The registered silver (dealer silver) is NOW NEAR  multi year lows as silver is being drawn out at both dealer and customer levels 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.
And now the Gold inventory at the GLD
July 5/no change in inventory/rests tonight at 953.91
July 1/a huge change in the gold inventory/ a deposit of 3.86 tonnes/rests tonight at 953.91 tonnes
JUNE 30/no change in gold inventory /inventory rests tonight at 950.05 tonnes
June 29/ a good sized deposit of 2.67 tonnes/inventory rests at 950.05 tonnes
June 28/ a huge deposit of 13.067 tonnes into inventory/new inventory rests so far at 947.38 tonnes.  This was a paper addition
June 27/a huge deposit of 18.415 tonnes into the GLD inventory/the new inventory rests at 934.313 tonnes.  The addition was a paper addition and not physical
june 24./strange!! no additions to gold with its huge 58 dollar advance??
june 23/no change in gold inventory tonight/rests at 915.90 tonnese
June 22/with gold down badly again, we had another huge deposit of 3.57 tonnes into the GLD/Inventory rests at 915.90 tonnes
June 21/ with gold down badly, we had a huge deposit of 3.56 tonnes into the GLD/Inventory rests at 912.33 tonnes
June 20/we had one deposit of .890 tonnes of gold into the GLD inventory/Inventory.
rests at 908.77 tonnes.
June 17./we had two huge deposits: last night: 1.782 tonnes and this afternoon: 5.3480 tonnes/Inventory rests at 907.88 tonnes
JUNE 16/no changes in GLD/Inventory rests at 900.75 tonnes.
June 15/the farce continues:  another paper deposit of 2.08 tonnes into the GLD/Inventory rests at 900.75 tonnes. Wait until you see tomorrow’s level!!
June 10/a huge “paper” deposit of 6.54 tonnes of gold into the GLD/Inventory rests at 893.92 tonnes
JUNE 9. a huge deposit of 6.23 tonnes of gold into the GLD/Inventory rests at 887.38 tones
June 8/no change in inventory at the GLD/Inventory rests at 881.15 tonnes
june 7/ a tiny withdrawal of .29 tonnes of inventory/probably to pay for fees/Inventory rests at 881.15 tonnes
July 5 / Inventory rests tonight at 953.91 tonnes


Now the SLV Inventory
july 5/no change in silver inventory/inventory rests at 333.554 milllion oz
july 1/no change in silver inventory/inventory rests at 333.544 million oz
JUNE 30/no changes in silver inventory/inventory rests at 333.544 million oz
June 29/ a small deposit of 760,000 oz/Inventory rests tonight at 333.544 million oz/
June 28/no change in silver inventory/rests tonight at 332.784 million oz
June 27/ a small deposit of 570,000 oz in the SLV inventory/Inventory rests at 332.784 million oz
June 24/This makes no sense!! 855,000 oz of silver leaves the SLV headed straight to Shanghai/Inventory rests at 332.214 million oz
June 23/ no change in silver inventory/rests tonight at 333.069 million oz
June 22.2016/no change in inventory at the SLV/Inventory rests at 333.069 million oz/
June 21/ we had another 2.67 million oz of silver withdrawn from the SLV.  This no doubt is real silver leaving and heading straight to China/Inventory at 333.069 million oz
June 20/we had another 2.852 million oz of silver withdrawn from the SLV. Again this is probably real silver leaving and heading straight to China. Inventory rests at 334.495
June 17/a monstrous 5.418 million oz of silver withdrawn from the SLV.  This may be some real silver and thus it is heading for China which is massively importing silver/inventory rests at 337.347 million oz
JUNE 16./no changes in silver inventory/rests tonight at 342.765 million oz
June 15and the dfarce continues for the SLV/we had a massive 2.376 million oz of a paper deposit into the SLV/Inventory rests at 342.765 million oz
June 10/no change in silver inventory at the SLV/Inventory rests at 338.725 million oz
JUNE 9/no change in silver inventory at the SLV/Inventory rests at 338.725 million oz.
June 8/no change in silver inventory at the SLV/Inventory rests at 338.725 million oz
July 5.2016: Inventory 333.544 million oz

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 2.5 percent to NAV usa funds and Negative 2.1% to NAV for Cdn funds!!!!  (the discount is starting to disappear)
Percentage of fund in gold 59.5%
Percentage of fund in silver:39.3%
cash .+1.2%( July 5/2016). 
2. Sprott silver fund (PSLV): Premium RISES  to +1.71%!!!! NAV (July 5/2016) 
3. Sprott gold fund (PHYS): premium to NAV  FALLS TO  0.88% to NAV  ( July 5/2016)
Note: Sprott silver trust back  into POSITIVE territory at +1.71% /Sprott physical gold trust is back into positive territory at +0.88%/Central fund of Canada’s is still in jail.


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

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

“In Gold We Trust” Annual Report Showing New Bull Market “Emerging”

The “In Gold We Trust” Annual Report by fund managers, Ronald-Peter Stöferle and Mark Valek has just been published and is as ever essential reading for all seeking to better understand the gold market.

Inline image 1

Last year’s report by Ronnie and Mark from Incrementum in Liechtenstein, was downloaded more than 1.5 million times and the report is now one of the most widely read gold studies in the world. The 170-page publication is as comprehensive as ever with many great tables and charts. It concludes that a new gold “bull market is emerging.”

– Gold is back, a new bull market is emerging
– Increasing uncertainty about economic and political developments boosts the gold price
– Monetary stimulus ongoing: the BoJ and the ECB are creating the equivalent amount of the world’s entire annual gold production via their QE programs each month
– BREXIT: Uncertainty will negatively affect growth. Further monetary and fiscal stimulus to be expected to counter further disintegration of the Union
– Dollar strength upon US-recovery and normalization was major contributor to gold/commodity weakness of the last years
– The narrative of economic recovery is crumbling; US recession cannot be ruled out; faith in monetary policy measures declines
– Continued depreciation of the US dollar and strength in commodities may lead to higher inflation, or maybe stagflation
– The persisting low interest rate environment is leading to a revival in interest in gold investments on the part of institutional investors
– In addition to gold, this generally means a positive environment for inflation-sensitive assets like silver and mining stocks
– Incrementum confirms its long-term price target of USD 2,300 for June 2018 – New Gold “Bull Market Is Emerging
The full report can be read here 


Gold and Silver News
China buyers drive silver prices higher (WSJ)
Silver crushes even gold as it powers to 2-year high (Marketwatch)
Gold retreats, correction seen short-term (Reuters)
Still stronger gold price ahead (Credit Suisse)
Precious Metals Shine Bright for Brexit Haven Seekers (Bloomberg)
Gold pushes back towards 2 year high, silver crosses $21oz (Reuters)
Is Gold the Answer to Negative Rates and Brexit Woes? (Bloomberg)

ETF Securities Reports Biggest One-Day Gold Inflow Since Financial Crisis (Zerohedge)
Bear Stearns 2.0? UK’s Largest Property Fund Halts Redemptions, Fears “Vicious Circle” (Zerohedge)
Detonation of the LBMA – It Wasn’t Brexit, Governor Carney (Safehaven)
Read More Here

Gold Prices (LBMA AM)
05 July: USD 1,344.75, EUR 1,207.05 & GBP 1,023.89 per ounce
04 July: USD 1,348.75, EUR 1,213.07 & GBP 1,016.42 per ounce
01 July: USD 1,331.75, EUR 1,199.51 & GBP 1,001.34 per ounce
30 June: USD 1,317.00, EUR 1,183.59 & GBP 976.82 per ounce
29 June: USD 1,318.00, EUR 1,191.64 & GBP 984.36 per ounce
28 June: USD 1,312.00, EUR 1,185.79 & GBP 985.84 per ounce
27 June: USD 1,324.60, EUR 1,200.49 & GBP 996.36 per ounce

Silver Prices (LBMA)
05 July: USD 19.73, EUR 17.69 & GBP 14.99 per ounce
04 July: USD 20.36, EUR 18.31 & GBP 15.36 per ounce
01 July: USD 19.24, EUR 17.29 & GBP 14.48 per ounce
30 June: USD 18.36, EUR 16.48 & GBP 13.61 per ounce
29 June: USD 18.21, EUR 16.42 & GBP 13.55 per ounce
28 June: USD 17.57, EUR 15.84 & GBP 13.17 per ounce
27 June: USD 17.70, EUR 16.06 & GBP 13.40 per ounce

Recent Market Updates

– 3 Charts Show “How Precious Brexit Is” for Gold and Silver Bullion
– Gold, Silver Best Performing Assets In H1, 2016 – Up 26% & 38%
– BREXIT Creates EU Contagion Risk – Ramifications for Investors, Savers and Companies In Ireland
– BREXIT Day – Markets Becalmed – Gold Panic Prelude – Trading Hours
– Gold Lower Despite “Panic” Due To “Supply Issues” In Inter Bank Gold Market
– Gold Slips Despite UK Gold Demand Surging – Investors “Seek Stability”
– Gold Prices Surge to Highest in Nearly Two Years On FED and Brexit Haven Demand
– Gold Bullion Has Little Downside, Brexit Or Not, Says HSBC
– Central Bank of Ireland Warns Risks are Debt, Brexit, Geopolitical Tensions and Migration
– Gold In Euros Surges 6.5% In June and 17% YTD On BREXIT Concerns
– Soros Buying Gold On BREXIT, EU “Collapse” Risk
– UK Gold Demand Rises On BREXIT “Nerves”
– Pensions Timebomb in “Slow Motion Detonation” In UK, EU, U.S.
– Silver – Perfect Storm Brewing in the Market
– Martin Wolf: There Will Be Another “Huge” Financial Crisis





Precious Metal Pandemonium – Silver Spikes Limit-Up, Gold Surges As China FX Basket Hits Record Low

Update: Silver just exploded above $21 – up almost 8% – its biggest single day surge since September 2013. Silver is limit up on SHFE as Gold is also surging back towards Brexit highs near $1360… China’s CFETS Renminbi basket just hit a record low..

All of this is happening as China’s currency collapses to a record low since it began being published against a broad basket of majors…

Notably silver’s strength has unwound all of gold’s post-QE3 gains…

*  *  *

As we detailed earlier, following silver’s best week since August 2013, dramatically catching up to gold’s recent performance, it appears, despite the volumeless meltup in stocks, that Brexit has sparked huge demand for the safety of precious metals.

For a second straight week, funds boosted their net-long futures and options positions in the two metals to the highest since the data begins in 2006.

Money managers have been piling in on demand for havens and speculation that interest rates will stay low as central bankers around the world struggle to contain the economic fallout from the U.K.’s vote to quit the European Union.

But what happens next?

As a reminder, on April 21st PIMCO’s Harley Bassman suggested “The Fed should monetize gold”…

In “Rumpelstiltskin at the Fed“, Bassman goes down the well-trodden path of proposing Fed asset purchases as the last ditch panacea for the US economy, however instead of buying bonds, or stocks, or crude oil, Bassman has a truly original idea: “the Fed should unleash a massive Fed gold purchase program that could echo a Depression-era effort that effectively boosted the U.S. economy.

He is of course, referring to FDR’s 1933 Executive Order 6102, which made it illegal for a citizen to own gold bullion or coins. Americans promptly sold their gold to the government at the official price of $20.67, with the resulting hoard of gold was then placed in Fort Knox.

The Gold Reserve Act of 1934 raised the official price of gold to $35.00, a near 70% increase. It also resulted in an implicit devaluation of the US dollar. As Bassman points out, over the three years from January 1934 to December 1936, GDP increased by 48%, the Dow Jones stock index rose by nearly 80%, and most salient to our topic, inflation averaged a positive 2% annually, despite a national unemployment rate hovering around 18%.

In short, a brief economic nirvana which was unleashed by the devaluation of the dollar confiscation of gold. In fact, we have frequently hinted in the past that another Executive Order 6102 is inevitable for precisely these reasons. However this is the first time when we see a “respected economist” openly recommend this idea as a matter of monetary policy.

Bassman says that the Fed should “emulate a past success by making a public offer to purchase a significantly large quantity of gold bullion at a substantially greater price than today’s free-market level, perhaps $5,000 an ounce? It would be operationally simple as holders could transact directly at regional Federal offices or via authorized precious metal assayers.”

What would the outcome of such as “QE for the goldbugs” look like? His summary assessment:

A massive Fed gold purchase program would differ from past efforts at monetary expansion. Via QE, the transmission mechanism was wholly contained within the financial system; fiat currency was used to buy fiat assets which then settled on bank balance sheets. Since QE is arcane to most people outside of Wall Street, and NIRP seems just bizarre to most non-academics, these policies have had little impact on inflationary expectations. Global consumers are more familiar with gold than the banking system, thus this avenue of monetary expansion might finally lift the anchor on inflationary expectations and their associated spending habits.

The USD may initially weaken versus fiat currencies, but other central banks could soon buy gold as well, similar to the paths of QE and NIRP. The impactful twist of a gold purchase program is that it increases the price of a widely recognized “store of value,” a view little diminished despite the fact the U.S. relinquished the gold standard in 1971. This is a vivid contrast to the relatively invisible inflation of financial assets with its perverse side effect of widening the income gap.

And it seems someone is front-running that moment…

Source: Bloomberg


It seems that Chinese day traders are responsible for silver’s rise and the bankers who supplied silver paper short: after falling from 21 dollars to $19.50 it resumed it’s rise back to over 20 dollars per oz.

(courtesy zero hedge)

Silver Bounces Back Over $20 After China Day-Traders Trounced

The last 48 hours in precious metals markets – more specifically silver – has been chaotic to say the least with a massive spike Sunday night above $21 and a sudden flash crash overnight to $19.50 before rallying back above $20 this morning. Silver’s recent rise mirrors a similar surge in steel rebar and iron ore futures in April

But as Saxo’s Ole Hanson warns, the biggest two-day surge in silver since 2011 has raised a few questions about the sustainability of the current rally and what is driving it.

Macro economic developments which have been highlighted on several occasions during the past few months continue to attract demand for precious metals from retail, real money and hedge funds.

Speculative positions held by hedge funds in both gold and silver have reached record levels while demand for exchange-traded products especially those in gold have continued to rise on an almost daily basis.

The 13% bottom-to-top rally from Friday to Monday in silver could represent a short-term top in the market, not least considering the 44% year-to-date rally seen already. During the rally in Asia Monday, several major stop levels got hit on Comex silver which could indicate that many short positions have now been flushed out.

Silver looking to consolidate the post-Brexit strong gains. Key area of support between $19.14 and $18.67.

Spot silver with retracement

 Source: SaxoTraderGO
It was not a coincidence that the Monday surge occured during Asian trading hours. When it comes to commodity trading, the Asian session was often in the past a period of tranquility with limited market action.
The emergence of commodity trading venues in China has, however, changed the balance in the market. Back in April, a sudden rise in demand for steel rebar and iron ore futures from Chinese day traders triggered a major surge in daily volumes.
As markets got increasingly disorderly, the regulators stepped in and raise the amount of colleteral required to trade and hold a position. This led to a collapse in activity and the price of iron ore and steel rebar collapsed by 25% and 33% respectively before recovering.
Iron ore and steel rebar
The movements in silver during the past couple of days resembles what happened to iron ore and steel rebar. The below chart shows the price development of silver traded on the Shanghai Futures Exchange. Following the Brexit vote traders around the world, not least in China, have increasingly cast their eyes on silver.
During the past week, volumes have spiked to levels last seen during the April frenzy. What happened Monday was that silver fairly quickly went limit up at the 6% daily cap in response to the strong COMEX close on Friday. This helped trigger a spill over surge on Comex silver which went through several major stop levels before retracing after hitting a two-year high above $21.
The fact that the traded volume goes up while the open interest goes down is a clear indication that day traders have taken over for now. As long this continues, we are likely to see bigger daily price swings with the Asian session seeing most of this.
Yesterday the Asian session yielded a 7.4% trading range while the remainder of the day it was only 4% (the US holiday did reduce activity during their session). Today the Asian session saw a 4.5% trading range while the European session so far has seen less than half of that.

SHF Silver

Source: Bloomberg

Do these observations lead to a warning that silver could be in for a collapse similar to that in iron ore and steel rebar? No is probably the shortest answer. Silver is a much more globally traded commodity than some of the other futures currently available for trading in China.A major move in SHF silver may attract the opposite interest from investors using other silver instruments from COMEX silver futures to spot and exchange-traded products.

The latest surge has triggered a great deal of attention and with both XAGUSD and XAUXAG reaching and temporarily breaching their technical extension levels, further upside now hinges on the support from a continued rally in gold.

The XAUXAG ratio completed the extension of the March to April move yesterday when the ratio temporarily hit a low around 64.2. With the ten-year average at 60, silver is no longer as cheap as it was back in March when it hit 84.On that basis, continued demand for precious metals should see silver continue to outperform but at a much slower pace with the relative value increasingly coming back into line with longer-term averages. 

XAUXAG ratio

 Source: SaxoTraderGO


“Gold should be owned for what gold represents, not what the price is”

Grant Williams..a must view interview

(courtesy Grant Williams/Mauldin Economics)

“Central Bankers Have Lost Control” Grant Williams Warns “The Clock Is Ticking On The Dollar”

“I don’t buy gold, I own it… I buy it for what it does.. not what the price is” begins Grant Williams in this fascinating (and brief) interview as he explains the clock is clearly ticking on the dollar. History says that paper-based currencies will eventually fail.

It has now been 45 years since the US dollar became a completely paper-based currency. Gold, on the other hand, has been a preferred medium of global exchange for over 5,000 years. That makes gold the ultimate hedge against monetary collapse. Despite its long-term record of stability, gold as an asset class still makes up less than 1% of the average investment portfolio. Negative sentiment from the public and media is a key reason why gold continues to be under owned and mispriced.

As Grant Williams explained in the following interview with Mauldin Economics’ Jonathan Roth, “Every day, the picture is becoming more and more discernible It is not quite clear as yet, but it is getting there. The credibility of central bankers is slowly fading away.”


Things will go bad when the general public finally realizes that global central bankers have lost control. When this happens, we will end up with either a sharp breakdown in financial markets or a slow-rolling panic. Either way, the price of gold will soar.

(courtesy Gary Savage/GATA)

GoldSeek interview with GATA secretary covers gold suppression comprehensively


9:50p ET Sunday, July 3, 2016

Dear Friend of GATA and Gold:

GoldSeek Radio and its host, Chris Waltzek, have given your secretary/treasurer an opportunity to explain gold price suppression in a comprehensive interview.

Among your secretary/treasurer’s observations:

— Central banks obscure their gold transactions to facilitate their currency market interventions.

— U.S. government policy long has been to push gold out of the international monetary system to protect the dollar’s status as the world reserve currency.

— Central banks are secretly trading gold derivatives, to use the words of a French central banker, “nearly on a daily basis.”

— The West’s market economy is an illusion.

— The immediate victims of gold price suppression are commodity-producing countries, developing countries. But developed countries are victims too, since the scheme destroys their markets and democracy. This sort of central banking is an essentially totalitarian system controlling the prices of all capital, labor, goods, and services in the world.

— Central banks meet in secret to formulate and implement their policies and this is by definition conspiracy.

— Gold price suppression policy is extensively documented in government archives and other official records.

— The Gold Reserve Act specifically authorizes the U.S. government, through the Treasury Department’s Exchange Stabilition Fund, to rig any markets in the world in secret.

— All major central banks are probably participating in the gold price suppression scheme, aiming to redistribute world gold reserves so holders of dollar surpluses are hedged when the dollar is devalued.

— Central banks probably will revalue gold upward substantially overnight, beginning a new half century of gold price suppression and market rigging at more sustainable levels.

The interview is 40 minutes long and can be heard at GoldSeek here:


CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


The “500 tonnes of gold” added to global gold holdings show a rise in investor concern.That is an understatement.  However much of this added gold is paper and not physical!

(courtesy Bloomberg)

The 500 tons of gold that show global rise in investor angst


By Ranjeetha Pakiam
Bloomberg News
Sunday, July 3, 2016

Global gold holdings have expanded by more than 500 metric tons since bottoming in January in a signal of investors’ rising concern about slowing growth, a Federal Reserve that’s probably on hold, and the ructions caused by Britain’s vote to quit the European Union.

Assets in bullion-backed exchange-traded funds rose 6.6 tons to 1,959.1 tons on Friday, up from 1,458.1 tons on Jan. 6, according to data compiled by Bloomberg. The holdings increased 37 tons last week as investors reacted to the U.K.’s vote, and swelled in five months out of six in the first half.

Bullion prices climbed to the highest level in more than two years in June as investors absorbed the implications of the U.K. result, adding to a rally that’s been driven by the Fed’s hesitation in raising borrowing costs and the spread of negative rates in Europe and Japan. Banks including Goldman Sachs Group Inc. raised their outlooks for gold after the vote, while yields on 10- and 30-year U.S. Treasuries have touched record lows. …

… For the remainder of the report:



The legendary Jim Grant on gold:

(courtesy James Grant/Mauldin Economics)

Jim Grant: “Gold Is An Investment ‘In’ Monetary Disorder”

In an interview at the 2016 Mauldin Economics Strategic Investment Conference, legendary investor Jim Grant noted, “Cash simply enables one to retain wealth, with an eye towards being opportunistic.”

Raising cash and reducing your exposure to volatile financial markets in turbulent times obviously make sense. The key, of course, is finding a safe, profitable investment opportunity to deploy your cash.

The founder of Grant’s Interest Rate Observer believes gold may be that investment. In the interview, he went on to say, “Gold isn’t so much a hedge against Armageddon… as it is against monetary shenanigans.”

He also noted he expects gold to continue moving up: “When the economic establishment encourages the idea that gold is ‘good for nothing,’ it’s almost always a good time to buy [gold].”

Gold to hit record in 18 months as bond yields crash, Swiss Asia Capital’s Kiener says


By Huileng Tan
CNBC, New York
Monday, July 4, 2016

Gold prices may hit all-time highs in the next 18 months amid low to negative global bond yields, said a fund manager on Monday, joining a chorus of bullish calls on the safe haven commodity.

Despite being a non-interest bearing asset with holding costs, gold was attractive in the current climate where there was little trust in the establishment and its policies as demonstrated by the June 23 referendum in the U.K. when voters chose to leave the European Union, said Swiss Asia Capital’s Singapore managing director and chief investment officer, Juerg Kiener.

The continued cratering of bond yields has also blunted the advantage fixed income instruments held over their shiny counterpart.

“This fall-off in trust is resulting in people looking at different ways to invest, particularly in an environment when the government controls the whole fixed-income market, which is negative. At least (in gold), you don’t have negative yields, there is no new supply … and falling production,” he told CNBC’s “Squawk Box.” …

… For the remainder of the report and a video excerpt:



On Monday, Chinese buyers were the guys to drive the silver prices higher:

(courtesy Wall Street Journal/Hoyle)

China buyers drive silver prices higher


By Rhiannon Hoyle
The Wall Street Journal
Monday, July 4, 2016

SYDNEY, Australia — The price of silver surged to a two-year high on Monday as buyers in China made bold bets in the futures market and scooped up vast volumes of physical metal.

Spot silver, the price paid for immediate delivery, rose as much as 6.9 percent to an intraday peak of $21.132 a troy ounce, its highest value since July 2014, as the Shanghai-traded benchmark futures and physical silver contracts reached their limit.

On the Shanghai Futures Exchange, the most actively traded silver futures contract jumped for a fourth straight session on Monday, hitting its 6-percent daily maximum at opening to reach 4,419 yuan ($663) a kilogram.

Monday’s moves were buoyed by investors seeking haven assets and speculation about further monetary easing worldwide. …

… For the remainder of the report:



Von Greyerz states that gold has outperformed both currencies and stocks

(Von Greyerz/Kingworldnews)

Gold has outperformed currencies and stocks, von Greyerz tells KWN


6:07p ET Monday, July 4, 2016

Dear Friend of GATA and Gold:

Swiss gold fund manager Egon von Greyerz, interviewed today by King World News, says that for many years gold has been outperforming both currencies and stocks and that, indeed, stock appreciation has been illustory. An excerpt from von Greyerz’s interview is posted at KWN here:


CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


Mints around the world are on fire with record demand;

(courtesy Ronan Manly/Bullionstar.com)

Ronan Manly: Bullion coin sales boost revenues of world’s largest mints


By Ronan Manly
BullionStar.com, Singapore
Monday, July 4, 2016

The world’s major precious metals mints are riding high on the back of extremely strong global bullion coin demand and relatively buoyant gold and silver prices. These mints are predominantly run as commercial enterprises.

The sheer scale of revenues that the U.S. Mint, Royal Canadian Mint, Perth Mint, and Austrian Mint have been generating over the last number of years is eye-opening. Not surprisingly, due to their high value nature, revenues from bullion coin sales account for the lion’s share of total revenues for each institution and have been a core driver of their overall profitability. …

… For the remainder of the report:



Canada’s and the USA Mint produce over 81 million oz of silver coins  and they have to import a total of 34 million oz to meet demand

(courtesy Steve St Angelo/SRSRocco report)

Americans & Canadians Face Silver Shortages As The Investment Deficit Surges

by SRSrocco

Americans and Canadians will likely face silver shortages in the future as investment demand continues to surge higher.  This will come at time as the silver price skyrockets, thus making it even harder for investors to acquire physical metal.

The U.S. and Royal Canadian Mints produce most Official Silver coins in the world.  In 2015, the combined total of Silver Eagles and Maples sales equaled 81.3 million ounces (Moz).  This is a stunning amount as their total sales in 2001 were only 9.2 Moz:

US-&-Canadian-Silver-Production-vs-Silver-Eagle-&-Maple Sales-2015

This chart was first published in my THE SILVER CHART REPORT.  It was one of 48 charts in the report on five sections of the Global Silver Market & Industry.

SIlver Chart Cover Graphic 3D shadow

As the price of silver skyrockets during the next global financial collapse, the Silver Market will become one of the world’s most explosive markets in the future.

The Silver Chart Report is a must-read for the new and experienced precious metals investor. Most analysts focus on a certain area or sector of the silver market.

However, the information in this report illuminates a holistic view of many sectors of the silver industry, capturing the relationships that connect many parts of the market.


As the chart above shows, U.S. and Canada had to import nearly 34 Moz of silver in 2015 just to supply the surging Silver Eagle & Maple demand of 81.3 Moz, as their combined silver production of 47.6 Moz fell significantly short.  This was a huge change since 2001, as the U.S. and Canada had 87.4 Moz of their domestic silver mine supply remaining after 9.2 Moz went to their U.S. Eagle and Maple sales.

Even though the U.S. and Canada had to import 34 Moz in 2015 just to supply their Official Silver coin program, this is only part of the total net physical silver investment deficit.  If we include total U.S. and Canadian Silver Bar & Coin demand, the silver investment deficit is much higher.

Surging U.S. & Canadian Silver Bar & Coin Demand Cause A The Investment Deficit To Balloon Higher

If we add the revised Silver Bar demand published in the 2016 World Silver Survey, now including “Private silver bars & rounds”, this would be the result:


I only revised the data for 2014 and 2015 which includes Silver Bar demand.  I could not revise the data for 2001-2013 as there isn’t enough detailed information in the World Silver Surveys to provide accurate figures.  However, we can now see just how much more physical silver investment demand there is in the U.S. and Canada when we include Silver Bar demand.

If I take these figures, now including private bars and rounds data, we can see the huge impact on domestic mine supply since 2001:


In 2001, the U.S. and Canada enjoyed a 86.1 Moz domestic silver mine supply surplus when total Silver Bar & Coin demand was deducted (Silver Eagle & Maple sales were 9.2 Moz and I estimated Silver Bar was 1.3 Moz for a total of 10.5 Moz).  However, the situation has totally reversed as U.S. and Canadian Silver Bar & Coin demand hit a record 133.1 Moz in 2015.

NOTE:  The World Silver Surveys do not provide actual Official Silver coin demand figures for the U.S. or Canada (or for any other country).  What they publish are total sales of each country’s Official Silver coin sales.  Many Silver Eagles & Maples are purchased by foreigners.  However, I believe Americans and Canadians purchase higher quantities of foreign Official Silver coins (Australian Kangaroos and Austrian Philharmonics) to offset Silver Eagles and Maples shipped abroad.

That 133.1 Moz Silver Bar & Coin demand figure for the U.S. and Canada includes 81.3 Moz of Silver Eagles and Maples as well as 51.8 Moz of reported U.S. Silver Bar demand (which now includes private bars and rounds).  GFMS did not include any data for Canadian Silver Bar demand.  Which means, the 133.1 Moz figure for the U.S. and Canada may be conservative.

That being said, the U.S. and Canada suffered a 85.5 Moz net physical silver investment deficit.  Which means, these two countries had to import 85.5 Moz of silver just to supply Silver Bar & Coin demand.  This is a big deal if we compare the change since 2001.

Total U.S. & Canada Silver Fabrication Supply Shortfall Triples Since 2001

According to the data from the 2010 World Silver Survey, total U.S. and Canadian silver fabrication demand in 2001 was 177 Moz.  Total silver fabrication demand includes industrial, jewelry, silverware and silver bar & coin.  Thus, the U.S. and Canada only had to import 80 Moz of silver to supply all their silver needs in 2001.


However, in 2015…. the situation changed drastically.  The 2016 World Silver Survey reports that total silver fabrication demand for these two countries was a staggering 307 Moz–Silver Bar & Coin demand accounted for 133 Moz (43% of the total).  Now that U.S. and Canadian domestic silver mine supply has fallen to only 47.6 Moz (in 2015), these two countries had to import nearly 260 Moz to supply all their silver needs.  This is more than three times what they had to import in 2001.

The white dotted lines in the total fabrication blue bars in the chart represent Silver Bar & Coin Demand.  In 2011, total Silver Bar & Coin demand was estimated to be 10.5 Moz, accounting for only 6% of total silver fabrication demand.  However, total Silver Bar & Coin demand in 2015 shot up to 133 Moz, which represents 43% of the total 307 Moz in total fabrication demand of these two countries.

Here is the CLINCHER.  Total U.S. and Canadian silver industrial, jewelry and silverware demand (minus Silver Bar & Coin), only increased from 166.5 Moz in 2011 to 174 Moz in 2015.  The big increase came from Silver Bar & Coin demand that jumped from 10.5 Moz in 2001 to 133 Moz in 2015.

The United States and Canada will be in serious trouble when the world wakes up to the “SILVER STORY.”  When institutions and hedge funds start to move into silver in a big way, there just won’t be enough silver to go around.  The biggest squeeze will occur in the U.S. and Canadian market, where silver investment demand is now the highest in the world.

Unfortunately, the U.S. and Canada will not be able to import enough silver to supply all of its silver needs…. only at much higher prices.  Even then, I believe we are going to experience severe silver shortages.

Some analysts say there is no such thing as a shortage.  They claim a higher price will satisfy any shortages.  While that makes sense in FINANCE 101, it won’t work in the real market as investment demand skyrockets.

The Silver Threshold Line Will Likely Be Defended By The Bullion Banks

For those investors who thought we would continue to see much higher silver prices in early Asian trading today or in the Western markets tomorrow, don’t forget that the bullion banks will likely defend the 50 MA of $20.50.  Here is Kitco’s silver chart showing early Asian trading:


The yellow dotted line represents the $20.50 Threshold trend-line that I wrote about in my previous article,WATCH OUT If Silver Breaks Through This Threshold Line:


While I don’t pay much attention to short-term technical analysis, a lot of traders most certainly do.  Once silver closes well above that 50 MA (Blue Line), I believe we will see a lot more hedge funds and big investor pile into the silver market.  However, this is not something the Bullion banks would like to see as they are holding onto a lot of UNDERWATER short contracts.

So, don’t despair, as this is just part of the game.  At some point, an onslaught of traders moving into silver will totally overwhelm the bullion banks and we will finally see that Commercial Bank Short Squeeze from hell.  Investors need to realize that the Chinese who are now piling into Bitcoin, will likely make their way into silver.

……. it’s just a matter of time.


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




2 Nikkei closed DOWN 106.47 OR 0.67% /USA: YEN FALLS TO 101.73

3. Europe stocks opened ALL IN THE RED (EXCEPT LONDON)  /USA dollar index DOWN to 95.51/Euro UP to 1.11161

3b Japan 10 year bond yield: RISES  TO -.247%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 101.73

3c Nikkei now WELL BELOW 17,000

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

3e WTI::  47.88  and Brent: 49.11

3f Gold  UP  /Yen UP

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

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

3h Oil DOWN for WTI and DOWN for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund FALLS to -.151%   German bunds BASICALLY negative yields from  10+ years out

 Greece  sees its 2 year rate RISE to 8.66%/: 

3j Greek 10 year bond yield FALL to  : 8.02%   (YIELD CURVE NOW COMPLETELY INVERTED)

3k Gold at $1347.90/silver $19.70(7:45 am est)   SILVER FINAL RESISTANCE AT $18.50 BROKEN 

3l USA vs Russian rouble; (Russian rouble DOWN 7/100 in  roubles/dollar) 64.19-

3m oil into the 47 dollar handle for WTI and 49 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/GOT a LARGE DEvaluation DOWNWARD from POBC.


30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9719 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0843 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.


3r the 10 Year German bund now NEGATIVE territory with the 10 year FALLS to  -.158%

/German 10 year rate  negative%!!!


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 1.386% early this morning. Thirty year rate  at 2.155% /POLICY ERROR)

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

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

Sunday night/Monday morning:

Precious Metals Surge Continues, As Does Italian Bank Pain, In Holiday-Shortened Session

Important data for Monday:

i)USA: CNY:6.6630  (onshort rate)

ii)USA:CNY:6.6756  (offshore rate)

Spread widens.

iii) USA 10 yr bond yield: 1.44

iv) WTI overnight: 49.21 up 22 cents.

In today’s US holiday-impacted session, the biggest overnight story was the dramatic surge in precious metals, which saw silver briefly soar above $21 following a Chinese short squeeze sending the metal as much as 7% higher overnight, its biggest one day gain since December 1, 2014. As we reported overnight, silver touched a two-year high and gold rallied for a fourth day after the Brexit vote spurred demand for havens. The catalyst is familiar: speculation central banks in some of the world’s leading economies will step up monetary stimulus in the wake of Britain’s decision to leave the European Union.  The commodity complex helped push the Shanghai Composite higher by 1.9%, closing the SHCOMP just shy of 3,000, the highest since May.

“Investment demand for metals continue on expectations of a dovish Fed, growth worries and central bank policies putting more and more sovereign bonds into negative yields,” said Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank A/S by e-mail. “The policies of the ECB and BOJ are already ultra loose and further stimulus could be added following the Brexit vote.”

Brent crude held above $50 a barrel as Nigerian militants threatened more supply disruptions, while nickel climbed to an eight-month high after the Philippines announced plans to audit all mining operations. Miners in the Stoxx Europe 600 Index traded at the highest level since April, while automakers and builders led the industries lower. Currencies of commodity producers Australia, Canada and New Zealand were the best performers among major peers. The Shanghai Composite Index climbed the most since May.

Meanwhile, things for European, and especially banks, have turned from bad to worse, with Italy’s FTSE MIB Index falling 0.9%, the biggest decline among western-European markets, as Banca Monte dei Paschi di Siena SpA and Banca Popolare dell’Emilia Romagna SC lost more than 3 percent. The catalyst was news that the ECB asked Monte Paschi to draw up a plan for tackling its bad-loan burden, yet another confirmation the nation’s banks are under pressure to bolster their finances. As a result European equities turned lower this morning, having reversed their opening gains as Italian banks drag the region lower amid dampened hopes of further state aid.

The Stoxx 600 slipped 0.2 percent, after posting is biggest four-day rally since February. The volume of shares changing hands was about 20 percent lower than the 30-day average, with the U.S. market closed for the Independence Day holiday. S&P 500 Index futures gained 0.2 percent. The U.K.’s FTSE 100 Index was little changed. The gauge of megacaps is close to entering a bull market, boosted by a weaker pound and a rally in miners of precious metals. Fresnillo Plc and Randgold Resources Ltd. climbed more than 4 percent on Monday.  The MSCI Emerging Markets Index rose 0.5 percent to the highest since April. It is up 6.1 percent in five days, the best performance for the period since March 7.

The US is closed today with all floor exchanges, the CME, CBOT, NYSE and NYMEX dark.

Market Snapshot

  • S&P 500 futures up 0.2% to 2101
  • Stoxx 600 down 0.2% to 331
  • US 10-yr yield unch at 1.44%
  • Nikkei up 0.6% to 15,776
  • SHCOMP up 1.9% to 2,989
  • Dollar Index unch at 95.73
  • FTSE down 0.1% to 6,568
  • EURUSD down 0.14% to 1 1123
  • USDJPY up 0.1% to 102.62
  • WTI Crude futures up 0.4% to $49.15
  • Brent Futures up 0.5% to $50.58
  • Gold spot up 0.7% to $1,351
  • Silver spot up 4.0% to $20.27

Looking at regional markets, Asian equity markets traded positive across the board following the biggest weekly YTD advance in the S&P 500 and Dow Jones last week. Nikkei 225 (+0.6%) shrugged off its initial weakness as JPY pared some of its strength, while ASX 200 (+0.6%) has also rebounded, led by materials after continued gains across metals in which silver rallied above the USD 21/oz level for the first time since July 2014. Elsewhere, Chinese markets conformed to the positive sentiment with the Hang Seng (+1.3%) seeing strength as it played catch up to last Friday’s gains and the Shanghai Comp (+1.9%) benefiting from another firm liquidity injection. Finally, 10yr JGBs traded in negative territory amid the improvement in appetite for riskier assets, although 2yr and 20yr yields declined to fresh record lows while today’s BoJ operations were for a paltry JPY 390b1n in government debt.

In Europe, equities are lower this morning, having reversed their opening gains as Italian banks drag the region lower amid dampened hopes of further state aid. This comes after reports that an Italian official has denied that PM Renzi is to challenge the EU and intervene in the banking sector, as such the FTSE MIB has been the notable underperformer. Additionally, Monti Paschi (-7%) plunged to a record low after the ECB demanded that the company reduced its holding of NPLs. However, price action has been contained with volumes lighter as many participants are away for the US Independence Day holiday. While in terms of credit markets, Bunds are a touch softer with the price remaining in close proximity to the 167.00 level.

In FX, The Australian, Canadian and New Zealand dollars appreciated at least 0.3 percent, buoyed by the pickup in commodity prices. The British pound was little changed versus the dollar, after Chancellor of the Exchequer George Osborne floated the possibility of a lower corporate tax rate and before Bank of England Governor Mark Carney outlines the available macroprudential tools on Tuesday. The currency tumbled 8.1 percent in June, the most since 2008, as the U.K.’s decision to leave the EU shocked investors and triggered political upheaval in the country. Japan’s yen weakened 0.1 percent to 102.60 per dollar. It declined 0.3 percent last week as BOJ Governor Haruhiko Kuroda said more funds could be injected into the market should they be needed. The haven currency touched 99.02 in the wake of the vote for Brexit, its strongest level since 2014.

In Commodities, silver soared as much as 7 percent, its biggest intraday gain since 2014, before paring its advance to 3 percent as it traded at $20.3404 at 11:28 a.m. in London. Holdings in silver-backed exchange traded funds expanded to a record last month, and assets in gold ETFs are now at the highest since August 2013 as investors bet on a continued low-yield environment. Gold bullion rose 0.7 percent on Monday. “Brexit has created all sorts of fear and loathing across markets,” Commonwealth Bank of Australia analysts, including Tobin Gorey, wrote in a July 4 note, adding that investors are cutting back on risk. “Gold and silver, as we would expect, benefit the most from safe-haven demand flows.”

Brent crude added 0.5 percent to $50.59 a barrel. A militant group operating in Nigeria’s southern oil-producing region said it attacked five crude-pumping facilities, dealing a blow to the government’s effort to enforce a cease-fire. Nickel, which is used in the production of stainless steel, rose 3.6 percent to more than $10,000 a ton in London. It surged 5.6 percent on Friday after the Philippines announced its audit plans, threatening to curb supplies from the southeast Asian country. Less than a third of miners operating in the nation are compliant with international standards for responsible mining, according to the government. Rubber futures climbed 3.7 percent in Tokyo, buoyed by shrinking stockpiles after rains disrupted production in Thailand.

Bulletin Headline Summary from RanSquawk and Bloomberg

  • European equities are lower this morning, having reversed their opening gains as Italian banks drag the region lower amid dampened hopes of further state aid
  • In FX, we have seen some decent movement in the majors, led by the AUD which has recovered swiftly from the weekend gap lower on the back of the tight election results in Australia
  • Looking ahead, there are no major standouts on the data slate

DB’s Jim Reic conludes the overnight wrap

Financial markets were certainly more robust last week post Brexit than my failing body. Indeed despite the heavy declines across markets last Monday, markets roared back in style from Tuesday onwards as the focus quickly turned over to the Central Banks reaction function. In fact last week saw a number of European equity markets record their best week in a month. The Stoxx 600 (+0.72% on Friday, +3.19% over the week) had its best week since the end of May along with the DAX (+0.99%, +2.29%) while even more impressively the IBEX (+1.29%, +6.18%) had its best weekly return since October last year. Amazingly the FTSE 100 (+1.13%, +7.15%) had its best one-week gain since 2011 and you’d have to go back to 2008 to find the last time that the index recorded a better four-day gain (Tuesday-Friday). Clearly alot of that has to do with Sterling (-0.33%, -3.01%) which is hovering around 1.3285 this morning although still hasn’t quite got down to those Monday lows. Meanwhile across the pond the S&P 500 (+0.19%, +3.22%) – while enduring a slower session on Friday ahead of the long weekend – still had its best weekly gain this year.

It was much the same in credit markets too. In Europe the iTraxx Main (-5bps Friday) and Xover (-22bps Friday) closed the week just 4bps and 26bps off their pre-referendum levels on the 23rd. The peripherals were the standouts in the sovereign bond market where 10y yields in Italy, Spain and Portugal closed the week 32bps, 48bps and 33bps lower respectively. 10y Gilt yields were 22bps lower over the week and the Swiss yield curve turned completely negative – along with a number of other eye watering record lows being achieved. Commodity markets also joined in the global rally. Gold was up +1.32% over the week, Silver +11.35%, Copper +4.53%, Nickel +10.53% and WTI Oil +2.83%.

One market which is struggling to keep up is European Banks however. The Euro Stoxx Banks index was down -0.88% last week and is nearly 19% down from its pre referendum levels. Italian Banks are at the heart of that weakness with the likes of Unicredit, Intesa, Banco Monte dei Paschi and UBI down -9.78%, -3.44%, -15.79% and -6.11% respectively last week. There’s been plenty in the press about possible liquidity guarantees and recaps for Italian Banks and it looks like this one still has plenty of room to run. The FT ran a story over the weekend suggesting that Italy PM Renzi is set to inject public funds into the banking system should it come under severe systematic stress, and so break the bail-in principles of EU regulation. While UK politics has dominated headlines for the last few weeks it feels like the health of Italian Banks could well takeover in the near term.

The Brexit chat should reduce this week whilst never being too far beneath the surface. As the week builds Friday’s payrolls will also loom large. We should get some payback from last month’s weak 38k headline print and 59k downward revisions to prior months. DB don’t expect a return to prior levels though and are at 155k. Consensus is at 175k while expectations are also for the unemployment rate to creep up one-tenth to 4.8% (DB at 4.9%).

After last month’s payroll report and Brexit, the Fed have been priced out until October 2018 now (the probability of a December hike this year is 12% and a December 2017 hike is 45%) and regular readers will know that we’ve always felt the Fed will struggle to raise rates this cycle. However the pattern has always been under and over pricing the risk and perhaps the market has got a little complacent about the Fed again. If Brexit chat eases for a while and the data is ok, there will be a number of Fed members who start getting hawkishly excited again. So watch out for this, even if we think that they will still struggle to raise rates this cycle.
In terms of the weekend newsflow and unlike in previous weeks there’s not actually a great deal to report. It’s been largely politics orientated again and the biggest perhaps is the news that the UK Chancellor George Osborne is considering a cut in the corporate tax rate to less than 15% (from 20% now) in a bid to deter businesses from leaving the UK.

Glancing at our screens, markets in Asia are opening the week on the front foot and largely following the lead from the European and US sessions on Friday. Bourses in China are leading the way with the Shanghai Comp currently +1.33% and CSI 300 +1.07%, while the Hang Seng (+1.54%) has also risen strongly. Elsewhere the Nikkei (+0.44%), Kospi (+0.35%) and ASX (+0.32%) are also up. Meanwhile the Aussie Dollar has pared early losses after the Australian General Election over the weekend failed to yield a clear winner on election night.

Moving on. This morning we published our latest HY monthly where we’ve highlighted the orderly nature in which markets have handled the outcome of the UK referendum on EU membership. Overall there is evidence that both GBP HY and generally domestically focused UK names have been under pressure since the referendum. Whether this is a trend that continues will probably depend on the ultimate outcome for the UK economy. Near-term there might be some respite for the relative underperformance purely due to a lack of information. Ultimately the Conservative leadership contest and subsequent negotiations with the EU are likely to drive sentiment. See the report from Nick Burns just before this one.

Just when you thought we were done with politics, one interesting development on Friday came in Austria with the news that the Austrian Constitutional Court has decided in favour of the FPO contestation and annulled May 22nd’s election result with a likely new run-off presidential election to be held in autumn according to our European economists. Significantly, our colleagues note that it seems likely that the new election will be neck-and-neck again. As a result political uncertainty has resurfaced as the far right wing populist Hofer again has the chance to become Austria’s president. He had previously caused some uproar with his statement that if he was elected president there would be early parliamentary elections and pointing to a referendum on EU membership (Oxit) in the event EU policy goes in the wrong direction. One to keep an eye on.

The economic dataflow on Friday in the US was a bit of a mixed bag. On the positive side the ISM manufacturing reading for June rose 1.9pts to 53.2 (vs. 51.3 expected) which was the best reading since February last year. In the details the employment component rose above 50 (+1.2pts to 50.4) for the first time since November while new orders, production and new export orders also rose. On the negative side however construction spending in May was unexpectedly weak (-0.8% mom vs. +0.6% expected) while total vehicle sales in June declined to an annualized 16.6m rate (vs. 17.3m expected) from 17.4m in the prior month.

Meanwhile in Europe there was a relatively positive read-through from the final manufacturing PMI revisions for June. The Euro area reading was revised up two-tenths to 52.8 while readings for Germany and France were revised up to 54.5 (+0.1pts) and 48.3 (+0.4pts) respectively. The PMI for the UK came in at 52.1 (vs. 50.1 expected) which was a decent increase on the 50.4 in May although it remains to be seen how much of an effect the referendum at the end of the month played a part.

There was a little bit of central bank speak on Friday too. The Cleveland Fed’s Mester (hawkish) said (unsurprisingly) that it is too early to judge the Brexit impact on the US which was a view also shared by Vice-Chair Fischer (centrist to slightly dovish), with Fischer also adding that recent data since the weak payrolls print last month ‘has done pretty well’.



Futures Slide As Italian Banks Drag Risk Lower; Sterling Tumbles; Bond Yields Drop To New Record Lows

The festering wound involving Italian banks in general and Italy’s third largest bank Monte Paschi, just got worse yet again, as the bank which suddenly everyone is focused on extends yesterday’s 14% drop, and is halted in Milan trading after falling 7%, once again dragging down European bank stocks with it, and this time US equity futures are starting to notice. 

As a reminder, Matteo Renzi’s helplessness at Italy’s financial situation, appears to have started to boil over, when as we reported overnight, some testy words were exchanged, in which the Italian PM accused the ECB’s head and former Bank of Italy governor, Mario Draghi, of not doing everything in his power to “help Italian banks.” Instead it was up to the Italian government to flaunt bail-in rules once again, after La Stampa reported that the government is once again studying a capital plan for Monte Paschi that includes new convertible bonds and support from Atlante fund, the latter worth at least €3 billion even as Brussels says intervention would need to respect principle of “burden sharing” by shareholders and bondholders. As La Stampa also adds, the results of 2016 stress test, due to be published on July 29, could trigger the start of the process to inject new capital in the bank

In short, Italy is desperate to bail out a bank whose failure (or even bail in) may spark a bank run, yet neither the ECB is rushing to help it, nor Europe has given any indication it will budge.

It wasn’t just Italian banks, which have become a near-daily fixture of Europe’s failing system, that dragged risk lower, but also the latest surge in the Yen and another fresh all time low in DM bond yields. Indeed, the Yen headed for biggest advance in more than a week, with the USDJPY tumbling overnight, down -0.8% to 101.65, a move which started earlier in Asian session amid thin liquidity, around the time Japan’s 10-year bond auction draws record-low average yield.

And then there was sterling, which after flirting with a rebound over the past week following the Brexit vote, fell to its weakest level in 31 years against the dollar, exceeding lows reached in the aftermath of Britain’s vote to leave the European Union. Sterling sank before Bank of England Governor Mark Carney gives a press conference in London, in which he outlined more tools to contain the fallout from the U.K.’s decision to quit the bloc, among which the first indications of how he would ease stress on UK banks:

  • Bank of England’s Financial Policy Committee cuts countercyclical capital buffer for U.K. banks to zero from 0.5%, according to Financial Stability Report published Tuesday.
  • Expects buffer to stay at zero until at least June 2017
  • Says there is evidence that risks surrounding Brexit have begun to materialize
  • Says current financial stability outlook is challenging; sees period of uncertainty, adjustment

That said, Carney’s “easing” remarks have pushed UK stocks to session highs and helped cut the S&P drop to only 9 points, while pushing the pound off its multi-decade lows. Yes, we have reached a singularity in which central bank easing is currency positive.

So why the latest intervention by the BOE? As Bloomberg adds, there are increasing signs that the U.K. vote is weighing on investor confidence. As reported last night, Scotland-based Standard Life Investments suspended trading in its 2.9 billion-pound ($3.8 billion) fund this week, after seeing an increase in redemption requests “as a result of uncertainty for the U.K. commercial real estate market.” Data published by YouGov Plc and the Centre for Economics and Business Research on Tuesday indicated that pessimism about the economic outlook almost doubled following the June 23 referendum. “There’s a lot of nervousness in the sterling market,” said Thu Lan Nguyen, a currency strategist at Commerzbank AG in Frankfurt.

Pierre Mouton, of Notz, Stucki & Cie. in Geneva told Bloomberg that  “part of the weaknesses or sell-off today can be explained by some profit taking after a surprising week,” said “We have seen this morning that the PMI wasn’t that good for the euro area, and markets can react to economic figures. It might be a good opportunity at the beginning of the third quarter to lighten the positions and wait.”

A measure of U.K. business confidence dropped sharply following the referendum, a report showed on Tuesday. Across Europe, Purchasing Managers Indexes for manufacturing and service showed lackluster growth. “We have an amalgamation of small reasons to fall piling up,” said Takuya Takahashi, a Tokyo-based senior strategist at Daiwa Securities Group Inc.

Putting this all together, and we get a major drop across European markets in which all industry groups on the Stoxx Europe 600 Index declined, with insurers and banks among the biggest losers, as the market takes a second look at the Brexit aftermath and suddenly is not so sure that everything is “contained.”

Brent crude dropped below $50 a barrel as nickel slid from an eight-week high, while gold and silver retreated for the first time in at least a week. The pound fell to its weakest level since 2013 against the euro and South Africa’s rand led losses among the currencies of commodity-exporting nations. Bond yields plumbed new lows from Australia to the U.S. The MSCI All-Country World Index dropped 0.4% in early trading, its first slide in more than a week. The Stoxx 600 lost 1.3%, extending its decline into a second day, while S&P 500 Index futures slid 0.6%, The U.S. market is reopening after being closed for the Independence Day holiday.

The MSCI All-Country World Index dropped 0.4 percent at 10:58 a.m. in London, its first slide in more than a week. The Stoxx 600 lost 1.3 percent, extending its decline into a second day, while S&P 500 Index futures slid 0.6 percent. The U.S. market is reopening after being closed for the Independence Day holiday. In Europe, all industry groups fell, and more than 550 companies in the Stoxx 600 declined, with commodity producers among the biggest losers. Anglo American Plc and BHP Billiton Ltd. dropped more than 2.5 percent, while precious metals miner Fresnillo Plc dropped 2.9 percent after reaching its highest price since 2013. Standard Life Plc lost 4.2 percent after its money manager unit suspended trading in its 2.9 billion-pound ($3.9 billion) U.K. Real Estate fund. Legal & General Group Plc fell 6.4 percent after Jefferies Group lowered its rating on the insurer on concern over its dividend. The MSCI Emerging Markets Index fell 1.1 percent, after climbing 6.2 percent in the past five days in the biggest rally since the period ended March 7.

Meanwhile, global bond yields continued setting new record lows: the yield on Treasury 10-year notes slid seven basis points to an unprecedented 1.3750 percent. The securities are rallying as futures indicate that the chance of the Federal Reserve raising interest rates this year has dwindled to 12 percent, down from 50 percent prior to the U.K.’s vote on EU membership. Thirty-year bond yields dropped to as low as 2.1395 percent, also a record. “This is the most obvious manifestation of the global search for yield forcing investors further out the curve,” said Damien McColough, head of fixed-income research at Westpac Banking Corp. in Sydney. “The size of the drop in the 30-year yield reflects a bit of a capitulation trade, but I am not particularly surprised.”

Germany’s 10-year bond yield was at minus 0.16 percent, approaching the minus 0.17 percent all-time low reached on June 24. The yield on the U.K.’s 10-year gilt yield slid four basis points to 0.79 percent. Australia’s 10-year yield dropped as much as nine basis points to a record 1.92 percent following the RBA meeting. Taiwan’s declined four basis points to an unprecedented 0.70 percent after the island’s central bank was said to have reduced an overnight interest rate. Japan sold 10-year debt at a yield of minus 0.24 percent, the lowest-ever rate, and the yield on its 20-year notes touched a record low of 0.03 percent.

Market Snapshot

  • S&P 500 futures down 0.6% to 2083
  • Stoxx 600 down 1.3% to 326
  • FTSE 100 up 0.1% to 6530
  • DAX down 1.5% to 9567
  • S&P GSCI Index down 1.6% to 370.5
  • MSCI Asia Pacific down 0.5% to 130
  • Nikkei 225 down 0.7% to 15669
  • Hang Seng down 1.5% to 20751
  • Shanghai Composite up 0.6% to 3006
  • S&P/ASX 200 down 1% to 5228
  • US 10-yr yield down 6bps to 1.39%
  • German 10Yr yield down 2bps to -0.16%
  • Italian 10Yr yield up 2bps to 1.27%
  • Spanish 10Yr yield up 4bps to 1.19%
  • Dollar Index down 0.07% to 95.58
  • WTI Crude futures down 2.6% to $47.71
  • Brent Futures down 2.2% to $49.01
  • Gold spot down 0.5% to $1,344
  • Silver spot down 3.4% to $19.62

Top Global Headlines

  • Carney Sees Tougher Times With Brexit as BOE Eases Bank Rules
  • Italy Said to Consider Capital Injection in Banca Monte Paschi
  • Tesla Misses Delivery Forecast Amid ‘Extreme’ Production Ramp-up
  • Billionaire Bros. Seek Repeat of Danaher’s M&A-Fueled Ascent
  • Debt Boom That Put JPMorgan on Top After Decade Gathers Pace
  • Third Ex-Citigroup Trader Wins Unfair Dismissal Lawsuit
  • Blackstone Names Ex-M&S CEO Bolland Europe Private Equity Head
  • For RBA’s Next Move on Interest Rates, Set Alarm for July 27
  • Buffett Applies to Fed to Expand Wells Fargo Holding Beyond 10%
  • Aurobindo Said to Enter Fray for $1.5 Billion Teva Portfolio
  • Wall Street Takes a Hit in Draft of Democratic Party’s Platform
  • ‘Dory’ Swims Past ‘Tarzan’ for Third Straight Box-Office Win
  • Petrobras CEO Said to See $15b 5-Year Payment in U.S. Case: Estado
  • Google, Facebook Said to Have Looked at Buying LinkedIn: Recode
  • London Banker Bonuses Set to Shrivel as Brexit Hits Dealmaking
  • Goldman Sachs Tells Asset-Management Staff to Curb Spending: FT
  • U.K. Business Expectations Fall ‘Off a Cliff’ on Brexit Vote
  • Staples Hires KPMG to Weigh Possible U.K. Unit Sale: Telegraph

Looking at regional markets, dampened demand was observed for riskier assets in Asia following the US holiday and losses seen in European stock markets. Nikkei 225 (-0.7 %) was pressured from the open by a firmer JPY, while ASX 200 (-1.0%) was dragged lower amid a decline across the commodities complex, with participants initially tentative ahead of the RBA rate decision. Chinese markets were mixed with the Hang Seng (-1.5%) conforming to the mostly downbeat tone, while Shanghai Comp (+0.6%) was resilient amid somewhat encouraging data in which Caixin Services PMI printed an 11-month high and although the Composite figure printed slightly lower than prior, it remained above the 50 benchmark level. 10yr JGBs traded lower but are off their worst levels following a 10yr auction which showed the lowest accepted price, beat estimates and better than prior.

Top Asian News

  • China Rising Yield Premium Spurs Global Funds to Boost Holdings: Gap with 10-year U.S yield widest since August
  • Real Yield at 2014 Low as India Sells Debt Quotas to Foreigners: Consumer prices rose in May at fastest pace in 21 months
  • Japan Top-Performing Fund Fell 25% as Volatility Rose on Brexit: Stratton’s Japan Synthetic Warrant Fund fell 50% YTD
  • As 2-and-20 Fees Under Fire, Asia Hedge Funds Seek Cost Cuts: Bigger funds are joining “platforms” as costs rise, fees fall
  • Aussie Election Hangs in Balance as Slow Vote Count Proceeds: Prime Minister Turnbull’s coalition still short of majority

In Europe, equities have been equally volatile today, with all major European indices trading in negative territory (Euro Stoxx: -1.5%), and attention given to the yoyo-ing Italian financial sector as well as yet another German automaker scandal. Italian financials saw downside initially, before moving higher shortly after the open, however with Banca Monte dei Paschi (-9%) still one of the worst performers despite source reports suggesting that Italy could be considering capital injections in the Co. German Automakers also unperformed today after the likes of Daimler, Volkswagen and BMW have all been implicated in alleged collusion with regards to steel prices. Given the price action across other asset classes, fixed income has been comparatively quiet, with Bunds higher by around 30 ticks by mid¬morning, however failing to break 167.50, while the US 10-year reached fresh record lows.

Top European News

  • Pound Tumbles to 31-Yr Low as Selloff Resumes Before Carney: Sterling sank to lowest since 2013 vs euro ahead of BOE Governor Mark Carney’s press conference, where he may outline more tools to contain Brexit fallout.
  • U.K. Economy May Face Contraction as Brexit Bites: Former deputy BOE governor John Gieve said on Bloomberg TV: “I am expecting quite a sharp reduction in investment spending, a sharp hit to the commercial property market, probably a check to consumer spending, all of which could push us toward zero or below growth this year and the beginning of next”
  • Italy Said to Consider Capital Injection in Monte Paschi: Italy would seek to use Article 32 of EU’s bank failure rules that allows temporary state aid.
  • Hutchison, VimpelCom Said in Exclusive Sale Talks With Iliad: Iliad emerged as favored buyer of wireless assets in Italy that would be used to create fourth carrier in that country.
  • Mediaset Mulling New Channels, Extra Payout After Unit Sale: Co. considering starting free-to-air television channels in France, Germany, U.K. as it reviews investment options.

In FX, the pound fell to its lowest in more than three decades against the dollar, surpassing levels immediately after the referendum. An index published by YouGov Plc and the Centre for Economics and Business Research indicated pessimism about the economic outlook almost doubled in the week following the June 23 vote. Sterling slid 1.1 percent to $1.3148 and was 1 percent weaker at 84.73 pence per euro. The yen climbed 0.9 percent to 101.66 per dollar. The currency has gained more than 4 percent since the U.K. referendum amid persistent demand for haven assets. The Bloomberg Dollar Spot Index rose 0.2 percent. Australia’s dollar fell 0.5 percent, after climbing 1.2 percent over the last two sessions. A national election over the weekend failed to produce a clear winner with officials continuing to tally votes on Tuesday. The MSCI Emerging Markets Currency Index retreated 0.5 percent. It was little changed on Monday after jumping 2 percent in the four days through Friday.

“Markets are concerned about what’s going on in the U.K. and there’s more uncertainty about Italian banks,” said Vishnu Varathan, a senior economist at Mizuho Bank Ltd.

In commodities, precious metals declined as the dollar snapped five days of losses. Silver tumbled 2.9 percent to $19.73 an ounce, ending its biggest two-day advance since 2011. Gold fell 0.4 percent to $1,345.63 an ounce. Industrial metals also declined, led by a 1.2 percent loss in Copper to $4,836 a metric ton. Oil extended losses, with West Texas Intermediate crude dropping to $47.71 a barrel, a decline of 2.6 percent relative to Friday’s close following the July 4 public holiday. Brent fell 2.1 percent to $49.03.

Bulletin Headline Summary from RanSquawk and Bloomberg

  • European equities trade lower across the board as risk aversion persists with Italian banking names and German auto names further souring sentiment
  • GBP/USD hit a fresh 31-year low as the post-Brexit fallout continues to grip FX markets and UK Services PMI falls short of expectations (albeit from a partly out-of-date report)
  • Looking ahead, highlights include US IBD/TIPP Economic Optimism, Factory Orders & Durable Goods, GDT Auction and a host of central bank speakers
  • Treasuries rally with 10Y and 30Y hitting record lows as risk-off sentiment sends global equities and commodities lower; this week will feature nonfarm payrolls on Friday and FOMC minutes Wednesday.
  • Italy is considering injecting fresh capital into Banca Monte dei Paschi di Siena SpA to boost the finances of Italy’s third-biggest bank ahead of stress test results
  • It’s now a familiar refrain: A European prime minister calls a referendum, his job could be on the line and markets are getting worried. This time it’s not Britain’s David Cameron but Italy’s Matteo Renzi has called a vote, expected in October
  • The Bank of England cut its capital requirements for U.K. banks and pledged to implement any other measures needed to shore up financial stability after Britain’s shock decision to leave the European Union
  • BOE’s Carney said bank will take whatever action is necessary to support U.K. but its actions cannot fully offset Brexit volatility
  • Confidence of British executives plunged and pessimism doubled as the Brexit turmoil stoked concerns that business investment and the property market are poised to slump
  • Commercial-property companies slumped after Standard Life Investments suspended trading in its 2.9 billion-pound ($3.9 billion) U.K. Real Estate fund on Monday as redemptions surged in the wake of Britain’s vote to leave the European Union
  • The pound fell to its weakest level in three decades against the dollar, exceeding lows reached in the aftermath of Britain’s vote to leave the European Union
  • The euro-area economy continued growing at a lackluster pace in June, ahead of the U.K.’s referendum on its European Union membership. Purchasing Managers Index for manufacturing and service activity was unchanged at 53.1
  • The Australian dollar erased losses after the central bank left its benchmark cash rate unchanged at a policy meeting on Tuesday. The Aussie rose by as much as 0.1% after the decision
  • Four banks including ING Groep NV and ABN Amro Group NV agreed to pay hundreds of millions of euros to settle a long-running dispute with Dutch businesses over interest- rate swaps that backfired after the 2008 financial crisis
  • Oil prices won’t rise much further over the next year and a half as demand growth slows and refiners comfortably meet gasoline consumption, according to the world’s largest independent oil-trading house

* * *

DB’s Jim Reid concludes the overnight wrap

One theme which could instead dictate near term direction for markets however and which arguably Brexit has reignited and brought back to the forefront is the ailing and fragile state of the Italian banking sector. Indeed following on from the weekend headlines concerning Italy PM Renzi and the suggestion that he is prepared to go against EU bail-in principles by using public funds to bail out domestic banks, yesterday the sector was put under further stress after Banca Monte dei Paschi revealed that it had received a notice from the ECB requiring it to meet certain non-performing loan requirements. Indeed the draft statement laid out NPL targets for the next three years which would require Monte to shed bad loans by just over €14bn by 2018.

That sent Monte shares down 14% yesterday with the rest of the Italian bank complex also sent tumbling (Banco Popolare SC -4.50%, Mediobanca -4.21%, Unicredit -3.63%, UBI -3.05%). Monte shares – which are at an all time low – are now down over 70% year-to-date already while yesterday’s move took the bank’s market cap below €1bn. With the sector sitting on a €360bn behemoth of bad loans the results of the EU bank stress tests on the 29th July loom large and it’s hard not to picture this Italian job as an important event for markets. Don’t forget that we’ve also got the not-so-small matter of the senate reform referendum in October. On a similar topic, interestingly a poll run by Ipsos for Corriere della Sera yesterday showed 46% of Italian voters are in favour of remaining in the EU versus 28% in favour of leaving. That leaves a relatively sizeable 26% undecided or unwilling to vote.

Meanwhile the daily soap opera that is UK politics rolls on with the news yesterday that UKIP leader Nigel Farage has become the latest political leader to stand down after arguing that he had achieved his political ambition following the referendum result. Today the first rounds of voting for the Conservative leadership position commence with MP’s voting to take the five candidate race down to four. Further voting is set to come on Thursday and then again on Tuesday when we will be down to the final two candidates. However we’ll still have to wait until September until we know the result of the final vote and therefore the subsequent position on renegotiation and Article 50.

In terms of markets yesterday, with the US on holiday and so volumes much lower than usual that weakness for Italian banks was enough to see risk assets finally succumb to losses in Europe following the strong run since last Monday. The Stoxx 600 ended -0.74% by the closing bell and the FTSE 100 was -0.84%. Sterling was up a fairly modest +0.15% to $1.329. Unsurprisingly the FTSE MIB (-1.74%) and Euro Stoxx Banks (-1.52%) indices underperformed. BTP’s were also underperformers in sovereign bond markets with yields a couple of basis points higher. Moves for credit markets were highlighted by weakness in financials. The iTraxx Main and Crossover indices were little changed however senior and sub financials materially underperformed after closing 6bps and 16bps wider respectively.

Some of the more notable price action yesterday came in the commodity complex and specifically precious metals. Silver in particular extended its post Brexit rally after rising another +2.86% yesterday and at one stage rising above $21/oz for the first time since July 2014. Gold closed up +0.70% meaning it is now up nearly 8% since pre-Brexit. Silver is up a fairly remarkable +19% in the same time frame.
Refreshing our screens now, with the exception of China most major bourses are lower in early trading in Asia this morning. The Nikkei (-0.78%), Hang Seng (-0.81%), Kospi (-0.35%) and ASX (-0.89%) are all in the red as we type, however the Shanghai Comp is +0.40%. That perhaps reflects the latest Caixin services reading for June in China which rose 1.5pts to 52.7 and to the highest level since July last year. Combined with the soft manufacturing reading from last week however the composite reading nudged down 0.2pts to 50.3. Meanwhile the Aussie Dollar (-0.27%) is a touch weaker this morning following the latest trade data which revealed a widening in the deficit. The RBA cash target rate decision is due shortly after we go to print (no change expected). US equity index futures are modestly in the red.

In terms of the rest of the newsflow, yesterday saw the ECB release their latest CSPP holdings data which showed the Bank as continuing its strong run rate of purchases and so far surprising on the upside. Total purchases settled by July 1st were €6.798bn. This implies that the latest weekly purchases amount to €1.9bn and an average daily run rate in that week of €380m. The average daily run rate since the program started is €425m. Interestingly we also got a breakdown of purchases by primary and secondary markets and it showed that 96% of purchases were made in the secondary and only 4% in the former, so perhaps making the quantum of buying even more impressive given the low amount of new issue buying.

There wasn’t much in the way of economic data for us to highlight yesterday. Of the data that was released, Euro area PPI printed at +0.6% mom for May which was higher than expected (+0.3% mom) and has had the effect of slowing the rate of deflation to -3.9% yoy from -4.4%. The other release was the July Sentix investor confidence reading which printed at a below market +1.7 for the headline (vs. +5.0 expected) and down 8.2pts from June. That was the lowest print since January last year and a first bit of evidence of the impact of the Brexit vote. The expectations component reading actually tumbled to -2.0 from +10.0.



i)Late  MONDAY night/TUESDAY morning: Shanghai closed UP 17.78 POINTS OR 0.60% / /Hang Sang closed DOWN 308.48 OR 1.46%. The Nikkei closed DOWN 106.47 POINTS OR 0.67% Australia’s all ordinaires  CLOSED DOWN 0.98% Chinese yuan (ONSHORE) closed DOWN at 6.6634 /Oil FELL to 47.88 dollars per barrel for WTI and 49.11 for Brent. Stocks in Europe ALL IN THE RED EXCEPT LONDON . Offshore yuan trades  6.6873 yuan to the dollar vs 6.6634 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS AS MORE USA DOLLARS LEAVES CHINA’S SHORE 



Something Huge Is Coming From Japan

Posted with permission and written by John Rubino, Dollar Collapse (CLICK HERE FOR ORIGINAL)

Pretend, for a minute, that your country responds to the bursting of a credit bubble by borrowing unprecedented amounts of money and using it to prop up banks and construction companies. This doesn’t work, so you create record amounts of new money and push interest rates into negative territory in an attempt to devalue your currency. But this — amazingly — doesn’t work either. Your currency soars and the inflation you’d hoped to generate never materializes.

Now what? Is there even anything left to try, or is it simply time to stand back and let the current system melt down? Those are the questions facing Japan, and the answers are not obvious. Here, for instance, is its inflation rate two years into the largest major-country money creation binge since Wiemar Germany:

Deflation is to be expected and even desired in a well-run country where debt is minimal, money is sound and rising productivity makes things continuously cheaper. But in an over-indebted financial system, deflation is death because it magnifies the debt burden and raises the odds of an existentially threatening financial crisis. To continue to borrow money under such circumstances is to court disaster. And yet Japan is still at it:

What we’re witnessing, in short, is a catastrophic loss in the currency war. Contrary to every mainstream economic theory, debt monetization and full-throttle currency creation have resulted in a rising yen and falling prices. Here’s an excerpt from a recent — and really gloomy — Financial Times analysis of Japan’s situation:

It’s time for investors to admit it: Abenomics has failed

The past few weeks have not been happy ones for many central bankers — and none more so than Haruhiko Kuroda, the hapless governor of the Bank of Japan.

That is because the threat of moving rates deeper into negative territory and buying up even more assets has done nothing to weaken the yen down as he desires. Brexit, which briefly sent the yen beyond the ¥100 mark against the dollar on Friday, is a fresh headwind.

The Bank of Japan is likely to move rates from negative 0.1 per cent to minus 0.3 per cent come the end of July, increase its holdings of ETFs from ¥3.3tn to ¥6.3tn as well as its purchases of Japanese Reits from ¥90bn to ¥200bn, economists at JPMorgan in Tokyo predict.

With the yen ever stronger, Abenomics and the desired impact of central bank policies are going into reverse. The irony is that these policies, which were meant not to change traditional Japan but to revive it, are likely to end up wounding it — perhaps irreparably.

Abenomics was never about real reform. Instead, it was merely meant to weaken the currency, undercutting competitors like Korea and China and allowing Japan Inc to more easily export its cars and other manufactured goods to the rest of the world.

Since corporate profits for the last three years were only ever about currency translation gains, these are now going in reverse and dragging down industrial shares with them.

Surveys suggesting companies plan to invest have failed to materialise: in April core machinery orders, the best proxy for capex, dropped 8.2 per cent from the previous year, while exports fell in May with the trade surplus down 32 per cent compared with the previous month.

The March tankan survey showed corporate Japan expected the yen/dollar rate at ¥117 going forward — today it sits at ¥101.5 to the dollar. Masaaki Kanno, chief Japan economist for JPMorgan, expects the currency to surge to ¥90 next year.

Meanwhile, negative rates are especially murderous for bank shares. “Why should a central bank policy that hurts bank shares be good for a credit-driven economy?” asks Christopher Wood, strategist for the CLSA unit of Citic Securities.

In a way, the fact that Mitsubishi UFJ is preparing to give up its primary dealership in the government bond market is immaterial — at least from a narrow economic or financial perspective. The Bank of Japan’s purchases of JGBs far exceed net new issuance. Trading volumes have collapsed.

But as a symbolic political gesture it is huge, suggesting that the mutual support and trust of the old convoy system have totally broken down. Moreover, it is no accident that the protest comes from Nobuyuki Hirano.

There are other signs that the private sector has become less compliant as well. Both the heads of the GPIF and Japan Postal Savings say this is no time to buy risky assets at home since they reflect only the BoJ’s buying (and perhaps foreign fund front-running of that buying). Given the flat yield curve, insurers can hardly hold JGBs, and anyway fear losses on their holdings should rates eventually move up.

In addition, there is likely worse to come for many major investors. They have been pushed abroad by the central bank. But with the yen rising in a world which has been mostly risk-off, they will have big losses on assets held in foreign currencies, especially since only a small part of their exposures have been hedged, according to data from JPMorgan.

Rather than reboot Abenomics, it is time to replace it. Investors should not bet on Japan any longer.

So what happens — and doesn’t happen — now? Several things:

The bad stuff gets worse. Post-Brexit Europe will be a source of anxiety and therefore capital flight for years. See What is Frexit: Will France leave the EU next?

That means more money looking for a place to hide, some of which will choose yen-denominated bonds. So Japan’s already-negative interest rates will fall even further, which is catastrophic news for the Japanese banks and pension funds now suffocating under the current yield curve.

Regime change — but not yet. In upcoming elections the ruling party looks likely to hold its legislative majority. Longer term, though, Japan will find itself in pretty much the same boat as every other major democracy, with inept incumbents having handed lethal ammo to opposition parties more than willing to pull the trigger. New leaders won’t be able to fix the problem (which is by now unfixable) but the uncertainty surrounding a contested election will raise the odds of a crisis of involving currencies, debt, banks or any number of other things.

Plunging US rates. Eventually, hundreds of trillions of yen will have to find a new home with more hospitable returns. And 30-year Treasuries yielding 2% will look pretty tasty in a relative if not absolute sense. Rising foreign demand will push down Treasury yields, killing off numerous US banks, pension funds and insurance companies but giving the remaining solvent Americans a chance to refinance their mortgages at 1%.

Governments become the biggest stock market players. This is already happening, as Japan, China and (probably) the US buy equities and ETFs to blunt natural corrections in share prices. But with nothing else left to try, expect these programs to be ramped up virtually everywhere. This will prop up stock prices until it doesn’t, and then look out below.

Soaring gold. Everything that happens these days points to higher precious metals prices. I’m thinking of writing a piece of boilerplate to that effect for placement at the end of every future article.


The following is an extremely important paper and a must read..

Meijer was talks about Europe’s biggest risk and this is Italy as this country has 30% of all the EMU’s bad debt and only 10% of its GDP/  Yet that is not the world’s biggest problem. He then goes into the failed policies of Abenomics .  They have a huge deflation problem as witnessed by again household spending coming to a complete stop. It’s total DEBT to GDP is 400% and that is contributing to its deflation.  The rising yen is choking off any hope of a recovery..But that is not the major problem that will grip the globe: it is China!!

We pointed out to you the huge increase in POBC injection of capital in January. This week they announced another huge increase in paper stimulation for the month of June to the tune of 4 trillion yen or equiv 316 billion USA!  China’s money supply has grown by 71% and yet its economy has grown by 6%.  Clearly the yuan must drop by 30 to 50% and that will cause western prices and wages to drop precipitously

a must read..

(courtesy R Meijer/Automatic Earth Blog)

Deflation Is Blowing In On An Eastern Trade Wind

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

Brexit is nowhere near the biggest challenge to western economies. And not just because it has devolved into a two-bit theater piece. Though we should not forget the value of that development: it lays bare the real Albion and the power hunger of its supposed leaders. From xenophobia and racism on the streets, to back-stabbing in dimly lit smoky backrooms, there’s not a states(wo)man in sight, and none will be forthcoming. Only sell-outs need apply.

The only person with an ounce of integrity left is Jeremy Corbyn, but his Labour party is dead, which is why he must fight off an entire horde of zombies. Unless Corbyn leaves labour and starts Podemos UK, he’s gone too. The current infighting on both the left and right means there is a unique window for something new, but Brits love what they think are their traditions, plus Corbyn has been Labour all his life, and he just won’t see it.

The main threat inside the EU isn’t Brexit either. It’s Italy. Whose banks sit on over 30% of all eurozone non-performing loans, while its GDP is about 10% of EU GDP. How they would defend it I don’t know, they’re probably counting on not having to, but Juncker and Tusk’s European Commission has apparently approved a scheme worth €150 billion that will allow these banks to issue quasi-sovereign bonds when they come under attack. An attack that is now even more guaranteed to occur than before.

Still, none of Europe’s internal affairs have anything on what’s coming in from the east. Reading between the lines of Japan’s Tankan survey numbers there is only one possible conclusion: the ongoing and ever more costly utter failure of Abenomics continues unabated.

It’s developing in pretty much the exact way I said it would when Shinzo Abe first announced the policies in late 2012. Not that it was such a brilliant insight, all you had to know is that Abe and his central bank head Kuroda don’t understand what their mastodont problem, deflation, actually is, and that means they are powerless to solve it.

That Abe said somewhere along the way that all that was needed was his people’s confidence to make Abenomics work, says more than enough. The multiple flip-flops over a sales-tax increase say the rest. People don’t become more confident just because someone tells them to; that has the opposite effect. Deflation results from reduced spending, which in turn comes from not only decreasing confidence as well as a decrease in money people have available to spend.

That modern economics sees everything not spent as ‘savings’ adds significantly to the failure -on the part of Abe, Kuroda and just about everyone else- to understand what happened in Japan over the past 2-3 decades. To repeat once again, inflation/deflation is the velocity of money multiplied by money- and credit supply. The latter factor has in general gone through the roof, but that means zilch if the former -velocity- tanks.

That this velocity is -still- tanking, in Japan as well as in the western world, is due to, more than anything else, an unparalleled surge in debt. At some point, that will catch up with any economy and society. Even if they are growing, which our economies are not. Growth has been replaced with credit, and credit is debt. It’s safe to say that money velocity cannot possibly ‘recover’ until large swaths of debt have been cancelled, one way or another.

For Japan we saw this week that “..household spending fell for the third straight month in May and core consumer prices suffered their biggest annual drop since 2013..” (Reuters) while “..The Topix index dropped about 9% in June, plunging on June 24 with the Brexit vote, the most since the aftermath of the 2011 earthquake. The yen strengthened about 8% against the dollar in June.. (Bloomberg).

Japan has an upper-house election in a little over a week, and it seems like Abe can still feel comfortable about his position. A remarkable thing. The country needs to stop digging, it’s in a more than 400% debt-to-GDP hole, but Abe won’t listen. The rising yen is suffocating what is left of the economy, as are the negative interest rates, but all the talk is about ‘further easing’.

Still, Japan is outta here, and this has been obvious for a long time to the more observant observer. In the case of China, it is a more recent phenomenon, and it will even be disputed for a while to come. It’s also one that will have a much more devastating effect on the west. We’ve seen problems in various markets in Singapore, Macau and Hong Kong, but the real issues on the mainland are still to be sprung on us.

Mainland stock exchanges are as good a place as any to begin with. The combined tally for Shanghai and Shenzhen looks like this -data till June 23-; yes, that’s a loss of over 40% in the past year.

Beijing has been trying very hard to paper over these numbers, even quit supporting it all for a while through 2014, only to do a 180º when they didn’t like what they saw (foreign reserves drawdown), and now PBoC injections have gone bonkers: $316 billion in one month would mean $4 trillion on a yearly basis in what is really nothing but monopoly money.

Meanwhile, corporate bonds are, perhaps partly because of volatility, becoming an endangered species. Maybe the PBoC can do something there as well, the way Draghi does in Europe (must be high on the agenda), but there’s already so much bad debt we hardly dare watch.

China must and will try to keep boosting exports by devaluing the yuan. It’s just waiting for an opportunity to do it without being accused of currency manipulation. Perhaps it can create that opportunity?! Create a crisis and then use it?! Regardless, this Reuters headline yesterday sounded very tongue in cheek:

China To ‘Tolerate’ Weaker Yuan

China’s central bank would tolerate a fall in the yuan to as low as 6.8 per dollar in 2016 to support the economy, which would mean the currency matching last year’s record decline of 4.5%, policy sources said. The yuan is already trading at its lowest level in more than five years, so the central bank would ensure any decline is gradual for fear of triggering capital outflows and criticism from trading partners such as the United States, said government economists and advisers involved in regular policy discussions. Presumptive U.S. Republican Presidential nominee Donald Trump already has China in his sights, saying on Wednesday he would label China a currency manipulator if elected in November.

Note: remember Japan above? The yen rose 8% against the USD just in June, as the yuan fell by just 4.5% in all of 2015 (6.8% over the past 2 years). Now you go figure what’s happening to Japan-China trade. And the yuan is still hugely overvalued. But the desire to be part of the IMF basket of currencies comes with obligations. Trump doesn’t help either.

I said in the beginning of this year that a 30% devaluation was something of a minimum, and that certainly continues to stand. So yeah, creating a crisis may be the only way out. An accident in the South China Sea perhaps. Combined with a ‘tolerance’ for a 50% weaker yuan….

All of the above leads us to the title of this essay: deflation is coming in from the east.China’s economy’s already in deflation, even though it will take some time yet to be acknowledged. A very ‘nice’ report from Crescat Capital provides a bunch of clues.

China QE Dwarfs Japan and EU

In July of 2014, we wrote about the huge imbalance with respect to China’s M2 money supply and nominal GDP relative to the US. At the time, China’s M2 money supply was 71% higher than the US but its economy was 56% smaller, which we said was an indication of the overvaluation of the Chinese currency. Since that time, the yuan has fallen by only 6.8% relative to the dollar. We haven’t seen anything yet.

Today, the circumstances have significantly worsened. Money supply has continued to grow faster than GDP. With over $30 trillion of assets in its banking system and an underappreciated non-performing loan problem, we are convinced that China is headed for a twin banking and currency crisis. Money velocity has reached historically low levels which reflects China’s extreme credit imbalance and its crimping impact on its ability to generate future real GDP growth.

Just as worrying as the immense amount of credit built up, China has been reporting major downward revisions in its balance of payments (BoP) accounts. For more than a decade, China had been reporting an impossible twin surplus in its BoP accounts. When we wrote about this issue in 2014, we emphasized the likelihood of massive illicit capital outflows that not been accounted for. At that time, according to the State Administration of Foreign Exchange of China (SAFE), China had accumulated a BoP imbalance that was close to $9.4 trillion surplus since 2000 which we believed represented capital outflows that should have been recorded in the capital account.

The same accumulated BoP number today, revised by SAFE several times since, is now a deficit of about $2.8 trillion. Essentially, with its revisions, the SAFE has acknowledged even more capital outflows over the last 16 years than we had initially identified. On the capital account side, there was a downward revision of $10.1 trillion – from a $4.2 trillion surplus to a $5.9 trillion deficit. On the current account side, the revisions show that Chinese exports have not been as strong as initially reported over the last decade and a half. China’s current account surplus has been reduced by $2.1 trillion– going from $5.1 trillion to $2.9 trillion over the last 16 years. What we initially considered to be a $9.4 trillion imbalance has been more than proven by a $12.2 trillion revision.

Those are some pretty damning numbers, if you sit on them for a bit. There was another graph that came with that report that takes us head first into deflationary territory. China’s velocity of money:

That is utterly devastating. It’s what we see in the US, EU and Japan too, but ‘we’ have thus far been able to export our deflation -to an extent- to … China. No more. China has started exporting its own deflation to the west. Beijing MUST devalue its currency anywhere in the range of 30-50% or its export sector will collapse. It is not difficult.

That it will have to achieve this despite the objections of Donald Trump and the IMF is just a minor pain; Xi Jinping has more pressing matters on his mind. Like pitchforks.

The ‘normal’ response in economics would be: in order to fight deflation, increase consumer spending (aka raise money velocity)! But as we’ve seen with Japan, that’s much easier said than done. Because there are reasons people are not spending. And the only way to overcome that is to guarantee them a good income for a solid time into the future, in an economy that induces confidence.

That is not happening in Japan, or the US or EU, and it’s now gone in China too. Beijing has another additional issue that (formerly) rich countries don’t have. This is from a recent Marketwatch article on Andy Xie:

China Is Headed For A 1929-Style Depression

[..] Xie said China’s trajectory instead resembles the one that led to the Great Depression, when the expansion of credit, loose monetary policy and a widespread belief that asset prices would never fall contributed to rampant speculation that ended with a crippling market crash. China in 2016 looks much the same, according to Xie, with half of the country’s debt propping up real-estate prices and heavy leverage in the stock market – indicating that conditions are ripe for a correction. “The government is allowing speculation by providing cheap financing .. China “is riding a tiger and is terrified of a crash. So it keeps pumping cash into the economy. It is difficult to see how China can avoid a crisis.”

And then check this out:

China’s GDP grew 6.9% in 2015, its slowest pace in a quarter-century. For 2016, Beijing has set a GDP target of 6.5% to 7%; The latest spate of global uncertainties prompted Bank of America Merrill Lynch and Deutsche Bank to trim their forecasts to 6.4% and 6.6%, respectively. The export sector, long a driver of Chinese growth, is sputtering due to global saturation and household consumption is barely 30% of China’s GDP, Xie said. In the U.S., household consumption accounted for more than 68% of GDP in 2014, according to the World Bank.

Yeah, China is supposed to be going from an export driven- to a consumer driven economy. Problem with that seems to be that those consumers would need money to spend, and to earn that money they would need to work in export industries (since there is not nearly enough domestic demand). Bit of a Catch 22. And definitely not one you would want to find yourself in when the global economy is tanking.

The more monopoly money Beijing prints, the more pressure there will be on the yuan. And if they themselves don’t devalue the yuan, the markets will do it for them.

Kyle Bass says China’s $3 trillion corporate bond market is “freezing up” (see the third graph above), which threatens to undermine the $3.5 trillion market for the wealth management products Chinese mom and pops invest in. He expects a whopping $3 trillion in bank losses, an amount equal to the entire corporate bond market (!) “to trigger a bailout, with the central bank slashing reserve requirements, cutting the deposit rate to zero and expanding its balance sheet – all of which will weigh on the yuan.”

With the yuan down by as much as it would seem to be on course for, wages and prices in the west will plummet. This wave of deflation is set to hit western economies already in deflation and already drowning in private debt, and therefore equipped with severely weakened defenses.

Leonard Cohen once wrote a song called “Democracy Is Coming To The USA”. Maybe someone can do a version that says deflation is coming too. Not sure that’s good for democracy, though.




Although difficult to follow, it seems that China is becoming good at hiding capital outflows from its country trying to hide the true picture of its financial mess.  In Q1  they supposedly had an outflow of 123 billion USA.  The true outflow:  500 billion.

It sure looks like Kyle Bass is correct!


(courtesy Goldman Sachs/zero hedge)

Goldman Reveals How China Is Covering Up Hundreds Of Billions In Capital Outflows

In order to mask the tremendous capital outflows leaving its country – in order to prevent and/or delay a depositor panic – China has resorted to various gimmicks: back in October, we reported that the first one involved the PBOC gradually shifting from FX spot intervention to the using forwards as a preferred mechanism of market intervention as it is not as obvious, or as transparent to detect, to wit: “we need to take account not only of the PBoC’s non-spot market intervention efforts in the offshore market, but also of banks’ forward books if we want to get a better read on capital outflows in China.”

Then, when Wall Street figured out how to back into the true capital outflow numbers, China stopped reporting key capital flow data outright. As SCMP reported in February, “sensitive data was missing from a regular central bank report in China amid concerns about the flow of cash out of the country as its economy slows and currency weakens.” FT added that the People’s Bank of China removed the data category “Position for forex purchase”, which tracked total foreign exchange purchases by both the central bank and other financial institutions. In its place, a separate series that captures only central bank forex purchases is substituted. A rise in forex purchases is considered a sign of capital inflows, while a drop suggests outflows.

However, not even this was enough to mask the massive outflow of capital leaving China’s economy and being parked offshore.

So what did China do? Why it resorted to the oldest trick in the book: fabricating data outright. Only… it was caught again. As Goldman calculates, cross-border yuan flow in recent months could have masked the true level of outflow pressure in China. According to the bank, SAFE data on onshore FX settlement show outflow of about $2b in May; was also $24b in RMB flow to offshore, meaning underlying outflow in May could be $26b, analysts including MK Tang and Maggie Wei write in a note released overnight.

More notably, they calculate that since October total net FX outflow has been about $500 billion, which is 50% above $330b implied by SAFE’s onshore FX settlement data.

They adds that there are no obvious market forces to explain RMB flow in recent months, adding that non-commercially driven factors seem a more likely explanation.  They note that it is possible that offshore clearing banks or Chinese entity have been buying CNH and selling back onshore; this is justified by near-daily anecdotes of frequent CNH smoothing operations by Chinese institutions. As a result, flow to offshore doesn’t show in foreigners’ holdings of CNH assets.

Goldman also observes that since the August yuan “reform”, CNH has been generally weak; but this hasn’t led to net flow from offshore to onshore. “In a stark contrast, the relationship is in total reverse since October last year – the cheaper the CNH (vs CNY), the greater the net flow of RMB from onshore to offshore.”

Here are the details from Goldman’s MK Tang:

China capital flows update—sources how cross-border RMB flow might mask outflow pressures

  • We have updated our estimates of sources of China’s capital n outflows. Our analysis suggests net capital outflows at $123bn in Q1 (vs. $504bn in Q3-Q4 combined last year).
  • Of the Q1 net outflows, about 70% was due to Chinese residents’ accumulation of foreign assets; 40% to repayment of FX liabilities; and -10% to foreigners’ demand for RMB assets (i.e., foreigners were a source of net inflows in Q1). This composition is broadly similar to our earlier estimates for 2015 H2.
  • Separately, we flag a large $170bn net RMB flow from onshore to offshore since last October, which has helped reduce FX reserve drawdown and put downward pressure on CNH forward points. This flow  cannot be readily explained by marketbased factors in our view, and did not seem to result in an increase in foreigners’ CNH holdings. We think it might have masked the true FX outflow pressure in China, on the order of some $20bn (or 50%) per month in recent months.
  • Going forward, we think it will be important to also track cross-border RMB movement to get a fuller picture on China’s underlying flow situation.

For those not intimately familiar with China’s capital outflow battle over the past year, here is a quick recap from Goldman:

We have updated our estimates of sources of China’s capital outflows based on the framework we introduced in January. In Q1 this year and 2H last year, the big picture was the same as we estimated in the  piece – Chinese residents accumulating foreign assets remains the dominant source of total capital outflows. The mix of the different sources appears slightly different though, and we will discuss in more detail in the following session.

  • Corporates paying down FX debt: By our estimate, outflows driven by Chinese corporates paying down FX debt were US$156bn in 2H 2015, and around US$60bn in Q1 this year. As exhibit 1 and 2 show, we break down Chinese corporates FX debt into four major segments, namely trade liabilities, offshore banks’ claims on Chinese nonbanks, FX bonds issued by Chinese corporates, and FX loans lent out by onshore banks (such as Industrial and Commercial Bank of China etc.) to domestic Chinese nonbank sectors.
  • Chinese residents’ cumulating FX assets: There were around US$372bn outflows driven by Chinese residents demand for foreign assets in 2H last year, and another US$108bn outflows in Q1 this year based on our calculation. In the headline reported data, Chinese residents cumulating FX assets include outward direct investment, portfolio investment assets and other investment assets. These three channels saw around US$ 268bn outflows in 2H last year and US$69bn outflows in Q1 this year. We also add “net errors and omissions” (NEO) as part of the outflows motivated by Chinese residents buying FX assets—as we’ve been discussing for a while3., we think the negative numbers in NEO might represent disguised capital outflows (Exhibit 3).
  • Foreigners reducing RMB assets: This driver has become less obvious in Q1 this year, compared with 2H last year. Around US$7.4bn outflows were driven by foreigners reducing RMB assets in 2H last year, and in Q1 this year situation actually reversed, i.e. on net basis, foreigners accumulated around US$19.6bn RMB assets rather than reducing, mainly helped by inbound FDI and the relatively stable holding of offshore CNH (more on this in the second part of the report).

Goldman sums it up as follows:

Summing up different sources of outflows, in Q1 this year, of the total net capital outflows of $123bn, Chinese residents buying foreign assets accounted for around 70% of the outflows, and Chinese corporates paying down FX debt explained another 40% of the outflows. Foreigners’ adding RMB assets helped mitigate outflows by around 10%. In2H last year, according to our calculation based on factual data, residents buying FX assets accounted for 70% of the outflows, FX debt repayment was another 29%, and foreigners reducing RMB assets only represented 1% of the outflows. This was broadly in line with our analysis in the January’s work (we estimated the split at 60%/30%/10%), although the final official data suggests that foreigners reducing RMB assets was an even less important driver, while residents buying FX assets was more important than what we found based on our estimates of some BOP and FX debt data.

So far so good: a modest $123 billion in Q1 outflows. There is just one problem: the real number is vastly greater. Here is Goldman’s explanation:

While according to the BOP the pace of capital outflows has slowed in Q1, it might not have in fact slowed by as much as the data suggest. We have in the past discussed various caveats to interpreting official flow and reserve data, and in the following we add one more, in light of a large unusual cross-border RMB flow in recent months that we believe could have masked the true outflow pressure in China.

A $170bn flow of RMB to offshore…

Specifically, since October last year we have seen a large net flow of RMB from onshore to offshore, primarily due to trade settlement in RMB (i.e., Chinese importers pay for the imports in RMB). This totaled $170bn through May or about $20bn per month on average (Exhibit 4). This flow has helped lessen the overall outflow pressure faced by China because it means that importers did not have to buy as much FX to pay for imports (since they just used RMB). This also helps explain in our view the general decline in CNH forward points (or equivalently, CNH interest rates) in the last few months (Exhibit 5), despite market perception of large-scale CNH smoothing operations by state-related entities (more on this below).

Compared to previous actions, this is somewhat unusual. In the past, net crossborder flow of RMB had typically been driven by offshore RMB sentiment, e.g., when offshore RMB sentiment is strong, CNH tends to be more expensive than CNY ($/CNH is below $/CNY), naturally driving a net flow of RMB from onshore to offshore (e.g., for trade settlement) to satisfy high RMB demand; and vice versa.

However, especially since the August 2015 RMB reform, offshore RMB has been generally weak. While the CNH-CNY gap has narrowed in the last few months, CNH has still been usually cheaper than CNY ($/CNH above $/CNY). Therefore, the typical market-driven relationship would have suggested a net flow of RMB from offshore to onshore instead.Indeed, in a stark contrast, the relationship is in total reverse since October last year—the cheaper the CNH (vs. CNY), the greater the net flow of RMB from onshore to offshore. This is more consistent with a supply-push pattern (an exogenous push of RMB from onshore to offshore, which causes CNH to trade cheaper), rather than a market driven demand-pull relationship.

In short, we cannot point to any obvious market forces that could explain the RMB flow in the last several months; non-commercially driven factors seem to be a more likely explanation, in our view.

… that does not seem to result in any increase in foreigners’ CNH holdings

Another interesting observation is that this large amount of net RMB flow to offshore does not seem to show up in foreigners’ holdings of CNH assets. In general, if the RMB is received by foreign non-banks, that would likely end up as CNH deposits; and if it is received by foreign banks, that would show up as an increase in banks’ holdings of CNH assets. However, CNH deposits in Hong Kong and Taiwan, two key CNH centers, have been on a decline in the last several months (Exhibit 7); and Hong Kong banks’ spot position of “other currencies” has also been falling (Exhibit 8).

More broadly, overseas entities’ holdings of onshore RMB deposits (which include placement of CNH by offshore banks to onshore banks) have as recently, sharply deviated from the hitherto synchronized pattern with the cumulative net flow of RMB from onshore to offshore, and have been even surpassed by the latter in absolute level (Exhibit 9).

What does this mean? In simple terms, China is masking massive capital outflows, far greater than the $123 billion reported for the first three months.

These various official data pieced together are consistent with either of the following two possibilities:

  1. Some offshore RMB clearing banks buy RMB in the offshore market and sell the RMB back in the onshore FX market. In this scenario, it is unlikely that most of the RMB is sold to PBOC, because in the last few months PBOC’s FX reserve data have been roughly in line with the onshore demand for FX as suggested by SAFE’s onshore FX settlement data (i.e., it does not suggest that PBOC has used much of their reserves to meet offshore clearing banks’ demand for FX). In other words, in this scenario, it is likely that banks (or other non-PBOC participants of the onshore FX market) used their own FX position to buy the RMB. and in doing so, banks have likely suffered losses as CNY has generally weakened in the last few months. In late April, SAFE relaxed the regulatory floor on onshore banks’ FX net open position, expanding further their scope to short FX by $100bn.
  2. A Chinese entity (possibly state-backed) that has access to both
    offshore and onshore markets buys RMB (with FX) in the offshore market
    and invests the RMB in onshore assets.
    Since this entity is Chinese, its
    RMB assets would not be reflected in foreigners’ holdings of RMB assets

Goldman notes that in this context, “there have been market anecdotes on frequent offshore CNH smoothing operations by Chinese institutions.” Actually, not anecdotes: those are all too daily, all too real interventions by “large banks” who keep a barrier on both the CNY and CNH from moving far beyond 6.65. It is precisely in these “streamlining” operations that this massive “outflow” is hidden.

Summing it all up, the reality is that instead of $330 billion in FX outflows since October, the real number is 50% greater, or half a trillion, which also suggests that instead of getting better, China’s capital outflow situation is as bad as it has been, and not only that, but the government is now actively covering up the reality. Here’s Goldman:

Given the discussion above, it is possible that the actual underlying FX flow situation (i.e., FX/RMB demand by Chinese corporates/households and foreigners) has been less encouraging than even the SAFE data on onshore FX settlement imply10. (e.g., according to that data alone, FX outflow was about $2bn in May.), but there was also $24bn in RMB flow to offshore during the month—if we assume that that flow was not market-driven and that it was not subsequently held by foreigners, then the underlying FX outflow could instead be $26bn in May. In the eight months since last October, this approach would have suggested a total net FX outflow of about $500bn, or 50% above the $330bn implied by SAFE’s onshore FX settlement data.

All of this is bad news for the PBOC, now that the market is on to it:

Going forward, we believe also tracking the data on cross-border RMB flow (released monthly by SAFE) will be important to coming to a more comprehensive view on the underlying flow picture. For the time being, we will be incorporating this into our measure of net FX flow (Exhibit 10 shows this modified version

This means that either China’s central bank will have to disclose the truth, or further cover up the true nature of China’s capital outflows, in the process unleashing even more skepticism, even more outflows, and even more concerns about China’s economy (and banking system), to the point where these concerns reflame the same cross-asset (and market) contagions that led to the December/January swoon and which have been temporarily brushed under the rug while the Shanghai Accord still forces central banks to avoid major market moves in response to the sweeping capital outflows undertaken by China.

For now, however, we will be content to watch how the narrative that China’s capital outflows are “moderating” crashes and burns, and how long it takes other capital markets to realize that far from fixed, China is furiously burning through virtually any and all liquid reserves it still has access to, only doing so in a way that only a handful of central bankers were aware of it. Well, now everyone else knows as well thanks to Goldman…. which brings us tothe Goldman note from a month ago, in which Goldman revealed the FX doom loop…

… and in which the bank openly declared war on the Yuan, which it expects will crash in the coming months. To be sure, no better way to achieve that than by actually revealing the truth.


Sunday: ITALY

Trouble this weekend as Italy’s Renzi states that he will defy Brussels and provide direct aid to his ailing banks.  In the last few days, we have seen the devastation morph from a 40 billion euro bailout, to a 150 billion emergency loans and then emergency loans with support from the pension funds. The risk of course, is the entire credibility of the European Monetary Union and bank depositors fleeing the Italian banking scene!.

(courtesy zero hedge)

“We Won’t Be Lectured” – Italy’s Renzi To Defy Brussels Over Banking Bailout

With all eyes distratcted by the post-Brexit euphoria, the last week has seen a far more existential crisis accelerating in Europe. Italy’s banking system is in tatters (from a EUR40bn bailout 6 days ago, to EUR150 emergency support 3 days ago, to a bank bailout and chatter of further support from pension funds Friday) but, in what seems like a clear admission that things are really bad, The FT reports that Italian prime minister Matteo Renzi is prepared to defy the EU and unilaterally pump billions of euros into its troubled banking system if it comes under severe systemic distress, a last-resort move that would smash through the bloc’s nascent regime for handling ailing banks.

As we noted previously, Brexit will be just the scapegoat used by Renzi and Italy to circumvent any specific eurozone prohibitions. And if it fails, all Renzi has to do is hint at a referendum of his own. Then watch as Merkel scrambles to allow Italy to do whatever it wants, just to avoid the humiliation of a potential “Italeave.”

And sure enough, as The FT reports, Matteo Renzi, the Italian prime minister, is determined to intervene with public funds if necessary despite warnings from Brussels and Berlin over the need to respect rules that make creditors rather than taxpayers fund bank rescues, according to several officials and bankers familiar with their plans.

The threat has raised alarm among Europe’s regulators, who fear such a brazen intervention would devastate the credibility of the union’s newly implemented banking rule book during its first real test. In the race to find workable solutions, Margrethe Vestager, the EU’s competition chief, has laid out options for Rome to address its banking problems without breaking the bail-in principles of Europe’s banking union.

Italy is the eurozone’s biggest vulnerability following the shock outcome of the UK vote to leave the EU, with bank stocks plunging by a third. Concerns are building before the outcome of bank stress test results due this month and a constitutional referendum in Italy in early October, on which Mr Renzi has wagered his job. Citi has described the referendum as “probably the single biggest risk on the European political landscape this year outside the UK”.

After several of its ideas on intervention were rebuffed, Rome is considering whether to act alone. “We are willing to do whatever is necessary [to defend the banks], and do not rule out acting unilaterally, although that would only be as a last resort,” said one person familiar with the government’s thinking. European officials fear any Italian intervention would carry high risks, opening a battle over illegal state support that would put off private investors.

Angela Merkel, German chancellor , last week rebuffed Italy’s request for a suspension of state aid and bail-in rules in order to recapitalise its banks. Benoit Coeure, a senior European Central Bank official, has said any suspension of bail-in rules would spell the end of the banking union “as we know it”.

Mr Renzi has bristled at suggestions he is ignoring rules, saying he will not be “lectured by the school teacher”.

Italy’s business lobby, Confindustria, on Friday warned of “political chaos” should Mr Renzi lose October’s referendum. Under such a scenario, Italy would re-enter recession, spreads on Italian debt would widen and there would be capital flight from Italy, Confindustria argued. Italian gross domestic product would fall 0.7 per cent in 2017 and drop a further 1.2 per cent in 2018, it added.

So to summarize, The EU’s “bail-in” banking system failure regime has been entirely dismissed (as Italy proves that when it gets serious, it’s about national rescue, not ‘union’ rules). However, as we warned previously, the real threat is if the local population wakes up to the risk of holding their savings in a financial system that is now teetering on the edge, something Renzi himself admitted when he said that he “hoped to use a liquidity backstop to contain investor panic, which could result in a run on deposits and affect banks’ liquidity.” Because even if it buys up every bond, loan and stock in the world, the ECB will not be able to fix the public’s loss of trust in fractional reserve banking.

Finally, if you haven’t already had enough enough of European bullshit, here is the massive divergence between Italy’s banking system (red) and its sovereign bonds (green) which are remarkably – due to Mario Draghi’s plans – as interconnected as they have ever been in history as banks bought bonds to front-run ECB bazookas…

What happens next?


Monday! ITALY

The 360 billion euro bad debt on the books of Italian banks is weighing in on the woes of the country.  Now we learn, that Monte de Paschi has received an ECB letter telling them to sell 10 billion euros worth of soured notes. With nobody to sell do, this is going to be very problematic:

(courtesy zero hedge)

Italian Banks Tumble, Monte Paschi Plunges To Record Low After ECB Letter

The pain for Europe’s banks, and especially those in Italy, continues this morning following the latest news surrounding the Italian bank sector.

As a reminder, the Euro Stoxx Banks index was down -0.88% last week and is nearly 19% down from its pre-referendum levels. Italian Banks are at the heart of that weakness with the likes of Unicredit, Intesa, Banco Monte dei Paschi and UBI down -9.78%, -3.44%, -15.79% and -6.11% respectively last week, in the process sending Italian stocks to levels not seen since Draghi’s famous “whatever it takes” speech.

As we documented recently, there has been plenty in the press about possible liquidity guarantees and recaps for Italian Banks (not to mention yet another quiet Atlante-funded bailout on Friday) and it looks like this one still has plenty of room to run. Following reports that Italy was planning either a direct €40BN liquidity injection, a plan reportedly shot down by Merkel, as well as an EU cleared proposal for a €150 billion liquidity backstop, last night the FT ran a story suggesting that Italy PM Renzi is prepared to defy Brussels to inject public funds into the banking system should it come under severe systematic stress, and so break the bail-in principles of EU regulation following the upcoming European stress tests which, at least based on Italy’s panicked response, suggest many Italian banks will fail.

That story, however, was denied today when La Repubblica reported that Renzi will respect European Union rules on state aid for banks, an Italian official said on Monday. It remains to be seen if he will stick to this commitment especially if the collapse in Italy’s banking sector continues. Overnight DB also said that, “while UK politics has dominated headlines for the last few weeks it feels like the health of Italian Banks could well takeover in the near term.

Which brings us to the latest catalyst, namely reports that the ECB has asked perpetually troubled, insolvent and repeatedly bailed out Banca Monte dei Paschi di Siena, the world’s oldest bank, to draw up a plan for tackling its bad-loan burden, asking the lender to reduce its load of soured debt to 14.6 billion euros ($16.2 billion) in 2018 from 24.2 billion euros at the end of 2015, Italy’s third-biggest bank said in a statement Monday.

As a result, Monte Paschi was halted after tumbling for yet another day to fresh new record lows, while the Italian bank sector tumbled in Milan on Monday amid fresh concerns the country’s lenders are under pressure to raise capital to bolster their finances.

Seven of the 10 biggest decliners in the STOXX 600 Banks Index were Italian lenders, with Monte Paschi dropping 8.2 percent as of 9:40 a.m., while UniCredit SpA fell 3.3 percent. The benchmark index, which tracks 48 banks, dropped 1.1 percent.

Cited by Bloomberg, Vincenzo Longo, a strategist at IG Markets in Milan said that selling such a large stock of soured loans “could lead the bank to seek additional capital that investors are not available to provide. The government’s moves to seek easier rules to support Italian banks underscores the difficulty of the weakest ones, adding pressure to the industry.”

Italian Prime Minister Matteo Renzi is weighing injecting capital into the nation’s banks after Britain’s vote to leave the European Union jolted stock markets, aggravating the decline in Italy’s lenders. The plan has drawn opposition from Germany and is pitting Renzi against the EU amid concern government funding would violate the region’s state-aid rules.

Monte Paschi, which has dropped 70% this year, has sold 2 billion euros of bad loans since 2015, toward a goal of 5.5 billion euros in such disposals by 2018. Chief Executive Officer Fabrizio Viola said in May that he is considering accelerating the effort. Clearly, the ECB’s insistence that the bank offload more than €9 billion over this time period is not doing well with the company’s shareholders, as well as those of other Italian banks who are looking at Italy’s bad debt load of €360 billion and wondering who is next.



Is this a repeat of Bear Stearns 2007? The UK’s largest property fund has just halted redemptions as its fears a vicious circle is upon them as they cannot raise cash fast enough to fund those redemptions.

(courtesy zero hedge)

Bear Stearns 2.0? UK’s Largest Property Fund Halts Redemptions, Fears “Vicious Circle”

In the summer of 2007, two inconsequential Bear Stearns property-related funds were gated and then liquidated, exposing the reality of the US housing bubble and catalyzing the collapse of the financial system. While equity markets have rebounded exuberantly post-Brexit, suggesting all is well, British property-related assets have tumbled and, as The FT reports,Standard Life has been forced to stop retail investors selling out of one of the UK’s largest property funds for at least 28 days after rapid cash outflows were sparked by fears over falling real estate values. As one analyst warned,“the risk is this creates a vicious circle, and prompts more investors to dump property.”

Standard Life Investments has suspended trading on its £2.7 billion U.K. Real Estate fund, effective immediately, following Brexit, Investment Week reported, citing a statement.

The firm has suspended trading on the SLI UK Real Estate PAIF and the SLI UK Real Estate income and accumulation feeder funds.

The company cites “exceptional market circumstances” following an increase in redemption requests from the referendum.

The drop in NAV is the largest since Lehman…

The £2.9bn commercial property fund will need to sell real estate to raise cash before any money can be redeemed.

And, as The FT reports, the last property crash in the UK in 2007 was preceded by a wave of similar gatings by funds struggling to meet investor demands for cash. They led to firesales of property that added to the pressure on an already falling market.

Last week, Standard Life was one of a handful of UK open-ended property funds to mark down the value of the buildings they own by 5 per cent in the wake of the UK’s vote to leave the EU.

In another sign of stress in the sector, some closed-ended property trusts are trading at discounts of more than 10 per cent to their net asset value, which reflects fears over the future of commercial property.

“Given the outflows the sector seems to be experiencing, this could well put downward pressure on commercial property prices,” said Laith Khalaf, senior analyst at Hargreaves Lansdown. “The risk is this creates a vicious circle, and prompts more investors to dump property, until such time as sentiment stabilises.”

Retail investors have been attracted to property funds in recent years in part because returns from other types of investment have been so low.

Investors in the fund will be unable to redeem their holding for at least 28 days. The asset manager said the suspension on the fund’s trading will end “as soon as practicable”, and will be reviewed every 28 days.

Standard Life said the decision was taken to avoid the fund’s managers being forced to sell buildings quickly in order to satisfy redemption requests, which have increased “as a result of uncertainty for the UK commercial real estate market following the EU referendum result”.

“Unless this selling process is controlled, there is a risk that the fund manager will not achieve the best deal for investors in the fund, including those who intend to remain invested over the medium to long term.”

Adrian Lowcock, head of investing at Axa Wealth, said the suspension of the fund “brings back to focus the issues with investing in open-ended property funds”.

“During the financial crisis many investors were stuck in funds which had closed to redemptions as liquidity dried up,” he said.

A spokeswoman said the fund will be closed for the foreseeable future to give the fund manager more time to sell assets to raise its cash levels at the best possible price. “The suspension was requested to protect the interests of all investors in the fund and to avoid compromising investment returns from the range, mix and quality of assets within the portfolio.”

*  *  *

Storm in a teacup we are sure… because once Carney drops the next QE bomb, everything will be fixed, right? Or dead canary in the Brexit contagion coalmine? The big question is – how do you hedge your exposure for the next 28 days until you might – just might – be allowed to get your money back?

As we ironically noted previously,Brexit is a Bear Stearns moment, not a Lehman moment. That’s not to diminish what’s happening (markets felt like death in March, 2008), but this isn’t the event to make you run for the hills. Why not? Because it doesn’t directly crater the global currency system. It’s not too big of a shock for the central banks to control. It’s not a Humpty Dumpty event, where all the Fed’s horses and all the Fed’s men can’t glue the eggshell back together. But it is an event that forces investors to wake up and prepare their portfolios for the very real systemic risks ahead. In other words – it’s the beginning of the end.


Monday afternoon  GERMANY

Deutsche bank continues it’s slide:

(courtesy zero hedge)

The bank of England is scared that UK confidence is falling:  thus it unveils first easing measures after the BREXIT vote

(courtesy zero hedge)


Putin continually shows his muscle but still acts diplomatic:  He deploys a Russian aircraft carrier to Syria in total retaliation to the USA naval buildup in the Mediterranean

(courtesy zero hedge)

Putin Deploys Russian Aircraft Carrier To Syria In Retaliation To US Naval Build Up In Mediterreanean

One month ago, in a move which US military officials admitted was aimed squarely at “sending a clear message to Russia”, the US deployed not one but two aircraft carriers to the Mediterranean: the USS Truman and USS Eisenhower.  As we reported at the time, a military official in Washington said the Truman’s shift was a signal to Moscow and a demonstration of the Navy’s operational flexibility and reach. “It provides some needed presence in the Med to check…the Russians,” the official said. “The unpredictability of what we did with Truman kind of makes them think twice.”

The Truman would not be alone: the USS Dwight D. Eisenhower aircraft carrier strike group will allegedly support “US national security interests in Europe.” “The USS Dwight D. Eisenhower Carrier Strike Group (IKE CSG) entered the US 6th Fleet area of operations […] in support of US national security interests in Europe,” the US European Command (EUCOM) has announced.

US Carriers Truman and Eisenhower.

Naturally, in addition to sending Russia a message, the official reason was to further punish the perpetual scapegoat for all military activity in the region, the Islamic State: “Washington claims that the increased military presence is aimed at fighting Islamic State and balancing Russian extensive military efforts. “The presence of two carrier strike groups in the Mediterranean Sea demonstrates our commitment to safety and security in the region,” the statement read. “These forces further serve to support European allies and partners, deter potential threats and are capable of conducting operations in support of the counter-ISIL [Daesh] mission.”

As the WSJ notes, Rear Adm. Bret Batchelder, the highest-ranking officer on the carrier, told visiting reporters this week that moving the “capital ship” of the U.S. Navy from the Gulf through the Suez Canal is a flexing of muscle meant to reassure North Atlantic Treaty Organization allies of the American commitment to maintaining the balance of naval power in the Mediterranean.  “It is a demonstration of capability. That’s for sure,” he said. “There are undoubtedly folks who are watching that and this is just a graphic representation of what we’re capable of.”

The implication from this escalation was clear, and this is how we concluded less than a month ago:

“while the US may be hoping to “check” the Russians, all this action which will be seen as the latest provocation by the Kremlin will do is further strain already chilly relations between Russia and the US.We expect Russia to respond by promptly deploying warships of its own to the Mediterranean in a repeat of the summer of 2013 when the beach off the Syrian coast was a parking lot of Russian, US, European and even Chinese warships.”

Once again this assessment proved correct, and as Tass reports, citing a military-diplomatic source in Moscow, Russia will respond to the US double aircraft carrier escalation, by deploying its own aircraft carrier, the Admiral Kuznetsov, to Syria where its unofficial role will be as a counterpoint to US naval presence in the eastern Mediterranean. The official justification for the deployment is the same as that of the US: to crush the Islamic State of course, to wit: “the Admiral Kuznetsov carrier will participate in delivering strikes against militants in Syria from an eastern part of the Mediterranean Sea in October 2016 – January 2017, a military-diplomatic source in Moscow told TASS on Saturday.”

A military and diplomatic source told TASS earlier that the aircraft carrier Admiral Kuznetsov would arrive in the eastern part of the Mediterranean Sea in autumn. The ship is currently undergoing shipbuilders’ trials in the Barents Sea after repairs.

Russian carrier Admiral Kuznetsov

“The General Staff has prepared a plan for involvement of the deck aircraft in delivering strikes on terrorist groups in the Syrian Arab Republic, where the crews will practice taking off the carrier to deliver strikes on ground targets.”

Not only that, but according to the Russian source, the Kuzentsov will henceforth lead the the Russian navy’s “permanent grouping” in the Mediterranean, meaning that at any one moment there will be at least on Russian and, correspondingly, at least one (or more) US carriers.

Thus, the source said, in autumn-winter, the strikes will be delivered both by the crews located at the Hmeymim Base, and the aircraft carrier’s crews “in most close coordination.” “The Admiral Kuznetsov,” which will lead the Russian Navy’s permanent grouping in the Mediterranean Sea, will be close to the Syrian shore “so that the deck aircraft have enough fuel to complete the military tasks and return back,” the source said.

During the voyage, the source continued, the Admiral Kuznetsov “will have about 15 fighters Su-33 and MiG-29K/KUB and more than ten helicopters Ka-52K, Ka-27 and Ka-31.”

“The aircraft carrier will come to the Mediterranean Sea roughly before end of January – early February, after that it will return home and in February-March it will undergo maintenance and modernization in Severodvinsk, supposedly at Sevmash,” the source added.

TASS added that it does not have official confirmation of this information, although we expect the Kremlin will shortly confirm this Russian response to the build up of US naval forces in the region, in keeping with Putin’s warning that he will promptly respond to the growing build up of NATO forces on Russia’s borders.




Tourism is a big part of the Turkish economy.  Today Istanbul resembles a ghost town as tourists are reacting to the tragic suicide bomber attack at Ataturk Airport

(courtesy zero hedge)

Istanbul Turns Into A Ghost Town As Tourism Collapses

In the aftermath of the tragic suicide bomber attacks at Istanbul’s Ataturk Airport, Turkey’s biggest city now feels like a ghost town.

Restaurants sit empty in the Sultanahmet tourist district, and five-star hotel rooms can be booked for bargain prices. As AFP reports, in better times, the queues outside the Hagia Sophia (a former mosque and church that is now a museum) might have stretched an hour or longer at this time of year, today you can walk straight in and share the place with just a smattering of other visitors.

It’s disastrous. All my life I’ve been a tour guide, most of us have come to a turning point where we don’t know if we can go on. It’s tragic.” said Orhan Sonmez, hopelessly offering tours of the Hagia Sophia.

Analysts say the attack on Istanbul’s airport may have been a deliberate attempt to weaken the Turkish state by hitting its tourist industry, and it appears to be working. The United States, Germany and several other countries have warned their nationals against threats in Turkey, and to make matters worse, the TAK, a radical Kurdish group that has carried out several attacks in Turkey this year has also warned foreign tourists to stay away.

This development comes at a time when Turkey had just suffered its worst drop-off in visits in 22 years in the month of May, which was down 35% from a year ago. The tourism industry, which according to AFP brings in over $33 billion a year, is now in a free fall.

Part of the downturn was driven by a Russian ban on Turkish package holidays, but the ban has since been lifted, providing at least a small relief for the industry.

Those that are still visiting say they are enjoying the peace and quiet, while taking a more philosophical approach as AFP puts it. “This could happen in any city, it’s an unlucky lottery. The people are really friendly, and I really think I’ll come back and spend some more time here.” said Nessa Feehan, a visitor for Ireland.

However, the situation is still dire for many who depend on tourism to make a living.

“If it goes on like this, many shops will close. I’m thinking of moving to America, I can’t make money here.” said Ismail Celebi, an owner of a jewellery shop. Even though large Chinese tour groups are still arriving, Celebi says “It’s not enough, we need Americans, we need Europeans.

Even I’m afraid to come to work here” Celebi went on to say.

* * *

These recent security concerns as well as the economic hits that Turkey has endured as a result of the attacks and overall tension in the region are key factors in President Recep Tayyip Erdogan’s pivot to a softer approach in an attempt to strengthen diplomatic ties. As we reported last week, Erdogan even apologized to Vladimir Putin for the death of a Russian pilot, and even called Russia a “friend and a strategic partner.”


Hungary will hold a referendum on Oct 2 to halt the inflow of migrants:

(courtesy zero hedge)

Hungary Will Hold A Referendum On October 2 To Halt Inflow Of Migrants

While as previously reported the biggest political threat facing Europe in the coming months is Italy’s October referendum on Matteo Renzi’s overhaul of the political system aimed at ending Italy’s unstable governments (which as of this moment is not looking to good, with the latest Euromedia Research polls showing that 34% of Italians would vote against Renzi’s plan, with 28.9% in favor and 19.4% still undecided), a referendum which may cost the prime minister his job as Renzi has promised to resign if he does not get the needed support, another referendum has emerged overnight when as Reuters reports Hungary will hold a referendum on Oct. 2 on whether to accept any future European Union quota system for resettling migrants as Prime Minister Viktor Orban’s government steps up its fight against the EU’s migration policies.

Emboldened by Britain’s shock vote to quit the European Union, Orban – another nemesis of the Brussels establishment who was once called the “dictator” by none other than Jean-Claude Juncker – is forging ahead with his own referendum which he hopes will give him a mandate to challenge Brussels. A massive pre-referendum campaign has already been underway. Orban took an anti-immigration stance during the migrant influx to Europe last year. Hungary was the main entry point into the EU’s border-free Schengen zone for migrants traveling by land until Orban shut the Croatian and Serbian frontier.

According to Reuters, President Janes Ader said in a statement posted on his office’s website on Tuesday that the vote will be about the following question: “Do you want the European Union to be entitled to prescribe the mandatory settlement of non-Hungarian citizens in Hungary without the consent of parliament?

Hungary is already fighting an EU relocation scheme established during the height of the crisis last year, which will set quotas for each EU country to host a share of the migrants over two years. Along with Slovakia, Budapest has launched a court challenge against the plan. But the EU is also discussing a change to asylum rules that would require member states to accept a quota of refugees or pay a penalty for them to be housed elsewhere.

Antal Rogan, Orban’s cabinet chief, said on Tuesday the flow of migrants had to be stopped. “The Hungarian government asks Hungarian citizens to say no to mandatory resettlement and to say no to the immigration policy of Brussels,” Rogan told reporters. “Only Hungarians can decide with whom we want to live in Hungary.”

Rogan also said Hungary has doubled troops patrolling its southern border with Serbia, where 6,000 to 10,000 policemen and soldiers will be deployed from now on. More than 17,000 migrants have crossed into Hungary illegally from Serbia so far this year, according to the government.

Rogan said human traffickers had begun to use drones to monitor the movement of Hungarian border patrols, adding Hungary would inform Serbian authorities about this. Orban’s anti-immigration measures have been popular at home but criticized by rights groups. As of this month, a new law has taken effect which allows police to send back to Serbia illegal migrants detained within eight kilometers (five miles) of the border, drawing criticism from the U.N. refugee agency.

The Hungarian referendum, largely expected to halt migrant flow, will be merely the latest slap in the face of European cohesion and unity, and its passage is certain to impose even further limitations on the “free flow” of individuals across the customs union which with every passing day is becoming increasingly less that and more a loose cohesion of states unbound by any overarching federalism or ideology.



The CLSA warns everyone that the global economy was struggling long before BREXIT:  A good summary:

(courtesy zero hedge/CLSA)

CLSA Reminds Everyone: The Economy Was Struggling Long Before Brexit

As a result of Brexit, we pointed out that companies now will have a convenient scapegoat for any future earnings misses, or at the very least use Brexit as a reason to lower guidance for the remainder of the year without any pushback from analysts.

We also noted that with the referendum behind us, everyone would conveniently forget that earnings expectations had already been continuously revised down for quite some time now, long before Brexit.

But if you don’t want to take our word for it, here is CLSA reminding everyone as well.

In a recent note, CLSA wrote that world trade growth had hit a new post-global financial crisis low long before Brexit ever came about.


World trade growth hits new low
The UK’s surprise Brexit vote has caused a spike in risk perceptions but even before the vote the global economy was struggling. With the March data world trade growth hit a new post-GFC low. Emerging Market demand has contracted on a YoY basis for six back-to-back months. And developed economy demand has weakened, from +3.7% YoY in the three months to November 2015 to 1.2% YoY in the three months to March

* * *

Of course this won’t stop companies from using Brexit as a hall pass in order to explain away any and all misses and forward guidance revisions, and it also won’t stop analysts from using the infamous “one-time adjustment” line in order to paper over the weaker earnings, but it is good to keep this in mind that the new narrative isn’t the whole truth.



The avengers twitter account is suspended following its move to a new website.  It is possible that whoever is funding this organizaiton has had enough and stopped. Oil is on its way down

(courtesy zero hedge)

Key Oil Upside Catalyst Gone, As Niger Delta Avengers Twitter Account Suspended

West Texas intermediate falls into the 46 dollar handle with a huge unexpected build in Cushing Oklahoma:

(courtesy zero hedge)

Crude Crashes Most In 9 Months

WTI Crude is down over 5% to $46.50 – its biggest daily drop since early September 2015…

With East Coast gas inventories at a record high…

Sparking selling in crude..

Crude dropped with equities on a gloomy outlook for the global economy and amid signs that oil stockpiles remain ample.

Nigerian oil output rose last month following repairs to infrastructure that had been damaged by militant attacks, a Bloomberg survey showed, while gasoline supplies on the U.S. East Coast reached a record, the government said. Gasoline futures dropped to the lowest price in more than two months.

“The path of least resistance is lower,” said Michael Wittner, the New York-based head of oil-market research at Societe Generale SA. “The long-term picture remains bullish but in the short-term, crude is coming back from the disruptions. We have a lot of crude to work off as well.”

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

Euro/USA   1.11161 UP .0018 (STILL  REACTING TO BREXIT)



USA/CAN 1.2900 UP .0031

Early THIS TUESDAY morning in Europe, the Euro ROSE by 18 basis points, trading now JUST above the important 1.08 level FALLING to 1.1087; Europe is still reacting to BREXIT,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 17.78 POINTS OR 0.60%   / Hang Sang CLOSED DOWN 308.48 OR 1.46%/AUSTRALIA IS LOWER BY 0.98%/ EUROPEAN BOURSES ARE ALL IN THE RED EXCEPT LONDON  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 DOWN 106.47 POINTS OR 0.67% 

Trading from Europe and Asia:

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 308.48 OR 1.46% ,Shanghai CLOSED UP  17.78 POINTS OR .60%  / Australia BOURSE IN THE RED: (RESOURCES UP)/Nikkei (Japan) CLOSED  IN THE RED/India’s Sensex IN THE RED  

Gold very early morning trading: $1349.00


Early TUESDAY morning USA 10 year bond yield: 1.386% !!! DOWN 6 in basis points from FRIDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield FALLS to 2.155 DOWN 7 in basis points from FRIDAY night. (SPREAD GOES AGAINST THE BANKS)

USA dollar index early TUESDAY morning: 95.51 DOWN 14 CENTS from FRIDAY’s close.

This ends early morning numbers TUESDAY MORNING


And now your closing TUESDAY NUMBERS

Portuguese 10 year bond yield:  3.02% PAR in basis points from FRIDAY  (does not buy the rally)

JAPANESE BOND YIELD: -0.247% UP 1  in   basis points from FRIDAY

SPANISH 10 YR BOND YIELD: 1.19%  UP 4 IN basis points from FRIDAY( this is totally nuts!!)

ITALIAN 10 YR BOND YIELD: 1.26 UP 3 IN basis points from FRIDAY (again totally nuts)

the Italian 10 yr bond yield is trading 7 points HIGHER than Spain.




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


Euro/USA 1.11078 DOWN .0067 (Euro =DOWN 67 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 101.52 DOWN 1.007(Yen UP 101 basis points )


USA/Canada 1.2977-UP 0.01103 (Canadian dollar DOWN 110 basis points  AS OIL FELL  (WTI AT $46.68).


This afternoon, the Euro was DOWN by 67 basis points to trade at 1.1078

The Yen ROSE to 101.52 for a GAIN of 100 basis points as NIRP is STILL a big failure for the Japanese central bank/

The POUND was DOWN 251 basis points, trading at 1.3025

The Canadian dollar FELL by 110 basis points to 1.2977, WITH WTI OIL AT:  $46.69

The USA/Yuan closed at 6.6770

the 10 yr Japanese bond yield closed at -.247% UP 1  IN BASIS  points in yield/

Your closing 10 yr USA bond yield:DOWN 8 IN basis points from FRIDAY at 1.365% //trading well below the resistance level of 2.27-2.32%)

USA 30 yr bond yield: 2.139 DOWN 9 in basis points on the day ( HUGE POLICY ERROR)


Your closing USA dollar index, 96.09 UP 57 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 23.11 OR 0.35%
German Dax :CLOSED DOWN 176.48 OR  1.82%
Paris Cac  CLOSED DOWN 71.44  OR 1.69%
Spain IBEX CLOSED DOWN 188.30 OR 2.28%
Italian MIB: CLOSED DOWN 232.15 OR 1.45%

The Dow was UP 19.38  points or 0.11%

NASDAQ UP 19.89 points or 0.41%
WTI Oil price; 49.05 at 4:30 pm;

Brent Oil: 47.99




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:



BRENT: 48.14

USA 10 YR BOND YIELD: 1.375% 

USA DOLLAR INDEX: 96.20 up 68 cents

The British pound at 5 pm: Great Britain Pound/USA: 1.3032 down .0245 or 245 basis pts.

German 10 yr bond yield at 5 pm: -.185%




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


Banks Battered As Bond Yields ‘Comey-kaze’ Dive To Record Lows

Seemed appropriate for today…


Bullion and bonds continue to dramatically outperform post-Brexit…


Following the best week for stocks in two years, having failed to reach the pre-Brexit highs, stocks rolled over today led by Trannies and Small Caps…


Post-Brexit Trannies and Small Caps are also the biggest losers…


Futures show the selling began Sunday night and has been ‘well behaved’ for now…


Banks were battered…


Tesla did what Tesla does…


VIX pushed back above 16.5 briefly before being hit in the last hour…


Stocks began to catch down to bonds and FX reality…


The USD Index rose modestly today as Cable tumbled and JPY rallied against the USD…


Cable fell to fresh 31 year lows (below 1.3000)…

Difficult to see the pound forming the Dying Elephant pattern as good news

And as gilt yields tumbled, swissy govies went negative out to 50Y, so US Treasury yields plunged to fresh record lows…having crashed post-Brexit…


With 2s30s collapsing to new cycle lows… (dragging financials lower)…


With global developed market bond yields collapsed to record lows at just 42bps…


Commodities were mixed with copper and crude clubbed and PMs bid since Friday…


But note the craziness in Silver over the last 48 hours…


And crude was not pretty…biggest drop in 9 months


Charts: Bloomberg

Bonus Chart: A gentle reminder of the utter farce that the US equity market has become…




David Stockman goes all out on Stanley Fischer who claims that the data coming in “looks good”

(courtesy David Stockman/ContraCorner)

Humpty-Dumpty—–Teetering On The Eccles Building Wall

The Eccles Building trotted out Vice-Chairman Stanley Fischer this morning. Apparently his task was to explain to any headline reading algos still tracking bubblevision that things are looking up for the US economy again and that Brexit won’t hurt much on the domestic front. As he told his fawning CNBC hostess:

 “First of all, the U.S. economy since the very bad data we got in May on employment has done pretty well. Most of the incoming data looked good,” Fischer said. “Now, you can’t make a whole story out of a month and a half of data, but this is looking better than a tad before.”

You might expect something that risible from Janet Yellen——she’s just plain lost in her 50-year old Keynesian time warp. But Stanley Fischer presumably knows better, and that’s the real reason to get out of the casino.

What is happening is that after dithering for 90 months on the zero bound the Fed has run out the clock. The current business cycle expansion—as tepid as is was— is now clearly rolling over. So the Fed has no option except to sit with its eyes wide shut while desperately trying to talk-up the stock market.

And that means happy talk about the US economy, no matter how implausible or incompatible with the facts on the ground. No stock market correction or sell-off of even 5% can be tolerated at this fraught juncture.

That’s because the U.S. economy is so limp that a proper correction of the massive financial bubble the Fed and other central banks have re-inflated since March 2009 would send it careening into an outright recession. And that, in turn, would blow to smithereens all of the FOMC’s demented handiwork since September 2008, and indeed since Greenspan launched the era of Bubble Finance back in October 1987.

So when Fischer used the phrase “the incoming data looked good”, he was doing his very best impersonation of Lewis Carroll’s version of Humpty Dumpty. “Good” is exactly what our monetary politburo says it is:

“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”

The fact is, the “lesses” have it by a long shot, but the Fed cannot even whisper a word about the giant risks, challenges and threats which loom all across the horizon.

So for the third time this century, a business cycle contraction will come without warning from the Fed. Once again the Cool-Aid drinking perma-bulls, day traders and robo-machines will be bloodied as they stampede for the exist ramps. But it is the main street homegamers, who have been lured back into the casino for the third time this century, that will suffer devastating losses yet another time.

Indeed, if there were even a modicum of honesty left in the Eccles Building it would be warning about the weakening trends in the US economy, not cheerleading about fleeting and superficial signs of improvement.

Likewise, it would acknowledge the drastic over-valuation of the stock, bond, real estate and other derivative financial markets and remind investors that a healthy capitalism requires a periodic purge of such excesses in order to check mis-allocation of resources and malinvestment of capital.

Most importantly, it would flat out confess the inability of monetary policy—–even its  current extraordinary accommodation variant—–to ameliorate the structural and supply-side obstacles to a more robust rate of economic growth and wealth creation in the US.

In that regard, it would especially abjure the hoary notion that an excess of monetary stimulus is warranted because fiscal policy and regulators, for example, are allegedly not holding up their side of the bargain.

In fact, monetary stimulus is not the “only game in town”, as is often asserted; it’s the wrong game. Money printing is not a second best substitute for other pro-growth policies because it’s not pro-growth at all.

At best, it shifts the incidence of economy activity in time, such as when cheap mortgage rates cause housing construction to be higher today and then lower in the future when rates normalize.

But mainly monetary stimulus causes systemic mis-pricing of financial assets. It turns money and capital markets into gambling arenas where speculators capture huge unearned windfalls while the mainstream economy is deprived of growth and productivity inducing real capital investment.

Thus, instead of dispensing sunny-side agit prop Friday morning, Fischer might have noted the startling anomaly that was occurring at the very moment of his CNBC appearance.

To wit, the 10-year US Treasury note——the very benchmark of the entire global financial system—-had just kissed a record low yield of 1.38%. At the same moment, the futures market was signaling an open on the cash S&P 500 at 2110 or within 0.09% of its all-time high and at nosebleed PE ratio of 24X reported earnings.

Not in a million years would an honest, healthy, stable and sustainable free market have produced that combination. Starring at CNBC’s on set monitors, Fischer was looking at a screaming warning sign that financial markets have become radically unhinged. Starring into the cameras, he lied through his teeth in order to perpetuate the Fed’s sunny-side narrative.

Here’s the thing, however. The Fed’s primitive Keynesian models are all about quantity of economic factors and the short-run sequential change in the GDP and jobs data set. There is not even acknowledgement of qualitative factors or how the “incoming data” aligns with historical trends.

Nor does a positive quarter purchased at the certain expense of a sharp reversal a few periods down the road get discounted. The Fed model is all about sequential GDP gains——even if there are blatant indications that they are not sustainable or compatible with the prerequisites for healthy capitalist prosperity and stability.

All of these considerations were evident in the incoming data releases on Friday and in recent days——the very items that Fischer insisted had gotten better from “a tad before”.

Booming auto sales have been a pillar of the weak overall recovery since 2009, but even they came in for June down by a sharp 4.6% from prior year at 16.7 million light vehicles. Moreover, this was a continuation of the weakening pattern since last fall, and a clear indicator that the peak sales rate for this cycle is already in:

Motor Vehicle Sales 2016-07-01

But that’s not the half of it. Given population and household growth since the 2007 peak, 18 million units should be the floor of a healthy sustainable US economy, not a momentary peak, as is evident in the chart.

And that’s especially true given the qualitative factors behind the peak levels that were achieved late last year. To wit, the entire rebound from the 2008-2009 crisis lows was funded with debt, and much of it was issued to anyone who could fog a rearview mirror.

Moreover, the apparent low default rate of recent years was self-evidently misleading in the context of Bubble Finance. Owing to the collapse of new car sales between 2007 and 2011, there has been a sharp reduction in the supply of used cars, causing the resale value of the existing fleet to steadily rise.

Rising used car prices, in turn, made it easy for even marginal consumers to refinance old loans into new vehicle purchases, thereby avoiding defaults. At the same time, artificially low interest rates enabled auto finance companies to finance loans and leases at exceedingly low but unsustainable monthly payment rates.

So the auto contribution to GDP growth during the last few years had an unsustainable “virtuous circle” character. There was no reason, therefore, to believe these gains could be replicated permanently. In fact,  there was every reason to believe that the artificial Fed induced auto finance cycle would be eventually reversed, thereby generating substantial, off-setting “payback” down the road.

That risk is now materializing. The entire “virtuous” but artificial auto finance cycle is reversing as a flood of used cars—–reflecting the booming sales of the last four years—–comes into the resale market.

Consequently, used car prices are heading south, thereby undermining trade-in values and eligibility for new loans. Alas, that also means that default rates will be rising and new car loan or lease finance will be shrinking, generating lower sales and production rates in the auto sector.

Needless to say, Fischer eschewed the opportunity to talk soberly about the headwinds facing the strongest sector of the recent recovery.

The recession will come, therefore, with the Fed flat-footed again and this time, out of dry powder, as well.

Indeed, so thoroughly will the Fed be discredited when the market crashes again by 40% or 50% or more, that modern Keynesian central banking will be faced with an existential crisis.

To use the metaphor, our monetary Humpty Dumpty is heading for a great fall, and all the Imperial City’s potentates and poobahs will not be able to put it together again.

And that would be a very good thing.





Here is another cost that is soaring:  child care costs!

(courtesy zero hedge)

More ‘Transitory’ Non-flation: Child Care Costs Are Soaring

As the middle class erodes in the US, we have pointed out the many things that have continued tofinancially squeeze what is left of The American Dream out of the average joe, from rent becoming increasingly unaffordable to healthcare premiums exploding higher. We now have another expense that is taking a toll financially on the average American family, and that is child care.

Child care expenses have climbed nearly twice as fast as overall prices since the recession ended in 2009 the WSJ reports, and coupled with lackluster wage gains, families with young children are finding themselves stretched financially.

As the WSJ points out, the cost of child care is so high that in 41 states, the cost of sending a 4 year old to full-time preschool exceeds 10% of a median family income, and full-time preschool is more expensive than the average tuition at public college in 23 states. Care for an infant even costs more than the average rent in 17 states.

Since the recession ended in 2009, the cost of child care and nursery school has increased at a 2.9% annual average, outpacing overall inflation of 1.6% during that seven year period.

According to the WSJ, it costs $245,340 to raise a child born in 2013 from birth to age 18, nearly five years worth of income for the median US household. By comparison, the cost of raising a child born in 2003 was $226,108 after adjusting for inflation.

Looking at the breakdown of costs for middle income families from 1960 to 2013, education and child care costs have exploded higher.

For Malki Karkowsky, child care costs account for almost a quarter of the family budget. Adding in rent for the family’s Kensington, Md apartment, and more than half of her and her husband’s month take-home pay is gone. Karkowsky has a 3 year old son and a daughter under the age of 1. “Thankfully, we can cover the cost of food and clothing, but not really the extras.” Karkowsky said.

The family aspires to buy a home, but saving is difficult, even after moving to a cheaper location.The move saved $350 a month, but that doesn’t even cover a week of day care.

According to the WSJ, an April Gallup poll found that 37% of Americans between 30 and 49, the age when many are raising children, said they didn’t have enough money to live comfortably.

Increased costs are a struggle for many families, especially due to the fact that adjusting for inflation,incomes are barely above pre-recession levels.

Ironically, even the Federal Reserve admitted the inflation – which they can never seem to find anywhere – is higher for low income families.

From the WSJ

That presents a test for Federal Reserve officials who set economic policy based upon the average inflation rate experienced in the economy. A recent analysis by the Federal Reserve Bank of Minneapolis found that households with low incomes, more household members or older household heads experience higher inflation on average– but concluded that any given individual’s inflation rate can be several percentage points different from the average rate.

It speaks to the challenge the Fed faces in communicating about inflation,” Minneapolis Fed Director of Research Sam Schulhofer-Wohl said. “Even if average inflation is around 2%, you have to be aware that many households face price changes that are much higher or lower than inflation.”

* * *

We’re stunned that the Federal Reserve even acknowledged that inflation is out there in any form, since it continuously ignores rent, student loans, health insurance, and now child care costs. Then again, it’s not likely that the Fed will stop its actions that create those situations to begin with of course.


In an successful economy you must have a good manufacturing sector:  Today the USA factory orders collapse to the longest streak in USA history:

(courtesy zero hedge)

WTF Chart Of The Day – Factory Orders Collapse To Longest Streak In US History

For the 19th month in a row, US Factory Orders decline YoY (-1.2% for May) with a 1% drop MoM. Simply put, in 60 years of historical data, the US economy has never, ever suffered a 19 month stretch of consecutive annual declines

And yet we are supposed to believe there is no recession?

What happens next? 

Charts: Bloomberg



As expected no charges against ‘above the law’, Clinton!

(courtesy zero hedge)

FBI Recommends “No Charges” Against Hillary Clinton

In a surprising statement which concluded moments ago, FBI director James Comey announced that Federal officials have decided not to pursue federal charges against Hillary Clinton for her private email setup, an announcement that will send a shockwave throughout national politics.

BREAKING: FBI to recommend DOJ not pursue charges in Clinton email investigation: “No charges are appropriate.”

In a press briefing at the bureau’s headquarters in downtown Washington, Comey said investigators and prosecutors had concluded there was not sufficient evidence to push forward with an indictment against Clinton, clearing her of a federal investigation that has loomed over her presidential campaign for nearly a year. Comey’s announcement comes just three days after the former secretary of State sat for a 3.5-hour interview with the FBI on Saturday, and just a few hours before President Obama is set to campaign with Clinton in Charlotte, N.C.

The punchline of Comey statement is that Hillary Clinton shouldn’t face charges over her e-mail practices while serving as Secretary of State because there was no “intentional misconduct” and there was “no clear evidence” of intentional violation of the laws.The FBI’s conclusion will now be referred to the Justice Dept for a decision.

FBI Director Comey: No “intentional misconduct” in connection with sorting of Clinton’s emails.

FBI Director: No “clear evidence” Clinton and staff intentionally violated laws, but were “extremely careless”

He adds that the decision, if agreed to by the Justice Dept, would remove one of the biggest remaining obstacles to Clinton’s presidential bid, putting an official end to questions about penalties for her use of a private e-mail server, though the issue may continue to resonate on the presidential campaign trail

Still, the FBI director admitted that Clinton and her aides were “extremely careless” with e-mail and that it’s “possible” hostile actors gained access to Clinton e-mail system however no direct evidence of it found though.

What is shocking is Comey’s admission that Clinton used not one but several different email servers, adding that 110 emails contained classified information and 8 contained top secret information, he also reported that Clinton did not turn over “several thousand” emails to the FBI and added that due to Hillary’s sloppy set up, it is possible that “hostile actors” got access to Clinton’s emails.

FBI Director Comey: 110 emails found to have contained classified information at the time they were sent.

Yet, despite all these “facts”, the FBI has decided not to proceed with recommending charges.

It appears that the FBI is implying that the only reason why no charges will be filed is because there was no “intent”, and yet according to the US criminal code, specifically U.S. Code Section  793 – “Gathering, transmitting or losing defense information” subsection (f), intent in this case is not required for prosection:

Whoever, being entrusted with or having lawful possession or control of any document, writing, code book, signal book, sketch, photograph, photographic negative, blueprint, plan, map, model, instrument, appliance, note, or information, relating to the national defense, (1) through gross negligence permits the same to be removed from its proper place of custody or delivered to anyone in violation of his trust, or to be lost, stolen, abstracted, or destroyed, or (2) having knowledge that the same has been illegally removed from its proper place of custody or delivered to anyone in violation of its trust, or lost, or stolen, abstracted, or destroyed, and fails to make prompt report of such loss, theft, abstraction, or destruction to his superior officer— Shall be fined under this title or imprisoned not more than ten years, or both.

As the Hill adds, the juxtaposition is likely to inflame White House critics, who have insisted that political pressures would prevent any chance of an indictment for Clinton, regardless of the damage to national security.  Obama has previously weighed in to dismiss concerns about the investigation — to the ire of Republicans and federal investigators.

Last week, Attorney General Loretta Lynch said that she would defer judgment to the FBI and career Justice Department prosecutors, following a private and extremely controversial 30-minute meeting with former President Bill Clinton. The decision left Comey as the public face of the investigation, in what some viewed as an opportunity for the hard-nosed maverick to buck political pressures and act against Clinton.

“It is impossible for the FBI not to recommend criminal charges against Hillary Clinton,” her presumptive general election opponent, Donald Trump, said on Twitter this weekend. “What she did was wrong! What Bill did was stupid!”

The FBI began its probe connected to Clinton last summer, when inspectors general at the State Department and federal intelligence agencies referred Clinton’s “homebrew” email arrangement to the Justice Department for review. The bespoke setup might have jeopardized sensitive national secrets, investigators warned.

Roughly one-in-15 of the work-related messages that Clinton sent or received on the private server have been classified at some level, according to the trove of 30,000 emails that she handed over to the State Department. Twenty-two emails were classified as top secret — the highest level of secrecy.

In May, the State Department’s inspector general released a scathing report claiming that Clinton had never asked to use the unconventional setup while in office, and that the request would have been denied if she had. Comey has been under the gun to finalize the investigation before the presidential nominating conventions later this month.

While the FBI director has insisted that he had no deadline to complete the probe, a delay past the end of the month would have been interpreted as a sign of trouble for her campaign.

Some of the initial reactions were less then excited by the FBI’s admission that while Clinton may have been “extremely careless” she did not commit a crime:

Quite a day today
Sorry that my commentary is long but we had a lot of material to cover.
I will see you tomorrow night


  1. Harvey,

    You miss the GLD reporting for their gold holdings. GLD added 28.81 tonnes today (926,300 oz or about 2,316 400oz bars). The SLV added 3.099 million oz as well. Today’s GLD gold share creation is one of the larger one day additions in it’s history, the largest was possibly the 40.37 tonne addition on Feb 11, 2009. I have a suspicion that many of the countries who “store their gold in London for trading purposes” are going to eventually wind up like MF Global customers. The Bank of England leases their stored gold to insolvent bullion banks who then sell it into the market to satisfy physical demand… and it’s gone! When the bad bank eventually files for bankruptcy the countries who allowed their gold to be leased wind up as unsecured creditors of a bankrupt entity.

    One thing you have wrong as do many others is once the gold is sold on the market and the bars allocated to the account of the new owner be it GLD, China or Joe Sixpack, the leasing party no longer has a claim on that gold. They only have a claim against the bullion bank who borrowed it. Gold is a fungible commodity. If the bullion bank goes bankrupt and can’t repurchase the leased gold, the leaser is just like an MF Global account holder who by opening a margin account and thus signing an hypothecation agreement legally allowed MF Global to borrow their deposited assets…. as long as they put them back each day. The very first thing MF Global did on day they couldn’t “put them back” was to file for bankruptcy. So in other words with my suspicion that these 2,316 400oz bars might be leased gold, the physical is now owned by GLD. There is “paper gold” created in this situation which is the lease contract that has been created by the bullion bank with the Bank of England or the FRBNY who manage the foreign central bank gold deposits. Even though the gold may have been leased, the foreign central banks still officially count the gold on their books as being there, thus we get double counting.


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