August 2/Amount standing for gold still an extremely high 41.517 tonnes/Open interest for Sept gold also extremely high/gold and silver rise/Japanese bond yields rise (prices fall) sending global bond prices faltering/Most European bank stocks crashed today/Oil breaks the 40 dollar barrier on the downside/Aetna insurance loses 300 million on Obamacare and will probably exit in November/

Gold:1364.40 up $13.00

Silver 20.66  up 20 cents

In the access market 5:15 pm

Gold: 1364.00

Silver: 20.62

.

For the August gold contract month,  we had a HUGE 2096 notices served upon for 209,600 ounces. The total number of notices filed so far for delivery:  8925 for 892,500 oz or  tonnes or 27.760 tonnes

In silver we had 120 notices served upon for 600,000 oz. The total number of notices filed so far this month:  121 for 605,000 oz.

 

The way that silver lagged behind gold today, it sure looks like our criminal banks will try another raid tomorrow on our precious metals.

Let us have a look at the data for today

.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

In silver, the total open interest FELL BY A CONSIDERABLE 1,356 contracts DOWN to 221,987 AND CLOSE ITS NEW ALL TIME RECORD AS THE  PRICE OF SILVER ROSE  BY 15 CENTS WITH YESTERDAY’S TRADING.In ounces, the OI is still represented by just over 1 BILLION oz i.e. 1.109 BILLION TO BE EXACT or 159% of annual global silver production (ex Russia &ex China).

In silver we had 120 notices served upon for 600,000 oz

In gold, the total comex gold ROSE BY A SMALLISH 866 contracts as  that the price of gold ROSE by $2.40 yesterday. The total gold OI stands at 569,664 contracts.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

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

 

GLD

we had no change  in gold inventory . /

Total gold inventory rest tonight at: 964.03 tonnes

SLV

we had a small change  in the SLV, a withdrawal of 40,000 oz, into the SILVER INVENTORY TO THE SLV

Inventory rests at 350.815 million oz.

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

1. Today, we had the open interest in silver FELL by 1356 contracts DOWN to 221,987,despite the fact that the price of silver ROSE BY 15 cents with YESTERDAY’S trading.We must have lost a few banker shorts as they must be getting a little nervous. The gold open interest ROSE by A TINY  866 contracts UP to 569,664 as the price of gold ROSE by $2.40 WITH YESTERDAY’S TRADING.

(report Harvey).

 

2 a) Gold/silver trading overnight Europe, Goldcore

(Mark OByrne/zerohedge

2b  FRBNY report on earmarked gold removed from its vaults:

(Harvey)

3. ASIAN AFFAIRS

i)Late  MONDAY night/TUESDAY morning: Shanghai closed UP 17.89 POINTS OR 0.61%/ /Hang Sang closed for holiday. The Nikkei closed down 244.32 POINTS OR 1.47% Australia’s all ordinaires  CLOSED down 0.84% Chinese yuan (ONSHORE) closed UP at 6.6356/Oil rose to 40.61 dollars per barrel for WTI and 42.85 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.6409 yuan to the dollar vs 6.6356 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS SLIGHTLY AS CHINA TRIES TO STOP MORE USA DOLLARS LEAVING THEIR SHORES  

REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) REPORT ON JAPAN

i)Japanese bonds prices crashed as yields rose as investors are losing faith in the ability of government to stave off deflation.

( zero hedge)

ii)Is the Bank of Japan going to do a U turn with respect to Abenomics.  Are they ready to scrap monetary policy for fiscal policy.  If so, the yen will surge, risk assets will plummet (yen carry trade) and Japanese bond yields rise.

( zero hedge)

iii)We now have contagion as bond yields rise across all global bond markets due to the rise in Japanese bond yields.

( zero hedge)

iv)How is this for confidence?:  Japan grinds to a complete halt as officials issue a false earthquake alarm :

( zero hedge)

b) REPORT ON CHINA

The following ought to be good for gold as China prepares for a “sudden, cruel and short war”.  They are doing massive naval drills in the East China  Sea:

( zero hedge)

4 EUROPEAN AFFAIRS

i)All European banks are crashing today, including German banks Commerzbank,  and Deutsche bank, together with Credit Suisse, the latter two huge derivative players:

( zero hedge)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

none today

6.GLOBAL ISSUES

 i)Mish Shedlock articulates the end game quite well.

( Mish Shedlock)

ii)A 1% rise in global bond interest rates will produce of loss of 3.8 trillion in investment grade sovereign bonds:

( Fitch/zerohedge)

7.OIL ISSUES

i)Oil broke the 40 dollar barrier and right now it is trading at $39.56.  We have witnessed a huge number of rigs enter the oil scene these past 6 months. The price fall will be devastating to many in the oil patch.

( zero hedge)

ii)Oil gets a little break on Cushing OK draw down:

( zero hedge)

8.EMERGING MARKETS

none today

 

9.PHYSICAL STORIES

i)My goodness, these guys are stupid as they will lose their physical gold for interest:

( Andrew Topf/Mining.com/GATA)

ii)Morgan Stanley warns that the USA is not going to raise interest rates soon as thus they warn that the dollar is set to fall by at least 5% in the next few months and that must be good for gold

( Bloomberg news/GATA)

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

i)Personal income growth slumps while spending rises.

( zero hedge)

ii)With two-thirds of the S and P reporting earnings which was suppose to be heading to 26.69 is now down to $24.09.  The high value of S and P is an accident waiting to happen!

( zero hedge)

iii)Two important points in the following:

  1. Large insurer Aetna states that it lost 300 million dollars on Obamacare
  2.  They also are warning of an exit from Obamacare

(courtesy zero hedge)

Let us head over to the comex:

The total gold comex open interest ROSE TO AN OI level of 569,664 for a GAIN of 866 contracts as THE PRICE OF GOLD ROSE BY $2.40 with YESTERDAY’S TRADING..   We are now in the active month of AUGUST. As I stated on Friday “Somebody big is continually standing for the gold metal despite the fact that July is  generally a poor delivery month. We  again witnessed the same scenario as in May  June and July whereby the front delivery month increases in OI standing for metal or a slight contraction We will no doubt see the same modus operandi in August.  The  big active contract month of August saw it’s OI FELL by 2000 contracts down to 6519,  We had 1801 notices filed upon yesterday so we lost 199 contracts or an additional 19,900 oz will not stand for delivery in August. The next contract month of Sept saw it’s OI fall by 23 contracts down to 10,319.The September contract remains extremely elevated and we may have another of those high deliveries rare for a non active month.The next active delivery month is October and here the OI fell by 166 contracts down to 45,729. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was fair at 202,885. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was POOR at 123,604 contracts.The comex is not in backwardation.
Today, we had  2096 notices filed for 209,600 oz in gold
And now for the wild silver comex results. Total silver OI FELL by 1356 contracts from 223,343 down TO 221,987.  We are now close an all time record high for silver open interest set ON MONDAY AUGUST 1: (223,343). The  non active month of August saw it’s OI FALL by 11 contracts down to 405. We had 1 notice served yesterday so we lost 10 contracts or an additional 50,000 oz will not stand in this non active delivery month of August. The next big active month is September and here the OI fell by 3387 contracts down to 150,638. The volume on the comex today (just comex) came in at 79,203 which is HUGE. The confirmed volume yesterday (comex + globex) was huge at 68,963 with tiny rollovers.. Silver is not in backwardation. London is in backwardation for several months.
We had 120 notices filed for today for 600,000 oz
INITIAL standings for AUGUST
 August 2.
Gold
Ounces
Withdrawals from Dealers Inventory in oz   nil OZ
Withdrawals from Customer Inventory in oz  nil
 32.15 oz
Brinks
1 kilobar
Deposits to the Dealer Inventory in oz NIL

 

Deposits to the Customer Inventory, in oz 
 64,302.000 oz
hsbc
2,000 KILOBARS
No of oz served (contracts) today
2096 notices 
209,600 oz
No of oz to be served (notices)
4423 contracts
442,300 oz
Total monthly oz gold served (contracts) so far this month
8925 contracts (892,500 oz)
(27.780 tonnes)
Total accumulative withdrawals  of gold from the Dealers inventory this month   NIL
Total accumulative withdrawal of gold from the Customer inventory this month    32.15 OZ
My goodness we had aNOTHER huge amount of gold enter the vaults of the comex.
Today we had 0 dealer DEPOSITS
total dealer deposit:NIL    0z
Today we had  0 dealer withdrawals:
total dealer withdrawals:  nil oz
We had 1 customer deposit:
i) Into  HSBC: 64,302.000 oz
2,000 KILOBARS:  HOWEVER THE CORRECT WEIGHT OF 2,000 KB = 64,300.00 OZ
Total customer deposits:64,302.000 oz
Today we had 0 customer withdrawals:????
Total customer withdrawals  nil OZ ??
Today we had 3 adjustment:
i) Out of Delaware:  389.46 oz was adjusted out of the customer and this landed into the dealer account of Delaware
Out of HSBC
ii) 100,033.217 oz was adjusted out of the customer and this landed into the dealer account of HSBC
iii) Out of Manfra:
81,982.500 oz was adjusted out of the customer and this landed into the dealer account at Manfra.
Note: If anybody is holding any gold at the comex, you must be out of your mind!!!
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 2096 contracts of which 60 notices was stopped (received) by JPMorgan dealer and 558 notices was stopped (received)  by JPMorgan customer account. 
To calculate the initial total number of gold ounces standing for the AUGUST  contract month, we take the total number of notices filed so far for the month (8925) x 100 oz  or 892,500 oz , to which we  add the difference between the open interest for the front month of AUGUST  (6519 CONTRACTS) minus the number of notices served upon today (2096) x 100 oz   x 100 oz per contract equals 1,334,800 oz, the number of ounces standing in this active month. 
 
Thus the INITIAL standings for gold for the AUGUST contract month:
No of notices served so far (8925) x 100 oz  or ounces + {OI for the front month (6519) minus the number of  notices served upon today (2096) x 100 oz which equals 1,334,800 oz standing in this non   active delivery month of AUGUST  (41.517 tonnes).
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 +  21.452 TONNES FOR JULY + 12.3917 + 41.517 tonnes Aug +  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 1778 tonnes, JULY 28 .089 TONNES / JULY 29 .128 TONNES/ THEREFORE 92.901 tonnes still standing against 71.999 tonnes available.
 Total dealer inventor 2,314,772.813 oz or 71.999 tonnes
Total gold inventory (dealer and customer) =10,995,142.689 or 341.99tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 341.99 tonnes for a  gain of 39  tonnes over that period. 
 

THE GOLD COMEX IS AN ABSOLUTE FRAUD. THE USE OF KILOBARS AND EXACT WEIGHTS MAKES THE DATA TOTALLY ABSURD AND FRAUDULENT!!

To me, the only thing that makes sense is the fact that “kilobars” are entries or hypothecated gold sent to other jurisdictions so that they will not be short in their derivatives like in England.  This would be similar to the gold used by Jon Corzine. If this is the case, this would be the greatest fraud perpetrated on USA soil.

 

 
 end
And now for silver
 
AUGUST INITIAL standings
 august 2.2016
Silver
Ounces
Withdrawals from Dealers Inventory NIL
Withdrawals from Customer Inventory
238,126.390 oz
SCOTIA, HSBC
Deposits to the Dealer Inventory
 597,001.400 OZ
CNT
Deposits to the Customer Inventory
599,871.210 oz
SCOTIA
No of oz served today (contracts)
120 CONTRACTS 
(600,000 OZ)
No of oz to be served (notices)
285 contracts
1,425,000 oz)
Total monthly oz silver served (contracts) 121 contracts (605,000 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  2,191,370.3 oz
today we had 1 deposit into the dealer account:
 i) Into CNT: 597,001.400 oz
total dealer deposit 597,001.400 oz
we had 0 dealer withdrawal:
:
total dealer withdrawals:  NIL oz
we had 2 customer withdrawals:
i) Out of Scotia: 60,067.300 oz
iii) Out of HSBC: 178,059.090  oz
Total customer withdrawals: 238,126.390 oz
We had 1 customer deposit:
i) Into Scotia: 599,871.210 oz
total customer deposits:  599,871.210  oz
 
 
 
 we had 0 adjustments
The total number of notices filed today for the AUGUST contract month is represented by 120 contract for 600,000  oz. To calculate the number of silver ounces that will stand for delivery in AUGUST., we take the total number of notices filed for the month so far at (121) x 5,000 oz  = 605,000 oz to which we add the difference between the open interest for the front month of AUGUST (405) and the number of notices served upon today (120) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the AUGUST contract month:  121(notices served so far)x 5000 oz +(405 OI for front month of AUGUST ) -number of notices served upon today (120)x 5000 oz  equals  2,030,000 oz  of silver standing for the AUGUST contract month.
we lost 10 contract or an additional 50,000 oz will not stand for delivery in this non active month of August.
 
Total dealer silver:  26.975 million (close to record low inventory  
Total number of dealer and customer silver:   154.051 million oz (close to a record low)
The total open interest on silver is NOW close to its all time high with the record of 223,343 being set July 28.2016.  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.
END
And now the Gold inventory at the GLD
August 2/no change in gold inventory at the GLD/Inventory rests at 964.03 tonnes
August 1/we had a huge paper deposit of 5.94 tonnes of gold into the GLD/Inventory rests at 964.03 tonnes
July 29/ we had a huge deposit of 3.86 tonnes into the GLD/inventory rests at 958.09 tonnes
July 28/no changes in gold inventory at the GLD/Inventory rests at 954.23 tonnes
July 27/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 954.23 TONNES
jULY 26./ANOTHER HUGE PAPER WITHDRAWAL OF 4.46 TONNES FROM THE GLD/INVENTORY RESTS AT 954.23 TONNES
JULY 25/ A HUGE PAPER WITHDRAWAL OF 4.45 TONNES FROM THE GLD/INVENTORY RESTS AT 958.69 TONNES
July 22/ no change in gold inventory at the GLD/Inventory rests at 963.14 tonnes
July 21/ a large withdrawal of gold inventory to the tune of 2.08 tonnes/Inventory rests at 963.14 tonnes
July 20./no changes in gold inventory at the GLD/Inventory rests at 965.22 tonese
July 19/no change in gold inventory at the GLD/Inventory rests at 965.22 tonnes
July 18./ a good sized deposit of 2.37 tonnes of gld into GLD/this is a paper gold entry/inventory rests at 965.22 tonnese
July 15./no change in gold inventory at the GLD/Inventory rests at 962.85 tonnes
July 14/a good sized withdrawal of 2.37 tonnes from the GLD/this would be a “paper withdrawal”/inventory rests tonight at 962.85 tonnes..
July 13/ we had a huge paper withdrawal of 15.98 tonnes of gold from the GLD/inventory rests at 965.22 tonnes.
July 12/we had no changes in gold inventory at the GLD/Inventory rests at 981.20 tonnes
July 11/no changes in gold inventory at the GLS/Inventory rests at 981.20 tonnes
JULY 8/ A  good sized deposit of 2.91 tonnes into the GLD/Inventory rests at 981.20
July 7/a good sized withdrawal of 4.15 tonnes from the GLD/Inventory rests at 978.29 tonnes (this was nothing but a paper entry/no physical moved)
JULY 6/WHAT A FRAUD!! A MASSIVE 28.53 TONNES OF PAPER GOLD ADDED INTO THE GLD
July 5/no change in inventory/rests tonight at 982.44
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
August 2/ Inventory rests tonight at 964,03  tonnes

end

Now the SLV Inventory
August 2/ we had a tiny withdrawal of 40,000 oz of silver/Inventory rests at 350.815 million oz
August 1/we had a huge paper deposit of 1.235 million oz into the SLV/Inventory rests at 350.955 million oz
July 29/we had no change in silver inventory/inventory rests at 349.720 million oz
July 28/we had 1.14 million oz of additional silver added to the SLV/Inventory rests at 349.720 million oz
July 27/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 348.580 MILLION OZ
jULY 26/NO CHANGE IN SILVER INVENTORY AT THE slv/INVENTORY RESTS AT 348.580 MILLION OZ
JULY 25/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 348.580 MILLION OZ
July 22/we had no change in silver inventory at the SLV.Inventory rests at 348.580 million oz/
July 21/no change in silver inventory at the SLV/Inventory rests at 348.580 million oz
July 20/no change in silver inventory at the SLV/Inventory rests at 348.580 million oz
July 19/no change in silver inventory at the SLV/Inventory rests at 348.580 million oz
July 18/no change in silver inventory at he SLV/inventory restss at 348.580 million oz
July 15/ no change in  silver inventory at the SLV/Inventory rests at 348.580 million oz
July 14/no changes in silver inventory at the SLV/Inventory rests at 348.580 million oz/
July 13./ a huge addition of 5.187 million oz into silver inventory at the SLV/ this is a paper addition as inventory rests at 348.580 million oz
July 12/ a huge addition of 1.94 million oz into silver inventory at the SLV/a “paper” addition/inventory rests at 343.393 million oz
July 11/no changes in silver inventory/rests tonight at 341.453 million oz
JULY 8/no change in silver inventory/rests tonight at 341.453 million oz
July 7./no change in silver inventory/inventory rests at 341.453 million oz
JULY 6/AND ANOTHER FRAUD!! A MASSIVE 7.909 MILLION OZ ADDED INTO THE SLV/INVENTORY RESTS AT 341.453 MILLION OZ
july 5/no change in silver inventory/inventory rests at 333.554 milllion oz
.
August 2.2016: Inventory 350.815 million oz

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 3.8 percent to NAV usa funds and Negative 3.5% to NAV for Cdn funds!!!!  (the discount is starting to disappear)
Percentage of fund in gold 58.6%
Percentage of fund in silver:40.3%
cash .+1.1%( August 2/2016).
2. Sprott silver fund (PSLV): Premium rises  to +1.42%!!!! NAV (august 2/2016) 
3. Sprott gold fund (PHYS): premium to NAV  falls TO  1.13% to NAV  ( august 2/2016)
Note: Sprott silver trust back  into POSITIVE territory at +1.42% /Sprott physical gold trust is back into positive territory at 1.13%/Central fund of Canada’s is still in jail.
 
 
 

end

FEDERAL RESERVE BANK OF NEW YORK EAR MARKED GOLD REPORT:

Late tonight we received the report of movement of gold from the Federal Reserve Bank of New York:

In the previous month we had 7951 million dollars worth of gold in inventory valued at 42.22 dollars per oz.

Tonight the FRBNY reports that we had 7910 million dollars worth of gold inventory valued at $42.22 per oz.

Thus a total of 41 million dollars worth of gold left New York shores valued at 42.22 dollars per oz.

Thus in oz, the amount exported out of NY:

971,103.7 oz  or 30.205 tonnes

Since Germany is the only official country to have asked for the gold back you can be safe to assume that it is this country that is the recipient of the gold.

Germany must have sent out an extra SOS to get their gold back!!.

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

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

Silver Kangaroo Coins – Sales Surge To Over 10 Million

Silver kangaroo coins have seen sales surge to over 10 million coins which is double the expected demand for the year.

product_coins_2016-Australian-Kangaroo-Silver-1oz-BullionSilver Kangaroo Coins 1 oz (2016)

Introduced to the market less than 11 months ago in September 2015 at a launch attended by GoldCore, sales of the new release Perth Mint’s 2016 Australian Kangaroo 1 ounce silver bullion coin were anticipated to reach 5 million coins in their introductory first year. Yet sales of the silver coins have already surged to a whopping 10 million coins.

Commenting on the new silver coin’s worldwide success, the CEO of the Perth Mint, Richard Hayes said:

”Now that we can better gauge the popularity of the release, we predict sales in excess of 12 million this coming year.”

The Kangaroo coin is 0.9999 fine silver and it is only available in the 1 ounce size, unlike the Perth Mint’s other bullion coins which range in weights from 1/2 ounce to 10 kilograms. The 1 ounce weight was specifically selected for the new annual series because investors and silver stackers favour the size.

“These issues sell out of their limited mintages consistently each year,” the Mint said.“With this in mind, the Silver Kangaroo was issued in a 1 ounce weight only and to an unlimited mintage.”

2016-Australian-Kangaroo-Silver-Bullion-CoinAdded as a counterfeiting measure, the first A of AUSTRALIAN includes a micro-engraved ‘A’ that shows up under magnification

“We made sure that the new Kangaroo satisfies investors’ key aims — to secure an asset which features an Australian icon — to secure silver at an affordable price — to add 9999 fine silver to their portfolio — and to stack precious metals in convenient one ounce coins,” Hayes said.

Bullion buyers and silver “stackers” in particular continue to accumulate. They see silver at below $30 per ounce as good value vis a vis gold ($1,360 per ounce), stocks and many other investments. Many believe, like GoldCore, that silver will surpass $50 per ounce again and should reach levels above $100 per ounce given the very favourable fundamentals of very little supply and robust demand.

Discounted Bullion For Storage (Allocated and Segregated) In London, Zurich and Singapore

London
Gold Bars (1 oz)

Zurich
Gold Bars (1 oz)
Gold Krugerrands (1 oz)
Silver Bar (1051.2 oz Engelhard)
Platinum Eagle  (1 oz)

Singapore
Gold Bars (1 oz)
Gold Eagles (1 oz)
Silver Maples (1 oz)
Silver Eagles (1 oz)
Silver Bars (100 oz)

Call for discounted prices  +353 1 632 5010 (IRL)    +44 (0) 203 086 9200 (UK)    +1 302 635 1160 (US/ Canada)

Gold and Silver Bullion – News and Commentary

Gold Set to Extend Gains – Industry Says (Bloomberg)

Gold Prices Gain in Quiet Trade (WSJ)

Silver futures closes at 2-year high; gold ends up (Marketwatch)

Gold steady as U.S. rate hike expectations cool (Reuters)

Indians plow 2.95 tonnes of gold into banks (Mining)

7RealRisksBlogBanner

Gold Prices (LBMA AM)

02 August: USD 1,358.15, EUR 1,213.10 & GBP 1,025.13 per ounce
29 July: USD 1,332.50, EUR 1,200.18 & GBP 1,012.03 per ounce
28 July: USD 1,341.30, EUR 1,208.78 & GBP 1,017.64 per ounce
27 July: USD 1,320.80, EUR 1,200.21 & GBP 1,007.77 per ounce
26 July: USD 1,321.25, EUR 1,199.56 & GBP 1,006.40 per ounce
25 July: USD 1,315.00, EUR 1,196.91 & GBP 1,000.32 per ounce
22 July: USD 1,323.20, EUR 1,199.22 & GBP 1,005.10 per ounce

Silver Prices (LBMA)

02 August: USD 20.71, EUR 18.51 & GBP 15.65 per ounce
29 July: USD 20.04, EUR 18.03 & GBP 15.20 per ounce
28 July: USD 20.41, EUR 18.42 & GBP 15.52 per ounce
27 July: USD 19.58, EUR 17.81 & GBP 14.95 per ounce
26 July: USD 19.68, EUR 17.89 & GBP 15.00 per ounce
25 July: USD 19.41, EUR 17.66 & GBP 14.77 per ounce
22 July: USD 19.70, EUR 17.87 & GBP 15.03 per ounce

Recent Market Updates

– Trump, Clinton, “Ugliest” Election Coming – Gold’s “Summer Doldrums” Prior To Resumption of Bull Market
– Gold Bullion Up 1.6%, Silver Surges 3.7% After Poor U.S. Data and Dovish Fed
– Marc Faber: Invest 25% Of Investment Portfolios In Gold Bullion
– “Could Not Invent A More Bullish Story For Gold Bullion”
– Gold In Bull Market – “Every Reason For It To Continue” – Frisby In Money
– Is Gold Set To Hit $1,500 Per Ounce?
– Why Italy’s bank crisis could be a ‘ticking time bomb’
– Gold Holds Near Two-Week Low as Risk Appetite Rises on U.S. Data
– IMF Scraps Forecast for Global-Growth Pickup on Brexit Fallout
– Gold, Trump and Rates: Bank That Foresaw Rally Flags $1,500
– Gold Lower After Central Bank’s Surprise Move
– “We Are On the Cusp of an Explosion in the Silver Price”
– Stocks Rally – Is Brexit Systemic Risks Contained?
– Britain has a new prime minister – here’s what that means for you

Mark O’Byrne
Executive Director

end

My goodness, these guys are stupid as they will lose their physical gold for interest:

(courtesy Andrew Topf/Mining.com/GATA)

Indians plow 2.95 tonnes of gold into banks

Section:

By Andrew Topf
Mining.com, Vancouver, British Columbia, Canada
Sunday, July 31, 2016

The Indian government’s plan to incentivize households to hand their gold over to banks in return for interest payments appears to be working.

According to The Indian Express, the government collected 919 crore (US$137.8 million) during the fourth tranche of its Sovereign Gold Bond program, rolled out in November 2015.

“The amount realised through the fourth tranche, at around Rs 919 crore, is the highest achieved as yet. The previous highest was Rs 746 crore in the second tranche, when the issue price was only Rs 2,600 per gram of gold. This was mobilised through over 1.95 lakh applications representing around 2.95 tonnes of gold,” a finance ministry statement said.

The first three tranches of the Sovereign Gold Bond program raised 1,318 crore (US$197.6 million). The fourth tranche was launched July 18-22, in consultation with the Reserve Bank of India. …

… For the remainder of the report:

http://www.mining.com/indians-plow-2-95-tonnes-gold-banks/

end

Morgan Stanley warns that the USA is not going to raise interest rates soon as thus they warn that the dollar is set to fall by at least 5% in the next few months and that must be good for gold

(courtesy Bloomberg news/GATA)

Morgan Stanley warns currency traders that worst is still to come for dollar

Section:

By Rebecca Spalding
Bloomberg News
Saturday, July 30, 2016

The dollar is set to fall 5 percent in the next few months, the Federal Reserve isn’t raising interest rates any time soon, and U.S. economic data is only going to get worse.

That’s what Morgan Stanley chief global currency strategist Hans Redeker told clients in a note published Thursday, citing in-house indicators showing U.S. domestic demand is set to fade in the coming months.

It didn’t take long for markets to prove him prescient. The greenback fell 1.3 percent Friday, capping its worst week since April, after the Commerce Department said U.S. second-quarter gross domestic product advanced at about half the rate economists had forecast. …

… For the remainder of the report:

http://www.bloomberg.com/news/articles/2016-07-30/morgan-stanley-warns-c…

end

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

 
 

:

1 Chinese yuan vs USA dollar/yuan SLIGHTLY UP to 6.6356 (  SMALL REVALUATION NORTHBOUND  /CHINA UNHAPPY TODAY CONCERNING USA DOLLAR RISE/MORE $ USA DOLLARS LEAVE CHINA/OFFSHORE YUAN NARROWS TO 6.6409) / Shanghai bourse  up 17.89 OR 0.61%   / HANG SANG CLOSED for holiday

2 Nikkei closed DOWN 244.32  OR 1.47% /USA: YEN FALLS TO 101.77

3. Europe stocks opened ALL IN THE RED    /USA dollar index DOWN to 95.44/Euro UP to 1.1191

3b Japan 10 year bond yield: RISES TO  -.075%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 101.77

3c Nikkei now JUST BELOW 17,000

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

3e WTI::  40.57  and Brent: 42.85

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./“HELICOPTER MONEY” ON THE TABLE 

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund RISES to -.037%   German bunds BASICALLY negative yields from  10+ years out

 Greece  sees its 2 year rate RISE to 8.25%/: 

3j Greek 10 year bond yield RISE to  : 7.83%   (YIELD CURVE NOW  FLAT TO INVERTED)

3k Gold at $1358.15/silver $20.68(6:45 am est)   SILVER FINAL RESISTANCE AT $18.50 BROKEN 

3l USA vs Russian rouble; (Russian rouble UP 39/100 in  roubles/dollar) 66.59-

3m oil into the 40 dollar handle for WTI and 42 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 SMALL REVALUATION UPWARD from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 101.77 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9859 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0810 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p BRITAIN VOTES AFFIRMATIVE BREXIT

3r the 10 Year German bund now NEGATIVE territory with the 10 year RISES to  -0.037%

/German 10+ year rate BASICALLY  negative%!!!

3s The Greece ELA NOW a 71.4 billion euros,AND NOW THE ECB WILL ACCEPT GREEK BONDS (WHAT A DISASTER)

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 1.554% early this morning. Thirty year rate  at 2.301% /POLICY ERROR)

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

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

HELICOPTER MONEY STILL ON THE TABLE/JAPANESE STIMULUS PLAN DISAPPOINTS

Global Shares Slide As Japan Stimulus Disappoints, RBA Underwhelms, Italy Bank Fears Return

European stocks slid to a two-week low amid mixed earnings, as bank stocks extended yesterday’s decline as fears that Italy is not “fixed” have reemerged sending both UniCredit and Monte Paschi tumbling, not helped by an adverse market reaction to a disappointing Japanese fiscal stimulus announcement, while the AUD first dropped but then jumped after the RBA’s priced in rate cut was announced, seen as underwhelming.

As expected by both economists and the market, in the main central bank event overnight, the RBA cut rates by 25 bps to a new record low of 1.5%, however as Citi analysts quickly observed, much of RBA’s statement today – widely seen as hawkish – was a reproduction of the July comments, with no mention of further easing guidance, adding that the RBA appears to be sanguine about the housing market. “We wouldn’t be surprised if AUD ended up higher following the RBA’s interest rate cut,” Todd Elmer, Singapore-based strategist at Citigroup writes in note. He was right. After the AUD, which had already seen downward pressure ahead of RBA, dropped in kneejerk reaction to the rate cut, it promptly rebounded and was trading at session highs of moments ago in what has been a largely wasted “buy the currency news” rate cut.

And speaking of reacting to the news, the other notable overnight event was Japan’s announcement of its JPY28 trillion stimulus plan, which however as we warned last week proved to be underwhelming, and as a result Japanese shares fell the most in almost four weeks to lead a slump in Asian equities, while the yen strengthened against all of its major peers and Japanese bonds tumbled after a 10Y debt auction drew widest tail since March 2015, which coupled with fears that  that the BOJ may soon be phasing out QE, sent 10Y yields spiking higher by 8.5bp post-auction, almost back to 0%, and putting selling pressure on both US and European yields.

AS Bloomberg put it, the Japanese yen appreciated to the strongest level in three weeks against the dollar as extra spending announced by the government amounted to only a small part of a headline number flagged by Prime Minister Shinzo Abe last week. The currency climbed against all except one of its 16 major peers as Japan’s government announced 4.6 trillion yen ($45 billion) in extra spending for the current fiscal year, as Abe seeks to bolster the economy without abandoning targets for improving fiscal health. The measures are part of what Abe referred to in a speech last week as a 28 trillion yen stimulus package. Faltering stock markets also caused investors to shun riskier assets in favor of havens such as the yen.

The yen appreciated 0.7 percent to 101.70 per dollar at 10:33 a.m. in London. It touched 101.46 per dollar earlier, the strongest level since July 11.

“The acknowledgment is that the fact the fiscal package is not going to be the panacea to the ills of Japan in terms of emerging from deflation.” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “We are seeing risk appetite moving sharply on the defensive and accordingly we are seeing a flight to safety which will invariably favor a lower dollar-yen.”

The currency jumped last week as the Bank of Japan enlarged a program of buying exchange-traded funds, while keeping its negative interest rate unchanged and avoiding an increase in raising the target for the monetary base. “The headlines were 28 trillion yen, but the actual new spending will only be a quarter of that,” said Mansoor Mohi-uddin, a Singapore-based strategist at Royal Bank of Scotland Group Plc. “So another sign following Friday’s BOJ decision, policy makers aren’t beating expectations.”

Shifting to Europe, Commerzbank AG led Europe’s banking shares lower as Germany’s second-largest lender tumbled 8% after it scrapped its profit target for this year and forecast a drop in earnings.  In Italy, UniCredit plunged 5.4% following yesterday’s 9.4% drop, and was again halted as Il Messaggero reported that the lender
may consider a capital increase of as much as 8 billion euros.

“There doesn’t seem to be much confidence for banks making profit in this low-cost environment,” said Guillermo Hernandez Sampere, the head of trading at MPPM EK. “Oil prices were one of the main subjects in Q1 and now it’s back, but the situation hasn’t changed. There’s still too much being produced by the large oil countries.”

The MSCI All-Country World Index fell 0.3% in early trading, while the Stoxx Europe 600 Index slipped 1 percent. Royal Dutch Shell Plc lost 2 percent, pulling crude producers lower. Metro AG dropped 6.9 percent after reporting third-quarter sales and profit that missed estimates because of swings in currencies. Deutsche Lufthansa AG declined 2.6 percent after saying that average ticket prices fell in the second quarter due to a combination of lower demand stemming from terrorist attacks and excess capacity across the airline industry. S&P 500 futures dropped 0.2%, signaling U.S. equities will extend losses into a second day after erasing gains in late trading Monday, while the Dow’s losing streak – 6 days in a row as of yesterday –  in over a year may continue

Oil stayed near $40 a barrel, after a slide that pushed it into a bear market on Monday. West Texas Intermediate crude was 0.2 percent higher at $40.13 a barrel after sliding to its lowest settlement price since April 18 on Monday. Futures have retreated 22 percent from a peak reached in June, meeting the common definition of a bear market.

On today’s docket, investors will look to economic data which includes releases on personal income and spending forecast to show continued expansion for June. Earnings will also be in focus, with companies including Pfizer Inc. and American International Group Inc. posting results. About 57 percent of S&P 500 members that have reported so far beat sales projections, while 80 percent topped profit forecasts. Analysts estimate profit at S&P 500 companies fell 3.2 percent in the second quarter.

Market Snapshot

  • S&P 500 futures down 0.3% to 2159
  • Stoxx 600 down 1.2% to 336
  • FTSE 100 down 0.8% to 6642
  • DAX down 1.4% to 10186
  • German 10Yr yield up 3bps to -0.07%
  • Italian 10Yr yield up 2bps to 1.2%
  • Spanish 10Yr yield up 3bps to 1.05%
  • S&P GSCI Index up 0.2% to 333.2
  • MSCI Asia Pacific down 0.7% to 136
  • Nikkei 225 down 1.5% to 16391
  • Hang Seng closed amid typhoon
  • Shanghai Composite up 0.6% to 2971
  • S&P/ASX 200 down 0.8% to 5541
  • US 10-yr yield up less than 1bp to 1.53%
  • Dollar Index down 0.31% to 95.42
  • WTI Crude futures up 0.1% to $40.12
  • Brent Futures up 0.2% to $42.24
  • Gold spot up 0.5% to $1,360
  • Silver spot up 0.7% to $20.58

Top Global News

  • Australia Cuts Rates to Record Low to Spur Inflation, Jobs
  • Carney Quantifies Gloom With BOE Stimulus Debate at Crunch Point
  • Infineon Drops After Earnings Disappoint on Smartphone Weakness
  • Treasuries drop in overnight trading, global equities mostly lower and commodities rally as Australia’s central bank cuts rate to record low 1.5% and 10-year JGB auction drew widest tail since March 2015.
  • Japan’s government announced 4.6 trillion yen ($45 billion) in extra spending for the current fiscal year, as Prime Minister Shinzo Abe seeks to bolster the economy without abandoning targets for improving fiscal health
  • The Bank of Japan is unlikely to wind back its record monetary stimulus after completing a review of its policy, Governor Haruhiko Kuroda said
  • Six weeks after Britain’s vote to leave the European Union sent shock waves across the nation, on Thursday the Bank of England governor will present a detailed assessment of what it means for the economy as well as his plan of action
  • Euro-denominated investment-grade notes had their biggest monthly returns in four years in July as the ECB bought more and more corporate and sovereign bonds and drove yields lower
  • Around the world, governments are planning fresh spending to boost growth and support wages, heeding the advice of those who have argued that economies need the jolt as society ages and productivity sags
  • Investors managing $163 billion are throwing their weight behind what BlackRock Inc. dubbed the “great migration’’ to emerging-market debt in search of antidotes to the near-zero yields offered by their staple assets
  • Saudi Arabia may be embarking on a new phase in its efforts to stave off the worst of a cash crunch among its banks as its central bank offered domestic lenders about 15 billion riyals ($4 billion) in short-term loans
  • Fed’s Kaplan stated in speech this morning, “In light of the decline in the neutral rate, using monetary policy to help manage the economy has become more challenging”

* * *

Looking at regional markets in detail, Asia traded mostly lower amid initial cautiousness ahead of the RBA rate decision and following the weakness seen in Wall St., where declines in energy to bear market territory and discouraging data dampened sentiment. This saw Nikkei 225 (-1.5%) underperformed as participants awaited Japan’s stimulus announcement which was expected to be around JPY 28TN (later confirmed), which some analysts feel may not be enough to have a sustained impact. ASX 200 (-0.8%) traded subdued with a widely expected RBA rate cut failing to provide counterbalance the commodities led weakness. Shanghai Comp (+0.6%) saw indecisive amid mixed earnings, while Hong Kong markets remained closed due to a typhoon. 10yr JGBs continued to feel the repercussions from last week’s BoJ disappointment with prices down nearly a point while a poor 10yr auction, which saw the b/c and lowest accepted price decline from prior and a wider tail-in-price, further exacerbated losses in the paper.

Top Asian News

  • World Equity Traders Flip Switch From Hate to Love for China
  • Hong Kong Closes Stock Market Amid Typhoon
  • Australia Cuts Rates to Record Low to Spur Inflation, Jobs
  • Honda Profit Exceeds Estimates as Sales Climb in U.S., China
  • Nintendo Benefits From Pokemon Go Halo as 3DS Game Sales Double
  • China Said to Consider Merging Xinxing Cathay, First Heavy
  • Uber Said to Plan Boosting Resources for Southeast Asia, India
  • Noble Group Sinks in Singapore, Triggering Query From Exchange

European equities have slipped this morning with sentiment dampened by fears over the banking sector, in particular, the concerns surrounding Italian banks NPLs. As such, shares in UniCredit had been halted having fallen over 5% after reports suggest that the bank is considering raising EUR 7-8bIn worth of capital. While Monte Paschi (-8.1%) shares yet again underperform as some investors doubt the viability of a bail out for the bank. Elsewhere, the slew of poor earnings from the European banking sector continues, with Commerzbank (-8.2%) the latest bank to announce that profits have been hampered by the low interest rate environment. Furthermore, UK banking names are also feeling the squeeze amid an extension to the PPI deadline to 2019 (2018 was the originally planned date) and the UK property sector has also been hampered by the latest UK construction PMI, which although beat expectations, revealed the steepest fall in commercial building for over 6.5yrs. Another contribution to the downside in EU bourses has been the declines observed in the oil complex with WTI crude futures breaking back below USD 40. Moreover, fixed income markets were initially pressured most notably stemming from the pickup in JGB yields which rose for a 4th consecutive session after last Friday’s disappointment from the BoJ and a tepid reception to the latest Japanese stimulus package. Furthermore, a disappointing 10yr JGB auction also acted as a drag on prices with UK investors also concerned ahead of the UK DMO’s 2022 auction which was said to be one of their more illiquid offerings by the debt agency. However, Gilts saw a move higher in the wake of the auction which drew an impressive b/c of 2.28. Additionally, despite the initial downside, Bunds have recouped some losses after finding support at the 167.00 level allied with the softness across the oil complex.

Top European News

  • BMW Pledges to Stay Atop Luxury-Car Market as Sales Lag Mercedes
  • Metro Sales, Profit Miss Estimates on Currency and Costs
  • Commerzbank Scraps Full-Year Target, Sees Decline in Profit
  • Infineon Drops After Earnings Disappoint on Smartphone Weakness
  • Lufthansa Sees Difficult Second Half as Terrorism Damps Demand
  • Top Airbus A320neo Buyer IndiGo Considers Slowing Deliveries
  • U.K.’s May Wants ‘Economy Firing’ in Post-Brexit Industrial Plan

In FX, the yen jumped 0.7 percent to 101.61 per dollar as the government announced 4.6 trillion yen ($45 billion) in extra spending for the current fiscal year, accounting for about a quarter of the total amount Prime Minister Shinzo Abe flagged in a speech last week. “The market is buying the rumor and selling the fact, so the yen has rallied after the headlines,” said Mansoor Mohi-uddin, a Singapore-based strategist at Royal Bank of Scotland Group Plc. The announcement was another sign, after the central bank’s meeting last week, that officials are failing to beat expectations, he said. The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 peers, fell for the fifth time in six days. The Australian dollar advanced 0.4 percent to 75.48 U.S. cents, reversing earlier declines. While Australia’s economy has grown faster than the central bank predicted, core inflation and wage growth are both at record lows. The MSCI Emerging Markets Currency Index retreated 0.1 percent a day after it reached its highest level since July 2015. Malaysia’s ringgit led declines, weakening 0.8 percent, the most since July 18. The country loses 450 million ringgit ($111 million) in annual income for every $1 drop in oil and the nation derives about a fifth of its revenue from energy-related sources, according to government data. South Africa’s rand and Mexico’s peso both dropped 0.5 percent.

In commodities, West Texas Intermediate crude was 0.2 percent higher at $40.13 a barrel after sliding to its lowest settlement price since April 18 on Monday. Futures have retreated 22 percent from a peak reached in June, meeting the common definition of a bear market. While American crude and gasoline inventories are forecast to have declined last week, they’ll likely remain around the highest seasonal level in at least two decades. Nigeria has also resumed payments to former militants as the government seeks to establish a cease-fire after attacks cut the country’s oil output to the least since 1989. Factions in Libya have reached a deal to re-open oil terminals. Gold headed for its longest stretch of gains since early July, advancing 0.4 percent to $1,366.33 an ounce. Copper advanced 0.3 percent, while aluminum gained 0.1 percent and nickel rallied 0.8 percent.

Bulletin Headline Summary From RanSquawk and Bloomberg

  • European equities trade lower across the board as financial names continue to be pressured amid concerns around the Italian banking sector and soft Commerzbank earnings
  • Elsewhere, Japanese Prime Minister Abe’s cabinet have now approved the JPY 28tr1 stimulus package and the RBA cut rates by 25bps as expected
  • Looking ahead, highlights include US Consumer Spending, PCE Deflator, API Crude Oil Inventories, earnings from BMW, AIG, P&G and Pfizer

DB’s Jim Reid concludes the overnight wrap

The first day of August didn’t bring much joy to markets yesterday as another steep leg lower for Oil – which has been wobbling in the background for a while now – largely dictated the weaker sentiment. Yesterday WTI tumbled -3.70% and at one stage dipped below $40/bbl before steadying to finish a shade above that by the close. You have to go back to late April to find the last time Oil went below $40/bbl. It now means that since touching an intraday high of $51.67/bbl on June 8th, Oil has slid an impressive -22.25% after accounting for the very modest bounce back (+0.32%) this morning. The weekend news that Libya had provisionally reached a deal to reopen three eastern ports appeared to be the main culprit of the latest leg lower, while Saudi Aramco also announced that it had cut its export prices into Asia by the most in 10 months.

Equity markets started the new month on the back foot as a result, although declines in US markets were fairly modest as tech and healthcare names stood firm. The S&P 500 closed -0.13% with the energy component down over -3% although the index did actually briefly reach a new record high early in the session. European equities were weaker. The Stoxx 600 fell -0.59% and the Italian FTSE MIB was down a steep -1.73%. As you’ll see below much of that had to do with Banks. Meanwhile the US CDX HY index was 15bps wider reflecting that energy weakness. The index is now at the widest level since July 7th.
Meanwhile, we wondered in yesterday’s EMR how long the relief rally in European bank equities would last after the results of the stress tests given that profitability concerns are no nearer to being addressed. The answer was 6 minutes as an immediate +1.27% rally in the Euro Stoxx 600 banks index reversed not long after the open and ended the day closing -1.79% lower. In fact of the 48 banks in the index, just 6 finished up on the day and it was peripherals in particular that underperformed with the likes of Unicredit (-9.40%), Bank of Ireland (-6.49%), Banco Popolare di Milano (-6.22%) and UBI (-6.20%) sharply lower. While some of this may reflect the general level of scepticism over Friday’s stress tests it’s likely that the weakness in Italian banks in particular may be down to renewed fears that more recaps are needed in the sector.

Financials credit did however hold in much better. While the iTraxx senior fins index ended up 1bp wider, the iTraxx sub-financials index was actually 2bps tighter on the day. In fact a quick glance at some of the AT1 cash bonds suggests that the asset class outperformed (Unicredit, Intesa, Lloyds and Barclays as examples were all up 1pt or so). This is probably a reflection of the comfort over capital levels in banks (current and that some will be forced higher) after the stress tests.

Looking at banks on the other side of the pond, last night we saw the latest quarterly Fed senior loan officer survey. We always look to the corporate and industrial (C&I) number as it’s well correlated with future corporate defaults. The results showed the fourth quarter of net tightening even if the figure of 8.5 was improved on the 11.6 seen last quarter. In the 26 year history of the survey we’ve never seen two or more successive quarters of net tightening without it eventually leading to a recession. It’s quite a cyclical series. However the amount of net tightening seen so far is still mild relative to recessionary levels. The bulls would argue that the oil and gas sector has been the main negative driver. However losses in one or two sectors can cause banks to tighten the spigots elsewhere so it’s still relevant.
Staying with credit, yesterday saw the latest weekly ECB CSPP numbers (as of 29 July 2016) and they’ve continued to make impressive progress considering the time of year even if last week did mark the second successive week of sub €300m daily purchases. They settled €1.365bn last week to leave the grand total at €13.214bn. This implies €273m of daily purchases last week against the average run rate of €367m since early June.

The monthly report is also out and it shows that 94.1% of the total now is from secondary with only 5.9% from primary. The number for July showed a slightly higher 7.8% from primary. Whilst we’ve been pretty bullish on the likely impact of the ECB on spreads it’s fair to say that they will likely need to up the amount of primary they buy as the year progresses if they want to hit their targets. Secondary will get harder and harder once all the loose bonds are bought.

Changing tack now and switching over to Asia where markets are eagerly awaiting the latest out of Japan and specifically the confirmation and details from the Government of PM Abe’s fiscal stimulus plan. As we type there’s still no word yet, with the Nikkei (-0.68%) and Topix (-0.78%) both in the red owing largely to the weakness stemming from the move in oil. The Yen is 0.20% weaker while JGB yields continue to march higher. The 10y is currently 8bps higher. Elsewhere bourses in China are little changed and the Kospi (-0.45%) and ASX (-0.41%) are also slightly lower. The Hang Seng index is closed following a typhoon warning. Also in focus this morning is the RBA which as expected cut the cash rate by 25bps to a record 1.5%. The Aussie Dollar (-0.25%) is a touch softer post the news.

Moving on. Yesterday’s economic data didn’t move the dial all that much. Firstly we got confirmation of the final July manufacturing PMI’s. The Euro area reading was revised up 0.1pts to 52.0 helped by an upward revision to Germany. Notable was the further downgrading of the UK data to 48.2 (from 49.1). The wider periphery was also weaker last month. Indeed the PMI for Italy declined 2.3pts to 51.2 (vs. 52.5 expected) while Spain fell 1.2pts to 51.0 (vs. 51.5 expected). In the US the final manufacturing PMI was unrevised at 52.9 which represents a 1.6pt rise from June. Meanwhile the ISM manufacturing last month fell 0.6pts to 52.6 (vs. 53.0 expected). New orders were little changed at 56.9 while production rose (+0.7pts to 55.4) however the employment component did fall back below 50 to 49.4 (from 50.4) which is notable ahead of Friday’s employment report. The other data yesterday was a much softer than expected construction spending print for June (-0.6% mom vs. +0.5% expected).

Interestingly despite the fairly underwhelming data and leg lower for Oil, the US Dollar was a smidgen higher yesterday while US Treasury yields rose and are back to more or less pre-GDP report levels. Indeed 10y yields rose 6.8bps yesterday and much of that appeared to be attributed to comments from the NY Fed’s Dudley. Notable given his influence as a more dovish member of the committee and who’s views are seen as aligning with those of Yellen, Dudley said that while ‘directionally, the movement in investor expectations towards a flatter path for US short term interest rates seems broadly appropriate’, it is however ‘premature to rule out further monetary policy tightening this year’. He went on to add that should the incoming data validate his view of the outlook, then US monetary policy would need to move at a faster pace than implied by futures markets. Dallas Fed President Kaplan (moderately hawkish) also spoke yesterday although his comments didn’t offer a whole lot of new info. Kaplan said that September is ‘very much on the table’ but that we’ll have to see how events unfold.

Before we jump into the day ahead, earnings took a bit of a back seat yesterday given the fairly quiet calendar, however that gives us a good chance to take stock of where we’re up to now. Based on Friday’s close we’ve now had 316 S&P 500 companies report with 63% beating on EPS with a weighted average beat of 2.4% (20% have missed). On the sales side, 34% have beat with a weighted average beat of 0.9% and 29% have missed, with the remainder in line. Despite the earnings beats, EPS YoY growth is now -2.2% for the index, although that jumps to +2.8% ex-energy. Sales YoY growth is -0.6% and +2.8% ex-energy. We’re still seeing the same pattern of analyst EPS cuts during the quarter prior to reporting however. While it’s not quite to the same extent as Q1 (c.-9%) or the 5y average (c.-4.2%), earnings have still been cut c.-3% this quarter which is aiding the beat ratio. We highlight that this data is based off DB’s David Bianco’s US equity insights publication and he also adds that analysts are continuing to cut Q3’16 EPS during this quarter. Indeed bottom up consensus EPS for next quarter is $30.40, down from $30.85 seen on 1st of June.

Looking at today’s calendar it’s a fairly quiet start to the day this morning with Euro area PPI for the June the sole release. Over in the US this afternoon we’ll get the core PCE and deflator readings for June along with the personal income and spending report. There shouldn’t be too much in this report because the figures were already incorporated into the Q2 GDP report on Friday. We’ll also get the ISM NY reading, while later this evening it’s worth keeping an eye on the July vehicle sales data. Our US economists note that these should rise but only incrementally compared to June. In the past the trend in vehicle sales has tended to lead the trend in overall consumer spending and so if vehicles sales continue to moderate, it would provide early evidence that we have likely seen the peak in consumption growth for the cycle. One to keep an eye on. Away from the data the Fed’s Kaplan is due to speak again (11.15am BST) while earnings will also be back in the limelight. Today we’ve 40 S&P 500 companies reporting including Pfizer and Procter & Gamble (both prior to the open). In Europe BMW is due to report.

ASIA MARKETS

i)Late  MONDAY night/TUESDAY morning: Shanghai closed UP 17.89 POINTS OR 0.61%/ /Hang Sang closed for holiday. The Nikkei closed down 244.32 POINTS OR 1.47% Australia’s all ordinaires  CLOSED down 0.84% Chinese yuan (ONSHORE) closed UP at 6.6356/Oil rose to 40.61 dollars per barrel for WTI and 42.85 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.6409 yuan to the dollar vs 6.6356 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS SLIGHTLY AS CHINA TRIES TO STOP MORE USA DOLLARS LEAVING THEIR SHORES  

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) JAPAN ISSUES

Japanese bonds prices crashed as yields rose as investors are losing faith in the ability of government to stave off deflation.

(courtesy zero hedge)

Japanese Government Bonds Are Crashing

Ahead of tonight’s 10Y JGB auction and reportedly the unleashing of Abe’s fiscal stimulus, it appears the world’s investors are losing faith in the Bank of Japan’s buying power and the MoF’s credibility asJapanese government bonds are collapsing for the 3rd day in a row. With the biggest crash in prices (JGB Futures) since May 2013 (back to 5 month lows), yield across the entire JGB curve are exploding higher since Kuroda punted last week and questioned monetary policy effectiveness.

As the world awaits Japan’s over-promise and under-deliver fiscal stimulus…

  • *SAKAKIBARA SAYS HE DOESN’T THINK ABENOMICS HAS FAILED
  • *JAPAN FISCAL STIMULUS PLAN ALREADY PRICED IN, SAKAKIBARA SAYS
  • *ABE STIMULUS PLAN WON’T HAVE A MAJOR IMPACT, SAKAKIBARA SAYS

“The fiscal spending will probably include public works spending, so we can expect something of an economic boost,” said Masaki Kuwahara, an economist at Nomura Securities Co. in Tokyo. But such growth may not be sustainable. “What Japan needs to do is to spur more demand and increase productivity by pushing through deregulation, increasing the nation’s potential growth rate.”

It appears demand for direct monetization of the debt and questioning BoJ capabilities (and therefore independence)…

  • *JAPANESE GOVT GROWS SKEPTICAL OF BOJ’S INFLATION TARGET: NIKKEI
  • *DLR/YEN WILL SLOWLY APPRECIATE TO 100 YEN: SAKAKIBARA
  • *HAMADA REITERATES OPPOSITION TO HELICOPTER MONEY
  • *HAMADA FAVORS RECOGNIZING DE-FACTO DEBT MONETIZATION
  • *HAMADA FAVORS JAPAN PROCLAIMING A DEBT-MONETIZING POLICY

One of Prime Minister Shinzo Abe’s top advisers says he favors a declaration by Japan’s policy makers that their current measures are monetizing the nation’s debt.

Some people say that Japan has “already adopted ad hoc monetization of debt, and that to improve public confidence the government and the BOJ should recognize that they are doing already a combination of fiscal stimulus and de facto monetization,”Koichi Hamada, a former Yale University professor, said in an e-mailed response to questions.

“Given this long deflation and liquidity-trap type of behavior of Japanese banks and firms, I am now inclined to join the ranks” of those commentators, Hamada said. That view says “piecemeal and de facto monetization should be rather highlighted to change investors’ psychology,” he said.

Hamada declined to comment specifically on the Bank of Japan’s July 29 decision to conduct a “comprehensive” assessment of its measures at its next meeting, or whether it’s likely to expand stimulus further at that gathering, which is scheduled for Sept. 20-21.

The adviser also reiterated his opposition to “helicopter money.” “If one institutionalizes helicopter money or monetization of the new debt, the economy loses the safeguard against inflation.”

Through its easing to date, the BOJ has gobbled up more than one third of outstanding Japanese government bonds, and some observers don’t anticipate that debt will ever return into the hands of private investors. BOJ officials in the past debated a strategy of maintaining a large balance sheet — at least back in 2014, according to people familiar with the talks at the time. The context then was to avoid any spike in bond yields when the central bank reached its inflation target.

JGB yields are rising on concerns that BOJ’s planned comprehensive assessment of its policy, announced by Kuroda last week, will set back its monetary-easing stance…

Sending bond prices reeling…

This is the biggest 3-day drop since May 2013.

Is this the market pushing back demanding BoJ action… or the rebirth of the widowmaker trade?

 

end

 

Is the Bank of Japan going to do a U turn with respect to Abenomics.  Are they ready to scrap monetary policy for fiscal policy.  If so, the yen will surge, risk assets will plummet (yen carry trade) and Japanese bond yields rise.

(courtesy zero hedge)

Why Japan’s “Massive” ¥28 Trillion Fiscal Stimulus Plan Was A Disappointment

Last week, when details of Japan’s “massive” JPY28 trillion stimulus plan emerged, we pointed out the “minor” snagthat assured the plan would be a disappointment: only about JPY7 trillion of this amount would be in the form of new spending. Overnight, Japan finally revealed the full plan, and as expected it was met with significant disappointment by the market, which sent the Yen soaring to new multi-week highs, with the USDJPY tumbling under 102 which, together with a very poorly received 10Y auction, sent Japanese bond yields surging.

So what was in the plan? 

First the good news: as the FT writes, “Shinzo Abe has put Japan at the forefront of a global shift away from austerity and back towards looser fiscal policy as he launched a new ¥4.6tn ($45bn) stimulus to boost a struggling Japanese economy.” 

However, as previewed here last week, while Abe proclaimed a total package of ¥28.1tn, the actual new government spending is ¥6.2tn, of which ¥4.6tn — 0.9 per cent of gross domestic product — will fall in the current fiscal year. The package includes ¥2.5tn in welfare spending, ¥1.7tn for infrastructure, ¥0.6tn for small and medium-sized businesses hit by “uncertainty due to Brexit”, and ¥2.7tn for reconstruction after an earthquake on the southern island of Kyushu earlier this year.

The Japan Ministry of Finance released the following breakdown of key stimulus component:

As the FT reports, the package marks a return to the basics of the prime minister’s Abenomics program, which was supposed to combine monetary and fiscal stimulus, as Japan wrestles with weak consumption and the drag on exports from a stronger yen. “The key word is investment in the future,” said Mr Abe as he announced the decision in cabinet. He exhorted ministries to put the package into effect as fast as possible.

At the heart of the package are measures to help low-income pensioners and bringing forward the completion of a maglev train line from Tokyo to Osaka by eight years using soft government loans.

“There was no surprise at all,” said Daiju Aoki, an economist at UBS in Tokyo. “Last year we had ¥3.3tn and this year it will be ¥4.6tn,” he said, arguing that the additional impetus to growth might be as little as 0.1 or 0.2 per cent of GDP.

Bloomberg adds that a key part of the spending on infrastructure will be to help double the number of tourists visiting the country, speed up the construction of a magnetic levitation line and aid building projects overseas. Japan is aiming to double the number of overseas visitors to 40 million by the time of the Tokyo Summer Olympics in 2020. The government will also provide loans to help bring forward the completion of a Nagoya-Osaka maglev link, originally scheduled to open in 2045, by eight years, it said.

Even so, there was few precise details: the package contains a laundry list of measures for ministries to spell out later,  but the welfare spending is expected to include childcare subsidies and a payment of ¥15,000 ($147) each for 22m low-income individuals.

Direct spending on families and low-income households should find its way into consumption quickly. Some of the infrastructure spending may not take effect for years.

The underwhelming stimulus announcement comes just days after the Bank of Japan itself disappointed markets with a modest addition to its monetary stimulus last week, in which it only upping the pace of stock market purchases to ¥6tn a year (which however is equivalent to the Fed purchasing over half a trillion dollars worth of ETFs over 2 years).

Taro Aso, finance minister, sought to portray the stimulus as a joint effort with the BoJ, holding an unusual meeting with central bank governor Haruhiko Kuroda on Tuesday evening to discuss the details.

“We want to accelerate Abenomics in co-operation with the BoJ,” Aso told reporters. Kuroda sought to keep fiscal and monetary policy separate, saying only that there is “synergy between the stimulus measures and the accommodative financial environment”.

Regardless of how it was spun, the market’s reaction was less than favorable, with the Yen surging, while government bond yields rose sharply in Tokyo, with the 10-year yield close to positive territory for the first time since March.

Masamichi Adachi, senior economist at JPMorgan in Tokyo, said investors went into last Friday’s BoJ meeting expecting a large easing. They were disappointed when the BoJ did nothing but boost stock market purchases.

There is still hope: Kuroda also announced a “comprehensive review” of monetary policy to take place at the central bank’s next meeting in September. “There are basically two views in the market about what that means,” said Mr Adachi. Adachi thinks the review could lead to more stimulus. He takes Mr Kuroda at his word: the BoJ governor insists that the review is about how to reach 2 per cent inflation as fast as possible. However, as we reported last week, others think the review means the BoJ will admit defeat and accept it will take longer for inflation to get to target.

“Many Japanese bond investors think the comprehensive review means the BoJ is now facing a serious limit and it will step back and normalise to some degree,” Mr Adachi said.

A report overnight in the Nikkei confirmed this skepticism when it announced that “Tokyo grows skeptical of BOJ’s inflation target”, saying that the Japanese government is increasingly diverging from the Bank of Japan’s stance that 2% inflation can be achieved soon. “The central bank has targeted 2% price growth within a roughly two-year time frame since 2013, when Haruhiko Kuroda became governor. Yet the government sees inflation falling steadily instead.”

It concluded that the Finance Ministry and the Financial Services Agency meet regularly with the BOJ to ensure they are on the same page regarding the economic situation. Even at these meetings, some people are apparently arguing against the insistence of reaching 2% inflation in two years.

“The view is gaining ground in Tokyo that trying to force a sharp rise in stubbornly weak prices is unnecessary. A surge in prices amid stagnant wage growth could dampen consumer spending, as seen with the slump that followed the 2014 consumption tax hike.”

Several analysts joined the chorus of concerns over what may be a dramatic shift in Japanese strategy:

Hideo Suzuki (chief manager for forex & financial products trading at Mitsubishi UFJ Trust and Banking)

  • Uncertainty surrounding BOJ’s assessment will continue to weigh on JGBs
  • Investors doubt BOJ’s stance toward additional easing as the assessment will consider the negative-rate policy and the 2-year timeframe for reaching inflation target
  • May not want to take the risk of buying JGBs ahead of U.S. non-farm payroll data on Friday
  • Suggests buying on the dip if 10-year yield rises to 0% and 20-year yield to 0.3%

Satoshi Shimamura (head of rates & markets at investment strategy department at MassMutual Life Insurance)

  • Looks as if the market is pricing in an end to BOJ’s QQE
  • Increase in 10-yr yield may be capped at zero

Makoto Suzuki (senior bond strategist at Okasan Securities)

  • 10-yr JGB may trade around -0.1% until Sept. meeting, and could rise above zero percent should the market start to see risks over the central bank’s commitment toward easing
  • Sees it as unlikely BOJ will make a drastic change on monetary policy

* * *

Needless to say, if Abe has indeed thrown in the towel on monetary policy this would mark a stark transformation to Abenomics, which has over the past 3 years relied almost exclusively on monetary policy. If Japan is U-turning toward a fiscal stimulus driven response, it will result in an accelerating surge in the Yen, a plunge in risk assets and a spike in Yields, rekindling fears of Japan’s numerous VaR shocks over the years.

It remains to be seen if Abe is willing to take such a large gamble.

end

We now have contagion as bond yields rise across all global bond markets due to the rise in Japanese bond yields.

(courtesy zero hedge)

JGB Carnage Sparks Contagion Across Global Bond Market

Disappointing fiscal stimulus, loss of faith in The BoJ, and increasingly headless-chicken policymakers has sparked a sudden and severe rush for the exits from Japan’s government bond markets. 10Y JGB yields exploded from -30bps to almost 0bps in the last 4 days – the biggest crash in prices in over 3 years. This bloodbath is roiling the rest of the global developed bond market with Bund yield spiking (+12bps in last 2 days, almost back to 0), Swiss, UK, and Danish bonds are all blowing out, and Treasury yields up 14bps since Friday alone.

As the world’s third largest economy approved 13.5 trillion yen in fiscal measures on Tuesday, market sentiment remained bruised by the Bank of Japan’s decision last week to ramp up its bond-buying scheme by less than many investors has expected. A shift in policy towards fiscal stimulus from monetary easing is seen as having less direct impact on asset prices.

Japan’s 10-year bond yields rose more than 10 basis points to a 4-1/2-month high of minus 0.03 percent after tepid demand was seen for a 2.4 trillion yen ($23.42 billion) 10-year auction.

Euro zone bond yields were hauled higher by Japanese equivalents on Tuesday after a weak debt auction underscored investor disappointment at Tokyo’s apparent shift from monetary easing towards fiscal stimulus.

And Treasury yields are surging in the face of a dropping stock market…

With the Treasury curve steepening dramatically on the week…

This Japan’s worst bond swing in 3 years, and US’ Treasyr yield spike in the worst since Aug 2015.. with the biggest curve steepening since 2011.

The question is – who catches down to whom?

Charts: Bloomberg

 

end

How is this for confidence:  Japan grinds to a complete halt as officials issue a false earthquake alarm :

(courtesy zero hedge)

Japan Panics, “Grinds To A Halt” As Officials Issue Massive Earthquake False Alarm

With the government losing faith in the central bank’s capabilities, it seems perhaps they should not be throwing stones from their glass house. In a shockingly unsurprising snafu on Monday, trains ground to a halt, a mobile network became jammed, and thousands of citizens began to panic as Japan’s meteorological agency sent an alarm that a massive earthquake was about to strike the capital Kanto Region, home to more than 40 million people… before admitting the false alarm: “it’s an error on our part, we sincerely apologize.”

The warning was issued at 5:09pm local time on Monday, and as RT reports, quickly relayed to mobile apps that warned millions of Tokyo residents about an earthquake measuring 7 out of 7 on the scale used within the country – equivalent to 9.1 on the Richter scale, and as bad or worse than the Tohoku disaster of 2011.

Bullet trains began to stop services, in accordance with regulations, and NTT Docomo, the country’s largest mobile provider, reported that for 15 minutes the network was overloaded and went down.

But then – nothing happened.

“The quake that had been predicted has not taken place. It’s an error on our part. We sincerely apologize,” said Japan’s Meteorological Agency.

The agency said it warned most apps about the false positive, and they were able to cancel the alert in time, but one major app, Yurekuru, still sent out the alert.

Social media was quickly filled with reactions, from relief, to confusion to anger at officials and app developers.

“When I saw the Yurekuru app screen, I prepared to die,” read one tweet.

My earthquake app just told me a level 7 quake was coming. There was nothing but it gave me such a damn fright OMGGGGGG

This is not what you want from your Earthquake warning app. No quake, but I did just age a year.

Rumors circulated on social media about the possible causes, which included a lightning bolt, Godzilla and “Pokemon Go” congestion; but the organization said the erroneous reading was produced by electrical noise.
Interference from electrical currents disturbing the sensor or cable is
a frequent cause of false alarms in early-warning systems, though
equipment is usually designed to filter out the noise.

The mistake was “probably the biggest” misreading since the system started in October 2007, said Toshio Kusano, a spokesman for the Office of Earthquake and Tsunami Disaster Prevention at the agency.

 

end

b) REPORT ON CHINA

The following ought to be good for gold as China prepares for a “sudden, cruel and short war”.  They are doing massive naval drills in the East China  Sea:

(courtesy zero hedge)

China Prepares For “Sudden, Cruel And Short” War With Massive Naval Drill In East China Sea

As previewed last week, China further substantiated its displeasure with last month’s international tribunal ruling on the East China Sea according to which the country has no claim over the disputed territory, by holding a large-scale “live ammunition” drill in the East China Sea, which involved hundreds of ships and submarines from all three fleets of the People’s Liberation Army. The exercise involving China’s East Sea, North Sea and South Sea fleets practiced both offensive and defensive capabilities of the Chinese naval power. The exercise mobilized some 300 ships, dozens of fighter planes, and involved troops that are responsible for coastal defense radars, communications, and electronic warfare defense, daily newspaper The China Times reported.

“The drill is aimed at honing the assault intensity, precision, stability and speed of troops amid heavy electromagnetic influences,” said a navy statement released Monday. “An information technology-based war at sea is sudden, cruel and short, which requires a fast transition to combat status, quick preparation and high assault efficiency.”

As RT adds, the participating troops and vessels were divided into red and blue teams. The red side joint-assault group perfected skills in attacking the blue side, while the blue team had to use missiles and torpedoes to counterattack their enemy. The drills overall covered a wide range of combat scenarios including reconnaissance, early warning, long-range precision strikes and air and missile defense capabilities of the navy.

China’s Defense Ministry called the drills “routine” and not directed against any third party. The drills, however, comes at a time of heightened tensions in East Asia after an international arbitration tribunal last month rejected Chinese territorial claims to the South China Sea. Beijing rejected the decision by the Permanent Court of Arbitration in The Hague calling the ruling “waste paper.”

China continues to claim most of the South China Sea, through which more than $5 trillion in annual trade passes, and the naval drill was a demonstration that Beijing’s claims on the area have in no way been weakened. Furthermore, China has repeatedly warned against US intervention in the region, which continues to show its force through the freedom of navigation principle. “The People’s Liberation Army is ready,” one source with ties to the military told Reuters. “We should go in and give them a bloody nose like Deng Xiaoping did to Vietnam in 1979.”

As observed last week, Beijing also announced that it would hold a “routine” naval exercises in the South China Sea in September with Russia. “This is a routine exercise between the two armed forces, aimed at strengthening the developing China-Russia strategic cooperative partnership,” China’s defense ministry spokesman Yang Yujun told reporters. “The exercise is not directed against third parties.”

Translation: all exercises are directed squarely at the US and its Pacific rim allies, as geopolitical tensions in the area continue to build.

 

end

EUROPEAN AFFAIRS

All European banks are crashing today, including German banks Commerzbank,  and Deutsche bank, together with Credit Suisse, the latter two huge derivative players:

(courtesy zero hedge)

European Bank Bloodbath Destroys Stress Test Credibility

If the goal of the EBA Stress Tests was to reassure investors and regain confidence that ‘all is well’ in Europe’s increasingly fragile and systemically interconnected banking system, then it has utterly failed. The broadest European bank stock index is now down 7% from the post-stress-test spike highs, Italian banks are at record lows and being halted (despite Renzi’s promises), Commerzbank is struggling with capital raise chatter, and Deutsche Bank and Credit Suisse are tumbling after being booted from the Stoxx 50.

“We’re gonna need a bigger stress test”…

Credit Suisse is down almost 15% since Stress Test hope…

Commerzbank is collapsing too…

Commerzbank’s warning on profits and negative interest rates sent its shares to a record low on Tuesday.

While the results of the latest health check on regional banks by the European Banking Authority were greeted by investors with a sense of relief, the fact that the tests did not take into account interest rates staying negative for a long time has met with criticism.

“If rates stay this low, interest income will not be that much of a contributor to the capital base and from that angle, it’s difficult to see the banks being in a strong position,” Gerhard Schwarz, head of equity strategy at Baader Bank in Munich, said.

Deutsche Bank is only going to end one way… (hitting new record lows today)

For Deutsche Bank, it will be the first time since 1998 that it will no longer be a member of the STOXX 50.Shares of both were firmly in the red on Tuesday, with Credit Suisse down more than 5 percent and Deutsche off 3.5 percent. The decision by STOXX Ltd, which manages Europe’s top benchmark stock indexes, came following a near halving in value of Credit Suisse and Deutsche shares this year. Deutsche shares are now more than 88 percent below their 2007 peaks.

Banks in Europe are grappling with deteriorating profits, slumping investment income on the back of collapsing yields and higher regulatory costs.

And Italian Banks have given up all their immediate Stress Test gains...

So given all of this, one wonders how long it will be before the bank runs begin?

Charts: Bloomberg

 

end

GLOBAL ISSUES

Many have asked me how this mess will end. Mish Shedlock articulates the end game quite well.

(courtesy Mish Shedlock)

How And When Does This Mess End?

Submitted by Michael Shedlock via MishTalk.com,

A concerned reader wants to know if there are any precedents for the monetary printing we see today, and also when and how this all ends.

Hello Mish,

I wish to get your opinion as to how, or the possible sequence of end games to this bubble economy.

The Fed, ECB, and BoJ all print trillions of $$ to keep bubble inflated. Are there any historical times that match we have seen here?

Are there any measurements that would trigger an avalanche of storms in stock market and economy?

I just cannot believe this bubble will keep going perpetually.

Sean

What Cannot Go On Won’t

What cannot go on won’t, but that’s about all anyone can say at the moment.

There are no precedents for the trio of negative interest rates and massive amounts of QE by numerous countries simultaneously in a clear game of competitive currency devaluations.

Even if there was a precedent, there would not be any guarantees things would play out the same.

End Game Speculation

We are all speculating how this ends. No one can tell you because no one knows.

There are too many variables in play.

  • Does Japan or China start the mother of all currency wars?
  • Does Trump start a global trade war? Hillary?
  • Does the US get drawn into a China-Japan war over rocks in the South China Sea?
  • Will the 5-Star movement win in the next Italian election, then take Italy out of the eurozone?
  • What happens if Merkel unexpectedly bites the dust?
  • Can central banks keep markets levitated forever?

The answer to the last question is “no”, but it matters greatly if there is a crash starting tomorrow vs. a prolonged torture by a thousand cuts starting three years from now.

My best set of guesses is we have another huge deflationary asset bubble collapse at some point, that prime minister Abe goes totally crazy in Japan, that the eurozone does not survive intact, that yen-hedged Japanese equities soar, and gold is a safe haven in this mess (especially when central banks respond with still more QE madness).

The most painful scenario would likely be slow torture along the lines of a 10% correction this year, a 6% correction next year, then a 5% rally, followed by a 15% decline, a 7% rally and another 15% decline, etc., for a period of seven years or so.

At the end of seven or 10 years, investors would be down 40-50% without a crash. It would destroy pension plans. Heck, given 7.5% assumptions, even a flat market for seven years would destroy them.

Stocks are more ridiculously valued now than any time in history except 1929, 2007, and 2000 but know one knows when that matters.

Anyone who claims to know for certain how this ends is a fool.

 

end

 

A 1% rise in global bond interest rates will produce of loss of 3.8 trillion in investment grade sovereign bonds:

(courtesy Fitch/zerohedge)

 

Fitch Sees $3.8 Trillion Of Losses For “Investment-Grade” Sovereign Bond Investors

As we recently pointed out in a post titled “Why The Fed Is Trapped: A 1% Increase In Rates Would Result In Up To $2.4 Trillion Of Losses,” international monetary policy, which has consistently lowered short-term interest rates in a effort to reflate economies by pushing investors into risk assets, has unwittingly created yet another massive bubble in the long-end of investment-grade sovereign debt.  In our previous post, we pointed out that the artificially low short-term rates, while succeeding in creating a massive equity bubble, also served to push yield-hungry investors (skeptical of inflated equity valuations) into the long end of the curve, a fact that will result in substantial losses for those investors when interest rates ultimately revert back to long-term means.  Our analysis concluded that a 100bps shock to interest rates could result in market value losses of $2.4 trillion.

In an article posted today, Fitch agreed finding that a reversion of rates to 2011 levels for $37.7 trillion worth of investment-grade sovereign bonds could drive market losses of as much as $3.8 trillion. Fitch noted that unconventional monetary policies in Japan, Europe and the US, together with a surge in investor demand for safe assets, pushed sovereign yields to new lows in 2016, with $11.5 trillion in sovereign securities trading at a negative yield as of July 15.  An analysis of yields by maturity pointed out that the long-end of the curve has contracted by ~250bps over the past 5 years.

Sovereign Bond Yields

Fitch also pointed out, as we did, that losses would be greatest for European issuers where yields have contracted the most in a flight to “safety” and duration has been stretched as government issuers take advantage of low rates to stretch out maturity profiles and investors reach for yield.

Sovereign yields for European countries, particularly Italy and Spain, declined significantly since summer 2011 as Eurozone credit risk remained high during that period. If yields in these countries returned to July 2011 levels, the market loss on their debt would be 21% each.

 

Additionally, the UK’s relatively longer maturity stock of debt outstanding would drive total market losses of 19%. For debt with 25 or more remaining years to maturity, investors in European countries would lose 44% in market value on average in this scenario.

At some point in the future we suspect investors are going to wake up and realize that lending money to insolvent “investment-grade” sovereign entities for 30 years at 1.5% probably isn’t adequate compensation for the risk being taken.  We suspect that realization may only come once it becomes painfully obvious that these countries have amassed trillions in debt that can only be repaid by massive currency devaluations and rampant inflation.  Until then, we’re sure that everyone will just keep their heads in the sand and continue to play the “greater fool” trade.

OIL ISSUES

Oil broke the 40 dollar barrier and right now it is trading at $39.56.  We have witnessed a huge number of rigs enter the oil scene these past 6 months. The price fall will be devastating to many in the oil patch.

(courtesy zero hedge)

As Oil Crashes Under $40, How Much Further Can It Drop

Well that escalated quickly. Having toyed with the $39-handle yesterday, this morning’s plunge has erased those stops:

… and WTI is set to test the early April lows on the way back to 2016 lows…

What is next for oil now that key support is broken?: some thoughts from BofA’s chief technician, Paul Ciana:

Oil has reached the triangle top target (40.80) we reported on in early July. Today oil is extending its decline, breaking the 200d SMA and testing support at the round number of $40. Short term measurements shown in Table 1 and Table 2 suggest oil could bounce this week (as much as a 65% possibility) and test resistance at $43.18 or $44.50. However that bounce may be short lived and we think sold. The weekly chart shows momentum isn’t oversold yet and deeper Fibonacci retracement levels at $38.86 and $35.84 could be reached as a larger oil market bottom pattern forms. Oil in the mid $30’s which is near the 61.8% retracement and bottom of the weekly Ichimoku cloud would be a more technically convenient long trade scenario.

Price action has moved to the center of the weekly Ichimoku cloud. The cloud offers support as low as $35.40 and resistance at $44.32. If price were to reverse higher between here and the bottom of the cloud then we could see a potential head and shoulders bottom forming. If the decline were to accelerate lower and break the bottom of the cloud, then a double bottom pattern could form.

The below chart shows crude oil’s five, ten and thirty year average trend normalized to the start of the year and compares it to the current year in black. The pressure on crude oil prices is generally down from August through early December giving plenty of time for a right shoulder or double bottom to develop.

* * *

Finally, why is the breach of $40 important? We go back to what Marko Kolanovic said in the remainder of his note earlier today:

While US momentum is positive across the board—and S&P 500 exposure of CTAs likely is at record level—negative momentum in Europe and Japan require a short position in these equity markets. CTA signals for oil recently turned from strongly positive to moderately negative. This has contributed to past-month divergence between S&P 500 and oil (~1.5 standard deviations) and is closely monitored by equity and high yield credit investors. It is our view that the risk of CTAs significantly increasing oil shorts over the next 1 month is low. For oil momentum to further deteriorate, oil would need to drop to ~$30 at which point the medium term momentum (strongest signal) would turn negative and trigger selling.

Look forward to today’s API report to add to the volatility.

 

end

 

Oil gets a little break on Cushing OK draw down:

(courtesy zero hedge)

 

Oil Bounces On Unexpected Cushing Inventory Draw

Following last week’s surprise build in overall crude inventories (after 9 weeks of draws), API reported a smaller than expected drawdown (-1.34mm vs -2mm exp). However, oil prices are extending late-day gains as Cushing reported a major 1.3mm draw (against expectations of a 1mm barrel build). Gasoline drew down but Distillates built.

API

  • Crude -1.34mm (-2mm exp)
  • Cushing -1.3mm (+1mm exp)…Genscape reported a small (<100k) draw for Cushing.
  • Gasoline -450k (-1mm exp)
  • Distillates+593k

10th weekly draw of last 11 in crude but it was the Cushing draw that was the biggest driver…

 

And crude, having faded all day, rallied into the NYMEX close and NYSE close and is extending gains on the API data…

 

end

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

Euro/USA   1.1191 UP .0012 (STILL  REACTING TO BREXIT/

USA/JAPAN YEN 101.77  DOWN .537(Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER/KURODA HELICOPTER MONEY  ON THE TABLE BUT DISAPPOINTS WITH STIMULUS

GBP/USA 1.3241 UP .0058(MORE STIMULUS PLANNED)

USA/CAN 1.3062 DOWN .0061

Early THIS TUESDAY morning in Europe, the Euro ROSE by 24 basis points, trading now JUST above the important 1.08 level FALLING to 1.1191; Europe is still reacting to Gr Britain 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 UP 17.89 POINTS OR .61%   / Hang Sang CLOSED FOR HOLIDAY    /AUSTRALIA IS LOWER BY .84% / EUROPEAN BOURSES  ALL IN THE RED 

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

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

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

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

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

The NIKKEI: this MONDAY morning CLOSED UP 66.50 POINTS OR 0.40%  

Trading from Europe and Asia:
1. Europe stocks ALL STOCKS IN THE RED 

2/ CHINESE BOURSES / : Hang Sang CLOSED FOR HOLIDAY   ,Shanghai CLOSED UP 17.89 OR .61%    / Australia BOURSE IN THE RED: /Nikkei (Japan)CLOSED DOWN 244.32 OR 1.47%  /INDIA’S Sensex IN THE RED  

Gold very early morning trading: $1357.25

silver:$20.66

Early TUESDAY morning USA 10 year bond yield: 1.554% !!! UP 3  in basis points from MONDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield RISES to 2.301 UP 7 in basis points from MONDAY night. (SPREAD GOES AGAINST THE BANKS)

USA dollar index early TUESDAY morning: 95.44 DOWN 27 CENTS from MONDAY’s close.

This ends early morning numbers TUESDAY MORNING

END

And now your closing TUESDAY NUMBERS

Portuguese 10 year bond yield:  2.93% UP 3 in basis points from MONDAY  (does not buy the rally)

JAPANESE BOND YIELD: -0.059% DOWN 7  in   basis points from MONDAY

SPANISH 10 YR BOND YIELD: 1.08% UP 6 IN basis points from MONDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 1.22 UP 4 in basis points from MONDAY (again totally nuts/)

the Italian 10 yr bond yield is trading 16 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: -0.036% UP 6 IN  BASIS POINTS ON THE DAY

END

IMPORTANT CURRENCY CLOSES FOR TUESDAY

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

Euro/USA 1.1225 UP .0058 (Euro UP 58 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 100.89 DOWN 1.414(Yen UP 142 basis points/

Great Britain/USA 1.3342 DOWN 0.0159 ( Pound UP 159 basis points/BREXIT DECISION AFFIRMATIVE/QE TO START AGAIN/UK DOWNGRADED/NEW PRIME MINISTER T. MAY/

USA/Canada 1.3087-DOWN 0.0037 (Canadian dollar UP 37 basis points AS OIL fell (WTI AT $39.65). Canada keeps rate at 0.5% and does not cut!

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was UP by 58 basis points to trade at 1.1225

The Yen FELL to 100.89 for a GAIN of 141 basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED 

The POUND was UP 159 basis points, trading at 1.3342 AS PRIME MINISTER THERESA MAY TAKES OFFICE/CONCERNS ON BREXIT/CONCERNS ON TERRIBLE PMI

The Canadian dollar ROSE by 37 basis points to 1.3087, WITH WTI OIL AT:  $39.65

CANADIAN RATES WERE NOT CUT

The USA/Yuan closed at 6.6330

the 10 yr Japanese bond yield closed at -.059% UP 7  IN BASIS  points in yield/

Your closing 10 yr USA bond yield: UP 2 IN basis points from MONDAY at 1.537% //trading well below the resistance level of 2.27-2.32%)

USA 30 yr bond yield: 2.2861 UP 5  in basis points on the day /

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

Your closing USA dollar index, 95.05 DOWN 66 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 DOWN 48.55 OR 0.73%
German Dax :CLOSED DOWN  186.18 OR  1.80%
Paris Cac  CLOSED  DOWN 81.18  OR 1.84%
Spain IBEX CLOSED DOWN 236.10 OR 2.77%
Italian MIB: CLOSED DOWN 456.46 OR 2.76%

The Dow was DOWN 90.74 points or 0.49%

NASDAQ  DOWN 46.46 points or 0.90%
WTI Oil price; 40.51 at 4:30 pm;

Brent Oil: 41.83

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  66.72 (ROUBLE UP  66/100 ROUBLES PER DOLLAR FROM THURSDAY) 

TODAY THE GERMAN YIELD FALLS TO -.036%  FOR THE 10 YR BOND

END

This ends the stock indices, oil price, currency crosses and interest rate closes for today

Closing Price for Oil, 5 pm/and 10 year USA interest rate:

WTI CRUDE OIL PRICE 5 PM:39.65

BRENT: 41.93

USA 10 YR BOND YIELD: 1.554% 

USA DOLLAR INDEX: 95.07 DOWN 72 cents

The British pound at 5 pm: Great Britain Pound/USA: 1.33490 UP .01646 or 165 basis pts.

German 10 yr bond yield at 5 pm: -.098%

END

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

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

Stocks Slump Most Since Brexit Amid Creditnado, Oilmageddon, Yenplosion

 

With The Dow down 7 days in a row, it only seemed appropriate to offer Katy Perry’s “Rise” to the central planning gods…

 

The overnight bloodbath in JGBs started the risk-off sentiment…

 

And USDJPY weighed everything down because Fun-Durr-Mentals…

 

Pushing The Dow down 7 days in a row – the longest losing streak in a year…

 

Trannies were the day’s biggest loser and The Dow lose least…

 

Trannies are now red post-Fed-Rate-Hike once again…

 

Trannies broke through 3 key technical levels of support today.. 50-, 100-, and 200-day moving-averages…

 

Biotechs spiked on the BIIB-MRK-AGN chatter…

 

VIX popped over 14 as stocks sold off this morning but when 2150 for the S&P 500 needed saving they “got back to work”…

 

But Gold and the long bond are the biggest winners since The Fed “started nornmalizing rates”…

 

HY credit spreads have are over 35bps wider in the last few days – the biggest jump since Brexit…

 

Treasury yields stormed higher this morning – even as stocks sold off – but as the US opened, so bonds went bid to end the day basically unchanged (despite considerable intraday vol)…

 

The USD Index slipped once again today led by considerable strength in JPY…

 

With USDJPY roundtrippiong back near a 100.00 test and brexit lows…

 

Another ugly day for crude, even as the USD Index slipped lower, with PMs bid…

 

Gold has rallied 6 days in a row to its highest close in 2 years…

And Silver…

 

As WTI Crude closes at 5-month lows… (down 10 of 12 days)

 

Charts: Bloomberg

Bonus Chart: It appears the market is not happy about Hillary’s lead and Trump’s loss… The Trump Dump

end

 

Personal income growth slumps while spending rises.

(courtesy zero hedge)

 

US Personal Income Growth Slumps To Lowest Since 2013, Spending Rises

With two-thirds of the S and P reporting earnings which was suppose to be heading to 26.69 is now down to $24.09.  The high value of S and P is an accident waiting to happen!

(courtesy zero hedge)

The Wall Street Hockey Stick Fades Again – S&P 500 EPS Drops Another 8% In The Past Month

Authored by Alhambra Investment Partners’ Jeffrey Snider, via Contra Corner blog,

Earlier in April, analysts were projecting $26.69 in as-reported second quarter earnings for the S&P 500. By the week of June 22, just prior to the start of Q2 earnings season, that estimate had only declined slightly to $26.38. For the week of July 21, just a month later, with about one-third of companies reporting the earnings figure sank to $24.89. With now two-thirds having reported, the EPS estimate has dropped another $0.80 in just one week to now $24.09.

In terms of trailing-twelve month EPS, what was supposed to be the start of the anticipated turnaround is now really more of the same. In April, analysts were projecting $92.72 for the full four quarters up to and including Q2; it is now $87.73, not at all different than the ttm EPS of $86.44 in Q1 and $86.53 for FY 2015. The earnings recovery keeps getting pushed further into the future, especially as EPS estimates are falling there, too.

ABOOK August 2016 EPS ttm

ABOOK August 2016 EPS ttm YY

ABOOK August 2016 EPS Q22016

ABOOK August 2016 EPS FY2016

For CY 2016, current estimates are for just barely above $100 as-reported. That might be significant improvement from the $86.53 of CY 2015, but there is still two more quarters of shrinking estimates to consider as well as the fact that 2015’s earnings were a huge, huge miss. In other words, even if there does turn out to be some EPS growth in 2016 it is only a fraction of what would restore the QE-belief trend line. This year was supposed to be last year’s complete opposite insofar as EPS is concerned, rather than mimicking the the same trends.  

ABOOK August 2016 EPS YY ttm Q22016

In November 2015, analysts were anticipating a sharp rebound that would get EPS closer to back on track, but still falling seriously short and thus only suggesting that a recovery was possible or even likely. That meant ttm EPS growth of 13% by Q2 2016 and 28% by Q3. As of July 28, that rebound is almost completely erased by actual earnings. Second quarter EPS is now only 5.7% above Q2 2015, itself an awful quarter, and 7.6% below on a trailing-twelve-month basis. Q3 is trending in the same direction just as quickly; since March, estimates have fallen by almost $2 already.

As a result, ttm EPS for Q3 2016 which were supposed to be +11% in March are now barely positive at all. The current estimates show just 1.5% growth, which in all likelihood will be erased by the time Q2 earnings are finished at the rate disappointment is currently being accumulated.

ABOOK August 2016 EPS YY ttm Q32016

That leaves the stock market in nearly the same position as mainstream commentary on the real economy.Both are viewing the current predicament as a binary model; in the economy, if it isn’t recession it must be growth and therefore all economic data is colored positively by that assumption. In stocks, it appears “investors” have decided that because earnings aren’t getting worse they will have to get better.

EPS (ttm) peaked in Q3 2014 at $105.96 and has not been close to that level since. As of the latest update, Q3 2016 ttm EPS is expected to be only $92.03, still significantly less than two years prior and much closer to unchanged from the trough. Thus, not getting worse is not at all the same as “must be getting better.” That is true from a fundamental, economic perspective as well as the more important valuation problem. The longer valuations question linger, as if two years weren’t enough already, the greater the risk of the imbalance becoming realized.

ABOOK August 2016 EPS FV

Stocks were already heavily overvalued by the time EPS topped out under the early part of the “rising dollar.” It was thought that continued growth, those forward earnings, would justify lofty multiples after only a year or so. Based on June 2014 EPS estimates, “fair value” of the S&P 500 at 15 times CY 2015 earnings would have been 2,169 for the index. But those forward earnings were a mirage, the real reported value more than a third less than that. “Fair value” on an actual basis would have been instead 1,297!

As you can see above, EPS estimates were supposed to close that gap relatively quickly, at least enough so that the “market” could forget about the revelation of forward earnings as a huge gamble and risk. As earnings have steadily come down in 2016 as 2015, however, there is much less support both on still the fundamental over-valuation as well as the ability of the market to once again “depend” upon forward earnings to dispel remaining, significant uncertainty. The $2 decline in just the past month in just one quarter of EPS should be a strong reminder to be very careful about earnings assumptions in this type of environment.

Obviously, with the S&P at and near more record highs, the far less pensive belief still holds to some extent. It isn’t getting worse so that’s all some stock investors need to justify themselves to themselves – at least until they might again be reminded that forward earnings are at least some good part economic in relation. After all, the S&P 500 may be at record highs, but it’s not as if it has gained all that much since EPS peaked almost two years ago and the earnings recovery is now stretched precariously into 2017.

end

 

Two important points in the following:

  1. Large insurer Aetna states that it lost 300 million dollars on Obamacare
  2.  They also are warning of an exit from Obamacare

(courtesy zero hedge)

 

Aetna Posts $300 Million Obamacare Loss, Warns May Exit Altogether

Well that about does it for tonight

I will see you tomorrow night

Harvey

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