Sept 27/As promised, a huge raid on gold/silver on comex options expiry/Deutsche bank’s stock lands into single digits/its credit defaults swaps rise and signals big trouble/Dept of Justice in the USA set to land on Volkswagen/Another USA hedge fund bites the dust (Perry Capital)

Gold $1327.00 down $12.70

Silver 19.09  down 43 cents

In the access market 5:15 pm

Gold: 1327.30

Silver: 19.14



The Shanghai fix is at 10:15 pm est and 2:15 am est

The fix for London is at 5:30  am est (first fix) and 10 am est (second fix)

Thus Shanghai’s second fix corresponds to 195 minutes before London’s first fix.

And now the fix recordings:

Shanghai morning fix Sept 27 (10:15 pm est last night): $  1337.76


Shanghai afternoon fix:  2: 15 am est (second fix/early  morning):$   1336.83




London Fix: Sept 27: 5:30 am est:  $1335.85   (NY: same time:  $1336.00:    5:30AM)

London Second fix Sept 16: 10 am est:  $1327.00  (NY same time: $1326.90 ,    10 AM)

It seems that Shanghai pricing is higher than the other  two , (NY and London). The spread has been occurring on a regular basis and thus I expect to see arbitrage happening as investors buy the lower priced NY gold and sell to China at the higher price. This should drain the comex.

Also why would mining companies hand in their gold to the comex and receive constantly lower prices.  They would be open to lawsuits if they knowingly continue to supply the comex despite the fact that they could be receiving higher prices in Shanghai.


For comex gold:The front September contract month we had 40 notices filed for 4000 oz

For silver:  the front month of September we have a total of 37 notices filed for 185,000 oz


I wrote the following yesterday and I guess I was correct:

“Tomorrow is options expiry and judging by the open interest reported today, the bankers will surely attack tomorrow.  It seems that they have circled $1340 gold and will do everything possible to keep the price below the level.  As far as silver is concerned, it looks like they want the price below $19.50.

This is criminal behaviour but since our regulators allows this nonsense to continue we can nothing about it and must wait it out.

After comex options expire tomorrow, we have the LBMA/OTC options which expire on Friday.”


Tomorrow the crooks will let paper gold/silver rise as they still have until Friday to whack the LBMA/OTC options.

Let us have a look at the data for today



In silver, the total open interest FELL by  only 267 contracts DOWN to 203,441. The open interest ROSE DESPITE THE FACT THAT the silver price was DOWN 21 cents in yesterday’s trading .In ounces, the OI is still represented by just MORE THAN 1 BILLION oz i.e. 1.017 BILLION TO BE EXACT or 145% of annual global silver production (ex Russia &ex China).

In silver we had 4 notices served upon for 20,000 oz

In gold, the total comex gold ROSE by 6183 contracts as the price of gold ROSE BY $2.50 YESTERDAY . The total gold OI stands at 599,973 contracts.


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



Total gold inventory rests tonight at: 949.14 tonnes of gold


we had no changes with respect to inventory at the SLV

THE SLV Inventory rests at: 364.523 million oz


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

1. Today, we had the open interest in silver FELL by 267 contracts down to 203,441 as the price of silver FELL by 21 cents with yesterday’s trading.The gold open interest rose by 6,183 contracts up to 599,973 as the price of gold ROSE $2.50 IN YESTERDAY’S TRADING.

(report Harvey).

2.a) The Shanghai and London gold fix report



2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg



i)Late  MONDAY night/TUESDAY morning: Shanghai closed UP 17.74 POINTS OR .60%/ /Hang Sang closed UP 139.37 POINTS OR 1.09%. The Nikkei closed UP  253.98 POINTS OR .84% Australia’s all ordinaires  CLOSED DOWN 0.47% /Chinese yuan (ONSHORE) closed UP at 6.6688/Oil FELL to 45.04 dollars per barrel for WTI and 46.35 for Brent. Stocks in Europe: ALL IN THE RED   Offshore yuan trades  6.6834 yuan to the dollar vs 6.6688 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS HUGELY AS MORE USA DOLLARS   LEAVE CHINA’S SHORES





none today


none today


i)A terrific explanation as to why gold was whacked this morning:

Deutsche bank crashes almost into single digits as well as their credit default swaps are now spiking to record highs:

( zero hedge)

ii)The Deutsche bank problems coupled with Commerzbank caused the shelving of  bond deals with Nord LB, Lufthansa and Korean Air

seems that the markets in Europe are having a tough time…

( zero hedge)

iii)The war between the USA and Europe is now escalating as the Dept of Justice is now assessing the size of the criminal penalty to Volkswagen. After the D of J is finished then comes the class action lawsuits against the company. The big question is the size of the criminal penalty!

( zero hedge)


The war of words between Russia and the uSA continues.  The Russians state that the  the real barbarism belongs to the USA

( zero hedge)


i)The following is not good:  global trade is slowing down immensely as the consumer has already hit peak debt everywhere:

( zero hedge)

ii)This is what happens when you have zero or negative interest rates around the globe:


i)This is not good for the oil industry; Goldman Sachs has just cut oil price target from 50 dollars down to 43 dollars: here is why!

( Goldman Sachs/zero hedge)

ii)Then early this morning crude crashes as Iran states:  “no deal”

( zero hedge)

iii)Chaos reigns supreme as the Saudis first admit “no deal” but hopeful for November.  The market figured it out and oil collapsed to the low 44’s

( zero hedge)

iv)Late this evening, oil gets a little pop back into the 45 dollar handle with a unexpected drop in  inventories

( zero hedge)


none today


i)The Deutsche bank shares slump to its lowest levels in over 25 years as Merkel rules out state aid.  This was brought to your attention yesterday:

( Bradshaw/London Telegraph)

ii)According to this author, Germany will rescue Deutsche bank.  As I keep reminding you there is not enough money in the system to bail out these guys:

( Bloomberg News)

iii)James Turk is explaining to you what I have been harping on for years” options expiry is prime time for monetary metals suppression:

( James Turk/



i)USA home prices show the slowest growth in a year

( zero hedge)

ii)The Richmond Fed (The Virginia + DC) mfg belt disappoints

(courtesy zero hedge)

iii)We see a small bounce in USA service PMI but the all important employment hits a 33 month low:( USA PMI/zero hedge)

iv)Another hedge fund, Perry Capital, bites the dust as they state that they cannot invest in this financial climate:

( Bloomberg)

Let us head over to the comex:

The total gold comex open interest ROSE BY AN HUGE 6,183 CONTRACTS to an OI level of 599,973 even though the price of gold ROSE by only $2.50 with YESTERDAY’S trading. We are now in the NON active month of SEPTEMBER/

The contract month of Sept saw it’s OI FELL by 46 contracts DOWN to 141. We had 40 notices filed yesterday so we lost 6 gold contracts or an additional 600 gold ounces will not stand for delivery.. The next delivery month is October and here the OI lost 633 contracts DOWN to 23,516. This level is extremely elevated.  To give you an idea as to its size, on Sept 28.2016 ,we had only 8270 contracts outstanding vs (23,516 today). we are a good 15,246 contracts ahead of last year. The next contract month of December showed an increase of 4851 contracts up to 458,129. The estimated volume today at the comex: 127,988 which is WEAK.  Confirmed volume on Friday: 129,498 which is also weak.

Today we had  5 notices filed for  500 oz of gold.

And now for the wild silver comex results.  Total silver OI FELL BY ONLY 267 contracts from 203,708 DOWN TO 203,441   despite the FALL in price of silver to the tune of 21 cents   yesterday.  We are moving NOW CLOSER TO the all time record high for silver open interest set on Wednesday August 3:  (224,540).  We are now into the next active month of September and here the OI fell by 34 contracts down to 498. We had 37 notices filed upon yesterday so we GAINED 3 contracts or 15,000 additional oz will stand  for delivery in this active month of September. The next non active delivery movement of October lost 18 CONTRACTS TO 412 contracts.  The next big delivery month is December and here it FELL by 629 contracts DOWN to 177,137. The volume on the comex today (just comex) came in at 50,571 which is very good.  The confirmed volume yesterday (comex and globex) was excellent at 50,584 . Silver is not in backwardation.  London is in backwardation for several months.

today we had 5 notices filed for silver: 185,000 oz

 SEPT 27.
Withdrawals from Dealers Inventory in oz  


Withdrawals from Customer Inventory in oz  nil
16,304.35 oz
509 kilobars
Deposits to the Dealer Inventory in oz niloz
Deposits to the Customer Inventory, in oz 
No of oz served (contracts) today
5 notices 
500 oz
No of oz to be served (notices)
136 contracts
(13,600 oz)
Total monthly oz gold served (contracts) so far this month
2658 contracts
265,800 oz
8.2675 tonnes
Total accumulative withdrawals  of gold from the Dealers inventory this month   192.90 oz
Total accumulative withdrawal of gold from the Customer inventory this month   465,365.4 oz
 Today; good activity at the gold comex and 3 kilobar entries and another large amount of gold leaving the comex
We had 0 dealer deposit:
Total dealer deposits; nil oz
We had 0 dealer withdrawals:
total dealer withdrawals; NIL oz
we had 0 customer deposit:
Total customer deposits: nil oz.
 We had 3 customer withdrawals:
i) Out of Manfra; 128.60 oz
ii) Out of Scotia: 16,203.60 oz ( 504 kilobars)
iii) out of HSBC: 32.15  (one kilobar)
total customer withdrawals: 16,364.35 oz
Today we had 2  adjustments:
i) Out of Manfra: 19,579.35 oz was adjusted out of the dealer and this landed into the customer account of Manfra (a probable settlement)
ii) 197.83 oz added to the customer account of Scotia as an addition error.
If anybody is holding any gold at the comex, you must be out of your mind!!!
since comex gold storage is unallocated , rest assured any gold stored at the comex will be compromised!
I also urge all of you do not place any option trades at the comex as these gangsters will gun you down.
If you are taking delivery of gold/silver please remove it from comex banks and place it in private vaults

Today, 0 notices were issued from JPMorgan dealer account and 0 notices were issued form their client or customer account. The total of all issuance by all participants equates to 5 contract  of which 0 notices were stopped (received) by jPMorgan dealer and 0 notice(s) was (were) stopped (received) by jPMorgan customer account.

To calculate the initial total number of gold ounces standing for the SEPT contract month, we take the total number of notices filed so far for the month (2658) x 100 oz or 265,800 oz, to which we add the difference between the open interest for the front month of SEPT (141 contracts) minus the number of notices served upon today (5) x 100 oz per contract equals 279,400 oz, the number of ounces standing in this  NON active month of September.
Thus the INITIAL standings for gold for the SEPT contract month:
No of notices served so far (2658) x 100 oz  or ounces + {OI for the front month (xxx) minus the number of  notices served upon today (5) x 100 oz which equals 279,400 oz standing in this non  active delivery month of SEPT  (8.6905 tonnes).
We lost an additional 600 oz that will stand.  We have surpassed  our original standings on first day notice. (ON FIRST DAY NOTICE 7.5561 TONNES STOOD FOR DELIVERY) as well as surpassing the 8 tonne mark and heading for the 9 tonnes.  This is without a doubt a record level of gold ounces standing for September.
Total dealer inventor 2,145,901.084 or 66.74 tonnes
Total gold inventory (dealer and customer) =10,609,572.809 or 330.0 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 332.00 tonnes for a  gain of 27  tonnes over that period. However since August 8 we have lost 22 tonnes leaving the comex.
Ladies and Gentlemen:  the comex is beginning to lose some of its gold as no doubt the Shanghai fix is having its effect.
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 of hypothecated gold sent to other jurisdictions so that they will not be short with their underwritten derivatives in that jurisdiction.  This would be similar to the rehypothecated gold used by Jon Corzine.
Ladies and Gentlemen:  We are now having our old fashioned run on the bank: the comex as gold is leaving by the buckets.

And now for silver
SEPT INITIAL standings
 SEPT27. 2016
Withdrawals from Dealers Inventory NIL
Withdrawals from Customer Inventory
115,808.55 oz
CNT, Scotia
Deposits to the Dealer Inventory
 514,779.900 OZ
Deposits to the Customer Inventory 
605,441.54 oz
No of oz served today (contracts)
(20,000 OZ)
No of oz to be served (notices)
494 contracts
(2,470,000 oz)
Total monthly oz silver served (contracts) 2717 contracts (13,585,000 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  8,394,867.1 oz
today, we had 1 deposit into the dealer account:
 i) Into Brinks; 514,779.900 oz
total dealer deposit: 514,779.900 oz
we had 0 dealer withdrawals:
 total dealer withdrawals: NIL oz
 we had 2 customer withdrawals:
i) Out of CNT: 25,086.23 oz
ii) Out of Scotia: 90,722.32 oz
Total customer withdrawals: 115,808.55  oz
We had 3 customer deposit:
 i) Into Brinks: 299,984.600 oz
ii) Into Scotia: 605,441.54 oz
iii) Out of CNT: 594,686.800 oz
total customer deposits: 1,500,112.940  oz
 we had 1 adjustment
i) Out of CNT: 5,022.25 oz was adjusted out of the customer and this landed into the dealer account of CNT
The total number of notices filed today for the SEPT contract month is represented by 4 contracts for 20,000 oz. To calculate the number of silver ounces that will stand for delivery in SEPT., we take the total number of notices filed for the month so far at (2717) x 5,000 oz  = 13,585,000 oz to which we add the difference between the open interest for the front month of SEPT (498) and the number of notices served upon today (4) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the SEPT contract month:  2718(notices served so far)x 5000 oz +(498 OI for front month of SEPT ) -number of notices served upon today (4)x 5000 oz  equals  16,055,000 oz  of silver standing for the SEPT contract month.
we GAINED 3  contracts or an additional 15,000 oz will  stand FOR DELIVERY IN THIS  ACTIVE MONTH OF SEPTEMBER. 
Total dealer silver:  31.439 million (close to record low inventory  
Total number of dealer and customer silver:   172.214 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 224,540 being set AUGUST 3.2016.  The registered silver (dealer silver) is NOW NEAR  multi year lows as silver is being drawn out at both dealer and customer levels and heading to China and other destinations. The shear movement of silver into and out of the vaults signify that something is going on in silver.
And now the Gold inventory at the GLD
SEPT 27/A huge withdrawal of 2.08 tonnes from the GLD/Inventory rests at 949.14 tonnes/
SEPT 26./no changes in gold inventory at the GLD/Inventory rests at 951.22 tonnes
Sept 22/a huge deposit of 6.53 tonnes of gold into the GLD/Inventory rests at 950.92 tonnes/this would be a paper deposit entry/
Sept 16./no change in gold inventory at the GLD/Inventory rests at 932.22 tonnes
SEPT 15/another paper withdrawal of 3.27 tonnes of “gold” inentory leaves the GLD/Inventory rests at 932.22 tonnes
SEPT 14./A  withdrawal of 4.45 tonnes of gold inventory from the GLD/Inventory rests at 935.49 tonnes
SEPT 13/no changes in gold inventory at the GLD/Inventory rests at 939.94 tonnes
Sept 12/no changes in gold inventory at the GLD/inventory rests at 939.94 tonnes
SEPT 27/ Inventory rests tonight at 949.14 tonnes


Now the SLV Inventory
SEPT 27./no change in silver inventory at the SLV/Inventory rests at 364.523 million oz/
SEPT 26./no changes in silver inventory at the SLV./Inventory rests at 364.523 million oz/
Sept 22/no change in inventory at the SLV/Inventory rests at 363.479  million oz/
Sept 16/no changes in silver inventory/inventory rests at 362.434 million oz/
SEPT 15/no change in silver inventory/inventory rests at 362.434 million oz.
SEPT 14/no change in silver inventory at the SLV/Inventory rests at 362.434 million oz
sept 13/2016: a huge deposit of 1.329 million oz into the SLV/Inventory rests at 362.434 million oz/
Sept 12/a huge withdrawal of 1.614 million oz from the SLV/Inventory rests at 361.105 million oz
SEPT 27.2016: Inventory 364.523 million oz

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 5.8 percent to NAV usa funds and Negative 6.1% to NAV for Cdn funds!!!!  (the discount is starting to disappear)
Percentage of fund in gold 59.5%
Percentage of fund in silver:39.4%
cash .+1.1%( SEPT 27/2016).
2. Sprott silver fund (PSLV): Premium RISES to +1.18%!!!! NAV (SEPT 27/2016) 
3. Sprott gold fund (PHYS): premium to NAV  RISES TO  0.90% to NAV  ( SEPT 27/2016)
Note: Sprott silver trust back  into POSITIVE territory at 1.18% /Sprott physical gold trust is back into positive territory at 0.90%/Central fund of Canada’s is still in jail.


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

Do You Really Own Your Gold?

Do You Really Own Your Gold?
by Ted Bauman, 
Editor, The Bauman Letter

What does it mean to “own” something? It’s a question you should be asking … especially if that something is gold.

The Oxford English Dictionary defines ownership as “the act, state, or right of possessing something.” That sounds about right. But what does it mean to “possess” something?

Gold Investment Pyramid - GoldCore

After all, you can own something that’s in someone else’s legal possession. For example, I own a house in Cape Town. My tenants have formal right of possession under a lease. I sleep at night because the sheriff of the Simon’s Town Magistrates’ Court will enforce my superior right of possession under South African law if needed — say, if they stop paying rent.

In other words, the “state or right of possessing something” that isn’t under yourphysical control depends on contracts and on law. That in turn depends on the ability and willingness of those who honor contracts — and enforce laws — to do so.

If you “own” precious metals under certain types of arrangements, you may be shocked to find that you’re in a legal limbo where ownership and possession are hazy at best.

It’s not a place you want to be.

Deutsche Bank Unter Alles

German mega bank Deutsche Bank is in serious trouble. The International Monetary Fund (IMF) has publicly called it one of the greatest threats to the global financial system. The Russian government (no doubt crying crocodile tears) is investigating its role in rampant money laundering. And the U.S. government has just announced a fine related to its behavior before the 2008 crisis that is more than the bank’s current market valuation.

Over the last few years, Deutsche Bank has been the principal banker and repository for a popular exchange-traded commodity fund (ETC) called Xetra-Gold. As you know, we here at the Sovereign Investor Daily don’t like metals ETFs and ETCs because you don’t really own any gold — just a claim on gold.

Xetra-Gold, however, differentiates itself from other ETCs by stating in its investor contract that “every gram of gold purchased electronically is backed by the same amount of physical gold” stored in the Frankfurt vaults of Clearstream Banking AG, a wholly-owned subsidiary of Deutsche Börse AG, one of Deutsche Bank’s subsidiaries.

Xetra explicitly says that every time an investor buys shares, a corresponding amount of gold is purchased and put into the vault, so that “investors always have the possibility of demanding delivery of the securitized amount of gold per bearer note.” Because of this promise, Xetra is extremely popular. During the first seven months of this year, order book turnover on Xetra stood at approximately €1.5 billion. The assets managed by Xetra currently amount to €3.5 billion.

But recently, an Xetra investor encountered a big surprise. When he went to arrange for delivery of physical gold, a Deutsche Bank account executive informed him that physical delivery “is no longer offered for reasons of business policy.”


Dude, Where’s my Gold?

People piled into Xetra because it promised the small spreads and low fees of an ETC and the promise of quick physical delivery of gold on demand. Usually you get one or the other, but not both. It seemed too good to be true. It was.

As things stand, Xetra is a paper-only ETC. If you want to turn your shares into gold, you have to sell them to a willing buyer and use the proceeds to buy gold somewhere else. That’s not what Xetra promised at all.

What about those promises of full gold backing? Nobody is quite sure how Xetra and Deutsche Bank are justifying their failure to deliver gold, but the likely culprit is a clause in investor contracts that allows Xetra to modify its terms as the need arises. Many contracts include such boilerplate, and many people ignore it precisely because it is boilerplate.

The problem is that any contract that allows one party to alter the terms at will means that the other party has no real rights of ownership. In this case, Xetra investors don’t have gold in their possession, but neither do they have an enforceable right to convert their shares into the metal.

Possession Is 9/10 of the Law

The speculation about Xetra is predictable. Deutsche Bank has probably raided its gold holdings in its scramble to remain solvent. And there’s nothing any Xetra investor can do about it, since they never really owned any gold in the first place — just a piece of paper.

If you want the protection that ownership of real gold bullion provides, you need to own it yourself and store it in your own name. You may pay a bit more in spreads and fees, but if you’re owning gold as a hedge against financial calamity, that shouldn’t matter.

The upside of avoiding massive loss far outweighs the extra cost of being a realowner of gold … not of a worthless piece of paper.

Full articlehere

Gold and Silver Bullion – News and Commentary

Deutsche Bank shares fall to lowest level since mid-1980s (TheGuardian)

Gold slips as equities, dollar gain after US presidential debate (Reuters)

India Growing 8% a Year Seen by Citi Helping Oil, Gold Demand (Bloomberg)

Gold Volatility Sags to 2-Year Low as Traders Assess Fed Outlook (Bloomberg)

Gold logs a gain as focus turns to U.S. presidential debate (MarketWatch)

Video: Deutsche Bank at “tipping point”, Verge of outright panic? (Bloomberg)

Germany Will Rescue Deutsche Bank If Necessary, Allianz Says (Bloomberg)

The rise of the creative classes (DavidMCWilliams)

Options expiration is prime time for monetary metals suppression – Turk (Qata)

Don’t let financial repression crush you and your investments (MoneyWeek)


Gold Prices (LBMA AM)

27 Sep: USD 1,335.85, GBP 1,031.01 & EUR 1,187.84 per ounce
26 Sep: USD 1,336.30, GBP 1,033.23 & EUR 1,188.91 per ounce
23 Sep: USD 1,335.90, GBP 1,027.17 & EUR 1,192.16 per ounce
22 Sep: USD 1,332.45, GBP 1,019.59 & EUR 1,186.68 per ounce
21 Sep: USD 1,319.60, GBP 1,015.96 & EUR 1,183.81 per ounce
20 Sep: USD 1,315.40, GBP 1,011.02 & EUR 1,175.84 per ounce
19 Sep: USD 1,315.05, GBP 1,007.99 & EUR 1,177.36 per ounce

Silver Prices (LBMA)

27 Sep: USD 19.42, GBP 14.99 & EUR 17.26 per ounce
26 Sep: USD 19.44, GBP 15.04 & EUR 17.29 per ounce
23 Sep: USD 19.82, GBP 15.28 & EUR 17.66 per ounce
22 Sep: USD 19.88, GBP 15.22 & EUR 17.69 per ounce
21 Sep: USD 19.43, GBP 14.95 & EUR 17.43 per ounce
20 Sep: USD 19.17, GBP 14.78 & EUR 17.15 per ounce
19 Sep: USD 19.12, GBP 14.65 & EUR 17.13 per ounce

Recent Market Updates

– “Gold Will Likely Soar To A Record Within Five Years”
– Savings Guarantee? U.N. Warns Next Financial Crisis Imminent
– Gold Up 1.5%, Silver Surges 3% – Yellen Stays Ultra Loose At 0.25%
– Trump and Clinton Are “Positive For Gold” – $1,900/oz by End of Year
– Gold Bugs Rejoice – Central Banks Think You’re On To Something
– ‘Hard’ Brexit Looms For Ireland
– EU Bail In Rules Ignored By Italy – Mother Of All Systemic Threats and World War?
– Buy Gold – Bonds Are ‘Biggest Bubble In World’ – Billionaire Singer Warns
– Silver Bullion Market – “Most Bullish Story Ever Told?”
– “Sorry, You Can’t Have Your Gold Bullion”
– Global Stocks, Bonds Fall Sharply – Gold Consolidates After Two Weeks Of Gains
– Gold, Silver, Blockchain and Fintech – Solutions To Negative Rates, Bail-ins, Cash Confiscations and Cashless Society
– Jan Skoyles Appointed Research Executive At GoldCore

Mark O’Byrne
Executive Director



The Deutsche bank shares slump to its lowest levels in over 25 years as Merkel rules out state aid.  This was brought to your attention yesterday:

(courtesy Bradshaw/London Telegraph)

Deutsche Bank shares slump to lowest level in 25 years as Merkel rules out state aid


By Julia Bradshaw
The Telegraph, London
Monday, September 26, 2016

Shares in Deutsche Bank have slumped to their lowest level in a quarter of a century following reports over the weekend that Germany’s Chancellor Angela Merkel has ruled out any state assistance for the lender, reviving fears that it could become severely undercapitalized.

The reports in Germany’s Focus magazine cited discussions that took place between Ms Merkel and Deutsche’s chief executive, John Cryan, over the summer. According to Focus, the German government has ruled out any state aid for at least the next 12 months and refused to wade into Deutsche’s legal dispute with the U.S. Justice Department. …

… For the remainder of the report:…





According to this author, Germany will rescue Deutsche bank.  As I keep reminding you there is not enough money in the system to bail out these guys:

(courtesy Bloomberg News)

Germany will rescue Deutsche Bank if necessary, Allianz exec says


By Esteban Duarte
Bloomberg News
Monday, September 26, 2016

The German government will have to bail out Deutsche Bank AG if its financial situation gets bad enough, Allianz Global Investors AG Chief Investment Officer Andreas Utermann said.

“I don’t buy at all what’s coming out of Germany in terms of Germany not wanting to step in ultimately if Deutsche Bank was really in trouble,” Utermann said today in a Bloomberg Television interview with Francine Lacqua and Tom Keene. “It’s too important for the German economy.” …

… For the remainder of the report:…





James Turk is explaining to you what I have been harping on for years” options expiry is prime time for monetary metals suppression:

(courtesy James Turk/

Options expiration is prime time for monetary metals suppression, Turk cautions


8:34p ET Monday, September 26, 2016

Dear Friend of GATA and Gold:

GoldMoney founder and GATA consultant James Turk tells King World News today that monetary metals prices are likely to weaken this week because of futures market options expiration, prime time for price suppression by central banks and their bullion bank agents. An excerpt from the interview is posted at KWN here:…

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





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




2 Nikkei closed UP 139.37 OR 0.84%   /USA: YEN FALLS TO 100.37

3. Europe stocks opened ALL IN THE RED (     /USA dollar index UP to 95.38/Euro DOWN to 1.1238

3b Japan 10 year bond yield: LOWERS TO     -.074%/     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 100.37/ THIS IS TROUBLESOME AS BANK OF JAPAN IS RUNNING OUT OF BONDS TO BUY.

3c Nikkei now JUST BELOW 17,000

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

3e WTI::  45.04  and Brent: 46.35

3f Gold DOWN /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” OFF THE TABLE FOR NOW /REVERSE OPERATION TWIST ON THE BONDS: PURCHASE OF LONG BONDS  AND SELLING THE SHORT END

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund FALLS to -.137%   

3j Greek 10 year bond yield FALLS to  : 8.36%   

3k Gold at $1336.25/silver $19.40(7:45 am est)   SILVER FINAL RESISTANCE AT $18.50 WILL BE DEFENDED 

3l USA vs Russian rouble; (Russian rouble UP 13/100 in  roubles/dollar) 63.84-

3m oil into the 45 dollar handle for WTI and 46 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  REVALUATION UPWARD from POBC.


30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9688 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0889 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.


3r the 10 Year German bund now NEGATIVE territory with the 10 year FALLS to  -.137%

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


The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 1.572% early this morning. Thirty year rate  at 2.304% /POLICY ERROR)

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

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


“Hillary Rally” Fizzles As DB Hits New Record Low; Volkswagen Slammed; Oil Slides On Iran Statement

A rally in global risk that started during last night’s first presidential debate on the market’s take that Hillary Clinton came out on top in the first head-to-head between the two candidates fizzled, and what was a 0.6% jump in futures faded to only a 0.2% rebound after news that the DOJ is assessing how big a criminal fine it can extract from Volkswagen (-3.8%) over emissions-cheatingwithout putting the German carmaker out of business“, while Iran’s oil minister Zanganeh told reporters in Algiers that it is “not our agenda” to reach an agreement, and that the country is unwilling to freeze output at current levels, and instead if looking to raise output to 4mmbpd.

We start with the debate, where as we pointed out last night, both a post-debate poll and also the positive reaction in relevant markets hinted that Clinton has come out with the advantage following the exchange. A CNN/ORC poll (which targeted a predominantly democratic sample as CNN admitted) had 62% of viewers claiming that Clinton won the debate, compared to 27% which believed Trump was the victor. In terms of markets, following three consecutive weekly losses in which it weakened nearly 9%, the Mexican Peso – which is seen as a bit of a sentiment proxy for the debate given the trade subject – had rallied back 1.95% and the most since February while there are gains also for a number of other EM currencies which are seen as vulnerable if Trump scrutinises trade deals.

As a result, in early trading US equity futures were up over +0.60%, while safe haven barometers like the Yen (-0.38%) and Gold (-0.22%) are weaker.

However, that initial rebound faded on the abovementioned Volkswagen news. Adding to the pain, while Deutsche Bank shares rebounded in early trading, they have since sunk again, dropping to a fresh record low, down as much as -2.8% with CDS rising to new all time highs, as concerns over the troubled German lender persisted. Germany’s second largest lender Commerzbank (-3.0%) also felt the squeeze on a report it plans to eliminate 9,000 jobs and suspend dividend payments.

The weakness spread to global stocks as well: the MSCI All-Country World Index of shares erased an advance, weighed down by the prospect of U.S. fines for Volkswagen AG and Deutsche Bank AG. Crude oil declined after Iran ruled out an immediate agreement on an output freeze, while Saudi Arabian stocks slumped on concern austerity will lower consumer spending. German bunds led gains in European government bonds and Finland’s 10-year yield dropped below zero for the first time.  Norddeutsche Landesbank, Germany’s largest shipping lender, was said to pull plans to sell seven-year euro notes a day after Deutsche Lufthansa AG canceled a similar transaction.

Even Mexico’s peso pared gains, Bloomberg noted, after earlier surging as investors concluded Clinton had won the first presidential debate. An election victory for Republican candidate Donald Trump may hurt bonds in emerging markets such as China and Mexico by weighing on global trade, according to Aberdeen Asset Management.

“Had Trump been stronger then maybe we would have seen a stronger downside reaction in the market,” said Jasper Lawler, an analyst at CMC Markets in London. “Deutsche Bank is the eye of the storm because even if it’s listed in Germany it’s a multinational bank with a big role in U.S. markets and has a history of causing some troubles in the U.S. The European and U.S. banks have strong links in the end. This at least is the going excuse as markets don’t have the impetus to go higher.”

The Stoxx Europe 600 Index slid 0.5% after earlier advancing as much as 0.7%. The benchmark tumbled the most since July on Monday amid concern about the strength of Deutsche Bank’s capital buffers. S&P 500 Index futures were 0.2% higher, paring a gain of as much as 0.7%.

Market Snapshot

  • S&P 500 futures up 0.2% to 2144
  • Stoxx 600 down 0.3% to 339
  • FTSE 100 down 0.2% to 6802
  • DAX down 0.7% to 10317
  • German 10Yr yield down 3bps to -0.14%
  • Italian 10Yr yield down 2bps to 1.17%
  • Spanish 10Yr yield down 3bps to 0.89%
  • S&P GSCI Index down 0.8% to 353.5
  • MSCI Asia Pacific up 0.7% to 142
  • Nikkei 225 up 0.8% to 16684
  • Hang Seng up 1.1% to 23572
  • Shanghai Composite up 0.6% to 2998
  • S&P/ASX 200 down 0.5% to 5406
  • U.S. 10-yr yield down less than 1bp to 1.58%
  • Dollar Index up 0.08% to 95.37
  • WTI Crude futures down 1.5% to $45.22
  • Brent Futures down 1.7% to $46.54
  • Gold spot down 0.2% to $1,336
  • Silver spot down less than 0.1% to $19.44

Global Headline Summary

  • Clinton, Trump Draw Stark Contrasts With Sharp Debate Attacks: Debate devolved into exchange of accusations, blame regarding each others’ past statements, records.; MXN Jumps, Stocks Rally as Clinton Seen Winning Debate
  • BlackRock Issues Warning on Treasuries as Fed Moves Toward Hike: “It’s time to rethink the role of U.S. Treasuries in portfolios,” chief strategist Richard Turnill wrote. “We are cautious on long-term U.S. Treasuries.”
  • Rice Energy to Acquire Vantage Energy for About $2b: Deal for closely held Vantage is Rice’s biggest deal yet in core of Marcellus shale.
  • Wells Fargo Faces ‘Top-to-Bottom’ Review: Labor Department: Agency agreed to conduct review of WFC requested by lawmakers who said bank may have pressured employees to meet sales quotas; Wells Fargo Sued by Shareholders Over Cross-Selling Scandal
  • Possible Disney-Twitter Merger Poses Risks for Iger Legacy: Deal may let Iger leave knowing he’s given Disney big presence in digital media, advertising.
  • AmEx Can Bar Merchants From Steering Users to Rival Cards: A federal judge had found AmEx’s policy violated antitrust law, but higher court said retailers aren’t obliged to accept AmEx cards, pay its fees.
  • Mylan, Lupin Said to Weigh Bids for Bayer Dermatology Unit: Leo Pharma, Cadila Healthcare, Torrent Pharmaceuticals are also weighing offers.
  • Over 50% of Shoppers Turn First to Amazon in Product Search: Co. widening lead over major retailers like WMT, search engines as starting point for online shopping.
  • SolarCity Accused of Taking Shingling Technology Secrets: Co. accused of misappropriating trade secrets, other IP in lawsuit over development of shingled-cell solar modules.
  • HomeAway CEO Steps Down to Make Way for Former Expedia Exec: CEO Brian Sharples, who co-founded in 2005, took it public in 2011 and oversaw its takeover by Expedia, stepped down.

* * *

Looking at regional markets we start in Asia, where markets shrugged off the broad-based losses from Wall Street and traded mixed, with an improvement in risk appetite seen amid the first US Presidential Debate and strong Chinese industrial profits. ASX 200 (-0.5%) and Nikkei 225 (+0.8%) began with firm losses following the financial-led weakness in EU and US markets. However, Nikkei 225 rebounded off its lows alongside a recovery in risk appetite as markets reflected a composed and consistent effort from Clinton. Chinese markets benefited from strong industrial profit figures which rose by the most in nearly 3 years of 19.5% Y/Y vs. 11% increase in the prior month, resulting to outperformance in Hang Seng (+1.1%) while Shanghai Comp. (+0.6%) traded choppy as a weak liquidity injection capped gains. 10yr JGBs saw minor gains despite the improvement in risk appetite in Japan with the 10yr yield declining to its lowest since early September, while today’s 40yr auction also failed to spur demand with the b/c and lowest accepted price declining from prior.

Top Asian News

  • Wall Street Shrinking in Asia Continues With Goldman, BofA Cuts: Goldman Sachs said to be planning steep reductions
  • Citigroup Said to Plan India Branch Cuts in Digital Banking Push: Lender may close five outlets in smaller cities
  • China’s Shibor Climbs to Seven-Week High as PBOC Withdraws Funds: PBOC policy tilted toward curbing leverage, Huafu says
  • Maersk May Target Hanjin, Hyundai in New Acquisition Plan: Jefferies says Maersk needs to buy and Korean lines need help
  • Takata Lifelines Scrutinized by Carmakers Stuck in Cost Bind: Troubled supplier said to meet customers on bids, liabilities
  • Billionaire Wang in Talks to Buy Producer of Golden Globe Awards: Hollywood Reporter reported that the talks are valuing Dick Clark Productions at ~$1b.

European equities have failed to hold on to their Presidential-debate inspired gains as ongoing concerns around the fragility of Deutsche Bank and Volkswagen continue to hamper sentiment and energy prices ebbed lower as changes of an agreement at Algiers continue to dissipate.More specifically, Deutsche Bank’s (shares -2.8%) 5 year subordinated CDS hit a fresh record high as markets remain concerned about the future of the company in the context of Chancellor Merkel’s unsupportive comments over the weekend. Elsewhere, for financials, Commerzbank (-3.0%) have felt the squeeze as markets were less than impressed with their restricting and dividend plans. Volkswagen (-3.8%) shares have been dealt a fresh blow amid reports that the US are said to vet whether criminal fine would bankrupt the Co. while pondering what size diesel penalty VW can withstand. Finally, downbeat comments from the Algiers meeting have weighed on energy prices with the latest rhetoric indicating the unlikelihood of a deal being struck this week. Given the downside in equities, Bunds have been dealt a fresh bid throughout the session with the yield falling to it’s lowest level since July with prices reclaiming 166.00 (Dec’16 contract at all time highs). Supply today comes in the form of a US 5yr auction with focus for fixed income markets also centred on a slew of Fed speakers today and for the rest of the week.

  • Top European News
  • Renzi Starts 10-Week Fight for Italian Referendum, His Job: Push for “the mother of all reforms” being closely watched by markets.
  • Maersk May Target Hanjin, Hyundai in New Acquisition Plan: Co., which will try to grow through acquisitions, targeting South Korea’s 2 biggest shipping firms: Jefferies.
  • VW Scandal Spreading to Audi Risks Hitting Carmaker’s Cash Cow: Audi head Rupert Stadler under increased scrutiny as investigators seek to untangle origins of VW diesel cheat.
  • London Mayor Khan Urges Labour to Win Cities in Push for Power: Khan to say at conference that effective local government can prove that Labour is ready for power nationally.
  • Carney Enters Corporate Bond Market in Post-Brexit Stimulus: Central bank to seek to buy notes issued by cos. including GE, United Utilities, Rio Tinto, according to list.
  • Poland at Risk of Being Left Behind Cheap Debt on Refusal: Amundi, Pekao think government should prefinance 2017 budget, capitalizing on emerging-market debt rally.
  • Fast Growing Nordea AM Hits the Brake on Inflows: New money of EU14.6b through Aug. making it harder for Nordea to generate excess returns.

In FX, US election fever put the focus on the likes of USD/MXN and USD/JPY in particular, with Clinton’s narrow lead, giving the MXN some near term relief. USD/JPY is still testing the downside in tandem with the selling pressure seen in stocks. For GBP, Cable has attempted a recovery through 1.3000, but this was short lived, though the pressure from the EUR/GBP rate looks to have eased somewhat as a return to .8700 looks tame as yet. Early days as yet, but the signs are that the market still intends to test and post fresh Brexit lows. No new drivers to prompt this today however. For USD/CAD, the breach of 1.3250 overnight was prompted by comments from BoC Poloz, who stated that the Canadian economy may take 3-5 years to recover from the impact from low Crude prices. The pair snapped back sharply to base out in the mid 1.3100’s, but is back on a 1.3200 handle, with reports the Iran are no willing to freeze Oil output at current levels. Later today we have US services and composite ISM

In Commodities, WTI and Brent crude futures enter the North American crossover in negative territory as the latest rhetoric from the IEA meeting suggests that it is unlikely that markets will be presented with a formal agreement this week. More specifically, the Russian and Saudi energy ministers this morning have firmly stated that this week’s summit will not result in an agreement and that this week’s meeting is purely for consultative purposes. This was then followed up by comments from the Iranian oil minister that the nation is not willing to freeze oil output and therefore it appears that little will be achieved this week in Algeria. Gold has been stuck in a 3-day range between USD 1343/oz and USD 1331.19/oz. Silver today has retraced some of the losses seen in the last 2 days, and is currently consolidating at the USD 19.50/oz.

* * *

Bulletin Headline Summary from RanSquawk and Bloomberg

  • European equities trade lower as ongoing concerns surrounding Deutsche Bank and Volkswagen trim opening Presidential election-inspired gains
  • Energy prices enter the North American crossover in negative territory as the latest rhetoric from the !EA
    meeting suggests that it is unlikely that markets will be presented with a formal agreement this week
  • Looking ahead, highlights include US Services PMIs, API Crude Oil Inventories and comments from Fed’s Fischer and ECB’s Coeure
  • Long-end Treasuries rally, European equities lower, driven by losses in banks; Treasury auctions continue with sale of $34b 5Y notes, WI 1.135%; last sold at 1.125% in August, lowest 5Y auction stop since 1.045% in May 2013.
  • As Merkel considers running for a fourth term, any whiff of government action on behalf of Deutsche Bank would be electorally toxic just as she faces a backlash against her refugee policy, unrest in her party bloc and slumping poll ratings
  • Even a record acquisition spree by Chinese companies isn’t enough to ease pressure on investment banks to cut costs in Asia, with Goldman Sachs and Bank of America becoming the latest firms to prepare job reductions
  • Commerzbank AG extended losses after a media report that the lender plans to eliminate 9,000 jobs and suspend dividend payments as part of an overhaul under new Chief Executive Officer Martin Zielke
  • Credit Suisse Group AG Chief Executive Officer Tidjane Thiam said the bank is mulling further cost reductions at the global markets unit that blindsided him with losses earlier this year
  • Jamie Dimon and Sergio Ermotti starred in the roadshow promoting Postal Savings Bank of China Co.’s share sale. Yet the executives’ participation in this year’s biggest initial public offering also serves as a reminder that investing in Chinese banks isn’t what it used to be
  • The head of the bankers’ association in Denmark, where interest rates have been negative longer than anywhere else on the planet, says the policy may not be as punishing for lenders as once thought
  • Iran is not willing to freeze its oil output at current levels and doesn’t intend to forge an agreement with other major crude producers at talks in Algiers this week, said the nation’s oil minister
  • Saudi Arabia canceled bonus payments for state employees and cut ministers’ salaries by 20%, steps that further spread the burden of shoring up public finances to a population accustomed to years of government largesse
  • The U.S. Justice Department is assessing how big a criminal fine it can extract from Volkswagen AG over emissions- cheating without putting the German carmaker out of business, according to two people familiar with the negotiations
  • The U.S. Department of Labor agreed to conduct a review of Wells Fargo & Co. requested by lawmakers including Elizabeth Warren, who said the bank may have put undue pressure on employees to meet sales quotas

* * *

DB’s Jim Reid concludes the overnight wrap

Nowhere else to start this morning other than the most watched televised election debate in history and the first of three between Clinton and Trump. Both the post-debate poll just released and also the positive reaction in relevant markets suggests that Clinton has come out with the advantage following the exchange.

Indeed a CNN/ORC poll out a short time ago had 62% of viewers claiming that Clinton won the debate, compared to 27% which believed Trump was the victor. This is the only poll that we have seen officially released so far. In terms of markets, following three consecutive weekly losses in which it weakened nearly 9%, the Mexican Peso – which is seen as a bit of a sentiment proxy for the debate given the trade subject – has rallied back 1.95% and the most since February while there are gains also for a number of other EM currencies which are seen as vulnerable if Trump scrutinises trade deals. US equity index futures are up over +0.60%, while safe haven barometers like the Yen (-0.38%) and Gold (-0.22%) are weaker.

In terms of the debate itself, the subjects of trade, foreign policy, the US economy and race were all debated along with various personal charges of both candidates. It was far from smooth however and at times the moderator lost control of both candidates as the exchanges descended into a tirade of accusations. As a report from the Washington Post out just a short time ago suggested, Clinton came across overly rehearsed but tended to stay more on topic while also coming across as competent and deliberate, and surprisingly didn’t face too many challenges. Trump, meanwhile, was a lot more restless and unprepared. Having said all this Trump has been written off many times and has repeatedly confounded his critics with strong on the ground support. Roll on the next two battles on October 9th and 19th.
The majority of bourses in Asia have rebounded from early declines meanwhile. The Nikkei is back to +0.46% having been down as much as -1.50% prior to the debate, while the Hang Seng (+1.10%) and Kospi (+0.62%) also gained as the debate progressed. China stocks are reasonably flat and just the ASX (-0.56%) is lagging. Sovereign CDS markets in the likes of China and Korea were initially 2-3bps wider but also pared those moves as the debate wore on and are back to flat now.

Moving on to today, we see the start of the BoE’s corporate bond purchases with reverse auctions across the energy, industrial, transport, property, water and financial sectors. Tomorrow and Friday sees more of the same across the communications, consumer cyclical and non-cyclical sectors tomorrow, and electricity and gas sectors on Friday. We published a quick Credit Bites yesterday reviewing where we stand with regards to the market ahead of this new regime. know if you didn’t get a copy. Staying with central bank bond purchases, yesterday saw the latest weekly ECB CSPP holdings released. It was another strong week, the fourth largest since the scheme launched in June. Three of the top four weeks have occurred this month suggesting that the ECB is using the rebound in primary to stock up on bonds. They bought €2.316bn last week which equates to €463mn/day. The average daily run rate so far is €372mn.

So central banks continue to keep yields at ultra low levels however there’s obviously been a lot of discussion on whether there is a fresh desire to steepen curves to help financials. Easier said than done but our European Equity strategists have discussed the implications in a note this morning. They suggest that if they could steepen curves there would be scope for significant sector rotation in the European equity market from over-owned defensives into financials and cyclicals. However, they note that yields have continued to track market expectations for the future Fed funds rate, which in turn has continued to move in line with global growth momentum. This suggests low bond yields are not principally due to discretionary central bank policies (which could be reversed at will), but to the weakening in the global growth picture, to which central banks have only responded by making policy more accommodative. They expect global growth momentum to continue weakening (due to rising recession risks in the US and the fading of the Chinese credit stimulus) – and, hence, see limited upside for bond yields. If central banks were to attempt to push up nominal yields against the backdrop of weak growth and low inflation expectations, this would likely lead to higher real bond yields, a negative re-pricing in risk assets and, ultimately, a renewed drop in nominal bond yields. As a consequence, they remain overweight the bond proxies in the European equity market (real estate and our basket of sustainable dividend payers) and are cautious on financials.

Moving on. It was a risk off day to start the week yesterday led by the European banking sector that had its worst day (Stoxx 600 Banks index -2.32%) for nearly 8 weeks. European markets underperformed relative to their US counterparts as a result with the Stoxx 600 and DAX closing -1.55% and -2.19% respectively. The S&P 500 finished -0.86% while the Dow nudged down -0.91%. A sharp leg higher for WTI Oil (+3.26%), which wiped out the bulk of Friday’s losses on the first day of the OPEC meeting, didn’t appear to translate into gains for the energy sector. It appears that prices were up on higher expectations of some sort of action or agreement with the latest headlines suggesting that the UAE is also in favour of freeze should all other participants agree. There were also upbeat comments from Nigeria but it would be no great surprise to see a flurry of back and forth headlines over the next two days before the meeting draws to a close tomorrow.

Meanwhile in FX markets Sterling was busy again, touching an intraday low of $1.292 at one stage (about -0.40% on the day) before then recovering into the close in the US to finish relatively flat. Unsurprisingly it’s a number of negative news articles concerning Brexit which was attributed to the early weakness again. A couple in particular caught our attention. The first was a survey released by KPMG yesterday morning (Source-Reuters) suggesting that three-quarters of CEO’s (in a sample of 100) said that they would consider moving headquarters or operations out of the UK as a result of Brexit. The second was an article in the FT suggesting that senior City figures were growing increasingly alarmed that political momentum is growing behind a ‘hard Brexit’. ECB President Draghi spoke on the subject yesterday and said that ‘any outcome should ensure that all participants are subject to the same rules’ and that ‘it is very hard to imagine that any agreement that will be perceived as discriminatory against some subjects or in favour of other subjects could be a source of stability for the future of our EU’.

Staying with Europe, we’ve got a new date for readers to put into their diaries this morning, that being Italy’s high stake Senate Reform referendum which has been officially scheduled for December 4th. The 10 week countdown is underway then. While we’re in the periphery, yesterday DB’s Marco Stringa published a note touching on what the Spain regional election results from the weekend mean. Following the heavy defeats to the centre-left PSOE and decent performance for the PP, he has left unchanged his 60% indicative probability of a government being formed before the 31st October and continues to see a third election as the only feasible alternative. That said he is becoming increasingly concerned by the lack of progress and sees the balance of risks clearly tilted towards a new election, which would be the third in twelve months, possibly in mid-December.

Elsewhere, in terms of the minimal data that was released yesterday, a bumper IFO survey reading in Germany seemingly did little to boost sentiment. The headline business climate reading printed at 109.5 for September which was up an impressive 3.2pts from August and also well ahead of the consensus expectation of 106.3. It also puts the index at the highest level since mid-2014. The expectations component also jumped 4.4pts to 104.5 which is the largest rise since re-unification, while the current assessment index printed at 114.7, up 1.8pts from the month prior. Our economists in Germany noted that while this data brings the manufacturing IFO roughly in line with the manufacturing PMI, the discrepancy between the two surveys with respect to the services sector has gotten wider with the services and retail IFO improving, too. Moreover, at their September level IFO expectations points to a strong GDP growth pick-up in Q4, while the weakening PMI points to slowing growth. Overall, this data release brought little clarity in the view of our colleagues. On the plus side, it somewhat eases downside risks to their Q4 GDP expectations. On the negative side, they fear that part of the IFO surge is a “relief rally” after initial fears of an immediate large negative Brexit-impact have eased.

Away from this the data in the US was a bit of a sideshow. New home sales declined less than expected in August (-7.6% mom vs. -8.3% expected) to an annualized rate of 609k, while the Dallas Fed’s manufacturing survey rose 2.5pts but to a still softish -3.7.

There was also a bit of chatter out of the Fed yesterday too. The Dallas Fed’s Kaplan said that ‘I would have been comfortable in seeing some removal of accommodation in September’ and that ‘I am concerned about distortions rates this low are creating’. The Minneapolis Fed’s Kashkari said on the other hand that the decision to hold this month was the right move and that he was in support of it. Richmond Fed President Lacker appeared to side with the former after saying in an interview yesterday that ‘our benchmarks point to interest rates that are substantially higher than they are now, and I think we need to get on with it’.

Looking at today’s calendar, this morning we kick off in Germany where we’ll firstly get the import price index reading for August. Shortly following that we’ll get the latest M3 money supply growth reading for the Euro area, followed then by the September CBI retail reported sales numbers in the UK. This afternoon in the US the early data is the S&P/Case-Shiller house price index reading for July. The remaining flash PMI’s then follow (services and composite – the former of which is expected to improve 0.2pts to 51.2) along with September consumer confidence (expected to decline to 99.0 from 101.1) and the Richmond Fed manufacturing survey (expected to improve 9pts to -2). Elsewhere the Fed-Vice Chair Fischer is due to speak this afternoon at 4.15pm BST however there’s no indication that either the economic outlook or monetary policy will be discussed, while the BoE’s Haldane is also due to speak at 6.30pm BST.




i)Late  MONDAY night/TUESDAY morning: Shanghai closed UP 17.74 POINTS OR .60%/ /Hang Sang closed UP 139.37 POINTS OR 1.09%. The Nikkei closed UP  253.98 POINTS OR .84% Australia’s all ordinaires  CLOSED DOWN 0.47% /Chinese yuan (ONSHORE) closed UP at 6.6688/Oil FELL to 45.04 dollars per barrel for WTI and 46.35 for Brent. Stocks in Europe: ALL IN THE RED   Offshore yuan trades  6.6834 yuan to the dollar vs 6.6688 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS HUGELY AS MORE USA DOLLARS   LEAVE CHINA’S SHORES


none today


none today


c) Report on CHINA

none today


A terrific explanation as to why gold was whacked this morning:

Deutsche bank crashes almost into single digits as well as their credit default swaps are now spiking to record highs:

(courtesy zero hedge)

Deutsche Bank Stock Crashes Near Single-Digits As CDS Spike To Record Highs

The “most systemically dangerous bank in the world” is in grave trouble. Despite exclamations that there is “no need for additional capital” and that “Deutsche Bank is no Lehman” investors are fleeing the bank’s assets en masse as professionals pile in to buy counterparty risk protection. With the only thing standing between bank runs and stability being the confidence of depositors, and knowing full well that everybody lies when it gets serious, one witty trader noted, “if it walks like Lehman, and talks like Lehman… it is Lehman.”

Deutsche stock is collapsing…

And counterparty risk hedges are spiking…

as the bottom end of DB’s capital structure is starting to reflect a serious haircut…

And the DB pain is spreading to the entire EU banking system…

When is Draghi going to starting sell CDS Protection?


The Deutsche bank problems coupled with Commerzbank caused the shelving of  bond deals with Nord LB, Lufthansa and Korean Air

seems that the markets are having a tough time…

(courtesy zero hedge)

Deutsche Bank Contagion: Nord LB, Lufthansa, Korean Air Pull Bond Deals

As noted earlier, the post-debate market relief rally has given way to concerns over banking woes, with stocks turning lower in Europe as focus returns to Deutsche Bank and Italy’s constitutional referendum, now scheduled for December 4. More troubling is the overnight news that two German issuers – Nord LB and Lufthansa  – followed quickly by Korean Air Lines, have pulled their bond deals prompting commentators to suggest that ‘uncertainty on the credit front appears to be weighing” on some and may be raising concerns about the German economy.

As IFR reported overnight, concerns around potential contagion from the German banking sector forced Norddeutsche Landesbank to shelve a 7 year senior unserued bond on Tuesday “after the issuer struggled to find enough demand to cover the seven-year trade.” The German lender, rated Baa1/NR/A-, started marketing the benchmark trade on Monday at 90bp area over mid-swaps via leads BNP Paribas, DZ Bank, NordLB, Santander (B&D) and UniCredit. However, Nord LB’s ambitions were cut short as renewed concerns around Deutsche Bank’s capital position swirled around the market, sending spreads wider.

“It didn’t get the response that you would want. There is too much noise around the German banking sector,” a lead manager said. Deutsche Bank’s bonds shot wider despite the bank insisting it can weather a potential U$14Bn fine without raising extra capital and that it had not sought a government bailout. A 750m 4.5% 2026 Tier 2 bond has widened 24bp since Monday’s open to swaps plus 509bp.

But Deutsche Bank is not the only culprit. The German Landesbank sector, of which NordLB is a part, has also come under intense scrutiny this year given the damaging scale of its shipping loan exposures. Reuters reported earlier this month that the German state-controlled lender had agreed to take full control of its loss-making Bremer Landesbank unit, which is suffering from a weak shipping market that is chipping away at its capital.

Moody’s downgraded NordLB earlier this month following that announcement after both entities reported losses in the first half. NordLB’s senior rating was lowered to Baa1 (negative) from A3. It is A- (stable) by Fitch. NordLB’s 750m January 2021s, issued in January at swaps plus 77bp on books of just under 800m, were bid around 41bp on September 6 but are now around 67bp, according to Tradeweb prices.

And while fundamentals have largely not mattered in recent months as investors felt backstopped by central banks, such concerns returns with a vengeance on Monday.

NordLB is the second deal to be pulled this week in the European bond market. Lufthansa mothballed a proposed €500MM no-grow seven-year on Monday after refusing to compromise on pricing, stating that pricing was not “achievable in the current market.”

In a statement released on Tuesday NordLB thanked investors for their interest in the transaction, but said it had “decided not to proceed with the transaction at this point. The company is looking forward to re-engaging with investors again in the future.”

And then, most recently, completing the trifecta of pulled deals was Korean Air Lines which pulled a US-denominated 30NC3 deal. The carrier decided not to proceed with transaction in current market and will “review future issuance windows”, according to Bloomberg.

The trend of pulled deals is, needless to say, disturbing since that has been the primary pathway the central banks have focused on in recent months: from the ECB’s March announcement of corporate bond buying, to the BOE following suit over the summer. With the bulk of proceeds from new debt issuance continuing to fund stock dividends and buyback, should the “contagion” spread to more issuers, it is probable that equities will be the first asset class to suffer should the bond issuance window indeed slam shut.



This spells trouble:  the CDS on 5 yr Deutsche bank bond in spread points inverts over the 10 yr.

(courtesy zero hedge)

Deutsche Curve Inverts As Bundesbank Dismisses State Support Of “Zombie” Banks

Deutsche Bank Sub CDS closed above 500bps for only the second day in its history (and the longer-term CDS curve inverted once again) as a bad day ended worse with Bundesbank member Andreas Dombret exclaimed “state support of banking sector must end,” warning that it only “props up zombie banks.” His pronouncements also pushed politicians to make the hard decisions and “tell banks they need structural reform.”

As Bloomberg details, “Political support for the banking sector has to end at last,” Bundesbank board member Andreas Dombret says in text of speech in Vienna. “Unfortunately I’m only seeing this to a limited extent.”

  • “Without courageous realignment, banks won’t be able to permanently survive, except perhaps as zombie banks with the support of public authorities,” he says.
  • German and Austrian banks have to “adjust their business models so that they match the current environment,” he says.
  • The whole sector has to shrink, because the “systematic clean-up, inevitable after the bursting of the financial bubble, isn’t finished yet,” he says.
  • Discussion shouldn’t focus exclusively on “fewer banks, fewer branches,” he says, adding that the sector has to shrink to a sustainable size.
  • Market participants have to decide how to address overcapacities, Dombret says.
  • Basel III rules should be finalized by year-end and in the medium term the privileged treatment of sovereign bonds should be abolished.
  • Capital markets union should be advanced to strengthen capital markets as supplement to the banking system

And the credit market reacted badly with Sub CDS topping 500bps for only the 2nd day ever...

And more troubling, Deutsche Bank’s longer-term CDS curve has returned to inversion…

The Q&A added to the worrries:

  • EU “resolution regime, which started at the beginning of the year, hasn’t been tested,” ECB Supervisory Board member Andreas Dombret says in Q&A after speech in Vienna.
  • “The banking sector must be an industry where unsustainable business models mean market exit without causing a systemic crisis”
  • On negative rates: “If we reach the price-stability goal, we should get out of the low rate policy as soon as possible”

and Dombret’s parting comments that

  • “We need to stick to the bail-in rules. If we now propose a ‘bail-in holiday’ we don’t have the resolution system anymore”

Explains why the Sub CoCo bonds are trading with a 30% haircut already…

This won’t end well.




Then late in the day, the worry on Deutsche intensified which strangely caused investors to pour into sovereign German Bunds with a negative yield of .12% for 10 yrs.

A little note to our German investors:  you have heard about an ancient metal of kings, you know the yellow stuff?  they call it gold! Maybe that would be a better investment return that German bunds!

(courtesy zero hedge)

Deutsche Bank Fears Spark Buying Panic In Bunds (Despite Rising Germany Sovereign Risk)

Investors have piled into global developed market sovereign bonds as fears of Deutsche Bank collapse ripple through global markets. Interestingly, despite rising default risk concerns in Germany CDS, Bunds have been aggressively bid with negative yields now out to 15 years (and Finland NIRP to 10 years).

As Deutsche Bank risk explodes to record highs, Germany’s sovereign risk has been rising…


But that rising risk has done nothing to hold back buyers of Bunds as the “global growth is awesome, bond curves are steepening” narrative is destroyed…


Driving the entire Bund curve below zero out to 15 years…


And Finland now NIRP to 10 years…


Charts: Bloomberg



The war between the USA and Europe is now escalating as the Dept of Justice is now assessing the size of the criminal penalty to Volkswagen. After the D of J is finished then comes the class action lawsuits against the company. The big question is the size of the criminal penalty!

(courtesy zero hedge)

DOJ Is Assessing Size Of Criminal Penalty It Can Levy On Volkswagen “Without Putting Company Out Of Business”

When two weeks ago the DOJ announced a far larger than expected $14 billion settlement demand from Deutsche Bank, one which if left unrevised would would leave Deutsche Bank short of billions in capital, has since triggered the latest episode of European bank selling and potential contagion, some wondered if there was an element of punitive retaliation aimed at Europe’s “assault” on Apple’s taxes. That question will surely grow louder when overnight Bloomberg reported that the DOJ is now assessing“how big a criminal fine it can extract from Volkswagen AG over emissions-cheating without putting the German carmaker out of business.

Volkswagen stock promptly dropped over 3% on the news and was down 2.5% as of the latest refresh.

The government and Volkswagen are trying to reach a settlement by January, Bloomberg reported, before a new U.S. administration comes into office and replaces the political appointees who have been overseeing the process. In criminal prosecutions, the Justice Department may assess the impact of a charge or settlement on a business’s viability, and the resulting effect on shareholders and employees. A prosecution’s potential collateral damage is one of the factors the department considers under principles for prosecuting businesses laid out in the “U.S. Attorney’s Manual.”

Bloomberg adds that while in the DB case the penalty may have been overly demanding, as the U.S.’s Volkswagen calculations show, the department is showing that in some cases, it will take a company’s financial health into account. That said, it’s not clear what penalty range the U.S. is considering in the criminal case against Volkswagen. The company had net liquidity of 28.8 billion euros ($32.4 billion) as of June 30, and Chief Financial Officer Frank Witter said his goal is to keep the target for average net liquidity at 20 billion euros to ensure funding needs and protect the company’s credit rating. The carmaker generates several billions of dollars of cash each quarter and could tap into a credit line or raise capital if necessary to pay its obligations.

Volkswagen has already agreed to pay an industry-record $16.5 billion in civil litigation fines in the U.S. after admitting last year that its diesel cars were outfitted with a “defeat device” that allowed them to game U.S. environmental tests. The carmaker is also on the hook for outstanding civil claims from several states and as much as $9.2 billion in investor lawsuits in Germany, where it’s also under criminal investigation.

“The department doesn’t pick a number in a complete vacuum,” said William Stellmach, a former federal prosecutor now at Willkie Farr & Gallagher LLP in Washington. “There are a number of cases where it has acknowledged that the impact of a financial penalty on a company was a factor in deciding what that penalty should be.

Nonetheless, the ability-to pay assessment doesn’t necessarily result in a lower number, according to Stellmach, who isn’t involved in the VW case. Rather, the department can structure an agreement to soften some of the sting, such as an installment plan allowing for deferred payments, he said. Companies can also receive credit for penalties assessed by other regulators or authorities both in the U.S. and abroad.

The good news for Volkswagen is that the automaker, and one of Germany’s largest employers, has plenty of money to meet further fines, particularly because penalties tend to be paid over long time periods, according to Joel Levington, a Bloomberg Intelligence credit analyst. “Despite all the damage that its reputation has taken, VW is still a company that might be back to generating $5 billion in free cash flow in 2018, and when you generate that kind of cash, it absolves a lot of sins,” he said. The Justice Department began negotiations on the criminal penalty in August, one person said.

Bloomberg points out an interesting tangent about Volkswagen’s financing unit: “Volkswagen, like most carmakers, also has a financing unit, which offers buyers loans or lease packages when they are ready to buy their cars at a dealership. Should the company’s cash level fall too low, it could spark ratings downgrades by credit agencies, which risks increasing the costs of that unit.”

Standard & Poor’s Ratings Services said in a note in February that it would consider lowering the carmaker’s rating only if its litigation costs exceeded 40 billion euros ($45 billion) or if its legal costs caused a severe negative impact on the company’s liquidity position, a scenario it considers unlikely. By that measure, after U.S. civil penalties and accounting for maximum damages in German lawsuits, the company would still have a cushion of about $20 billion to absorb other litigation and investigation-related expenses.

Volkswagen is currently rated BBB-plus by S&P, three levels above junk. S&P has warned that it may cut Volkswagen’s rating further. “The negative outlook is still there and that reflects the risks that there could be more charges,” said Alex Herbert, the London-based analyst who wrote the February report.

Ultimately, however, the question remains: is the DOJ set out on a crusade to “punish” European some of the most iconic European -or rather German- companies, taking a shot first at Deutsche and now Volkswagen, and if so at what point will it deem its overreach to be sufficient. For now, there is no answer and as questions linger, expect European stocks to suffer for the near-future.




The war of words between Russia and the uSA continues.  The Russians state that the  the real barbarism belongs to the USA

(courtesy zero hedge)

Russian Foreign Ministry Responds To US Accusations: “The Real Barbarism Is What You Did In Libya and Iraq”

The war of words between the US and Russia escalated dramatically today, when in response to an accusation by Samantha Power, the US envoy to the UN, on Sunday that “What Russia is sponsoring and doing [in Syria] is not counter-terrorism, it is barbarism“, the Russian foreign ministry – through an FB post by its spokesperson Maria Zakharova – responded that there is “nothing more barbaric in modern history” than what the US has done in Iraq and Libya.

As noted earlier, Samantha Power delivered an emotional speech before the UN, accusing Russia and Syria of attacks on aid workers, civilian infrastructure and residential areas; she omitted that armed groups, including Al-Qaeda offshoot Al-Nusra Front which is now directly supported by the US coalition following its public “reverse merger” with the terrorist organization, are in control of large parts of Aleppo and are using its population as human shields.

In any event, it was Russia’s turn to respond to the accusations which it did today, when Power’s use of the term ‘barbarism’ drew sarcastic remarks from Russian Foreign Ministry spokesperson Maria Zakharova.

“Historically speaking… a barbarian is someone not belonging to an empire, and we have only one of those today,” she noted on her Facebook page. “As for the imagery… the world has seen nothing more barbaric in modern history than Iraq and Libya done the Washington way.

As with Lavrov, Zakharova said that she believes Power’s remarks were meant to draw attention from the American attack on Syrian troops near Deir ez-Zor, which happened amid the ceasefire and almost resulted in the Syrian Army’s positions being overrun by ISIS troops which the US is supposedly seeking to eradicate.

While the US blames Russia for the collapse of the ceasefire after Russia allegedly attacked a UN convoy last weekend, Moscow blames the US for the failed truce, saying it was incapable of reining in rebel groups who would not commit to it, and would not agree to designating them as legitimate targets for counter-attacks.

As RT notes, Power, who received her current appointment in 2013, was among the most vocal supporters of the concept of “humanitarian interventionalism” – the use of military force on humanitarian grounds. The invasion of Saddam Hussein’s Iraq and the toppling of Muammar Gaddafi in Libya are both examples of such actions. In both cases, interventions meant to prevent human suffering actually caused huge tragedies in the long run.




The following is not good:  global trade is slowing down immensely as the consumer has already hit peak debt everywhere:

(courtesy zero hedge)

Global Trade To Grow At Slowest Pace Since Financial Crisis

Over the past several years, whenever we have looked at the IMF’s global growth forecasts, the only chart we said is worth keeping an eye on, is that of global trade, because while GDP can be massaged, retroactively revised, and “double-seasonally adjusted” when the need arises – and is far more a political “metric” than an economic one – trade remains the most objective indicator of how the world is truly doing at any given moment, especially since “central banks can’t print trade.”

In fact, it has been our contention for several years now that the single best indicator of the global economy is the rate of growth in global trade, which unfortunately has been slowing for the past 5 years.

Making matters worse, according to a new update from the World Trade Organization, global trade is now set to grow at the slowest pace since the financial crisis. In a report issued today, the WTO said that world trade will again grow more slowly than expected in 2016, expanding by just 1.7%, well below the April forecast of 2.8%.

The forecast for 2017 was also slashed, with trade now expected to grow between 1.8% and 3.1%, down from 3.6% previously. With expected global GDP growth of 2.2% in 2016, this year would mark the slowest pace of trade and output growth since the financial crisis of 2009.

Merchandise trade volume and real GDP, 2012-2017 a

Volume of merchandise exports and imports by region, 2012Q1-2016Q2

Volume of merchandise exports and imports by level of development, 2012Q1-2016Q2

If the revised projection holds (if anything, it may be revised further downward), 2016 will be the first time in 15 years that the ratio between trade growth and world GDP has fallen below 1:1.

Ratio of world merchandise trade volume growth to world real GDP growth, 1981-2016

Redundantly, the WTO adds that “historically strong trade growth has been a sign of strong economic growth, as trade has provided a way for developing and emerging economies to grow quickly, and strong import growth has been associated with faster growth in developed countries.  However the increase of the number of systematically important trading countries and the shift in the ratio of trade and GDP growth makes it more difficult to forecast future trade growth. Therefore, the WTO is for the first time providing  a range of scenarios for its 2017 trade forecast rather than giving specific figures.  As Chart 1 below shows, the current trend in the relationship between trade growth and world GDP is lower than observed over the last three decades.”

The ongoing collapse in world trade will likely get even worse in coming months, especially if as a result of the ongoing Europe backlash against the TPP, Obama’s trade agreement fails to pass.

As the WTO admits, the latest figures are a disappointing development and underline a recent weakening in the relationship between trade and GDP growth.  Over the long term trade has typically grown at 1.5 times faster than GDP, though in the 1990s world merchandise trade volume  grew about twice as fast as world real GDP at market exchange rates. In recent years however, the ratio has slipped towards 1:1, below both the peak of the 1990’s and the long-term average.

Needless to say, WTO director general Robert Azevedo was shocked by this dramatic trade slowdown:

The dramatic slowing of trade growth is serious and should serve as a wake-up call. It is particularly concerning in the context of growing anti-globalization sentiment.  We need to make sure that this does not translate into misguided policies that could make the situation much worse, not only from the perspective of trade but also for job creation and economic growth and development which are so closely linked to an open trading system.

“While the benefits of trade are clear, it is also clear that they need to be shared more widely. We should seek to build a more inclusive trading system that goes further to support poorer countries to take part and benefit, as well as entrepreneurs, small companies, and marginalised groups in all economies. This is a moment to heed the lessons of history and re-commit to openness in trade, which can help to spur economic growth.”

The WTO’s appeal to “revise” globalization echoes a similar call made by the IMF, although it is difficult to see how such a transformation could take place. That said, the IMF recently took a pot shot at none other than Donald Trump for his protectionist agenda, when she said that “Those who promote ‘getting tough’ with foreign trade partners through punitive tariffs should think carefully”, said the IMF’s Maurice Obstfeld earlier in September. “It may be emotionally gratifying; it may boost specific industries; the threat may even frighten trade partners into changing their policies; but, ultimately, if carried out, such policies cause wider economic damage at home,” he said.

Looking at the collapse in global trade under the existing “non-protectionist” paradigm, the damage has already been done.



This is not good for the oil industry; Goldman Sachs has just cut oil price target from 50 dollars down to 43 dollars: here is why!

(courtesy Goldman Sachs/zero hedge)

Goldman Cuts Oil Price Target From $50 To $43 On Rising Global Surplus

While we await every new headline out of Algiers, overnight Goldman threw in the towel on its “transitory” oil market bullishness, and in a note by Damien Courvalin looking “Beyond Algiers, Weakening Oil Fundamentals”, the bank cut its Q4 oil price target from $50 to $43, as the bank admits the previously anticipated rebalancing will take longer to achieve, and now expects “a global surplus of 400 kb/d in 4Q16 vs. a 300 kb/d draw previously.

Speaking of the Algiers meeting, Goldman also notes that “while a potential deal could support prices in the short term, we find that the potential for less disruptions and still relatively high net long speculative positioning leave risks skewed to the downside into year-end. Importantly, given the uncertainty on forward supply-demand balances, we reiterate our view that oil prices need to reflect near-term fundamentals – which are weaker – with a lower emphasis on the more uncertain longer-term fundamentals.”

Here is the summary from Courvalin:

Oil prices have remained range bound ahead of the OPEC consultation in Algiers this week and as production disruptions have yet to meaningfully ramp up. Statements by participants suggest potentially greater collaboration between OPEC members than in previous attempts, although the outcome of this advisory meeting remains uncertain. Our production forecast continues to reflect a seasonal Saudi production decline into year-end and no growth elsewhere (the equivalent of a deal) with OPEC exc. Libya/Nigeria production growth only resuming in 1Q17.

Nonetheless, our 4Q16 oil supply-demand balance is weaker than previously expected given upside surprises to 3Q production and greater clarity on new project delivery into year-end.This leaves us expecting a global surplus of 400 kb/d in 4Q16 vs. a 300 kb/d draw previously. Importantly, this forecast only assumes a limited additional increase in Libya/Nigeria production of 90 kb/d vs. current estimated output. As a result, we are lowering our 4Q16 forecast to $43/bbl from $50/bbl previously. While a potential deal could support prices in the short term, we find that the potential for less disruptions and still relatively high net long speculative positioning leave risks skewed to the downside into year-end. Importantly, given the uncertainty on forward supply-demand balances, we reiterate our view that oil prices need to reflect near-term fundamentals – which are weaker – with a lower emphasis on the more uncertain longer-term fundamentals.

Despite a weaker 4Q16, our 2017 outlook is unchanged with demand and supply projected to remain in balance. We expect demand growth to remain resilient while greater than previously expected production declines in US/Mexico/Venezuela/ Brazil/China are offset by greater visibility in the large 2017 new project ramp up in Canada/Russia/Kazakhstan/North Sea. While our price forecast remains unchanged at $52/bbl on average for next year with a 1H17 expected trading range of $45-$50/bbl, we continue to view low cost and disrupted supply as determining the path of an eventual price recovery with our forecasts conservative on both. As we wait for headlines from Algiers, it is worth pointing out that Iran, Iraq and Venezuela have each guided over the past month to a 250 kb/d rise in production next year.

And then there is the demand side:

July and August data point to demand growth slowing in line with our expectation, in particular in China. We forecast demand growth to average 0.9 mb/d yoy in 3Q, down from its torrid 1H16 pace of 1.8 mb/d. Our expectation for moderating demand growth in 2H16 is driven by strong base effects, a slowdown in growth and continued switching of power generation away from oil in Japan, Brazil and Mexico. Note that our demand estimate remains higher than the IEA’s however given our corrected measure of Mexican demand1. and our expanded accounting of Chinese demand.

To summarize, in Goldman’s base case, the bank’s “forecast continues to reflect a combined decline in OPEC production (exc. Libya and Nigeria) of 340 kb/d in 4Q16, with growth of only 140 kb/d in 1Q17. Despite this forecasted help from OPEC, we find that the improvement in oil fundamentals has stalled in 3Q and that the inventory build is set to resume in 4Q, a weaker outlook than we had previously expected.

So given Goldman’s outlook for a well supplied market and a crude curve in contango with limited spot upside, it “continues to recommend being short the S&P GSCI Crude Oil index, especially paired with positive yielding oil-exposed assets such as HY E&P credit.

* * *

Normally, this would suggest buying oil here, which is what Goldman’s flow traders will be doing, however considering the significant volatility potential out of Algiers over the next 48 hours, it may be best to just sit back and observe if only for a few days.



Then early this morning crude crashes as Iran states:  “no deal”

(courtesy zero hedge)

Crude Crashes As Iran Says “No Deal” After Saudi Offer




Chaos reigns supreme as the Saudis first admit “no deal” but hopeful for November.  The market figured it out and oil collapsed to the low 44’s

(courtesy zero hedge)

Crude Chaos Strikes: Saudis Admit “No Deal” But “Hopeful” For November

Having failed completely to consummate a freeze deal in Algiers, the Saudi oil minister throws out a bone of hope to crude bulls that November’s OPEC meeting may see a freeze deal. Crude is testing its lows of the day but bouncing around like Hillary’s eyes as the minister desperately tries to keep the dream alive.


  • *FALIH: IRAN, LIBYA, NIGERIA POSSIBLY TO BE ALLOWED MAX. OUTPUT (yeah, like that will happen!)

And crude’s reaction…

So prepare yourself for 2 more months of rumors and denials as we head towards the November meeting which will once again produce nothing.. unless oil is at $20 going in.




Late this evening, oil gets a little pop back into the 45 dollar handle with a unexpected drop in  inventories

(courtesy zero hedge)

Oil Pops After Crude Inventories Unexpectedly Drop

In the week since the last API report, oil has ripped and dipped back to unchanged following an unexpected draw and Algiers disappointment, but prices jumped higher (tagging $45.00) as API noted a752k draw (4th week in a row). This was dramatially below the 3mm build expected. Cushing, Gasoline, an Distillates all saw inventory draws (the latter’s first draw in 7 weeks). 


  • Crude -752k (+3mm exp)
  • Cushing -832k
  • Gasoline -3.7mm
  • Distillates-343k

The last 3 weeks have seen the biggest drawdown in crude inventories (over 4%) since July 2013 and if this 4th week’s data holds it will hold the biggest drop in 3 years.


Have slipped back to pre-API levels during the day, oil’s knee-jerk spike tagged $45.00 stops after this week’s across the board draw from API data…


Charts: Bloomberg



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




GBP/USA 1.2961 DOWN .0005 

USA/CAN 1.3235 up .0005

Early THIS TUESDAY morning in Europe, the Euro FELL by 11 basis points, trading now well above the important 1.08 level RISING to 1.1179; 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 CLOSED UP 17.74 OR   0.60%   / Hang Sang  CLOSED UP 253.98  POINTS OR 1.09%     /AUSTRALIA IS LOWER BY 0.47% / 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 TUESDAY morning CLOSED UP 139.37 POINTS OR 0.84%

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

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 253.98  OR 1.09%  ,Shanghai CLOSED  UP 17.74 POINTS OR .60%   / Australia BOURSE IN THE RED: /Nikkei (Japan)CLOSED IN THE GREEN   INDIA’S SENSEX IN THE RED

Gold very early morning trading: $1335.90


Early TUESDAY morning USA 10 year bond yield: 1.572% !!! DOWN 5 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  2.304, DOWN 4 IN BASIS POINTS  from YESTERDAY night.

USA dollar index early TUESDAY morning: 95.38 UP 8 CENTS from MONDAY’s close.

This ends early morning numbers TUESDAY MORNING



And now your closing TUESDAY NUMBERS

Portuguese 10 year bond yield: 3.41% UP 3 in basis point yield from MONDAY  (does not buy the rally)

JAPANESE BOND YIELD: -.074% DOWN 1 in   basis point yield from MONDAY

SPANISH 10 YR BOND YIELD:0.898%  DOWN 2 IN basis point yield from  MONDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 1.21 UP  3 in basis point yield from MONDAY 

the Italian 10 yr bond yield is trading 31 points HIGHER than Spain.





Closing currency crosses for TUESDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/2:30 PM

Euro/USA 1.1219 DOWN .0031 (Euro DOWN 31 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 100.29 DOWN: 0.0851 (Yen UP 9 basis points/POLICY ERROR ON BANK OF JAPAN

Great Britain/USA 1.3017 UP 0.0051( POUND UP 51 basis points

USA/Canada 1.3227 DOWN 0.0001 (Canadian dollar UP1 basis points AS OIL FELL (WTI AT $44.33). Canada keeps rate at 0.5% and does not cut!


This afternoon, the Euro was DOWN by 31 basis points to trade at 1.1219


The POUND ROSE 51 basis points, trading at 1.3017/

The Canadian dollar ROSE by 1 basis points to 1.3237, WITH WTI OIL AT:  $44.33

The USA/Yuan closed at 6.6685

the 10 yr Japanese bond yield closed at -.074%  DOWN 1  IN BASIS POINTS / yield/ AND THIS IS BECOMING BOTHERSOME TO THE BANK OF JAPAN

Your closing 10 yr USA bond yield: DOWN 2 IN basis points from MONDAY at 1.620% //trading well below the resistance level of 2.27-2.32%) very problematic

USA 30 yr bond yield: 2.343  DOWN 2 in basis points on the day /*very problematic as all bonds globally rose in yield (lowered in price)


Your closing USA dollar index, 95.46 UP 15 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: 2:30 PM EST

London:  CLOSED DOWN 10.37 POINTS OR 0.15%
German Dax :CLOSED DOWN 32.23 OR  0.31%
Paris Cac  CLOSED DOWN 9.17 OR 0.21%
Spain IBEX CLOSED DOWN 23.20 OR 0.27%
Italian MIB: CLOSED DOWN  57.77 POINTS OR 0.36%

The Dow was UP 133.47 points or 0.74%  4 PM EST

NASDAQ  UP 48.22 points or 0.92%  4 PM EST
WTI Oil price;  44.33 at 4:00 pm; 

Brent Oil: 45.95   4:00 EST




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

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


BRENT: $46.09

USA 10 YR BOND YIELD: 1.560%

USA DOLLAR INDEX: 95.46 UP 15 cents

The British pound at 5 pm: Great Britain Pound/USA: 1.3013 up 0.0047 or 47 basis pts.

German 10 yr bond yield at 5 pm: -0.139%



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


US Bonds, Stocks Rally As Most Systemically Dangerous Bank In The World Collapses

It’s probably nothing…


But hey, Hillary ‘reportedly’ won the debate so buy stocks?


Which reminds us…


Don’t think Deutsche Bank matters?


Post-Fed, Gold was shellacked today (despite very modest move higher in the USD Index) leaving long-bonds the big winner...


Post-Fed, Trannies are outperforming  with today’s bounce shifting The Dow positive…


On the day Trannies and Nasdaq were best, all helped by a panic bid around 12ET…


VIX was monkey-hammered to a 12 handle once again to ensure momentum carried stocks higher…


The Treasury curve flattened further today with the short-end unch as long-end yields fell 2-4bps…


The USD Index rose very modestly on the day with CAD weakness offset by Yen strength…


Crude whipsawed around again on headlines from Algiers, but ended near the lows on ‘no deal’ but Silver was worst hit...


Crude back at where it started last week before the API inventory surge (which hits again tonight)


Charts: Bloomberg


USA home prices show the slowest growth in a year

(courtesy zero hedge)

US Home Price Growth Slowest In A Year

(courtesy zero hedge)


  1. at the bottom of your page is an ad that automatically starts and drags you all the way to it. can’t get 2 paragraphs into reading your blog and i fight it till i just leave your blog…sorry really enjoyed reading your stuff, but i just spent 10 min fighting the ad to let you know whats going on…try another time


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