Oct 26/China sells 34 billion USA of treasuries last month/China purchases 87 billion dollars worth of Japanese sovereigns/China’s banks have almost 30 trillion equiv. USA liabilities on their books with 15 to 20% non performing/Funds are fleeing Deutsche bank/Bank of England asks UK banks their exposure to Deutsche bank and Italian banks/Huge 14.24 tonnes of “paper gold” removed from GLD and used in the attack on gold today/No silver leaves the SLV/SIGNIFICANT DRILL HOLES AND HUGE EARNINGS FROM AGNICO EAGLE/

Gold $1264.80 down  $7.10

Silver 17.59 down 15 cents

In the access market 5:15 pm

Gold: 1266.50

Silver: 17.63

THE DAILY GOLD FIX REPORT FROM SHANGHAI AND LONDON

.

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 OCT 26 (10:15 pm est last night): $  1279.91

NY ACCESS PRICE: $1275.30 (AT THE EXACT SAME TIME)

Shanghai afternoon fix:  2: 15 am est (second fix/early  morning):$   1278.98

NY ACCESS PRICE: 1273.60 (AT THE EXACT SAME TIME)

HUGE SPREAD TODAY!!  5 dollars

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

London Fix: OCT 26: 5:30 am est:  $1274.10   (NY: same time:  $1274.10:    5:30AM)

London Second fix OCT 24: 10 am est:  $1272.30  (NY same time: $1272.30 ,    10 AM)

Shanghai premium in silver over NY:  80 cents.

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.

end

For comex gold: 

1  NOTICE(S) FILED FOR 100 OZ

For silver:

for the Oct contract month:  0 notices for NIL oz.

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Let us have a look at the data for today

.

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In silver, the total open interest ROSE by 2,332 contracts UP to 196,311. The open interest ROSE as the silver price was UP 18 cents in yesterday’s trading .In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e. .981 BILLION TO BE EXACT or 140% of annual global silver production (ex Russia &ex China).

In silver for October we had 0 notices served upon for NIL oz

In gold, the total comex gold ROSE by 849 contracts with the rise  in price of gold ($9.90 YESTERDAY) . The total gold OI stands at 507,617 contracts.

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

GLD

TODAY WE HAD A BIG CHANGE AT THE GLD: A MASSIVE WITHDRAWAL OF 14.24 TONNES OUT OF THE GLD.  THIS GOLD WAS USED IN THE WHACKING OF GOLD TODAY

Total gold inventory rests tonight at: 942.59 tonnes of gold

Note:  the huge withdrawal of gold and yet no ounces leave the SLV!!

SLV

we had NO CHANGES at the SLV/

THE SLV Inventory rests at: 366.366 million oz

.

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

1. Today, we had the open interest in silver ROSE by 2,332 contracts UP to 196,311 as the price of silver ROSE by 18 cents with yesterday’s trading.The gold open interest ROSE by 849 contracts UP to 507,617 as the price of gold ROSE $9.90 IN YESTERDAY’S TRADING.

(report Harvey).

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

3. ASIAN AFFAIRS

i)Late  TUESDAY night/WEDNESDAY morning: Shanghai closed DOWN 15.63 POINTS OR 0.50%/ /Hang Sang closed DOWN 239.68  OR 1.02%. The Nikkei closed UP 26.59 POINTS OR 0.15% Australia’s all ordinaires  CLOSED DOWN 1.53% /Chinese yuan (ONSHORE) closed UP at 6.7690/Oil FELL to 49.23 dollars per barrel for WTI and 50.10 for Brent. Stocks in Europe: ALL IN THE RED   Offshore yuan trades  6.7808 yuan to the dollar vs 6.7690  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS QUITE A BIT  AS MORE USA DOLLARS  LEAVE CHINA’S SHORES / CHINA SENDS A MESSAGE TO THE USA TO NOT RAISE RATES IN DECEMBER.

REPORT ON JAPAN  SOUTH KOREA NORTH KOREA AND CHINA

3a)THAILAND/SOUTH KOREA

none today

b) REPORT ON JAPAN

none today

c) REPORT ON CHINA

i)Last week’s TIC report showed a huge 346 billion dollars worth of treasuries sold. What was more disturbing was China sold 34 billion of USA treasuries. The big question is China offloading all of its foreign treasuries proportionally or just the USA. It seems the latter as Japan reports that China is gobbling up Japanese government bonds by the bucketful despite its negative yield. Last yr they bought $87 billion worth of Japanese bonds. China made its move because of the threat of higher interest rates.  The chance that Japanese rates go higher is nil.

( zero hedge)

ii)Chinese bank assets total 32 trillion equiv usa, with bank liabilities at just about 30 trillion equiv USA. To give you a comparison to the uSA:  the total USA banking liabilities are around 15 trillion.  The problem in China is bad debts which are in the area of 15 to 20%.

Thus 5 to 6 trillion equiv dollars must be written off…where are they going to get the money for this?

(courtesy zero hedge)

4 EUROPEAN AFFAIRS

i)Deutsche bank 

Investors scared as to what they are witnessing, have pulled another 8 billion dollars worth of funds from the ETF unit, causing more liquidity problems for the bank

( zerohedge)

ii)ECB

A trial balloon has been floated by the ECB that they are almost certain to continue buying bonds beyond the March 2017 deadline

( zero hedge)

iii)SPAIN

What a mess:  King Felipe asks Spain to form a minority government and it will be done with abstentions.  The problem here is that Rajoy promised to cut taxes and increase expenditures.  The ECB wants the opposite

( Mish Shedlock/Mishtalk)

iv)DEUTSCHE BANK
Deutsche bank is probing its own derivatives to see if they have been misstated. They are also sharing their information with USA authorities
( zerohedge)

v)ITALY

 

This is all Italy needs;  Central Italy  (around the Perugia area) is hit with a strong 5.4 magnitude earthquake

( zero hedge)

vi) BANK OF ENGLAND/ITALIAN BANKS/DEUTSCHE BANK

 

Great reason for gold and silver to be whacked today:  The Bank of England is asking its UK Banks  to detail their exposure to both Deutsche bank and the Italian banks

( zero hedge)

vii)CALAIS FRANCE  (THE “JUNGLE”)
We brought you the story where the authorities rounded up 8,000 refugees harbouring on the outskirts of Calais in what is referred to as the “Jungle”. They burned the refugee centers there and tried to move the migrants throughout France.  This is not working as they breaking the police lines trying to get into the jungle.  Generally they try and hitch a ride across the channel into England.
(courtesy zero hedge)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

i)Trump correctly states that Hillary’s plan for Syria would eventually lead to World War iii as the Russians would be totally against her formula.  The Russians know full well that the issue is to remove Russia from providing natural gas to all of Europe

( zero hedge)

ii)Russia flexes its muscle by revealing a nuclear missile capable of reaching USA soil.

( Alexander Mercouris/The Duran.com)

iii)World tensions just got hotter as Russia is forced to cancel refueling of its warships at Spain’s eastern Mediterranean port of Cueta.  The warships are heading to Syria( zero hedge)

iv)what on earth is going on here? Cyberwarfare?

no comment from me is necessary:
( zero hedge)

v)The warmongers are at again, as NATO is pushing for the biggest build up on Russia’s borders since the cold war; good reason to whack gold today(courtesy zero hedge)

6.GLOBAL ISSUES

Months ago, many foreign investors were flocking into Mozambique bonds due to its higher yield.  This morning, they woke up to the fact that these bonds are crashing with a yield of over 20%.  The government admits that it’s nation is in debt distress and they also reported on undisclosed bond issuance.  The country’s Debt to GDP ratio is 86 / with total country debt/GDP at 112.

( zerohedge)

7.OIL ISSUES

After a huge gain in API inventory, the DOE reports a draw down and this causes crude to climb back above 50 dollars

(courtesy zero hedge)

8.EMERGING MARKETS

Conditions inside Venezuela going from bad to worse

(courtesy zero hedge)

9.PHYSICAL STORIES

i)Rory Hall/Dave Kranzler interview Bill Murphy of GATA

( GATA/IRD)

ii)Chinese mining companies Zijin andShandong are in talks for stakes in Barricks Veladero mine in Argentina.  This mine is a good producer for Barrick at 500,00 plus oz per year.

(courtesy GATA/R euters)

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

i)The following is very important:  the Richmond fed finally confirms that business conditions in its area has not deteriorated this fast since Q2 of 2008.

( zero hedge)

ii)The Fed is broadcasting that it is going to let inflation run wild in the USA

( Graham Summers/Phoenix Capital Research)

iii)Apple slides after disappointing numbers:

( zero hedge)

iv)Trump unexpectedly regains the lead in Florida with the latest polls

( zero hedge)

v)Wholesale inventories fail to grow and are basically unchanged even though auto inventories are up 9%.  Inventory to sales ratio improves to 1.33 but still deep in recession.

( zero hedge)

vi)Today, we see the service sector PMI surge to 54.8 and it is at its highest level in 11 months.Together with the mfg PMI it looks like the USA is growing at 2%

( zero hedge)

vii) New home sales rose only after a major revision from August:

new home sales: 593,000 but expectations were 600,000.  August levels; 609,000

( zero hedge)

viii)Project Veritas 4 just released and more trouble for the DNC

( zero hedge)

Let us head over to the comex:

The total gold comex open interest ROSE BY 849 CONTRACTS to an OI level of 507,617 as the price of gold ROSE $9.90 with YESTERDAY’S trading.

We are in the delivery month is October and here the OI LOST 217 contracts DOWN to 104. We had 250 notices filed YESTERDAY so we GAINED 33 contracts or 3,300 additional oz will stand  for delivery.

The next delivery month is November and here the OI FELL by 176 contract(s) DOWN to 2260 contracts. This level is extremely elevated as generally November is a very poor delivery month.To give you an idea of size, on Oct 26 2015, we had an OI of only 253 contracts standing. Eventually by the end of Nov 2015, 214 notices stood for delivery for 21,400 oz  (.6656  tonnes).The next contract month and the biggest of the year is December and here this month showed an decrease of 871 contracts down to 372,221.

Today we had  1 notice filed for 100 oz of gold.
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And now for the wild silver comex results.  Total silver OI rose by 2332 contracts from  193,979 UP TO 196,311 as the  price of silver ROSE to the tune of 18 cents yesterday.  We are moving  further from the all time record high for silver open interest set on Wednesday August 3:  (224,540).  The next non active delivery month is October and here the OI fell by 5 contracts down to 36. We had 4 notices filed yesterday so we lost one contract or an additional 5,000 oz will not stand for delivery. The November contract month saw its OI lose 4 contracts down to 329.   The next major delivery month is December and here it rose BY 628 contracts up to 148,976.

we had 0 notices filed for NIL oz

VOLUMES:

Today the estimated volume was 146,431 contracts which is POOR.

Yesterday’s confirmed volume was 59,136  which is  fair.

today we had 1 notice filed for 5,000 oz of silver:

INITIAL standings for OCTOBER
 Oct 26.
Gold Ounces
Withdrawals from Dealers Inventory in oz  NIL
Withdrawals from Customer Inventory in oz  nil
9,894.700 oz
 BRINKS
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz 
 NIL oz
No of oz served (contracts) today
1 notice 
100 oz
No of oz to be served (notices)
106 contracts
 10,600
oz
Total monthly oz gold served (contracts) so far this month
9414 contracts
941,400 oz
29.281 tonnes
Total accumulative withdrawals  of gold from the Dealers inventory this month    oz
Total accumulative withdrawal of gold from the Customer inventory this month    388,783.5 oz
Today we had 0 kilobar transactions, AND MORE GOLD LEAVES THE COMEX
Today we had 0 deposit into the dealer:
total dealer deposits:  nil oz
We had zero dealer withdrawals:
total dealer withdrawals:  nil oz
.
We had 0 customer deposit;
total customer deposits;NIL oz
We had 1 customer withdrawal(s)
i) Out of BRINKS; 9,894.700 oz
total customer withdrawal: 9.894.700   oz
We had 1 adjustment(s)
i) Out of Scotia:  196.95 oz was adjusted out of the customer and this landed into the dealer account of Scotia
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Total dealer inventor 2,236,377/829 or 69.560 tonnes
Total gold inventory (dealer and customer) =10,552,763.862. or 328.23 tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 328.543 tonnes for a  gain of 25  tonnes over that period.  Since August 8 we have lost 26 tonnes leaving the comex. However I am including kilobar transactions and they are very suspect at best.
For October:

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 1 contract  of which 0 notices were stopped (received) by jPMorgan dealer and 1 notice(s) was (were) stopped/ Received) by jPMorgan customer account.

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To calculate the initial total number of gold ounces standing for the Oct contract month, we take the total number of notices filed so far for the month (9414) x 100 oz or 941,400 oz, to which we add the difference between the open interest for the front month of OCT (XXX contracts) minus the number of notices served upon today (1) x 100 oz per contract equals 948,700 oz, the number of ounces standing in this  active month of October.
 
Thus the INITIAL standings for gold for the Oct contract month:
No of notices served so far (9414) x 100 oz  or ounces + {OI for the front month (107) minus the number of  notices served upon today (1) x 100 oz which equals 952,000 oz standing in this non active delivery month of Oct  (29.611 tonnes).
we GAINED ANOTHER 33 NOTICES OR AN ADDITIONAL 3300 oz will stand for gold in this active delivery month of October and that is a record standing for any October from the beginning of time. To give you an idea of size from last yr, we had only a little over 2 tonnes standing at the conclusion of Oct 2015!
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I have now gone over all of the final deliveries for this year and it is startling.
First of all:  in 2015 for the 12 months: 51 tonnes delivered upon for an average of 4.25 tonnes per month.
Here are the final deliveries for 2016:
Jan 2016:  .5349 tonnes  (Jan is a non delivery month)
Feb 2015:  7.9876 tonnes (Feb is a delivery month/deliveries this month very low)
March 2015: 2.311 tonnes (March is a non delivery month)
April:  12.3917 tonnes (April is a delivery month/levels on the low side
And then something happens and from May forward deliveries boom!
May; 6.889 tonnes (May is a non delivery month)
June; 48.552 tonnes ( June is a very big delivery month and in the end deliveries were huge)
July: 21.452 tonnes (July is a non delivery month and generally a poor one/not this time!)
August: 44.358 tonnes (August is a good delivery month and it came to fruition)
Sept:  8.4167 tonnes (Sept is a non delivery month)
Oct; 29.611 tonnes so far.
total for the 10 months;  182.591 tonnes
average 18.59 tonnes per month vs last yr 51 tonnes total for 12 months or 4.25 tonnes average per month. From May 2016 until Oct 2016 we have had: 159.299 tonnes per the 6 months or 26.549 tonnes per month (which includes the non delivery months of May, June and Sept).  In essence the demand for gold is skyrocketing.
Something big is going on inside the gold comex.
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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
 
IN THE LAST TWO MONTHS  26 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
 
OCT INITIAL standings
 Oct 26. 2016
Silver Ounces
Withdrawals from Dealers Inventory NIL
Withdrawals from Customer Inventory
nil oz
Deposits to the Dealer Inventory
NIL  OZ
Deposits to the Customer Inventory 
 2,040.300 oz
CNT
DELAWARE
No of oz served today (contracts)
0 CONTRACT(S)
(NIL OZ)
No of oz to be served (notices)
36 contracts
(180,000 oz)
Total monthly oz silver served (contracts) 500 contracts (2,500,000 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  6,508,272.3 oz
today, we had 0 deposits into the dealer account:
total dealer deposit: NIL oz
we had 0 dealer withdrawals:
 total dealer withdrawals: nil oz
we had 0 customer withdrawals:
Total customer withdrawals: NIL  oz
We had 2 customer deposits:
 i) Into CNT: 1009.700 oz
ii) Into DELAWARE: 1070.600
total customer deposits;  2,040.300 oz
 
 
 we had 1 adjustment(s) 
I) FROM THE SCOTIA VAULT:
we had 35,041.500 oz adjusted out of the customer and this landed into the dealer account of Scotia.
Volumes:
Today the estimated volume was 50,722 which is VERY GOOD.
YESTERDAY’S  confirmed volume was 55,357 which is EXCELLENT
The total number of notices filed today for the Oct contract month is represented by 0 contracts for NIL oz. To calculate the number of silver ounces that will stand for delivery in OCT., we take the total number of notices filed for the month so far at  500 x 5,000 oz  = 2,500,000 oz to which we add the difference between the open interest for the front month of OCT (36) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the OCT contract month:  500(notices served so far)x 5000 oz +(36) OI for front month of SEPT ) -number of notices served upon today (0)x 5000 oz  equals  2,680,000 oz  of silver standing for the OCT contract month. THIS IS STILL A HUGE SHOWING FOR SILVER AS OCTOBER IS GENERALLY A VERY WEAK DELIVERY MONTH.
We  LOST 1 SILVER CONTRACT OR AN ADDITIONAL 5,000 OUNCES WILL NOT STAND FOR DELIVERY TODAY.
 
Total dealer silver:  29.987 million (close to record low inventory  
Total number of dealer and customer silver:   174.431 million oz
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.
end

And now the Gold inventory at the GLD
Oct 26/a massive 14.24 tonnes of gold leave the GLD and I am sure this is a paper transaction/this “paper gold” was used in the whacking of gold today/Inventory rests at 942.59 tonnes
OCT 25/A HUGE ADDITION OF 3.27 TONNES INTO THE GLD/INVENTORY RESTS AT 956.83 TONNES
OCT 24/NO CHANGES AT THE GLD/INVENTORY RESTS AT 953.56 TONNES
OCT 21/A MONSTROUS CHANGE IN GOLD INVENTORY AT THE GLD: A WITHDRAWAL OF 16.61 TONNES FROM THE GLD/INVENTORY RESTS AT 953.56 TONNES
OCT 20/A HUGE CHANGE IN GOLD INVENTORY AT THE GLD OF 2.94 TONNES/INVENTORY RESTS AT 970.17 TONNES
OCT 19/no change in gold inventory at the GLD inventory/inventory rests at 967.21 tonnes
OCT 18/A DEPOSIT OF 1.78 TONNES OF GOLD INTO THE GLD/INVENTORY RESTS AT967.21 TONNES
OCT 17/ A DEPOSIT OF 3.86 TONNES OF GOLD INTO THE GLD/INVENTORY RESTS AT 965.43 TONNES/IN 10 DAYS 16.29 TONNES DEPOSITED
Oct 14./NO CHANGE IN INVENTORY AT THE GLD
OCT 13/a deposit of 2.67 tonnes of gold into the GLD/inventory rests  at 961.57 tonnes
Oct 12/No changes in inventory/inventory rests at 958.90 tonnes
Oct 11/ what!!! we had a gigantic 9.76 tonnes of inventory increase today/inventory rests at 958.90 tonnes.  (this was done with gold down?)
Oct 7:  949.14 tonnes
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Oct 26/ Inventory rests tonight at 942.59 tonnes
*IN LAST 18 DAYS: 7.6 TONNES REMOVED FROM THE GLD

end

Now the SLV Inventory
Oct 26/NO CHANGES AT THE SLV/INVENTORY RESTS AT 366.366 MILLION OZ/
OCT 25/NO CHANGES AT THE SLV INVENTORY/INVENTORY RESTS AT 366.366 MILLION OZ
OCT 24/NO CHANGES AT THE SLV INVENTORY/INVENTORY RESTS AT 366.366 MILLION OZ
OCT 21/A HUGE CHANGES IN SILVER INVENTORY AT THE SLV/: A DEPOSIT OF 3.226 MILLION OZ INTO THE SLV/INVENTORY RESTS AT 366.366 MILLION OZ
oCT 20/NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 363.140 MILLION OZ
oCT 19/a good sized change at the SLV inventory: a deposit of 855,000 oz/rests at 363.140 million oz/
OCT 18/NO CHANGES AT THE SLV INVENTORY RESTS AT 362.285 MILLION OZ
OCT 17/NO CHANGES AT THE SLV/INVENTOR RESTS AT 362.285 MILLION OZ/
oCT 14: A HUGE ADDITION (DEPOSIT) OF 1.138 MILLION OZ INTO THE SLV/INVENTORY RESTS AT 362.285 MILLION OZ
OCT 13/ NO CHANGES  in inventory at the SLV/Inventory rests at 361.147 million oz
Oct 12:NO CHANGES  in inventory at the SLV/Inventory rests at 361.147 million oz
Oct 11/ a withdrawal of 1.762 million oz of inventory from the SLV/Inventory rests at 361.147 million oz/
.
Oct 26.2016: Inventory 366.366 million oz
 end

NPV for Sprott and Central Fund of Canada

Central fund data not available today.

1. Central Fund of Canada: traded at Negative 2.8 percent to NAV usa funds and Negative 2.7% to NAV for Cdn funds!!!! 
Percentage of fund in gold 60.7%
Percentage of fund in silver:38.3%
cash .+1.0%( Oct 25/2016).
2. Sprott silver fund (PSLV): Premium FALLS to +0.56%!!!! NAV (OCT 26/2016) 
3. Sprott gold fund (PHYS): premium to NAV  FALLS TO  0.65% to NAV  ( OCT 26/2016)
Note: Sprott silver trust back  into POSITIVE territory at 0.56% /Sprott physical gold trust is back into positive territory at 0.65%/Central fund of Canada’s is still in jail.
 
 
 

end

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

Trading in gold and silver overnight in Asia and Europe

Gold Is The “Kardashian of Commodities” – Herbert & Keiser Interview Skoyles

Max Keiser and Stacy Herbert have interviewed Jan Skoyles to discuss how gold is the “Kardashian of Commodities” and “future-proofing your portfolio with gold”.

Topics covered are

  • Double Down asks Jan Skoyles, of Goldcore.com, if there is enough gold in the world to hedge against a President Trump
  • U.S. Election – Trump and Clinton most hated Presidential candidates in history
  • Goldman Sachs says that gold is a ‘good hedge against politicians’
  • Skoyles says that, in the West, gold is considered ‘the Kardashian of commodities,’ something not taken seriously as an investment — until the likes of Goldman Sachs says it might be so
  • Dubai and Middle East is “environment where people automatically understand gold”
  • Gold reaching new highs in Russian rubles and South African rand and close to new highs in pounds sterling
  • UK media do not cover gold and gold price in sterling so people do not understand
  • Keiser and Herbert point out how gold has value because people believe it has value
  • BBC Newsnight studio has “religious moment” when people are drawn to gold bullion
  • How gold will protect from bail-ins
  • The importance of having outright legal owership and being able to take delivery of individual coins and bars

Listen to interview here

Gold and Silver Bullion – News and Commentary

Gold Holds Near Three-Week High as India Buys Ahead of Festival (Bloomberg)

Gold Prices Rise on Dimmer Economic Outlook (WSJ)

Gold extends gains, buoyed by Indian festival demand (Reuters)

Consumer confidence droops ahead of presidential election (MarketWatch)

Rare gold coin worth £250,000 found in boy’s ‘toy’ treasure chest (Telegraph)

How One Billionaire Became A Gold Bug (ZeroHedge)

China could be on verge of gold buying boom (Mining)

As yuan sinks, Goldman sees rising gold demand in China (Qata)

A long-term gold bull wants to see this happen before he buys more (MarketWatch)

7RealRisksBlogBanner

Gold Prices (LBMA AM)

26 Oct: USD 1,273.90, GBP 1,043.45 & EUR 1,166.13 per ounce
25 Oct: USD 1,269.30, GBP 1,037.53 & EUR 1,165.85 per ounce
24 Oct: USD 1,267.00, GBP 1,034.89 & EUR 1,163.61 per ounce
21 Oct: USD 1,263.95, GBP 1,033.79 & EUR 1,160.69 per ounce
20 Oct: USD 1,269.20, GBP 1,034.65 & EUR 1,156.75 per ounce
19 Oct: USD 1,269.75, GBP 1,031.29 & EUR 1,154.97 per ounce
18 Oct: USD 1,261.65, GBP 1,031.15 & EUR 1,145.33 per ounce

Silver Prices (LBMA)

26 Oct: USD 17.66, GBP 14.46 & EUR 16.17 per ounce
25 Oct: USD 17.73, GBP 14.49 & EUR 16.30 per ounce
24 Oct: USD 17.64, GBP 14.41 & EUR 16.19 per ounce
21 Oct: USD 17.51, GBP 14.34 & EUR 16.08 per ounce
20 Oct: USD 17.60, GBP 14.35 & EUR 16.03 per ounce
19 Oct: USD 17.69, GBP 14.38 & EUR 16.11 per ounce
18 Oct: USD 17.65, GBP 14.37 & EUR 16.03 per ounce


Recent Market Updates

– Value of Gold – Unlike Paper Currency Gold Maintained Value Throughout Ages
– Fed Risks Lehman Crisis As US Recession Storm Gathers
– Silver Eagle Demand ‘Returned with a Vengeance’
– Cashless Society – War On Cash to Benefit Gold?
– “Higher Gold Prices” On Global Trade Slowdown – HSBC
– Euro “Will Collapse” As Is “House of Cards” Warns Architect of Euro
– Property Bubble In Ireland Developing Again
– “Gold Is A Great Hedge Against Politicians” – Goldman
– Sell Gold Now – Time To Liquidate Gold ETF, Pooled and Digital Gold
– Gold In GBP Up 43% YTD – “Massive Twin Deficits” To Impact UK Assets
– Ron Paul Says “Gold Going Up” Whether Trump Or Clinton Elected
– Gold Trading COT Report “Means Lower – Then Much Higher – Prices Coming”
– Currency Shock Sees Sterling Gold Surges 5% In One Minute “Flash Crash”

Mark O’Byrne
Executive Director

end

 

Rory Hall/Dave Kranzler interview Bill Murphy of GATA

(courtesy GATA/IRD)

GATA Chairman Bill Murphy interviewed by Dave Kranzler and Rory Hall

Section:

12:30p CT Tuesday, October 25, 2016

Dear Friend of GATA and Gold:

Interviewed by Dave Krazler of Investment Research Dynamics and Rory Hall of The Daily Coin, GATA Chairman Bill Murphy discusses the intervention by governments against the gold price and the developments that may overcome it. The interview is 26 minutes long and can be heard at the IRD internet site here:

http://investmentresearchdynamics.com/bill-murphy-bill-murphy-the-fundam…

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

 

 

END

 

Chinese mining companies Zijin andShandong are in talks for stakes in Barricks Veladero mine in Argentina.  This mine is a good producer for Barrick at 500,00 plus oz per year.

(courtesy GATA/R euters)

Chinese miners in talks for stake in Barrick’s Veladero mine, Reuters says

Section:

By John Tilak and Nicole Mordant
Reuters
Tuesday, Otober 25, 2016

China’s Zijin Mining Group Co. Ltd. and Shandong Gold Mining Co. Ltd. have held separate talks with Barrick Gold Corp. to buy a 50-percent stake in its Veladero gold mine in Argentina, according to four sources with knowledge of the process.

Veladero is one of Barrick’s five core mines; all are in the Americas. It is expected to produce between 580,000 and 640,000 ounces of gold this year.

The high quality of the mine, production capacity, and the prospect for geographical diversification have appealed to the state-owned Chinese suitors, said three of the sources, who requested anonymity because the matter is private. All spoke over the past week. …

… For the remainder of the report:

http://www.reuters.com/article/us-barrick-gold-argentina-idUSKCN12P2QD

 

END

 

Despite all the criminal activity orchestrated by our crooked banks, these guys still outperform all other mining companies

 

(courtesy seeking alpha)

 

Stock Symbol: AEM (NYSE and TSX)
(All amounts expressed in U.S. dollars unless otherwise noted)

TORONTO, Oct. 26, 2016 /PRNewswire/ – Agnico Eagle Mines Limited (AEM) (“Agnico Eagle” or the “Company”) today reported quarterly net income of $49.4 million, or net income of $0.22 per share for the third quarter of 2016.  This result includes non-cash stock option expense of $3.2 million ($0.01 per share), non-cash foreign currency translation losses of $2.5 million ($0.01 per share), a non-cash foreign currency translation loss on deferred tax liabilities of $1.3 million ($0.01 per share), various mark-to-market and other adjustment gains of $1.1 million (nil per share), non-recurring losses of $0.7 million (nil per share) and losses on financial instruments of $0.6 million (nil per share).  Excluding these items would result in adjusted net income1 of $56.6 million, or adjusted net income of $0.25 per share for the third quarter of 2016.  In the third quarter of 2015, the Company reported net income of $1.3 million or $0.01 per share.

For the first nine months of 2016, the Company reported net income of $96.2 million, or $0.43 per share.  This compares to the first nine months of 2015, when net income was $40.1 million, or $0.19 per share.  Financial results in the 2016 period were positively affected by higher revenues as a result of higher realized gold prices (approximately 8%), silver prices (approximately 9%) and other higher by-product metals revenues.

Third quarter 2016 cash provided by operating activities was $282.9 million ($233.7 million before changes in non-cash components of working capital).  This compares to cash provided by operating activities of $143.7 million in the third quarter of 2015 ($217.8 million before changes in non-cash components of working capital).  The increase in cash provided by operating activities before changes in non-cash components of working capital during the current period was mainly due to higher realized gold and silver prices and higher by-product metals revenues.

________________________
1 Adjusted net income is a Non-GAAP measure. For a discussion regarding the Company’s use of non-GAAP measures, please see “Note Regarding Certain Measures of Performance”.

For the first nine months of 2016, cash provided by operating activities was $658.0 million ($593.9 million before changes in non-cash components of working capital), as compared to the first nine months of 2015 when cash provided by operating activities was $475.5 million ($547.4 million before changes in non-cash components of working capital).  The increase in cash provided by operating activities before changes in non-cash components of working capital during the period was mainly due to the reasons described above.

“In the third quarter of 2016, our operations continued to deliver solid production and cost performance.  As a result, we now expect to exceed the upper end of our 2016 production guidance of 1.6 million ounces,” said Sean Boyd, Agnico Eagle’s Chief Executive Officer. “Furthermore, our strong operating performance resulted in increased operating cash flow and an increase in our cash position which further supports our development plans to grow production to approximately 2.0 million ounces in 2020,” added Mr. Boyd.

Third Quarter 2016 Highlights Include:

  • Quarterly gold production – Payable gold production2 in the third quarter of 2016 was 416,187 ounces of gold at total cash costs3 per ounce on a by-product basis of $575 and all-in sustaining costs4 on a by-product basis (“AISC”) of $821 per ounce
  • Record gold production at La India and record silver production in Mexico – In the third quarter of 2016, payable gold production was a new quarterly record of 30,779 ounces at the La India mine.  Silver production was a new quarterly record of 825,000 ounces at the Company’s Mexican mines
  • Whale Tail drilling yields deepest intersection to date – Hole AMQ16-1045 intersected the deepest mineralization in the Whale Tail deposit to date: 5.4 grams per tonne (“g/t”) gold over 3.3 metres at 658 metres depth and 5.5 g/t gold over 16.1 metres at 725 metres depth, including 13.1 g/t gold over 3.5 metres at 732 metres depth (capped gold grades over estimated true width)

Harvey:  the above is huge!!

  • Infill drilling yields widest intercept to date in the Sisar Central Zone – Hole ROD16-702D intersected 6.6 g/t gold over 12.7 metres at 1,303 metres depth (uncapped gold grade over estimated true width)
  • Lapa Mine Life Extended Through Year-End 2016 – Production is now forecast to continue through year-end 2016 and the Company is evaluating a number of opportunities that could potentially see the mine life extend into 2017
  • Increasing cash position reduces net debt5 – In the third quarter of 2016, net debt was reduced by approximately $154 million, to $587.9 million, at September 30, 2016.  Cash and cash equivalents and short term investments totaled $627.4 million
  • A quarterly dividend of $0.10 per share was declared

end

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

 
 

:

1 Chinese yuan vs USA dollar/yuan UP to 6.7690( REVALUATION NOTTHBOUND  /CHINA UNHAPPY TODAY CONCERNING USA DOLLAR RISE/MORE $ USA DOLLARS LEAVE CHINA/OFFSHORE YUAN WIDENS TO 6.7809 / Shanghai bourse CLOSED DOWN 15.63 POINTS OR 0.50%   / HANG SANG CLOSED DOWN 239.68 OR 1.02%

2 Nikkei closed UP 26.59 OR 0.15%   /USA: YEN RISES TO 104.22

3. Europe stocks opened ALL IN THE RED ( /USA dollar index DOWN to 98.51/Euro UP to 1.0923

3b Japan 10 year bond yield: FALLS TO    -.064%/     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 104.00/ 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::  49.23  and Brent:50.10

3f Gold DOWN  /Yen DOWN

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa./“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 RISES  A BIT to +079%   

3j Greek 10 year bond yield FALLS to  : 8.35%   

3k Gold at $1271.00/silver $17.68(7:45 am est)   SILVER FINAL RESISTANCE AT $18.50 WILL BE DEFENDED 

3l USA vs Russian rouble; (Russian rouble DOWN 15/100 in  roubles/dollar) 62.27-

3m oil into the 49 dollar handle for WTI and 50 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.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 104.22 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9913 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0827 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p BRITAIN VOTES AFFIRMATIVE BREXIT

3r the 10 Year German bund now POSITIVE territory with the 10 year RISES to  +.079%

/German 9+ year rate BASICALLY  negative%!!!

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

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

4. USA 10 year treasury bond at 1.775% early this morning. Thirty year rate  at 2.518% /POLICY ERROR)

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

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

HELICOPTER MONEY STILL ON THE TABLE FOR THE FUTURE/JAPANESE STIMULUS PLAN DISAPPOINTS

Global Stocks, US Futures Drop On Apple Disappointment, Sliding Crude

After economic optimism based on “soft” surveys and stronger than expected earnings lifted stocks around the globe in the first two days of the week, it was the turn of earnings to push them down again. European, Asian stocks and S&P futures all fall as oil prices slumped and Apple Inc.’s results disappointed.

Yesterday, the S&P 500 ended the day with a -0.38% drop led by declines in the consumer discretionary sector. Following disappointing earnings reports there were double digit declines for Under Armour and Whirlpool in the sector, while General Motors also tumbled -4% as investors looked through better than expected Q3 numbers and decided that we may have seen the peak in auto sales. Other corporates to feel the pinch yesterday following earnings were 3M, where shares closed down nearly -3%, and also Caterpillar.

Meanwhile, the big earnings focus was Apple’s Q4 numbers. While revenues for the fourth quarter confirmed the first annual decline in revenue since 2001, the headline sales number was in line with the consensus while earnings were a fraction ahead. Shares were initially up 3% in extended trading with that news however once the details were sifted through, shares reversed and were actually down over -3%. Guidance on margins for the December quarter was a little lower than hoped, while some also pointed towards a disappointing decline in selling prices for its smartphones.

Analysts were generally not happy with the world’s largest company by market cap: “Apple’s forward expectations aren’t great and it’s susceptible to more of a pullback,” said James Audiss, Sydney-based senior wealth manager at Shaw and Partners Ltd., which oversees about $7.5 billion. “Apple does speak directly to the region as a lot of its supply chain is in Asia, and that will add to weakness,” said Michael McCarthy, chief market strategist in Sydney at CMC Markets. Asian earnings have been generally positive so far, he said.

Putting earnings season to date in context, the S&P has have barely moved since Alcoa Inc. kicked off the reporting season two weeks ago as U.S. and European earnings failed to offer clear cause for optimism. While the big banks, namely Goldman, Citigroup and JPMorgan started off Q3 season strong and beat forecasts, disappointing results from Lloyds Banking Group Plc, Daimler and Caterpillar, among others, have muddied the outlook for global growth. That leaves earnings from companies including Amazon.com, Deutsche Bank and Volkswagen in focus this week. Exacerbating the uncertainty: skepticism about major oil producers’ ability to agree output reductions.

The good news, at least for now, is that concern over the outcomes of the U.S. presidential election and Federal Reserve policy has eased, reducing overall volatility. Bank of America Merrill Lynch’s GFSI Market Risk Index, a measure of future price swings implied by options trading on global equities, interest rates, currencies and commodities, has fallen to the lowest since 2014. Hillary Clinton’s odds of victory in next month’s vote are close to the highest on record at 86.5 percent, according to forecaster FiveThirtyEight, and futures trading indicates a 73 percent chance of a U.S. interest-rate hike by December.

After yesterday’s blistering move in commodities, especially metals, higher, crude oil slid 1.3% to $49.29 a barrel in New York in early trading as the market focused on a warning by Russia which confirmed our warning from the weekend, namely that output cuts aren’t an option for Russia, according to Interfax. American supplies rose by 4.75 million barrels last week, industry data showed before Wednesday’s release of official figures.  Putting further pressure on oil is the ongoing collapse in Brent time-spreads, with the Z6-Z6 spread, shown below, now the widest since January.

“The recent drop in oil prices is partially responsible but also indices continue to struggle for momentum as they attempt to break above their recent highs,” said Craig Erlam, senior market analyst at OANDA.

In FX, the big movers was the Australian dollar which strengthened 0.6 percent after consumer prices in Australia increased 1.3% from a year earlier, in the latest quarter exceeding the previous period’s 1 percent gain.

Asia stocks slipped amid the declines in oil prices following a larger than expected build in the latest API report, with Apple earnings, especially among AAPL suppliers, pressuring local markets. Energy companies led declines on the MSCI Asia Pacific Index, which slipped 0.2 percent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong slid 1.4 percent, led by an 11 percent drop in Great Wall Motor Co. after recommendation downgrades. South Korea’s Kospi index declined 1.1 percent after Hyundai Heavy Industries Co. tumbled 5.1 percent on mounting concern the shipbuilding industry faces more job cuts.  The ASX 200 (-1.5%) underperformed after strong Australian Q3 CPI figures beat expectations, reducing the likelihood of further RBA easing. The Nikkei 225 (+0.15%) traded flat for a bulk of the session.

The Stoxx 600 lost 0.9 percent at 10:38 a.m. in London. The equity gauge has failed to post a daily increase since Thursday as investor sentiment oscillates on mixed earnings. Energy producers slipped with oil Wednesday, while miners declined after reaching their highest prices since August of last year.

Among European companies moving on corporate results, as summarized by Bloomberg:

  • Lloyds fell 1.8 percent as Britain’s largest mortgage lender posted a slide in profit after taking a charge to compensate customers who were wrongly sold loan insurance.
  • Vinci SA dropped 1.8 percent, dragging construction companies lower, as its revenue fell.
  • Bayer AG retreated 2.4 percent as its prescription-drugs unit, which is at risk of being sidelined after the takeover of Monsanto Co., spurred better-than-forecast earnings.
  • Heineken NV fell 2.3 percent as Exane BNP Paribas noted that, while its third-quarter volumes beat forecasts, the “whisper” consensus estimate was probably higher than the official one.
  • Kering SA, the owner of Gucci, led retailers to the best performance of the Stoxx 600’s 19 industry groups, rallying 7.6 percent after posting its fastest sales growth since 2012.
  • Logitech International SA jumped 12 percent as the Swiss electronics manufacturer beat earnings and revenue projections.
  • Banco Santander SA rose 0.9 percent after posting better-than-expected third-quarter profit.

The U.S will auction $34 billion of five-year nominal notes and $15 billion of two-year floating-rate debt. The yield on U.S. Treasuries due in a decade was little changed at 1.76 percent. American sovereign debt is saddling investors with losses for the third month in a row as speculation mounts that inflation will quicken and the Fed will boost interest rates. “The cyclical low for inflation rates has almost certainty past,” said Peter Jolly, the global head of markets research at National Australia Bank Ltd. in Sydney, who predicts headline consumer-price gains in the U.S. will rise above 3 percent early next year if oil prices remain at current levels. “That will help change market perceptions of inflation ahead, and put to rest deflation fears for now.” China’s 10-year government bonds fell for a third day amid concern policy makers are looking to increase scrutiny of wealth-management products, a move that would curb the flow of funds to the debt market.

Bulletin Headline Summary from RanSquawk

  • European equities trade lower across the board in a continuation of softer energy prices and participants digesting large cap earnings — most notably Apple
  • Limited movement in the major FX pairings this morning, with some much welcome calm returning to the GBP pairs as Cable reclaims 1.2200
  • Looking ahead, highlights include US services PM! and New Home sales, DoE inventories and a host of earnings including GSK, Coca-Cola and Comcast

* * *

Market Snapshot

  • S&P 500 futures down 0.4% to 2129
  • Stoxx 600 down 0.8% to 340
  • FTSE 100 down 1% to 6946
  • DAX down 1% to 10649
  • German 10Yr yield up 2bps to 0.05%
  • Italian 10Yr yield up 4bps to 1.42%
  • Spanish 10Yr yield up 3bps to 1.11%
  • S&P GSCI Index down 0.7% to 370.5
  • MSCI Asia Pacific down 0.2% to 140
  • Nikkei 225 up 0.2% to 17392
  • Hang Seng down 1% to 23325
  • Shanghai Composite down 0.5% to 3116
  • S&P/ASX 200 down 1.5% to 5360
  • US 10-yr yield up less than 1bp to 1.76%
  • Dollar Index down 0.27% to 98.45
  • WTI Crude futures down 1.4% to $49.27
  • Brent Futures down 1.3% to $50.12
  • Gold spot up less than 0.1% to $1,274
  • Silver spot down less than 0.1% to $17.76

Top Healdine News

  • Deutsche Bank Said to Weigh Alternatives to Cash Bonuses: Options said to include giving shares in non-core unit or bank
  • Lloyds Shares Fall on Capital Questions, Quarterly Profit Drop: Some analysts discount capital boost driven by accounting move
  • Apple Holiday Forecast Disappoints Given Samsung’s Troubles: Investors expected a more optimistic forecast for iPhone sales
  • Big Oil Braces for Profit Pain as Refining Safety Net Slips: Global oil-processing margins shrank 42% last quarter: BP data
  • Chevron’s 28 Years of Dividend Growth on the Line Amid Rout: ‘No one wants to be the CEO who breaks the streak.’ – analyst
  • IBM Teams Up With Slack to Build Smarter Data-Crunching Chatbots: The two companies will release a developer toolkit that includes Watson technologies and can integrate easily into Slack
  • Turbines From Outer Space Lift Lockheed Into New Energy Frontier: Company looking to commercialize its lithium-ion batteries

Looking at regional markets, we start in Asia where stocks slipped amid the declines in oil prices following a larger than expected build in the latest API report, while Apple earnings also added to the softer tone in which the tech giant missed on its revenue despite an EPS beat. ASX 200 (-1.5%) underperformed following weak sales growth from Wesfarmers (-5%), while losses in the index were exacerbated after Australian Q3 CPI figures beat expectations, subsequently reducing the likelihood of further RBA easing. Shanghai Comp (-0.5%) and Hang Seng (-1.0%) tracked lower with the latter hampered by a spate of mixed earnings, while Great Wall Motors shares crashed amid reports that Beijing are to restrict the number of vehicles on road. The Nikkei 225 (+0.15%) traded flat for a bulk of the session with Apple suppliers pressured in Asia after its revenue declined 9%. In credit markets, JGB’s traded in subdued fashion, up marginally by 5 ticks. Australian bonds weakened in the wake of the CPI figures, in which the 10-yr yield pulled off session lows, while the curve saw some notable flattening.

Top Asian News

  • With Economy Stable, China Steps Up Quest to Rein in Credit Risk: PBOC said to trial monitoring some wealth management products
  • Tata Surprise Raises Deleveraging Doubts for Bond Investors: Tata Group was focused on being fiscally prudent under Mistry
  • Jailed Former CNPC Head Says He Wrongly Approved Oilfield Sales: Former Chairman Jiang serving 16-year sentence for corruption
  • Galaxy Casino Beat Quarterly Profit Estimates on Tourist Visits: Profit jumps 28%, lifted by mass market as VIP revenue fell
  • Hyundai Motor Profit Declines 29% as Strikes Cut Production: Stronger won against U.S. dollar eroded repatriated earnings
  • A Wary Japan Quietly Opens Its Back Door for Foreign Workers: Number of foreign workers almost doubles over eight years

In Europe, equities have opened softer this morning, (EuroStoxx -0.5%) following on from their Asian counterparts amid the fall in oil prices overnight and the fallout from earnings releases on both sides of the pond. Auto names underperform due to news of usage caps from the fastest growing market China, although Renault are in the green (+1.6%) due to a stellar earnings report. In the financial sector, Lloyds reported a slight miss on expectations and, adding to their woes, PPI issues remain unresolved with a further GBP lbin in charges (-3.1 %). In fixed income markets Gifts are softer this morning and drag the asset class lower as markets digest BoE’s Carney’s comment from yesterday, with some analysts noting that the comments point to no additional QE measures in November if at all. Supply today in the US comes in the form of a US 5yr and 2yr FRN.

Top European News

  • Paschi CEO Sees Slow Pace of Consolidation Among Italian Banks: Investors are looking for ‘long-term stability,’ CEO says
  • Ericsson Names Wallenberg Insider as CEO to Revive Its Fortunes: Analyst: ‘Hard to see this as a fresh wind coming in’
  • Bayer Confident It Can Resolve Monsanto Product Overlap: Bayer crop business is resilient in difficult environment, CEO Werner Baumann says in Bloomberg TV interview
  • Dong Hired JPMorgan for Advice, Hasn’t Decided to Divest Oil&Gas: not considered long-term strategic commitment

In FX, the Bloomberg Dollar Spot Index fell 0.1%, extending Tuesday’s retreat from a seven-month high. The euro strengthened 0.2 percent. The Australian dollar strengthened 0.6 percent versus the greenback, the best performance among major currencies. In the last quarter, consumer prices in Australia increased 1.3 percent from a year earlier, exceeding the previous period’s 1 percent gain. Australia’s two-year bond yield increased by two percentage points to a one-week high of 1.69 percent. The probability that the central bank will cut interest rates by mid-2017 dropped to 29 percent in the swaps market, from 37 percent on Tuesday.

In commodities, crude oil slid 1.3 percent to $49.29 a barrel in New York. Output cuts aren’t an option for Russia, the nation’s envoy to the Organization of Petroleum Exporting Countries said, according to Interfax. American supplies rose by 4.75 million barrels last week, industry data showed before Wednesday’s release of official figures. U.S. natural gas futures extended their decline to a seven-week low before Energy Information Administration data on Thursday that’s forecast to show fuel inventories probably grew last week. Warmer-than-normal temperatures are also expected through most of the U.S. from Oct. 30-Nov. 4, reducing demand for heating. Aluminum in Shanghai jumped as much as 5.2 percent to its highest level since 2014, extending a rebound on speculation that transport bottlenecks may have created a shortage for some users in China. The metal rose 0.3 percent in London. French electricity for delivery next month soared to a record after Electricite de France SA and the nation’s nuclear safety authority said that investigations at a third of the country’s 58 atomic reactors would unveil new anomalies. EDF’s reactors supply almost three quarters of France’s power.

DB’s Jim Reid concludes the overnight wrap

The S&P 500 ended the day with a -0.38% decline with the consumer discretionary sector in particular enduring a tough day. Following disappointing earnings reports there were double digit declines for Under Armour and Whirlpool in the sector, while General Motors also tumbled -4% as investors looked through better than expected Q3 numbers and decided that we may have seen the peak in auto sales. Other corporates to feel the pinch yesterday following earnings were 3M, where shares closed down nearly -3%, and also Caterpillar. The latter’s earnings are always an interesting read given that Caterpillar is bit of a bellwether for the industrial sector. While earnings bettered expectations for Q3, revenues slid more than expected while the outlook for the remainder of 2016 and 2017 was a bit more subdued than hoped. Indeed it was noted that 2017 sales are not expected to be significantly different than 2016 and that the balance of risks, particularly in the first half of the year, was tilted to the downside. While management pointed towards the improvement in commodity prices, it was also acknowledged that many trucks remain idle and there has been little evidence of a pickup in orders for new equipment.

It was a similar end for markets in Europe too. The Stoxx 600 closed -0.35% and erased an early gain of as much as +0.40% with earnings in the healthcare sector in particular weighing (Novartis and Roche). European Banks (-0.34%) also ended a run of five straight sessions of gains. A big chunk of the blame was on the Italian Banking sector after Banca Monte dei Paschi swung incredibly, from an early 20% gain, to a -15% decline by the close. The intraday high to low change was actually 39%.

Meanwhile, the big focus since markets closed last night has been on the Apple Q4 numbers. While revenues for the fourth quarter confirmed the first annual decline in revenue since 2001, the headline sales number was in line with the consensus while earnings were a fraction ahead. Shares were initially up 3% in extended trading with that news however once the details were sifted through, shares reversed and were actually down a little over -2%. Guidance on margins for the December quarter was a little lower than hoped, while some also pointed towards a disappointing decline in selling prices for its smartphones.
This morning in Asia major bourses have generally followed the lead from the US yesterday. The Hang Seng (-0.69%), Shanghai Comp (-0.37%), Kospi (-1.33%) and ASX (-1.76%) are all currently in the red, while US equity index futures are also trending lower following those Apple numbers. Only the Nikkei (+0.06%) is up as we go to print.

Also weighing on bourses this morning is the decline for Oil with WTI currently -1.22% at $49.30/bbl as we type and the lowest level this month. That comes following a -1.11% decline yesterday with the finger of blame being pointed at Russia after the nation’s envoy at OPEC said that production cuts aren’t ‘an option for us’. That mirrors similar comments we heard from Iraq earlier this week. The latest American Petroleum Institute inventory numbers haven’t helped either, with the data showing that crude inventories rose 4.8m barrels last week. The official EIA inventory numbers are due today.

Elsewhere, the big mover in FX markets is the Aussie Dollar which is up over half a percent after headline CPI (+0.7% qoq vs. +0.5% expected) rose more than expected in Q3. That has seemed to offset the concern about lingering soft core inflation with the average of the RBA measures coming in at just +0.3% qoq for the quarter. There has also been some data in China where the Westpac consumer sentiment reading for this month has increased 1.9pts to 117.1 and the highest since April.

Moving on. As has so often been the case in the last couple of months, Sterling was one of the other main stories in markets yesterday. At one stage in the early afternoon the Pound tumbled to an intraday low of $1.2083, or some -1.27% lower. However as BoE Governor Carney spoke the Pound recovered. His comments weren’t particularly groundbreaking but it was enough of a calming influence for the market. Speaking in front of the House of Lords, Carney said that there were limits to officials’ willingness to look beyond an overshoot of their inflation target and that officials’ were not ‘indifferent to the exchange rate’. The Pound recovered a decent amount of that fall to close ‘just’ -0.41% lower at $1.2188. It’s holding that level this morning as we type. Weakness in Sterling did however help the FTSE 100 (+0.45%) to outperform yesterday.

Staying with the macro, yesterday’s data in the US was a bit of a mixed bag but it was the underwhelming consumer confidence reading which caught the eye and ultimately contributed to that damper mood for risk. The headline 98.6 print for this month was down from 103.5 in September (which was revised down) and also lower than the market consensus of 101.5. The details showed that both the present conditions (120.6 from 127.9) and expectations (83.9 from 87.2) gauges fell, while the share of those who said jobs were plentiful also decreased to 24.3% from 27.6%.

Elsewhere, there was better news in the latest IBD/TIPP economic optimism reading which was up 4.6pts and more than expected to 51.3 (vs. 47.5 expected) this month. The Richmond Fed manufacturing index reading was up 4pts and in line with the market at -4. Finally the latest housing market data showed that house prices in the 20 largest US cities were up +0.24% mom and a bit more than expected in August according to the S&P/Case-Shiller index. That puts the YoY rate at +5.13% from +4.98%. Meanwhile in Europe the highlight was the Germany IFO survey which revealed a 1pt increase in the headline business climate reading to 110.5 (vs. 109.6 expected). Sovereign bond markets were quiet again yesterday. 10y Bund yields edged up just shy of 1bp to 0.028% while 10y Treasury yields (+3bps to 1.766%) continue to remain stuck in this 1.70-1.80% range that they’ve been in for the best part of 3 weeks now.

Speaking of rates, ECB President Draghi had a few things to say on the subject yesterday. He argued that ‘the type of actions we need, if we want interest rates at higher levels, are those that can raise the natural rate’ and that ‘this requires a focus on policies that can address the root causes of excess saving over investment – in other words, fiscal and structural policies’.

Looking now at the day ahead. This morning in Europe we’re kicking off in Germany where the September import price index reading will be released, along with the latest consumer confidence print. France will also release its latest consumer confidence print a short time after. This afternoon in the US the highlight will likely be the remaining October flash PMI’s (both services and composite prints due). Also important is the advance goods trade balance reading for September where a slight widening in the deficit is expected. This might be one of the few remaining releases which could influence forecasts for Friday’s GDP print. Also due out is the wholesale inventories reading for last month, and new home sales data. Away from the data the only notable speaker on the cards today is the ECB’s Praet this evening. Expect earnings to also continue to be front and centre with 43 S&P 500 companies due to report. The highlights include Coca-Cola and Boeing prior to the open. In Europe results from GSK and Bayer are also due.

3.REPORT ON JAPAN  SOUTH KOREA NORTH KOREA AND CHINA

i)Late  TUESDAY night/WEDNESDAY morning: Shanghai closed DOWN 15.63 POINTS OR 0.50%/ /Hang Sang closed DOWN 239.68  OR 1.02%. The Nikkei closed UP 26.59 POINTS OR 0.15% Australia’s all ordinaires  CLOSED DOWN 1.53% /Chinese yuan (ONSHORE) closed UP at 6.7690/Oil FELL to 49.23 dollars per barrel for WTI and 50.10 for Brent. Stocks in Europe: ALL IN THE RED   Offshore yuan trades  6.7808 yuan to the dollar vs 6.7690  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS QUITE A BIT  AS MORE USA DOLLARS  LEAVE CHINA’S SHORES / CHINA SENDS A MESSAGE TO THE USA TO NOT RAISE RATES IN DECEMBER.

3a)THAILAND/SOUTH KOREA/SOUTHEAST ASIA:

none today

b) REPORT ON JAPAN

none today

c) Report on CHINA

Last week’s TIC report showed a huge 346 billion dollars worth of treasuries sold. What was more disturbing was China sold 34 billion of USA treasuries. The big question is China offloading all of its foreign treasuries proportionally or just the USA. It seems the latter as Japan reports that China is gobbling up Japanese government bonds by the bucketful despite its negative yield. Last yr they bought $87 billion worth of Japanese bonds. China made its move because of the threat of higher interest rates.  The chance that Japanese rates go higher is nil.

(courtesy zero hedge)

As China Liquidates US Treasuries, It is “Gobbling” Up Japanese Government Bonds

As we reported one week ago, the latest Treasury International Capital report revealed something disturbing: not only had foreign central banks sold a record amount of US Treasurys in the past 12 months, some $346 billion worth…

 

… but America’s largest foreign creditor, China, sold a record $34 billion in US paper in the latest month, and bringing its total holdings to the lowest since 2012.

This led to an obvious question: is China dumping all of its foreign reserve holdings proportionately, or is Beijing strategically offloading its US paper, for financial, political reasons or otherwise, as it buys other foreign government bonds. The answer, at least according to the Nikkei, is the latter.

As the Japanese owner of the Financial Times reports, China is on a shopping spree, and has been “gobbling” up Japanese government bonds, adding that Beijing bought close to a net 9 trillion yen ($86.6 billion) worth of JGBs in the January-August period, more than tripling the amount from the same period last year. Incidentally that’s almost equivalent to the number of US Treasurys sold by China.

A simple explanation for the shift is that the People’s Bank of China has been reducing its holdings of U.S. Treasurys in anticipation of higher U.S. interest rates and shifting some of its money to JGBs, where higher rates – courtesy of 250% in debt/GDP – are largely guaranteed to never arrive. 

But more importantly, and this could explain the perplexing recent strength in the Yuan, this trend may be a reason behind the yen’s appreciation in foreign exchange markets in recent months.

According to Japan’s Ministry of Finance, China invested 8.9 trillion yen in Japanese securities in net terms between January and August. Buying started to exceed selling more often on a monthly basis in the second half of 2015. In April, net buying surpassed 3 trillion yen. Curiously, China is not buying the Japanese bonds for the “yield”, but rather for liquidity: most of the securities purchased by the PBOC are bonds with maturities of one year or less.

Judging by the latest TIC data, China’s selling of US paper is accelerating, which also suggests that just as China has been a factor pushing the Yen higher, the dollar has been pressured lower by the ongoing Chinese liquidation. One wonders how much higher the USD will jump if and when China decides to halt its selling of US paper, and how much lower the Yuan will then tumble in response, leading to even faster capital outflows from China.

 

end

 

Chinese bank assets total 32 trillion equiv usa, with bank liabilities at just about 30 trillion equiv USA. To give you a comparison to the uSA:  the total USA banking liabilities are around 15 trillion.  The problem in China is bad debts which are in the area of 15 to 20%.

Thus 5 to 6 trillion equiv dollars must be written off…where are they going to get the money for this?

(courtesy zero hedge)

 

 

Chinese Bank Liabilities Rise Above 200 Trillion Yuan (29.58 trillion usa) For The First Time

By now it is widely accepted that the biggest credit risk facing the global financial system is not so much among western banks, which have been closely scrutinized, and their balance sheets are largely exposed to both regulators and the public (perhaps with a few notable exceptions), but are arising from China. And while China’s total leverage, by most counts, is somewhere in the 300% range, according to the IFF…

… and modestly lower according to other sources, the real worry is not so much the sovereign or corporate non-financial debt within China, but the leverage within its opaque, murky financial system.

What we do know about China’s banks is what the government discloses, which is not much, however overnight China’s Banking Regulatory Commission reported on its website the latest amount of total domestic assets on China’s bank books: as of September the number is a stunning CNY217.3 trillion, or just over $32 trillion. On a year over year basis, this series grew at a whopping 14.7% in September, more than double the rate of growth of China’s overall economy, and suggesting that something is truly broken in China’s credit transmission mechanism.

 

As for bank liabilities, or loans and other even murkier obligations, the Chinese regulators reported that this number had grown even faster, by 15.5%, and has for the first time ever surpassed 200 trillion yuan – just shy of USD $30 trillion – for the first time, and hitting CNY200.4 trillion as of September 30. By comparison, total US bank liabilities are roughly half this number.

Normally we would end with something cynical or witty to add, alas when looking at this massive number, of which by rough estimates somewhere between 15% and 20% is in the form of bad loans, there is nothing witty, or even cynical, to be added.

 

 

end

 

The largest component of bank liabilities is the so called shadow banking system where we have seen huge amounts of loans created in the Peer to Peer section in financing homes inside China.

This afternoon China has finally announced a crackdown on this lending and this caused bitcoin to rise over 100 dollars

( zero hedge)

Bitcoin Soars As China Launches Crackdown On Wealth-Management Products

After trading in a tight range for much of the summer, coiled within a $100 range around the mid-$500s, over the past several weeks bitcoin has once again started to push higher, closely tracking the decline in the Chinese Yuan as shown below.

However, the most recent burst in bitcoin activity, which sent it surging by over $20 overnight, has little to do with any moves in the official Chinese currency, which recently rebounded modestly tracking the recent dip in the dollar, and is likely attributable to a long overdue crackdown on China’s Wealth-management products, a key component of China’s “shadow banking” system.

As Bloomberg reported overnight, China’s central bank is finally conducting a trial monitoring of banks’ off-balance-sheet wealth-management products under its macro-prudential assessment system. A question one should ask perhaps is why the $1.9 trillion in asset locked up with WMPs had so far been exempt from regulatory supervision.

Just as notable, going forward the WMPs will be included in calculating broad-based credit, something we discussed last week when we showed just how vastly China is undercounting its broadest credit aggregate, Total Social Financing by ignoring shadow debt. Currently, the products aren’t included in the assessment framework, however it’s not clear when or if the People’s Bank of China will add them, Bloomberg added.

 

Citigroup estimated that 13 trillion yuan ($1.9 trillion) of the products, which are a key building block in China’s shadow-banking system, could be covered. Other banks’ estimates are even bigger.

No matter the size, the extra scrutiny will certainly cool growth of the unregulated products, as China tries to rein in financial risks that could tank the economy. Adding the products to the central bank’s calculations could help to emphasize requirements for lenders to limit dangers and maintain sufficient capital. A change would mean regulators would be may be better able to “control the pace of broad-based credit supply,” Judy Zhang, a Hong Kong-based analyst at Citigroup, said in a note. WMP issuance and yields may shrink as lenders pass on extra costs to investors, she said.

As Bank of America explained overnight, in late 2015, PBoC officially introduced its MPA framework, which expanded its focus from loans to credit in a broader sense, covering not only loans but also banks’ bond investments, equity rights and other investments, financial assets bought with re-sale agreement, and deposits with non-deposit-taking financial institutions. The MPA can make it more difficult for banks to adjust on-balance sheet assets to circumvent government’s credit control. The latest move adds banks’ off-balance sheet WMPs, i.e. those without a principal guarantee, to the mix. This, in theory, should make it more difficult for banks to move assets off balance sheet.

Chinese households, companies and banks held a record 26.3 trillion yuan of wealth-management products as of June 30 and the China Banking Regulatory Commission has been tightening rules on WMPs since late 2014. Most of the products are non-principal guaranteed, which means they reside off banks’ balance sheets.

The implications for th economy can be significant:

The cornerstone of PBoC’s MPA is capital adequacy, in-line with Basel III. So it’s possible that in the long term, banks may be required to provide capital for at least some of its off-balance sheet assets, including the WMPs. As of Jun, total balance of bank WMPs reached Rmb26.3tr. Without considering future growth, the additional amount under the MPA would be some Rmb15.5tr, after deducting Rmb6.1tr products with guarantees (already on banks’ balance sheet) and Rmb4.7tr of cash and deposits. This represents about 7% of banks’ on-balance sheet assets as of June (Rmb217tr). More important, we should view the latest development in the broad context of policy tightening over shadow banking activities since early this year (related reports linked in the sidebar).

However, the most immediate practical consideration from the increased regulatory supervision of the $1.9 trillion in related product is that these funds, many of which are of highly suspect origins, will seek to shift away from the heightened scrutiny and find alternative venues. Which may explain the latest jump in bitcoin as a modest portion of the funds locked up wealth-management products may have found itself into the digital currency, promptly sending it higher by nearly 5%. Should the crackdown on WMPs persist, it may be just the catalyst to push bitcoin above its recent multi-year highs just why of $800 hit earlier this summer.

 

end

 

 

4 EUROPEAN AFFAIRS

Deutsche bank 

Investors scared as to what they are witnessing, have pulled another 8 billion dollars worth of funds from the ETF unit, causing more liquidity problems for the bank

(courtesy zerohedge)

Investors Have Pulled $8 Billion From Deutsche Bank’s ETF Unit

Earlier this month, Deutsche Bank stock was shaken following a Bloomberg report that Deutsche Bank’s hedge fund clients had withdrawn billions in margin cash from the bank’s prime brokerage unit, adding a shade of liquidity concerns to the bank’s ongoing capitalization woes. It now appears that DB has continued to hemmorhage cash with the FT reporting that the German lender’s exchange traded fund unit has seen billions in outflows as Germany’s biggest lender considers whether to sell parts of its asset management business.

Investors have pulled $8bn from Deutsche’s ETF arm so far this year. This is an unwelcome collapse after a strong performance in 2015 when the unit attracted positive inflows of $28bn, according to ETFGI, a London-based consultancy. DB’s clients have been heading for the exit after the bank was threatened with a $14bn claim by the DOJ.

“The noise around Deutsche Bank has clearly not helped its ETF business,” said a senior executive from a rival asset manager who did not wish to be named.

As the FT adds, Deutsche has put aside €5.5bn to cover potential litigation costs but the threat of a larger bill has forced it to consider selling a minority stake in its asset management arm, its best-performing division in recent years. However, efforts to raise fresh capital could be hindered by the outflows from the ETF unit, which is widely regarded as one of the crown jewels of Deutsche’s asset management operations.

To be sure, DB defended itself when a spokesman for the bank said the ETF outflows were “part of the broader industry-wide” trend away from currency-hedged ETFs. The outflows account for 10 per cent of Deutsche’s total ETF assets under management, and indeed the difficulties at Deutsche coincide with a period of upheaval across the European ETF industry. A cut-throat price war led by BlackRock and Vanguard, the world’s two largest fund managers, has forced rivals to abandon their strategic plans.

Still, the cash strapped bank may find it more complicated to unwind positions and provide the needed cash at a time when each of its moves is scrutinized under a microscope.

DB is not alone: Source, the London-based ETF provider, has been put up for sale fewer than three years after being acquired by Warburg Pincus, the private equity group. Commerzbank, Germany’s second-largest lender, has also confirmed it plans to spin off its ETF business into a separate unit.

Some industry observers believe Deutsche’s ETF business could make an attractive acquisition target for a rival looking to establish a foothold in the market. A former Deutsche employee said that efforts had been made in the past to find a buyer for the ETF unit, which has assets of $76.9bn and ranks as the fifth-largest ETF provider globally.

“We heard a lot of rumours that senior management put [the ETF business] up for sale several times but they were unable to get much traction for the price they were asking,” he said.

It wouldn’t be the first time Deutsche has tried to monetize some of its better performing assets. Following a review in 2011, the Frankfurt-based lender tried to sell large chunks of the asset management business but a potential deal with Guggenheim Partners, the US investment firm, fell apart in 2012. The bank subsequently merged the asset management division with the bank’s wealth unit, bringing the two together under the leadership of the scandal-plagued Michele Faissola whose involvmenet in a series of Monte Paschi deals has prompted the Italian government to launch an investigation into his “market manipulation” activities. As reported previously, the former investment banker is one of four executives to have led the asset management division in as many years. His involvement in the suicide of former Deutsche Banker William Broksmit was profiled here recently. Faissola’s departure from Deutsche Asset & Wealth Management last year led to another reversal: the separation of the asset and wealth management divisions just three years after they had been brought together.

end

A trial balloon has been floated by the ECB that they are almost certain to continue buying bonds beyond the March 2017 deadline

(courtesy zero hedge)

Reuters Trial Balloon: ECB “Almost Certain” To Keep Buying Bonds Beyond March

It has been a while since we had an ECB-linked Reuters headline trial ballon, with the last one coming over a month ago and suggesting that the ECB may buy equities at some point in the future. So, maybe to make up for lost time, moments ago Reuters blasted headlines which had a quick but transitory effect on stocks and the Euro with the following:

  • ECB ALMOST CERTAIN TO KEEP BUYING BONDS BEYOND MARCH, ADJUST PROGRAMME RULES- CENTRAL BANK SOURCES
  • CHANGES TO CAPITAL KEY, ISSUE LIMIT AND YIELD FLOOR ARE UNDER CONSIDERATION – CENTRAL BANK SOURCES

Of course, once the algos got over the kneejerk reaction which benefited US and European equities, there was nothing really new in the headline, as both of those components were widely expected to be under consideration by the ECB. In fact, after the initial spike lower in the euro and highes in stocks, risk appears to have continued its descent, suggesting the ECB will need to come up with something more dramatic to jawbone markets into the desired direction.

Meanwhile, Italian yields are increasingly concerned that recent speculation about ECB tapering, or “yield targeting” is the real deal and continue to drift higher.

 

end

 

SPAIN

What a mess:  King Felipe asks Spain to form a minority government and it will be done with abstentions.  The problem here is that Rajoy promised to cut taxes and increase expenditures.  The ECB wants the opposite

(courtesy Mish Shedlock/Mishtalk)

Rajoy To Form Minority Government Thanks To Abstentions: Expect No Stability

Submitted by Michael Shedlock via MishTalk.com,

Mariano Rajoy is headed for another term as Spanish prime minister following two inconclusive elections.

It’s been 10 months since Spain has had a government, but King Felipe asked Rajoy to try one more time while pressuring the socialists to support or abstain in a parliamentary procedure.

Abstain it is.

Bloomberg reports Rajoy Faces Vote This Week as He Moves to Reclaim Power in Spain.

Caretaker Prime Minister Mariano Rajoy will face a second confidence vote in the Spanish Parliament on Thursday, this time with the tacit support of his Socialist rivals, as he seeks to confirm his return to power.

Rajoy said that King Felipe has asked him to seek lawmakers’ backing at a meeting in Madrid Tuesday. Speaking at a press conference, Rajoy pledged to reach out to other parties as he aims to govern for the next four years, though his People’s Party has just 137 out of 350 deputies.

“I will focus on the issues that unite us, setting aside those which divide us, or making an effort to turn them into topics that don’t divide us any longer,” Rajoy said. “It’s obvious that we’re entering an era when it will be necessary to talk and negotiate. That’s what I’ll say during my investiture speech.”

Spain’s establishment parties are set to seal an unprecedented compromise to end a 10-month political stalemate which has included two elections since December and risked triggering European Union budget sanctions. The settlement between the two biggest groups in parliament will bring a measure of stability to Spain as the rest of the major euro economies face national votes over the next year.

Expect No Stability

Bloomberg has two key details wrong. First, Rajoy does not have the tacit “approval” of the PSOE socialists. Rather, the PSOE will abstain, under pressure, for political reasons.

Second, even with the help of Ciudadanos, a party that will begrudgingly enter a coalition with Rajoy’s PP party, Rajoy’s parliamentary math falls short of 50%, the essence of a minority government.

No End to Political Gridlock

The Financial Times provides better analysis in its report Second Term for Rajoy Will Not End Spain’s Political Gridlock.

After 10 months of drift and two inconclusive general elections, Mariano Rajoy has all but secured a second term as prime minister. His path to power was finally cleared on Sunday, when the opposition Socialist party (PSOE) grudgingly agreed to lift its veto against a new conservative-led government. In a deeply fragmented parliament, Mr Rajoy will be elected with the votes of his own Popular party (PP) and the centrist Ciudadanos party, but also thanks to the abstention of most Socialist deputies.

His problem is that the underlying parliamentary arithmetic has not changed. The PP controls just 137 seats in the 350-seat legislature. Add in the deputies from Ciudadanos, and Mr Rajoy is still seven votes short of a majority. The prime minister, in other words, will have to beg and scrape for a majority on every law he hopes to pass. He will lead a minority government with a hostile majority in parliament from day one.

The Socialist abstentions are born of exhaustion and fear, not conviction. The PSOE hates the thought of another Rajoy government but it hates the thought of yet another election even more. Polls showed the party was in freefall. Another ballot could have delivered a knockout blow.

Even in areas where the Socialists and Mr Rajoy share some common ground, the PSOE will be deeply reluctant to offer parliamentary support.

The first crucial test of Mr Rajoy’s powers will come almost immediately. Madrid is under intense pressure from Brussels to bring its wayward deficit back into line. Mr Rajoy won a reprieve from the European Commission earlier this year but even the revised, less ambitious deficit target for 2017 is now out of reach. Spain promised to reduce its budget shortfall to 3.1 per cent of gross domestic product next year. On current calculations, the country is heading for a deficit of 3.6 per cent. Somehow, the new Rajoy administration will have to find tax increases or spending cuts worth about €5bn.

Most likely, the prime minister will try to assemble an ad hoc coalition made up of his own PP, Ciudadanos, the conservative Basque National party and a couple of regional lawmakers from the Canary Islands. In return, Mr Rajoy will have to spice the 2017 budget with financial rewards for the Basque country and the islands — concessions that will please neither his core voters nor the antinationalist Ciudadanos leadership. But it can, just about, be done.

Mr Rajoy holds one trump card. He can always force an early election, in the hope that voters will return him to office with a proper governing majority. But even that threat may not work on a Socialist party that has already tested the tolerance of its supporters to the limit. It should surprise no one if the next legislature turns out to be nasty, brutish, short — and mostly unproductive.

Problems Start Day One

Rajoy to form minority gov’t. Day 1 instability: Brussels will hound Spain for tax hikes, benefit cuts, budget cuts.http://mishtalk.com/2016/10/25/rajoy-to-form-minority-government-thanks-to-abstentions/ 

The tax hikes will not go over well for his PP party. Rajoy promised cuts. The socialists (PSOE), and the radical left (Unidos Podemos – United We Can), will not like any budget cuts and will especially dislike benefit cuts.

Rajoy’s only trump card is the threat of early elections. But there is no guarantee he could win. Moreover, should the socialists reorganize, Rajoy could easily find himself facing a vote of no confidence in a year or so.

Rajoy is corrupt as they come. Ciudadanos had to hold its nose to enter this fragile minority coalition. There is nothing at all stable about this setup.

 

end

DEUTSCHE BANK
Deutsche bank is probing its own derivatives to see if they have been misstated. They are also sharing their information with USA authorities
(courtesy zerohedge)

Deutsche Bank Probing “Misstated” Derivative Valuations After Finding “Divergences”

Perhaps the single biggest reason why Deutsche Bank’s stock has been drastically underperforming most of Europe’s banks, in addition to its skyhigh leverage and lack of capital buffer, is the market’s concern about what is hidden on its books, namely whether the bank’s billions in loans and its trillions in derivatives have been marked correctly. Which is why a just released report from Bloomberg that Deutsche Bank is reviewing whether it “misstated” the value of derivatives in its interest-rate trading business, will hardly spark optimism in the bank’s critical asset marking practices; the good news is that according to the report the biggest German lender is sharing its findings with U.S. authorities, according to people with knowledge of the situation.

Zero-coupon inflation swaps are derivatives that help customers bet on, or hedge against, inflation. Two parties agree to exchange a payment in the future whose size is determined by how much an inflation index rose or fell. The issue, however, is not the underlying security, but the total notional involved, which based on the DB’s latest public filings, could be in the hundreds of billions (or more), and how substantial the impact on DB’s P&L any variation from true market values will be.

Specifically, DB is looking at valuations on a type of derivative known as zero-coupon inflation swaps. The reason for the probe is that, as has been a recurring case with many of its peers of the last few years, the bank found valuations that “diverged from internal models” at which point it began questioning traders.

The push to finally open its books comes after CEO John Cryan’s vow in February to try to resolve his institution’s legal challenges swiftly. As Bloomberg sarcastically adds, “he is still working on it.” The bank has been facing regulatory and enforcement pressure around the world, including a money-laundering investigation tied to its Russia operations, inquiries into mortgage-bond trading before and after the financial crisis and charges that the bank colluded to help falsify the accounts of Italy’s Banca Monte dei Paschi di Siena.

More importantly perhaps is the reason why DB has decided to share its internal probe with the US, whose Justice Department asked in September for a $14 billion settlement, an amount the bank said it wouldn’t pay. The figure was big enough to unleash a selling frenzy in the stock, sending it to all time lows, leading to repeating rumored discussions with outside sources, most recently of Saudi and Chinese origina, about raising capital.

The bank last year hired Steven F. Reich as its general counsel for the Americas to help navigate its legal probes.Reich is a former official at the Justice Department and attorney for former President Bill Clinton.

Perhaps it is time for Deutsche to make some donations to the Clinton Foundation?’

 

end

 

ITALY

 

This is all Italy needs;  Central Italy  (around the Perugia area) is hit with a strong 5.4 magnitude earthquake

(courtesy zero hedge)

 

Strong 5.4 Magnitude Quake Hits Central Italy, Rattles Rome

end

BANK OF ENGLAND/ITALIAN BANKS/DEUTSCHE BANK

Great reason for gold and silver to be whacked today:  The Bank of England is asking its UK Banks  to detail their exposure to both Deutsche bank and the Italian banks

(courtesy zero hedge)

 

Bank of England Asks UK Banks To Detail Their Exposure To Deutsche And Italian Banks

In what may or may not be a coincidence, just hours after Bloomberg reported that DB launched a probe into whether it “misstated” derivatives, moments ago the FT reported that the Bank of England is seeking details from large British banks on their current exposure to Deutsche Bank and some of the biggest Italian banks, including Monte dei Paschi, “amid mounting market jitters over the health of Europe’s financial sector.”

The FT notes that the request was made in recent weeks by the BoE’s Prudential Regulation Authority as investors sold off Deutsche and Monte dei Paschi, both of which have been the subject of scrutiny over their capital levels. Supervisors worldwide have attempted to curtail the links between large institutions since the 2008 banking crisis, when the collapse of Lehman Brothers and other big groups threatened to drag down the entire global financial system.

While the PRA regularly speaks to banks about their exposures, particularly to any lender that might be facing difficulty, the BoE’s recent intervention is a sign of continued nervousness among regulators that the interconnectedness of Europe’s largest banks could harm otherwise healthy groups if one of the weakest links were to fall into crisis.

Some more details:

Normally, exposures to other financial institutions are not disclosed to regulators unless they are particularly large or as part of annual stress tests. That forced the BoE to ask for the latest snapshot of the big UK banks’ exposures to their German and Italian rivals as those groups came under market attack. Banks can be exposed to one another directly through lending or derivatives but indirect exposures — such as lending to a counterparty of a bank in trouble — also need to be considered.

 

Global rules cap the amount that one bank can hold in another to 25 per cent of the first bank’s capital, while anything above 10 per cent must be disclosed to regulators. Smaller holdings are therefore harder for supervisors to spot.

 

Paul Sharma, a former PRA official now a consultant at Alvarez & Marsal, said large UK banks were now able to monitor their direct exposure to troubled banks on a “near real-time” basis but that market turmoil could complicate the picture.

The FT also writes that British regulators are particularly anxious about the impact of litigation costs on Deutsche’s already weak profitability and that large piles of non-performing loans could have a similarly corrosive impact on Italian banks.

As we pointed out earlier, Germany’s biggest bank still faces serious doubts on whether it will need to raise billions of euros of extra capital and slash costs drastically to strengthen its balance sheet and boost profits. Among the entities rumored to provide backstop capital are various middle-eastern funds as well as rumored Chinese investors.

Normally, similar reports of heightened regulatory scrutiny would lead to a brike selling in any named bank; however perhaps because Deutsche Bank has already been through hell and back over the past few months, this latest news will hardly come as a shock to investors.

Meanwhile, Deutsche Bank is set to announce earnings tomorrow, in which it is expected to announce a lower net loss of around €610 million, versus a massive €6 billion loss one year ago, much of which stemmed from write-downs on investment-banking and other assets. At this time last year, Deutsche Bank was kicking off its new, multi-year overhaul under Chief Executive John Cryan. This quarter’s loss is expected to be largely due to another large major litigation provision ahead of a potential settlement with the DoJ. Analysts are split on precisely how much the bank will set aside, but their forecasts range from €250m to €1.5bn according to a consensus report compiled by the bank. Analysts also expect third-quarter revenues to be €7.1 billion, according to a consensus of 17 analysts’ estimates compiled by the bank. That compares with €7.3 billion a year ago.

Prolonged uncertainty around Deutsche Bank’s capital position-exacerbated by the litigation questions–have fueled persistent questions about whether the lender might be forced to sell shares, shed businesses it has planned to keep, or accelerate cost-cutting plans.

Keys to Deutsche Bank’s plans for building its capital cushion include divesting its German retail-banking division called Postbank. That plan has proved more difficult than expected, and investors want to know the latest-especially if executives have changed their minds. Investors will also want to know when the bank is going to see the cash it is expecting from selling its roughly 20% stake in Chinese bank Hua Xia. The roughly $4 billion deal was announced in December 2015, but the proceeds have taken longer to arrive than executives expected.

Meanwhile, in an attempt to cut costs, DB has undergone on a major layoff spree and, as reported yesterday, is considering paying banker bonuses in compensation other than cash.

 

end

 

CALAIS FRANCE  (THE “JUNGLE”)

We brought you the story where the authorities rounded up 8,000 refugees harbouring on the outskirts of Calais in what is referred to as the “Jungle”. They burned the refugee centers there and tried to move the migrants throughout France.  This is not working as they breaking the police lines trying to get into the jungle.  Generally they try and hitch a ride across the channel into England.
(courtesy zero hedge)

As Calais “Jungle” Burns, Refugees Try To Storm Their Way Back In

It has been a harsh week for the 8,000 refugees inhabiting the Calais “Jungle” camp.

Continuing an operation which began on Monday, workers ramped up demolition of France’s notorious Calais “Jungle” on Wednesday after fierce blazes cut through a swathe of the camp overnight, sending migrants fleeing for safety.  Fabienne Buccio, the prefect of Pas-de-Calais, said it was “mission accomplished” for the demolition.

However his assessment may have been premature as charities said many unaccompanied minors had not been processed and BBC reporters at the camp said groups of adults remained.

Wearing hardhats and orange overalls in the morning fog, a team of around 15 workers resumed tearing down tents and makeshift shelters at the camp that has become a symbol of Europe’s migrant crisis.

As recounted by AFP reporters, a new fire threw black smoke into the sky as several dozen wood shacks smouldered on a main thoroughfare of the sprawling slum. “Someone burned our tents. Maybe they used petrol or something, I don’t know, but the fires spread fast. We had to run out in the middle of the night,” said Arman Khan, a 17-year-old Afghan. “I left all my things behind, I have nothing now.”

Riot police had cordoned off the demolition area while aid workers and government officials checked that the dwellings were empty. Others carted away the debris and abandoned belongings – mattresses, multi-coloured blankets, supermarket trollies and so on – in small earth-movers. Gas canisters, sinks, refrigerators and other metal objects lay scattered across the desolate scene.

The fires spread just hours after workers moved in Tuesday to clear the squalid camp that has been home to an estimated 6,000-8,000 migrants, many with hopes of reaching Britain.

A local official played down the blazes, telling AFP: “It’s a tradition among communities who set fire to their homes before leaving.”  Located next to the port of Calais, the Jungle has for years been a launchpad for migrants attempting to make it to Britain by sneaking onto trucks or jumping onto trains heading across the Channel.

Since Monday, 3,242 adults have been transferred to centres around France and 772 unaccompanied minors have been moved to shipping containers converted into temporary shelters in the Jungle, the interior ministry said.  The numbers represent around half the camp’s estimated population before the operation began, according to official figures.

The authorities have said those who agree to be moved can seek asylum in France. Those who refuse risk deportation. The fate of more than 1,000 unaccompanied minors is of particular concern.

Meanwhile, French Interior Minister Bernard Cazeneuve said Tuesday that all those “with proven family links in Britain” would eventually be transferred and that London had committed to reviewing all other cases where it was “in the child’s interest” to settle across the Channel.

* * *

However, not all are seeking to rush back. Many inhabitants of the camp attempted to break through the police line and storm back into the camp, which is being demolished by the authorities, according to RT’s reporter on the ground.

Inhabitants break through police line to storm back into camp.

Sky News also said that migrants were returning to the “Jungle.”

Migrants are returning to the ‘Jungle’ camp in Calais following fires during demolition at the site

A migrant child, who was among those returning to the camp, waved a cricket bat and shouted: “Jungle is not dead! Jungle is not dead!” according to the British Express newspaper. “It’s chaos with these ongoing fires and plumes of smoke [across the camp],” Harry Fear reported from the scene.

“The police line was broken by migrants wanting to enter back in,” he said, adding that it appears new fires have been set across the camp.

According to the RT correspondent, the operation to clear Calais looks much like a failure, despite claims of its complete success by the French authorities.  He said that fire brigades on site have been working “quite slowly” to put out the fires. The RT crew also noticed “uncontrolled gas canisters [at the camp’s territory], which haven’t yet been secured by the authorities,” Fear added.

According to an unnamed regional official, the authorities will be able to shut down the processing center, which is dispersing migrants to different locations in France until the end of the day. Fires keep burning in many locations around the camp as some migrants set fire to the camp in response to government actions.

The demolition of tents and wooden structures, which the residents had used as shelter, started at the site on Tuesday. Violent clashes between the police and the inhabitants were reported, with tear gas deployed by officers.  The camp was set ablaze last night by refugees displeased with the demolition. The flames caused several explosions of portable gas, with four migrants arrested over the incident.

Thousands of hopeful migrants, many of whom are now homeless, are looking to cross the English Channel to find asylum in the UK have been holed up at the camp for months. Britain, however, only agreed to take in around 1,000 migrant children from the camp who have relatives in the UK.

On Wednesday, almost 40 councils in England refused to accept any of the child refugees evacuated from the camp.

Meanwhile, with the UN warning that the recent attack on Mosul may unleash up to another million refugees in the coming weeks, Europe’s migrant crisis is about to get even worse.

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

Trump correctly states that Hillary’s plan for Syria would eventually lead to World War iii as the Russians would be totally against her formula.  The Russians know full well that the issue is to remove Russia from providing natural gas to all of Europe

(courtesy zero hedge)

Trump: “Hillary’s Plan For Syria Would Lead to World War III”

Trump took his most aggressive foreign policy shots yet at Hillary Clinton at an interview earlier today from his Trump National Doral golf resort in Florida, saying that her policies on Syria would inevitably lead to World War III.  Not pulling any punches, Trump also referenced his frequent attack against Hillary that she’s “all talk”, saying that her plan would engage Russia which “is a nuclear country, but a country where the nukes work as opposed to other countries that talk.”

U.S. Republican presidential nominee Donald Trump said on Tuesday that Democrat Hillary Clinton’s plan for Syria would “lead to World War Three,” because of the potential for conflict with military forces from nuclear-armed Russia.

On Syria’s civil war, Trump said Clinton could drag the United States into a world war with a more aggressive posture toward resolving the conflict.

Clinton has called for the establishment of a no-fly zone and “safe zones” on the ground to protect non-combatants. Some analysts fear that protecting those zones could bring the United bring into direct conflict with Russian fighter jets.

“What we should do is focus on ISIS. We should not be focusing on Syria,” said Trump as he dined on fried eggs and sausage at his Trump National Doral golf resort. “You’re going to end up in World War Three over Syria if we listen to Hillary Clinton,” Trump said.

“You’re not fighting Syria any more, you’re fighting Syria, Russia and Iran, all right? Russia is a nuclear country, but a country where the nukes work as opposed to other countries that talk,” he said.

Trump said Assad is much stronger now than he was three years ago. He said getting Assad to leave power was less important than defeating Islamic State.

“Assad is secondary, to me, to ISIS,” he said.

Trump also questioned how a Clinton administration could find common ground for negotiations with Russia after she, and the Obama administration, had seemingly gone all-in to demonize Putin in an effort to salvage her campaign.

On Russia, Trump again knocked Clinton’s handling of U.S.-Russian relations while secretary of state and said her harsh criticism of Putin raised questions about “how she is going to go back and negotiate with this man who she has made to be so evil,” if she wins the presidency.

Meanwhile, Trump also had harsh words for Obama who he said would rather “focus on his golf game” than engage with world leaders…an issue which he says led to the deterioration of ties with the Philippines.

On the deterioration of ties with the Philippines, Trump aimed his criticism at Obama, sayingthe president “wants to focus on his golf game” rather than engage with world leaders.

Since assuming office, Duterte has expressed open hostility towards the United States, rejecting criticism of his violent anti-drug clampdown, using an expletive to describe Obama and telling the United States not to treat his country “like a dog with a leash.”

The Obama administration has expressed optimism that the two countries can remain firm allies.

Trump said Duterte’s latest comments showed “a lack of respect for our country.”

Finally, Trump continues to draw huge crowds in the Florida, despite apparently being down massively in the polls, with the following rally held earlier today in Sanford.

Russia flexes its muscle by revealing a nuclear missile capable of reaching USA soil.
(courtesy Alexander Mercouris/The Duran.com)

Russia Unveils First Images Of Nuclear Missile Capable Of Reaching US Soil

Submitted by Alexander Mercouris via TheDuran.com,

Russia reveals photos of a new highly advanced liquid fuelled heavy ICBM capable of evading anti-missile defences and hitting US territory with 10 tonne nuclear payload.

The Makeyev Design Bureau – the designer of Russia’s heavy liquid fuelled Intercontinental Ballistic Missiles (“ICBMs”) – ie. of missiles capable of reaching US territory from Russian territory, has published the first picture of Russia’s new heavy Sarmat ICBM which is due to enter service shortly, probably in 2018.

The picture is accompanied by a short statement which reads

“In accordance with the Decree of the Russian Government ‘On the State Defence Order for 2010 and the planning period 2012-2013,’ the Makeyev Rocket Design Bureau was instructed to start design and development work on the Sarmat. In June 2011, the Bureau and the Russian Ministry of Defense signed a state contract for the Sarmat’s development.  The prospective strategic missile system is being developed in order to assuredly and effectively fulfil objectives of nuclear deterrent by Russia’s strategic forces.

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The Sarmat is the planned replacement of the R-36 family of Russian ICBMs, which entered service with the Soviet armed forces in the 1960s.  The R-36 family culminated in a series of missiles known in the USSR and Russia as the R-36M, which entered service in the 1970s.  With a throw weight of 8,800 kg these were the heaviest and most powerful ICBMs built up to now.  Here is a video of one being launched:

The specifications of the Sarmat have not been disclosed and are classified.  However it is believed to be a significantly smaller and lighter missile than the R-36 family, but to have a larger throw weight of up to 10,000 kg. 

Advances in the chemical industry and in the design of rocket engines since the 1960s have made it possible to build smaller and lighter rockets having the same or greater capability as the heavier rockets designed in the 1960s.

sarmat-comp

The Sarmat has been specifically designed to defeat the US’s Anti Ballistic Missile systems, which are being deployed in eastern Europe. 

Its range of countermeasures is classified and not known.  However it is believed the Sarmat is capable of manoeuvres during its flight trajectory to confuse incoming missiles, that it is able to launch decoys – also to confuse incoming interceptor missiles – and that at least one of the warheads being designed for it is a hypersonic warhead, which rumours say was tested successfully in April, and which is believed to be impervious to interception by incoming missiles.

A little mentioned fact about the military strategic balance between the US and Russia, is that Russia has been steadily upgrading its strategic deterrent with new advanced missiles, which are entirely different to those of the 1960s, which formed the basis of the Soviet strategic deterrent. 

These include the Topol and Yars light road mobile solid fuel ICBMs, and the very advanced solid fuelledBulava ICBM, which is sea launched from Russia’s advanced Borei strategic nuclear missile submarines. (Below)

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Topol ICBM

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Yars ICBM

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Bulava ICBM