Gold at (1:30 am est) $1204.30 UP $3.40
silver at $17.00: UP 3 CENTS
Access market prices:
THE DAILY GOLD FIX REPORT FROM SHANGHAI AND LONDON
The Shanghai fix is at 10:15 pm est last night and 2:15 am est early this morning
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 FIRST morning fix Jan 20/17 (10:15 pm est last night): $ 1219.24
NY ACCESS PRICE: $1207.70 (AT THE EXACT SAME TIME)/premium $11.54
Shanghai SECOND afternoon fix: 2: 15 am est (second fix/early morning):$ 1215.74
NY ACCESS PRICE: $1201.85 (AT THE EXACT SAME TIME/2:15 am)
THE SPREAD 2ND FIX TODAY!!: $7.61
China rejects NY pricing of gold as a fraud/arbitrage will now commence fully
London Fix: Jan 20/2017: 5:30 am est: $1199.10 (NY: same time: $1199.55 (5:30AM)
London Second fix Jan 20.2017: 10 am est: $1200.55 (NY same time: $1201.30 (10 AM)
It seems that Shanghai pricing is higher than the other two , (NY and London). The spread has been occurring on a regular basis and thus I expect to see arbitrage happening as investors buy the lower priced NY gold and sell to China at the higher price. This should drain the comex.
Also why would mining companies hand in their gold to the comex and receive constantly lower prices. They would be open to lawsuits if they knowingly continue to supply the comex despite the fact that they could be receiving higher prices in Shanghai.
For comex gold:
NOTICES FILINGS FOR JANUARY CONTRACT MONTH: 10 NOTICE(S) FOR 1000 OZ. TOTAL NOTICES SO FAR: 1185 FOR 118,500 OZ (3.6858 TONNES)
NOTICES FOR JANUARY CONTRACT MONTH FOR SILVER: 2 NOTICE(s) FOR 10,000 OZ. TOTAL NUMBER OF NOTICES FILED SO FAR; 559 FOR 2,795,000 OZ
Let us have a look at the data for today
In silver, the total open interest FELL by 1625 contracts DOWN to 172,592 with respect to YESTERDAY’S TRADING. In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e. .862 BILLION TO BE EXACT or 123% of annual global silver production (ex Russia & ex China).
FOR THE JANUARY FRONT MONTH IN SILVER: 2 NOTICES FILED FOR 10,000 OZ.
In gold, the total comex gold ROSE BY 9,603 contracts DESPITE THE FALL IN THE PRICE GOLD ($10.40 with YESTERDAY’S trading ).The total gold OI stands at 475,227 contracts.
we had 10 notice(s) filed upon for 1000 oz of gold.
With respect to our two criminal funds, the GLD and the SLV:
We had no changes in tonnes of gold at the GLD
Inventory rests tonight: 807.96 tonnes
we had no changes in silver into the SLV:
THE SLV Inventory rests at: 338.356 million oz
First, here is an outline of what will be discussed tonight:
1. Today, we had the open interest in silver FALL by 1625 contracts DOWN to 172,592 AS SILVER FELL 26 CENTS with YESTERDAY’S trading. The gold open interest ROSE by 9,603 contracts UP to 475,227 DESPITE THE FACT THAT THE PRICE OF GOLD FELL BY $10.40 WITH YESTERDAY’S TRADING
2.a) The Shanghai and London gold fix report
2 b) Gold/silver trading overnight Europe, Goldcore
and in NY: Bloomberg
2c) COT report
3. ASIAN AFFAIRS
REPORT ON JAPAN SOUTH KOREA NORTH KOREA AND CHINA
b) RPORT ON JAPAN
c) REPORT ON CHINA
i)A very important commentary. Even though we know that the data is fudged, China has now released data to suggest that their growth is the slowest in 26 years at 6.8%
ii)This is a surprise move: the POBC cuts reserve ratios and then offers temporary funding and support for its largest banks. They wish to avoid a cash crunch!!
4 EUROPEAN AFFAIRS
As you can see, global growth is falling out of bed: today UK retail sales plunge 2% and this caused the Pound to contract but it later recovered a bit:
( zero hedge)
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
i)A good commentary on what 5 territorial disputes may influence gold and/or problems for the world authorities: the two biggest of course is the South Chinese Seas and the Israel/Palestine conflict.
( Barton Edgerton/GlobalRiskInsights.com)
ii)It seems that 22 Mexican pesos per dollar is the line in the sand. Former Mexican commerce secretary Gutierrez comments that Mexico must show a tough stance against trump. With that and intervention, the peso surged
( zero hedge)
7. OIL ISSUES
i)Rig count rises which will mean increase production. Oil after rising in the early part of the day, falters again
( zero hedge)
ii)A good look at the Saudi economy and how it will fare with oil below 60 dollars per barrel. The privatization of Aramco will surely provide enough capital to diversify this nation
( Gregory Brew/OilPrice.com)
8. EMERGING MARKETS
9. PHYSICAL MARKETS
i)As we outlined yesterday, the POBC are investigating the Bitcoin platform which caused the price of Bitcoin to fall. This caused a flood of investors to enter physical gold and GOld ETF’s denominated in physical metal:
( zero hedge)
ii)Gold trading today: higher with the Trump rally faltering: money flowing into gold and bonds!
( zero hedge)
iii)Bill Murphy interviewed by Daily coin
( Bill Murphy/GATA)
iv)This is a good one: John Embry states that we should watch out when the world finally realizes all of the fake news, manipulated (and false data), all hell will break loose. He outlines the most important commentaries of this past week, that which I have also highlighted to you.
( Kingworldnews/John Embry)
v)Alasdair Macleod..why we should own and hold onto gold
( Alasdair Macleod)
vi)The new Sec Treasurer to be Mnuchin states that he believes in the long term the USA dollar is important but he backs boss Trump that the dollar should weaken and help USA exports
i)Trump is now the 45th President of the USA. His speech sends the Dow down as well as the Peso. The key sound bite: “we’re transferring power from Washington to “the people”
( zero hedge)
ib)Statement from President Trump: He wants to crate 25 million jobs, grow the economy by 4% and lower taxes for all Americans
( President Trump/zero hedge)
ii)Zero hedge comments on the Steve Mnuchin confirmation hearings. He in essence is echoing his boss where he states that the dollar is too high but in the long run he supports a “strong dollar”
( zero hedge)
iii)This should be fun: Trump team is preparing for dramatic cuts to spending and yet they need infrastructure spending. They will try and cut programs that nobody ever heard of:
( zero hedge)
Let us head over to the comex:
The total gold comex open interest ROSE BY 9,603 CONTRACTS UP to an OI level of 475,227 AS THE PRICE OF GOLD FELL $10.40 with YESTERDAY’S trading. We are now in the contract month of JANUARY and it is one of the poorest deliveries of the year.
With the front month of January we had a LOSS of 35 contract(s) DOWN to 72. We had 41 notices filed YESTERDAY so we GAINED 6 contract(s) or AN ADDITIONAL 600 oz WILL STAND for gold in this non active delivery month of January. For the next big active delivery month of February we had a LOSS of 8914 contracts DOWN to 193,356.(feb 2016: 201,000 contracts). March had a LOSS of 80 contracts as it’s OI is now 925. We are on a par with respect to OI when we compare data for open interest re the Feb 2016 contract.
We had 10 notice(s) filed upon today for 1000 oz
And now for the wild silver comex results. Total silver OI FELL by 1625 contracts FROM 174,217 DOWN TO 172,592 AS the price of silver FELL 26 CENTS with YESTERDAY’S trading. We are moving further from the all time record high for silver open interest set on Wednesday August 3/2016: (224,540).
We are now in the non active delivery month of January and here the OI FELL by 121 contract(s) FALLING TO 109. We had 122 notice(s) filed on yesterday so we gained 1 silver contracts or an additional 5,000 oz will stand in this delivery month of January. The next non active month of February saw the OI rise by 7 contract(s) RISING TO 261.
The next big active delivery month is March and here the OI FELL by 2595 contracts DOWN to 132,041 contracts.
We had 2 notice(s) filed for 10,000 oz for the January contract.
VOLUMES: for the gold comex
Today the estimated volume was 228,499 contracts which is good.
Yesterday’s confirmed volume was 283,375 contracts which is very good
volumes on gold are getting higher!
|Withdrawals from Dealers Inventory in oz||nil|
|Withdrawals from Customer Inventory in oz||
|Deposits to the Dealer Inventory in oz||nil oz
|Deposits to the Customer Inventory, in oz||
|No of oz served (contracts) today||
|No of oz to be served (notices)||
|Total monthly oz gold served (contracts) so far this month||
|Total accumulative withdrawals of gold from the Dealers inventory this month||3000.000 oz|
|Total accumulative withdrawal of gold from the Customer inventory this month||4,806,084.1 oz|
Today, 0 notice(s) were issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 10 contract(s) of which 0 notices were stopped (received) by jPMorgan dealer and 0 notice(s) was (were) stopped/ Received) by jPMorgan customer account.
March 2015: 2.311 tonnes (March is a non delivery month)
|Withdrawals from Dealers Inventory||nil|
|Withdrawals from Customer Inventory||
|Deposits to the Dealer Inventory||
|Deposits to the Customer Inventory||
|No of oz served today (contracts)||
|No of oz to be served (notices)||
|Total monthly oz silver served (contracts)||559 contracts (2,795,000 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||19,182,617.0 oz|
And now the Gold inventory at the GLD
Jan 20/no changes in gold inventory a the GLD/Inventory rests at 807.96 tonnes
Jan 19/no changes in gold inventory at the GLD/Inventory rests at 807.96 tonnes
Jan 18/no changes in gold inventory at the GLD/Inventory rests at 807.96 tonnes
Jan 17/17/a deposit of 2.96 tonnes of gold/inventory at the GLD rests at 807.96 tonnes. I guess there is no more gold inventory to sent to C+Shanghai
Jan 13/17/there were no changes in gold inventory at the GLD/Inventory rests at 805.00 tonnes
Jan 12/2017/no change in gold inventory at the GLD/Inventory rests at 805.00 tonnes
Jan 11/no change in gold inventory at the GLD/Inventory rests at 805.00 tonnes
JAN 10/no changes in gold inventory at the GLD/Inventory rests at 805.00 tonnes
JAN 9/A WITHDRAWAL OF 8.87 TONNES OF GOLD FROM THE GLD/INVENTORY RESTS AT 805.00 TONNES
NPV for Sprott and Central Fund of Canada
At 3:30 pm est we receive the COT report which gives position levels of our major players. For several weeks, the commercials were goading the specs to go short. That change last week and the commercials went net short and the specs net long.
Let us see what today brings:
First the gold COT
|Gold COT Report – Futures|
|Change from Prior Reporting Period|
|non reportable positions||Change from the previous reporting period|
|COT Gold Report – Positions as of||Tuesday, January 17, 2017|
Our large specs:
those large specs that have been long in gold added 4144 contracts to their long side those large specs that have been short in gold added 6585 contracts to their short side.
those large specs that have been long in gold added 4636 contracts to their long side.
those large specs that have been short in gold added a tiny 1931 contracts to their short side.
Our small specs:
those small specs that have been long in gold pitched a tiny 82 contracts from their long side.
those small specs that have been short in gold added a tiny 182 contracts.
Conclusions: commercials go net long changing direction from last week. They went net long by 2705 contracts. The large specs went net short by 2441 contracts and that is very bullish for gold.
And now for our silver COT
|Silver COT Report: Futures|
|Small Speculators||Open Interest||Total|
|non reportable positions||Positions as of:||143||100|
|Tuesday, January 17, 2017||© SilverSeek.com|
Our large specs:
Those large specs that have been long in silver added 2408 contracts to their long side
those large specs that have been short in silver pitched 2473 contracts from their short side.
those commercials that have been long in silver added 3603 contracts to their long side.
those commercials that have been short in silver added 6402 contracts to their short side.
Our small specs;
Those small specs that have been long in silver pitched 1077 contracts from their long side.
those small specs that have been short in silver added 1005 contracts to their short side.
large specs go net long by 4800 contracts; commercials go net short by 2799 contracts.
It sure looks like JPMorgan is controlling the silver comex market.
Major gold/silver trading/commentaries for FRIDAY
Gold’s Gains 15% In Inauguration Years Since 1974
– Gold’s average gains in inauguration years of 15% since 1974
– First year of new President frequently a time of increased uncertainties and risks
– Gold rose 30% in the 12 months after Obama inauguration
– Massive political uncertainty – President’s conflict with the CIA
– ‘Strong dollar policy’ to end as U.S. has $120 trillion plus debt
– Trump inherits Bush and Obama’s humongous debt
Gold performs well in inauguration years (see table) and has seen average gains of 15% in inaugural years since the 1970s.
Given the degree of uncertainty, divisiveness and conflict that Trump’s election has already created – both in America and internationally, it seems almost certain that the many risks as President Trump takes power will lead to higher gold prices.
Besides the myriad of risks today and arguable the most uncertain geo-political situation since World War II or the height of the Cold War, gold investors and buyers can look to Presidential history, as gold has recorded has average gains of 15% in inaugural years since 1974.
This may be due to the fact that the first year of many administrations is frequently a time of significant change and increased uncertainties and risks. Markets are concerned that the US presidential handover and advent of President Trump will lead to volatility and turmoil in 2017 which will likely impact risk assets such as stocks.
The price of gold has already gained 5% this year and appears to be consolidating just above US$1,200 an ounce today. Investors can take a look at history for signal and indications as to how gold and stocks might perform this year.
Bloomberg points out:
A look at recent presidential transitions supports optimism among traders over the metal’s prospects. Gold has averaged gains of almost 15 percent in years marking the inauguration of a new president since the 1970s, advancing in five of those seven years.
In contrast, the S&P 500 index of equities declined in four of those years for an average loss over the period of 0.9 percent.
From Presidents Gerald Ford to Barack Obama, bullion has often served as a haven in times of political flux.
The metal has climbed about 5 percent this year as questions over the possible economic impact of Donald Trump’s policies add to investor angst over Brexit and mounting trade frictions. Bulls reason that gold will extend its gain as scant details of Trump’s fiscal stimulus program and tensions with trading partners including China unnerve investors.
Axel Merk of Merk Investments LLC told Bloomberg that
“We have no idea what’s going to happen with some of Trump’s policies — everybody is a little nervous…”
“Gold is relatively undervalued and will push higher.”
Like Trump or loathe him, most would acknowledge that his recent press conference, ill judged tweets and recent transition to power has been a complete mess.
Trump time … Let the games begin
Today is “T day” or “Trump day” as the world awaits the inauguration and advent of Donald Trump as President of the United States. The eyes of the world are on Washington and traders and investors will be keeping an eye on the U.S. stock and bond markets, the dollar and gold.
Trump’s first speech as President, expected some time after his swearing in at 1700 GMT, may see President Trump offer more detail on his fiscal and economic policies, especially infrastructure spending and taxation, in addition to trade policy.
When Barack Obama was sworn in eight years ago, the dollar strengthened by more than 4% in a day. This reassured markets and lulled many investors into a false sense of security regarding the dollar and markets. In the subsequent month after Obama’s inauguration, gold was 16% higher and in the course of the following 12 months, gold rose by 30% and gold was 23.4% higher in the calendar year 2009.
Markets and the dollar are unlikely to welcome Trump’s inauguration with such enthusiasm today. However, there is that possibility but investors should fade the short term noise and focus on the fact that gold is likely to perform well in 2017 and in the coming years for some of the reasons outlined below.
Trump’s conflict with the CIA
Trump’s continuing spat with America’s top intelligence agencies including accusing them of Nazi like tactics shows the level of geo-political uncertainty and risk facing the U.S. and the world.
At his first news conference last week, he said
“I think it was disgraceful, disgraceful that the intelligence agencies allowed any information that turned out to be so false and fake out. I think it’s a disgrace, and I say that … that’s something that Nazi Germany would have done and did do,” Trump told a news conference in New York.
Trump has been smeared by senior elements in the CIA in another “dodgy dossier” akin to that of the “weapons of mass destruction” dossier which helped get the U.S. and the UK into the disastrous Iraq war. The tactics used in smearing Trump as a “sexual deviant” are akin to those used by FBI Director J. Edgar Hoover against politicians and others including Martin Luther King in the 1960s.
Martin Luther King was an outsider, a political activist, a civil rights activist and a man of peace who fought peacefully for the rights of the poor and the disenfranchised , especially the African-American community.
Trump is a maverick business man and today is set to become an insider and one of the most powerful men in the world. A civil war between a U.S. President and senior elements in the intelligence agencies will likely lead to political instability on a massive scale and is a recipe for disaster.
We do not like to have to consider the ‘assassination’ scenario but the precedent of JFK’s assassination looms large. Trump is hated by large sections of the American population and indeed by very powerful operators in the politics and intelligence circles in Washington D.C. and in the U.S. There are alas likely lots of willing patsies.
‘Strong dollar policy’ to end as U.S. has $100 trillion plus debt
The dollar was on the back foot again yesterday despite some strong data, most notably some strong numbers in the Philadelphia Fed Manufacturing Index and a very low initial jobless claims number.
New Treasury Secretary Steve Mnuchin sparred with Democratic lawmakers on various topics, and actually expressed support for a strong US dollar, placing him at odds with President Trump and attempting to clarify comments by the president-elect that hit the currency earlier this week.
Mnuchin, a former Goldman Sachs banker, told a Senate confirmation hearing yesterday that a strong currency remained important over the long-term, reflecting America’s attractions as an investment destination.
On Monday Trump appeared to break from decades of the strong dollar policy in the US by saying that the greenback’s strength is “killing us” and was preventing American companies from competing internationally and with China.
Trump and Mnuchin’s comments highlight the uncertainties and many conflicting signals over Trump’s financial and economic policies.
Will Trump’s speech today reignite the US dollar strength seen in late 2016 or will his speech lead to a sell off in the dollar and a surge in the gold price? We are living in a ‘Brave New Trump World’ and as Aldous Huxley said “You pays your money and you takes your choice.”
Now more than ever, the short term is nigh impossible to predict.
We believe that Trump will attempt to end the ‘strong dollar policy’ or at the very least will try and push the dollar lower in the short term in order to boost American exports and jobs in a desperate attempt to kick start the moribund U.S. economy.
There is also the somewhat important matter of the U.S.’ near bankruptcy with its $20 trillion nominal debt and over $100 trillion in unfunded liabilities (more on this below). The market will dictate the value of the dollar in the long term not the pronouncements of Trump or his Treasury Secretary.
Investors should fade the short term noise and focus on the diversification benefits that owning physical gold will provide in the coming months and years.
Trump inherits Bush and Obama’s humongous debt
Contrary to superficial figures and analysis, Obama has left Trump an enfeebled and massively indebted U.S. economy with some 95 million out of work. This accounts for Trump’s popularity among large sections of the working and middle classes.
President Obama is set to leave a massive near $20 trillion debt crisis for his successor.
The U.S. national debt reached $19.96 trillion last week and increased by roughly $1 trillion a year during Obama’s Presidency and during the so called fake news “recovery.” Obama and his government, like Bush before them, spent money like drunken sailors and pushed the U.S. closer to the brink of bankruptcy.
There is also the not insignificant matter of the between $100 trillion and $150 trillion in unfunded liabilities – for medicare, medicaid and social security as the baby boomers retire.
The U.S., like the EU and most western nations, is “kicking the can down the road.” Consequently, a U.S. and global debt crisis looks likely during the first term of President Trump.
This continuing surge in the U.S. national debt to the $20 trillion level means that the U.S. is now the largest debtor nation in the world – by a significant margin. Its total debt of over $120 trillion means it is the largest debtor nation the world has ever seen.
Donald Trump holds three gold bullion bars after accepting it as a security deposit for a 10 year lease for on the 50th floor of 40 Wall Street in New York City, a Trump owned property, during a news conference in New York, September 15, 2011. REUTERS/Mike Segar
This profligacy will be paid back by the people of the U.S., and most likely by people in all indebted western nations, in the form of higher taxes, higher interest rates, inflation, currency wars involving devaluations and almost certainly a currency crisis involving the dollar and other leading fiat currencies.
Owning gold coins and bars in your possession and owning bullion in allocated and most importantly in segregated accounts will continue to protect and grow wealth in the coming years.
As we outlined yesterday, the POBC are investigating the Bitcoin platform which caused the price of Bitcoin to fall. This caused a flood of investors to enter physical gold and GOld ETF’s denominated in physical metal:
(courtesy zero hedge)
Chinese Investors Exit Bitcoin, Flood Into Gold ETFs
Amid a weakening yuan and a tumbling Bitcoin (amid crackdowns on ‘virtual’ capital outflows from China), Chinese money is moving to bullion as investors seek an alternative to the ‘managed’ fiat paper offered by the PBOC. In the week through Monday, China attracted $52 million, the biggest inflow into commodity-linked exchange-traded funds of all countriestracked by Bloomberg.
As China cracks down on various Bitcoin exchanges, sparking an exodus from Bitcoin China platforms, gold has pushed higher…
As Bloomberg reports,Huaan Yifu Gold ETF, China’s largest ETF backed by raw materials, is getting all the attention, attracting almost $72 million last week.
“Chinese capital outflow has certainly elevated the risk to the financial system,” Chad Morganlander, a portfolio manager at Washington Crossing Advisors, which oversees $1.5 billion, said in a telephone interview. “It would be no surprise to me that Chinese gold ETF caught a bid under this elevated or increased concern about reserves, about the currency and about trade relations.”
Huaan Yifu attracted the third-biggest inflow into gold ETFs in the week through Monday, behind Frankfurt-listed Xetra-Gold, which got $172.9 million, and London-listed Source Physical ETF, which lured $73.6 million. ETF holders are bucking the trend in China’s jewelry market that saw the nation’s gold imports from Hong Kong fall in November to the lowest since January.
There are other troubles triggering capital flight and sending money to gold. The International Monetary Fund warned that China’s continued reliance on policy stimulus measures and the slow progress in addressing corporate debt raise the risk of a “sharper slowdown or disruptive adjustment.” The IMF issued the warning even as it raised the nation’s growth forecast for this year by 0.3 percentage points to 6.5 percent.
We will see shortly…
Gold trading today: higher with the Trump rally faltering: money flowing into gold and bonds!
(courtesy zero hedge)
Trump Rally Reverses: US Equity Outflows In 4 of Past 5 Weeks Offset By Gold, Bond Inflows
When looking at the latest weekly fund flows, it is clear that the Trump trade is over if only for the time being. As BofA reports, citing EPFR data, the last week saw the largest precious metal inflows in 5 months ($1.3bn), the 4th consecutive week of bond inflows ($4.5bn), and a week of modest $1.7bn equity inflows, however US stocks saw $2.5 billion in outflows, representing the 4th weekly outflow in the past 5 weeks.
Some highlights from BofA’s Michael Hartnett:
Election to Inauguration flows: since the US election, BofAML GWIM ETFs show private clients big buyers of Financials, Materials, Bank Loans, Industrials, TIPS, Value; big sellers of Low-Volatility & Precious Metals
Inauguration reversals: EPFR flows show partial profit-taking in these Trump reflation trades into the inauguration…1st outflows from financials in 17 weeks, 1st government bond inflows in 6 weeks (largest in 6 months), and 1st inflows to precious metals in 10 weeks; we also note 1st outflows from HY funds in 8 weeks; but we also see ongoing inflows to “inflation trades” of materials, TIPS, and (in particular) bank loans; so a “pause” in the Davos Man to Joe Six Pack rotation rather than major reversal
Post-inauguration tactics: meanwhile our Global Flow Trading Rule, which had flirted with a “sell” signal mid-Dec’16, has pulled back from the abyss (inflows to equities & HY currently below the 4-week “sell” threshold of 1.0% of AUM, and global PMIs continue to trend higher
Stick with Icarus Trade: our BofAML Bull & Bear Indicator also indicates more bullish sentiment (up to 3-month high of 4.9 – Chart 2) but remains some way below “sell” trigger of 8.0; Positioning, Profits & Policy make us stick with our Icarus Trade view… any Jan/Feb wobble to be followed by one last 10% melt-up in stocks & commodities in H1 before visible investor “hubris” on macro & markets signals the “Big Top”
And the details:
Asset Class Flows
- Equities: $1.7bn inflows ($1.7bn mutual fund outflows vs $3.4bn ETF inflows)
- Bonds: $4.5bn inflows (4 straight weeks)
- Precious metals: first inflows in 10 weeks ($1.3bn – largest in 5 months)
Fixed Income Flows
- First outflows from HY bond funds in 8 weeks ($0.3bn)
- First govt bond inflows in 6 weeks ($1.0bn – largest in 6 months)
- 4 straight weeks of IG bond inflows ($2.2bn)
- 10 straight weeks of inflows to bank loan funds ($0.7bn)
- 6 straight weeks of inflows to TIPS funds ($0.3bn)
- 3 straight weeks of inflows to EM debt funds ($0.4bn)
- Japan: strong $2.5bn inflows
- Europe: $0.7bn outflows (largest in 6 weeks)
- EM: small inflows of $64mn (2 straight weeks)
- US: $2.5bn outflows (outflows in 4 of past 5 weeks)
- By sector: first outflows from financials in 17 weeks ($0.7bn); first outflows from tech in 6 weeks ($0.1bn); inflows to energy in 6 of past 7 weeks ($0.4bn); inflows to materials in 10 of past 11 weeks ($0.2bn)
Bill Murphy interviewed by Daily coin
(courtesy Bill Murphy/GATA)
(courtesy Kingworldnews/John Embry)
Your early FRIDAY 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 DOWN to 6.8785(SMALL DEVALUATION SOUTHBOUND /CHINA UNHAPPY TODAY CONCERNING USA DOLLAR RISE/MORE $ USA DOLLARS LEAVE CHINA/OFFSHORE YUAN NARROWS COMPLETELY BUT FALLS AS WELL TO 6.8539 / Shanghai bourse CLOSED UP 21.84 POINTS OR 0.71% / HANG SANG CLOSED DOWN 164.05 OR 0.71%
2. Nikkei closed UP 65.66 POINTS OR 0.34% /USA: YEN RISES TO 115.16
3. Europe stocks opened ALL MIXED ( /USA dollar index RISES TO 101.35/Euro DOWN to 1.0642
3b Japan 10 year bond yield: FALLS TO +.066%/ !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 115.16/ THIS IS TROUBLESOME AS BANK OF JAPAN IS RUNNING OUT OF BONDS TO BUY./JAPAN 10 YR YIELD FINALLY IN THE POSITIVE/BANK OF JAPAN LOSING CONTROL OF THEIR YIELD CURVE AS THEY PURCHASE ALL BONDS TO GET TO ZERO RATE!!
3c Nikkei now JUST BELOW 17,000
3d USA/Yen rate now well below the important 120 barrier this morning
3e WTI:: 51.89 and Brent: 55.00
3f Gold UP/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 UP for WTI and UP for Brent this morning
3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund RISES TO +.404%/Italian 10 yr bond yield UP to 2.015%
3j Greek 10 year bond yield RISES to : 7.11%
3k Gold at $1202.40/silver $16.96(8:15 am est) SILVER BELOW RESISTANCE AT $18.50
3l USA vs Russian rouble; (Russian rouble UP 4/100 in roubles/dollar) 59.85-
3m oil into the 51 dollar handle for WTI and 55 handle for Brent/
3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/GOT a SMALL DEVALUATION DOWNWARD from POBC.
JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 115.16 DESTROYING JAPANESE CITIZENS WITH HIGHER FOOD INFLATION
30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning 1.0076 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0724 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 +.404%
3s The Greece ELA NOW at 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 2.50% early this morning. Thirty year rate at 3.068% /POLICY ERROR)GETTING DANGEROUSLY HIGH
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
S&P Futures, Dollar Rise As World Awaits Trump Inauguration Speech
Global shares were mixed, equity futures, the dollar and crude rose as investors focused their attention on today’s inauguration of Donald Trump as U.S. president. While the early tone is well bid, some traders anticipate a volatile session, with speculation that a bout of “sell the inauguration” could cap the aging Trump rally, which started with his inauguration.
Despite last night’s Yellen speech which was more dovish than her remarks just 24 hours earlier, and which suggested that the US economy is “not overheating”, the dollar managed to rebound from overnight losses and was trading 0.2% higher this morning. The early gains came after China reported its first economic expansion in 2 years (conveniently with president Xi in Davos) with GDP rising to 6.8% after quarters of decline.
However for the year, China’s GDP growth declined to the slowest pace in 26 years, despite a record debt load and record weak Yuan.
But it will be all about Trump today: tens of thousands of law enforcement officers and miles of barriers were in place in Washington D.C., as officials braced for hundreds of thousands of people planning to celebrate or protest the inauguration of Trump. The inauguration is “definitely a big moment for the markets,” said Neil Mellor, a London-based currency strategist at Bank of New York Mellon Corp. “We could get more clues about what Trump is planning today. If he ramps up the rhetoric the market will be concerned about building long dollar positions.”
“All eyes will be on the content and style of Trump’s inauguration speech,” Morgan Stanley’s Hans Redeker wrote in a note. “The more ‘Presidential’ this speech comes across, the better the outcome for markets.”
“[Trump is] likely to talk about job creation and unifying the U.S. and we may have to wait a bit longer for details on economic measures,” said Natixis fixed income strategist Cyril Regnat.
“It’s clear that investors have reached a level where they are prepared to wait and see what the Trump administration has to offer,” said Ric Spooner, chief market analyst at CMC Markets Asia Pacific Ltd. in Sydney.
Trump’s inauguration ceremony “will be followed by a speech that will be carefully decoded by those looking for signs of things to come in the new U.S. administration, an exercise that amounts to political astrology in an era characterized by a shakeup of the old rules of the game,” Citigroup’s chief global political analyst Tina Fordham wrote in note.
As Bloomberg notes, rallies in the dollar and equities are easing this week before Trump is sworn in as the 45th American president, with investors growing anxious for indications the administration will follow through on pro-growth campaign promises. Billionaire investor George Soros said the euphoria among stock investors since Trump’s victory will end as uncertainty takes over. The Dow Jones Industrial Average has churned in its tightest range ever over the past month.
European stocks opened weaker before recouping some losses to trade flat. Trading was choppy with mining shares, the biggest beneficiaries of the reflation rally spurred by Trump’s election win, the biggest drag on the indexes. The Stoxx Europe 600 Index was poised for its worst week since early December while the pound slid after a report showed U.K. retail sales fell at the fastest pace in almost five years last month. Gold headed for a fourth weekly advance.
Fund flows in the run-up to Friday’s inauguration indicate investors moving into less risky assets and locking in some profits in banking stocks and high-yield debt. Precious metals funds saw their first inflows in 10 weeks, according to data from fund tracker EPFR and Bank of America-Merrill Lynch while money was pulled from funds focused on financials stocks and high-yield bonds.
The Stoxx Europe 600 Index little changed as declines in miners offset gains in energy shares. Futures on the S&P 500 Index rose 0.2%. The S&P500 is heading for its biggest weekly drop of 2017. Contracts on the Dow Jones Industrial Average were little changed on Friday, and may be pressued by the disappointing earnings from both American Express and IBM.
10Y yields were flat at 2.5%, erasing previous declines. Government bonds retreated across the European Union.
* * *
Bulletin summary from RanSquawk
- Somewhat of a quiet affair this morning with European bourses failing to find any firm direction
- USD saw softness during Asian hours amid dovish interpretations of Yellen’s latest comments as well as ahead of Trump’s inauguration
- As well as Presidential Elect Trump’s Inauguration, today also see Canadian CPI and comments form Fed’s Harker and Williams
- S&P 500 futures up 0.2% to 2267
- Stoxx 600 down 0.1% to 362
- FTSE 100 down less than 0.1% to 7205
- DAX down less than 0.1% to 11595
- German 10Yr yield up 2bps to 0.4%
- Italian 10Yr yield up 3bps to 2.02%
- Spanish 10Yr yield up 2bps to 1.5%
- S&P GSCI Index up 0.5% to 396.9
- MSCI Asia Pacific down 0.1% to 140
- Nikkei 225 up 0.3% to 19138
- Hang Seng down 0.7% to 22886
- Shanghai Composite up 0.7% to 3123
- S&P/ASX 200 down 0.7% to 5655
- US 10-yr yield up 3bps to 2.5%
- Dollar Index up 0.16% to 101.31
- WTI Crude futures up 1.2% to $51.98
- Brent Futures up 1.2% to $54.79
- Gold spot down 0.3% to $1,201
- Silver spot down 0.9% to $16.87
Top Global News
- Trump Arrives for Inauguration With Promise to Unify the Nation: Addresses supporters on eve of swearing-in
- Yellen Says Fed Not Behind the Curve, Backs Gradual Rate Rises: Yellen sees risk in allowing the economy to run too hot
- Data showed U.K. retail sales fell at the fastest pace in almost five years in December
- China’s central bank said it provided a “temporary liquidity facility’’ to some major commercial banks for 28 days to help ease a cash crunch before the Lunar New Year holiday
- Soros Says Markets to Slump With Trump, EU Faces Disintegration: Says incoming U.S. president will fail
- JPMorgan Boosts CEO Dimon’s Annual Pay 3.7% to $28 Million: Bank awards $19 million compensation packages to four deputies
- IBM Margins Narrow While It Struggles to End Sales Slide: Revenue slips for 19th quarter, margins shrink for fifth
- American Express Profit Falls 8.2% as Expenses Top Estimates: Lender increases forecast for full-year earnings- per-share
- Deutsche Bank Burden in Mortgage Settlement Eased by Fine Print: German bank is the first to negotiate such a provision
- Heineken in Discussions With Kirin to Double Down in Brazil: Price would be less than a quarter of what it paid in 2011
- TPG’s Cushman & Wakefield Said to Have Held Early IPO Talks: Company said to hold informal meetings on listing soon as 3Q
* * *
Looking at regional markets, Asian stocks traded mixed following an uninspiring lead from Wall Street with participants cautious ahead of the US Presidential Inauguration and as the region digests Chinese GDP data. ASX 200 (-0.7%) lagged amid continued weakness in financials with mining names also pressured after iron ore prices fell over 1%. Conversely, Nikkei 225 (+0.3%) initially traded choppy alongside fluctuations in JPY, but was able to finish higher as JPY weakened slightly while Shanghai Comp (+0.7%) and Hang Seng (-0.6%) were mixed after a slew of tier-1 Chinese data including GDP in which the Y/Y figure beat expectations, although the pace of growth for 2016 was at its slowest in 26 years. Finally, 10yr JGBs traded higher amid a mostly cautious tone in the Asia-Pac region, while the BoJ were also in the market for a respectable JPY 1.12trl of JGBs ranging from 1yr-25yr-F maturities.
- Chinese GDP (Q4) Y/Y 6.8% vs. Exp. 6.7% (Prey. 6.7%)
- Chinese GDP YTD (Q4) Y/Y 6.7% vs. Exp. 6.7% (Prey. 6.7%): slowest yearly growth in 26 years.
- Chinese Industrial Production (Dec) Y/Y 6.0% vs. Exp. 6.1% (Prey. 6.2%); YTD (Dec) Y/Y 6.0% vs. Exp. 6.0% (Prey. 6.0%)
- Chinese Retail Sales (Dec) Y/Y 10.9% vs. Exp. 10.7% (Prey. 10.8%); Sales YTD (Dec) Y/Y 10.4% vs. Exp. 10.4% (Prey. 10.4%)
Top Asian News
- Mystery $9 Billion in Cash With Indians After Modi Shock Ban: Public withdrew more cash than currency in circulation: report
- Indonesia Tax Agency Demands Meeting With Top Google Executives: Google paid 5.2b rupiah in 2015 taxes: documents
- China Says It Offered Temporary Funding Support to Big Banks: ‘The central bank has a new liquidity tool,’ analyst says
- Mnuchin Says He’ll Tag China an FX-Manipulator If Warranted: Trump had backed away from pledge to add label immediately
In Europe, it has been a quiet morning with European bourses failing to find any firm direction, slight underperformance however has been observed in basis materials with Rio Tinto shares leading the FTSE 100 lower amid the declines in Iron prices.11 out of 19 Stoxx 600 sectors fall with basic resources, retail underperforming and oil & gas, construction & materials outperforming. 51% of Stoxx 600 members decline, 46% gain. While large UK supermarkets, Tesco’s and Sainsbury’s are soft today amid a negative note from Exane. Fixed income markets trade marginally in the red with Bunds lower by around 14 ticks, breaking below the 163.00 level, while slight outperformance in the curve has been notable in 5s and 10s.
Top European News
- U.K. Retail Sales Fall Most Since 2012 as Price Rises Bite: Sales drop 1.9% from November, decline 2% excluding auto fuel
- Lloyds Said to Shuffle Executives, Preparing for Strategy Review: CEO protege takes role examining group design, costs
- BofA, UBS Said to Lead Banks Sharing $427 Million UniCredit Fee: Fees represent about 3% of deal size vs 2% average
- Maersk IPO Plans Won’t Derail Bid for Dong’s $2.8 Billion Unit: Potential Dong bidders include DEA, PGNiG, BI analyst says
- Close Brothers Says Had Strong Performance at Start Fiscal Year: Confident of strong 1H result, good outcome for full 2017
- Tryg 4Q Net Misses Estimates; CEO Says 2017 on Track for Targets: Tryg 4Q profit after tax DKK560m vs est DKK664m
In currencies, the Bloomberg Dollar Spot Index was up 0.2 percent as of 10:38 a.m. in London after falling as much as 0.3 percent. The gauge is heading toward its first weekly advance since the period ending Dec. 23. The pound dropped 0.3 percent to $1.2301 and the euro retreated 0.3 percent to $1.0637. Nerves among USD longs were telling in late Asia and first thing in London were telling as the presidential inauguration ahead carries the ever-present risk of way lies ahead in terms of trade and currency policy in particular. This has since been reversed to some degree as UST yields push higher towards the highs seen at the very start of the year, but USD gains look a little more hesitant given events later in the day. USD/JPY is eyeing a return to the mid 115.00 highs seen yesterday, but notable was the EUFt/USD return to the upper 1.0600’s again despite was an unchanged status quo at the ECB Thursday, with tapering considerations dismissed out of hand to see the accommodative stance maintained despite rising headline inflation. For GBP, a softer than expect retail sales read in the UK for Dec has put a modest dent in the Pound based on the EUR/GBP upturn, which as yet struggles for momentum above the .8650 mark. Cable has slipped below 1.2300, but partly due to the broader USD impact. 1.2250 support has yet to be tested.
In commodities, the Trump inauguration ahead is prompting much caution across all asset classes, but given the prospective impact on infra structure spending and trade policy which has ramifications for China in particular, base metals in particular have been trading flat to marginally lower over the last 24-36 hours or so. Gold was finding a modest bid as the USD retreated a little this morning, but with US Treasuries pulling back again, we have seen the yellow metal slip back below USD1200.00, although it is likely that general risk sentiment will provide some support given today’s key events In Washington. Oil prices have stabilised after some notable losses in recent sessions, but the USD50.00 handle looks safe for now.
- 12pm: President-Elect Donald Trump takes oath of office
- Senate to hold confirmation votes on some Cabinet nominees
- 3pm: Congressional Hispanic Caucus holds news conference with House Democratic leaders on immigration policy
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DB’s Jim Reid concludes the overnight wrap
In my 2017 outlook presentation in Paris I asked 4 questions where the audience were able to vote on the answer. The first was when will the next US recession occur? The audience voted 45% for 2019 and 45% for 2020 or beyond. The rest were 2017 and 2018. So they were pretty optimistic that the cycle will extend. When I asked this question to two big audiences on my travels last year around 70% answered 2017 or 2018 so expectations have seemingly changed. I also asked whether Italy will still be in the single currency in 5 years time. 91% said yes. Last year around 80% said yes in similar polls so again a more optimistic crowd. When asked whether the ECB will be fully out of QE by YE 2018 around 80% said no so it seems investors, although optimistic, still feel the ECB need to keep stimulus high over the next two years. Finally I asked what was the most likely event to occur out of the following four by the end of 2018? a) 10 year USTs above 5%, b) the S&P 500 trading below 1500, c) England winning the football World Cup or d) France electing Le Pen. Interestingly answer a) won with nearly 50% and the biggest shock was that England winning the World Cup scored 40% on this measure with the other two making up the last 10%. So only a few French investors thought a Le Pen victory was more likely than 5% yields, the S&P 500 below 1500 or England winning the World Cup.
So overall an optimistic crowd contrasting with surveys I did last year at various conferences. So there’s no doubt sentiment has changed in 2017 even if markets are in a bit of a lull. This should change soon one way or another as Donald Trump’s inauguration today marks the start of what promises to be a fascinating ride with a wide range of outcomes. Trump is set to speak at 2.30pm GMT and all we know right now is that Trump was said to have prepared the speech himself, with some advice and counsel from advisers as well as from some historians specifically regarding the length of the speech. Trump was also said to have told reporters that the speech will aim to unite America but we know little more than that at this stage. So it remains to be seen just how market moving this will be.
One topic which is certainly hogging the spotlight right now is the administration’s views on the US Dollar. Treasury secretary nominee Steven Mnuchin was the latest to address the currency debate yesterday and added to the confusion by saying that Trump’s observation on Monday that the Dollar is too strong was not meant as a “long-term comment”. Instead, Mnuchin said that “long-term strength over long periods of time is important” and that “I believe that’s a reflection of (the US having) the most attractive investment environment in the world”. Mnuchin also made comments about bank regulation, saying he supports the Volcker rule. On top of this he also said that he would look to raise the debt ceiling sooner rather than later, while also saying that he would label China a FX manipulator if warranted.
Over in markets, Dollar strength was again a theme yesterday after the USD index closed up +0.22% although it did pare earlier gains of as much as +0.80%. The other theme yesterday was the second successive day of Treasury yields climbing higher. In fact 10y Treasury yields closed up 4.4bps higher yesterday at 2.475% – which is a YTD high – and have all of a sudden risen 17bps from the intraday lows on Tuesday. The data helped at the margin but it appeared to be Yellen’s speech the day before and then those comments from Mnuchin which helped drive yields higher. The Fed Chair spoke again this morning but it seems to largely be a repeat of what she said previously, with little new information to highlight. Meanwhile US equity markets never really got going yesterday with the S&P 500 finishing -0.36% with rate sensitive sectors in particular underperforming.
Before we go any further we’re straight to China now where the latest monthly data dump is in. It has revealed that China’s economy grew 6.8% yoy in Q4 last year which was slightly more than the 6.7% expected by the market. For full year 2016, China reported growth of 6.7% which, while being the slowest pace since 1990, did end up right in the middle of the government’s official target. Meanwhile other activity indicators were mixed. Retail sales rose +10.9% yoy in December (vs. +10.7% expected) which is a tenth higher than that in November, although industrial production did slip two-tenths to +6.0% yoy (vs. +6.1% expected). Finally fixed asset investment was reported as rising +8.1% yoy for the full year (vs. +8.3% expected).
In terms of the market reaction Chinese equity markets are higher in response with the Shanghai Comp and CSI 300 +0.54% and +0.69% although a Bloomberg report suggesting that the China Financial Futures Exchange is to relax curbs on trading might also be helping the positive tone. Elsewhere it’s more mixed. The Nikkei is +0.14% although the Hang Seng (-0.58%), Kospi (-0.19%) and ASX (-0.58%) are down.
Moving on. The other focus for markets yesterday was the ECB meeting outcome. As we’d expected, a patient message was preached. Our European economists noted that the Bank is looking through the rise in headline inflation as the ECB’s patience and willingness to wait to extract the underlying trend from inflation was emphasized. Draghi said the Council will “continue to look through” HICP inflation “if judged to be transient and to have no implications for medium-term price stability”. The ECB President also outlined a framework for judging the “sustained adjustment” of inflation. In the view of our colleagues, “looking through” inflation implies less risk of an early tightening move in March. June is still the earliest timing for a tapering decision.
Away from that it was interesting to hear comments (Bloomberg) from hedge-fund manager George Soros yesterday in Davos. Speaking about Brexit he said that “it is unlikely that Prime Minister May is actually going to remain in power” and that Britons are in denial about what the economic impact of Brexit could be. When commenting about Europe Soros added that the laws that govern the EU are “not appropriate to the current circumstances” and that while he acknowledges it can still be saved, those making decisions in Brussels “know that Europe is not functioning”.
Before we look at the day ahead, it was an overall decent day for economic data in the US yesterday. Housing starts were reported as rising a bumper +11.3% mom (vs. +9.0% expected) in December while the November data was also revised up. Building permits (-0.2% mom vs. +1.1% expected) did miss but again we saw upward revisions to prior months. Meanwhile initial jobless claims declined to 234k from 249k which is the lowest since November. Finally the Philly Fed manufacturing survey ticked up 3.9pts to 23.6 (vs. 15.3 expected). That’s actually the highest level since November 2014 and more importantly, the detail revealed broad-based improvement which is indicative of a decent improvement in business spending this year according to our US economists.
Looking at today’s calendar, this morning in Europe the early data comes from Germany where the December PPI print will be released. Thereafter we’ll get retail sales numbers in the UK for the month of December which is expected to show a -0.4% mom decline excluding fuel. There’s nothing of note in the US this afternoon although we will hear from both the Fed’s Harker (2pm GMT) and Williams (6pm GMT). Of course the main event today will be Donald Trump’s inauguration as the 45th US President. The swearing-in ceremony is due at 2.30pm GMT. Before we wrap up, in addition to all things Trump related this weekend it’s also worth highlighting a couple of other potentially interesting events. French presidential candidate Marine Le Pen and Holland’s Freedom Party head Geert Wilders are amongst political leaders speaking at a rally of European nationalist parties in Germany tomorrow. Meanwhile on Sunday, France’s leftist parties are due to hold the first round of their primary. So worth keeping an eye on both those events.
i)Late THURSDAY night/FRIDAY morning: Shanghai closed UP 21.84 POINTS OR 0.71%/ /Hang Sang closed DOWN 164.05 OR 0.71%. The Nikkei closed UP 65.66 POINTS OR 0.34% /Australia’s all ordinaires CLOSED DOWN 0.62%/Chinese yuan (ONSHORE) closed DOWN at 6.8785/Oil ROSE to 51.89 dollars per barrel for WTI and 55.00 for Brent. Stocks in Europe ALL MIXED. Offshore yuan trades 6.8539 yuan to the dollar vs 6.8785 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE COMPLETELY NARROWS AS POBC ATTEMPTS TO STOP DOLLARS FROM LEAVING CHINA’S SHORES. HOWEVER BOTH CHINESE YUANS FALL WITH THE HIGHER DOLLAR
b) REPORT ON JAPAN
c) REPORT ON CHINA
A very important commentary. Even though we know that the data is fudged, China has now released data to suggest that their growth is the slowest in 26 years at 6.8%
China Grows At Slowest Pace In 26 Years Despite Record Debt, Currency Devaluation
Amid constant liquidity additions, record credit support, a devaluing currency, and admission that the last three years of macro data was fabricated; China ended 2016 with the worst economic growth since 1990…
China’s macro data avalanche was a mixed bag. The headline GDP grew more than expected (+6.8% YoY) but Industrial Production disappointed and while retail sales rose more than expected, fixed asset investment growth missed.
If debt is growth then China’s transmission mechanism is officially FUBAR as Q4 saw the largest surge in aggregate financing ever…
Credit expansion at close to twice the pace of GDP growth will be tough to sustain without putting financial stability at risk.
And a massive devaluation occurred in the yuan during Q4… (along with soaring bond yields and rising default risk)
And the result of all that…
- GDP (4Q): +6.8% BEAT +6.7% Exp
- Industrial Production (Dec.): +6.0% MISS +6.1% Exp
- Retail Sales (Dec.): +10.9% BEAT +10.7% Exp
- Fixed Assets Investments (YTD): +8.1% MISS +8.3% Exp
As Bloomberg notes,
“Stable growth has come at the expense of higher leverage and bubbles from bonds to bitcoin. A policy shift toward controlling financial risks and curbing housing prices will weigh on the economy in 2017.”
On a long-term horizon, the economy seems to be filled by ever-growing debt rather than investment or consumption.
“GDP beat market expectations. Mind you, China’s growth remains supported by massive government spending and record-setting bank lending which in itself continues to fuel asset bubble fears.”
* * *
As a reminder, Bloomberg notes that a shrinking working-age population, reduced scope for additions to the capital stock and diminished space for productivity gains mean that China’s potential growth is slowing. Bloomberg Intelligence estimates potential growth at 7.1% in 2016, down from 7.3% in 2015 and on a path to 6.5% by the end of the decade.
As Enda Curran, Bloomberg’s Chief Asia Economics Correspondent, concludes…
Of course, there is a cost to propping up GDP like this. And that’s debt.
It’s hard to look past the headline number without considering the gargantuan lending China’s banks were forced to pump into the economy to keep things chugging along. We know that policy makers are aware of this risk given the recent signals about prudent monetary policy and a tolerance for slower growth.
The initial fallout was a drop in the offshore Yuan rate (following Yuan strength going into the numbers thanks to Yellen’s dovish comments)…
In “Strange Move”, PBOC Cuts Reserve Ratio, Offers Temporary Funding Support For Largest Banks
Overnight the PBOC injected another CNY95 billion into its banking system bringing the total weekly injection to a record CNY1.13 trillion.
However, it was not enough and overnight China allowed its five biggest banks to cut their reserve requirement ratio by 1% taking it down to 16% thus temporarily lowering the amount of money that they must hold as reserves to relieve pressure in its financial system as demand for cash surges ahead of the Lunar New Year holiday, Reuters reported. The banks affected by the move iclude ICBC, CCB, Bank of China, Bocom, and Agricultural Bank of China. The last time the central bank cut RRR was Feb. 29, 2016. The move is expected to release approximately 630 billion yuan in liquidity.
The dramatic moves come in a bid to avert a cash crunch heading into the country’s biggest holiday of the year.
Earlier in the week short-term funding costs had spiked to their highest levels in nearly 10 years on fears that liquidity was sharply tightening, sparking a jump in the yuan currency. But China watchers polled by Reuters had not expected a cut in RRR until the third quarter of 2017, as such a move would put more pressure on the ailing yuan. Following the massive central bank liquidity injections, key funding and money market rates showed signs of easing on Friday but remained well above normal levels.
But wait, that’s not all, because also overnight, the PBOC said it provided a “temporary liquidity facility” to some major commercial banks for 28 days to help ease a cash crunch before the Lunar New Year holiday. According to Bloomberg, the operation provides more effective liquidity transmission before the week-long break, the People’s Bank of China said in a statement Friday.
The PBOC said the new lending facility will have a funding cost for banks that’s around the same as open-market operations for a similar 28-day period, which is about 2.55 percent. That means the tool differs from cutting the ratio of deposits big banks must hold in reserve and suggests a fresh evolution of tools policy makers have been overhauling.
Commercial banks had 11 trillion yuan ($1.6 trillion) of sovereign and financial bonds outstanding as of December, Ming said, and have pledged about 43 percent of those to access funding through central bank open market operations, limiting room for further such operations.
The PBOC’s statement Friday didn’t say whether the temporary funding required collateral. Should none be required, that would be unusual because most such tools involve collateral.
The PBOC has shifted toward selective tightening after a two-year easing cycle. President Xi Jinping and other policy makers decided at their annual economic conference last month China should plan prudent and neutral monetary policy this year to prevent financial risks.
“It’s too premature to conclude that there’s a change in China’s monetary policy direction,” Raymond Yeung, chief greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong, wrote in a note. “Liquidity management and leverage control seem to be more appropriate expressions to describe the policy direction of China’s central bank.”
“It’s likely the central bank will use temporary liquidity facility as a regular tool in the future to ease liquidity shortage before quarter-end or holidays,” said Xia Le, chief economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. The PBOC is using a new tool because older ones offer funds at a high cost and longer duration than needed, and it’s wasteful for banks that need money for five days to have to borrow for a full year, Xia said.
While in the past the PBOC has engaged in similar moves ahead of the new year, the latest move suggested there were additional factors involved in draining liquidity: “Today’s move seems to suggest that liquidity conditions are tighter than authorities’ expectations, as capital outflows remain strong,” said Zhou Hau, senior emerging markets economist at Commerzbank in Singapore.
“But in the meantime, an outright easing will add pressure on the yuan exchange rate as well. That could be the reason behind today’s strange move.”
The central bank will restore the RRR for the five banks to the normal level at an appropriate time after the holiday, according to Reuters’ sources. “This is a temporary adjustment, and is mainly in response to the cash withdrawal, tax payment and reserve payment. (The RRR) will go back to the normal rate after the Lunar New Year holiday,” one source said.
The PBOC said later on Friday that it will provide temporary liquidity support for several major commercial banks for 28 days to ensure adequate liquidity ahead of the Lunar New Year, according to a notice posted on its official microblog. The funding cost for the liquidity support will be about the same as the open market operations rate over the same period, the PBOC said, without specifying any requirement for collateral.
As noted previously, Chinese liquidity always tightens in China ahead of the Lunar New Year holiday, which this year starts on Jan. 27 and ends on Feb. 2, as households and companies usually withdraw huge amounts of cash from banks. The central bank typically responds by injecting ample funds into the market.
But some traders say its injections this year have barely been keeping up with heavier demand. This year, the holiday also extends over the month-end, when corporate cash demand increases and some tax payments are due, adding to the strain.
Analysts estimate that every 50 basis point cut in RRR systemwide effectively injects an estimated $100 billion worth of long-term cash into the economy, which recorded its slowest growth in 26 years last year.
4 EUROPEAN AFFAIRS
As you can see, global growth is falling out of bed: today UK retail sales plunge 2% and this caused the Pound to contract but it later recovered a bit:
(courtesy zero hedge)
Pound Plunges After UK Retail Sales Crash Most Since 2011
The post-Brexit euphoria appears to have abruptly vanished in December as UK core retail sales plunged 2.0% month-over-month, the biggest drop since May 2011. Ironically, this crack in the ‘Brexit Boom’ occurred an hour before U.K. Chancellor of the Exchequer Philip Hammond told a Davos gathering on Friday that an inflation pickup will put a damper on consumers this year. Cable tumbled on the print (not helped by London home pre-sales plunging).
As Bloomberg reports, possible explanations include price increases and consumers scaling back purchases after taking advantage of Black Friday discounts the previous month. Mild weather also probably affected clothing sales — down 3.7 percent on the month — though the weakness in the sector was broad-based, with turnover at food, household goods and department stores all falling.
The decline could be a portent of 2017, with the pound’s 17 percent drop since the June vote to leave the European Union boosting import costs and fueling a sharp upturn of inflation. That means consumers, who have weathered the Brexit vote so far, now face a squeeze that will eat into real incomes. That could potentially hurt growth in an economy that relies heavily on their enthusiasm for spending.
No matter the driver, the result is clear – cable tumbled…
The price of retail goods sold in December, as measured by the deflator, increased on an annual basis by 0.9 percent, the most in three years. Consumer-price inflation jumped to 1.6 percent, according to a report earlier this week, and is forecast to keep climbing through 2017. While most surveys see it around 3 percent by the end of the year, some expect a figure closer to 4 percent. “This is likely to be the theme for the rest of the year — higher prices will reduce disposable income and hurt consumer spending growth,” said Alan Clarke, an economist at Scotiabank.
But that was not the only bad news to spoil the Brexit bravado, as Bloomberg reports sales of London homes under construction last year dropped to the lowest level since 2012, leaving developers with a record number of unsold properties.
Purchases of homes currently being built fell 22 percent to 20,695 from a year earlier, according to a report by Molior London seen by Bloomberg. The number of unsold properties that are under construction surged 14 percent to 25,139 units in the period, the highest since the researcher began collating data in 2009, the report shows. A spokesman for Molior declined to comment.
London’s residential real estate market is being buffeted by headwinds ranging from near-record prices to higher sales taxes and uncertainty surrounding the terms of the U.K.’s exit from the European Union. Home values in the British capital fell for eight consecutive months through November with central luxury properties declining the most, LSL Property Services Plc and Acadata said this month.
A record 24,817 homes were completed last year and, based on current sales rates, it will take 1.3 years to sell the properties that have yet to find a buyer, the Molior report shows. The measure, which assumes no further stock is completed, stood at 0.8 years at the end of 2015.
“Stubborn affordability issues still persist in London” and are affecting the wider market, said Faisal Durrani, head of research at broker Cluttons LLP. “The drop in the pound is something that international buyers are watching, but those investors focus on London’s most prime locations.”
And that is weighing on the FTSE 100…
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
A good commentary on what 5 territorial disputes may influence gold and/or problems for the world authorities: the two biggest of course is the South Chinese Seas and the Israel/Palestine conflict.
(courtesy Barton Edgerton/GlobalRiskInsights.com)
5 Territorial Disputes To Watch For In 2017
For several places around the world, 2017 could be a watershed year, as various territorial disputes threaten to boil over amidst a climate of global uncertainty.
Much like fights over territory itself, the concept of territory has disputed roots. It is not uncommon to associate ‘territory’ with ‘terra’ as in terra firma (or terroir to wine connoisseurs). However, some scholars suggests an alternative root – ‘terror’. Here, territory belongs to those who are able to instill fear such that those living within its boundaries are obliged to respect the laws and norms of their respective rulers. This is the very core of the Hobbesian concept of sovereignty and gets to the heart of territorial disputes. At the moment, fear may be the more useful concept when evaluating contested territories – fear present in governments, policy makers, and businesses.
More acutely, potentially significant shifts in policy from the incoming Trump administration have created significant ambiguity in the role the United States may play in these disputes. Other challenges have also served to fan the flames in several specific hot spots. Any such shift, from recent elections or other sources, will likely have follow-on effects as states, NGOs, and other actors alter their own positions in response. Below are five territorial disputes that may be exacerbated over the next year.
South China Sea
China claims large portions of the South China Sea. To bolster its position, the Chinese government has built artificial islands to turn a dispute about the ocean into one about land. This was investigated by an international tribunal in the Hague during the summer of 2016. Since then, Washington has taken a relatively cautious approach. However, during a Senate hearing on January 12th, US Secretary of State nominee Rex Tillerson, made it clear that he believes the Chinese stance to be unacceptable. “You’re going to have to send China a clear signal that, first, the island-building stops, and second, your access to those islands is also not going to be allowed,” he told senators.
Although the official Chinese response was to downplay the significance of this statement, its state run media interpreted Tillerson’s comments more aggressively. An estimated $5 trillion in trade travels through the South China Sea, meaning even a slight disruption can have profound effects on economies and investors across the globe.
Israel and Palestine
The United States has long maintained that it acts as an honest broker in the Israeli – Palestinian conflict. While this was view has not always been shared by all parties, US policy has remained predictable and stable for nearly 30 years. The incoming Trump administration appears to be signaling a clear and vocal shift.
Since the early 1990’s, the US has generally viewed Israeli settlements as a barrier to furthering the peace process. Furthermore, US policy on retaining its embassy in Tel Aviv, rather than Jerusalem is nearly as old as Israel itself. This may change abruptly with the appointment of David Friedman as US ambassador to Israel. In the past he appears to have diverged from US policy on both issues. It is unclear if this signals a shift in actual policy or if there is simply a stronger voice in the incoming administration to do so. Either way, it is likely to increase uncertainty for Israeli and Palestinian governments, NGOs, and investors approaching key questions in their respective portfolios.
Since Russia’s 2014 intervention in Ukraine, global reaction has been near universal condemnation: the EU, US, and others began sanctions soon thereafter. These may have contributed to both the decline in the value of the ruble and Russia’s poor financial performance over the last two years.
On January 15th, 2017 Donald Trump signaled a willingness to lift sanctions in exchange for a nuclear arms deal between the US and Russia. In recent years Russia has been among the three largest oil producing nations. However, sanctions have made it difficult for Moscow to benefit from oil exports; lifting sanctions would likely reverse this. Perhaps more importantly is the exchange of sanctions for a nuclear arms deal, which would further entrench Russia’s territorial claims in Crimea.
The Arctic seafloor
In August 2007, a Russian submarine descended nearly four kilometers (2.5 miles) under the Arctic to plant a flag on the seafloor. As many investors are no doubt aware, the claim is not only a way to gain access to the potentially vast natural resources under the ocean; rather it also has the potential to determine control of shipping lanes as Arctic ice melts.
Since 2015 Russia has attempted to legitimize this claim through UN recognition. However, it was not until August of 2016 that the UN Commission on the Limits of the Continental Shelf began its evaluation. It is important to note that US, Canada, Norway, and Denmark have also made claims in the region.
Russian claims, however, are larger and are more developed than those of other nations. While the UN Law of the Sea governs many of these disputes, the US is the only claimant that is not party to the treaty. Interestingly, the US Defence Department has urged the Senate to adopt the treaty, so that the US can gain at seat at the table on Arctic (and other) deliberations. With a nearly unprecedented number of former generals set to play civilian roles in the Trump administration, such a shift is perhaps more likely than in years past.
Contested since the inception of India and Pakistan, Kashmir has long been a disputed territory. This turbulent history saw the addition of another sorry chapter in 2016, as unrest increased during the past year. One reason was the death of Burhan Muzaffar Wani – the leader of the Hizbul Mujahideen militant group – during an encounter with Indian military forces: protests erupted in the aftermath of the incident in July. Successive skirmishes have since led to a cycle of protest and violence leaving the territory in an especially volatile position as 2017 begins
It seems that 22 Mexican pesos per dollar is the line in the sand. Former Mexican commerce secretary Gutierrez comments that Mexico must show a tough stance against trump. With that and intervention, the peso surged
(courtesy zero hedge)
Peso Is Surging Ahead Of Inauguration After “Tough Stance” Chatter From Mexico
Following former Mexican commerce secretary Gutierrez’ comments that “Mexico has to show a tough stance against Trump,” the peso is surging stronger (from previous intervention levels) ahead of the inauguration…
It seesm 22.00 is the “red line”…
Is Banxico using a distracted day to intervene on the cheap? Or pre-empting Trump’s speech?
7. OIL ISSUES
Rig count rises which will mean increase production. Oil after rising in the early part of the day, falters again
(courtesy zero hedge)
Oil Slides After Rig Count Spikes Most Since April 2013
While a desperate Saudi Arabia jawbones how well OPEC production cuts are going, the road ahead looks like a surge in US Shale supply is coming. Following a brief dip in the previous week, US oil rig counts soared 29 to 551 last week – the biggest weekly rise since April 2013 – to the highest since Nov 2015.
*U.S. OIL RIG COUNT UP 29 TO 551 , BAKER HUGHES SAYS :BHI US
Which signals to OPEC that more production is coming…
And WTI prcied are leaking lower…
A good look at the Saudi economy and how it will fare with oil below 60 dollars per barrel. The privatization of Aramco will surely provide enough capital to diversify this nation
(courtesy Gregory Brew/OilPrice.com)
Can Saudi Arabia Survive With Oil Below $60?
With the OPEC production deal holding, at least for the moment, questions have now arisen over how prospects look for the cartel’s biggest producer. It’s been a strange few years for the Kingdom of Saudi Arabia, as its endured budget deficits for the first time in its modern history, stagnation in oil prices and rising competition from other OPEC members and the American shale boom. Recently, talk has centered on the Saudi monarchy’s glimpse of the future: the Vision 2030 plan, whereby it hopes to diversify its economy and end its dependence on the mercurial oil and gas market. But can the world’s biggest oil producer and OPEC’s de facto leader pull it off?
In the short term, Riyadh will continue to feel the pain of lower-than-normal oil prices. The growth outlook for Saudi Arabia has been slashed, as the International Monetary Fund (IMF) announced on January 16 that the world’s largest oil producer would see its GDP grow by only 0.4 percent in 2017. The estimate comes on the basis of the continued low price of oil, but more importantly on the country’s slashed oil production: as a result of the recent OPEC production deal, Saudi Arabia has agreed to keep its production level at or below 10 million bpd. This has resulted in a cut in its growth outlook, down from 2 percent in October, according to Bloomberg.
This comes after anemic growth in 2016, where GDP expanded by only 1.4 percent. If oil prices stabilize, and the country’s economic forecast improves, GDP will likely expand by 2.3 percent in 2018.
The official Saudi response decried the IMF’s results as overly conservative. A government spokesman declared that Saudi growth would be “north of 1 percent,” citing the anticipated investment in renewable energy and a stimulus packaged the Saudi government was planning for the private sector, according to Bloomberg.
The Saudi leadership had been pivotal in the campaign to bring about an OPEC cut, after resisting production deals for years. The stakes were raised this year, as draining cash reserves and a resistant American energy sector convinced Riyadh that cuts were needed to boost prices. The cuts have come, surprising many analysts, and the OPEC deal looks set to hold at least for the time being.
Along with the cuts to production, the Saudi government looks to cut spending. The 2017 budget, the most detailed in the country’s history, lays out a series of measures for stabilizing state finances, which plunged into deficit in 2016 as a result of the crash in prices. The state is the largest employer and spender in the Saudi economy, which is largely built on the oil and gas industry. Cuts to construction projects and social programs, estimated at around $20 billion, will help to balance the budget. The deficit in 2016 was around 12.6 percent, down from 2015’s budget deficit of 15 percent, and if prices stay where the Saudis expect them to, between $50 and $43 per barrel, the budget gap in 2017 will be smaller still. The official Saudi estimate has the deficit amounting to 7.7 percent of GDP in 2017.
The current fiscal forecast is based on the National Transformation program (NTP) which aims at a balanced budget by 2020. The plan, also known as Vision 2030, was announced in 2016 and is intended to diversify the Saudi economy away from petroleum. The largest single component in the Saudi economic sector, the massive state energy company Saudi Aramco, is to be privatized, and its assets used to develop the country’s manufacturing, tourism and other sectors.
Gestures towards building investors’ confidence in the Saudi economy have included last year’s $17.5 billion sovereign bond sale, the largest such issue in history and a move which attracted bids totaling $67 billion, according to Bloomberg. Looking ahead, the Saudi government is expected to raise another $15 billion on international markets this year, boosting debt levels as high as 30 percent of total GDP by 2020. It is hoped that by then the budget will be back in surplus, likely spurred on by further sales of Saudi Aramco.
Investors are spurred on by the attractive Saudi rial-dollar rate, the continued strength of Saudi oil production (which has shown no signs of slowing down), and the clear interest within the current Saudi government in serious financial and economic reforms. This should make it easy for the Saudi state to raise all the funds its needs on international markets.
But that’s in the short term. Borrowing can only cover budget deficits for so long, and growth in the non-oil economy will have to be kick-started if the Saudi vision can be realized. The problem is that Saudi non-oil prospects aren’t great, with the non-oil economy on the edge of recession pending the release of some Q316 data. Government borrowing an increase in contracts in 2017 should boost non-oil growth from 0.2 percent to 0.8 percent, hopefully reaching 1.9 percent in 2018, according to CPI Financial.
Public debt will grow from 1.6 percent in 2014 to 23 percent in 2018. This is still a historically low rate for a country the size of Saudi Arabia, but the growth in debt could have investors alarmed and scare markets away from accepting more and more Saudi debt, which looks likely to fund continued growth past 2017.
So, while the Saudi forecasts are upbeat, and Saudi rhetoric around oil prices remains buoyant and hopeful, storm clouds are hovering on the horizon for the oil kingdom. Should the Vision 2030 plan succeed, and the country pivots away from oil and gas, fostering non-oil growth and a balanced budget in the next five-to-ten years, it will have justified Saudi enthusiasm. But oil remains the most important component in the Saudi economic picture, and the assertions of the 2017 budget and future forecasts are based on the assumption that oil prices will climb back up to $60 by 2018. Should that increase fail to occur, and the Saudi treasury continue to sell off more bonds and accumulate more debt, things in Riyadh could get more unstable.
8. EMERGING MARKETS
Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings FRIDAY morning 7:00 am
Euro/USA 1.0642 DOWN .0016/REACTING TO + huge Deutsche bank problems + USA election:/TRUMP WINS THE ELECTION/USA READY TO GO ON A SPENDING BINGE WITH THE TRUMP VICTORY/ITALIAN REFERENDUM DEFEAT/AND NOW ECB TAPERING BOND PURCHASES/USA FALLING RATE
USA/JAPAN YEN 115.16 UP 0.222(Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER/KURODA: HELICOPTER MONEY ON THE TABLE AND DECISION ON SEPT 21 DISAPPOINTS WITH STIMULUS/OPERATION REVERSE TWIST
GBP/USA 1.2293 DOWN .0047 (Brexit by March 201/UK government loses case/parliament must vote/PRIME MINISTER MAY DECIDES ON A HARD BREXIT)
USA/CAN 1.3362 UP .0041 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT FROM EU)
Early THIS FRIDAY morning in Europe, the Euro FELL by 16 basis points, trading now WELL BELOW the important 1.08 level FALLING to 1.0642; Europe is still reacting to Gr Britain HARD BREXIT,deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and now the Italian referendum defeat AND NOW THE ECB TAPERING OF ITS PURCHASES/ THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE AND NOW THE HUGE PROBLEMS FACING TOO BIG TO FAIL DEUTSCHE BANK + THE ELECTION OF TRUMP IN THE USA+ AND TODAY MONTE DEI PASCHI NATIONALIZATION / Last night the Shanghai composite CLOSED UP 21.84 or 0.71% / Hang Sang CLOSED DOWN 164.05 POINTS OR 0.71% /AUSTRALIA CLOSED DOWN 0.62% / EUROPEAN BOURSES ALL MIXED
We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;
1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.
2, the Nikkei average vs gold carry trade ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)
3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.
These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>
The NIKKEI: this FRIDAY morning CLOSED UP 177/88 OR 0.94%
Trading from Europe and Asia:
1. Europe stocks ALL MIXED
2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 164.05 OR 0.71% Shanghai CLOSED UP 21,84 POINTS OR 0.71% / Australia BOURSE CLOSED DOWN 0.62% /Nikkei (Japan)CLOSED UP 65.66 OR 0.34% / INDIA’S SENSEX IN THE RED
Gold very early morning trading: $1201.90
Early FRIDAY morning USA 10 year bond yield: 2.500% !!! UP 3 IN POINTS from THURSDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%. THE RISE IN YIELD WITH THIS SPEED IS FRIGHTENING
The 30 yr bond yield 3.068, UP 2 IN BASIS POINTS from THURSDAY night.
USA dollar index early FRIDAY morning: 101.35 UP 18 CENT(S) from THURSDAY’s close.
This ends early morning numbers FRIDAY MORNING
And now your closing FRIDAY NUMBERS
Portuguese 10 year bond yield: 3.87% DOWN 1 in basis point yield from THURSDAY (does not buy the rally)
JAPANESE BOND YIELD: +.066%DOWN 1 in basis point yield from THURSDAY/JAPAN losing control of its yield curve
SPANISH 10 YR BOND YIELD:1.505% UP 3 IN basis point yield from THURSDAY (this is totally nuts!!/
ITALIAN 10 YR BOND YIELD: 2.023 UP 3 POINTS in basis point yield from THURSDAY
the Italian 10 yr bond yield is trading 52 points HIGHER than Spain.
GERMAN 10 YR BOND YIELD: +.421% UP 4 IN BASIS POINTS ON THE DAY
IMPORTANT CURRENCY CLOSES FOR FRIDAY
Closing currency crosses for FRIDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/1:00 PM
Euro/USA 1.0687 up .0026 (Euro UP 26 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/
USA/Japan: 114.80 DOWN: 0.140(Yen UP 14 basis points/
Great Britain/USA 1.2339 UP 0.0004( POUND UP 4 basis points)
USA/Canada 1.3346 DOWN 0.0025(Canadian dollar UP 25 basis points AS OIL ROSE TO $52.59
This afternoon, the Euro was UP by 26 basis points to trade at 1.0687
The Yen ROSE to 114.80 for a GAIN of 14 Basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED/BANK OF JAPAN NOW WORRIED AS AS THEY ARE RUNNING OUT OF BONDS TO BUY AS BOND YIELDS RISE /OPERATION REVERSE TWIST ANNOUNCED SEPT 21.2016
The POUND ROSE 4 basis points, trading at 1.2339/
The Canadian dollar ROSE by 25 basis points to 1.3346, WITH WTI OIL RISING TO : $52.59
Your closing 10 yr USA bond yield PAR IN basis points from THURSDAY at 2.489% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic USA 30 yr bond yield: 3.068 UP 2 in basis points on the day /
Your closing USA dollar index, 100.98 DOWN 19 CENT(S) ON THE DAY/1.00 PM
Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for FRIDAY: 1:00 PM EST
London: CLOSED DOWN 10.00 OR 0.14%
German Dax :CLOSED UP 33.24 POINTS OR 0.29%
Paris Cac CLOSED UP 9.53 OR 0.20%
Spain IBEX CLOSED UP 1.00 POINTS OR 0.01%
Italian MIB: CLOSED DOWN 11.50 POINTS OR 0.06%
The Dow was closed up 92.72 OR .47%
NASDAQ WAS closed up 15.25 POINTS OR .28% 4.00 PM EST
WTI Oil price; 52.59 at 1:00 pm;
Brent Oil: 55.50 1:00 EST
USA /RUSSIAN ROUBLE CROSS: 59.89 (ROUBLE DOWN 38/100 roubles from YESTERDAY)
TODAY THE GERMAN YIELD RISES TO +0.421% FOR THE 10 YR BOND 1:30 EST
This ends the stock indices, oil price, currency crosses and interest rate closes for today
Closing Price for Oil, 5 pm/and 10 year USA interest rate:
WTI CRUDE OIL PRICE 5 PM:$52.33
USA 10 YR BOND YIELD: 2.467% (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)
USA 30 YR BOND YIELD: 3.049%
EURO/USA DOLLAR CROSS: 1.0698 up .0040
USA/JAPANESE YEN:114.55 down 0.396
USA DOLLAR INDEX: 100.85 down 32 cents ( HUGE resistance at 101.80)
The British pound at 5 pm: Great Britain Pound/USA: 1.2354 : up 18 BASIS POINTS.
German 10 yr bond yield at 5 pm: +.421%
And now your more important USA stories which will influence the price of gold/silver
TRADING IN GRAPH FORM
Gold Pops; Banks, Bonds, & Greenback Drop As Trump Takes Office
Quite a week… this seemed appropriate…
Gold remains 2017’s big winner with bonds and stocks close to unch…
Trump’s actual swearing in (and speech) sparked a notable drop in stocks and pop in VIX…But in a desperat attempt to keep The Dow green, VIX was monkey-hammered
But VIX ended the week higher…
On the week, Nasdaq and Trannies desperately tried to get back to green but Dow, S&P and Small Caps lost ground (Russell 2000’s worst week in the last 7)…
The Dow managed to get back into the green for 2017
US Financials suffered their worst week since September 9th 2016… (Goldman Sachs’ worst week since April 2016)
Treasuries had their worst week in six weeks…(notably 2Y ended the week best – unch)
The USD Index fell for the 4th consecutive week (longest losing streak since Feb 2016)..
The Loonie was the worst on the week and cable best…
The Mexican Peso was lower on the week again (6th week on a row) but ripped higher today by the most since the election!!
And as The Dollar slides, so Gold is up 4 weeks in a row (longest win streak since July)…
Crude managed to scramble back to unchanged on the week…
Trump is now the 45th President of the USA. His speech sends the Dow down as well as the Peso. The key sound bite: “we’re transferring power from Washington to “the people”
(courtesy zero hedge)
Stocks, Peso Slump As Trump Warns “We’re Transferring Power From Washington To ‘The People'”
Following Trump’s swearing in, his speech marked a notably anti-establishment tone and that has smacked US equities lower…
- *TRUMP: WE’RE TRANSFERRING POWER FROM WASHINGTON TO `THE PEOPLE’
- *TRUMP: ALL DECISIONS ON TRADE, FOREIGN AFFAIRS, TO BENEFIT U.S.
And the peso tumbles…
(courtesy President Trump/zero hedge)
Trump’s Economic Plan: Create 25 Million Jobs, Grow GDP At 4%, Lower Taxes For All Americans
President Trump’s economic plan will create 25 million new jobs in next decade, “return to 4 percent annual economic growth,” “lower rates for Americans in every tax bracket, simplify the tax code, and reduce the U.S. corporate tax rate” according to a statement just posted on the White House wesbite.
He has also proposed “a moratorium on new federal regulations and is ordering the heads of federal agencies and departments to identify job-killing regulations.”
The statement also announced the US withdrawal from the Trans-Pacific Partnership and that he is committed to renegotiating NAFTA. “If our partners refuse a renegotiation that gives American workers a fair deal, then the President will give notice of the United States’ intent to withdraw from NAFTA.”
From the White House website
Bringing Back Jobs And Growth
Since the recession of 2008, American workers and businesses have suffered through the slowest economic recovery since World War II. The U.S. lost nearly 300,000 manufacturing jobs during this period, while the share of Americans in the work force plummeted to lows not seen since the 1970s, the national debt doubled, and middle class got smaller. To get the economy back on track, President Trump has outlined a bold plan to create 25 million new American jobs in the next decade and return to 4 percent annual economic growth.
The plan starts with pro-growth tax reform to help American workers and businesses keep more of their hard-earned dollars. The President’s plan will lower rates for Americans in every tax bracket, simplify the tax code, and reduce the U.S. corporate tax rate, which is one of the highest in the world. Fixing a tax code that is outdated, overly complex, and too onerous will unleash America’s economy, creating millions of new jobs and boosting economic growth.
As a lifelong job-creator and businessman, the President also knows how important it is to get Washington out of the way of America’s small businesses, entrepreneurs, and workers. In 2015 alone, federal regulations cost the American economy more than $2 trillion. That is why the President has proposed a moratorium on new federal regulations and is ordering the heads of federal agencies and departments to identify job-killing regulations that should be repealed.
With decades of deal-making experience, the President also understands how critical it is to negotiate the best possible trade deals for the United States. By renegotiating existing trade deals, and taking a tough stance on future ones, we will ensure that trade agreements bring good-paying jobs to our shores and support American manufacturing, the backbone of our economy. The President plans to show America’s trading partners that we mean business by ensuring consequences for countries that engage in illegal or unfair trade practices that hurt American workers.
By standing side-by-side with America’s workers and businesses, the President’s policies will unleash economic growth, create 25 million new jobs, and help Make America Great Again.
* * *
He also had the following remarks on US Trade, including the announcement
Trade Deals Working For All Americans
For too long, Americans have been forced to accept trade deals that put the interests of insiders and the Washington elite over the hard-working men and women of this country. As a result, blue-collar towns and cities have watched their factories close and good-paying jobs move overseas, while Americans face a mounting trade deficit and a devastated manufacturing base.
With a lifetime of negotiating experience, the President understands how critical it is to put American workers and businesses first when it comes to trade. With tough and fair agreements, international trade can be used to grow our economy, return millions of jobs to America’s shores, and revitalize our nation’s suffering communities.
This strategy starts by withdrawing from the Trans-Pacific Partnership and making certain that any new trade deals are in the interests of American workers. President Trump is committed to renegotiating NAFTA. If our partners refuse a renegotiation that gives American workers a fair deal, then the President will give notice of the United States’ intent to withdraw from NAFTA.
In addition to rejecting and reworking failed trade deals, the United States will crack down on those nations that violate trade agreements and harm American workers in the process. The President will direct the Commerce Secretary to identify all trade violations and to use every tool at the federal government’s disposal to end these abuses.
To carry out his strategy, the President is appointing the toughest and smartest to his trade team, ensuring that Americans have the best negotiators possible. For too long, trade deals have been negotiated by, and for, members of the Washington establishment. President Trump will ensure that on his watch, trade policies will be implemented by and for the people, and will put America first.
By fighting for fair but tough trade deals, we can bring jobs back to America’s shores, increase wages, and support U.S. manufacturing.
Zero hedge comments on the Steve Mnuchin confirmation hearings. He in essence is echoing his boss where he states that the dollar is too high but in the long run he supports a “strong dollar”
(courtesy zero hedge)
What Steve Mnuchin Thinks About The “Strong Dollar”
In Steven Mnuchin’s nearly 6 hour confirmation hearing on Thursday, there was just one critical exchange lasting all of 90 or so seconds. It was Mnuchin’s response to a question from Senator Pat Toomey how he feels about a strong dollar. The question was predicated by Trump’s recent interview with the WSJ in which he voiced concern about the dollar’s recent appreciation, saying the currency was “too strong.”
Mnuchin’s response: the dollar is “very, very strong”, and “what you see is people from all over the world wanting to invest in the U.S. currency;” However, he hedged saying that while a strong dollar is great in long term, “it was meant to be that perhaps in the short term, the strength in the currency as a result of free markets and people wanting to invest here, may have had negative impacts on — on our ability in trade.”
Here is the exchange in full:
TOOMEY: Would you agree that many of the periods of strong economic growth that we’ve had in recent decades have corresponded to periods of a strong dollar and that often, if our economy is performing well and the world perceives our economy to have a bright future, the inevitable result will be a stronger dollar?
MNUCHIN: Let me just comment on that because I think that the U.S. currency has been the most attractive currency to be in – for very, very long periods of time. I think that it’s important and I think you see that now more than ever. The currency is very, very strong and what you see is people from all over the world wanting to invest in the U.S. currency. I think when the president-elect made a comment on the U.S. currency, it was not meant to be long-term comment.
It was meant to be that perhaps in the short term, the strength in the currency as a result of free markets and people wanting to invest here, may have had negative impacts on — on our ability in trade. But I agree with you, the long-term strength – over long periods of time, is important. And again, that’s a reflection of – I believe we have the most attractive investment environment in the world, and we just have to protect our U.S. companies so they’re not forced abroad.
That said, as Bloomberg pointed out, earlier in the hearing, Mnuchin departed from the text of his prepared testimony to say he “will enforce trade policies that keep our currency strong on the world exchanges and create and protect American jobs.” The line in his written statement reads: “I will enforce these trade policies that keep and protect American jobs.”
Still, while readers may disagree, the market interpreted Mnuchin’s statement as agreement with Trump that the dollar may indeed be too strong, if only in the “short-term.”