June 1/Gold down 5 dollars and Silver down 13 cents but withstand another Central bank raid/For the 3rd straight month the amount standing for silver increases immediately after first day notice/Chinese manufacturing contracts which is a harbinger of things to come/Another Islamist attack and this time in Manila Philippines/Comey to testify on June 8/Illinois downgraded again and one notch above junk with another review on July 1./2017/

GOLD: $1267.00  down $5.00

Silver: $17.24  down 13  cent(s)

Closing access prices:

Gold $1265.60

silver: $17.33

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

SHANGHAI GOLD FIX:  FIRST FIX  10 15 PM EST  (2:15 SHANGHAI LOCAL TIME)

SECOND FIX:  2:15 AM EST  (6:15 SHANGHAI LOCAL TIME)

SHANGHAI FIRST GOLD FIX: $1274.43 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME:  1269.75

PREMIUM FIRST FIX:  $4.68

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SECOND SHANGHAI GOLD FIX: $1274.41

NY GOLD PRICE AT THE EXACT SAME TIME: 1267.00

Premium of Shanghai 2nd fix/NY:$7.41

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

LONDON FIRST GOLD FIX:  5:30 am est  $1266.55

NY PRICING AT THE EXACT SAME TIME: $1267.40

LONDON SECOND GOLD FIX  10 AM: $1264.85

NY PRICING AT THE EXACT SAME TIME. $1266.60 ???

For comex gold:

MAY/

NOTICES FILINGS TODAY FOR APRIL CONTRACT MONTH:  308 NOTICE(S) FOR 30,800  OZ. 

 TOTAL NOTICES SO FAR: 1116 FOR 111,600 OZ    (3.4712TONNES)

For silver:

For silver: MAY

 18 NOTICES FILED TODAY FOR 90,000  OZ/

Total number of notices filed so far this month: 55 for 275,000 oz

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

END

FEDERAL RESERVE BANK OF NY EAR MARKED GOLD REPORT

LAST MONTH WE HAD 7,841 MILLION DOLLARS WORTH OF GOLD VALUED AT 42.22 DOLLARS PER OZ

THIS MONTH:  WE HAVE 7841 MILLION DOLLARS WORTH OF GOLD VALUED AT $42.22 PER OZ

AMOUNT OF GOLD MOVED FROM NY:  0

END

 

Let us have a look at the data for today

.

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In silver, the total open interest FELL BY  A TINY 789  contract(s) DOWN to 204,466 WITH THE FALL IN PRICE OF SILVER THAT TOOK PLACE WITH YESTERDAY’S TRADING (DOWN  5 CENT(S).   In ounces, the OI is still represented by just OVER 1 BILLION oz i.e.  1.02400 BILLION TO BE EXACT or 146% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MAY MONTH/ THEY FILED: 18 NOTICE(S) FOR 90,000  OZ OF SILVER

In gold, the total comex gold ROSE BY A STRONG 8,732 contracts WITH THE RISE IN THE PRICE OF GOLD ($9.55 with YESTERDAY’S TRADING). The total gold OI stands at 442,978 contracts.

we had 308 notice(s) filed upon for 30,800 oz of gold.

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

GLD:

We had no changes in tonnes of gold at the GLD

Inventory rests tonight: 847.45 tonnes

.

SLV

Today: no changes in inventory

THE SLV Inventory rests at: 340.976 million oz

end

.

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

1. Today, we had the open interest in silver FELL BY 789 contract DOWN TO 204,446, (AND now A LITTLE FURTHER FROM  THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787), WITH THE FALL IN PRICE FOR SILVER WITH YESTERDAY’S TRADING  (5 CENTS). NO QUESTION THAT WE HAD FAILED SHORT COVERING BY THE BANKERS ALONG WITH SOME BANKER DELTA HEDGING WITH THE STRONGER PERFORMANCE FROM SILVER OF LATE.

(report Harvey)

.

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

2c) Federal Reserve Bank of NY Ear Marked Gold Report

(Harvey)

3. ASIAN AFFAIRS

i)Late WEDNESDAY night/THURSDAY morning: Shanghai closed DOWN 14.56 POINTS OR 0.47%   / /Hang Sang CLOSED UP 148.57 POINTS OR 0.58% The Nikkei closed UP 209.46 POINTS OR 1.07%/Australia’s all ordinaires  CLOSED UP  0.19%/Chinese yuan (ONSHORE) closed   UP at 6.8089/Oil DOWN to 48.45 dollars per barrel for WTI and 50.84 for Brent. Stocks in Europe OPENED MOSTLY IN THE GREEN     ..Offshore yuan trades  6.7631 yuan to the dollar vs 6.8089 for onshore yuan. NOW  THE OFFSHORE IS  STRONGER TO THE ONSHORE YUAN/ ONSHORE YUAN STRONGER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS HUGELY  STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE SLIGHTLY STRONGER DOLLAR. CHINA NOT HAPPY WITH THE NEWS THAT ITS DEBT HAS BEEN DOWNGRADED  /CHINA UNDERGOES INTERVENTION AGAIN LAST NIGHT DRIVING UP BOTH YUANS.

3a)THAILAND/SOUTH KOREA/NORTH KOREA

i)NORTH KOREA

b) REPORT ON JAPAN

c) REPORT ON CHINA

i)Wow!! this is telling; Chinese Caixin Manufacturing index shows a contraction in China for the first time.  Clearly the Chinese economy is in a downtrend and that does not bode well for the global economy

( zero hedge/Caixin)

ii)Another government intervention sees the Chinese yuan continue to rise in its biggest 4 day rally in over 12 years.The move is meant to create havoc for our yuan shorters.  The deposit rate lowers to 15% but HIBOR rises to 19.59%

( zero hedge)

4. EUROPEAN AFFAIRS

France confirms: no trace of Russian involvement in Macron’s hacker attack with respect to his campaign

( zero hedge)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

i)The USA will now go into the “annihilate phase as they try to destroy the Islamic state caliphate

( Mish Shedlock/Mishtalk)

ii)Another ISIS attack:  this time in a luxury hotel in downtown Manila, Philippines

( zero hedge)

6 .GLOBAL ISSUES

Canada unveils a tiny $650 million lumber industry bailout as they are asserting that they will stand up to the USA

( zerohedge)

7. OIL ISSUES

i)Another manipulated market; the oil market as the west needs oil prices higher

( zero hedge)

ii)WTI and Gasoline gets confused as the encounter:

i) a big crude drawdown

ii) a huge 21 month high production

( zero hedge)

8. EMERGING MARKET

9.   PHYSICAL MARKETS

i)A major  Chinese conglomerate, Fosun International buys a 10% stake in Russia’s 3rd largest gold miner

( Reuters)

ii)John Embry in a conversation with Kingworldnews states that gold and silver will catch up to other assets whose values have exploded northbound

( kingworldnews/John Embry)

iii)Craig Roberts and Dave Kranzler question whether bitcoin is standing in as proxy for gold in that central banks cannot go naked short bitcoin but they certainly engage in that activity with gold

( Roberts and Dave Kranzler/)

iv)The latest COT report (up to the 18th of May) suggests that managed money (hedge funds) piled into gold. However they will have to wait until figures come in next week when we see the COT which envelopes May 31 which saw the humongous liquidation at the comex.  As many of you are aware, all of these longs transferred into an EFP and a future delivery contract.  This is why I am angry that the COT reports are distorted because of these EFP’s.

 

(ZEROHEDGE)

( zero hedge)

 

10. USA stories

i))Bricks and Mortar meltdown in the retail sector of the USA

( WolfRichter/WolfStreet)

ii)This is getting ridiculous!! Nigel Farage is a person of interest in the FBI’s fake probe of Trump and Russia;

( zero hedge)

iii)I would not look too much into this latest ADP report (private).  It shows a surge in employment despite the biggest job cut rise in over 2 years:

( ADP/zerohedge)

iv)Senator Mike Lee, a member of the Judiciary Committee is one smart cookie.  Trump is even considering him as a candidate for the Supreme Court if one of its members retires.  Yesterday, Lee states that when Comey will testify before the committee, he would be surprised if he states that Trump pressured Comey to end the investigation on Flynn and Russian connections.  He explains why..

a must view…

( zero hedge)

iv b)It is now official: Comey to testify next Thursday June 8

( zerohedge)

v)Another flip flop for Trump but this is understandable.  He wants to give peace between Israel and the Palestinians a chance.

For now Trump will not move the USA embassy to Jerusalem

(courtesy zerohedge)

vi)As we have been reporting to you over the past year, General Motors continue to channel stuff its car inventory.  It is now the highest level in over 10 years:

( zero hedge)

vii)Janet is not going to like this:  USA construction spending plunged by 1.4% in April and much worse than the weakest  economists expectations

( zero hedge)

( zero hedge)

( zero hedge)

x) My goodness, it sure took the rating agencies the long time to recognize the basket case status of the state if Illinois.

now two rating agencies have cut Illinois’ debt to near junk and they will surely feel the pain

( zero hedge)

 

 

Let us head over to the comex:

The total gold comex open interest ROSE BY A STRONG 8,732 CONTRACTS DOWN  to an OI level of 442,978 WITH THE RISE IN THE PRICE OF GOLD ( $9.55 with YESTERDAY’S trading).

We are now in the contract month of JUNE and it is one of the BETTER delivery months  of the year. In this JUNE delivery month  we had A  HUGE LOSS OF 1886 contract(s) FALLING TO  4528.  We had 808 notices filed upon yesterday so we LOST 1078  contracts or an additional 107,800 oz will  NOT stand for delivery in this very active delivery month of June AND WITHOUT A SHADOW OF DOUBT THESE 1078 CONTRACTS RECEIVED AN EFP CONTRACT WHICH ENTITLES THEM TO A FIAT BONUS PLUS A FUTURE GOLD CONTRACT/OR A LONG CALL OR MOST LIKELY A LONDON BASED FORWARD GOLD CONTRACT. THESE EFP’S ARE PRIVATE OFF COMEX TRANSACTIONS.

Below is a little background on the EFP contracts  initiated by our bankers:
We now know for certainty that private EFP contracts are given by the bankers when faced with an upcoming active delivery month and they state that this is for emergency purposes only and that they do not have actual physical metal to deliver upon in the front month.  We just do not know the makeup of that private deal.  It is my contention that the longs in GOLD FOR INSTANCE at the end of MAY(for June contracts) were given a fiat bonus plus a long “in the money” call for a  future July contract or a August FUTURE contract or MAYBE EVEN A LONDON BASED FORWARD GOLD CONTRACT. . and this is why the total comex open interest complex obliterates as we enter first day notice.  So now everything makes sense: the obliteration of OI as we enter first day notice has not really occurred in the real sense but replaced with a future long contract call and/or an off -comex London based gold contract  with some bonus money for their effort.

The non active July contract LOST 43 contracts to stand at 2147 contracts. The next big active month is August and here the OI gained 10,307 contracts up to 320,204.

We had 308 notice(s) filed upon today for 30,800 oz

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And now for the wild silver comex results.  Total silver OI FELL BY 789 contracts FROM  205,235 DOWN TO 204,446 WITH YESTERDAY’S 5 CENT LOSS.  IT SURE LOOKS LIKE OUR BANKERS ARE TRYING TO COVER THEIR SHORTS IN SILVER IN EARNEST. WE ALSO NO DOUBT HAVE CONSIDERABLE EVIDENCE OF SOME DELTA HEDGING BY THE BANKERS TRYING TO OFFSET THAT HUGE SHORT POSITION THEY HAVE BEEN BURGEONING OVER THE YEARS.
We are in the NON active delivery month is JUNE  Here the open interest LOST 16 contract(s) FALLING TO 380 contracts. We had 37 notices served upon yesterday so we AGAIN GAINED 21 CONTRACTS OR AN ADDITIONAL 105,000 OZ OF SILVER WILL STAND FOR DELIVERY IN THIS NON ACTIVE DELIVERY MONTH OF JUNE.  IT SEEMS WE ARE CONTINUING WHERE WE LEFT OFF LAST MONTH IN SILVER AS INVESTORS ARE WILLING TO FORGO THE FIAT PROFIT JUST TO SECURE PHYSICAL METAL.

The next big active month will be July and here the OI LOST 2385 contracts DOWN to 136,651.  The next big active delivery month for silver after July will be September and here the OI already jumped by 1498 contracts up to 31,878/

The line in the sand is $18.50 for silver and again it has been defended by the criminal bankers.  Once this level is pierced, the monstrous billion oz of silver shorts will blow up. The bankers are defending the Alamo with their last stand at the $18.50 mark. THE NEW RECORD HIGH IN OPEN INTEREST WAS SET FRIDAY APRIL 21/2017 AT:  234,787.

We had 18 notice(s) filed for 90,000 oz for the June 2017 contract

VOLUMES: for the gold comex

Today the estimated volume was 165,426 contracts which is FAIR

Yesterday’s confirmed volume was 216,891 contracts  which is GOOD

volumes on gold are STILL HIGHER THAN NORMAL!

INITIAL standings for JUNE
 June 1/2017.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
 96.45 oz
3 kilobars
Deposits to the Dealer Inventory in oz 48226.500 oz

brinks

1500 kilobars

 

Deposits to the Customer Inventory, in oz 
 nil oz
No of oz served (contracts) today
 
308 notice(s)
30,800 OZ
No of oz to be served (notices)
4220 contracts
422,000 oz
Total monthly oz gold served (contracts) so far this month
1116 notices
111,600 oz
3.4712 tonnes
Total accumulative withdrawals  of gold from the Dealers inventory this month   NIL oz
Total accumulative withdrawal of gold from the Customer inventory this month   65,009.1 oz
Today we HAD  2 kilobar transaction(s)/ 
We had 1 deposit into the dealer:
i) Into Brinks: 48,226.500 oz  1500 kilobars
total dealer deposits: 48,226.500 oz
We had NIL dealer withdrawals:
total dealer withdrawals:  NIL oz
we had no dealer deposits:
total dealer deposits:  nil oz
we had 0  customer deposit(s):
total customer deposits; nil  oz
We had 1 customer withdrawal(s)
 i Out of Manfra:  96.45 oz
3 kilobars
total customer withdrawal: 96.45  oz
 we had 1 adjustments:
i Out of Delaware:  2399.99 oz was adjusted out of the customer and this landed into the dealer account of Delaware
For JUNE:

Today, 39 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 308 contract(s)  of which 112 notices were stopped (received) by jPMorgan dealer and 0 notice(s) was (were) stopped/ Received) by jPMorgan customer account.

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To calculate the initial total number of gold ounces standing for the JUNE. contract month, we take the total number of notices filed so far for the month (1116) x 100 oz or 80,800 oz, to which we add the difference between the open interest for the front month of MAY (4528 contracts) minus the number of notices served upon today (308) x 100 oz per contract equals 533,600  oz, the number of ounces standing in this active month of JUNE.
 
Thus the INITIAL standings for gold for the JUNE contract month:
No of notices served so far (1116) x 100 oz  or ounces + {(4528)OI for the front month  minus the number of  notices served upon today (308) x 100 oz which equals 533,600 oz standing in this  active delivery month of JUNE  (16.5972 tonnes).
WE LOST 1078 CONTRACTS OR AN ADDITIONAL 107,800 OZ WILL NOT STAND AT THE COMEX.  HOWEVER THESE GUYS WERE GIVEN EFP CONTRACTS WHICH ENTITLES THEM TO A FIAT BONUS PLUS A FUTURES GOLD CONTRACT OR A LONG CALL ON A GOLD CONTRACT OR MOST LIKELY A LONDON BASED GOLD FORWARD CONTRACT.  
 
 
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Total dealer inventory 894,646.624 or 27.82 tonnes DEALER RAPIDLY LOSING GOLD
Total gold inventory (dealer and customer) = 8,750,276.96 or 272.17 tonnes 
 
Over a year ago the comex had 303 tonnes of total gold. Today the total inventory rests at 272.17 tonnes for a  loss of 30  tonnes over that period.  Since August 8/2016 we have lost 81 tonnes leaving the comex. However I am including kilobar transactions and they are very suspect at best
I have a sneaky feeling that these withdrawals of gold in kilobars are being used in the hypothecating process  and are being used in the raiding of gold!

The gold comex is an absolute fraud.  The use of kilobars and exact weights makes the data totally absurd and fraudulent! To me, the only thing that makes sense is the fact that “kilobars: are entries of hypothecated gold sent to other jurisdictions so that they will not be short with their underwritten derivatives in that jurisdiction.  This would be similar to the rehypothecated gold used by Jon Corzine at MF Global.
 
IN THE LAST 12 MONTHS  81 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
AND NOW THE MAY DELIVERY MONTH
June INITIAL standings
 June 1. 2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
301,173.160 oz
CNT
SCOTIA
Deposits to the Dealer Inventory
nil oz
Deposits to the Customer Inventory 
 495,753.0000  o
????z
 HSBC
exact weight
No of oz served today (contracts)
 18 CONTRACT(S)
(90,000 OZ)
No of oz to be served (notices)
362 contracts
( 1,810,000 oz)
Total monthly oz silver served (contracts) 55 contracts (275,000 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 1,418,985.5 oz
today, we had  0 deposit(s) into the dealer account:
total dealer deposit: nil  oz
we had Nil dealer withdrawals:
total dealer withdrawals: nil oz
we had 2 customer withdrawal(s):
i) Out of CNT: 9029.93 oz
ii) out of Scotia: 292,144.23 oz
TOTAL CUSTOMER WITHDRAWALS: 301,173.16  oz
 We had 1 Customer deposit(s):
i) Into HSBC:  495,753.000 oz   exact weight?????
***deposits into JPMorgan have now stopped 
In the month of March and February, JPMorgan stopped (received) almost all of the comex silver contracts.
why is JPMorgan bringing in so much silver??? why is this not criminal in that they are also the massive short in silver
total customer deposits  495,753.000 oz
 
 we had 0 adjustment(s)
The total number of notices filed today for the JUNE. contract month is represented by 18 contract(s) for 90,000 oz. To calculate the number of silver ounces that will stand for delivery in JUNE., we take the total number of notices filed for the month so far at 55 x 5,000 oz  = 275,000 oz to which we add the difference between the open interest for the front month of JUNE (380) and the number of notices served upon today (18) x 5000 oz equals the number of ounces standing

 

.
 
Thus the initial standings for silver for the JUNE contract month:  55(notices served so far)x 5000 oz  + OI for front month of JUNE.(380 ) -number of notices served upon today (18)x 5000 oz  equals  2,0850,000 oz  of silver standing for the JUNE contract month. WE ALSO HAVE 0 EFP CONTRACTS WERE ISSUED AS THE LONGS REFUSED A FIAT BONUS: THEY WANTED THEIR SILVER.
 
 
Volumes: for silver comex
 
Today the estimated volume was 86,150 which is huge
Yesterday’s  confirmed volume was 79,201 contracts which is HUGE
FRIDAY’S ESTIMATED VOLUME OF 79,201 CONTRACTS EQUATES TO 396 MILLION OZ OF SILVER OR 57% OF ANNUAL GLOBAL PRODUCTION OF SILVER EX CHINA EX RUSSIA). IN OUR HEARINGS THE COMMISSIONERS STRESSED THAT THE OPEN INTEREST SHOULD BE AROUND 3% OF THE MARKET.  
 
Total dealer silver:  33.563 million (close to record low inventory  
Total number of dealer and customer silver:   201.561 million oz
The record level of silver open interest is 234,787 contracts set on April 21./2017  with the price at that day at  $18.42
The previous record was 224,540 contracts with the price at that time of $20.44
 
end

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 6.7 percent to NAV usa funds and Negative 6.6% to NAV for Cdn funds!!!! 
Percentage of fund in gold 62.0%
Percentage of fund in silver:37.9%
cash .+0.1%( June 1/2017) 
 
2. Sprott silver fund (PSLV): Premium FALLS TO   -.223%!!!! NAV (june 1/2017) 
3. Sprott gold fund (PHYS): premium to NAV RISES to -0.35% to NAV  (June 1/2017 )
Note: Sprott silver trust back  into NEGATIVE territory at -0.22% /Sprott physical gold trust is back into NEGATIVE/ territory at -0.35%/Central fund of Canada’s is still in jail  but being rescued by Sprott.

Sprott’s hostile 3.1 billion bid to take over Central Fund of Canada

(courtesy Sprott/GATA)

Sprott makes hostile $3.1 billion bid for Central Fund of Canada

 Section: Daily Dispatches

From the Canadian Press
via Canadian Broadcasting Corp. News, Toronto
Wednesday, March 8, 2017

http://www.cbc.ca/news/canada/calgary/sprott-takeover-bid-central-fund-c…

Toronto-based Sprott Inc. said Wednesday it’s making an all-share hostile takeover bid worth $3.1 billion US for rival bullion holder Central Fund of Canada Ltd.

The money-management firm has filed an application with the Court of Queen’s Bench of Alberta seeking to allow shareholders of Calgary-based Central Fund to swap their shares for ones in a newly-formed trust that would be substantially similar to Sprott’s existing precious metal holding entities.

The company is going through the courts after its efforts to strike a friendly deal were rebuffed by the Spicer family that controls Central Fund, said Sprott spokesman Glen Williams.

“They weren’t interested in having those discussions,” Williams said.

 Sprott is using the courts to try to give holders of the 252 million non-voting class A shares a say in takeover bids, which Central Fund explicitly states they have no right to participate in. That voting right is reserved for the 40,000 common shares outstanding, which the family of J.C. Stefan Spicer, chairman and CEO of Central Fund, control.

If successful through the courts, Sprott would then need the support of two-thirds of shareholder votes to close the takeover deal, but there’s no guarantee they will make it that far.

“It is unusual to go this route,” said Williams. “There’s no specific precedent where this has worked.”

Sprott did have success last year in taking over Central GoldTrust, a similar fund that was controlled by the Spicer family, after securing support from more than 96 percent of shareholder votes cast.

The firm says Central Fund’s shares are trading at a discount to net asset value and a takeover by Sprott could unlock US$304 million in shareholder value.

Central Fund did not have any immediate comment on the unsolicited offer. Williams said Sprott had not yet heard from Central Fund on the proposal but that some shareholders had already contacted them to voice their support.

Sprott’s existing precious metal holding companies are designed to allow investors to own gold and other metals without having to worry about taking care of the physical bullion.

end

And now the Gold inventory at the GLD

June 1/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 847.45 TONNES

May 31./ no change in gold inventory at the GLD/Inventory rests at 847.45 tonnes

May 30/no change in gold inventory at the GLD/Inventory rests at 847.45 tonnes

May 26./no change in inventory at the GLD/Inventory rests at 847.45 tonnes

May 25./no change in inventory at the GLD/Inventory rests at 847.45 tonnes

May 24/no change in inventory at the GLD/inventory rests at 847.45 tonnes

May 23/a paper withdrawal of 5.03 tonnes of gold from the GLD/Inventory rests at 847.45 tonnes

May 22/A DEPOSIT OF 1.77 TONNES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 852.48 TONNES

May 19/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 850.71 TONNES

May 18/a withdrawal of 1.18 tonnes of gold from the GLD/Inventory rests at 850.71

May 17/no change in the GLD inventory/inventory rests at 851.89 tonnes

May 16./ no change in the GLD inventory/inventory rests at 851.89 tonnes

May 15/no change in the GLD inventory/inventory rests at 851.89 tonnes

May 12/no changes in GLD/inventory rests at 851.89 tonnes

may 11/no changes in GLD inventory/inventory rests at 851.89 tonnes

May 10/no changes in GLD inventory/inventory rests at 851.89 tonnes/

May 9/a withdrawal of 1.19 tonnes from the GLD/Inventory rests tonight at 851.89 tonnes

May 8/no change in inventory at the GLD/Inventory rests at 853.08 tonnes

May 5/no changes in inventory at the GLD/Inventory rests at 853.08 tonnes

May 4/A tiny change in inventory at the GLD /a withdrawal of .28 tonnes to pay for fees/inventory rests at 853.08 tonnes

May 3/no change in inventory at the GLD/Inventory rest at 853.36 tonnes

May 2/no change in inventory at the GLD/Inventory rests at 853.36 tonnes

May 1/ no changes in inventory at the GLD/inventory rests at 853.36 tonnes

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
June 1 /2017/ Inventory rests tonight at 847.45 tonnes
*IN LAST 163 TRADING DAYS: 100.68 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 106 TRADING DAYS: A NET  26.75 TONNES HAVE NOW BEEN ADDED INTO GLD INVENTORY.
*FROM FEB 1/2017: A NET  52.09 TONNES HAVE BEEN ADDED.

end

Now the SLV Inventory

June 1/NO CHANGE IN INVENTORY AT THE SLV/INVENTORY RESTS AT 340.976 MILLION OZ

May 31./ no change in silver inventory at the SLV/inventory rests at 340.976 million oz/

May 30/no change in silver inventory at the SLV/inventory rests at 340.976 million oz

May 26/another paper withdrawal of 946,000 oz of silver from the SLV with silver rising/inventory rests at 340.976 million oz

May 25/no change in silver inventory at the SLV/Inventory rests at 341.922 million oz

May 24./a “paper” withdrawal of 1.893 million oz from the SLV/inventory rests tonight at 341.922 million oz

May 23/no change in silver inventory at the SLV/inventory rests at 343.815 million oz

May 19/no change in silver inventory at the SLV/Inventory rests at 343.815 million oz.

may 18/2017/another big deposit of 1.42 million oz added to the SLV/inventory rests at 343.815 million oz.

may 17/no change in silver inventory at the SLV/Inventory rests at 342.395 million oz/

May 16./we had a huge addition of 1.416 million oz of silver into the SLV/inventory rests at 342.395 million oz

May 15/no changes in silver inventory/inventory rests at 340.979 million oz/

May 12/a huge change in silver: a deposit of 2.369 million oz/inventory rests at 340.979 million oz

May 11/no changes in silver inventory at the SLV/Inventory rests at 338.610 million oz

May 10/ a gigantic 3.833 million oz of silver added to the SLV and this occurred with the constant whacking of silver for the past 17 trading sessions/inventory rests at 338.610 million oz

may 9Again, no movement of inventory at the SLV. Inventory rests at 334.777 million oz

May 8/no change in silver inventory at the SLV/inventory rests at 334.777 million oz/

May 5/Strange!! no change in silver inventory at the SLV/Inventory rests tonight at 334.777 million oz

May 4/a very tiny withdrawal of 144,000 oz to pay for fees/inventory rests tonight at 334.777 million oz/

May 3/strange!! with the drop in price of silver we had no change in inventory at the SLV/inventory rests at 334.921 million oz

May 2/extremely strange again/a huge 3.502 million oz deposit into the SLV despite silver being in the toilet for the past several trading days.Inventory 334.921 million oz

may 1/extremely strange/with silver being walloped these past several days, the inventory rises again by a huge 1.136 million oz/(maybe someone can explain this phenomena??)

June 1.2017: Inventory 340.976  million oz
 end

Major gold/silver trading/commentaries for THURSDAY

GOLDCORE/BLOG/MARK O’BYRNE.

GOLD/SILVER

Trump, UK and the Middle East drive uncertainty

  • Gold hits five-week high
  • Reaches $1,273.74/oz, highest since April 25th
  • Sterling recovers after UK polls point towards a hung Parliament
  • Expected Fed-tightening capped gains
  • 90-dead in Kabul, further signs of increasing tension in Middle East
  • Trump expected to pull out of Paris Accord and Trump’s anti-Iran axis already feuding

Yesterday gold hit $1,273.74/oz, a level not seen for five weeks. Analysts point to some safe-haven demand for the yellow metal on account of the geopolitical tensions, upcoming UK elections and tomorrow’s non-farm payroll data.

We suggest investors look beyond data releases and political peacocking, and instead look at what the greater picture shows which is uncertainty on all fronts.

All about the Federal Reserve

Amongst mainstream financial analysts, all eyes appear to be on the expected Federal Reserve rate hikes. Thomson Reuters data shows traders see an 87% chance of a 25-basis-point hike at the next Federal Reserve meeting, this month.

Softer economic data of late, may mean that the Janet Yellen and her team might not be so keen to ramp up rates this month. Investigations into Russia’s alleged involvement in the 2016 U.S. election and possible collusion with Trump’s campaign also have clouded the prospect of a rate hike next month. The plan was for two further rate hikes this year in order to tighten the central bank’s balance sheet.

Fed policy tightening is expected to be negative for gold. But times might be changing as we note that in both December and March, following rate rises, gold decided to rally. This might be on account of expectations of over-tightening by the Fed and which would tip the country into a recession. Good news for gold.

Should the Fed over tighten, then they are likely to return forward guidance. As we know this is a great environment for the gold price due to increased inflation and a weaker currency.

Jitters over UK elections

In what feels like groundhog day for many UK-voters, there will be an election next week. To listen to the international media one could be forgiven the election is about Brexit. It is a general election which has consequences far beyond Brexit negotiations. Many of these consequences are unknown, which suggests a positive environment for gold regardless of the outcome.

When the election was initially called it seemed as though Mrs May’s election was a dead cert, however the polls suggest it might not be so easy. This morning news of a YouGov poll commissioned by the Times show Mrs May has a battle ahead of her. YouGov found the Conservative lead has slipped dramatically in recent weeks and is now within the margin of error. In April, when the election was first called, the Tories had a 24-point lead over Labour.

The YouGov Poll also found 30% of respondents think Jeremy Corbyn would be a better Prime Minister, this is the highest it has ever been. Meanwhile, Teresa May’s personal favourability has slipped to by 2%, to 43%.

Investors would be prudent to remember that whilst Mrs May is using the “promise of Brexit” to improve the country’s fortunes, the outcome of the ‘divorce’ remains unknown regardless of who is elected. With a Conservative victory the market might feel slightly reassured as there is no change in management, however we are still unsure how Brexit will actually look. A Labour victory is effectively double the uncertainty as we have not seen Corbyn lead, let alone run a Brexit negotiation.

Trump tension

Trump continues to be a cause for concern in both the US and the wider community. Concern comes from the usual basket of goodies the President serves on a daily basis, namely strange tweets, misinformed statements on foreign relations and the desire to show independence when the opposite is required.

One example of this came on Tuesday when Trump tweeted, “We have a MASSIVE trade deficit with Germany, plus they pay FAR LESS than they should on NATO & military. Very bad for U.S. This will change,”

This tweet from Trump harks back to 1987 when US Treasury Secretary James Baker took issue with German policy. For many this resulted in the stock market crash of October 1987.

This morning the US dollar hovered near a 6-1/2 month low against a basket of major currencies on. Today, markets will also be closely watching for Trump’s announcement on whether or not the United States will continue to be part of the Paris Accord.

Whilst an agreement over whether or not to fight climate change may seem a tenuous link to make with precious metal prices, Trump’s decision will say so much more than his thoughts on global warming. A step away from the Paris Accord shows once again Trump’s desire to focus on his ‘America First’. In isolation the decision might not count for much but is the statement about Trump’s intentions to work with others, that are of most concern. He is pushing further towards an isolationist and protectionist agenda.

This adds to geopolitical tensions that are already quite fraught. Trump’s decision to effectively reject what is really the rest of the world’s view in terms of how to deal with something, could see the tension gauge ramp up an extra couple of notches, something else that is good for gold.

Middle East problems remain despite Trump (!)

All eyes were on the Middle East just ten days ago when President Trump made his first international visit to the region. The President made a few speeches and all concerned were expected to feel revived and reunited in the fight against those wanting to cause harm in the Middle East. However, no sooner had the President left the region, media attentions were back on Western problems such as handshakes, photo-op barging and angry tweets.

It hasn’t taken long for the Middle East to demonstrate that it needs a bit more than some FaceTime. Yesterday an attack in Kabul left 90 dead. Whilst no one has claimed responsibility for it Afghanistan’s intelligence service, the National Directorate of Security, issued a statement attributing blame to the Haqqani Network, a Taliban-affiliated group in Pakistan. The National Directorate also claimed the group had received help from ISI, the Pakistani intelligence service.

Trump’s anti-Iran axis is also already beginning to fray around the edges. Less than two weeks after his visit. Qatar is embroiled in a public feud with both Saudi Arabia and the United Arab Emirates (UAE) over their conciliatory line on Iran and support for the Muslim Brotherhood. A spat between Doha and other members of the GCC could have major implications for the Middle East with long-term repercussions.

Conclusion: We’re still uncertain

It seems we conclude many market updates with reference to the overall uncertainty regarding geopolitics and finance. But there is little else to say.

It can be both entertaining and worrying to look at Trump’s behaviour and attribute much of the blame for the current chaos, to him. But the truth is, whether he had been elected or not, we would still be watching the UK general election, the Middle East would still have major problems and the Federal Reserve would still be turning it’s back on the realities of the damage that it has caused.

The future might seem uncertain but the ways in which we can protect ourselves remain constant and certain. Gold and silver act as both financial insurance and portfolio diversifiers.

Data shows more people are choosing to invest in gold. This tells us that savers are no longer concerned about the increasingly lower, opportunity cost of holding gold. Instead they are realising that the uncertainty we see across the globe is not because of one event such as an election or tweet, instead it is the general air of uncertainty and concern as to how this will pan out.

Those looking to insure their portfolio against global events should ignore the day-to-day reports and instead prepare for these uncertain times by diversifying and owning gold and silver. For many years, gold and silver have protected investors and savers from uncertainty, both economic and political.

News and Commentary

Gold holds near five-week highs, but potential U.S. rate hike drags (Reuters)

Asia Stocks Rise as Yuan Strengthens, Oil Rebounds (Bloomberg)

Marc Faber—aka Dr. Doom—warns that in financial markets ‘there is a bubble in everything’ (MarketWatch)

Gold ends higher, then pulls back as Fed Beige Book ups odds of June rate hike (MarketWatch)

Fed Survey Shows Modest Growth With Tight Labor and Tame Prices (Bloomberg)

India’s Hunger for Gold is Legendary – But who are these Gold Buyers? (Commodity Trade Mantra)

GOLD – The Ultimate Buy and Hold (SilverSeek)

SWOT Analysis: Deutsche Bank Says Investors Should Prepare for Flight to Gold (GoldSeek)

Is Bitcoin Standing In For Gold? (ZeroHedge)

The Next Recession May Be A Complete Reset Of All Asset Valuations (Mauldin Economics)

end

A major  Chinese conglomerate, Fosun International buys a 10% stake in Russia’s 3rd largest gold miner

(courtesy Reuters)

 

END

John Embry in a conversation with Kingworldnews states that gold and silver will catch up to other assets whose values have exploded northbound

(courtesy kingworldnews/John Embry)

 

Hard assets will catch up, Embry tells King World News

Section:

4p ET Wednesday, May 31, 2017

Dear Friend of GATA and Gold:

In an interview with King World News, Sprott Asset Management’s John Embry says debt-based economic expansions end badly and that, with some patience, the monetary metals will catch up to other assets whose values have exploded lately. Embry’s comments are posted at KWN here:

http://kingworldnews.com/john-embry-global-money-printing-and-credit-cre…

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

END

Craig Roberts and Dave Kranzler question whether bitcoin is standing in as proxy for gold in that central banks cannot go naked short bitcoin but they certainly engage in that activity with gold

(courtesy Roberts and Dave Kranzler/)

Roberts and Kranzler: Is bitcoin standing in for gold?

Section:

9:07p ET Wednesday, May 31, 2017Dear Friend of GATA and Gold:

Former Deputy U.S. Treasury Secretary Paul Craig Roberts and financial analyst Dave Krazler write today that bitcoin may be taking gold’s place as an inflation hedge because, to protect their currencies, central banks can naked-short gold to infinity in the futures markets but not bitcoin. Their commentary is headlined “Is Bitcoin Standing in for Gold?” and it’s posted at Roberts’ internet site here:

http://www.paulcraigroberts.org/2017/05/31/bitcoin-standing-gold/

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

END

The latest COT report (up to the 18th of May) suggests that managed money (hedge funds) piled into gold. However they will have to wait until figures come in next week when we see the COT which envelopes May 31 which saw the humongous liquidation at the comex.  As many of you are aware, all of these longs transferred into an EFP and a future delivery contract.  This is why I am angry that the COT reports are distorted because of these EFP’s.

 

(ZEROHEDGE)

Hedge Funds Pile Into Gold At Fastest Pace Since 2007

Hedge funds are jumping back into gold.

Money managers boosted their long positions in U.S. futures by the most in almost a decade in the week ended May 23, Commodity Futures Trading Commission data show.

As Bloomberg notes, bullion futures have posted three straight weekly gains, helped by U.S. and European political angst that has boosted demand for the metal as a haven.

(courtesy zero hedge)

Bitcoin Surges Back Above $2450 After China Eases Exchange Controls

Bitcoin has retraced over half its losses from last week‘s tumble, rallying back above $2450 overnight after news that China’s three largest bitcoin exchanges are allowing customers to withdraw bitcoins from their accounts.

As CoinTelegraph reports, on May 31, local Chinese Bitcoin and cryptocurrency news source cnLedger reported that OKCoin China resumed withdrawals for traders.

BREAKING: We received report that OKCoin (CN site) resumed withdraws!
W/d limit based on vip level, starting from 10BTC/200LTC/1000ETH daily

OKCoin is the largest Bitcoin exchange in China which processes 31 percent of trades within the Chinese Bitcoin exchange market. In February, OKCoin and Huobi, the two largest Bitcoin exchanges in China, were flagged by the People’s Bank of China for operating a trading platform without appropriate Know Your Customer (KYC) and Anti-Money Laundering (AML) systems.

 

And the reaction is positive…

The OKCoin trading platform’s withdrawal resumption acting as a catalyst to trigger the interest and demand for Bitcoin from local investors. Currently, Bitcoin is being traded in China at a premium rate, which the global market hasn’t seen since last year.

The global average Bitcoin price at the time of reporting is $2,300 and traders within the Chinese Bitcoin exchange market is trading Bitcoin at over $2,340, around $50 higher than that of the US. In comparison to South Korea, which is demonstrating a $400 premium, the premium rate of the Chinese market is significantly small. However, the recovery of the Chinese Bitcoin exchange market is a positive sign of growth and recovery for the global market.

Due to extensive mainstream media coverage of Bitcoin as digital gold in China, the demand for Bitcoin within the country and amongst local traders has already been on the rise.

People’s Daily (China’s biggest newspaper): Bitcoin becomes “digital gold”. High risk, high expected yield. BU/SegWit may soon help it scale

As CoinTelegraph concludes, the resumption of withdrawals by OKCoin will further fuel the growth of the Bitcoin market in China and when the People’s Bank of China completes the final regulatory framework on Bitcoin by this month, the Chinese market will stabilize and Bitcoin price will likely increase as a result.

 

end

 

Your early THURSDAY 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  STRONGER  6.8089(REVALUATION NORTHBOUND   /OFFSHORE YUAN MOVES  STRONGER TO ONSHORE AT   6.7631/ Shanghai bourse CLOSED DOWN 14.56 POINTS OR .47%  / HANG SANG CLOSED UP 148.57 POINTS OR 0.58% 

2. Nikkei closed UP 209.44 POINTS OR 1.07%   /USA: YEN RISES TO 111.15

3. Europe stocks OPENED IN THE GREEN        ( /USA dollar index RISES TO  97.18/Euro DOWN to 1.1221

3b Japan 10 year bond yield: RISES TO   +.049%/     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 111.15/ 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::  48.45 and Brent: 50.84

3f Gold DOWN/Yen DOWN

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa./“HELICOPTER MONEY” OFF THE TABLE FOR NOW /REVERSE OPERATION TWIST ON THE BONDS: PURCHASE OF LONG BONDS  AND SELLING THE SHORT END

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund RISES TO  +.307%/Italian 10 yr bond yield UP  to 2.216%    

3j Greek 10 year bond yield RISES to  : 6.16???  

3k Gold at $1266.50/silver $17.13 (8:15 am est)   SILVER BELOW  RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble DOWN 26/100 in  roubles/dollar) 56.69-

3m oil into the 48 dollar handle for WTI and 50 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/GOT A SMALL SIZED REVALUATION NORTHBOUND 

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 111.15 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  0.9696 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0882 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/LOWER PARLIAMENT APPROVES BREXIT COMMENCEMENT/ARTICLE 50 COMMENCES MARCH 29/2017 

3r the 10 Year German bund now POSITIVE territory with the 10 year RISES to  +0.307%

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 2.215% early this morning. Thirty year rate  at 2.874% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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

Global Stocks Rise As Oil Rebounds; Yuan Soars

S&P futures are little changed this morning, while Asian shares rise and European stocks (+0.5%) are poised to snap a five-day losing streak amid a broad-based rally. The pound declined as better-than-expected manufacturing data failed to offset political risk before the impending election, while crude oil gained.

Across Europe, all 19 industry groups on the Stoxx Europe 600 Index advanced (the index itself was up 0.5% in early trading), helped by media companies amid strength in the auto sector after Barclays said fears for the used car market have been overdone. Bank shares underperformed rising European stocks, after JPM and BofA warned on Wednesday that low market volatility would crimp trading revenue. Energy shares also rose as oil bounced in the wake of data pointing to a bigger-than-expected drop in U.S. stockpiles. The euro fell after two days of gains while the dollar edged higher. European manufacturing activity grew at its fastest rate in more than six years in May, according to the final eurozone PMI index.

The final Markit Eurozone Manufacturing PMI rose to a 73-month high of 57.0 in May, up from 56.7 in April and unchanged from the earlier flash estimate. The PMI has signalled expansion in each of the past 47 months.

  • Germany 59.5 (flash: 59.4) 73-month high
  • Austria 58.0 2-month low
  • Netherlands 57.6 4-month low
  • Ireland 55.9 22-month high
  • Spain 55.4 4-month high
  • Italy 55.1 3-month low
  • France 53.8 (flash: 54.0) 2-month low
  • Greece 49.6 9-month high

Commenting on the final Manufacturing PMI data, Chris Williamson, Chief Business Economist at IHS Markit said: “The eurozone upturn is developing deeper roots as factories enjoy a spring growth spurt. Demand for goods is growing at the steepest rate for six years, encouraging manufacturers to step up production and take on extra staff at a rate not previously seen in the two-decade history of the PMI survey.

Asian shares, as measured by MSCI’s main index of Asia-Pacific shares, excluding Japan rose 0.1% to 498.39, though gains were limited by data showing Chinese factory activity contracted in May for the first time in 11 months. The MSCI Asia Pacific Index rose 0.3 percent, after capping its fifth straight monthly gain for the longest winning streak since 2013. Japan’s Topix rallied 1.1 percent as capital spending topped estimates. The Shanghai Composite fell 0.5% after the a private survey of the manufacturing sector. The findings contrasted with official data on Wednesday which suggested growth remained steady. The poor Chinese data hit the Australian dollar, often seen as a proxy for the health of the world’s second-biggest economy.

As reported earlier, following ongoing fireworks, China’s onshore yuan shrugged off poor PMI data and headed for the biggest four-day advance in almost 12 years, rising to a seven month high amid speculation policy makers are trying to discourage bets against the currency. The Yuan strengthened beyond 6.8 per dollar for the first time since Nov. 11 after the central bank pushed its reference rate, around which the spot rate can fluctuate, 0.8 percent higher in the second-largest single-day appreciation of the currency since it was de-pegged from the dollar in 2005.

“The PBOC has let the yuan bulls loose in the China shop,” said Stephen Innes, senior trader at OANDA in Australia, referring to the People’s Bank of China.

Britain’s pound, on a rollercoaster ride this week as polls have sent conflicting signals about the outcome of next week’s election, fell 0.1 percent to $1.2874 after another poll showed the Prime Minister Theresa May’s Conservatives just 3 percentage points ahead of the Labour opposition. There was little reaction to Britain’s manufacturing PMI beating forecasts. “This data point is clearly a positive for the UK economy however GBP traders are putting macro releases on the back burner at present, with the twists and turns in the race for upcoming election having a greater impact on the market of late,” David Cheetham, markets analyst at broker XTB, said.

In commodities, Brent rose off Wednesday’s three-week lows in anticipation of the United States quitting the Paris accord. President Donald Trump is expected to announce his decision later on Thursday. West Texas Intermediate crude oil advanced 1.3 percent to $48.96 a barrel, rebounding from a 2.7 percent drop in the previous session.

“If he actually withdraws the U.S from the climate accord, this would signal his intention to further roll-back emission regulations that would favor the use and demand of fossil fuels, thus giving a much needed boost to oil prices,” Jonathan Chan, investment analyst at Phillip Futures in Singapore, told Reuters.

Gold dropped 0.2 percent to $1,266.99 an ounce, giving back some of Wednesday’s 0.5 percent gain.

There was little acticity in rates, where the yield on 10-year Treasuries rose one basis point to 2.21 percent, after falling a similar amount on Wednesday.

Today markets will look ahead to jobless claims and ISM data, while Lululemon, Dollar General and Tech Data are among companies expected to release earnings. U.S.

Market Snapshot

  • S&P 500 futures up 0.1% to 2,413.25
  • STOXX Europe 600 up 0.5% to 391.83
  • MXAP up 0.3% to 153.14
  • MXAPJ up 0.1% to 498.39
  • Nikkei up 1.1% to 19,860.03
  • Topix up 1.1% to 1,586.14
  • Hang Seng Index up 0.6% to 25,809.22
  • Shanghai Composite down 0.5% to 3,102.62
  • Sensex up 0.06% to 31,162.95
  • Australia S&P/ASX 200 up 0.2% to 5,738.13
  • Kospi down 0.1% to 2,344.61
  • German 10Y yield unchanged at 0.303%
  • Euro down 0.2% to 1.1225 per US$
  • Italian 10Y yield fell 8.9 bps to 1.908%
  • Spanish 10Y yield rose 1.2 bps to 1.565%
  • Brent Futures up 1.2% to $51.37/bbl
  • Gold spot down 0.2% to $1,266.43
  • U.S. Dollar Index up 0.2% to 97.11

Top Overnight News

  • Trump’s Biggest Goals at Risk as Kushner Is Sucked Into Probe
  • If Trump Dumps the Climate Accord, the U.S. Is the Loser
  • China, EU Recommit to Climate Pact With Trump Support in Doubt
  • Goldman Sachs Says OPEC Should Be More Like the Federal Reserve
  • Buy Utility, Real Estate ETF Straddles Before FOMC: Goldman
  • Perennial Said to Be Chosen for Final United Engineers Talks
  • Intelsat Bondholders Said to Reject Merger Terms With OneWeb
  • Google Submits New Plan for London King’s Cross Headquarters
  • Europe Carmakers Lobby Raises 2017 Market Growth Forecast to 2%
  • VW Weighs U.S. Factory Plans as Trump Ponders Trade Barriers
  • Autoliv Repurchased 870,972 Shares in May
  • Air Transport Prices 3.8m Shrs From Existing Stockholder
  • Next IPhone Sale Likely to Start in Nov.: Hua Nan Securities

Asian stock markets traded mixed following a subdued lead from Wall St. where financials suffered after revenue warnings by BofA and JPMorgan, while the region also digested a miss on Chinese Caixin Manufacturing PMI. A deluge of data was the main driver in Asia with Nikkei 225 (+1.1%) the outperformer following encouraging Japanese Capex, Company Profits and PMI figures, while a softer JPY also underpinned exporter sentiment. Conversely, ASX 200 (+0.1%) traded choppy and was briefly pressured alongside weakness in the Shanghai Comp. (-0.4%) after the disappointing Chinese PMI data which fell into contraction territory for the 1st time in 11 months. 10yr JGBs were relatively flat with demand lacking amid strength in Japanese stocks, while slightly weaker 10yr auction results added to the lacklustre price action with both b/c and accepted prices lower than prior. Chinese Caixin Manufacturing PMI (May) 49.6 vs. Exp. 50.1

Top Asia News

  • China Crushes Yuan Bears, Snubs Moody’s as Currency Takes Off
  • China Stocks Decline From Four-Week High as Factory Data Misses
  • Citi Assigns 40 Percent Probability of India Rate Cut in June
  • Pakistan’s MSCI Dream Becomes Dull Reality as Stocks Hold Losses
  • Prada Falls as Much as 4.9% After Michael Kors Sales Plummet
  • Bharti Said to Sound Out Banks to Fund $8 Billion Indus Deal
  • Kaisa Said to Plan New Bonds to Exchange Debt From Workout

European equity markets trade in modest positive territory, as energy outperforms, following the higher than expected draw in yesterday’s API report (-8670k), with the earlier miss in the Chinese Caixin Manufacturing PMI unfazing European markets. Manufacturing has been the theme of the morning, with Manufacturing PMI figures being seen across the continent with slight beats in the UK and Germany assisting in maintaining the marginal positive territory in European bourses. Politics continue to dictate, with the overnight selling pressure in GBP, following the latest UK election from Times/YouGov and SurveyMonkey showing Labour gaining on the Conservative lead, finding a bounce, with GBP/USD seeing support around the 1.285 level. Risk sentiment has been unaffected by the marginal morning buying seen in USD/JPY, looking towards the 112.00 handle, with the subdued trade evident in fixed income markets, with the French OAT auction being the highlight, currently trading marginally lower on the day alongside the German Bund.

Top European News

  • Spring Boom Fuels Hiring at European Factories as ECB Looks On
  • U.K. Domestic Demand Helps Manufacturing Sustain Growth Momentum
  • Banco Popular Shares Fall to Record Low on Solvency Concerns
  • ECB’s Villeroy Warns Against ‘Dangerous Hesitations’ by U.S.
  • Satellite Companies Fly; Softbank’s OneWeb Deal Said to Collapse
  • Iron Ore Sell-Off Deepens as New Month Opens With Same Old Pain
  • Deutsche Bank Plans Asia Wealth Expansion With 50 New Hires
  • Italy’s Growth Pace Revised Up, Boosting Prospects for 2017

In currenices, we have seen some modest adjustments in some of the major pairings, with some of the crosses playing a key part over the last 24 hours. These have moderated in the last 12 hours or so, but the focus turns back to the USD as the US data schedule starts in earnest today. First up is the ADP private jobs survey, with the manufacturing ISM release later on this afternoon. A very small comeback seen in US Treasury yields after the weakness seen this week, and this has lifted USD/JPY back above 111.00 in what is a very tentative move based on the price action alone. EURUSD maintains better levels but continues to struggle, in what is a clear sign that we have risen a little too fast in the time frame achieved, but we see little prospect of a major pullback here as the ECB meeting next week will be fraught with taper-talk risk. Tight ranges set to play out here as a result.

In commocidites, the big news overnight was the Caixin manufacturing PMI released in Asia, falling short of expectation and below the pivotal 50.0 mark. We would have expected a little more of a reaction were it not for the losses already suffered in the metals market, and with China demand having been a concern for some time, this was effectively priced in. Even so, minor losses seen across the board, but Copper is in the upper half of its USD2.50-2.60 range. Nickel is still underperforming though, and this is largely on the technical backdrop, having fallen back under the key 9000 mark. Oil prices have stabilised after another strong report from APIs showing a near 8.5mln barrel draw down in Crude, but higher US production levels have tempered some of this. Gold is still at better levels as safe haven flow dictates as well as recent USD weakness. Silver is well propped-up above UD17.00.

Looking at the day ahead, we’ve got a fairly packed calendar. Along with the final manufacturing PMI revision we will also receive the ISM manufacturing print for May which is expected to nudge down a modest 0.1pts to 54.7. The other important data concerns the ADP report which comes a day before tomorrow’s payrolls. The  ADP consensus is currently sitting at 180k. Also due out today is April construction spending, initial jobless claims and the May vehicle sales data. Away from the data we’re due to hear from the Fed’s Powell this afternoon at 1pm when he speaks on the ‘Normalization of Monetary Policy’. The ECB’s Villeroy is due to speak this morning. China Premier Li Keqiang is also due to meet the EU’s Tusk and Juncker at the China-EU summit in Brussels.

US Event Calendar:

  • 7:30am: Challenger Job Cuts YoY, prior -42.9%
  • 8:15am: ADP Employment Change, est. 180,000, prior 177,000
  • 8:30am: Initial Jobless Claims, est. 238,000, prior 234,000; Continuing Claims, est. 1.92m, prior 1.92m
  • 9:45am: Markit US Manufacturing PMI, est. 52.5, prior 52.5
  • 9:45am: Bloomberg Consumer Comfort, prior 50.9
  • 10am: ISM Manufacturing, est. 54.7, prior 54.8; Prices Paid, est. 67, prior 68.5; New Orders, prior 57.5; Employment, prior 52
  • 10am: Construction Spending MoM, est. 0.5%, prior -0.2%
  • Wards Total Vehicle Sales, est. 16.9m, prior 16.8m
  • Wards Domestic Vehicle Sales, est. 13.2m, prior 13.1m

DB’s Jim Reid concludes the overnight wrap

While politics continues to bubble a little under the surface, yesterday US banks cast a shadow over markets with Q2 trading outlooks disappointing. Indeed JP Morgan’s CFO said at a conference yesterday that revenues from its trading business are down 15% in Q2 so far relative to this time last year, driven predominantly by the fixed income business. She also added that she doesn’t see any reason why this trend will change in June. Similar comments were made by BofA’s CEO who said revenues are 10-12% lower while Wells Fargo’s CFO said that the Bank has taken its foot off the gas in lending lately. Morgan Stanley’s CEO later said that the estimates from his two rivals “are reflecting reality and I don’t think we’re very different”.

That sent shares prices for US Banks lower with the sector ending the day down -1.68%. That weighed on the broader index however a late bounce back into the close meant the S&P 500 only finished down a tiny -0.05%. It’s worth noting that yesterday DB’s Binky Chadha published his latest asset allocation report in which he argues for a broader-based more sustainable move up for the S&P on an imminent turn up in growth and a positive data surprise phase. You can find more in his report. Note that it’s global PMI/ISM day so we’ll see the latest on activity sentiment as the day progresses.

Closer to home European bourses were also a little weaker at the margin (Stoxx 600 -0.13%) following a late dip into the close although the bigger underperformer was the energy sector after Oil prices dipped lower. WTI Oil tumbled -2.70% and closed back below $48.50/bbl seemingly just on scepticism around the recently extended production cut deal. It has bounced back a little this morning (+0.60%) after the weekly API data reported a drop in crude inventories last week. Meanwhile bond markets were a bit of mixed bag yesterday with month-end flows seemingly distorting any obvious trends. Treasuries ended little changed while yields in Europe ranged from a 5bp rally in Portugal (following the strongest quarterly GDP print since 2013) to a 5bp move higher for Gilts (as the market dissected that shock YouGov/Times poll).

Staying with politics, the EU-China summit is scheduled to kick off today however the FT, amongst other news outlets, is reporting that both have agreed to forging an alliance on combating climate change, in stark contrast to the suggestions that President Trump is to withdraw the US from the Paris climate act (the President has tweeted that he will announce his decision at 3pm EDT today). It’s expected that the alliance will be revealed on Friday at the EU leaders’ summit. Meanwhile the Washington Post is reporting that former FBI Director James Comey is preparing to testify to Congress as early as next week  concerning the conversations with President Trump prior to his dismissal.

This morning in Asia it’s been another mixed start for risk assets. Leading the way is the Nikkei (+0.97%) with the rally coinciding somewhat with a weaker Yen after the BoJ’s Harada said that “monetary easing measures have been effective and warnings of the dangers of these measures make little sense”. He did however go on to say that these measures have not achieved an increase in prices, but that a tightening labour market should lead to wage growth. “Hyperinflation” and the collapse of the Yen are unlikely to happen when the BoJ exits easy policy, Harada also said. Nice to know!! The Hang Seng (+0.39%) and ASX (+0.15%) are also a little firmer this morning however the Shanghai Comp (-0.28%) and Kospi (-0.14%) are in the red. China’s Caixin manufacturing PMI for May printed at 49.6 (lowest since June 2016) and down from 50.3, resulting in a bit of divergence from the official data. Sterling has also weakened a bit more in the early going this morning (although remains above where it was prior to that shock poll this time yesterday) after another YouGov/Times poll late last night showed the Conservative lead shrinking to just 3% over Labour at 42% to 39%. That’s down from 7% on May 27th.

Moving on. As suggested by some softer country-level inflation reports leading into it, yesterday’s Euro area headline CPI print missed to the downside after coming in at +1.4% yoy for May (vs. +1.5% expected) and down five-tenths from April largely on base effects. The core also dropped a bit more than expected (+0.9% yoy vs. +1.0% expected) and was down three-tenths from the month prior. That level matches where core inflation was from December through to February. Prior to this in France headline inflation was confirmed as being flat in May versus expectations for a small +0.1% mom rise. In Germany there were no surprises to come from the latest unemployment data with the 5.7% rate for May down one-tenth from April. Meanwhile in the UK mortgage approvals edged lower for a third consecutive month in April (64.6k vs. 66.0k expected).

Across the pond, the highlight of the data yesterday was the May Chicago PMI which rose 1.1pts from April to 59.4 (vs. 57.0 expected) making it the strongest reading since November 2014. Pending home sales were confirmed as falling -1.3% mom in April after expectations were for a small rise. Away from that the main take away from the Fed’s Beige Book was some districts reporting that positive optimism was waning somewhat, while labour markets also continue to tighten and most districts reported shortages across a broadening range of occupations and regions. The Dallas Fed’s Kaplan also spoke yesterday and reiterated his call for two more rate hikes this year, despite highlighting concern about the recent decline in core inflation. He added that he expects an increasingly tight labour market will help create building inflation pressures in the months ahead.

Looking at the day ahead, this morning in Europe we will receive the final revisions to the May manufacturing PMIs which also includes a first look at the data for the UK and periphery. As a reminder, with strong data for Germany and France, readings in the periphery are expected to be a little softer. This afternoon in the US we’ve got a fairly packed calendar. Along with the final manufacturing PMI revision we will also receive the ISM manufacturing print for May which is expected to nudge down a modest 0.1pts to 54.7. The other important data concerns the ADP report which comes a day before tomorrow’s payrolls. The  ADP consensus is currently sitting at 180k. Also due out today is April construction spending, initial jobless claims and the May vehicle sales data. Away from the data we’re due to hear from the Fed’s Powell this afternoon at 1pm when he speaks on the ‘Normalization of Monetary Policy’. The ECB’s Villeroy is due to speak this morning. China Premier Li Keqiang is also due to meet the EU’s Tusk and Juncker at the China-EU summit in Brussels

3. ASIAN AFFAIRS

i)Late WEDNESDAY night/THURSDAY morning: Shanghai closed DOWN 14.56 POINTS OR 0.47%   / /Hang Sang CLOSED UP 148.57 POINTS OR 0.58% The Nikkei closed UP 209.46 POINTS OR 1.07%/Australia’s all ordinaires  CLOSED UP  0.19%/Chinese yuan (ONSHORE) closed   UP at 6.8089/Oil DOWN to 48.45 dollars per barrel for WTI and 50.84 for Brent. Stocks in Europe OPENED MOSTLY IN THE GREEN     ..Offshore yuan trades  6.7631 yuan to the dollar vs 6.8089 for onshore yuan. NOW  THE OFFSHORE IS  STRONGER TO THE ONSHORE YUAN/ ONSHORE YUAN STRONGER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS HUGELY  STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE SLIGHTLY STRONGER DOLLAR. CHINA NOT HAPPY WITH THE NEWS THAT ITS DEBT HAS BEEN DOWNGRADED  /CHINA UNDERGOES INTERVENTION AGAIN LAST NIGHT DRIVING UP BOTH YUANS.

3a)THAILAND/SOUTH KOREA/NORTH KOREA

i)NORTH KOREA/SOUTH KOREA

b) REPORT ON JAPAN

c) REPORT ON CHINA

Wow!! this is telling; Chinese Caixin Manufacturing index shows a contraction in China for the first time.  Clearly the Chinese economy is in a downtrend and that does not bode well for the global economy

(courtesy zero hedge/Caixin)

 

 

 

China Manufacturing Contracts For The First Time In A Year: “The Economy Is Clearly On A Downward Trajectory”

Following yesterday’s official  (if less credible and focused mostly on SOEs) manufacturing and non-mfg PMI reports from China’s National Bureau of Statistics, both of which came either in line or slightly better than expected, moments ago Caixin/Markit reported its own set of Chinese manufacturing data, and it was far more disappointing: at 49.6, not only did it miss expectations of 50.1, but by printing below 50, the operating conditions faced by Chinese goods producers deteriorated for the first time in nearly a year. As shown below, this was the first contractionary print sine last June when China’s massive, anti-deflationary fiscal stimulus kicked in.

The seasonally adjusted PMI posted below the neutral 50.0 value at 49.6 in May, the first contractionary print since the middle of 2016. Although only indicative of a marginal deterioration in operating conditions, Caixin conceded that the index fell from 50.3 to signal the first decline in the health of the sector for 11 months.

The fall in the headline index coincided with slower increases in output and new orders, while staff numbers were cut at a quicker rate. Subdued demand conditions underpinned a renewed fall in purchasing activity, albeit only slight, and the first increase in inventories of finished items in 2017 so far. The latest data also signalled the first fall in input costs since last June, which in turn led manufacturers to lower their selling prices for the first time since February 2016.

Commenting on the data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:

“The Caixin China General Manufacturing PMI fell 0.7 points to 49.6 in May, marking its first contraction in 11 months. The subindices of output and new business stayed in expansionary territory, but both fell to their lowest levels since June last year. The subindices of input costs and output prices dropped into contractionary territory for the first time since June 2016 and February 2016 respectively. The sub-index of stocks of purchases signalled a renewed decline, while the sub-index of stocks of finished goods rebounded, indicating that companies have stopped actively restocking as inventories began to stack up. China’s manufacturing sector has come under greater pressure in May and the economy is clearly on a downward trajectory.”

And while Chinese manufacturers reported a further rise in production during May, the pace of expansion was the weakest in the current 11-month sequence and only slight. Softer growth in output reflected a relatively muted increase in total new orders during May. Furthermore, growth in new order books was also the slowest seen since the current upturn began in July 2016. Data indicated that customer demand was relatively subdued both at home and overseas, with new export sales rising at a similarly marginal pace. Confidence towards the year-ahead meanwhile remained weaker than the historical average, with the degree of optimism unchanged from April’s four-month low.

At the same time, employment continued on a downward trend, with the rate of job shedding picking up slightly for the third month running. Notably, it was the quickest decline in workforce numbers seen since last September. Lower staffing levels were partly linked to company down-sizing initiatives, but also the non-replacement of voluntary leavers. As a result, outstanding business increased again in May and at the fastest pace this year so far.

Goods producers in China lowered their purchasing activity for the first time in 11 months in May, albeit only slightly. A number of panellists mentioned that weaker than expected sales had weighed on input buying. As a result, stocks of inputs declined and at the quickest pace since January. Subdued sales also contributed to a renewed increase in inventories of finished items.

Although purchasing activity fell in May, average delivery times continued to lengthen. A number of panellists blamed longer lead times on stock shortages at vendors.

Manufacturing companies reported the first decline in average cost burdens for nearly a year in May. The rate of reduction was marginal overall, and widely linked by respondents to lower raw material prices. Firms generally passed on any savings to clients, by cutting their output charges for the first time since February 2016.

The FX market reacted swiftly with AUDUSD gains being erased…

And Offshore Yuan erasing early losses and pushing to new highs…

* * *

None of this should come as a surprise: back in February we showed that, as a result of China’s deleveraging measures, the global credit impulse had suddenly tumbled back to zero.

And since that is a 3-4 month leading indicator, it was only a matter of time before China’s economy reverted back into contraction, as the latest PMI data now confirms.

 

end

Another government intervention sees the Chinese yuan continue to rise in its biggest 4 day rally in over 12 years.The move is meant to create havoc for our yuan shorters.  The deposit rate lowers to 15% but HIBOR rises to 19.59%

(courtesy zero hedge)

China Fireworks Continue With Yuan’s Biggest 4-Day Rally In 12 Years

China’s unprecedented crackdown against Yuan shorts continued overnight, when the FX market saw even more fireworks as the onshore yuan headed for the biggest four-day advance since 2005 following the strongest central bank fixing since January and amid ongoing speculation China’s central bank is trying to crush shorts while China’s big banks continue to limit offshore liquidity.

The onshore Yuan rose 0.18% to 6.8062, extending the four-day gain to 1.2%, as of late trading in Shanghai. At one point in the session, the Yuan rose as much as 6.79, the most since July 2005, when China ended a peg to the dollar, according to Bloomberg.  Earlier, the People’s Bank of China strengthens its reference rate by 0.79% to 6.8090 from 6.8633, the most since January. According to trader, the PBOC continues to use the fixing to guide the exchange rate higher, and both the onshore and offshore yuan will remain strong in the short term; Kenix Lai, an FX analyst at Bank of East Asia told Bloomberg that Thursday’s reference rate was stronger than what the bank’s model suggests. The gap between the onshore and offshore yuan rates narrowed modestly to 0.7%, after widening to 1% on Wednesday.

Meanwhile, the internals suggest that the move is not over as onshore yuan 12-month non-deliverable forwards gain for a seventh day, advancing 0.04% to 6.9785, while CNY 1-month volatility rises 8 basis points to 3.82%.

Separately, Bloomberg’s replica of CFETS index, which tracks the yuan against 24 currencies, climbed 0.6% to 92.96, this was the biggest advance since the index was expanded.

The moves in the offshore markets were even more dramatic, with the CNH fluctuating between early gains and leading to subsequent losses; last trading 0.3% weaker at 6.76041 per dollar after earlier rising to a seven-month high. The impact of the PBOC’s direct intervention meant the USD/CNH one-month risk-reversal options volatility fell to -0.1075, indicating options to sell the yuan against the dollar cost less than the options to buy: this was the first time this has happened since 2011.

In another notable move, the CNH tomorrow next forward points soared as much as 205 points to 290, the highest on record…

… however later in the session the move reversed direction to drop to 72.5. CNH 1-month forward points jump for a second day, rising 77.5 to 545

Similarly, after soaring earlier in the session, CNH overnight deposit rate ended up dropping 5 percentage points to 15%.

On the offshore liquidity front, the one-day CNH interbank rate in Hong Kong adds 21.74 percentage points to highest level since Jan. 6, according to fixing by Treasury Markets Association. One-week CNH Hibor advances 11.74 percentage points to 19.59633%; one-month rises to 10.57033%.

* * *

Despite the ongoing fireworks, there was some good news for Yuan traders. In a note released overnight, UBS wrote that the CNY has appreciated notably against the USD in the past couple of days – a bit of an understatement – and added that “we see this as playing a bit of catching up following recent USD weakness. CNY has actually depreciated against the basket this year despite strengthening against the USD. Poor liquidity meant CNH moved up more. We now expect CNY to stay strong and not moving beyond 7 against USD this year.

More importantly, UBS said it expects the RMB to remain stable going forward. Here are the note highlights:

After a notable recovery in demand and corporate earnings, there are signs of the current mini-cycle peaking, although the slowdown has been very gradual and will likely remain so. We see property and credit as the two main forces that will lead to a slowdown in growth. That said, property starts and construction will likely lag sales by at least 6 months, which means property construction should remain resilient until year-end While we think overall credit growth may slow more notably than the official TSF growth would suggest (see Tightening on Shadow Credit and Implications; Deleveraging by Supervisory Tightening), any impact on the economy will likely also be delayed until Q4. As such, we maintain our 2017 GDP growth forecast of 6.7%, and expectations for Q4 to slow to 6.5%. The slowdown is expected to be more pronounced in 2018, when we see growth slowing to 6.2%.

 

We now see USDCNY not moving beyond 7 by end 2017 (versus 7.15 previously) and to remain relatively stable in 2018 – not moving beyond 7.1 by end of next year (from 7.3 previously). A weaker USD since the beginning of this year despite expected Fed tightening, tighter Chinese capital outflow controls, subsiding risks of a US-China trade war, and altered expectation towards USDCNY (partly helped by PBC adjustments to its CNY fixing strategy) are all important factors behind recent USDCNY stability. Going forward, UBS does not expect the USD to strengthen in 2018, and we expect controls on capital outflows to persist and political pressure on the CNY to stay. We also see limited upside for CNY – if and when the USD weakens further, we see the Chinese government limiting CNY  appreciation (allowing for a bit of depreciation against the basket), so as to leave some room for USDCNY stability when the USD strengthens again.

 

 

Helped by exchange rate stability and controls on outflows, China’s FX reserves will likely stay above $3 trillion in 2017. As USDCNY has stabilized, carry-trade or arbitrage activities by corporate and financial institutions have come down substantially – even through the underlying desire by Chinese corporates and households to diversify into foreign assets remain. Onshore FX purchase activity by households also seems to have calmed down. As a result, we now see China’s FX reserves staying above $3 trillion in 2017, despite the fact that its current account surplus will likely shrink.

end

4. EUROPEAN AFFAIRS

France confirms: no trace of Russian involvement in Macron’s hacker attack with respect to his campaign

(courtesy zero hedge)

France Confirms No Traces Of Russian Hackers In Macron Campaign Cyber-Attack

In a blow to the anti-Russia narrative being spewed by any and everyone in the western establishment (most recently Hillary again), the head of the French National Agency of Information Systems Security (ANSSI) told AP that France has found no traces of Russian hackers in a cyberattack on President Emmanuel Macron’s campaign (we wonder if the result would have been the same if he, like Hillary, had lost).

French Intelligence Head: there is absolutely no evidence of Russian involvement in French Elex hacking. Hack was crude; could be anyone

Right after the event, it was claimed (by officials and the media lapdogs) that Russian hacking group called APT28 was responsible for the cyberattack on Macron’s presidential campaign.

However, according to ANSSI (the French cybersecurity agency has been investigating the attack) chief Guillaume Poupard,

the hacker attack on Macron’s campaign “was so generic and simple that it could have been practically anyone.”

 

He told AP that it “means that we can imagine that it was a person who did this alone. They could be in any country.”

Of course, given Putin’s meeting with Macron this week, we are sure the narrative remains alive and well and Putin must have strong-armed Macron to deny this.

As a reminder, the leak of Macron campaign data contained 9 gigabytes of emails, images and attachments dating back several months. At the time, the French authorities called on the national media not to report the contents of the leak, saying that doing so would violate election rules to stop campaigning a day ahead of an election. The candidate also barred RT and the Russian news agency Sputnik from his campaign HQ, accusing them of spreading false information about him. His team failed to provide any examples of such misreporting.

end

 

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

The USA will now go into the “annihilate phase as they try to destroy the Islamic state caliphate

(courtesy Mish Shedlock/Mishtalk)

Mattis: US To “Annihilate” Islamic State Caliphate, Civilian Casualties A “Fact Of Life”

Authored by Mike Shedlock via MishTalk.com,

US Defense Secretary James Mattis announced plans on Sunday to ‘Take Apart’ Islamic State Caliphate. Civilian casualties do not matter one bit.

The fight against Islamic State has shifted to “annihilation tactics” to stop potential terrorists who’ve flocked to places such as Iraq and Syria from returning to their home countries to wreak havoc, Defense Secretary James Mattis said Sunday.

 

“We have already shifted from attrition tactics where we shove them from one position to another in Iraq and Syria,” Mattis said on “Face the Nation” on CBS. “Our intention is that the foreign fighters do not survive the fight to return home to North Africa, to Europe, to America, to Asia, to Africa.”

 

“We are going to squash the enemy’s ability to give some indication that they’re — that they have invulnerability, that they can exist, that they can send people off to Istanbul, to Belgium, to Great Britain and kill people with impunity,” Mattis said.

 

Asked about the potential for greater civilian casualties from the stepped-up attacks, Mattis said such losses “are a fact of life.”

 

“The bottom line is we are going to accelerate the campaign against ISIS,” he said. “It is a threat to all civilized nations. And the bottom line is we are going to move in an accelerated and reinforced manner, throw them on their back foot.”

 

He said the U.S. plans to “strip them of any kind of legitimacy” and deny any country from providing Islamic State with any degree of protection as well as dry up the group’s fundraising.

Civilian Pay Price

The Intercept reports THE U.S. HAS RAMPED UP AIRSTRIKES AGAINST ISIS IN RAQQA, AND SYRIAN CIVILIANS ARE PAYING THE PRICE.

ON APRIL 24, a group of Syrian women bundled themselves and their children into a car and attempted to flee the small town of Tabqa, outside of Raqqa. In recent months the sleepy principality had become the site of raging battles between Islamic State militants and U.S.-backed proxy forces, waging a campaign to drive ISIS from the country. Packed into the fleeing car were 11 people, including eight members of the al-Aish family: three women between the ages of 23 and 40, and five children, the youngest one just 6 months old.

 

The al-Aish family’s flight from a warzone was similar to millions of other desperate journeys made by Syrian civilians over the past six years. But they would not make it to safety. As they fled Tabqa, their car was hit by an airstrike, reportedly carried out by the U.S.-led coalition against ISIS in Iraq and Syria. All 11 people were killed in the strike, in what local reports described as a “massacre.”

 

“A U.S.-led coalition warplane targeted heavy machine guns at civilians trying to flee the city of Al-Tabaqa, which is witnessing heavy clashes between gunmen,” reported the local anti-ISIS activist group Raqqa is Being Slaughtered Silently. The air raid led to “the death of a whole family.” Following the attack, photos of the young children from the al-Aish family circulated widely on social media and local news sites, including pictures of 3-year-old Abdul Salam and 6-month-old Ali.

 

The strike that killed the al-Aish family was just one of an estimated 9,029 strikes carried out by the U.S.-led coalition in Syria since 2014. The independent monitoring group Airwars estimates that coalition strikes in Syria and Iraq over the past several years have killed between 3,681 and 5,849 civilians, compounding the suffering of people who have already endured years of civil war. In recent months, local media have reported a steady stream of airstrikes that have hit civilian targets, including several particularly egregious strikes on packed schools and mosques.

 

But worse days for civilians in northern Syria could still be ahead, as the United States and its allies prepare for a terminal offensive against Raqqa — the last urban stronghold of ISIS and the capital of its deteriorating proto-state.

Agree or Disagree?

Civilian casualties “are a fact of life”. Time to “annihilate” ISIS says Defense Secretary, Agree or Disagree?
http://mishtalk.com/2017/05/30/us-to-take-apart-islamic-state-caliphate-civilian-casualties-be-damned 

48%Yes
40%No
12%Don’t Know
end
Another ISIS attack:  this time in a luxury hotel in downtown Manila, Philippines
(courtesy zero hedge)

ISIS Claims Responsibility For Attack On Luxury Resort In Manila, Dozens Injured

Update: According to Site Intel Group, an Islamic State operative has indicated IS is responsibile for the Resorts World Manila Attack.

* * *

Gunfire and explosions have been reported at the luxury Resorts World Manila hotel in the Philippines. A masked gunman was on the second floor of one hotel, firing at guests, hotel employees fleeing the scene told CNN Philippines. According to initial press reports, at least 25 people have been injured following the attack which has been claimed by Islamic State operatives.

Police, fire trucks and SWAT teams were seen in the area at about 1:30 a.m. local time Friday to deal with what may be a terrorist event, and takes place just days after president Duterte launched martial law in Mindanao in crackdown against local terrorist activity.

– reports of explosions/gunfire at Resorts World Manila, near the Manila Intl Airport. Avoid area & monitor local news.

One picture featured white smoke billowing from the top of the complex.

Thick smoke coming off from the top floor or Resorts World Manila. Gunshots were allegedly heard by people inside the casino area.

The venue, Resorts World Manila, also known as RWM, is a resort complex in Newport City which consists of 4 integrated hotels,39 restaurants, a shopping and a gambling area located in metropolitan Manila. RWM has an array of hotels, restaurants and bars. Tourists flock to the complex for its casino, shopping mall, cinema and theater.

“Resorts World Manila is currently on lockdown following reports of gunfire from unidentified men,” the resort posted to its Twitter feed.

Resorts World Manila is currently on lockdown following reports of gunfire from unidentified men.

The complex, which is described on RWM’s website as “the first and largest integrated resort in the Philippines,” is located across from Ninoy Aquino International Airport.

Casualties were seen being carried out on stretchers and loaded up onto ambulances, or helped to make their own way out of the center in the aftermath of the incident, which occurred at about 1:30am local time on Friday morning

View image on TwitterView image on TwitterView image on TwitterView image on Twitter

BREAKING: Ilang tao, sugatan matapos magmadaling lumabas ng Resorts World Manila sa Pasay. Nakarinig kami ng 2 pang putok ng baril. @dzbb

The Philippines has been grappling with incidents of terrorism, especially on the southern island of Mindanao. There, in the city of Marawi, government forces have been battling ISIS-linked militants for control of the city.

The battle for Marawi, a largely Muslim city, has displaced at least 70,000 residents and left 140 people dead. The terrorist siege unfolded last week as Muslims worldwide began to mark the holy month of Ramadan.

View image on TwitterView image on Twitter

Employees of Resorts World Manila ran out after hearing gun fire from the second floor. Bonnet-wearing men are the suspects. @inquirerdotnet

Philippines President Rodrigo Duterte declared martial law over the island of Mindanao last week after the crisis began. Duterte has suggested he might extend martial law until the end of the year or impose it nationwide, alarming critics.

6 .GLOBAL ISSUES

Canada unveils a tiny $650 million lumber industry bailout as they are asserting that they will stand up to the USA

(courtesy zerohedge)

Canada Unveils $650 Million Lumber Industry ‘Bailout’ “To Stand Up To US”

Canada’s Natural Resources Minister Jim Carr just announced C$867 million (around $650 million) in financial supports for softwood lumber producers and the communities where they are based…“Canada is standing up to the U.S., Canada is standing up for Canadians.”

On Wednesday, the Conference Board of Canada released a report saying Canadian softwood producers would pay $1.7 billion in duties a year and cut 2,200 jobs and $700 million in U.S. exports over the next two years before the dispute is settled.

And perhaps on the basis of that report, as Canadian Press reports, the package includes loans and loan guarantees to help cushion the blow for forestry companies and to help them exploring new markets and innovations.

Package includes up to C$605 million in loans and loan guarantees for companies, C$45 million to reach new markets, C$118 million in innovation funding for firms, C$9.5 million funding for those who lose jobs, C$80 million in training, C$10 million for indigenous resource development.

 

The help includes C$260 million to help diversify the market base for Canadian lumber products, improve the efficiency of indigenous forestry initiatives and extend work-sharing agreement limits to minimize layoffs.

 

The money also includes measures to support workers who want to upgrade their skills and transition to a different industry.

 

Cabinet discussed the options for a package last month, but the federal government wanted more input from the provinces via the special working group Carr established in February.

Notably, the government has been careful to characterize the money as a support package, not a bailout, in order to avoid running further afoul of protectionist forces in the United States.

Remember how everyone screamed at Trump that this would send Lumber prices soaring, crush homebuilder margins, send housing costs through the roof? Well…

7. OIL ISSUES

Another manipulated market; the oil market as the west needs oil prices higher

(courtesy zero hedge)

 

Oil Jumps On First ‘OPEC Sources’ Headline Of The Day

WTI Crude had erased its post-API (big crude draw) gains this morning after weak China PMI overnight and so something had to be done to keep the oil-normalization dream alive. OPEC sources stepped up…

  • OPEC COULD REVIVE IDEA OF DEEPER SUPPLY CUT AT NEXT MEETING IF OIL INVENTORIES STAY HIGH – TWO SOURCES FAMILIAR WITH MATTER

The above is not news, per se, as a major sellside desk reminded us moments after the headline hit, nothing that “WTI has jumped a tad on these Reuters headlines – trying to rally above $47.70. To be fair, this is known information. OPEC shared that it would discuss deeper cuts but decided to deliver the market consensus. Now $47.50.”

And the reaction was a kneejerk higher oiff the pre-API levels.

WTI and Gasoline gets confused as the encounter:

i) a big crude drawdown

ii) a huge 21 month high production

(courtesy zero hedge)

WTI/RBOB Mixed After Biggest Crude Draw Since 2016, Production Hits 21-Month Highs

Oil prices have roller-coastered since last night’s API report of the biggest crude draw since September (hurricane-impacted), but kneejerked higher after DOE confirmed a big crude draw (though less than API), the largest since Dec 2016 and 8th weekly draw in a row. Distillates saw a surprise build, crude exports hit a record high, and production rose again to its highest since Aug 2015.

 

API

  • Crude -8.67mm (-3mm exp) – biggest since Sept 2016
  • Cushing -753k
  • Gasoline -1.726mm (-1.5mm exp)
  • Distillates +124k

DOE

  • Crude -6.43mm (-3mm exp)
  • Cushing -747k (-500k exp)
  • Gasoline -2.86mm (-1.5mm exp)
  • Distillates +394k (-700k exp)

8th weekly crude draw in a row and biggest since Dec 2016… surprise build in distillates

U.S. COMMERCIAL CRUDE STOCKS are drawing down much earlier and harder than normal for time of year

Bloomberg’s Laura Blewitt notes that Today is June 1st — an important day for Bakken crude. As of today, Energy Transfer’s controversial Dakota Access Pipeline is now in service, providing a key outlet for oil to the U.S. Gulf Coast.

Lower 48 production continues to rise… from 8.815mm to 8.835mm – highest in 21 months…

Rystad Energy says U.S. crude production will exceed 10 million barrels a day before year-end, echoing sentiment from other analysts.  

Crude exports hit a new record high…

Gasoline demand at its highest since the peak last summer – seasonally ahead…

It’s been a week since the OPEC extension deal and prices continue to hold lower… GLENCORE CEO SAYS OPEC HAS LOST MARKET CONTROL DUE TO SHALE – but prices were holding above API lows heading into the DOE print (ticking up into the data)= and bounced higher (though only marginally) on the data…

 

Close up…

 

8. EMERGING MARKET

end

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

Euro/USA   1.1221 DOWN .0017/REACTING TO  + huge Deutsche bank problems + USA election:/TRUMP HEALTH CARE DEFEAT//ITALIAN REFERENDUM DEFEAT/AND NOW ECB TAPERING BOND PURCHASES/ /USA RAISING INTEREST RATES/EUROPE BOURSES MOSTLY IN THE GREEN 

USA/JAPAN YEN 111.15 UP 0.354(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 1.2853 UP .0034 (Brexit  March 29/ 2017/ARTICLE 50 SIGNED

USA/CAN 1.3498 UP .0008 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU/TRUMP INITIATES LUMBER TARIFFS ON CANADA)

Early THIS THURSDAY morning in Europe, the Euro FELL by 17 basis points, trading now ABOVE the important 1.08 level  FALLING to 1.1221; 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+ TRUMP HEALTH CARE BILL DEFEAT AND MONTE DEI PASCHI NATIONALIZATION / Last night the Shanghai composite CLOSED  DOWN 14.56 POINTS OR .47%     / Hang Sang  CLOSED  UP 148.57 POINTS OR 0.58% /AUSTRALIA  CLOSED UP 0.19% / EUROPEAN BOURSES OPENED MOSTLY IN THE GREEN

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 THURSDAY morning CLOSED UP 209.46 POINTS OR 1.07%

Trading from Europe and Asia:
1. Europe stocks  OPENED MOSTLY IN THE GREEN 

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 148.57 POINTS OR 0.58%  / SHANGHAI CLOSED DOWN 14.56 POINTS OR .47%   /Australia BOURSE CLOSED UP 0.19% /Nikkei (Japan)CLOSED UP 209.44 POINTS OR 1.07%    / INDIA’S SENSEX IN THE RED

Gold very early morning trading: 1266.15

silver:$17.13

Early THURSDAY morning USA 10 year bond yield: 2.215% !!! UP 1 IN POINTS from TUESDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%.

 The 30 yr bond yield  2.874, UP 1  IN BASIS POINTS  from WEDNESDAY night.

USA dollar index early THURSDAY morning: 97.18 UP 26  CENT(S) from WEDNESDAY’s close.

This ends early morning numbers THURSDAY MORNING

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And now your closing THURSDAY NUMBERS

Portuguese 10 year bond yield: 2.99%  DOWN 7 in basis point(s) yield from WEDNESDAY 

JAPANESE BOND YIELD: +.047%  DOWN 1/5  in   basis point yield from WEDNESDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD: 1.563%  UP 1 IN basis point yield from WEDNESDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 2.256 UP 5   POINTS  in basis point yield from WEDNESDAY 

the Italian 10 yr bond yield is trading 70 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: +.305% UP 0 IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR THURSDAY

Closing currency crosses for THURSDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/1:00 PM 

Euro/USA 1.1215 DOWN .0024 (Euro DOWN 24 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 111.37 UP  0.571 (Yen DOWN 57 basis points/ 

Great Britain/USA 1.2878 UP 0.0004( POUND UP 4 basis points)

USA/Canada 1.3516 UP .0025 (Canadian dollar DOWN 25 basis points AS OIL FELL TO $48.59

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This afternoon, the Euro was DOWN by 24 basis points to trade at 1.1215

The Yen FELL to 111.37 for a LOSS  of 57  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 BY 4  basis points, trading at 1.2878/

The Canadian dollar FELL by 25 basis points to 1.3516,  WITH WTI OIL FALLING TO :  $48.59

The USA/Yuan closed at 6.8080/
the 10 yr Japanese bond yield closed at +.047% DOWN 1/5  IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield UP 1  IN basis points from WEDNESDAY at 2.220% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 2.874  UP 1 in basis points on the day /

Your closing USA dollar index, 97,23 UP 30 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 THURSDAY: 1:00 PM EST

London:  CLOSED UP 23.82 POINTS OR 0.32%
German Dax :CLOSED UP 49.86 POINTS OR 0.40% 
Paris Cac  CLOSED UP  35.04 POINTS OR 0.66% 
Spain IBEX CLOSED  UP 1.00 POINTS OR 0.01%

Italian MIB: CLOSED  UP 204.39 POINTS/OR 0.99%

The Dow closed UP 135.53 OR 0.65%

NASDAQ WAS closed UP 48.31 POINTS OR 0.78%  4.00 PM EST
WTI Oil price;  48.59 at 1:00 pm; 

Brent Oil: 50.54 1:00 EST

USA /RUSSIAN ROUBLE CROSS:  56.42 UP 19/100 ROUBLES/DOLLAR 

TODAY THE GERMAN YIELD RISES T0  +0.305%  FOR THE 10 YR BOND  4.PM EST EST

END

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

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

WTI CRUDE OIL PRICE 5:00 PM:$48.03

BRENT: $50.32

USA 10 YR BOND YIELD: 2.211%  (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)

USA 30 YR BOND YIELD: 2.86%

EURO/USA DOLLAR CROSS:  1.1213 DOWN .0025

USA/JAPANESE YEN:111.39  UP 0.596

USA DOLLAR INDEX: 97.20  UP 28  cent(s) ( HUGE resistance at 101.80 broken TO THE DOWNSIDE)

The British pound at 5 pm: Great Britain Pound/USA: 1.2882 : UP .0007  OR 7 BASIS POINTS.

Canadian dollar: 1.3512 UP 22 BASIS pts 

German 10 yr bond yield at 5 pm: +.305%

END

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

TRADING IN GRAPH FORM FOR THE DAY

Small Caps Spike Most Since The Election As Crude Pumps’n’Dumps

Buy, Sell, or…

 

Overnight saw China PMI slump back into contraction but ongoing squeeze efforts sent Yuan soaring…

 

S&P record highs as US Macro data slumps near 16-month lows…

As Bloomberg’s Vincent Cignarella notes, U.S. equities rose, the S&P 500 index to an intraday record, the dollar strengthened and Treasuries fell as a spike in private hiring data bolstered optimism in the economy before Friday’s non-farms payroll report. Crude failed to hold gains from a larger inventory draw than expected. The shift in asset prices came after ADP reported more workers were added to U.S. payrolls in May than forecast. All eyes now on the jobs report Friday, with market assigning all but certain odds that the Fed will hike rates in two weeks.

After a big tumble at the open yesterday (into month-end), Small Caps were panic-bid today – the best day for Small Caps since the election)

 

Dow hit a new record high for first time since March 1st.

 

As shorts were squeezed notably over the last two days…

 

VIX was pressed lower once again (and fell below the Maginot Line of 10)…

 

Banks battled back from yesterday’s bloodbath with only MS covering the losses…

 

Treasury yields rose marginally on the day but remain markedly lower on the week…

 

The Dollar Index rose most in 2 weeks (spike after ADP but faded)…

 

But remains unch on the week, with AUD and CAD weakness offsetting Yuan strength…

 

Gold and SIlver lost ground today but rallied back after early morning dumps…

 

WTI/RBOB saw a big pump’n’dump today, rallying after the inventory data, but reversing aggressively lower as the USD index turned up…

 

 

 

end

Bricks and Mortar meltdown in the retail sector of the USA

(courtesy WolfRichter/WolfStreet)

Brick-and-Mortar Retail Meltdown Has a Busy Month

After years of asset stripping by private equity firms and hedge funds.

This morning, luxury handbag retailer Michael Kors Holdings, which had had stellar sales through 2014, revealed in its Q4 earnings report that it would close up to 125 retail stores and take a $125 million charge, to save $60 million this fiscal year.

Sales plunged 11.3% year-over-year in Q4, and the company lost $27 million, or 17 cents a share. It doused investors with a gloomy outlook for its fiscal year 2018, with revenues expected to drop over 5% to $4.25 billion, and with same-store sales plunging “in the high-single digit range.”

The company was dogged by heavy promotions, a “difficult retail environment,” and a “product and store experience” that didn’t “sufficiently engage and excite consumers,” CEO John Idol said. So the company needs to enhance the store experience “to deepen consumer desire and demand for our products.”

Despite a “new $1 billion stock repurchase program” – funded with the money the company is losing, so to speak – share plunged 8.5%.

Other retailers aren’t so lucky.

On June 1, Gymboree, a children’s clothing retailer, will face an interest payment on its debt that it is unlikely to make. So a bankruptcy filing could be next. Serious bankruptcy rumors started swirling on April 11 when issues with the interest payment cropped up.

On May 4, “people familiar with the matter” told the Denver Post that Gymboree was looking to close 350 of its 1,200 stores as part of a broader restructuring in bankruptcy court. Buckling under its debt, the company has been in talks with its lenders. According to the Wall Street Journal, the company has contacted firms known for liquidating inventories and other assets during store closures.

Inevitably, there is a private equity angle. PE firm Bain Capital acquired the retail chain in 2010 for $1.7 billion, stripped out assets, and loaded the company up with debt – by now $1 billion, an amount company founder Joan Barnes described to Bloomberg as “horrendous.” Meanwhile, Walmart, Children’s Palace, and online retailers have put the squeeze on sales and margins.

To raise cash and stay alive and carve out a niche online, the company mortgaged its distribution center in 2015. In 2016, it sold Gymboree Play and Music to Zeavion Holding, a Bain investor. But in its fourth quarter, the company lost $325 million, and the CEO was sacked.

 

Bain Capital has been buying up Gymboree’s beaten-down bonds to have more leverage during the bankruptcy and participate in what Bain hopes will be Gymboree’s revival, “a person familiar with the matter” told Bloomberg. As of April, prices for those bonds collapsed to 4 cents on the dollar. Bain’s equity stake is essentially worthless.

This has become a common PE game in the run-up to a bankruptcy filing: buying the bonds to get more leverage and possibly, as part of the bankruptcy, exchange those bonds for equity, and regain ownership after much of the debt has been shed, only to start all over again.

On May 25, Sears Holdings announced that quarterly sales had plunged another 20% year-over-year. They were down 46% from Q1 2014 and 63% from Q1 2007. The plunges are accelerating, and given the endless store closings, cuts in advertising, and so on, revenues are now projected to drop to zero by Q1 2020. In theory. In practice, a bankruptcy filing is on the horizon. It’s hard for a highly indebted retailer run by a hedge fund manager to keep going when sales just disappear:

On May 15, Rue21filed for bankruptcy. The teen apparel chain, which once had 1,179 stores in the US, has already started closing 400 stores in April and may close more stores. During the bankruptcy process, “Rue21 expects to continue normal business operations,” it said.

This came after “people familiar with the matter” had told Debtwire in April that Rue21 had missed principal and interest payments on its debt and was preparing to file for bankruptcy.

Once again, there is a private equity angle: the company was acquired by PE firm Apax in 2013 for about $1 billion. Back in September 2013, problems were already piling up when JPMorgan, Bank of America, and Goldman Sachs had trouble selling the junk debt they pledged to sell to fund the buyout. It took less than four years to blow up the company.

But Apax might still come out ahead. This is a prepackaged filing: the company said it had entered into a restructuring agreement with lenders holding 96.8% of the company’s secured term loan and 60.2% of the company’s unsecured notes. Apax is part of that deal.

On May 11, Marsh grocery store chain in Indiana and Ohio filed for chapter 11 bankruptcy. At its peak in 2006, it operated 116 supermarkets and 154 convenience stores.

And the private equity angle: During the LBO boom that year, the Marsh family sold the chain to PE firm Sun Capital for $325 million. Sun Capital then did what PE firms do: cut expenses, close stores, strip out assets, and load the company up with debt. It took the PE firm 10 years to get through with this.

At the time of the bankruptcy filing, Marsh was down to 67 stores. In the filing, it said it already sold its in-store pharmacy business to CVS Pharmacy. It’s trying to find a buyer for the stores and proposed an auction on June 12. If a buyer doesn’t materialize, the stores will be shuttered.

When the company notified the Indiana Department of Workforce Development that it may have to lay off 1,535 workers, it blamed “unexpected difficulties and increased competition.”

On May 4, Central Grocers filed for bankruptcy protection, after General Mills, Coca-Cola Co., and other suppliers filed an involuntary Chapter 7 liquidation petition for the grocer, claiming it owed them $1.7 million, according to the Wall Street Journal. Other suppliers too have gotten cold feet as the company has run out of liquidity to pay them.

The cooperative of grocery wholesalers in the Midwest sells its Centrella-branded products to independent retail chains. It also owns and operates three regional chains, Strack & Van Til, Ultra Foods, and Town & Country Markets. The company is trying to sell some of the more viable stores and close the rest. Inventory at its distribution center is being liquidated.

This concludes the May installment of brick-and-mortar retail meltdown. Here’s the prior installment… I’m in Awe of How Fast Brick-and-Mortar Retail is Melting Down.

And what’s going to happen to the malls? Read… Retail Meltdown Demolishes Mall Investors

end

 

This is getting ridiculous!! Nigel Farage is a person of interest in the FBI’s fake probe of Trump and Russia;

(courtesy zero hedge)

Nigel Farage Is “Person Of Interest” In FBI’s Probe Of Trump And Russia

In what may be the most unexpected news of Thursday morning, the Guardian has reported that former UKIP leader, and the man largely responsible for Brexit, Nigel Farage is a “person of interest” in the FBI’s investigation looking into possible collusion between the Kremlin and Donald Trump’s presidential campaign. As the UK newspaper notes, citing “sources with knowledge of the investigation“, the former Ukip leader had raised the interest of FBI investigators because of his relationships with individuals connected to both the Trump campaign and Julian Assange, the WikiLeaks founder whom Farage visited in March.

“One of the things the intelligence investigators have been looking at is points of contact and persons involved,” one source said. “If you triangulate Russia, WikiLeaks, Assange and Trump associates the person who comes up with the most hits is Nigel Farage.

So far, Farage has not been accused of wrongdoing and is not a suspect or a target of the US investigation. But being a person of interest means investigators believe he may have information about the acts that are under investigation and he may therefore be subject to their scrutiny.

The Guardian adds that it was Farage’s proximity to people at the heart of the investigation that was being examined as an element in their broader inquiry into how Russia may have worked with Trump campaign officials to influence the US election. “He’s right in the middle of these relationships. He turns up over and over again. There’s a lot of attention being paid to him.”

The source mentioned Farage’s links with Roger Stone, Trump’s long-time political adviser who has admitted being in contact with Guccifer 2.0, a hacker whom US intelligence agencies believe to be a Kremlin agent.

Meanwhile, Farage’s spokesman said he had never worked with Russian officials, and described the Guardian’s questions about Farage’s activities as “verging on the hysterical”.

“Nigel has never been to Russia, let alone worked with their authorities,” the spokesman said. But he did not respond to questions about whether Farage was aware of the FBI inquiry; had hired a lawyer in connection to the matter; or when Farage first met Trump.

 

The spokesman also declined to comment on whether Farage had received compensation from the Russian state-backed media group RT for his media appearances. RT, which has featured Farage about three times over the last 18 months, also declined to comment, citing confidentiality.

Farage said he only met Assange once has but declined to say how long the two have known each other.

In the past, the former Ukip leader has also voiced his support for the Russian president, calling Vladimir Putin the leader he most admired, in a 2014 interview. Ukip also has history with Assange: Gerard Batten, a Ukip member of the European parliament (MEP), defended the Wikileaks founder in a speech in the European parliament in 2011.

One source familiar with the US investigation told the Guardian that the examination of Farage’s activities was considered especially delicate given his role as an MEP.

* * *

While Farage reportedly first met Trump at a campaign stop in Mississippi in August, where he spoke at a Trump campaign event, Farage’s relationships with people close to the US president began years earlier. Farage first met Steve Bannon, Trump’s strategist and former campaign chief executive, in the summer of 2012, when Bannon, who was interested in rightwing movements in Europe, invited the then Ukip leader to spend a few days in New York and Washington, according to an account in the New Yorker magazine.

There Farage was introduced to, among others, the staff of the then senator Jeff Sessions, who is now the US attorney general. Speaking of his longtime admiration for Bannon, Farage told the New Yorker last year: “I have got a very, very high regard for that man’s brain.”

Two years later, in 2014, Breitbart News, of which Bannon was executive chair, opened an office in London. A top editor, Raheem Kassam, later went on to work as Farage’s chief of staff.

 

In 2015, Breitbart News arranged a dinner in Farage’s honour at “the embassy”, the nickname for the house the news group rented in Washington. According to a report in Bloomberg, attendees were “blown away” by Farage’s speech at the event, which was also attended by Sessions.

 

Then, on 24 June last year, the day after the UK voted to leave the EU, Farage thanked Bannon during an interview for Breitbart News’s coverage of the leave campaign. Bannon, in turn, congratulated Farage on his victory, saying he had led an extraordinary “David v Goliath” campaign.

Farage’s ties to Stone are also under scrutiny, it is understood. Stone has frequently publicised his relationship with Assange and described him on Twitter as “my hero”.

* * *

Farage was asked about his relationship with Assange in a recent interview with Die Zeit, the German newspaper, after he was seen on 9 March leaving the Ecuadorian embassy where Assange has lived for years. Farage, who declared he had “never received a penny from Russia”, said he met Assange for “journalistic reasons”. Pressed on his meetings with Russian officials in the past, Farage initially denied having had any, but then acknowledged that he had met Alexander Yakovenko, the Russian ambassador to the UK, in 2013.

Asked by Die Zeit what he was doing now, and whether he saw himself as a politician or a journalist, Farage concluded: “Changing public opinion. That’s what I have been doing for 20 years. Using television, media. Shifting public opinion. That’s what I am good at.”

A spokesman for Farage told the Guardian he had only met Assange on that one occasion. “The meeting was organised by a broadcaster, they could have easily sent another presenter instead.”

end

 

I would not look too much into this latest ADP report (private).  It shows a surge in employment despite the biggest job cut rise in over 2 years:

(courtesy ADP/zerohedge)

 

ADP Employment Surges Despite Biggest Job Cuts Spike In 2 Years

Despite Challenger’s headlines of a 71% jump in job cuts YoY in May, ADP reported a bigger-than-expected 253k rise in employment for May (above all economist expectations) after a big plunge in April.

May saw the biggest YoY jump in job cuts since September 2015

But ADP reports a massive surge in employment.

Services jobs outpaced goods-producing jobs once again (+205k vs +48k) with medium-sized business seeing the biggest jump.

From the report:

“May proved to be a very strong month for job growth,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Professional and business services had the strongest monthly increase since 2014. This may be an indicator of broader strength in the workforce since these services are relied on by many industries.”

 

Mark Zandi, chief economist of Moody’s Analytics said, “Job growth is rip-roaring. The current pace of job growth is nearly three times the rate necessary to absorb growth in the labor force. Increasingly, businesses’ number one challenge will be a shortage of labor.”

Which is not at all what he predicted before Trump won the election.

Meanwhile, Citi quickly poured some cold water on the report, saying “ADP bests consensus but…”

This is the type of ADP prints that traders get excited about. The headline rise of 253k blasts 180k expected, with 205k from service producing jobs and 48k from goods. US 10y yields have shot up 1.5bps towars 2.23% on the print, while USDJPY trades higher from the 111.15 area to 111.40.

 

While this move is decent, the risk is that it proves short-lived and as we type, there’s evidence that it will. More jobs are great but remember that the market is looking for more money – via a higher Average Hourly Earnings (AHE) print – on Friday. AHE is currently expected to rise 0.2%MoM or 2.6%YoY, while NFP (likely to be revised up following ADP) is seen at 173k.
can i add to ADP

Some more details:

Change in Nonfarm Private Employment

Change in Total Nonfarm Private Employment

Change in Total Nonfarm Private Employment by Company Size

Full infographic:

<br /> ADP National Employment Report: Private Sector Employment Increased by 253,000 Jobs in May<br /> http://www.adpemploymentreport.com/2017/May/NER/images/infographic/main/…&#8221; width=”598″ />

 

Citi notes that this is the type of ADP prints that traders get excited about. The headline rise of 253k blasts 180k expected, with 205k from service producing jobs and 48k from goods. US 10y yields have shot up 1.5bps towars 2.23% on the print, while USDJPY trades higher from the 111.15 area to 111.40.

While this move is decent, the risk is that it proves short-lived and as we type, there’s evidence that it will. More jobs are great but remember that the market is looking for more money – via a higher Average Hourly Earnings (AHE) print – on Friday. AHE is currently expected to rise 0.2%MoM or 2.6%YoY, while NFP (likely to be revised up following ADP) is seen at 173k.

end

Senator Mike Lee, a member of the Judiciary Committee is one smart cookie.  Trump is even considering him as a candidate for the Supreme Court if one of its members retires.  Yesterday, Lee states that when Comey will testify before the committee, he would be surprised if he states that Trump pressured Comey to end the investigation on Flynn and Russian connections.  He explains why..

a must view…

(courtesy zero hedge)

Why A Judiciary Committee Member Said “I’d Be Surprised If Comey Testifies That Trump Pressured Him”

Echoing the thoughts of many who have watched this farce from outside the Beltway, Senator Mike Lee said early Thursday that he would be surprised to hear former FBI Director James Comey testify that President Trump pressed him to end a federal investigation into former national security advisor Michael Flynn.

Speaking on CNN’s “New Day”, Lee said “that would surprise me” when asked if Comey would testify that Trump pressured him. His reasoning is simple…

“I’m on the Judiciary Committee and just a few weeks ago we had, still Director Comey, come and testify. Someone asked him about political pressure and he said, ‘This is something I haven’t seen, something in my experience has not occurred.'”

As a reminder, testifying under oath in front of the Senate Judiciary Committee on May 3rd, Comey states that he has not been pressured to close an investigation for political purposes, “not in my experience.”

COMEY: Not in my experience. Because it would be a big deal to tell the FBI to stop doing something like that — without an appropriate purpose.

 

I mean where oftentimes they give us opinions that we don’t see a case there and so you ought to stop investing resources in it. But I’m talking about a situation where we were told to stop something for a political reason, that would be a very big deal.

 

It’s not happened in my experience.

Caught on tape?

As The Hill reports, recent reports said Comey is expected to testify that he believes Trump was trying to meddle in the FBI’s investigation of Russian interference in the presidential election.

Lee said he hasn’t personally seen Comey’s memos related to Trump’s reported requests to the former FBI director to end the investigation into Flynn.

 

“Those memos, if they exist, if he said those things, would seem to contradict his testimony,” Lee said.

 

“So that’ll be my first question …, ‘How do you reconcile that memo, if in fact it does say that, with the testimony you provided with the committee in early May?’ “

 

Lee said there are an “infinite number of possibilities” about what could happen.

 

“I’m not going to pre-judge the fact until I have them,” he said, “but I will have a whole bunch of follow-up questions for him if these things turn out to be the case.”

This comes a day after reports that Comey would testify publicly.

 

 

end

It is now official: Comey to testify next Thursday June 8

(courtesy zerohedge)

It’s Official: Comey To Testify Next Thursday, June 8

We already know the topic, and now we know the time and place: according to just released statement by the Senate Intel Committee, former FBI Director James Comey will testify in an open session next Thursday, June 8, starting at 10:00 am, which will be followed by a closed session testimony at 1pm.

Recall, that as CNN reported yesterday, the former FBI director plans to testify publicly that President Donald Trump “did push Comey to end his investigation into a top Trump aide’s ties to Russia.”

When he testifies, Comey is unlikely to be willing to discuss in any detail the FBI’s investigation into the charges of possible collusion between Russia and the Trump campaign — the centerpiece of the probe, this source said. But he appears eager to discuss his tense interactions with Trump before his firing, which have now spurred allegations that the president may have tried to obstruct the investigation. If it happens, Comey’s public testimony promises to be a dramatic chapter in the months-long controversy, and it will likely bring even more intense scrutiny to an investigation that Trump has repeatedly denounced as a “witch hunt.”

As the CNN sources concluded, “the bottom line is he’s going to testify. He’s happy to testify, and he’s happy to cooperate.” We doubt Donald Trump will share Comey’s sentiment.

end

 

Another flip flop for Trump but this is understandable.  He wants to give peace between Israel and the Palestinians a chance.

For now Trump will not move the USA embassy to Jerusalem

 

 

(courtesy zerohedge)

In Latest Flip-Flop, Trump Decides Not To Move Israel Embassy To Jerusalem

The list of campaign promise reversals continues to grow as The FT reports President Donald Trump has decided not to move the US embassy in Israel from Tel Aviv to Jerusalem, in a major reversal of one of his foreign policy campaign pledges.

During the presidential campaign Mr Trump repeatedly vowed to move the US embassy to Jerusalem despite concerns that it would exacerbate tensions between Israel and the Arab world.

Washington’s embassy is in Tel Aviv, as are most foreign diplomatic posts. Israel calls Jerusalem its eternal capital, but Palestinians also lay claim to the city as part of an eventual Palestinian state. Both sides cite biblical, historical and political claims. The U.S. Congress passed a law in 1995 describing Jerusalem as capital of Israel and saying it should not be divided, but successive Republican and Democratic presidents have used their foreign policy powers to maintain the U.S. Embassy in Tel Aviv and to back negotiations between Israel and the Palestinians on the status of Jerusalem.

As we noted previously, any decision to break with the status quo is likely to prompt protests from U.S. allies in the Middle East such as Saudi Arabia, Jordan and Egypt. Bill Clinton, George W Bush and Barack Obama all signed repeated six-month waivers postponing the move for national security reasons.

>@realDonaldTrump is in the same place on US embassy in israel as most D and R presidents. says he’ll move in campaign, backtracks in office

No countries currently have their embassy to Israel in Jerusalem.

So, first China currency manipulation, then Yellen’s future, followed by Ex-Im Bank, and NATO, and now, Mr Trump on Thursday followed the path of his predecessors in the Oval Office by taking action to circumvent a Congressional mandate to move the embassy to Jerusalem.

Trump offered no hints at his decision last week on his visit to Israel with his ‘old friend’ Bibi…

But we do note that he (reportedly) was angry at Palestine’s Abbas for “lying.”

The White House said in a statement that the decision was made to “maximise the chances of successfully negotiating a deal between Israel and the Palestinians”.

“While President Donald J. Trump signed the waiver under the Jerusalem Embassy Act and delayed moving the U.S. Embassy in Israel from Tel Aviv to Jerusalem, no one should consider this step to be in any way a retreat from the President’s strong support for Israel and for the United States-Israel alliance,” the White House added.

So Saudis 1 – 0 Bibi?

Maybe not, as Axios notes, a source who has been in the process for multiple presidents told Axios, this is Trump defaulting to the status quo. Bureaucrats brief a new president, show them the doomsday forecast of riots, broken peace deals, new security requirements and other issues, and presidents back off. etc.

end

As we have been reporting to you over the past year, General Motors continue to channel stuff its car inventory.  It is now the highest level in over 10 years:

(courtesy zero hedge)

 

GM Reports Record “Channel Stuffing”: Auto Inventory Highest Since November 2007

As we await all US carmakers to report May auto sales, we remind readers that when we discussed last month’s disappointing monthly car sales report, which badly missing expectations showing the fourth consecutive month of declining auto sales – the first time this has happened since July 2009 –  we noted what may be the biggest concern for the auto industry: inventory days continued to trend higher as OEMs push product on to dealer lots even though sale-through to end customers has seemingly stalled.

Of note, we highlighted GM, one of the few OEMs to actually disclose dealer inventories in monthly sales releases, which reported that April inventories increased to 100 days (935,758 vehicles) from 98 days at the end of March and just 71 days (681,402 vehicles) in April 2016. Indicatively, analysts say an overall inventory level of 60 to 70 days is healthy. 100 is not. GM management was eager to deflect attention from this troubling statistic, and said that soaring inventories are normal and, somehow, “reflect strong sales”, as per the press release: “As planned, GM’s inventories reflect strong sales, lower car production and strategic, launch-related growth in truck and crossover stocks.”

Or maybe not, because as Automotive News reporter Nick Bunkley pointed out something troubling: with 935,758 unsold GM units collecting dust in dealer lots, this was the highest inventory number in 9.5 years, the highest since Nov. 2007, and, as Bunkley reminds us, “one month before the recession officially began.

Fast forward to today when GM reported its May results which again disappointed, and were down 1.3% vs estimates of a 4.3% increase, which in turn pressured GM stock. But that’s not what caught our attention: a bigger problem is what GM revealed in its deliveries report which disclosed a whopping 963,448 units in dealer inventory at the end of May, up nearly 30k from the past month, and representing 101 days of supply, up from an already red-flag raising 100 in April.

In short: GM “channel stuffing” just hit a new all time high, with the number of GM vehicles parked at dealer lots and patiently waiting for a buyer rising to the highest since the month before recession officially began, when GM was still pre-bankruptcy GM, with far greater (if ultimately superfluous and in need of restructuring) production.

 

Janet is not going to like this:  USA construction spending plunged by 1.4% in April and much worse than the weakest  economists expectations

(courtesy zero hedge)

 

US Construction Spending Plunged In April

If everything is so awesome (which the stock market alone is telling us it is), then why did US construction spending plunge 1.4% in April (worse than the weakest economists’ expectations)?

So this is the 3rd worst drop in construction spending in 6 years…

The last time US construction spending plunged like this – global central banks unleashed a coordinated buyiung program to save the world.

This was lower than every one of the 41 estimates and missed expectations by 9 standard deviations…

“probably nothing”

(courtesy zero hedge)

 

US Manufacturing PMI Drops To 8-Month Lows In May: “Sluggish Sales Prompted Firms To Scale Back Hiring”

The last two months have seen a major divergence between PMI and ISM Manufacturing reports (as the former confirmed today at its lowest final print since September). May’s final print of 52.7 was slightly above expectations and the preliminary print.

This is the lowest ‘final’ print for US Manufacturing PMI since September (while ISM rebounds)…

 

This follows China’s Manufacturing PMI ‘contraction’ overnight…

 

US New order levels increased again in May, although the rate of expansion was the least marked recorded since September 2016. This was mainly linked to subdued client demand.

And in line with China weakness, some manufacturers also cited weak export sales, as highlighted by a slower upturn in new work from abroad than that seen in April.

Commenting on the final PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“Manufacturing growth momentum continued to ebb in May, down to its weakest since just before the presidential election.

 

“Manufacturing output, order books and employment all grew at only modest rates as sluggish sales prompted firms to scale back hiring.

 

Exports sales remained especially lacklustre, hampered in part by the relatively strong dollar. The survey also brought signs of companies becoming more cautious about holding inventory.

 

“Factories’ raw material prices meanwhile rose at a sharply reduced rate, which should at least help take pressure off profit margins and also feed through to weaker pressure on consumer price inflation.”

Just another broken brick in the wall of ‘soft’ data post-trump hope.

 

end

My goodness, it sure took the rating agencies the long time to recognize the basket case status of the state if Illinois.

now two rating agencies have cut Illinois’ debt to near junk and they will surely feel the pain

(courtesy zero hedge)

 

“Now The Pain Begins”: S&P, Moodys Cut Illinois To Near Junk, Lowest Ever Rating For A U.S. State

The monetary problems plaguing the state of Illinois (not to mention its public pensions) have been widely documented here over the past few years, and today the rating agencies finally noticed, when in the span of a few hours, first S&P, then Moody’s downgraded Illinois to BB+/Baa3, respectively, both just one notch above junk, the lowest rating ever given to a U.S. state, as both agencies cited a long-running political stalemate over a budget shows no signs of ending.

In the first downgrade, S&P warned that Illinois is at risk of soon losing its investment-grade status, an unprecedented step for a state that would only deeper the government’s strain. Bypassing its traditional 90-day review, S&P said Illinois will likely be downgraded around July 1, when the new fiscal year begins, if leaders haven’t agreed on a budget that starts addressing the state’s chronic deficits.

In a statement, S&P analyst Gabriel Petek said that “The unrelenting political brinkmanship now poses a threat to the timely payment of the state’s core priority payments.”

Petek’s ire was prompted by Illinois’ inability to pass a budget for the past two years amid a clash between the Democrat-run legislature and Republican Governor Bruce Rauner. The ongoing confrontation has left the fifth most-populous US state with a record $14.5 billion of unpaid bills, ravaged entities like universities and social service providers that rely on state aid and undermined Illinois’s standing in the bond market, where investors have demanded higher premiums for the risk of owning its debt, Bloomberg reported.

The S&P analyst added that “the rating actions largely reflect the severe deterioration of Illinois’ fiscal condition, a byproduct of its stalemated budget negotiations.”

In a similar statement, Moody’s said that “legislative gridlock has sidetracked efforts not only to address pension needs but also to achieve fiscal balance, allowing a backlog of bills to approach $15 billion, or about 40% of the state’s operating budget. During the past year of fruitless negotiations and partisan wrangling, fundamental credit challenges have intensified enough to warrant a downgrade, regardless of whether a fiscal compromise is reached in an extended session.”

The rating agency added that “the downgrade to Baa3 for Illinois’ GO bonds is consistent with the state’s intensifying pressure from pension liabilities; by our calculation, the state’s unfunded pension liability for its five major plans in aggregate grew 25% in the year ended June 30, 2016, to $251 billion.”

And like S&P, Moody’s kept the state on negative outlook, citing the potential for additional credit weakening “because of a continuing political impasse that has left Illinois increasingly vulnerable to adverse revenue trends and severely underfunded retiree benefit plans.”

The downgrades, which also pushed some debt backed by legislative appropriations into junk, came a day after Illinois’s legislature blew the deadline for approving a compromise budget by a simple majority. Now, it gets even more difficult as it will take a higher threshold, or three fifths majority vote in each legislative chamber, to pass anything which effectively guarantees that one month from today Illinois will be America’s first ever Junk rated state.

On Wednesday, governor Rauner, who is up for re-election in 2018, and Democratic House Speaker Michael Madigan, who controls much of the legislative agenda, faulted each other for the unprecedented gridlock. The governor also held Democrats responsible for Thursday’s rating cut.

Cited by Bloomberg, a spokeswoman for Rauner said that “Madigan’s majority owns this downgrade because they didn’t even attempt to pass a balanced budget, get our pension liability under control, and other changes that would put Illinois on better financial footing. The governor will continue working toward a truly balanced budget with changes to our system to grow jobs and provide real and lasting property tax relief.”

“Her comment is typical Rauner incompetence, and that’s too bad,” said Steve Brown, a spokesman for Madigan.

Meanwhile, as the political circus continues, Illinois’ unpaid bills are piling up.

By June 30, the state will owe an estimated $800 million in interest and fees on the unpaid bills that have been piling up, according to estimates from Comptroller Susana Mendoza, a Democrat. She warned of “dire” consequences for residents if a budget isn’t reached by the start of fiscal year 2018 on July 1, including the shuttering of more social service providers and layoffs at public universities. With only a month to go before the start of fiscal year, the ratings cut wasn’t unexpected.

“We’re going to start to see some real pain now,” Senate President John Cullerton told reporters in Springfield on Wednesday. “We’re going to start to see downgrades. We don’t have any funding for schools. We don’t have any funding for higher end and a bunch of social programs. We don’t have a budget.

Just like Venezuela, despite not having a budget, Illinois has dutifully continued to cover payments due on its bonds, and, like other states, has no ability to resort to bankruptcy to escape from its debts.

For now. A downgrade to junk, though, would add even more financial pressure by increasing the state’s borrowing costs and preventing many mutual funds from buying Illinois’s securities.

To be sure, today’s announcement did not come as a surprise to markets: Illinois’s 10-year bonds already yield 4.4%, 2.5 percentage points more than those on top-rated debt. That spread is the highest since at least January 2013 and more than any of the other 19 states tracked by Bloomberg. In fact, ths spread to AAA debt is now the highest on record.

Discussing next steps, Dennis Derby, a money manager at Wells Fargo which holds Illinois bonds among its $40 billion of municipal debt said “It wouldn’t be too far of a stretch at this point” to get to junk, , said in an interview before S&P’s downgrade. “I don’t know if being downgraded to junk would motivate the state to come together. You would think getting downgraded to a BBB would have motivated them and it didn’t.”

end

Well that about does it for tonight

I will see you tomorrow night

Harvey.

 

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3 comments

  1. James · · Reply

    Harvey,
    What happened to all the Sovereign Silver excitement you were promoting AGAIN this month? It always seems to be the same drill, build it up and then move on without comment…I wont even request a response on your 2014 USD 200 Silver call.

    Please could you send a comment in reply.

    Like

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