GOLD: $1223.80 UP $3.40
Silver: $16.00 UP 8 cent(s)
Closing access prices:
Gold $1225.50
silver: $16.06
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: $1235.54 DOLLARS PER OZ
NY PRICE OF GOLD AT EXACT SAME TIME: $1225.50
PREMIUM FIRST FIX: $10.04
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
SECOND SHANGHAI GOLD FIX: $1235.05
NY GOLD PRICE AT THE EXACT SAME TIME: $1225.25
Premium of Shanghai 2nd fix/NY:$8.80
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
LONDON FIRST GOLD FIX: 5:30 am est $1224.30
NY PRICING AT THE EXACT SAME TIME: $1224.10
LONDON SECOND GOLD FIX 10 AM: $1224.90
NY PRICING AT THE EXACT SAME TIME. $1225.80
For comex gold:
JULY/
NOTICES FILINGS TODAY FOR APRIL CONTRACT MONTH: 19 NOTICE(S) FOR 1900 OZ.
TOTAL NOTICES SO FAR: 58 FOR 5800 OZ (.1804 TONNES)
For silver:
JULY
369 NOTICES FILED TODAY FOR
1,845,000 OZ/
Total number of notices filed so far this month: 1970 for 9,850,000 oz
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
end
Tomorrow’s OI for gold and silver should advance considerably. I get the preliminary numbers at 11 pm. I will post them at the conclusion of the commentary tonight for those interested.
Let us have a look at the data for today
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
In silver, the total open interest SURPRISINGLY ROSE BY A HUGE 3,920 contract(s) UP to 207,461 DESPITE THE DRUBBING IN PRICE THAT SILVER TOOK WITH YESTERDAY’S ATTEMPTED RAID (DOWN 18 CENT(S) ON TOP OF THE CONSTANT TORMENT THESE PAST FEW WEEKS.
In ounces, the OI is still represented by just OVER 1 BILLION oz i.e. 1.037 BILLION TO BE EXACT or 148% of annual global silver production (ex Russia & ex China).
FOR THE NEW FRONT MAY MONTH/ THEY FILED: 369 NOTICE(S) FOR 1,845,000 OZ OF SILVER
In gold, the total comex gold SURPRISINGLY ROSE BY A HUGE 5.656 CONTRACTS DESPITE THE TINY RISE IN THE PRICE OF GOLD ($2.40 with YESTERDAY’S TRADING). The total gold OI stands at 462,857 contracts.
we had 19 notice(s) filed upon for 1900 oz of gold.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
With respect to our two criminal funds, the GLD and the SLV:
GLD:
We had no changes in GLD/
Inventory rests tonight: 840.67 tonnes
.
SLV
Today: STRANGE: A HUGE CHANGE IN SILVER INVENTORY/ A MASSIVE DEPOSIT OF 2.126 MILLION OZ OF SILVER INTO THE SLV INVENTORY
INVENTORY RESTS AT 341.731 MILLION OZ
Please note the difference between gold and silver
end
.
First, here is an outline of what will be discussed tonight:
1. Today, we had the open interest in silver SURPRISINGLY ROSE BY A HUGE 3,920 contracts UP TO 207,461 (AND now A LITTLE CLOSER FROM THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787), DESPITE THE FALL IN PRICE FOR SILVER WITH YESTERDAY’S TRADING (DOWN 18 CENTS).We LOST NOBODY AS EVERYBODY remains firm and determined.
(report Harvey)
.
2.a) The Shanghai and London gold fix report
(Harvey)
2 b) Gold/silver trading overnight Europe, Goldcore
(Mark O’Byrne/zerohedge
and in NY: Bloomberg
3. ASIAN AFFAIRS
i)Late WEDNESDAY night/THURSDAY morning: Shanghai closed UP 5.31 POINTS OR 0.17% / /Hang Sang CLOSED DOWN 56.75 POINTS OR 0.22% The Nikkei closed DOWN 87.57 POINTS OR 0.44%/Australia’s all ordinaires CLOSED DOWN 0.06%/Chinese yuan (ONSHORE) closed DOWN at 6.8026/Oil DOWN to 45.73 dollars per barrel for WTI and 48.38 for Brent. Stocks in Europe OPENED ALL IN THE RED,, Offshore yuan trades 6.8020 yuan to the dollar vs 6.8026 for onshore yuan. NOW THE OFFSHORE IS A TOUCH STRONGER TO THE ONSHORE YUAN/ ONSHORE YUAN WEAKER (TO THE DOLLAR) AND THE OFFSHORE YUAN IS STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE WEAKER DOLLAR. CHINA IS HAPPY TODAY
3a)THAILAND/SOUTH KOREA/NORTH KOREA
i)NORTH KOREA
War drum beats continue to pound louder as generals warns that the uSA is prepared to attack North Korea.
( zero hedge)
ii)This worries about greatly: an EMP attack by North Korea. The author explains how easy it would be for North Korea to detonate such an attack
( Shannara Johnson/HardAssetsAlliance.com)
iii)Trumps plans to retaliate against North Korea by doing some “pretty severe things”.
( zero hedge)
b) REPORT ON JAPAN
Japan is going to be a huge demographic problem for them: the drop in Japan’s population as this aging society sees deaths outpace births. The problem of course is that their debt is spread over less people and their GDP drops because of the lower number of participants.
(c zero hedge)
c) REPORT ON CHINA
4. EUROPEAN AFFAIRS
i)Turkey/EU
This may turn out to be very problematic as the EU Parliament suspends Turkey accession talks. Turkey for the past 10 year has tried to become an EU member but as been rebuffed constantly. Today the Parliament cited the new “constitutional” reform package voted on by Turkey which gives Erdogan unlimited powers and that is violates European principles. The problem of course is that Turkey has 3 million migrants on its shores and if the vote becomes permanent that Turkey will unleash those migrants onto Greece:
ii) ITALY
Sovereign Italy comes in with another 5 billion euros, making the total taxpayer bailout at 22 billion euros (25 billion uSA) to rescue the world’s oldest bank: Monte de Paschi
(courtesy CNBC)
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
QATAR
Qatar is running out of dollars because the UAE will not ship any dollars due to the embargo. Interbank rates are hitting record highs
( zero hedge)
6 .GLOBAL ISSUES
7. OIL ISSUES
i)Seems that the boys are reacting to the wrong type of data. Oil and gasoline rebound after a major inventory draw but the real problem is a huge production surge;..the greatest in 6 months
( zero hedge)
ii)WELL THAT DID NOT LAST LONG: WTI AND GASOLINE TUMBLE EVEN AFTER “BULLISH’ INVENTORY GAINS
(courtesy zerohedge)
8. EMERGING MARKET
Maduro’s thugs storm the Venezuela’s legislature and beat opposition lawmakers. Venezuela is now down to its last 10 billion USA dollars of reserves. It credit default swaps are rising fast indicating a default is imminent.
( zero hedge)
9. PHYSICAL MARKETS
i)Mike Kosares warns what will happen when the bankers shrink their balance sheets
( Mike Kosares/USAGold)
ii)This should be extremely positive for gold as South Africa’s ruling party may nationalize the central bank. This story was brought to you yesterday but it is worth repeating
( The Times/Jo’burg/GATA)
iii )At least they admit it: The Philippines Central banks admits to rigging the currency market:
( ABS/CBN News Philippines/GATA)
10. USA Stories
i)the normally upbeat ADP employment report disappoints. We witness no new manufacturing jobs in June.
( ADP)
ii)The USA trade balance hardly improves despite the weaker dollar. Deficits with China and Europe shrink a bit. The overall deficit remains high at 46.5 billion USA down from $47.6 in April.
( zero hedge)
( zero hedge)
iv)Soft data Service PMI advances (equal to Markit) but inventory levels rise and stagflation seems on the horizon
( zero hedge)
Let us head over to the comex:
The total gold comex open interest SURPRISINGLY ROSE BY 5.656 CONTRACTS up to an OI level of 462,857 DESPITE THE TINY RISE IN THE PRICE OF GOLD ($2.40 with YESTERDAY’S trading). An open interest of around 390,000 to 400,000 is core and nothing will move these guys from their contracts.
We are now in the contract month of JULY and it is one of the POORER delivery months of the year. .
The non active July contract GAINED 1 contract(s) to stand at 75 contracts. We had only 1 notices filed YESTERDAY morning, so we GAINED 2 contracts or an additional 200 oz that will stand in this non active month of July. Thus 0 EFP notices were given which gives the long holder a fiat bonus plus a futures contract for delivery and most likely these are London based forwards. The contracts are private so we do not get to see all the particulars. The next big active month is August and here the OI LOST 3163 contracts DOWN to 285,238, as the bankers trying to keep this month down to manageable size. The next non active contract month is September and here they picked up another 71 contracts to stand at 256. The next active delivery month is October and here we gained 645 contracts up to 18,177. October is the poorest of the active gold delivery months as most players move right to December.
We had 19 notice(s) filed upon today for 1900 oz
We are now in the next big active month will be July and here the OI LOST 373 contracts DOWN to 828. We had 397 notices served yesterday so we gained 24 notices or an additional 120,000 oz will stand at the comex, and 0 EFP contracts were issued which entitles them to receive a fiat bonus and a future delivery contract (which no doubt is a London based forward).
The month of August, a non active month gained 56 contracts to stand at 424. The next big active delivery month for silver will be September and here the OI already jumped by another 3755 contracts up to 158,618.
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.
As for the July contracts:
Initial amount that stood for silver for the July 2016 contract: 14.785 million oz
Final standing JULY 2016: 12.370 million with the difference being EFP’s taking delivery in London. Thus we are basically on par to what happened a year ago as to the total amount of silver ounces standing.
We had 369 notice(s) filed for 1,845,000 oz for the June 2017 contract
VOLUMES: for the gold comex
Today the estimated volume was 199061 contracts which is good/
Yesterday’s confirmed volume was 414,447 contracts which is huge
volumes on gold are STILL HIGHER THAN NORMAL!
| Gold | Ounces |
| Withdrawals from Dealers Inventory in oz | nil |
| Withdrawals from Customer Inventory in oz |
NIL
OZ
|
| Deposits to the Dealer Inventory in oz | NIL oz |
| Deposits to the Customer Inventory, in oz |
NIL oz
|
| No of oz served (contracts) today |
19 notice(s)
1900 OZ
|
| No of oz to be served (notices) |
56 contracts
5600 oz
|
| Total monthly oz gold served (contracts) so far this month |
58 notices
5800 oz
.1804 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 | NIL oz |
Today, 0 notice(s) were issued from JPMorgan dealer account and 14 notices were issued from their client or customer account. The total of all issuance by all participants equates to 19 contract(s) of which 0 notices were stopped (received) by j.P. Morgan dealer and 0 notice(s) was (were) stopped/ Received) by j.P.Morgan customer account.
| Silver | Ounces |
| Withdrawals from Dealers Inventory | nil |
| Withdrawals from Customer Inventory |
2957.150 oz
Delaware
|
| Deposits to the Dealer Inventory |
nil oz
|
| Deposits to the Customer Inventory |
1,179,543.900 oz
Scotia
|
| No of oz served today (contracts) |
369 CONTRACT(S)
(1,845,000 OZ)
|
| No of oz to be served (notices) |
459 contracts
( 2,295,000 oz)
|
| Total monthly oz silver served (contracts) | 1870 contracts (9,850,000 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 | 181,927.3 oz |
NPV for Sprott and Central Fund of Canada
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
Submitted by cpowell on Thu, 2017-03-09 01:19. 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
July 6/no changes in GLD/Inventory rests at 840.67 tonnes
July 5/A MASSIVE 5.62 TONNES OF GOLD LEFT THE GLD AND NO DOUBT WAS USED IN THE RAID THIS MORNING/INVENTORY REST
July 3/ A MASSIVE 7.37 TONNES OF GOLD LEAVE THE GLD/INVENTORY RESTS AT 846.29 TONNES
June 30/no change in gold inventory at the GLD/Inventory rests at 853.66 tonnes
June 29/no change in inventory at the GLD/inventory rests at 853.66 tonnes
June 28/no change in inventory at the GLD/Inventory rests at 853.66 tonnes
June 27.2017/a deposit of 2.64 tonnes into the GLD/inventory rests at 853.66 tonnes
June 26/a withdrawal of 2.66 tonnes from the GLD and this gold no doubt was part of the raid/Inventory rests at 851.02
June 23/no change in gold inventory at the GLD/Inventory rests at 853.68 tonnes
June 22/no change in gold inventory at the GLD/Inventory rests at 853.68 tonnes
June 21/no change in gold inventory at the GLD/Inventory rests at 853.68 tonnes
June 20/no change in gold inventory at the GLD//Inventory rests at 853.68 tonnes
June 19/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 853.68 TONNES
June 16/no changes in gold inventory at the GLD/Inventory rests at 853.68 tonnes
June 15/ a monstrous “paper” withdrawal of 13.32 tonnes/Inventory rests at 853.68 tonnes
June 14./NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 867.00 TONNES
June 13. No change in gold inventory at the GLD/Inventory rests at 867.00 tonnes
June 12/No change in gold inventory at the GLD/Inventory rests at 867.00 tonnes
June 9/no change in inventory at the GLD/Inventory rests at 867.00 tonnes
June 8/AN ADDITION OF 3.07 TONNES OF GOLD ADDED TO THE GLD/INVENTORY RESTS AT 867.00 TONNES
June 7 a huge change in inventory/a deposit of 13.93 tonnes/inventory rests at 864.93 tonnes
June 6/ no changes in inventory at the GLD/Inventory remains at 851.00 tonnes
June 5.2017/no changes at the GLD/Inventory remain at 851.00 tonnes
June 2/2017/a huge deposit of 3.55 tonnes of gold into the GLD/Inventory rests at 851.00 tonnes
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
end
Now the SLV Inventory
July 6/STRANGE ANOTHER MASSIVE DEPOSIT OF 2.126 MILLION OZ INTO THE SLV/INVENTORY RESTS AT 341.731 MILLION OZ
July 5/STRANGE! NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 339.605 MILLION OZ
July 3/strange! with the huge whacking of silver we got an increase of 379,000 oz into inventory.
June 30/no change in silver inventory at the SLV/Inventory rests at 339.226 million oz
June 29/no change in silver inventory at the SLV/Inventory rests at 339.226 million oz/
June 28/ a small withdrawal of 662,000 oz form the SLV/Inventory rests at 339.226 million oz/
June 27/no change in the silver inventory at the SLV/Inventory rests at 339.888 million oz/
June 26/no change in the silver inventory at the SLV/Inventory rests at 339.888 million oz/
June 23/no change in silver inventory at the SLV/Inventory rests at 339.888 million oz
June 22/ a big change; a huge deposit of 2.175 million oz into the SLV/Inventory rests at 339.888 million oz
June 21/no change in silver inventory at the SLV/inventory rests at 337.713 million oz
June 20/a deposit of 1.513 million oz/inventory rests at 337.713 million oz/.
June 19/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 336.200 MILLION OZ
June 16/no changes in inventory at the SLV/inventory rests at 336.200 million oz
June 15/ a massive “paper withdrawal” of 3.405 million oz of silver/Inventory rests at 336.200 million oz/
June 14/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 339.605 MILLION OZ/
June 13/no change in silver inventory at the SLV/Inventory rests at 339.605 million oz
June 12/no change in silver inventory at the SLV/Inventory rests at 339.605 million oz/
June 9/no change in silver inventory at the SLV/Inventory rests at 339.605 million oz/
June 8/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 339.605 MILLION OZ/
June 7/no change in inventory at the SLV/inventory rests at 339.605 million oz/
June 6/no change in inventory at the SLV/Inventory rests at 339.605 million oz.
June 5/a huge change at the SLV/a withdrawal of 1.371 million oz /inventory rests at 339.605 million oz/
June 2/no change in silver inventory at the SLV/Inventory rests at 340.976 million oz/
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/
-
Indicative gold forward offer rate for a 6 month duration+ 1.08% -
+ 1.39%
end
Major gold/silver trading/commentaries for THURSDAY
GOLDCORE/BLOG/MARK O’BYRNE.
GOLD/SILVER
Precious Metals Are “Best Defence” Against Bail-ins In Economic Crisis
Precious metals are “real assets” and “best defence” against bail-ins and cashless society in the economic crisis which is “on its way”
The risks posed to investors and savers from the coming economic crisis and the threat of bank bail-ins, negative interest rates, ‘helicopter money,’ capital controls and the “cashless society” has been looked at in an excellent and timely article by economist John Adams, writing in the Daily Telegraph.
While the article is focused on how these risks threaten Australia and Australian investors and savers, the risks outlined are ones which threaten even those with modest amounts of wealth and all exposed to the western financial system.
John Adams writes:
“Globally, household, corporate and sovereign debt are at unprecedented levels. They are also linked through a fully integrated global financial system and an array of complex financial derivatives.
Given the scale of the system, the probability of a global stock, bond and real estate crash, coupled with a wave of corporate, bank and sovereign defaults via rising interest rates, increases dramatically.”
“Worryingly, the monetisation of government and corporate debt, nominal or real negative interest rates, “helicopter money” (issuing freshly created money directly to citizens), bank bail-ins, capital controls and the eradication of cash through financial digitisation are all being contemplated by American and other international central bank officials.
Such measures seek to, in effect, trap citizens to keep their money in the financial system and to allocate their money into particular asset categories, thus preventing bank runs or hoarding which can occur when confidence in political, economic and financial systems collapse.”
…
“Thus it is up to individuals to think about what they can do to mitigate their own risks.
Eliminating all forms of debt, improving personal cash flow and maintaining cash reserves to guard against bouts of unemployment or to purchase cheap assets is best under a deflationary scenario.
Alternatively, acquiring real (or physical) goods or assets such as precious metals is the best defence to offset any loss of currency purchasing power, noting that the Governor-General has the legal power to confiscate personal gold holdings via Part IV of the Banking Act 1959.
Nevertheless, Australians must remain vigilant in the coming months and years ahead, conduct their own independent research and prepare themselves for a volatile unstable economy.”
Excerpts from Daily Telegraph Australia
Bank Bail-In Guide: Protecting Your Savings in the Coming Bail-in Era
News and Commentary
PRECIOUS-Gold steady as US policymakers split on rate hike outlook (Nasdaq.com)
Asia shares drop on Fed minutes, oil edges up after big drop (Reuters.com)
Asian markets adrift amid global uncertainty (MarketWatch.com)
US Mint June gold coin sales slide 92% year on year to 0.19 m (Platts.com)
Ex-Glencore traders aim to cut out middlemen with online concentrate platform (Reuters.com)
May showed strong demand at 398.8 tonnes which is well in excess of global gold production at 269 tonnes per month. (Source: Goldchartsrus.com)
Central bankers are playing a giant game of Jenga with markets (MoneyWeek.com)
Steve St. Angelo: Prepare For Asset Price Declines Of 50-75% (ZeroHedge.com)
Illinois – Poster Child for the Coming Sovereign Debt Crisis (ArmStrongEconomics.com)
India tax hike could boost illegal bullion, jewelry sales (Reuters.com)
Keep Eye on Sovereign Debt for Next Minsky Moment (Bloomberg.com)
Gold Prices (LBMA AM)
06 Jul: USD 1,224.30, GBP 946.14 & EUR 1,077.51 per ounce
05 Jul: USD 1,221.90, GBP 945.87 & EUR 1,078.45 per ounce
04 Jul: USD 1,224.25, GBP 947.32 & EUR 1,078.81 per ounce
03 Jul: USD 1,235.20, GBP 952.09 & EUR 1,085.00 per ounce
30 Jun: USD 1,243.25, GBP 957.43 & EUR 1,090.83 per ounce
29 Jun: USD 1,246.60, GBP 959.88 & EUR 1,093.14 per ounce
28 Jun: USD 1,251.60, GBP 976.25 & EUR 1,101.91 per ounce
Silver Prices (LBMA)
06 Jul: USD 16.01, GBP 12.36 & EUR 14.09 per ounce
05 Jul: USD 15.95, GBP 12.36 & EUR 14.09 per ounce
04 Jul: USD 16.15, GBP 12.48 & EUR 14.23 per ounce
03 Jul: USD 16.48, GBP 12.72 & EUR 14.49 per ounce
30 Jun: USD 16.47, GBP 12.69 & EUR 14.44 per ounce
29 Jun: USD 16.83, GBP 12.98 & EUR 14.76 per ounce
28 Jun: USD 16.78, GBP 13.08 & EUR 14.78 per ounce
Recent Market Updates
– Buy Gold Near $1,200 “As Insurance” – UBS Wealth
– UK House Prices ‘On Brink’ Of Massive 40% Collapse
– Gold Up 8% In First Half 2017; Builds On 8.5% Gain In 2016
– Pensions Timebomb In America – “National Crisis” Cometh
– London Property Bubble Bursting? UK In Unchartered Territory On Brexit and Election Mess
– Shrinkflation – Real Inflation Much Higher Than Reported
– Goldman, Citi Turn Positive On Gold – Despite “Mysterious” Flash Crash
– Worst Crash In Our Lifetime Coming – Jim Rogers
– Go for Gold – Win a beautiful Gold Sovereign coin
– Only Gold Lasts Forever
– Your Future Wealth Depends on what You Decide to Keep and Invest in Now
– Inflation is no longer in stealth mode
– James Rickards: Gold Will Start Heading Higher On “Dwindling” Supply
END
Mike Kosares warns what will happen when the bankers shrink their balance sheets
(courtesy Mike Kosares/USAGold)
Mike Kosares: Blinded by the money illusion
Submitted by cpowell on Wed, 2017-07-05 17:09. Section: Daily Dispatches
1:12p ET Wednesday, July 5, 2017
Dear Friend of GATA and Gold:
The biggest threat to the financial markets, USAGold’s Mike Kosares writes today, may be the very central banks whose asset purchases have been propping them up, as the central banks consider selling those assets to shrink their balance sheets and return financial conditions to normal. Kosares’ analysis is headlined “Blinded by the Money Illusion” and it leads the July issue of USAGold’s News & Views letter here:
http://www.usagold.com/publications/NewsViewsNVJuly2017.html
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org
END
This should be extremely positive for gold as South Africa’s ruling party may nationalize the central bank. This story was brought to you yesterday but it is worth repeating
(courtesy The Times/Jo’burg/GATA)
S. Africa’s ruling party may nationalize central bank but leave it independent
Submitted by cpowell on Thu, 2017-07-06 01:52. Section: Daily Dispatches
By Olebogeng Molatlhwa and Stbongakonke Shoba
The Times, Johannesburg
Wednesday, July 5, 2017
The African National Congress is mulling the idea of nationalising the South African Reserve Bank but says its independence should be guaranteed.
Addressing the media on the outcome of discussions in the economic transformation commission at the ANC’s national policy conference‚ the party head of the economics transformation subcommittee, Enoch Godongwana said that private ownership of the reserve bank was an “anomaly.” However‚ he said that come what may‚ the independence of the Reserve Bank should be guaranteed. …
In the lead-up to the policy conference‚ there had been a strong push to nationalise the reserve bank and bring it completely under the control of the government.
But Godongwana explained that while the reserve bank had more than 650 shareholders‚ their influence over the bank’s mandate and decision making was “neither here nor there.” …
… For the remainder of the report:
https://www.timeslive.co.za/politics/2017-07-05-anc-mulls-nationalisatio…
END
At least they admit it: The Philippines Central banks admits to rigging the currency market:
(courtesy ABS/CBN News Philippines/GATA)
Philippines central bank admits rigging currency market
Submitted by cpowell on Thu, 2017-07-06 11:02. Section: Daily Dispatches
From ABS-CBN News, Quezon City, Philippines
Thursday, July 6, 2017
http://news.abs-cbn.com/business/07/06/17/central-bank-actively-managing…
MANILA — The Bangko Sentral ng Pilipinas is “actively managing excessive volatility” in the currency market, Governor Nestor Espenilla said today, as the peso hovered at its weakest level against the dollar in a decade.
The peso’s weakness was due to the normalization of ultra-easy monetary policy in the United States and rising borrowing costs in Europe and Japan, Espenilla said in a statement.
“The latest peso movements broadly reflect prevailing market conditions and underlying economic fundamentals, in line with the BSP exchange rate policy,” Espenilla said.
“BSP is nevertheless actively managing excessive volatility. This is business as usual,” he said.
The peso opened at P50.53 against the dollar on Thursday from P50.60 on Wednesday.
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 WEAKER 6.8026(DEVALUATION SOUTHBOUND /OFFSHORE YUAN MOVES STRONGER TO ONSHORE AT 6.8020/ Shanghai bourse CLOSED UP 5.31 POINTS OR 0.17% / HANG SANG CLOSED DOWN 56.75 POINTS OR 0.22%
2. Nikkei closed UP 87.57 POINTS OR 0.44% /USA: YEN RISES TO 113.37
3. Europe stocks OPENED ALL IN THE RED ( /USA dollar index RISES TO 96.10/Euro UP to 1.1370
3b Japan 10 year bond yield: RISES TO +.104%/ !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 110.06/ 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:: 45.73 and Brent: 48.38
3f Gold UP/Yen DOWN
3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa./“HELICOPTER MONEY” OFF THE TABLE FOR NOW /REVERSE OPERATION TWIST ON THE BONDS: PURCHASE OF LONG BONDS AND SELLING THE SHORT END
Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.
3h Oil 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 +.543%/Italian 10 yr bond yield DOWN to 2.241%
3j Greek 10 year bond yield RISES to : 5.391???
3k Gold at $1223.15 silver at:15.99 (8:15 am est) SILVER BELOW RESISTANCE AT $18.50
3l USA vs Russian rouble; (Russian rouble DOWN 11/100 in roubles/dollar) 60.10-
3m oil into the 45 dollar handle for WTI and 48 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 DEVALUATION SOUTHBOUND
JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 113.37 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 0.9648 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0973 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 RISING to +0.543%
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 2.366% early this morning. Thirty year rate at 2.876% /POLICY ERROR)GETTING DANGEROUSLY HIGH
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Global Bond Rout Sends S&P Futures, European Stocks Sliding
S&P futures are sliding this morning, down 0.4% and tracking the accelerating decline in European and Asian stocks, driven by a move higher in global interest rates, which started with Japanese 10Y yields rising to 0.1% for the first time since February, but mostly Bund yields which spiked after tripping stops, and jumped as high as 0.53% for the first time since early 2016. Oil climbs, dollar and gold slide. Economic data include initial jobless claims, trade balance, Markit PMI readings.
The main story of the otherwise quiet session has been the sharp move higher in bond yields, and particularly German 10y yields, which trended higher ahead of the release of the ECB minutes and large duration supply, extending losses after soft French auction results, and piercing the widely flagged 0.50% support level then rising as high as 0.53%, a 17 month high that saw declines quicken as futures volumes surged. French bonds were squeezed into the auction, before soft demand was seen with 30y bid/cover dropping to 1.53x vs 1.93x prior. Hedging related to the auction appeared to weigh heavily on bunds.
Here is Citi’s quick take on the sharp move:
Note a move lower across the whole fixed income space here and one flashing red headline on our Bloomberg screens:
*GERMAN 10Y BOND YIELD TOUCHES 0.50%, FIRST TIME SINCE JAN. 2016
The aggressive move first began at 10:00 BST and seems to have been accelerated by stops through levels we haven’t seen in 18 months. Bloomberg suggests that the catalyst was the results of a French debt auction which showed a drop in demand for French 30-year debt. Regardless the reason, German bunds are now leading the moves across the global fixed income space, both in Europe and in US treasuries, with the US 10y yield now at 2.357%. This is spilling over into FX, with EURUSD higher and USDJPY following US yields. However we would highlight the journey into the weekend is a long one.
First up is ECB minutes at 12:30 BST but we are also due to hear from ECB’s Praet, Weidmann and Nowtony today. If there are further attempts to counter the markets hawkish interpretation of Draghi’s Sintra appearance, then yields are in for a nasty ride.
The Bund yield is up 30bps since June 23 low at 23bps, with the German 2/10 curve bear steepening by 5bps tp 112bps. The driver for the sudden weakness was a poor France 30y auction which was met with weak demand as bid/cover drops to 1.53x, tailing 11c. Bund futures volumes surged as stop barrier resistance was taken out and the the widely highlighted 0.50% level broken, with over 18k futures trading in a 1-minute period, the largest volumes of the session. The move above the YTD high level of 0.50% opens up the 200-week moving average at 69bps, according to Bloomberg technical analyst Sejul Gokal. As German bund yields were blowing out, their French peers rose six basis points and those on gilts added four. The yield on 10-year Treasuries rose 4 bps to 2.37%, after falling three basis points Wednesday.
“We believe a strategic short duration bias to core Europe looks attractive given the continuing improvement in the economic backdrop,” said the London-based Insight Investment. “We also expect the European Central Bank to announce a tapering of its asset purchases in September.”
While Germany bore the brunt of the selloff, the move was widespread and has hit virtually every DM:
Equities had a largely quiet session at least until the recent yield fireworks, with MSCI’s index of Asia-Pacific shares ex-Japan closing down 0.1 percent overnight. Japan’s Nikkei slipped 0.5 percent as a stronger yen depressed the outlook for export earnings. Japan’s Topix dropped 0.2 percent and the yen weakened by the same amount. The South Korean won slumped 0.6 percent to the lowest level since March. India’s Sensex advanced 0.5 percent, poised for a record close.
Trading in Asia has been buffeted this week by tensions on the Korean peninsula after North Korea fired a missile, which U.S. officials concluded was an intercontinental ballistic missile, into Japanese waters. In Europe, a modest early selloff accelerated as US traders walked to their desks, with the Stoxx 600 down 0.7% ahead of the ECB’s minutes. Euro zone blue chips and Britain’s FTSE 100 also hit a day’w los of -0.8%, on track for the biggest drop since May 18.
S&P 500 futures, which were mostly unchanged for much of the session, have dropped 0.4% after closing higher by 0.2% Wednesday on the back of the Nasdaq’s 0.9% jump.
The other major mover of the session was oil, which clawed back some of its biggest loss in four weeks after data showed U.S. stockpiles declining. Brent oil was at $48.35 a barrel in early European trading as it recovered 1 percent of the 4 percent lost on Wednesday after rising OPEC exports had raised fresh questions about the group’s plans to cut back supply. WTI crude futures rose 1.3 percent to $45.71 a barrel. The contract dropped 4.1 percent Wednesday, the most in four weeks, as Russia was said to oppose any proposal to deepen OPEC-led production cuts.
Gold was off 0.2 percent at $1,224.24 per ounce though it was up from an eight-week low of $1,217.14 it had hit the previous day.
The dollar meanwhile was stalled at 113.32 Japanese yen as it consolidated a near 1 percent gain this week and was also hovering at $1.13495 per euro. The Bloomberg Dollar Spot Index was little changed.
Traders have been wary of making any sudden moves before a flurry of U.S. data later, which includes ADP employment, ISM non-manufacturing PMI and the initial jobless claims report, all of which are appetizers ahead of Friday’s Payrolls numbers.
Focus on Thursday will likely be on minutes from the latest European Central Bank meeting, and on private jobs data in the U.S. Minutes from the Fed showed a lack of consensus about when to shrink the central bank’s $4.5 trillion balance sheet, and how to approach policy strategy in a time of low inflation.
Bulletin Headline Summary from RanSquawk
- Asian equities trimmed opening gains in what was a light session overnight with FX markets relatively rangebound
- European trade has been subdued as many await data
- Looking ahead, highlights include ECB minutes, ADP and DoEs
Market Snapshot
- S&P 500 futures down 0.4% to 2,417.25
- STOXX Europe 600 down 0.74% to 380.15
- MXAP down 0.2% to 153.95
- MXAPJ down 0.05% to 503.59
- Nikkei down 0.4% to 19,994.06
- Topix down 0.2% to 1,615.53
- Hang Seng Index down 0.2% to 25,465.22
- Shanghai Composite up 0.2% to 3,212.44
- Sensex up 0.6% to 31,445.23
- Australia S&P/ASX 200 down 0.08% to 5,758.76
- Kospi down 0.02% to 2,387.81
- Brent Futures up 1.5% to $48.50/bbl
- Gold spot down 0.2% to $1,224.17
- U.S. Dollar Index down 0.1% to 96.16
- German 10Y yield rose 2.0 bps to 0.49%
- Euro down 0.05% to 1.1346 per US$
- Italian 10Y yield rose 4.6 bps to 1.865%
- Spanish 10Y yield rose 2.4 bps to 1.595%
Top Overnight News
- Xi May Put Ball in Trump’s Court on Talks With North Korea
- Trump Weighs ’Pretty Severe Things’ for North Korea Over Launch
- Cerberus Is Said to Consider Commerzbank Stake in Bank Push
- Manhattan Home Sales Surge as Cuts Bring Prices to Buyers’ Level
- Global Payments Held M&A Talks With Worldpay, Dealreporter Says
- Facebook, Twitter, Snap Said to Seek World Cup Clips From Fox
- Electric Cars Seen Dominating by 2040 as Battery Prices Plunge
- Ford to Increase Focus Car Output in China for Exports to U.S.
- Toyota, Mercedes, Lincoln Earn Top Safety Pick Eluding Model S
- China Agency Orders VW, GM, Benz to Recall Takata Airbags
- Celgene to Develop, Commercialize BeiGene’s Cancer Drug
- Costco Wholesale June Comp Sales Beat Estimates
- Amex May Lose Fight Over EU Card Fee System: EU Court Aide
- Yuhan Rises After Signing Hepatitis C Drug Deal With Gilead
- SpaceX Successfully Launches 10th Falcon 9 Rocket of 2017
- John McAfee Settles Lawsuit Against Intel Over Use of His Name
- Toshiba Said to Mull Move to Western Digital Bid: Kyodo
Asia equity markets failed to sustain opening gains and traded mostly negative as a lack of drivers and weakness in energy suppressed sentiment in the region. ASX 200 (-0.1%) and Nikkei 225 (-0.5%) were both lower with energy among the underperformers after crude prices fell around 3%, while a firmer JPY kept Japanese exporters in check. Shanghai Comp. (-0.3%) and Hang Seng (-0.3%) were choppy as China’s continued efforts to support business conditions was overshadowed after the PBoC refrained from liquidity injections and reiterated a prudent policy stance. 10yr JGBs were marginally lower and failed to benefit from the weak sentiment across the region, while the 30yr JGB auction results also failed to spur demand with the b/c virtually unchanged despite a decline in accepted prices from last month.
PBoC refrained from conducting open market operations for the 10th consecutive session. PBoC set CNY mid-point at 6.7953, Prey. 6.7922.
Top Asian News
- Konica, INCJ to Buy U.S. Gene Tester Ambry For $800 Million
- Singapore Luxury Home Prices Set to Recover, Guocoland Says
- IDFC, Shriram Group Said to Explore Merger, ET Now Reports
- Xi May Put Ball Back in Trump’s Court on Talks With North Korea
- Japanese Stocks Fall as Yen’s Appreciation Weighs on Exporters
- Short Sellers Burnt Again as Travel Agency’s Shares Take Off
- India States Unlikely to Borrow More in FY18: Official
- Siam Commercial Bank Said to Halt Insurance Unit Sale: Reuters
- Focus on BOJ’s Operation as 5-, 10-Year Yields Rise: Barclays
European bourses see another unexciting start this morning with indices failing to find any firm direction after the Fed minutes appeared to confuse markets over the future path for interest rates in the U.S. Downbeat earnings from Reckitt Benckiser (-2%) who also cut their guidance following the cyber-attack, ABF are among the best performers after they stated that their outlook had marginally improved. In fixed income markets, a slew of supply will hit with Spain, France and the UK. Selling pressure has been evident for Bunds consequently dragging T-notes lower as the German 10Y breaks above 0.5% and now trades at the highest level since Jan’16, (0.524%) while 17k sell contracts also adding to the pressure
Top European News
- Trump Gets Missile Deal, Request for Energy and Troops in Warsaw
- European TV Ad Trends Fail to Track Economic Revival: JPMorgan
- Norwegian Air Tumbles After CFO Departure, Traffic Figures
- Kepler Bets on European Small, Mid-Cap Value Stocks in 2H
- U.K. Working to ‘Mitigate’ White House Attitudes, Johnson Says
- Norwegian Air Says CFO Frode Foss Quits After 15 Years
In currencies, overnight was a relatively muted affair in major FX pairs, EUR hovering within around 113.50 with yields keeping the currency afloat as the German 10Y approach 50bps, price action likely to be tame until ADP Employment Change (Exp. 185k). ECB minutes also scheduled, although this may provide little to no new information given recent comments from ECB’s Coeure that the ECB have yet to discuss changing policy. Additionally, today there are around 3yards worth of expiries from 1.1290-1.1330. The FOMC minutes release last night delivered no meaningful surprises, which had been reflected in the price action where the USD edged a fraction higher, however the move was relatively muted, and eventually unwound. This saw USD/JPY make another push towards 113.50, however notable selling interest at these levels saw the pair back down to the low 113s. Yesterday’s APIs provided a slight lift to commodity currencies with AUD back above 0.76 and CAD dipping past 1.2950. FX price action tame thus far as participants await the ADP data, with major pairs trading sideways this morning.
Commodities have followed other asset classes with subdued trade this European morning. Volatility was seen in oil markets post the US close as the APIs reported a draw of 5.7mln barrels, resulting in slight reprieve to oil markets, which saw the 2% downturn yesterday. Gold continues to consolidate in the 1299.38 — 1218.00 range, as the yellow gold is seemingly resulting the week’s risk appetite. Metals have struggled to find any direction through Asian and European trade as all majors have failed to see any movement >1 %.
Looking at the day ahead,this morning in Europe the only data scheduled to be released is May factory orders in Germany. In the early afternoon we’ll then get the ECB minutes which could garner a little more interest than usual given some of the ECB speak of late. In the US we get the ADP employment print for June along with initial jobless claims, the May trade balance, services and composite PMIs and finally the non-manufacturing ISM for June. Away from the data, today we are due to hear from the Fed’s Williams and Powell. The ECB’s Praet is also due to speak this morning in Paris while Weidmann and Nowotny speak this evening on the subject ‘future of the euro’ which could be worth tracking.
US Event Calendar
- 7am: MBA Mortgage Applications, prior -6.2%
- 7:30am: Challenger Job Cuts YoY, prior 9.7%
- 8:15am: ADP Employment Change, est. 185,000, prior 253,000
- 8:30am: Initial Jobless Claims, est. 243,000, prior 244,000; Continuing Claims, est. 1.94m, prior 1.95m
- 8:30am: Trade Balance, est. $46.3b deficit, prior $47.6b deficit
- 9:45am: Markit US Services PMI, est. 53, prior 53;
- 9:45am: Markit US Composite PMI, prior 53
- 9:45am: Bloomberg Consumer Comfort, prior 48.6
- 10am: ISM Non-Manf. Composite, est. 56.5, prior 56.9
DB’s Jim Reid concludes the overnight Wrap
The hot weather is back in the UK and as I type we’re bracing ourselves for a big storm this morning. Over the last three years I’ve had 2 tellies, 4 Sky TV boxes, 2 projectors, 1 amplifier, 2 DVD players and 1 Apple TV player blown up after big thunderstorms. They say lightening doesn’t strike twice in the same place but that’s clearly a falsehood as twice over this period everything connected to the internet in my house has been frazzled. We think we’ve lightning proofed the house now but with Game of Thrones starting in 10 days one can’t be too careful so last night I unplugged the internet and all the TVs just in case. After all “Winter is Coming!!”.
It felt like neither rain nor shine in the FOMC minutes last night and instead we saw a relatively well balanced discussion between committee members. The focal point was the chatter around the balance sheet normalization process with the text revealing that “several preferred to announce a start to the process within a couple months” however also “some others emphasized that deferring the decision until later in the year would permit additional time to assess the outlook for economic activity and inflation”. So that suggested a bit of a divide amongst committee members. Other interesting aspects of the minutes included some concern about easing financing conditions. Indeed it was highlighted that “some participants suggested that increased risk tolerance among investors might be contributing to elevated asset prices more broadly; a few participants expressed concern that subdued market volatility, coupled with a low equity premium, could lead to a build-up of risks to financial stability”. On inflation the main takeaway was “Most participants viewed the recent softness in these price data as largely reflecting idiosyncratic factors, including sharp declines in prices of wireless telephone services and prescription drugs, and expected these developments to have little bearing on inflation over the medium run”. Our US economists expect the Fed to likely take a pause on its rate hiking cycle in September and begin the process of balance sheet normalization at that meeting.
Markets were little moved post the minutes. Treasuries were already a little firmer heading into the data following a big fall in the price of Oil (more on that shortly) before the 10y closed 2.7bps lower at 2.324% – the first time yields have closed lower since last Monday. The US Dollar index pared an earlier modest gain to finish unchanged although EM currencies had another day to forget (South African Rand -1.39%, Argentine Peso -1.29%, Turkish Lira -1.29% amongst those to tumble). Meanwhile in equity markets the S&P 500 edged to a small +0.15% gain on the back of a decent session for tech names (Nasdaq +0.67%) which helped to offset the biggest decline for the energy sector (-2.01%) since March 8th.
Indeed WTI Oil dropped nearly $2/bbl a yesterday to close at $45.13/bbl and suffered its biggest daily decline in a month. There appeared to be a few justifications going around for move with some pointing towards that Russia news we noted yesterday on pushing back on further production cuts, while profit taking following the recent rally and a Reuters report suggesting the OPEC exports rose in June were also cited as possible explanations. Late last night the latest API data revealed a drop in US crude inventories last week which has helped WTI claw back about +0.60% this morning.
Meanwhile in FX the euro was a bit softer yesterday and traded back down towards 1.1300 yesterday morning following comments from the ECB’s Coeure. The board member said that the ECB Governing Council has not been discussing any changes to monetary policy. However that was somewhat balanced by Coeure’s reference to the reaction in European bond markets and the euro last week as not being particularly significant, which suggests a slightly more comfortable stance.
In Asia this morning it’s been a mostly quiet and directionless session with little in the way of new news. The Nikkei (-0.27%), Hang Seng (-0.07%) and Kospi (-0.14%) are all posting modest losses while the Shanghai Comp is little changed and the ASX (+0.08%) is a shade higher. The Yen is a bit firmer although Gold is down a fraction.
Moving on. This morning we have published our latest HY monthly where we provide a further update to potential relative value between BBs and Bs after a month that provided further performance from EUR HY credit that was somewhat curtailed by the government bond sell off on the back of the more hawkish tone from the ECB’s Draghi as well as other central bankers. In addition we also update our analysis assessing relative value across the capital structure.
Back to yesterday, the main interest in the macro data released was the solid set of remaining European PMIs. The final services reading for the Euro area was revised up 0.7pts to 55.4. While that is a little lower relative to the last 3 months it is more or less in line with February and higher than any reading in either 2015 or 2016. The upward revision was primarily driven by France (+1.6pts to 56.9) while Germany was revised up 0.3pts to 54.0. A first look at the data outside the core saw Italy come in at 53.6 which is a reasonable drop from the 55.1 in May while Spain printed at 58.3 and a full point ahead of the month prior. The end result of all these revisions saw the composite Euro area reading come in at 56.3 for June which was 0.5pts lower relative to May but, as our economists noted, still suggestive of +0.8% qoq Q2 GDP growth. It’s worth noting that in the UK the services PMI came in more or less as expected at 53.4 (down from 53.8) which has left the composite at 53.8 and the lowest since February (when it was also 53.8). Across the pond yesterday the data didn’t really do much to move the dial. Factory orders in May were even softer than the market had already pegged (-0.8% mom vs. -0.5% expected) but are still up a fairly solid +4.2% yoy. Core capex orders were revised up four-tenths to +0.2% mom for May while headline durable goods orders were revised up three-tenths to -0.8% mom.
Before we wrap up and move on to today’s calendar it’s worth noting that next week will mark the unofficial commencement of Q2 earnings season in the US with a number of the big banks amongst those to report. Last night DB’s Binky Chadha published a preview note. In it he notes that the bottom up consensus EPS growth for the S&P 500 is 7.1% yoy for Q2. Binky makes the point that over the last 10 years, earnings have always surprised to the upside with a median beat of 3.4pp. Should we see this median beat for Q2 then EPS should end up at 10.6% yoy. If that is the case, it should mark the second consecutive quarter of double digit earnings growth – the first time that has happened since 2011. Sector wise tech and financials are expected to post the strongest median growth while consumer discretionary is expected to see earnings growth slow. For more, click here for Binky’s report.
Looking at the day ahead, this morning in Europe the only data scheduled to be released is May factory orders in Germany. In the early afternoon we’ll then get the ECB minutes which could garner a little more interest than usual given some of the ECB speak of late. Over in the US this afternoon we’ll get the ADP employment print for June along with initial jobless claims, the May trade balance, services and composite PMIs and finally the non-manufacturing ISM for June. Away from the data, today we are due to hear from the Fed’s Williams and Powell. The ECB’s Praet is also due to speak this morning in Paris while Weidmann and Nowotny speak this evening on the subject ‘future of the euro’ which could be worth tracking.
3. ASIAN AFFAIRS
i)Late WEDNESDAY night/THURSDAY morning: Shanghai closed UP 5.31 POINTS OR 0.17% / /Hang Sang CLOSED DOWN 56.75 POINTS OR 0.22% The Nikkei closed DOWN 87.57 POINTS OR 0.44%/Australia’s all ordinaires CLOSED DOWN 0.06%/Chinese yuan (ONSHORE) closed DOWN at 6.8026/Oil DOWN to 45.73 dollars per barrel for WTI and 48.38 for Brent. Stocks in Europe OPENED ALL IN THE RED,, Offshore yuan trades 6.8020 yuan to the dollar vs 6.8026 for onshore yuan. NOW THE OFFSHORE IS A TOUCH STRONGER TO THE ONSHORE YUAN/ ONSHORE YUAN WEAKER (TO THE DOLLAR) AND THE OFFSHORE YUAN IS STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE WEAKER DOLLAR. CHINA IS HAPPY TODAY
3a)THAILAND/SOUTH KOREA/NORTH KOREA
NORTH KOREA
War drum beats continue to pound louder as generals warns that the uSA is prepared to attack North Korea.
(courtesy zero hedge)
General Warns U.S. Is Prepared For War In North Korea: “Self-Restraint Is A Choice”
Following North Korea’s latest provocation, the launch of an ICBM that, for the first time, demonstrated North Korea’s ability to strike the continental United States, General Vincent Brooks, Commander of Combined Forces Command and General Lee, Sun Jin, Chairman of the Republic of Korea Joint Chiefs of Staff, made a rather forceful combined statement directly warning North Korea they’re prepared for war at any time.
“Self restraint, which is a choice, is all that separates armistice and war. As this Alliance missile live fire shows, we are able to change our choice when so ordered by our Alliance national leaders,” said Gen. Brooks. “It would be a grave mistake for anyone to believe anything to the contrary.”
“Despite North Korea’s repeated provocation, the ROK-U.S. Alliance is maintaining patience and self-restraint,” said Gen. Lee. “As the combined live fire demonstrated, we may make resolute decisions any time, if the Alliance Commanders in Chief order. Whoever thinks differently is making a serious misjudgment.”
The statement was issued after allied armies conducted a rare live-fire drill, launching tactical surface-to-surface missiles off the east coast of Korea—an action they said was aimed directly at “countering North Korea’s destabilizing and unlawful actions on July 4.” The drill and tough language appeared meant to reassure Seoul after North Korea’s successful ICBM test, a significant advance.
Of course, despite the tough talk, with Seoul, a city of 10 million people, sitting just 35 miles south of the North Korean border, any military action would almost certainly result in devastating casualties for allied forces. Per the Wall Street Journal:
Washington has considered military action against North Korea, but pulling the trigger presents serious risks. Seoul, a city of 10 million, sits just 35 miles from the North Korean border, where Pyongyang has assembled artillery that could inflict devastating damage on the densely populated South Korean capital.
“A single volley could deliver more than 350 metric tons of explosives across the South Korean capital, roughly the same amount of ordnance dropped by 11 B-52 bombers,” said a report published last year by Austin, Texas-based geopolitical consultancy Stratfor.
If attacked by the U.S., North Korea would also likely fire on U.S. ally Japan, which is within range of many of Pyongyang’s missiles. During one launch in March the North fired four missiles at once toward Japan, which some analysts interpreted as a warning that it could overwhelm any Japanese missile defense.
That said, efforts at diplomacy and sanctions have failed miserably over the past several years to thwart North Korea’s advancements.
The Obama administration last took a shot at a diplomatic solution back in February 2012 but it only took about 2 months for North Korea to violate the terms of the agreement. Per Reuters:
There have been no official negotiations for seven years. In February 2012, the United States and North Korea announced an agreement in which the North would suspend operations of its Yongbyon uranium enrichment plant, allow international inspectors to verify the suspension, and implement moratoriums on nuclear and long-range missile tests.
In return, North Korea would get badly needed food aid.
In April of that year, the North attempted to launch a satellite on a three-stage rocket, in what Washington said was a violation of the agreement because of the rocket’s potential military uses. While Pyongyang denied it had breached the agreement, the deal was suspended.
Meanwhile, Trump’s efforts to enlist the help of China to impose sanctions have also seemingly failed:
Trade between China and North Korea grew almost 40% in the first quarter. So much for China working with us – but we had to give it a try!
Given that, it seems the world is inching dangerously closer to the inevitable deadline that will require global leaders to choose between a nuclear-armed North Korea with the capability of striking targets as far away as the west coast of the United States and some degree of military action.
end
This worries about greatly: an EMP attack by North Korea. The author explains how easy it would be for North Korea to detonate such an attack
(courtesy Shannara Johnson/HardAssetsAlliance.com)
A North Korean EMP Attack: The Dark Possibility
Authored by Shannara Johnson via HardAssetsAlliance.com,
As the tension between North Korea and the US continues to grow, the possibility of war is rapidly evolving into a probability. Now some military experts worry that an attack via EMP (electromagnetic pulse) on the US mainland might be a feasible option for Pyongyang.
The signs are certainly there: Having recently completed the ninth missile test of 2017, Kim Jong-un promised to send the US an even bigger “gift package.”
Adding to Kim Jong-un’s antics and inflammatory rhetoric, the recent death of American college student Otto Warmbier after his 17-month imprisonment in North Korea has certainly fanned the flames of antagonism between the US and the rogue regime.
Han Tae Song, North Korea’s ambassador to the UN in Geneva, firmly rejected the accusation of misconduct and declared North Korea operates “according to our national laws and according to international standards.”
To add insult to injury, Pyongyang’s official Korean Central News Agency (KCNA) also denies any wrongdoing or torture of Otto Warmbier—even going as far as to say North Korea is the “biggest victim” in this situation.
EMP: Is This The Real Threat?
Most analysts believe North Korea is not yet capable of a direct missile strike on the US mainland, but Kim Jong-un’s dogged determination to make this a reality is quite disconcerting.
Some experts believe that the more realistic threat at this point in time is an EMP attack. To make that happen, all North Korea has to do is launch a low-yield nuclear missile from a submarine, ship, or even by balloon and explode it at high altitude, above the atmosphere.
The potential result: a blackout of the Eastern grid that supplies 75% of power to the United States.
If an EMP attack did take place, it would be beyond anything we have seen before. The Commission to Assess the Threat to the United States from Electromagnetic Pulse Attack, which was established by Congress in 2001, estimates that within 12 months following a nationwide blackout, “up to 90% of the US population could perish from starvation, disease, and societal breakdown.”
Electronic Armageddon
In practical terms, a catastrophic blackout would be worst in cities, because it would instantly deprive the population of access to drinking water, refrigeration, heat, air conditioning, and telecommunication. Food stores would be looted within a matter of days, and gas stations would cease to function without electricity.
Without Internet access and power, all commerce and advanced methods of communication would stop. There would be no TV, radio, phones. Credit card transactions and cash withdrawals at banks would be impossible. Paper money would become worthless, and Bitcoin would cease to exist, along with the stock market.
Newt Gingrich, speaking at the Senate Committee on Energy and Natural Resources earlier this month, said an EMP attack “would send us back to the 18th century.”
But that’s not the only problem. If no outside help arrives, within days, chaos begins to reign. Civilization is a rather thin veneer that humans have acquired over centuries, a mask covering our hard-wired survival instincts. Once the mask slips, it could mean the end of the world as we know it.
We Are Ill-Prepared For An EMP Attack
US politicians and major utilities have kicked the can down the road when it comes to EMP preparation. Edison Electric estimates that shielding transformers for the US grid system could cost $20 billion.
Granted, American power companies have been studying ways to protect our electronic grids against attack, but tangible results are slow in coming.
The only current option after an EMP attack would be to replace damaged or destroyed transformers. However, says Scott Aaronson, managing director for Cyber and Infrastructure Security at Edison Electric, replacements for those transformers must be procured from foreign suppliers, which could take up to 18 months.
Peter Vincent Pry, leader of the Task Force on National and Homeland Security, believes North Korea is closer to launching an EMP attack than many analysts believe. He wants Congress to work harder and cut the red tape to allow the innovation necessary to mitigate the threat.
In Pry’s opinion, an EMP attack would ultimately kill more Americans than a direct nuclear blast could. His book, The Long Sunday, describes several plausible EMP attack scenarios.
Pry thinks that “the first nation to use nuclear weapons today—even a rogue state like North Korea or Iran—will immediately become the most feared and credible nuclear power in the world, a formidable force to be reckoned with, and perhaps the dominant actor in a new world order.”
Is there a sensible way to prepare for an EMP attack?
Maybe not, but stocking some food, water, fuel, and batteries for emergencies is always a good idea—as well as owning a stash of gold coins as hard assets.
While “you can’t eat gold,” as some preppers say, it is the only kind of money that has prevailed over the millennia.
END
Trumps plans to retaliate against North Korea by doing some “pretty severe things”.
(courtesy zero hedge)
Trump Plans “Pretty Severe Things” In Retaliation Against North Korea
After praising Poland’s conservative ruling party during his visit to Warsaw on Thursday, President Trump quickly shifted his focus back to the escalating missile crisis in North Korea, saying that he is contemplating “some pretty severe things” to retaliate against Kim Jong Un after he tested an ICBM on America’s independence day, capable of reaching US territory.
“I have some pretty severe things we’re thinking about,” Trump said at a news conference in Warsaw. “Doesn’t mean we’re going to do them. I don’t draw red lines.”
“I think we will just take a look at what happens over the coming weeks and months with respect to North Korea,” Mr. Trump added. “It’s a shame they’re behaving this way and they’re behaving in a very dangerous manner, and something will have to be done about it.”
Trump’s comments, made during a news conference in Warsaw, come a day after UN Ambassador Nikki Haley warned that the US is prepared to use the full range of its capabilities to deter North Korea, including military force “if we must.”
Here’s Bloomberg:
Trump, who spoke alongside Polish President Andrzej Duda, offered no details about what he is considering and did not answer a question directly about whether he is contemplating the use of military force. Earlier in the news conference, he said he is calling on all nations to “publicly demonstrate to North Korea that there are consequences for their very, very bad behavior.”
Trump once again declined to say that it was only Russia that was involved in hacking the 2016 presidential election ahead of his meeting with Russia’s Vladimir Putin on Friday. U.S. intelligence agencies have blamed the Russian government but Trump has stopped short of laying blame squarely with the Kremlin.”
North Korea’s missile test, which followed several other launches in recent months rattled the international community and increased the pressure on Trump to take action, to show that his tough rhetoric is more than just bluster. Trump has previously said that “the era of strategic patience with the North Korea regime has failed’’ and “is over.”
“Trump has said all options including military force are available against Pyongyang, though its neighbors warn a strike could be disastrous for North Asia. South Korea’s new government favors talks to bring Kim to heel, also putting it potentially at odds with Trump’s administration.
North Korea’s pursuit of a nuclear-tipped warhead capable of reaching the U.S. is likely to be a significant topic during the G-20. Trump is scheduled to have bilateral meetings with Chinese President Xi Jinping, Japanese Prime Minister Shinzo Abe, South Korean President Moon Jae-In and Putin. Each of those leaders have spoken out against North Korea’s provocations, and Trump has leaned on China in particular to rein in the rogue regime but acknowledged recently that it’s not working.”
However, both China and Russia, each a permanent member of the UN Security Council, have spoken out against a full-on invasion at this stage – saying they would block the authorization of military force using their veto power at the UN.
At the news conference, Trump also fielded questions about whether he accepts the U.S. intelligence community’s verdict that Russia interfered in the 2016 election in a bid to help him defeat Democratic rival Hillary Clinton. With Trump set to meet President Vladimir Putin on Friday at the summit , the issue has fresh urgency at least for the likes of CNN.
Trump responded that others might have been culpable, in addition from Russia. “I think it was Russia and I think it could have been other people and other countries,” Mr. Trump said. “A lot of people interfered. I think it’s been happening for a long time.”
Trump also said the U.S. intelligence community has made mistakes in the past and its judgment is open to question. As he has done in the past when discussing Russian hacking, he mentioned the U.S. invasion of Iraq in 2003. Intelligence assessments claiming that Iraq possessed weapons of mass destruction turned out to be inaccurate.
“I remember listening about Iraq,” Trump said. He added: “Nobody really knows. Nobody really knows for sure.”
* * *
Trump also took a swipe at Barack Obama, referencing news reports that Obama was told about Russian hacking last August, Trump said the former president took no action because of the mistaken belief that Mrs. Clinton would win anyway. Trump was meeting with Mr. Duda and the heads of various Baltic and central European states. With the Poland visit, Trump hopes to deliver a message that the U.S. stands with allies living in Russia’s shadow, White House officials said.
Before departing in the afternoon, Trump will deliver a speech in Krasinski Square, scene of a Polish uprising against the Nazis in 1944. In the speech, Trump will repeat his message that nations need to safeguard their borders or risk terrorist attack.
“While we will always welcome new citizens who share our values and love our people, our borders will always be closed to terrorism and extremism,” Trump plans to say, according to a speech excerpt provided by the White House.
END
b) REPORT ON JAPAN
Japan is going to be a huge demographic problem for them: the drop in Japan’s population as this aging society sees deaths outpace births. The problem of course is that their debt is spread over less people and their GDP drops because of the lower number of participants.
(courtesy zero hedge)
Demographic Shock Ground Zero: Japan’s Population Drops At Fastest Pace On Record
Japan’s demographic time bomb is hardly new, although over the past year it has encountered several notable milestones. Last December, we wrote that for the first time on record, Japan’s births dropped below a million. This is what we said at the time:
While the US is finally starting to feel the social, political and economic hit from an aging population, nowhere is the demographic impact more visible than in what is the epicenter of the developed world’s demographic problems: Japan. It is here that according to the latest government data, the number of births in Japan is likely to fall below a million this year for the first time since data became available in 1899, reflecting a fast-ageing society and the high cost of child care. The number of births is estimated at 981,000 this year, down from slightly more than a million last year, data from the ministry showed. Births hit a record high of 2.696 million in 1949.
It was also obvious that Japan would also post yet another natural population decline this year as deaths outpace births by a record margin, as seen by the light blue line in the chart above.
Today, Japan’s Ministry of Internal Affairs and Communications confirmed just that, when it reported that Japan’s population has declined for an 8th straight year. More concerning than the ongoing decline, however, was the pace and as the Ministry added, Japan’s population fell at the fastest pace on record going back to 1968 when record-keeping began.
As of January 1, the number of Japanese people (excluding resident foreigners) dropped by a record 308,084 from a year earlier to 125,583,658, despite the country’s ongoing efforts to tackle the rapid graying of the society.
Last year, Japan’s cabinet approved a record $830 billion spending budget for fiscal 2017, which includes child-rearing support: however, at this rate, the local population may not need the free money in the not too distant future. The only hope, as in the case of many European nations, is that a surge in immigration will offset the natural decline of the domestic population whose average age has never been higher.
As we previously reported, the number of births stood at 981,202 – the lowest number on record – while that of deaths hit a record-high 1,309,515. The “natural population loss” – calculated by subtracting deaths from births – therefore came to 328,313. The ministry also reported that the number of Japanese people slid in 41 of the nation’s 47 prefectures amid a continued influx into the capital and its vicinities. Tokyo was the biggest gainer among the six prefectures with population growth, with an increase of 77,400; the capital marked its 21st straight year of increase, to about 13 million. Increases were also observed in the prefectures of Kanagawa, Saitama, Chiba, Aichi and Okinawa prefectures. Of those six, only Okinawa saw the number of births exceed the number of deaths, while population growth among the other five prefectures was the result of more people moving in than moving out. Populations were down from the previous year in the remaining 41 of Japan’s 47 prefectures.
The age split was just as drastic: people 65 years old or older accounted for a record-high 27.17% of the country’s population while the proportion of those aged 14 or younger continued its declining trend to hit 12.69% in the latest survey.
With the nation’s population fast declining and aging, an expert quoted by Mainichi said Japan needs to redesign its social system on the premise that its population will continue to decline for some time.
“The latest announcement shows a continuation of the current trend and is therefore no big surprise,” said Masakazu Yamauchi, an associate professor of population geography at Waseda University.
“In order to create and maintain a better society for the next generation, we should place importance on developing an environment that allows people to have families and make their living wherever they live, by improving employment situations and child-rearing support,” Yamauchi said. Unfortunately, so far PM Abe’s entire policy has been focused on keep the Yen low and keeping Japanese stocks high, while largely ignoring Japan’s biggest problem: its demographics.
Numerous economists have call the unsustainable situation a “demographic time bomb,” given the vicious cycle that has formed between low fertility rates and declining consumer spending. Similar to other developed nations, the demographic conflict lies in the tension between Japan’s traditional work culture, which emphasizes the role of men as primary breadwinners, and younger generations’ desire to have flexibility in their personal and professional lives.
One potential solution is to import more foreigners, or accept more refugees, although the latter may be problematic in the culturally homogeneous society that is Japan.
Japan’s foreign population stood at about 2.32 million, up about 150,000. The growth is the largest since relevant record-keeping began in 2013. The foreign nationals had visas that were valid for more than 3 months and were registered as residents. As we reported last year, There have been substantial net increases in the number of Chinese, Southeast Asians (especially Vietnamese), and South Asians (especially Nepalese) settling in Tokyo.
Hoping to boost its population at any cost, the government has been increasing its efforts to attract students and high-skilled workers from overseas. Saga Prefecture in southwestern Japan saw the fastest increase of such residents at 13.21 percent as it accepted more students from overseas and offered more foreigners training for technical skills.
Still, even this plan may be insufficient to offset the natural attrition of the domestic population: Japan’s overall population, which combines both Japanese and resident foreigners, fell by 159,125 or 0.1% from a year ago to 127,907,086.
What is most troubling, is that the US is no longer than far behind Japan. Last December we reported that in 2016, the US population grew at the slowest pace since the Great Depression…
… largely driven by the collapse in household formation as the number of Millennials living at home with their parents has hit a 75 year high.
end
c) REPORT ON CHINA
.
end
4. EUROPEAN AFFAIRS
Turkey/EU
This may turn out to be very problematic as the EU Parliament suspends Turkey accession talks. Turkey for the past 10 year has tried to become an EU member but as been rebuffed constantly. Today the Parliament cited the new “constitutional” reform package voted on by Turkey which gives Erdogan unlimited powers and that is violates European principles. The problem of course is that Turkey has 3 million migrants on its shores and if the vote becomes permanent that Turkey will unleash those migrants onto Greece:
(courtesy zero hedge)
EU Parliament Suspends Turkey Accession Talks
In the latest diplomatic escalation between the EU and Turkey, on Thursday the European Parliament voted to suspend Turkey’s EU accession talks, which as a reminder have been dragging on for decades, if Ankara proceeds with its planned constitutional reform which grants sweeping powers to President Recep Erdogan. The resolution passed by the parliament in Strasbourg calls for the “ Commission and the member states, in accordance with the Negotiating Framework, to formally suspend the accession negotiations with Turkey without delay if the constitutional reform package is implemented unchanged.”
“The current strategy of the European Commission and EU leaders seems to wait silently for things to improve in Turkey,” said the European Parliament’s lead negotiator on Turkey, Kati Piri, criticizing a stance which she said was “feeding President Erdogan’s authoritarianism.”
Still, the vote was largely symbolic: the EU Parliament has limited influence on Turkey’s decades-old pursuit of EU membership, now in limbo after bitter exchanges between Ankara and some European countries, but the decision does highlight the gulf which has grown between the two sides.
In response to the decision, Turkey’s EU affairs minister, Omer Celik did what Turkey has always done best: ignored the decision, and announced that Ankara does not accept the EU Parliament report. Quoted by Reuters, Celik said Ankara regarded Thursday’s vote in Strasbourg as invalid, while the foreign ministry was similarly dismissive.
“This decision, which is based on false claims and allegations, is trampling the reputation of the institution in question,” the ministry said in a statement, referring to the European Parliament. “This decision is of no value for us.” He added that Turkey “rejects with the back of our hand any proposals that there should be strong cooperation between Turkey and the EU in other areas instead of accession talks.”
“The European Parliament has failed in its solidarity with Turkey following the coup attempt. We had expected strong support, but the call to end membership talks instead is wrong,” Celik blasted.
The vote came one day after Turkey’s deputy prime minister, Numan Kurtulmus, told Reuters that Ankara was not responsible for the escalation of tensions with Brussels. “Europe displaying inappropriate behavior towards Turkey is not a situation we can accept. Being against our President Erdogan is also not a rational stance from Europe. Europe must decide… do they really want to enlarge?” Kurtulmus said.
While EU leaders have been critical of Erdogan and his behavior toward opponents, both before and after an abortive military coup against him last July, relations deteriorated following last April’s referendum which will grant President Erdogan power to become the sole executive head of state, with authority to choose his own cabinet ministers, enact laws, call elections and declare states of emergency. It topped a year-long crackdown since the failed “coup” last June.
Erdogan has claimed that both the crackdown and the increased presidential powers are needed to help tackle serious challenges to Turkey’s security both at home and beyond its borders.
Turkey’s president has wasted little time, and some constitutional changes approved in April have already been implemented: Erdogan has been able to return to lead the ruling AK Party, and members of a top judicial body have been changed. Other steps, such as scrapping the post of prime minister, are due to take place within two years. Opposition parties and human rights groups say the changes threaten judicial independence and push Turkey toward one-man rule. The EU has also expressed concern, although many in the European Parliament believe the bloc has not gone far enough.
Finally, addressing the EU Parl decision, Turkish Prime Minister Binali Yildirim said that Turkey still wants to join the EU but the “bloc is confused and this needs to be fixed” and added that the parliament’s decision had no value for Turkey and that it did not represent the views of higher European Union bodies.
The question is what will Erdogan’s reaction be if, indeed, the decision does represent the views of all EU bodies.
end
Sovereign Italy comes in with another 5 billion euros, making the total taxpayer bailout at 22 billion euros (25 billion uSA) to rescue the world’s oldest bank: Monte de Paschi
(courtesy CNBC)
Italy swoops in to save another bank leaving taxpayers on the hook for over $25 billion
- Italian state has now guaranteed taxpayer money for a third bank in just over a week
- Struggling BMPS launched a fully-fledged restructuring plan Wednesday morning
- Controversies continues over European Commission approving bailouts
Wednesday, 5 Jul 2017 | 4:30 AM ETCNBC.com
The Italian state has stepped in with funding to save yet another failing bank, meaning taxpayers now stand responsible for over 22 billion euros ($25.4 billion) of bailout money recently extended to the sector.
Finance Minister Pier Carlo Padoan announced late Tuesday that the government had received approval from the European Commission to pump 5.4 billion euros into Banca Monte dei Paschi di Siena (BMPS) in exchange for the lender undertaking a major restructuring overhaul.
BMPS revealed an outline of its new 2017 – 2021 plan on Wednesday morning which it says will deliver a net profit of over 1.2 billion euros and a return-on-equity of over 10 percent by 2021. Management has committed to implementing a headcount reduction of around 5,500 and to close around 600 of the bank’s existing 2,000 branches as well as a pay cap for senior management. BMPS also said that its CET1 ratio (its common equity tier 1 ratio which is a key standardized measure of a bank’s financial strength) should reach 14.7 percent by 2021.
Toxic assets are at the heart of the bank’s demise and its plan includes the intention to sell down 28.6 billion euros of gross non-performing loans (NPLs), of which 26.1 billion euros will be securitized (converted into marketable securities).
The move comes barely more than a week after Italy again received support from the European Commission for its pledge of a state guarantee of up to 17 billion euros as part of a plan to dismantle two troubled Venetian banks.
The use of taxpayer money to resolve problems within the banking system and therein protect retail bondholders in all three banks has been highly controversial given it flies in the face of the European Commission’s commitment to avoid bailouts and all of the recent legislation that it has passed geared towards that purpose.
The banking sector has been struggling for years under the weight of a mountain of bad debt, and defenders of the state aid say the government’s and the Commission’s broader aim of lowering systemic risk validates the decision.
Additionally, the goal of shoring up the wider Italian financial system is now making progress, according to analysts at Citi.
“The stock of NPLs in Italian banks’ balance sheets is significant but, given recent system developments, it is expected to show a large decrease before year-end,” said Azzurra Guelfi, banking analyst at Citi in a note on Wednesday morning.
Furthermore, having bought into the new equity at a discount, the state could even stand to benefit from the BMPS transaction, says Gildas Surry, senior analyst at Axiom Alternative Investments.
“Over the next five years, definitely the state has a case where potentially it could get a good return on its investment,” Surry told CNBC on Wednesday.
Indeed, there could also be an opportunity for brave investors, suggests Surry, if Italy follows the path trodden by Spain which has seen its banking sector shrink from around 70 lenders to closer to a dozen since the financial crisis.
“Potentially BMPS is a consolidation play because ultimately the bank will be clean and definitely there is consolidation to take place in Italy from the 400-plus institutions down to probably 150,” he offered.
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
QATAR
Qatar is running out of dollars because the UAE will not ship any dollars due to the embargo. Interbank rates are hitting record highs
(courtesy zero hedge)
Qatar Cash Crisis Looms As Interbank Rates Hit Record Highs
We warned previously that Qatar was running out of cash, and it appears that is very much the case as the cost of interbank borrowing (liquidity provision) hits a record high.
To boost their hard currency reserves, Qatar banks are now offering a premium of as much as 100 basis points over LIBOR to attract dollars from regional banks, some 80 bps higher compared to the rate they offered prior to this crisis. And the soaring cost of interbanking liquidity provision suggests its not working…
As Arqaam Capital analysts Jaap Meijer and Janany Vamadeva note in a recent report…
A prolonged conflict between Qatar and its neighbors may leave the country’s banking sector “vulnerable” because of its reliance on foreign funding. They reiterate underweight rating on the sector.
Arqaam doesn’t rule out renewed sanctions as Arab nations disappointed with Qatar’s response to list of 13 demands, and notes that the Qatari banking sector is “highly dependent on foreign funding (wholesale debt and deposits) with low operational relationships.”
The banking sector relies on foreign markets for 43% of its funding needs, with non-resident deposits making up 46%, interbank 43% and wholesale debt 11%.
Qatar Islamic Bank has the highest share of funding coming from the Gulf Cooperation Council at 24%, Qatar National Bank the least at 5%, though has the highest dependency on foreign funding at 57%.
A benevolent government and reserves/sovereign wealth fund offer some comfort, but Meijer and Vamadeva suggest strongly underweight on the sector due to profit deterioration.
As we noted previously, despite the spike in interbank rates, S&P is confident that Qatari banks are strong enough to survive the pullout of all Gulf money and then some. The ratings agency ran two hypothetical scenarios of capital flight, and concluded that Qatar’s lenders could survive the withdrawal of all Gulf deposits plus a quarter of the remaining foreign funds the banks keep. Still, that did not prevent S&P from lowering Qatar’s long-term rating by one level to AA- last week.
Separately, Reuters reports, that the dollar shortage has also spread over to money exchange houses in Qatar on Sunday, making it harder for worried foreign workers to send money home.
“We have no dollars because there is no shipment or transportation from the United Arab Emirates. There is no stock,” said a dealer at the Qatar-UAE Exchange House in Doha’s City Center mall. “The shipment is blocked from the UAE” the dealer added, although it was not quite clear if it was physical cash that was being transported.
Other exchange houses in Doha also told Reuters they had no supplies of dollars. At Qatar-UAE Exchange, dozens of people – some of the foreigners who comprise nearly 90 percent of the population of 2.6 million – waited quietly in line to change money or make remittances to their home countries.
“I spoke with my wife this morning. She said, ‘Send your savings to me now.’ I am not panicked but my family are scared,” said John Vincent, an air-conditioning repairman from the Philippines.
“I sent 2,000 riyals ($550) home but I have some more savings left here in Qatar. I will see what the situation is in coming days before I decide what to do.”
Sudhir Kumar Shetty, president of UAE Exchange, which has eight branches in Qatar, said his firm was continuing to handle remittances and currency buying as usual in that country. He said the firm hadn’t seen any major change in remittance volumes due to the diplomatic tension.
But he added that dollar supply was not meeting demand in Qatar and attributed this partly to flows of the U.S. currency from other Gulf countries being disrupted.
“Everywhere, all the banks and exchange houses, there are no dollars. All the exchange houses are trying to get currencies from other countries,” the dealer at Qatar-UAE Exchange said, adding that his firm was hoping for a shipment from Hong Kong.
For now most Western banks with a presence in Qatar have continued business as normal, partly because they did not want to lose out on billions of dollars of building projects which Qatar plans before it hosts the soccer World Cup in 2022. But other Western banks have halted new Qatar business including interbank and syndicated lending, while continuing to service existing business, banking sources said, declining to be named because of political sensitivities.
“Everybody is shocked – they’re not worried about Qatar’s credit, they’re worried about compliance and the risk that the local sanctions could be escalated to an international level,” said one foreign banker in the region.
In a worst case scenario, bankers expect Qatari banks to borrow from the central bank’s repo facility if they become short of funds. However, central bank rules limit the size of the repos to 2% of each bank’s private sector deposits. Bankers speculate the central bank may lift this cap although the central bank did not respond to Reuters requests for comment.
END
6 .GLOBAL ISSUES
7. OIL ISSUES
Seems that the boys are reacting to the wrong type of data. Oil and gasoline rebound after a major inventory draw but the real problem is a huge production surge;..the greatest in 6 months
(courtesy zero hedge)
WTI/RBOB Jump After Major Inventory Draw Despite Biggest Production Surge In 6 Months
Oil bounced notably overnight after a surprisingly large crude build reported by API, but there was some selling in QTI/RBOB into today’s DOE data, but that ended quickly as DOE reported major inventory draws across the board sending WTI spiking above $46. However, after last week’s drop, US crude production (in the Lower 48) soared by its most in 6 months.
API
- Crude -5.8mm (-2.5mm exp)
- Cushing -1.4mm
- Gasoline -5.7mm
- Distillates +400k
DOE
- Crude -6.299mm (-2mm exp)
- Cushing -1.334mm (-700k exp)
- Gasoline -3.669mm (-1.8mm exp)
- Distillates -1.85mm (+500k exp)
Draws across the board…
“Attention is likely to be focused not only on inventory trends, but also on gasoline demand in the run-up to the Fourth of July, as well as on U.S. oil production”: Commerzbank
Gasoline Demand rebounded…
US Crude production in the Lower 48 fell the prior week (the biggest weekly drop since August) and last week saw a decline in the US oil rig count… But crude production rebounded, as expected, as offshore platforms came back online following Tropical Storm Cindy passed. Output in the lower 48 up 105,000 barrels a day, offsetting a small drop in Alaska due to seasonal maintenance. This is the highest production since Aug 2015…
“If we see a pullback in production, that really may get the market going,” Phil Flynn, senior market analyst at Price Futures Group in Chicago, said by telephone.
Total inventories slid by 13.4 million barrels, the most since September, providing some ammunition for bullish investors.
WTI/RBOB bounced overnight after API but faded notably into the DOE print, but then spiked above $46 on the big draws as everyone, for now, ignores the production surge.
end
WELL THAT DID NOT LAST LONG: WTI AND GASOLINE TUMBLE EVEN AFTER “BULLISH’ INVENTORY GAINS
(courtesys zerohedge)
WTI/RBOB Tumble – Erase ‘Bullish’ Inventory Data Gains
The bulls got pretty much everything they could have hoped for – big inventory draws in all products and record high product demand – however, it appears it took the machines a little longer to read down the report and spot the fact that production soared to new cycle highs… and WTI/RBOB prices are tumbling…
Date – oldest first
8. EMERGING MARKET
Maduro’s thugs storm the Venezuela’s legislature and beat opposition lawmakers. Venezuela is now down to its last 10 billion USA dollars of reserves. It credit default swaps are rising fast indicating a default is imminent.
(courtesy zero hedge)
Maduro Thugs Storm Venezuela National Assembly, Beat Opposition Lawmakers, Default Risk Jumps
Venezuela celebrated 206 years of independence in a manner uniquely befitting Latin America’s socialist paradise: A gang of armed Maduro supporters broke into the National Assembly and viciously assaulted opposition lawmakers, nearly killing one.
Here’s Reuters:
“The melee, which injured seven opposition politicians, was another worrying flashpoint in a traumatic last three months for the South American OPEC nation, shaken by opposition protests against socialist President Nicolas Maduro.
Pipe-wielding government supporters burst into Venezuela’s opposition-controlled congress on Wednesday, witnesses said, attacking and besieging lawmakers in the latest flare-up of violence during a political crisis.
The melee, which injured seven opposition politicians, was another worrying flashpoint in a traumatic last three months for the South American OPEC nation, shaken by opposition protests against socialist President Nicolas Maduro.”
Mobs of anti-government protesters have been gathering daily in the streets of Caracas and other Venezuelan cities to protests Maduro’s intensifying crackdown on dissent. As is well known, government mismanagement in the country with the world’s biggest oil reserves has led to hyperinflation of over 10,000% and a total collapse in the standard of life. The country’s dire financial straits have led to widespread hunger while necessary supplies like medicine have become dangerously scarce. At least 90 people have died in the unrest since April, many of them young men, like a 22-year-old protester whose government-sanctioned murder was caught on tape.
Earlier this year, Maduro “annuled” the Assembly, stripping it of most of its legislative powers in favor of consolidating power in the hands of the executive branch.
After the July 5 “Independence Day” attack (Venezuela celebrates its independence one day after the US), National Assembly president Julio Borges said more than 350 politicians, journalists and guests to the Independence Day session were trapped in the siege that lasted until dusk.
‘There are bullets, cars destroyed including mine, blood stains around the (congress) palace,’ he told reporters. “The violence in Venezuela has a name and surname: Nicolas Maduro.”
The crowd had gathered just after dawn outside the building in downtown Caracas, chanting in favor of Maduro, witnesses said. In the late morning, several dozen people ran past the gates with pipes, sticks and stones and went on the attack. Several injured lawmakers stumbled bloodied and dazed around the assembly’s corridors. Some journalists were robbed. After the morning attack, a crowd of roughly 100 people, many dressed in red and shouting ‘Long Live The Revolution!’, trapped people inside for hours, witnesses said.”
Some in the crowd outside the legislature brandished pistols, threatened to cut water and power supplies, and played an audio of former socialist president Hugo Chavez saying “Tremble, oligarchy!” Fireworks were thrown inside. One lawmaker, Americo De Grazia, was hit on the head, fell unconscious, and was eventually taken by stretcher to an ambulance. His family later said he was out of critical condition and being stitched up.
In October 2016, Maduro quashed a recall vote organized by the assembly. Maduro, a former bus driver and chosen successor of its deceased former leader, Hugo Chavez. Venezuela’s opposition has stepped up its criticism of the dictator Maduro for seeking to solidify his control through the creation of a Constituent Assembly, a superbody that will be elected at the end of July. The opposition has promised to boycott the vote, which it (rightly) claims is being rigged.
There has been a string of clashes at the country’s assembly since the opposition thrashed Maduro’s Socialist Party in December 2015 parliamentary elections.
“In a speech during a military parade for Independence Day, Maduro condemned the “strange” violence in the assembly and asked for an investigation. But he also challenged the opposition to speak out about violence from within its ranks.
In daily protests since April, young demonstrators have frequently attacked security forces with stones, homemade mortars and Molotov cocktails, and burned property. They killed one man by dousing him in gasoline and setting him on fire.
In a statement that redefines irony, Maduro condemned the violence on the opposition that was unleashed by his own supporters.
‘I want peace for Venezuela,” Maduro said. “I don’t accept violence from anyone.’”
Western officials quickly condemned the attack:
‘I condemn the grotesque attack on the Venezuelan assembly,’ tweeted UK ambassador John Saville.
‘This violence, perpetrated during the celebration of Venezuela’s independence, is an assault on the democratic principles cherished by the men and women who struggled for Venezuela’s independence 206 years ago today,’ the U.S. State Department said.”
Meanwhile, Venezuela’s opposition is demanding general elections to end Maduro’s rule over the OPEC member state. Police pilot Oscar Perez, who staged a coup attempt earlier this month and somehow survived, also condemned the violence.
As previously noted, Perez had not been seen since he hijacked a helicopter last week and flew through Caracas pulling a “Freedom” banner.He reportedly opened fire and dropped grenades on the Interior Ministry and Supreme Court but nobody was injured. That attack is widely believed to have been staged to divert attention from the unrest that has brought the country to the brink of economic and political collapse.
Expect violence to worsen as the Constitutional Assembly vote – slated for later this month – draws closer.
Meanwhile, international investors, who have largely ignored the political upheavals in the socialist nation, have started to notice, and as Bloomberg reports, Venezuela’s default odds are once again sharply rising as its foreign reserves tumble toward $10 billion amid ongoing deadly anti-government protests and President Nicolas Maduro’s push to rewrite the constitution.
The implied probability of the country missing a payment over the next 12 months rose to 56 percent in June, based on the latest CDS data, the highest level since December. Implied odds of a credit event over the next five years increased to 91% last month.
Maduro, who has faced three months of violent protests that have left almost 80 dead, has drastically cut imports of food and medicine in order to conserve the cash needed to pay bondholders with declining oil prices and production. That hasn’t stopped a drop in reserves, which usually provide investors with a certain degree of assurance that the government will avoid default in the short-term. Recent deals to provide the government with liquidity have only resulted in minor spikes that have disappeared quickly.
The country faces payments on principal and interest of more than $5 billion in the remainder of the year, although no large sums are due before October. Judging by the recent moves in Venezuela CDS, the market is growing increasingly concerned that Maduro will have enough control over the country to make them.
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 1.1370 UP .0024/REACTING TO + huge Deutsche bank problems + USA election:/TRUMP HEALTH CARE DEFEAT//ITALIAN REFERENDUM DEFEAT/AND NOW ECB TAPERING BOND PURCHASES/ /USA RISING INTEREST RATES AGAIN/EUROPE BOURSES ALL IN THE RED
USA/JAPAN YEN 113.37 UP 0.166(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/LABOUR PARTY LOSES IN LOCAL ELECTIONS
GBP/USA 1.2947 UP .0017 (Brexit March 29/ 2017/ARTICLE 50 SIGNED
THERESA MAY FORMS A NEW GOVERNMENT/STARTS BREXIT TALKS
USA/CAN 1.2931 DOWN .0030 (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 ROSE by 24 basis points, trading now ABOVE the important 1.08 level FALLING to 1.1405; 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 UP 5.31 POINTS OR 0.17% / Hang Sang CLOSED DOWN 56.75 POINTS OR 0.22% /AUSTRALIA CLOSED DOWN 0.06% / EUROPEAN BOURSES OPENED ALL IN THE RED
We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;
1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.
2, the Nikkei average vs gold carry trade ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)
3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.
These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>
The NIKKEI: this THURSDAY morning CLOSED DOWN 87.57 POINTS OR 0.44%
Trading from Europe and Asia:
1. Europe stocks OPENED ALL IN THE RED
2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 56.75 POINTS OR 0.22% / SHANGHAI CLOSED UP 5.31 POINTS OR 0.17% /Australia BOURSE CLOSED DOWN 0.06% /Nikkei (Japan)CLOSED DOWN 87.57 POINTS OR 0.22% / INDIA’S SENSEX IN THE GREEN
Gold very early morning trading: 1223.00
silver:$15.98
Early THURSDAY morning USA 10 year bond yield: 2.3650% !!! UP 4 IN POINTS from WEDNESDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%.
The 30 yr bond yield 2.8754, UP 3 IN BASIS POINTS from WEDNESDAY night.
USA dollar index early THURSDAY morning: 96.10 DOWN 19 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: 3.061% up 8 in basis point(s) yield from WEDNESDAY
JAPANESE BOND YIELD: +.104% UP 1 in basis point yield from WEDNESDAY/JAPAN losing control of its yield curve
SPANISH 10 YR BOND YIELD: 1.678% UP 11 IN basis point yield from WEDNESDAY
ITALIAN 10 YR BOND YIELD: 2.268 UP 11 POINTS in basis point yield from WEDNESDAY
the Italian 10 yr bond yield is trading 59 points HIGHER than Spain.
GERMAN 10 YR BOND YIELD: +.562% UP 9 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 1.1413 UP .0066 (Euro UP 66 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/
USA/Japan: 113.29 UP 0.089 (Yen UP 9 basis points/
Great Britain/USA 1.2955 UP 0.0025( POUND UP 25 basis points)
USA/Canada 1.2938 DOWN .0023 (Canadian dollar UP 23 basis points AS OIL ROSE TO $46.19
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This afternoon, the Euro was UP by 66 basis points to trade at 1.1413
The Yen FELL to 113.29 for a LOSS of 9 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 23 basis points, trading at 1.2938/
The Canadian dollar ROSE by 23 basis points to 1.2938, WITH WTI OIL RISING TO : $46.19
Your closing 10 yr USA bond yield UP 4 IN basis points from WEDNESDAY at 2.375% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic USA 30 yr bond yield: 2.902 UP 5 in basis points on the day /
Your closing USA dollar index, 95.86 DOWN 43 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 DOWN 30.22 POINTS OR 0.41%
German Dax :CLOSED DOWN 72.43 POINTS OR 0.58%
Paris Cac CLOSED DOWN 27.70 POINTS OR 0.53%
Spain IBEX CLOSED DOWN 25.20 POINTS OR 0.24%
Italian MIB: CLOSED UP 144.80 POINTS/OR 0.69%
The Dow closed DOWN 158.69 OR 0.74%
NASDAQ WAS closed DOWN 63.30 POINTS OR 1.03% 4.00 PM EST
WTI Oil price; 46.19 at 1:00 pm;
Brent Oil: 48.77 1:00 EST
USA /RUSSIAN ROUBLE CROSS: 59.82 DOWN 16/100 ROUBLES/DOLLAR (ROUBLE HIGHER BY 16 BASIS PTS)
TODAY THE GERMAN YIELD RISES TO +0.5620% 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:$45.31
BRENT: $47.87
USA 10 YR BOND YIELD: 2.3677% (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)
USA 30 YR BOND YIELD: 2.902%
EURO/USA DOLLAR CROSS: 1.1424 UP .0078
USA/JAPANESE YEN:113.19 DOWN 0.10
USA DOLLAR INDEX: 95.81 down 48 cent(s)
The British pound at 5 pm: Great Britain Pound/USA: 1.2978 : UP 18 POINTS FROM last NIGHT
Canadian dollar: 1.2978 DOWN 18 BASIS pts
German 10 yr bond yield at 5 pm: +0.562%
END
And now your more important USA stories which will influence the price of gold/silver
TRADING IN GRAPH FORM FOR THE DAY
“They’re Selling Everything” – Bonds, Stocks, Oil, Gold, & Dollar All Tumble
“Probably nothing…”
ECB Minutes spoiled the bond party… when does it become a full blown tantrum…
Bund puking rippled… via risk-parity deleveraging – through European stocks, European bonds (not helped by ugly auctions in France, Spain), US Treasuries and into US stocks… And then dismal ‘hard’ data (and positively surprising ‘soft’ data) didn’t help as oil’s bounce on inventories provided some brief hope… but even that didn’t last once the market saw the craziness in Hamburg.
Shit’s getting real in Risk-Parity Unwind land...
Not a pretty day for stocks… Small Caps worst day in 2 months
Or bonds…
FANG Stocks tested the lows once again, bounced, then faded into the close…
Tesla bulls are having a bad week…the ‘carmaker’ is poised for its worst week since February 2016. A string of bad news has sent the electric automaker’s shares skidding for a third consecutive day, leaving the 2nd biggest US automaker in a bear market…\
Nasdaq ‘risk’ started to spread to VIX…
Treasury yields continued to rise… but the long-end is underperforming..
With 30Y breaking above two key technicals…
And the 2s30s curve has steepened to its post-Fed rate-hike highs…
The Dollar also fell once again…
Driven by strength in EUR (which sent Bund yields spiking) on ECB Minutes…
Despite bullish data from API and DOE, WTI/RBOB prices struggled to hold gains…
Notably, WTI reversed right at its 50DMA…
Gold rallied early on to test its 200DMA at $1231 but rejected that to end lower…
END
Trading early in NY:
“Sea Of Red” – Stocks, Bonds Slammed As Risk-Parity Funds Tumble
As Risk-Parity funds begin their 7th down day in a row – the biggest decline since Sept 2016 – so global bonds and stocks are feeling the leveraged unwind.
Something just changed:
The dollar is limping lower…
Stocks are in trouble…
And so are global stocks…
NOTE: 10Y JGB yields are back above BoJ’s crucial 10bps level.
Also of note, this morning we got the ECB’s cautiously hawkish minutes. While the overall tone was cautious, Citi highlights that there are certainly some interesting extracts specifically pertaining to changing communication on QE easing bias and the impact on markets. We highlight below with our own emphasis:
- On QE easing bias: While there were valid reasons at this juncture to retain the APP easing bias, it was noted that, as the economic expansion proceeded and if confidence in the inflation outlook improved further, the case for retaining this bias could be reviewed. More generally, it was highlighted that the overall degree of policy accommodation was determined by the combination of all the ECB’s monetary policy measures in place and not just the sum of individual policy measures.
- On communication being misinterpreted: At the same time, it was cautioned that even small and incremental changes in the communication could be misperceived as signalling a more fundamental change in policy direction. This could trigger unwarranted movements in financial conditions, which could put the prospects of a sustained adjustment of inflation at risk.
- On financial conditions: it was remarked that, as the economic conditions and fundamentals in the euro area improved further, also compared with other regions in the world, some tightening in financial conditions, notably with respect to bond and foreign exchange markets, was to be expected.
- On the impact of elections: Political risks inside and outside the euro area also remained relevant, even though they had diminished somewhat. In this context, a call was made not to overestimate the impact of normal electoral cycles on economic confidence or on financial market developments
As a reminder, Goldman has warned of the potential for a Risk-Parity-fund-driven “shock”:
While we think this low vol period will continue, supported by still strong global growth (as a result in our asset allocation we remain OW equity over 12m), we think as we move more late cycle that rates – in particular real rates – will continue to increase, also weighing on equity. In addition, higher rates from these low levels imply both poor income and negative capital returns to bonds (we remain UW bonds over 12m as a result).
We also think it is likely that bonds will be worse hedges for equity as rates are currently part of the risk to equity, rather than the support. For risk parity investors this is particularly problematic as low equity volatility has likely driven higher equity allocations, and so shocks driven by real rate increases will be amplified in their portfolios.
What is Goldman’s suggestion? Go to cash: “As an alternative to bonds and given little potential for diversification across assets, we remain OW cash over both 3 and 12m.“
end
The bond king, Jeff Gundlach states that the rout in bonds is just beginning:
(courtesy zero hedge)
Gundlach: Bond Wipeout Is Just Beginning
It was already a jittery day for fixed income investors, with a bond rout which started after today’s French auction was poorly received, unleashing a selling scramble and sending Bund yields above 0.50% for the first time since January 2016, and breaking out above a key support level, then crossing the ocean and slamming both US stocks and bonds. And according to Jeff Gundlach, who recently doubled down on his vocal bond bearishness on Twitter…
US 10-year yield above 200-day moving average, broke downtrendline from March. Critical level now 2.32%, probably coincides with 0.50% Bund.
… this is just the beginning. In an email to Bloomberg, Gundlach said that 10Y yields are on course to move “toward 3%” this year. There has “been no justification for the divergent policies in the U.S. versus Europe given economic fundamentals,” he said – a point he has made previously. A 10-year yield at 3 percent would put Treasuries in “definitive” bear market territory, Gundlach added. The 10Y traded as high as 2.39% on Thursday, just 3 bps below the key retracement of 2.42%, coinciding with the May high. The yield is alos just shy of the 100 DMA, whose breach could lead to more systematic and CTA selling.
Not only Gundlach is bearish on the market: looking at the market internals, Bloomberg writes that 30Y yields surged as much as 7 bps to 2.92% breaching both 50- and 200-day moving averages.
Discussing today’s selloff, FTN’s Jim Vogel said the “the dam broke” in German 10-year bunds and “the cascade quickly flooded sell orders into 10-year futures, with the biggest ‘emergency’ overnight volume in months.”
Additionally, September long-bond futures open interest has “dropped by around $3.7 million since June 28 in dollar-value per basis point move, or DV01, terms, a sign bulls are starting to liquidate positions in the sector. Speculators in recent weeks were the most bullish on 30-year Treasury futures on a net basis this year, according to CFTC data.”
Furthermore, Bloomberg notes that with yields approaching key technical levels that could trigger a fresh flush out of long-end bulls, the risk is building that Treasury yields go even higher.
Curve positioning may also fuel liquidation in the long end as traders start to unwind overcrowded flattener trades. The spread between five- and 30-year yields is hovering near 95 basis points, near the narrowest since 2007.
Brean Capital’s Peter Tchir also chimed in: “People this year had been buying long-dated Treasuries and other sovereigns as the hedge to their equity portfolios and that’s why this unwind is so ugly. They are losing money on both the equity and debt side now, and are bailing out of their long-dated Treasuries.”
Which of course is a problem first and foremost for risk parity funds, which tend to get in trouble when there is a concurrent selloff in both stocks and bonds at the same time. In fact, as we showed earlier, the deleveraging across the Risk-Par community started earlier and was a continuation of substantial weakness seen in recent days.
Just like last Thursday, the question is simple: will the Risk-parity deleveraging cascade end in time before it results in more systematic funds getting dragged into the coordinated selling, unleashing a bloodbath.
As for Gundlach, he was content with being proven right: one week after his June 30 tweet, he had this to say: “There you have it. US ten year closes twice over 2.32%, and Bunds spike above 0.50%. Remember the “yields can never rise mantra” 1 year ago?”
There you have it. US ten year closes twice over 2.32%, and Bunds spike above 0.50%. Remember the “yields can never rise mantra” 1 year ago?
end
(courtesy ADP)
ADP Employment Disappoints – No Manufacturing Jobs Gained In June
After jumping heroically in May, ADP reported a disappointing 158k employment gain in June (188k exp.) and revised May’s exuberance notably lower (253k to 230k). While ‘soft’ survey data suggests employment should be resurging, the hard numbers are disappointing again…
Medium-sized firms dominated the gains (+91k vs Small firms 17k and Large firms +50k).
Perhaps most notable for President Trump is that all 158k of the gains came in the Service-Producing sector of the economy – Goods-Producing Sector gained zero jobs.
“Despite a slight moderation in the month of June, the labor market remains strong,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “For the month of June, jobs were primarily created in the service-providing sector.”
Mark Zandi, chief economist of Moody’s Analytics, said, “The job market continues to power forward. Abstracting from the monthly ups and downs, job growth remains a stalwart between 150,000 and 200,000. At this pace, which is double the rate of labor force growth, the tight labor market will continue getting tighter.”
The drop in context:
Change in Nonfarm Private Employment
Change in Total Nonfarm Private Employment
Change in Total Nonfarm Private Employment by Company Size
Full Infographic.
http://www.adpemploymentreport.com/2017/June/NER/images/infographic/main…” width=”598″ />
end
The USA trade balance hardly improves despite the weaker dollar. Deficits with China and Europe shrink a bit. The overall deficit remains high at 46.5 billion USA down from $47.6 in April.
(courtesy zero hedge)
U.S. Trade Balance Improves In May As Deficit With China, Europe Shrinks
Coming in largely as expected, the U.S. monthly international trade deficit decreased in May 2017 from an unrevised $47.6 billion in April (revised) to $46.5 billion in May, fractionally worse than consensus expectations of $46.3 billion, as exports increased and imports decreased. According to the BEA, the goods deficit decreased $0.9 billion in May to $67.5 billion. The services
surplus increased $0.2 billion in May to $21.0 billion. The most notably item about today’s release is that the deficit with both the EU and China, the two largest trading partners, shrank by $2.6BN and $2.0BN respectively.
Exports
Exports of goods and services increased $0.9 billion, or 0.4% percent, in May to $192.0 billion. Exports of goods increased $0.2 billion and exports of services increased $0.6 billion.
- The increase in exports of goods mostly reflected increasesin consumer goods ($0.9 billion) and in automotive vehicles, parts, and engines($0.6 billion). A decrease in foods, feeds, and beverages($0.7 billion) partly offset the increases.
- The increase in exports of services mostly reflectedincreases in travel (for all purposes including education) ($0.3 billion) and in financial services($0.2 billion).
Imports
Imports of goods and services decreased $0.2 billion, or 0.1%percent, in May to $238.5 billion. Imports of goods decreased $0.6 billion and imports of services increased $0.4 billion.
- The decrease in imports of goods mostly reflected decreasesin consumer goods ($1.5 billion) and in automotive vehicles, parts, and engines($0.7 billion). An increase in capital goods ($1.3 billion) partly offset the decreases.
- The increase in imports of services mostly reflected an increase in travel (for all purposes including education)($0.2 billion).
* * *
Broken down geographically, the May figures show surpluses, in billions of dollars, with South and Central America ($2.4), Hong Kong ($2.3), Singapore ($0.8), Brazil ($0.8), and United Kingdom ($0.7).
Deficits were recorded with China ($30.1), European Union ($10.7), Mexico ($6.8), Japan ($6.4), Germany ($4.7), Italy ($2.4), Canada ($2.2), India ($2.0), Taiwan ($1.7), France ($1.7), OPEC ($1.1), South Korea ($0.8), and Saudi Arabia ($0.2).
- The deficit with the European Union decreased $2.6 billion to $10.7 billion in May. Exports increased $0.5 billion to $23.4 billion and imports decreased $2.0 billion to $34.0 billion.
- The deficit with China decreased $2.0 billion to $30.1 billion in May. Exports increased $0.6 billion to $11.3 billion and imports decreased $1.4 billion to $41.3 billion.
end
We have been alerting you on the rumblings of that “supervolcano” underneath Yellowstone National Park. If this erupts it would blanket a huge area of about 1/3 of the USA causing damage to crops etc. Early this morning this concern increased dramatically with news of a huge 5.8 earthquake centering around Lincoln Montana.
(courtesy zero hedge)
“Supervolcano” Concerns Rise After Montana Hit By Strongest Earthquake In 20 Years
Following a swarm of over 1100 earthquakes recorded in the Yellowstone caldera over the past month, prompting scientists to voice concerns about a dormant Yellowstone “Supervolcano” slowly waking up, overnight these concerns escalated after a strong M5.8 earthquake hit western Montana early on Thursday morning – the strongest quake to hit the area in the past 20 years – the U.S. Geological Survey reported, with Reuters adding that the tremor was felt hundreds of miles away, from Missoula to Billings and some surrounding states.
The quake appears to be the largest to hit Montana since a slightly weaker M5.6 struck outside of Dillon a dozen years ago. By comparison, the state’s largest quake which struck the West Yellowstone region 58-years ago was 7.2 magnitude.
The quake’s epicenter was about 6 miles south of Lincoln, originating from a depth of nearly 3 miles underground, according to a preliminary report from the U.S. Geological Service.
Subsequently the USGS recorded seven more tremors in the same area within an hour of the initial quake, which ranged in magnitude from 4.9 to 3.8.
The quake which struck at 12:30 a.m. local time was strong enough to knock items off of walls and shelves in Helena and Missoula. Some Twitter users posted feeling tremors as far as Spokane, Wash., Boise, Idaho and Calgary, Canada.
Mike Stickney, seismologist at the Earthquake Studies Office, Montana Bureau of Mines and Geology on the Montana Tech campus in Butte, said the quake was probably the strongest in Montana since October 1964. The location, he said, is not surprising. “It’s right along the axis of the intermountain seismic belt.” He said the quake occurred on a strike/slip fault, a vertical fault where one side moves horizontally against the other, similar to the kind of movement experienced along the San Andreas Fault in California.
That said, he said he “does not believe” the quake is seismically tied to the recent “swarm” of smaller earthquakes in the Yellowstone National Park area. “I don’t see any direct relationship between these two sequences,” he said. “This is a pretty sizeable earthquake. It would certainly have the potential to do structural damage near the epicenter, but we’ve had no reports indicating damage yet.” Others, however, disagree.
Residents in Lincoln briefly lost power and there was a gas leak in Helena, the National Weather Service in Great Falls said on Twitter. Lewis and Clark County Sheriff Leo Dutton said Lincoln lost electricity as a result of the quake, but the power has since been restored.
Lisa Large, a bartender at the Wheel Inn Tavern in Lincoln, said the power went out and bottles flew off the shelves when the earthquake hit. Other than that, she said, there wasn’t any major damage there. She was in a fairly jovial mood when called by a Missoulian reporter near closing time at 1:50 a.m. “It slopped all the grease outta the fryer,” she said. “The kitchen’s a mess right now. The lights have been out and they just came back on. Hopefully we don’t get any more aftershocks.”
Quoted by the Missoulian, Dutton said the fire chief in Lincoln was sending people out to check for damage, but they have not found any yet. Missoula Police Department Corporal Mick McCarthy said the department has had calls from people asking what was going on with the earthquake and some medical calls, but no power outages reported or gas leaks. “No property damage reported yet, but it’s still early,” McCarthy said.
Ray Anderson, 76, told the Associated Press that it was the strongest quake he had ever felt.
Carolyn Kennedy, who lives in South Calgary, said she felt about 20 seconds “of waves” from the tremors. “We heard rumbling noises,” she messages FoxNews.com, adding that perfume bottles on her desk shook from the tremblor.
Twitter lit up around Montana seconds after the quake, with people weighing in from Bozeman to Kalispell to Glacier National Park to Billings and elsewhere in Montana.
“Did the entire state of Montana just have an earthquake?” tweeted Brandon Furr. Sean Ryan of Butte tweeted, “Now that everyone in Montana is awake from that earthquake … you guys want to play Monopoly or something?” Glacier National Park account tweeted, “Western Montana just had a decent-sized earthquake. Good shake here at Park HQ in West Glacier #geology.”
Musician John Mayer, a part-time Bozeman resident, took to Twitter to marvel at the event. “Wow,” he wrote on Twitter. “Earthquake in Montana.”
Wow. Earthquake in Montana. So if you wonder if you’re crazy and you’re searching the words earthquake and Montana, earthquake Montana.
While minor earthquakes are fairly common, Thursday’s moderate quake was the strongest felt in western Montana in two decades. The last one to exceed 5.0 magnitude was reported 12 years ago near Dillon, according to the USGS. Most of those incidents had epicenters farther south, many centering in the famously active Yellowstone National Park. In total, there have been more than 70 quakes measuring larger than 4.5 in Montana and parts of Wyoming and Idaho since 1925, according to the USGS. The largest quake in state history was magnitude 7.2 in 1959 near west Yellowstone.
The USGS reports the Lincoln quake was one of 20 within the last week and 236 within the last month.
end
Soft data Service PMI advances (equal to Markit) but inventory levels rise and stagflation seems on the horizon
(courtesy zero hedge)
Services Economy Rebounds But Stagflation Looms As Inventories Spike
Following the shizophrenic picture of Manufacturing in ‘Murica that we got earlier in the week, this morning’s Services surveys show a modest and consistent rise for Markit’s PMI (strongest since January with input prices soaring at the fastest pace in 2 years, and new orders at 5-month highs), and ISM’s (employment down as new orders rise).
A reminder of the divergence between ISM and Markit’s view of Manufacturing…
But both Markit and ISM saw modest gains in the Services sector…
ISM Breakdown shows weakness in employment as new orders rise
- Business activity rose to 60.8 vs 60.7 prior month
- New orders rose to 60.5 vs 57.7
- Employment fell to 55.8 vs 57.8
- Supplier deliveries rose to 52.5 vs 51.5
- Inventory change rose to 57.5 vs 54.0
- Prices paid rose to 52.1 vs 49.2
- Backlog of orders fell to 52.5 vs 57
- New export orders rose to 55.0 vs 54.5
- Imports rose to 51.0 vs 48.5
- Inventory sentiment fell to 62.0 vs 63.0
Notably, while New Orders rose, we see that only 33% of respondents said new orders had improved (the lowest since January)…
Perhaps most critical is the surge in Inventories – expanding at the fastest pace since June 2010. If we build it this time, will they come again?
ISM Respondents seem positive overall but raise Obamacare as a worry:
“Labor continues to be constrained in the construction industry, driving cost increases. Regional unemployment rate of 2.7 percent is making hiring difficult on all phases of the construction supply chain.” (Construction)
“Off to a very strong start — 2017 YTD results above 2016 actual and 2017 target. Expect trend to continue. Very positive outlook for our business.” (Finance & Insurance)
“We continue to struggle with the unknowns surrounding Obamacare, whether it will be repealed, or replaced, and if replaced what does it mean for our health services business, as well as our health plans business.” (Health Care & Social Assistance)
“Activity level continues to climb in the oil and gas sector with supply in certain spend categories continuing to tighten.” (Mining)
“June has been quite a busy month in terms of internal food activity. Seasonal increases in beef and poultry overall. Produce has remained steady with some early summer items coming down in price as product moves from Mexico to California growing regions. Dairy slightly up due to summer season cream production increase.” (Accommodation & Food Services)
“General overall optimism in economy. Still job growth issues with mismatch in available labor pool and jobs available.” (Professional, Scientific & Technical Services)
Commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
“The final PMI numbers came in higher than the initial flash reading and provide news of a welcome uptick in the pace of growth in the vast services economy at the end of the second quarter.
“The services data follow news from the sister manufacturing survey showing steady but unspectacular growth in US factories.
“Looking at the combined performance of manufacturing and services, output, order books and employment all gained momentum in June, and average prices charged for goods and services rose at the fastest rate for nearly three years.
Markit’s data suggests a modest pick up in GDP…
“However, the average all-sector PMI reading for the second quarter is down slightly on the first quarter,suggesting that the underlying pace of economic growth remains somewhat subdued though still robust.
The surveys are historically consistent with annualised GDP growth of just over 2%. Actual GDP data are expected to show a stronger rebound, though largely reflecting volatile quarterly seasonal variations in the official data.”
We will see you FRIDAY night
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Harvey.
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