Asian Metals Market Update: November-7-2017 By: Chintan Karnani, Insignia Consultants
Higher crude oil prices are supporting gold and silver. Gold and silver have always flourished in an inflationary environment. Focus will shift to inflation. If crude oil prices continue to rise then one should use sharp dips to invest for the short term. I see a direct correlation between gold prices and crude oil prices. Trump’s South Korea visit and China visit will be closely watched. Ways to deal with North Korean nukes will affect gold and silver prices.
Electronic Gold: The Deep State’s Corrupt Threat to Human Prosperity and Freedom By: Stewart Dougherty
In surging, gold blurted out the Deep State Central Planners’ strategy for dealing with the Great Financial Crisis: the hyperinflation of bond, equities and real estate prices via the hyperinflation of both official and totally clandestine, off-the-books money supply, in order to create the hyperinflation of tax revenues desperately required by the government to forestall its fiscal collapse. Gold’s exposure of the Deep State Central Planners’ secret strategy was absolutely unacceptable to them, and had to be stopped.
Left-Swipe: Why are US Millennials leaning away from capitalism? RT
Published on Nov 7, 2017
Asked what kind of country they’d prefer to live in, 44 percent of young Americans said they prefer socialism, with only 42 percent favoring capitalism. For the US, a country where free market ideology is essential, the fact that socialism is more popular than capitalism among the youth is certainly mind-boggling.
RT’s Caleb Maupin has more.
The global risk levitation continues, sending Asian stocks just shy of records, to the highest since November 2007 and Japan's Nikkei topped 22,750 - a level last seen in 1992 - while European shares and US equity futures were mixed, and the dollar rose across the board, gains accelerating through the European session with EURUSD sumping below 1.16 shortly German industrial output shrank more than forecast, eventually dropping to the lowest point since last month’s ECB meeting. Meanwhile soaring iron-ore prices couldn’t provide relief to the Aussie as the RBA held rates unchanged as expected; Oil traded unchanged at 2.5 year highs, while TSY 10-year yields rose while the German curve bear steepened, both driven by selling from global investors.
The Stoxx Europe 600 Index edged lower, erasing an early advance, despite earlier euphoria in stocks from Japan to Sydney, which reached fresh milestones. Disappointing reports from BMW AG and Associated British Foods Plc weighed on the European index as third-quarter earnings season continued. Earlier, the Stoxx Europe 600 Index rose as much as 0.3%, just shy of a 2-year high it reached last week. Maersk was among the worst performers after posting a quarterly loss, saying a cyberattack in the summer cost more than previously predicted. Spain’s IBEX 35 gains crossed back above its 200 day moving average. European bank stocks trimmed gains after European Central Bank President Mario Draghi said that the problem of non-performing loans isn’t solved yet, though supervision has improved the resilience of the banking sector in the euro region. Draghi was speaking at a conference in Frankfurt.
Over in Asia, equities rose to a decade high, with energy and commodities stocks leading gains as oil and metals prices rallied. The MSCI Asia Pacific Index gained 0.8 percent to 171.40, advancing for a second consecutive session. Oil-related shares advanced the most among sub-indexes as Inpex Corp. rose 3.7 percent and China Oilfield Services Ltd. added 4.6 percent. The MSCI EM Asia Index climbed to a fresh record. The Asia-wide gauge has risen 27 percent this year, outperforming a measure of global markets. The regional index is trading at the highest level since November 2007. Hong Kong’s equity benchmark was at its highest since December 2007 as Tencent Holdings Ltd. advanced for an eighth session. Australia’s S&P/ASX 200 index closed at its highest level since the financial crisis.
Japanese stocks climbed, bolstered by strong corporate earnings, with the Nikkei 225 Stock Average closing 1.7% higher at 22,937.60 at 3pm in Tokyo, climbing for 23 out of the past 25 trading sessions. Japan's main stock index has gained 20% this year with Tokyo Electron, Fanuc, SoftBank and Kyocera providing the biggest boosts, as the Topix index rises 1.2% to 1,813.29 from Monday, pushing it up +19% YTD.
“Oil and other commodities’ fundamentals are improving amid OPEC’s efforts, stagnating U.S. production and stable growth in China are positive for most Asian markets,” said Hans Goetti, founder of HG Research, referring to output caps put in place by the Organization of Petroleum Exporting Countries. “Economic growth differentials also are in favor of Asian markets, so the rally should continue.”
The euro declined to a four-month low and bund yields nudged higher after German industrial production fell more than expected in September. WTI crude hovered near the highest since January as political upheaval in Saudi Arabia reverberated through the market. Yen traded at 113.99 per dollar from 113.71 on Monday; currency +2.6% YTD.
In rates, the yield on 10Y TSYs rose two basis points to 2.33%; Germany’s 10-year gained 1 bp to 0.34%; Britain’s 10-year yield rose 1 basis point to 1.263% while Japan’s 10-year yield advanced one basis point to 0.032%.
Investors’ focus returned to geopolitics as Trump continued his tour of Asia, while Saudi Arabia launched a crackdown on corruption. Speaking next to South Korean President Moon Jae-in in Seoul, Trump said he saw some progress on North Korea, said that now is the time to act with urgency and determination with North Korea, and called on the rogue state to “come to the table”. He added that the U.S. and South Korea will act together to confront North Korea’s actions, and the U.S. stands ready to use its full range of military capabilities “if need be.” Meanwhile, the South Korean President Moon says that he and Trump reaffirmed resolve to peacefully end N. Korean nuclear standoff.
Bulletin Headline Summary from RanSquawK
European equities have struggled to maintain the Asian and American impetus
RBA stood pat on rates as expected. RBNZ act looks to maximise employment as a goal
Looking ahead, highlights include US APIs and comments from Fed’s Yellen and BoC’s Poloz
S&P 500 futures little changed at 2,589
STOXX Europe 600 up 0.04% to 396.73
MSCI Asia up 0.8% to 171.40
MSCI Asia ex Japan up 0.6% to 560.95
Nikkei up 1.7% to 22,937.60
Topix up 1.2% to 1,813.29
Hang Seng Index up 1.4% to 28,994.34
Shanghai Composite up 0.8% to 3,413.58
Sensex down 0.9% to 33,424.09
Australia S&P/ASX 200 up 1% to 6,014.34
Kospi down 0.2% to 2,545.44
German 10Y yield rose 1.3 bps to 0.349%
Euro down 0.3% to $1.1574
Italian 10Y yield fell 0.7 bps to 1.52%
Spanish 10Y yield fell 0.9 bps to 1.459%
Brent futures down 0.3% at $64.11/bbl
Gold spot down 0.4% at $1,276.47
U.S. Dollar Index up 0.3% at 95.04
Top Overnight News
President Donald Trump again showed how quickly his tweets can outrun U.S. foreign-policy planning, after he backed Saudi Arabia’s king and crown prince over the arrests of dozens of officials before the State Department had completed its review of the moves
U.S. President Donald Trump said that North Korea should “come to the table” and make a deal on its missile and nuclear programs
ECB Executive Board member Sabine Lautenschlaeger would have “liked to see a clear exit” from the ECB’s asset- purchase program, she tells Bloomberg TV
A ninth straight annual advance for emerging-market macro hedge funds doesn’t mean investors are expecting an exodus as the world’s central bankers start turning off the taps; demand remains so brisk that some are turning new money away
German industrial production dropped 1.6% in September from August, when it surged 2.6 percent, the fastest pace in six years
There are continued signs that French bonds could be one of the big winners from the ECB’s extension of stimulus; the bank set a new record in buying the country’s securities, purchasing 1.70 billion euros ($2 billion) relative to its capital key for October, compared with 1.57 billion a month earlier
Saudi Arabia’s anti-corruption crackdown is expanding beyond the list of princes, billionaires and officials already arrested
Multinational companies including Apple Inc., Pfizer Inc. and Ford Motor Co. would face a new tax on payments they make to offshore affiliates under the House Republicans’ tax bill -- a surprise provision that has stunned tax experts
Broadcom Ltd. is using a tactic popularized by corporate raiders in the 1980s to convince Qualcomm Inc. and its shareholders that it has the means to complete the biggest tech deal ever
Biggest Danish Mortgage Bank Cancels IPO After Private Offer
Asian bourses higher across the board, having drawn encouragement from the close on Wall Street, where all three major indices touched yet more record highs over the surge in energy names amid rising oil prices. ASX 200 (+1.0%) briefly pushed through the key 6000 level for the first time since 2008 as miners lifted shares in Australia with iron prices continuing to rise. Similarly, the Nikkei 225 (+1.6%) traded at better levels, making fresh 25yr highs after topping 22,750. While, Chinese markets also eked out gains this morning with Evergrande the notable outperformer in China after the company stated that they were to sell CNY 60bln of property assets. In credit markets, across the Japanese curve, the short end outperformed with the curve somewhat steeper. JGBs had been tracking lower, in tandem with USTs as equities continue to reach new highs.
Top Asian News
Razer Is Said to Raise $529 Million in IPO Priced Near Top End
China Firms Have Found a Way to Cut Debt, at Least on Paper
India’s Sensex Falls from Record as Drugmakers, Oil Shares Drop
Hong Kong Traders Get Vertigo as Stocks Whipsaw to Decade- High
Tencent’s Honour Loses Top Spot in China After Year-Long Run
Lupin Gets FDA Warning Letter on Goa, Indore Plants; Shares Fall
Bank of Korea Board Split on Timing of Rate Hike, Minutes Show
European equities have followed the theme across the globe, with the majority of bourses trading in the green. Sectors see energy leading the charge once again, as oil continues to drive the unit over 1%. The Dax sees another record and is only seeing weight from BMW following their earnings – Earnings do continue to drive with the biggest moves seen in Maersk, Dialog, Siemens Gamesa and Zalando all suffering after disappointing updates. Treasuries trade near session lows, as some selling volume has helped the marginal bearish push. US 2/10s have flattened to a new low around 70bps, with the curve not seeing levels like that since Nov 2007.
Top European News
Fortum CEO Seeks Talks With Uniper Head as Germany Approves Bid
Credit Agricole Unit Agrees to buy Italy Wealth Manager Leonardo
U.K. Retail Sales Weaken as Cash-Strapped Consumers Hold Back
German Industrial Output Drops as Manufacturing Takes Breather
SocGen Faces French Criminal Probe Into Suspected Libya Bribery
Draghi Says Banks’ Non-Performing-Loans Problem Isn’t Solved Yet
Serbs Mull New IMF Deal as Weak Growth Mars Healthier Budget
Siemens Is Said to Ready Job Cuts Amid Slump in Power Orders
In FX, USD A second wave of USD buying has been evident in European trade, with a push clear in USD/JPY, as Monday’s 114.73 how is set to behave as the next resistance level. Focus remains political, with eyes on the GOP tax bill, coinciding with President Trump’s visit of South Korea and later comments expected from current Fed Chair Yellen. The Kiwi was one of the movers overnight, finding volatility as the New Zealand PM outlined the review of RBNZ act, which will include maximising employment as a goal, however, further stated that there is no desire to have the exchange rate in the review. The initial spike higher in the NZD retraced through the Asian session and opened Europe back below pre-announcement levels. Australian RBA Cash Rate (Nov) 1.50% vs. Exp. 1.50% (Prev. 1.50%). RBA says forecasts are largely unchanged with the forecast remaining that inflation will pick up. Higher currency would slow the economy, adding that it is restraining price pressures. Labour market has continued to strengthen, although inflation remains low and will likely do so for some time. New Zealand Financial Minister stated that they will retain the 1-3% inflation target for RBNZ. There is no desire to have NZD included in the RBNZ review. The RBNZ review to include maximising employment as their goal.
In commodities, Oil continued to gain through yesterday’s session continuing to print fresh highs, the next clear resistance is likely to be 2015 highs, just through 60.00/bbl. Precious metals have been pushed lower, led by gold, largely in line with the bullish pressure seen in the USD this morning
Looking at the day ahead, datawise we’ll get Germany industrial production for September, Euro area retail sales for September and September JOLTS and October consumer credit in the US. The holds a forum on Banking Supervision which will include a speech from President Draghi. The Fed’s Quarles is also due to speak in the evening at the Clearing House annual conference. The OPEC world oil outlook will also be presented.
US Event Calendar
10am: JOLTS Job Openings, est. 6,075, prior 6,082
12:35pm: Fed’s Quarles Speaks at Clearing House Conference
2:30pm: Yellen to Receive Award for Ethics in Government
3pm: Consumer Credit, est. $17.5b, prior $13.1b
DB's Jim Reid concludes the overnight wrap
Given the fairly light calendar elsewhere it feels like developments in and around Washington will likely hog the spotlight this week. With that in mind it was interesting to hear the latest view of DB’s Washington specialist Frank Kelly yesterday on his conference call. Unsurprisingly Frank thinks that the tax bill has little chance of passing in its current form. He made the point that the bill is likely to face an extraordinary amount of lobbying and noted three very powerful groups in the association of homebuilders, realtors and independent businesses. So the current House version is seen as more of an opening bid but as the days go on the lobbying will ramp up intensely. What is hugely important in Frank’s view though is the parallel developments in the Senate. Indeed early next week, or possibly late this week, the Senate Republicans will unveil a plan of their own which is likely to look very different to the current House bill legalisation, certainly in being a lot less sweeping. This morning, Bloomberg noted that the Senate’s tax plan may keep the mortgage interest deduction limit at $1m instead. Politico also ran an article yesterday saying that reconciling the difference between the two chambers could end up being the biggest hurdle. So keep an eye on that as the next important event in addition to any press snippets in terms of mark ups on the current House version.
In terms of timing Frank thinks that it’s very unlikely that we get the bill passed before Thanksgiving. Instead we might see something around the Holiday Season or possibly as late as early next year depending on how contentious it is. Frank is a bit more upbeat about getting something however given the health reform debacle. So all in all expect this to rumble on for some time.
Unlike politics, markets have had a slightly less complicated start to the week. Having dipped into the red at the open following the Saudi Arabia, China and Trump headlines from the weekend, equity markets largely closed on the front foot last night. In Europe the Stoxx 600 finished +0.13% while across the pond the S&P 500 also eked out a +0.13% gain by the end of play – the 5th day in a row it has closed higher – helped by a decent rally for energy stocks after WTI rose +3.07% and to the highest in two years on the back of those Saudi developments. The broader move higher was also despite the telecom sector doing its best to drag the index down after the news that Sprint and T-Mobile were officially ending merger talks. In fact M&A has been a bit of a theme over the last 24 hours particularly in the tech sector.
Bond markets were slightly firmer yesterday too. Bunds ended the session 2.8bps lower at 0.332% while Treasuries were 1.4bp lower to 2.316%. The Treasury curve was actually a bit flatter yesterday with the 2s10s curve dipping below 70bps intraday and to the lowest since early November 2007. It’s hard to know if the latest leg had anything to do with the weekend news of the NY Fed’s Dudley announcing his plan to retire by the middle of next year and before the end of his term in 2019. The board of the NY Fed will now choose the next President. The announcement means that the last member of the Yellen-Fischer- Dudley triumvirate will now step down and at face value one would think that this makes ‘continuity’ under Powell certainly more of a challenge given that Yellen was seen as having significant support from both Fischer and Dudley. So the decks have certainly been cleared for a Fed leadership change which is something to keep in mind as we approach 2018.
Back to bond markets briefly, it’s worth pointing out that the latest ECB PSPP and CSPP data was released yesterday. Significantly, with regards to the former, the ECB announced that there will be €124bn of reinvestments from January to October 2018 (so an average of €12bn a month). The pace will however be slower for the first three months of next year at just €23bn total for those months before ramping up from April. So that means that the pace of QE plus reinvestments following the taper announcement nearly two weeks ago will be around €38bn for January to March and closer to €45bn from April to October. In terms of CSPP, what was most interesting from the latest data was confirmation that next year’s CSPP redemptions are a lot smaller than would be implied by the eligible universe because purchases have been concentrated in liquid new-ish issues.
The data suggest that the average monthly CSPP redemptions over the next 12 months will only be €273m (2.7% pa of the current holdings versus close to 8% in the eligible universe). The data backs up the view of DB’s Michal Jezek as per his note here from mid-October.
Turning now to markets in Asia this morning where the rally for Oil is helping equity bourses to post decent gains. The Nikkei (+1.57%) in particular is at a new 25-year high while the Hang Seng (+1.22%), ASX 200 (+1.02%) and Shanghai Comp (+0.63%) are also up. There hasn’t been any notable updates from Trump’s Asia tour while this morning we also had the RBA meeting where policy was left unchanged, as expected.
Moving on. There were a few central bank speakers yesterday but in truth there wasn’t much in it to move the dial. The Fed’s Dudley spoke post his resignation announcement and said that “…there’s not a lot of discord going into this (Fed) transition…so I think it’s going to be a very, very smooth transition” and that the Fed vacancies “has no implication whatsoever for policy right now”. Further, he added that Governor Powell and Chair Yellen “are very well aligned, so I think this is going to be very evolutionary”.
Meanwhile the ECB’s Praet sounded a bit dovish, noting that “a substantial amount of monetary accommodation continues to be necessary…” and that “overall, inflation developments, despite the solid growth, have remained subdued”. In the details, he noted 3 factors were considered when ECB recalibrated its policy on QE back in October, including: i) pace - was reduced because “the brighter economic prospects have increased our confidence” on a gradual rise in inflation, ii) horizon – was extended because ECB “has always emphasized monetary policy needs to be persistent and patient for underlying inflation pressure to gradually build up” and iii) optionality – as retaining the option to recalibrate the APP if warranted is consistent with the forward guidance on the APP.
Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the Fed’s latest senior loan officer opinion survey was released. In the details, respondents indicated that bank’s lending
standards was i) eased for commercial and industrial loans (C&I), ii) broadly unchanged for most commercial (CRE) and residential real estate (RRE) loans, but iii) tightened for credit cards and auto loans. Conversely, in terms of demand, a) RRE and credit card lending was broadly unchanged, but b) demand for C&I and CRE loans was weaker.
In the Eurozone, the final reading for the October PMI was revised 0.1pts higher, with the services PMI now at 55.0 and composite PMI at 56.0. Overall, our economists believe that if this level is sustained, 4Q GDP growth could be closer to 0.7% qoq rather than the 0.5% qoq that they currently expect. Across the bloc in terms of composite PMI, France’s PMI was revised 0.1pt lower to 57.4, Germany’s PMI was revised 0.3pts lower to 56.6 and Spain’s PMI fell 1.3pts to a still solid 55.1 this month, albeit the lowest reading since February. Elsewhere, Italy’s flash PMI was lower than expectations at 52.1 (vs. 52.9 expected) and composite PMI was 53.9 (vs. 54.3 expected).
Elsewhere Germany’s September factory orders were above expectations at +1.0% mom (vs. -1.1% expected) and +9.5% yoy (vs. +7.1% expected). Excluding the volatile ‘other transport’ sector, manufacturing orders were still up +8.9% yoy. Elsewhere, the Eurozone’s September PPI was above consensus at +0.6% mom (vs. +0.4% expected) and +2.9% yoy (vs. +2.7% expected), while the November Sentix investor confidence also beat at 34 (vs. 31 expected) – now slightly lower than the pre-GFC high.
Looking at the day ahead, datawise we’ll get Germany industrial production for September, Euro area retail sales for September and September JOLTS and October consumer credit in the US. The ECB is due to hold a forum on Banking Supervision which will include a speech from President Draghi. The Fed’s Quarles is also due to speak in the evening at the Clearing House annual conference. The OPEC world oil outlook will also be presented.
BAKU - Saudi Arabia announced plans to construct a new megacity in the northwestern corner of the country by the Red Sea and the Gulf of Aqaba. The ambitious project will cost about 500 billion USD and seeks to link to neighbouring Egypt and Jordan. Besides its economic feasibility, the proximity of the project could lead to Saudi Arabia’s recognition of Israel. Suffice to say, a project of this magnitude is not without its geo-economic challenges.
By Gavin van Marle (The Loadstar) – Financial investors in North American ports and operating terminals may face difficult choices in the next few years, as margins continue to be squeezed and returns diminish, according to a new report from AlixPartners.
Prior to the global recession, scores of institutional investors were lured to the sector and its seemingly risk-free and stable returns. That in itself created something of an asset bubble.
A series of deals saw private equity and fund managers acquire terminals for increasingly high prices, culminating in a Deutsche Bank-led fund buying New York-based Maher Terminals for $2.7bn in 2007, just as the sub-prime crisis was beginning to spark a chain of events that would wreak havoc on the global economy and change liner shipping.
The AixPartners report says: “Today’s North American container terminal business is a far cry from what many investors thought they were buying into just a few years ago.
“Powerful trends – starting with a global recession of historic proportions – have upended the common assumption that this is a steadily growing business with consistently healthy returns.
“Traffic gravitates to gateways, not to specific terminals. So, the first challenges are to understand the dynamics affecting a particular gateway, and to objectively evaluate that port’s growth potential.
“Only then can an investor rationally assess the range of strategic options for increasing the value of a given terminal within that gateway.”
It adds: “In the most extreme cases, the best option might simply be to exit; but even in the best of cases, the paths to value creation are limited and investors must choose carefully.”
Shipping lines are undergoing one of the most radical eras of consolidation and, in combination with the deployment of ever-larger vessels, the challenges are mounting for terminal operators.
The report says: “Consolidation in the carrier market is reducing the number of potential customers terminals can serve, which makes each deal critical as the volume in play increases.
“At the same time, through a variety of investment structures, many of the leading carriers already have affiliations with terminals in leading ports, so the odds are tilting against independent terminals, thereby driving them to compete on price.”
This has been most extreme in the region’s largest container gateways of Los Angeles-Long Beach, New York-New Jersey and Seattle-Tacoma, where a “patchwork of partnerships between carriers and terminals” continues – and which is expected to consolidate.
Ironically, this effect, in combination with the Panama Canal expansion, means operators in secondary ports are finding new opportunities to develop services that draw in better-paying cargo, says the report.
“Terminal operators with exposure to major hubs and gateways are experiencing falling margins, and their peers with operations in secondary and developing markets are seeing their margins improve.
“We believe this trend will take root in the US market as competition in major gateways becomes fierce and as savvy operators in secondary ports seek opportunities to provide niche services,” it adds.
The Loadstar is fast becoming known at the highest levels of logistics and supply chain management as one of the best sources of influential analysis and commentary.
Gold vs. Bitcoin Debate, Germans Buying Gold, Nations Ban BTC. Junius Maltby
Published on Nov 7, 2017
The Gold Vs. BTC (or Crypto for that matter) has existed since the inception of BTC in 2009. Ever since it has been an either or argument for many in both communities, including myself. Only recently have I wrestled away some of my bias, while still retaining my harsh criticisms and skepticism surrounding the crypto world. For that reason, I feel I have been able to explore both camps, see many views and ideas and come to a somewhat balanced approach to my use of, exposure to, and handling of Cryptocurrencies. I will share my opinions here as we go through several articles highlighting some of the debate around Gold Vs BTC. Both pose a threat to government and offer some form of escape from the dying fiat world. The dollar is failing and the rise of metals and crypto are merely a symptomatic proof that the paper is ill.
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Gold Seeker Closing Report: Gold and Silver Fall Back A Bit By: Chris Mullen, Gold Seeker Report
Gold edged down to $1275.30 at about 4AM EST before it bounced back to $1280.10 in midmorning New York trade and then dropped to a new session low of $1272.30 by late morning, but it then chopped back higher into the close and ended with a loss of just 0.36%. Silver slipped to $16.987 before it rallied back to $17.183, but it then fell to $16.925 in early afternoon trade and ended with a loss of 1.65%.
Then, in Klemp’s words, “new money started showing up from people working ‘gig’ jobs” over the last decade or so – “gigs” that often revolved around cash-only work in landscaping, home repair, and the like.
“The size and scope of recent of consumer spending is part of the tip off; spending is increasing and growing apart from wages and incomes,” he said.
“The obvious benefit is not paying taxes,” Klemp explained. “Take part time lawn-mowing work. If you can mow 30 lawns a week – that’s not a heavy load – at $35 per lawn, you are making over a grand per week ($1,050) with no taxes.”
He added that such work pays well in relation to what truck drivers typically get in terms of a weekly paycheck. “And it’s hard to get caught because the resources devoted to finding un-reported income under a six-figure threshold are almost non-existent,” Klemp said.
Indeed, it’s a sad commentary on truck driving as a profession when you can make the same pay or better mowing lawns or working as an Uber or Lyft driver.
“Uber and Lyft are ‘ad-hoc’ cab companies, if you will – but it’s the worker who dictates when they work, how they work, and when they get paid, and they are home every night,” NTI’s Klemp noted.
“Their earning potential is $50,000 to $55,000 if they work full time and work at high-demand times,” he added. “That is very competitive with a truck driving job; particularly with long haul where drivers still pay for their meals and other living expenses.”
Klemp also noted in his commentary about truck driver pay trends last week that wages for big rig operators are not only growing slowly, they are far below the warning potential of what the profession used to pay back in the days before deregulation.
In 1979, if you fast forward with the rate of inflation to 2016, pay for a union driver would average $101,600. Yet according to NTI data, the average pay for a similar driver hit $52,406 in 2016.
“This means pay has really been a long-term problem,” Klemp said. “Between 2006 and 2017 net growth in [for-hire truck] driver income reached 6.3% – that is very low.”
By contrast, private fleet pay went up 16.55% over that same 11 year period –which just about mirrors the inflation rate at 18.5%, he pointed out. Yet over the same time period, the minimum wage went up 45.6% and McDonald’s pay up 94.2%.
“So that puts driver pay in perspective; it’s becoming ‘less attractive’ versus ‘more attractive.’ That puts a real damper on growing the driver pool,” Klemp noted.
It’s just one more challenge motor carriers need to address as they try to win the hearts and minds of younger workers and get them to choose trucking for a career.
“Our forecast reflects the very realistic steady momentum of the economy and overall strength of the industry,” said Matthew Shay, NRF president and CEO.
E-commerce sales will reach $111 billion to $114 billion this holiday season, an 18% to 21% increase from 2016, according to a forecast from Deloitte Consulting.
Rachal Snider, vice president of customer supply chain for Illinois-based logistics firm AFN, said the truckload carriers she has spoken with are expecting a “busy - and certainly at times challenging - holiday season.”
She noted the growth of e-commerce is pushing shipping patterns for the holidays out to the end of the year. As a result, retailers are setting up more distribution centers.
“Supply chains have been built to service the big box retailer ecosystem,” she told Fleet Owner. “E-commerce flips that model on its head, and changes the shipping strategy from large volume/low frequency shipments to low volume/high frequency shipments.”
FedEx Corp. said it expects to deliver between 380 million and 400 million packages during the holiday season.
“Changing market dynamics related to the growth of e-commerce are expected to once again drive the highest surges in demand on Mondays, and FedEx is expecting three Mondays during peak to more than double our average daily volume,” the company said.
About 26 million packages are projected for those three Mondays as consumers place online orders during the weekend.
FedEx is adding 50,000 seasonal workers and investing $1.5 billion to enhance automation and efficiencies across its FedEx Ground network. It is also adding more aircraft and drop-off centers at Walgreens, Albertsons and Kroger stores.
UPS Inc. said it will deliver more than 750 million packages globally in the 25 days between Thanksgiving and New Year’s Eve. That is about 5% above a year ago, aided by the new UPS Saturday Ground service, offering customers additional delivery days.
“Online and mobile commerce has transformed the retail industry, and UPS is ideally positioned to serve both our consumer and business customers during even these busiest of times,” said Kate Gutmann, chief sales and solutions officer.
Gutmann said the new Saturday operations will add about 6,000 permanent jobs once fully implemented. During the peak season, UPS will employ 95,000 temporary seasonal workers.
Also projecting a record holiday season is the U.S. Postal Service, which said it will deliver more than 15 billion pieces of mail and 850 million packages between Thanksgiving and New Year’s Day.
To handle the rising volume the Postal Service is expanding Sunday delivery operations to more locations on Nov. 26. It already delivers packages on Sundays in most major cities, and anticipates delivering more than 6 million packages on Sundays this December.
The Postal Service said the increase in online shopping means there is no long a “busiest day” for in-person shipping. Instead, the busiest time is spread over the two weeks ahead of Christmas, with Dec. 18 the busiest day online with more than 7 million customers seen visiting the USPS web site for shipping help.
To prepare for the holidays, XPO Logistics said it is hiring more than 6,000 seasonal workers, about 20% more than last year.
“Our growing network in last mile puts us in an excellent position going into the holiday peak,” said Scott Malat, XPO’s chief strategy officer. “We have strong capacity, and we opened eight new hubs ahead of Black Friday, bringing our e-commerce network to a total of 53 hubs in the U.S.”
Amazon.com plans to hire 120,000 temporary workers in the U.S. this season, the same as last year. They will be spread over 75 fulfillment centers in 33 states. The company continues to increase use of its private fleet for deliveries, as well as the “Seller Flex” program, which gives Amazon greater control of deliveries from warehouses of third-party merchants to customers’ homes.
Based on current market conditions, AFN’s Snider recommended shippers consider diversifying their portfolio of carriers to gain greater flexibility. She also stressed the importance of communicating sudden changes in volumes with carriers and logistics firms as quickly as possible.
“If shippers have spot loads that take precedence over primary freight, they should let their 3PLs know so they can act accordingly,” Snider said.
Dr. Ron Paul has long been a leading voice for limited constitutional government, low taxes, free markets, sound money, civil liberty, and non-interventionist foreign policies.
Dr. Paul served as the US Representative for Texas’s 27th Congressional District from 1976 to 1985. He then represented the 14th district from 1977 to 2013. He ran for the office of US President, three times, most recently in the 2012 Republican primaries. Dr. Paul also had a long career as an OBGYN over which he delivered more than 4,000 babies.
The recent author of the book, The Revolution At Ten Years, Dr. Paul looks ahead at the future of the movement he helped launch -- tackling central planning, the military empire, cultural Marxism, the surveillance state, the deep state, and the real threats from these institutions to our civil liberties.
As a multi-term member of Congress, Dr. Paul knows the players and policies responsible for the growing unfairness and inequality now rampant in society. He does not expect the offenders will reform willingly. Instead, he predicts the system will collapse under its own unsustainability -- offering a rare and valuable chance then for more sound and fair solutions to prevail.
The overnight fireworks in Japan, which saw the Nikkei plunge by 860 intraday points and sent vol and volumes soaring (before recovering most losses), spooked traders in Asia and around the globe, and U.S. equity futures are red this morning, along with European shares and oil. As one early riser sellside desk notes, the Nikkei 225 provided the latest example of choppy markets and the 860 point intraday plunge "got us worried. Is this a warning sign for risk assets?" President Trump's challenge of China for "unfair trading practices" (which he blamed on his predecessors) did not help the calm mood.
“The stock market has run out of a little momentum since the blow-out on the (Japanese) topix so it feels like it’s temporarily paused,” said Societe Generale strategist Kit Juckes. “We are waiting for some news from the Republicans on the tax plans, there is a bond market that has stalled and we’ve got rather soggy looking emerging markets... We probably need to get U.S. Treasury yields higher to get things going again.”
In the aftermath of the Japanese vol spike, the MSCI Asia Pacific Index turned briefly negative having earlier climbed to all-time record.
Most of Europe’s main bourses also drifted in and out of the red after Japan's disturbance spooked traders and after mixed earnings and as Brexit talks resumed with low expectations in Brussels. There were a series of ECB speeches and what should be buoyant new growth forecasts due later from the European Commission, though bond markets were mostly quiet following a rally this week in benchmark U.S. Treasuries and Bunds. In fact, German Bunds were sharply offered, with yields rising 9% on the day an approaching 0.36%: the move has dragged the rest of the European bonds lower, with OATs and Gilts also moving. According to some desks, this may be due to some rotation from the European equity markets, which are broadly trading into the red today and could be following in the footsteps of Nikkei.
Already shaken by events in Japan, basic-resources shares weighed on the Stoxx Europe 600 index following a decline in industrial-metals prices. An increase in growth expectations from the European Commission failed to lift stocks as disappointing results from companies including Siemens AG and Vestas Wind Systems A/S added to the malaise. Banks gained, led by Italian lenders after BPER Banca S.p.A. earnings beat estimates. Stocks in Asia earlier rose above their 2007 peak before an intraday reversal in Japanese shares on technically-driven trading pared gains in the region. Sterling edged lower as Brexit talks resumed, while oil halted a two-day drop.
Understandably, the yen was the dominant theme of the overnight session as investors rushed to buy the Japanese currency following the Nikkei plunge; the euro found support after the European Commission raised its growth outlook for the common area, while the pound reversed earlier gains as some hedge funds turned sellers;
Investor attention has been focused on Asia this week, where Trump has embarked on an 11-day tour. In Beijing Thursday, he said China is taking advantage of American workers and companies with unfair trade practices, but he blamed his predecessors in the White House rather than China for allowing the massive U.S. trade deficit to grow. A year after Trump was elected to president, investors are also reflecting on how financial markets have fared in the interim, and a rally that has outperformed all but 4 "new president" markets in US history.
As Bloomberg adds, elsewhere in the overnight session, the New Zealand dollar held onto Wednesday’s gains after the central bank flagged it may raise interest rates earlier than expected. The Kiwi was the day's big mover, surging about 1 percent to a two-week high of before dipping to trade at $0.6956. The kiwi soared after the Reserve Bank of New Zealand (RBNZ) said the country’s fiscal stimulus and the currency’s recent fall would lead to faster inflation and likely an earlier rise in interest rates.
Treasury yields were range-bound as markets wait to see the U.S. tax proposal that will serve as the basis for further discussions. The kiwi was near two-week high after more hawkish RBNZ sends New Zealand’s 10-year yield eight basis points higher. Aussie dips briefly following surprise drop in housing finance activity and a subseqent short squeeze sent it to session highs; Australian sovereign bonds drift lower with 10-year yield up three basis points at 2.60%. JGB futures dip after mediocre 30-year auction tails 1.1bps.
The dollar index against a basket of six major currencies was 0.1 percent lower at 94.803 meanwhile, as it drifted further from the three-month high of 95.150 set in late October. A U.S. Senate tax-cut bill, differing from one already in the House of Representatives, was expected to be unveiled on Thursday, complicating a Republican tax overhaul push and increasing scepticism on Wall Street about the effort. Some also focused on fallout from Democrat wins in regional U.S. elections this week as signal for next year’s mid-term Congressional elections for U.S. President Donald Trump.
“There’s very much a risk of disappointment. The U.S. dollar could go through a weakening phase on the back of uncertainty around that tax reform,” said Steven Dooley, currency strategist for Western Union Business Solutions in Melbourne. Meanwhile, stalled Brexit talks resume on Thursday in Brussels with no indication that a breakthrough is in reach.
In commodity markets, Brent and U.S. crude oil futures were modestly lower, having hit two-year highs earlier in the week following a 40% surge since July. U.S. data showing a rise in domestic crude production had weighed on sentiment overnight but the Middle East uncertainty in Saudi Arabia limited the losses. Gold added 0.2 percent to $1,283.45 an ounce after rising to a three-week high of $1,287.13 an ounce the previous day. Palladium hovered near a 16-year high of $1,019 while nickel fell by more than 2 percent in London to its weakest since October as hype over potential electric vehicle demand that has been driving it higher eased. The nickel market had been ignoring downside risks from policy developments in supply markets Indonesia and the Philippines, and instead focusing on potential future demand from electric vehicle batteries, said Morgan Stanley in a report.
“We (have) heard little to alter our view that producing NiSO (nickel sulphate) isn’t particularly challenging/costly and we see near-term downside risk to price,” it said.
On today's calendar, the ECB said economic growth in the U.K. is headed for a prolonged slowdown even as the euro-area economy is forecast to expand at the fastest pace in a decade this year. And in the U.S., tax reform discussions continue. The Senate is due to release a “conceptual mark” of a proposal Thursday, according to a spokeswoman. Expected economic data include jobless claims and wholesale inventories. Dish, Disney, Johnson Controls and TransCanada are among companies reporting earnings.
Bulletin Headline Summary from RanSquawk
European markets remain subdued, as equities trade mixed with a lack of any real direction
GBP weaker amid a late follow-through of concerning Brexit commentary
Looking ahead, highlights include US weekly jobs, ECB’s Lautenschlaeger and Constancio
S&P 500 futures down 0.1% to 2,588.30
STOXX Europe 600 down 0.2% to 393.82
MSCI Asia up 0.1% to 171.99
MSCI Asia ex Japan up 0.3% to 561.79
Nikkei down 0.2% to 22,868.71
Topix down 0.3% to 1,813.11
Hang Seng Index up 0.8% to 29,136.57
Shanghai Composite up 0.4% to 3,427.80
Sensex up 0.06% to 33,239.47
Australia S&P/ASX 200 up 0.6% to 6,049.43
Kospi down 0.07% to 2,550.57
German 10Y yield rose 0.2 bps to 0.328%
Euro up 0.05% to $1.1601
Italian 10Y yield rose 4.5 bps to 1.482%
Spanish 10Y yield rose 3.0 bps to 1.515%
Brent futures down 0.1% to $63.41/bbl
Gold spot up 0.2% to $1,283.82
U.S. Dollar Index down 0.06% to 94.81
Top Overnight News
President Trump said China is taking advantage of American workers and American companies with unfair trade practices, but blamed his predecessors in the White House for allowing the U.S. trade deficit to grow
The European Commission’s chief Brexit negotiator, Michel Barnier, and U.K. Brexit Secretary David Davis resume talks on the terms of Britain’s exit from the EU. Timing and duration in Brussels to be determined
ECB’s head of banking supervision, Daniele Nouy, signaled that she’s willing to compromise on controversial plans to toughen rules on bad loans after criticism from the European Parliament that sent Italian bank shares soaring
EU is giving U.K. an informal deadline of two to three weeks to set out how much it is prepared to pay in the Brexit divorce settlement, the Financial Times reports, citing an unidentified senior EU negotiator
Hearing on Powell for Fed Chair set for Nov. 28
Saudi Billionaires Said to Move Funds to Escape Asset Freeze
AT&T CEO Says He Won’t Sell CNN as Antitrust Tension Rises
Boeing Wins China Orders for 300 Planes Worth $37 Billion
London House-Price Slump Persists as Brokers See Sales Tumble
Vestas Plunges Most in 6 Years on Tougher Wind Competition
BOE’s McCafferty Says Banks May Leave Before Brexit Deal Agreed
Risk on sentiment had been in full swing in Asia as stocks continued to edge higher at the beginning of the session, before later paring initial advances, particularly in Japanese assets. Nikkei 225 had been the notable outperformer although reversed gains of 2% as US equity futures dipped, subsequently sparking safe haven flow in the JPY, while some investors also touted profit taking. Elsewhere, the ASX 200 hovered around 10yr highs with iron ore prices seeing another day of gains, consequently supporting miners. Chinese markets traded in mixed fashion with the Hang Seng keeping afloat after encouraging Chinese CPI and PPI data which tops analyst estimates, while the Shanghai Comp fluctuated between gains and losses. 10yr JGBs are a tad lower, while underperformance has been observed in the belly of the curve with the 10yr yield ticking up 0.1bps.
Top Asia News
Noble Group Posts $3 Billion Year-to-Date Loss as Crisis Deepens
Inside Noble-Vitol Deal Shows Colonial Pipeline as Top Asset
Malaysia Says It May Consider Review of Monetary Accommodation
Malaysian Bonds Face Specter of First Rate Hike Since 2014
Philippines Holds Benchmark Rate as Inflation Seen on Target
Bakrieland Says Singapore Court Approves Debt Restructuring Plan
European equities trade with little in the way of any notable price action after a directionless lead from Asia after initial gains were erased. On a sector specific basis, performance has largely been off the back of individual earnings from across the continent with notable movers including Vestas Wind Systems (-16.9%), Burberry (-10.5%), Sainsbury’s (-2.9%), Siemens (-2.6%) and Commerzbank (+2.6%). Upside in Commerzbank shares has subsequently lead to some outperformance in financial names with Italian banks also providing some support amid UniCredit’s latest trading update and a sector bounceback from yesterday’s losses. No sign of any investor angst or dampened demand whatsoever, as 2023 supply was snapped up with only a 1 tick price tail. This, despite a sharp retreat in yields following the BoE rate hike and not much in the way of concession going in to the DMO tap. Note also, the issue does not fall into the more normal 5 year bucket until next year and the average auction yield was just a shade below yesterday’s closing level. However, 10 year benchmark Liffe futures have retreated from best levels to marginal new lows for the session (125.45), albeit largely alongside a general downturn in fixed (Bunds just off a new Eurex base of 163.23). In truth, debt markets are lacking clear direction and consolidating recent gains/yield declines/curve flattening.
Top European News
Denmark’s Negative Rates Are Seen Persisting Into Next Decade
ECB’s Nouy Bends on Bad-Loan Plan as Italian Bank Shares Soar
U.K. Likely to See More Utility Mergers If SSE Deal Approved
Euro-Area Growth Forecast Lifted Again as U.K. Outlook Dims
In FX, a broadly softer Greenback, largely due to ongoing US tax reform uncertainty, and supportive RBNZ impulses has enabled the Kiwi to recoup more lost ground after the RBNZ stood pat on rates at 1.75%. Accordingly, it brought forward rate hike projections to June 2019 from Q3 previously, while Governor Spencer also contended that the NZD is now fair value (although his deputy McDermott thinks a bit more depreciation is desirable). EUR is back to pivoting around the 1.1600 level vs the Dollar where large (1.7 bn) option expiries reside. USD/JPY has seen very choppy trade in line with the Nikkei, but ultimately firmer on safe-haven grounds, as USD/JJPY retreats from 114.00 again towards November lows. Currently around 113.50, bids are seen at 113.40 and then 113.00, while offers are said to be layered from 114.00-20. Riksbank meeting minutes see several members emphasising the importance of the exchange rate for the economic outlook and inflation prospects.
In commodities, iron ore prices continued to surge higher overnight with Dalian iron ore rising as much as 2% amid the persistent rise in steel prices. Precious metals gained a slight bid following the turnaround in risk sentiment, where Japan equities reversed its 2% rise to trade with losses of 1.5%. WTI and Brent crude futures trade relatively sideways with little in the way of notable newsflow other than Goldman Sachs sticking to their USD 58bbl year-end call for Brent whilst noting the ‘potential for high spot price volatility in the coming weeks’.
Looking at today's calendar, data wise, September Germany trade data along with UK industrial production are due. Elsewhere, US initial jobless claims and wholesale inventories are also due. We’ll also receive the latest EC economic forecasts while the ECB’s Villeroy de Galhau, Coerue, Mersch, Lautenschlaeger and Constancio are due to speak. Brexit talks are due to resume between Barnier and Davis while President Trump holds meetings with China’s Xi and Li Keqiang.
US event calendar
7:45am: Bloomberg Nov. United States Economic Survey
8:30am: Initial Jobless Claims, est. 231,500, prior 229,000; Continuing Claims, est. 1.89m, prior 1.88m
9:45am: Bloomberg Consumer Comfort, prior 51.7
10am: Wholesale Trade Sales MoM, est. 0.9%, prior 1.7%; Wholesale Inventories MoM, est. 0.3%, prior 0.3%
DB's Jim Reid concludes the overnight wrap
Needless to say that the focus for markets today will be on what details emerge from the Senate’s version of the GOP tax bill. It’s unclear just how much detail we’ll get though with some conflicting reports out there. Axios reported that the release of the bill will be delayed however Politico reported separately that GOP leaders are ready to walk through the bill with the GOP conference at 11.30 EST. Thereafter it will be released to the public but the timing is a bit up in the air so we might have to wait and see. Overnight, a spokeswoman for the Senate Finance Committee, Ms Lawless, noted that today’s tax proposal will be a “conceptual mark” rather than the legislative details.
Over in markets, the one year Trump anniversary was one of the less exciting days that we’ve had so far. Initially the tone felt a bit more risk-off with European markets generally closing a bit softer. US markets did however pare early losses into the close at least with the S&P 500 ending +0.14%. That masked another difficult day for banks however, partly influenced by the Washington Post article that did the rounds suggesting that the Senate GOP tax bill could delay the cut in the corporate tax rate by one year. Later in the day, Treasury Secretary Steven Mnuchin also refused to rule out a possible phase-in of corporate tax cuts. Meanwhile victory for the Democrats in the two Governor races in New Jersey and especially Virginia also appeared to play a factor given the midterm elections next year. It remains to be seen whether that will transpire into taking back votes across the rest of the country but nevertheless it was a statement of intent.
Meanwhile EM tensions continue to bubble under the surface with headlines never too far from the front pages. EM sovereign debt has certainty had a tough time of it in the last week or so but we’re also starting to see some signs of selling pressure in DM HY credit with Crossover and CDX HY 11bps and 7bps wider this week, respectively. All the talk in bond markets at the moment though is the flattening across the Treasury curve. Yesterday saw both the 2s10s and 5s30s curves flatten for the 9th and 10th successive day respectively. The former dropped to 68bps and has now flattened by 16bps during that run. The latter was only modestly flatter at 78bps but is still also 12bps flatter over the same time.
So as we know the Treasury curve is the flattest it’s been in 10 years and there is plenty of ongoing debate as to what is driving the recent price action. Various reasons have been suggested. Our US rates strategists have previously noted that even with a tax plan, overseas investors and pension buying of the long-end is depressing term premium and yields. Another suggestion is that with 2y yields somewhat anchored relative to the Fed’s effective rate and therefore further rate hikes, the long-end is instead being weighed down by long-end Euro rates. Unsurprisingly there is plenty of discussion about how the recent moves are indicating late cycle tendencies. One thing we would note though is that the NY Fed recession model is only showing a 9% probability of a recession in the next 12 months. While that’s up from 3% at the end of last year the overall level is still clearly fairly low based on their model but it’s worth keeping an eye on. Also worth monitoring perhaps is the whether the flattening has had much impact on bank lending when we receive the next Fed Senior Loan Survey. In the last 3 days, US banks have dropped -3.53%, so the sector has certainly materially underperformed.
This morning in Asia, China’s October CPI was slightly above consensus at +1.9% yoy (vs. +1.8% expected) and also up from +1.6% the month prior, while PPI was steady but well above expectations at +6.9% yoy (vs. +6.6% expected). Markets are trading higher in Asia, with the Nikkei powering ahead (+0.58%) to a fresh 25 year high following sound corporate results, while the Hang Seng (+0.52%) and ASX 200 (+0.55%) are also up, but the Kospi is down 0.33%. Last night Bloomberg ran an article suggesting that the White House plans to announce $250bn of business deals with China this week based on comments from Commerce Secretary Wilbur Ross. As we go to print President Trump and China President Xi Jingping are about to hold a joint briefing. This comes after Trump called the trade relationship between the two “very one sided” and the deficit “shockingly high”. Xi said that China is to become more open to foreign investment and that the nation is “unswervingly committed” to opening up.
Moving on. In the UK, PM May’s cabinet has now lost two ministers within one week after the International Development Secretary Priti Patel offered her resignation, shortly after she admitted to holding a series of unauthorised meetings with Israeli officials without the PM’s knowledge and suggested giving British aid money to an Israeli army project. In view of the increased instability around PM May’s government, some suggested this may have knock on impacts on the progress of Brexit talks. Nonetheless, the Irish PM Varadkar has signalled that Brexit talks could have a breakthrough by December, noting that “I’m more optimistic than I was in the weeks before the October Summit”. The current round of Brexit talks will resume today in Brussels.
Following on, BoE policy maker McCafferty has warned that clarity on Brexit will be needed by early next year to better allow businesses to forward plan. He noted businesses “cannot wait until the last minute”, adding that “there’s a point…even when it becomes clear what the final deal will be – whether it’s no deal or some sort of deal – the banks will have to act”. Elsewhere, the BoE’s banking regulator Mr Woods had earlier noted that it was “plausible” the UK could lose up to 75,000 jobs in the banking and insurance sector if it left the EU bloc without a trade deal.
Staying in the UK, according to a network of UK businesses monitored by the BoE, the latest agents’ summary suggest wage growth in 2018 should improve further, now likely to be 2.5%-3.5% yoy growth (up 0.5% from prior readings), in part due to a slow-down in the availability of workers, which in some ways is not too surprising given UK’s unemployment is at a 42 year low. However, while the survey noted modest growth in spending is expected to continue for the coming year, expectations in the following two years were “weaker”.
Across the pond, the Fed’s Harker noted he has “not at this point” seen anything that would push him away from a rate hike in December, which is in line with the consensus view with the odds of rate hike unchanged at 92% (per Bloomberg). Looking ahead, he has “pencilled in three (rate) increases in 2018” but noted that this is somewhat evolving as he “will reassess that as the data comes in”. On potential tax cuts, he noted “we need more specificity as to what those programs would entail”, and that “we have not put any fiscal stimulus” in our forecasts at this stage.
Before we look at the day ahead, a quick recap of the minimal economic data from yesterday. In the US, the weekly MBA mortgage applications was flat (vs. -2.6% previous). Over in Europe, Spain’s September industrial production was above expectations at +0.1% mom (vs. -0.2% expected), leading to annual growth of +3.4% yoy (vs. +3.1% expected). In France, the September trade deficit was broadly in line at -$4.67bln, although there was a $0.3bn positive revision to the prior month’s reading. Elsewhere, the current account balance was lower than expected at -$3.1bn (vs. -$1.5bn expected). This morning in New Zealand, the central bank has the left cash rate on hold at 1.75% and noted that “monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly”. Elsewhere, inflation is now expected to trough at 1.5% yoy in 1Q18 but rebound to 2.1% yoy in 2Q.
Looking at the day ahead, data wise, September Germany trade data along with UK industrial production are due. Elsewhere, US initial jobless claims and wholesale inventories are also due. We’ll also receive the latest EC economic forecasts while the ECB’s Villeroy de Galhau, Coerue, Mersch, Lautenschlaeger and Constancio are due to speak. Brexit talks are due to resume between Barnier and Davis while President Trump holds meetings with China’s Xi and Li Keqiang.
Asian Metals Market Update: November-9-2017 By: Chintan Karnani, Insignia Consultants
Gold and silver are not out of the woods. So far Trump has not said anything to destabilize the markets. Fears of a surprise resulted in the rise of gold and silver yesterday. Developments in Saudi Arabia are here to stay. It may or may not affect metals and crude oil. The internet is filled with speculation that there is collusion between Israel and Saudi to expand Israel among other political agendas. Something is fishy in Saudi Arabia. Something big will happen in the Middle East over the coming months. Only big political news from the Middle east will impact global financial markets
The land-based Valemon control room in Bergen, Norway. In this photo, Control room operator Joakim Tesdal speaking with Norwegian minister of petroleum and energy, Terje Søviknes. Photo: Statoil
Norway’s first offshore oil platform to be remotely operated from land has now come online with the opening of the land-based control room in Bergen, Norway.
Statoil announced Thursday the opening of the Valemon control room, from where the Valemon platform will be remotely-controlled.
“This is a vital milestone for Statoil. We have had land-based surveillance and control of offshore operations for a long time, however, the remote control of Valemon marks one important step forward on our digitalisation journey,” says Gunnar Nakken, head of the operations west cluster in Statoil.
Valemon has been designed and constructed specifically for remote-controlled operations and is the first of its kind for both Statoil and the Norwegian Continental Shelf. The Valemon field is one of Statoil’s stand-alone development projects on the NCS, located in the North Sea about 160 kilometers west of Bergen. The field is estimated to contain about 192 million barrels of oil equivalent.
Statoil says the project will serve as the basis for possibly more remotely operated platforms in the future, particularly small and medium-sized platforms.
“Most of our production will still be carried out on large, manned platforms, such as Aasta Hansteen and the Johan Sverdrup platform, but for somewhat smaller platforms and fields it will absolutely be considered. First, we must gain experience from Valemon,” says Nakken.
“Thanks to new technology and knowledge we can utilise the advantages of our smaller, standardised building blocks that are combined differently from field to field for optimal resource exploitation. We want to combine the best technology, below and above water, to find optimal solutions for every project, thereby ensuring safer operation,” Nakken added.
The Valemon platform will be remote-controlled by a combined 14 operators who, divided on seven shifts, will man Valemon’s onshore control room.
Save American Transportation Research Institute (ATRI) this week highlights the federal fuel tax as the most “successful model for assessing a road user charge” with one of the lowest collection costs among the various infrastructure funding models examined – including a vehicle miles traveled (VMT) tax and broader use of roadway tolls.
The 63-page report, dubbed A Framework for Infrastructure Funding and authored by Jeffrey Short, ATRI’s senior research associate, also stressed the need not only to raise the federal fuel tax – which is 18.5 cents per gallon for gasoline and 24.5 cents per gallon for diesel; taxes that have remained unchanged for 24 years – but to possibly add in a universal vehicle registration fee to generate additional funds for expanding the nation’s 4 million mile roadway network.
“We inherently believe the ‘best case’ scenario for funding highway infrastructure is the federal
fuel tax, but we wanted more data to prove that,” Rebecca Brewster, ATRI’s president, explained to Fleet Owner.
“But not only did we identify the efficiency of the fuel tax, we found it can also create a lot of jobs, particularly highway construction and contractor jobs,” she added. “It’s also a job creator in the sense that by relieving traffic congestion, we get people moving – especially truck drivers – so they are more productive workers.”
That secondary form of “job creation” Brewster cited stems from previous ATRI research that found delays on the more than 220,000 miles of interstate highway that comprise the National Highway System (NHS) equated to more than 996 million hours of lost productivity – equal to 362,243 commercial truck drivers sitting idle for an entire working year.
In terms of those specific job-creating “secondary benefits” from raising the federal fuel tax, ATRI's findings suggest that every U.S. state would experience significant employment gains as a result of a 10 or 20 cent federal fuel tax increase.
In total, states would receive between $15 billion and $30 billion or more annually through a federal fuel tax increase; nearly half a million jobs could be created nationwide with a 20 cent federal fuel tax increase, the report indicated.
Yet the primary need remains the rehabilitation and expansion of the U.S. roadway network, which is in bad and worsening shape, according to ATRI’s report
ATRI also noted that despite federal, state and local governments expending $235 billion on highways for capital improvements, maintenance and other costs back in 2015: 11% of bridges remain classified as structurally deficient, with 14% classified as functionally obsolete; 16.7% of federal-aid highway pavement is rated as poor; some 6.7 billion hours of delay are experienced by travelers annually.
Along with raising the federal fuel tax, ATRI investigated and indicated a universal vehicle registration fee could not only capture more roadway infrastructure dollars but also function as a way to ensure alternative fueled vehicles – especially all-electric vehicles – pay their “fair share” for highway system upkeep.
“There were approximately 250 million private and commercial cars, trucks and buses registered in the U.S. in 2015 [and], hypothetically, a modest $20 annual federal registration fee on all vehicles, which would be collected through the already implemented state registration process, would generate revenue of $5 billion annually,” ATRI noted in its report. “A more aggressive per-vehicle average fee of $75 would add $18.7 billion to the highway trust fund [HTF] annually.
The report also concluded that the only “meaningful mechanism” to fund a large-scale infrastructure program is through a federal fuel tax increase as the “inefficiency” of other mechanisms, including VMT fees and tolls, would fall far short of the needed revenue stream and place “undue hardship” on system users.
ATRI noted that that the cost for collecting federal taxes is just 0.2% of the revenue collected. By translation, in 2015, it cost about $69 million to collect $34.5 billion in revenue. “The key to this efficiency is the limited number of excise tax transactions; there are only 1,304 collection points made up mostly of major fuel distributors who pay the tax directly to the U.S. Treasury Department,” the group said in its report.
By contrast, tolls – used on only 5,051 miles of U.S. highways currently – require more resources to collect, often requiring between 12% and 25% of the revenue collected. ATRI also cited previous research that found, in some cases, up to 30.3% of toll revenue is spent on just collecting tolls.
Where a potential VMT fee is concerned, ATRI used what it called a “hypothetical and very conservative cost” of $50 annually per vehicle to install and maintain the technology, track, collect and enforce a national VMT fee – estimating that would require a total collection cost in the range of $12.5 billion annually.
To collect that effectively, ATRI cited the model used by the Internal Revenue Service (IRS). In 2015, 79,890 IRS employees, using a budget of $11.4 billion, processed 240 million tax returns. Thus, at the federal level, deploying, monitoring, collecting, and enforcing compliance for a VMT tax on a similar number of entities -- some 250 million registered vehicles in the U.S. – would require “a similar, if not more technologically complex” government program.
Additionally, ATRI argued that mileage tax evasion would likely skyrocket under a program that can't "see" non-paying users.
At the end of the day, Brewster stressed to Fleet Owner, the critical issue is generating more funds for roadway infrastructure in order to keep up with growing economic activity – especially in the realm of e-commerce.
E-commerce activity has thrust a greater proportion of supply chain logistics and “last-mile” deliveries into the midst of dense urban regions, ATRI noted in its report, with smaller yet more numerous warehouses being built in urban population centers.
The net effect is that these distribution facilities are both closer to large population centers to meet consumer needs for high-speed, low-cost shipping – while at the same time they are at the “epicenter” of traffic snarls and freight bottlenecks, the group said.
“Taken together, not only is the volume of e-commerce logistics activity growing rapidly, it is increasing the most in urban areas where transportation infrastructure is severely strained,” Brewster noted.
Going forward, ATRI’s report stated “it is a certainty” that that the challenges associated with short-term retail shipping will be increasingly difficult for e-commerce players, and the cost to ship goods will increase with travel delays.
“Given the importance of low-cost and expeditious shipping to the e-commerce business model, it is clear that deficient transportation infrastructure is one of the most significant obstacles facing the industry today,” ATRI concluded.
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Gold Seeker Closing Report: Gold Gains While Stocks Fall on Tax Talk By: Chris Mullen, Gold Seeker Report
Gold gained $7.20 to $1288.10 in London before it dropped back to $1282.10 in late morning New York trade, but it then rallied back higher in afternoon trade and ended with a gain of 0.41%. Silver rose to as high as $17.14 and ended unchanged on the day.
Asian Metals Market Update: November-10-2017 By: Chintan Karnani, Insignia Consultants
The US dollar weakened and gold rose on suspicion that Trump’s tax cut proposal could see modifications. The next seven days is filled with market moving US economic data releases. The answer which investors will be looking for is what next after the expected December interest rate hike by the Federal Reserve. I am looking into global inflation/deflation targets for next year. Energy price trend will play a key role in inflation direction next year. The big challenge is to judge the pace of rise of crude oil prices and not the actual rise. At the moment the bottom for crude oil looks at $42 and top at $86+ in the next twelve months.
Published on Nov 10, 2017
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Gerald Celente – 2018 Predictions - Gold Will Hit a Bitcoin High Greg Hunter
Published on Nov 3, 2017
Gerald Celente – 2018 Predictions - Gold Will Hit a Bitcoin High
Renowned trends forecaster Gerald Celente predicts China will make big headlines in 2018. Celente points out, “China is not using petro-dollars. They are buying Russian oil, their biggest supplier, with yuan. You can cash in the yuan for gold. It’s the same with Iran and with Saudi Arabia. This is another reason that China is going to go further. You can start bringing your dollars to Walmart in a wheelbarrow because that’s what they will be worth. . . . What kept the dollar alive as the world reserve currency is that all the oil being traded is being bought in dollars. If you are paying for oil in other currencies . . . the Federal Reserve can’t keep printing up all the money that they want. They won’t have it out there as a reserve currency. You will see inflation skyrocket in this country, and gold will hit like a Bitcoin high. We believe it’s starting to happen.
Join Greg Hunter as he interviews the Publisher of the Trends Journal, Gerald Celente, and hear about multiple other trends and predictions for 2018.
The Dollar is in a bear market, which is good for gold, London Analyst Alasdair MacLeod tells Silver Doctors.
In this week’s SD Metals & Markets:
- The performance in the gold market is encouraging.
- The bear market in the Dollar is positive for gold.
- Major cracks in the petrodollar are appearing.
- We’re headed for a credit crisis, then a fiat currency collapse.
- Could cryptocurrencies make the coming credit crisis worse?
By Adam Williams (Bloomberg) — As the price of oil rises, an international rush is on for Mexico’s untapped deep-water riches.
The who’s who of the oil world — led by Exxon Mobil Corp and Royal Dutch Shell Plc, the world’s two biggest drillers by market value — are lining up to bid in the country’s Jan. 31 deep-water auction. And the interest is international in scope, drawing Chevron Corp. from the U.S., the U.K.’s BP Plc, Norway’s Statoil ASA, France’s Total SA, Australia’s BHP Billiton Ltd, Russia’s Lukoil PJSC and China’s Cnooc Ltd, among others.
The total: 25 registered to bid for 29 deep-water plots across the southern Gulf of Mexico, the nation’s regulator said Thursday. It shouldn’t be a surprise. The areas up for grabs are estimated to hold as much as 4.2 billion barrels of crude oil in untapped deep waters where 76 percent of Mexico’s prospective resources may lie, the energy ministry has said.
In the country’s first-ever deep water oil auction last year, eight of the 10 blocks auctioned were won by international crude majors. The stakes are higher for the Jan. 31 bid round, which aims to auction almost 3 times the amount of fields as last year.
At the same time, it arrives on the heels of two recent 1 billion barrel-plus discoveries in Mexico shallow waters this summer, and as the price of oil has risen. Brent crude, the global benchmark, has jumped from $44.43 a barrel in November 2016, to close at $63.93 on Thursday, a 44 percent rise.
Friday is the last day for companies to qualify to participate in the auction. Then the countdown will begin.
By Julie Gordon Nov 9 (Reuters) – A preliminary agreement with China for the development of a massive liquefied natural gas export project in Alaska will boost its profile, but does not ensure the $43 billion development will go ahead, analysts said on Thursday.
China’s biggest state oil company, Sinopec, one of its top banks and its sovereign wealth fund agreed early on Thursday to develop the Alaska LNG export terminal and an 800-mile (1,290-km) pipeline to deliver fuel to China.
It is one of dozens of projects racing to join a second wave of U.S. LNG projects set to come online in the middle of the next decade.
The announcement, made with fanfare as part of U.S. President Donald Trump’s state visit to China, lacked details about binding offtake agreements or financing, analysts said. The parties involved have pledged to work out details over the next year. Offtake deals are agreements to buy a fixed amount of LNG for a set period of time.
“This is a typical announcement that comes out of these big summits,” said Jason Feer of energy consultancy Poten & Partners.
“You really can’t build, or get financing for a big project, unless all those pieces are in place.”
Alaska LNG, backed by the state-owned Alaska Gasline Development Corp (AGDC) with input from North Slope energy producers, envisions a lengthy pipeline from the North Slope to an export terminal in south-central Alaska.
With both China and the United States pushing the project, it will likely ensure Chinese LNG buyers seriously consider Alaska LNG when they look to sign new offtake deals, said Feer.
With planned output of some 20 million tonnes a year, Alaska LNG would need to sign numerous major offtake deals, likely with customers beyond just China, before it can secure financing for construction, analysts said.
Genscape analyst Jason Lord said the deal with Sinopec was far from secure, with any investment decision on the project still a long way off.
“This joint development agreement is really non-binding and allows Sinopec Group the ability to quietly back out down the road,” said Lord in an email to Reuters. “There are still many steps before a final investment decision is reached.”
When asked about criticism from industry watchers, a spokeswoman for the AGDC said the deal with China was the “most important agreement in the history of Alaska LNG,” solidifying a working relationship to move forward to commercial negotiations.
The project is expected to create 12,000 jobs during construction, and reduce the trade deficit between the United States and Asia.
Alaska Governor Bill Walker said the project would generate $8 billion to $10 billion in revenue each year, including $1 billion from gas sales.
Shipping distances from the Pacific Coast to Asia are far shorter than from the East, making western projects attractive to Chinese buyers, although construction costs are generally far higher.
Alaska is pursuing foreign investors for further energy development as it struggles to compete with lower-cost shale projects. (Reporting by Julie Gordon in Vancouver; Editing by Tom Brown and Peter Cooney)
The Carnival Corp. cruise ship MS Adonia, part of Fathom Cruises’ fleet, arrives at the Havana Bay, on May 2, 2016. The arrival marked the first cruise ship to sail between the United States and Cuba since Cuba’s 1959 revolution. Photo: Carnival
By Sarah Marsh HAVANA, Nov 10 (Reuters) – Packed into a remote corner of a pavilion, just 13 U.S. companies took stands at Cuba’s sprawling trade fair this year, in a sign of how firms’ interest in doing business on the island has dwindled in the first year of Donald Trump’s presidency.
Last year, amid enthusiasm following a detente in relations agreed between former President Barack Obama and Cuban leader Raul Castro in 2014, 33 U.S. companies took stands at the fair, the premier event on Cuba’s business calendar.
The mood was very different at this year’s edition, which took place last week in Havana. While China brought a record company delegation, and more than 150 Spanish businesses packed into five pavilions, the handful of U.S. businessmen were downbeat.
“I’ve never seen it this deserted,” said Jay Brickman, vice president of Florida-based shipping company Crowley Maritime Corp, who has been attending the fair for 15 years. “People have really gotten discouraged, and feel they maybe should be investing their time someplace else.”
U.S. companies embraced Cuba in the wake of the detente, jostling for a foothold in an opening market of 11 million consumers.
Thanks to travel-related exemptions to the embargo, U.S. airlines restored regular flights. Starwood Hotels, a subsidiary of Marriott International Inc, took over management of a Cuban hotel and cruise operators like Florida-based Carnival Cruise Line included Cuba in their itineraries.
But worsening U.S. relations as well as growing awareness of the difficulty of doing business in Cuba put a dampener on that.
Trump in June ordered tighter trade and travel restrictions including a ban on business with the military, which controls vast swathes of the economy. The regulations were unveiled on Wednesday.
“This is a huge step backwards,” said former U.S. Secretary of Commerce Carlos Gutierrez, the Cuban-born head of the U.S.-Cuba Business Council. “We had made so much progress.”
An unfolding diplomatic crisis over allegations of attacks on U.S. diplomats in Havana is adding to the gloom.
Cuba Trade magazine, based in Miami, last month cut its issuance from monthly to bi-monthly, citing the deteriorating business environment under Trump. Several Cuba business conferences in the United States have also been canceled since June, including an agriculture conference in Chicago.
Following the Obama detente, U.S. farmers hoped for legislation allowing them to access credit for exports to Cuba. But Trump has made it clear he is not about to ease, let alone lift, the embargo.
“We need to get the diplomatic issue off the table first,” said Louisiana Agriculture Commissioner Mike Strain, adding U.S. food exports to Cuba could total $1 billion if relations were normalized.
Even before Trump took office, some of the interest fizzled as companies realized doing business in Cuba was hard with its red tape, shortage of hard currency, poor telecommunications and labor restrictions.
Online payments company PayPal Holdings Inc sent its chief executive in Obama’s delegation on his historic visit to Cuba in March 2016. It had been interested in making its Xoom money transfer service available in Cuba but said operational challenges were too great.
“When we are able to deliver the speed, convenience and security our customers have come to expect from Xoom, we will launch in Cuba,” a PayPal spokeswoman told Reuters.
Still, some companies made headway. After receiving all the necessary licenses under Obama, the Puerto Rican dealer for U.S. heavy equipment maker Caterpillar Inc last week agreed to open a distribution center in Cuba’s Mariel special development zone.
Future deals with Mariel, which boasts tax and customs breaks, will not be possible, as it features on a list published Wednesday of 180 government entities that Americans are now banned from doing business with. “The Mariel restriction particularly sticks out because it is the most dynamic and exciting opportunity in Cuba,” said James Williams, president of lobby group Engage Cuba.
The diplomatic crisis has also complicated the logistics for U.S. businesses. The Trump administration in September expelled 15 Cuban diplomats, including all those dealing with U.S. businesses.
The following week, the chair of the port of Cleveland, Darrell McNair, traveled to Havana to sign an agreement with Cuba’s port authority. He said the now-disbanded embassy commercial team had been instrumental in arranging his visit.
“Cutbacks obviously are going to slow things down,” he said.
The tougher environment under Trump has separated the wheat from the chaff, some business consultants say.
“The serious players who understand the risks are staying the course,” said Pedro Freyre, who heads the international practice at Miami-based law firm Akerman LLP.
Jeff Nelson said his firm Strategic Staffing Solutions, which provides companies with IT and other services, was prepared to put in the time laying the groundwork for business with Cuba given the potential of its educated workforce.
“Doing business in Cuba is a very long-term proposition,” said Nelson, who has visited eight times in two years.
Some companies were pursuing deals behind closed doors so as to not lose capital with the Trump administration, consultants said. Many Obama-era exemptions to the embargo remain in place.
The publication of the new regulations at least provided clarity about what was allowed.
“Companies know where they stand now and there are definitely opportunities still,” said Gutierrez. “Every day that goes by is just the missed opportunity where someone else is building a brand, someone else is building awareness among Cubans.” (Reporting by Sarah Marsh; Additional Reporting by Marc Frank in Havana and Anna Irrera and Alana Wise in New York; Editing by Daniel Flynn and James Dalgleish)