Asian Metals Market Update: January-30-2018 By: Chintan Karnani, Insignia Consultants
Deutsche Bank and its associate group, UBS, HSBC etc have been fined by the CFTC for gold price manipulation. I am sure silver prices are being manipulated by a group of banks and hedge funds. Silver is undervalued. Long term industrial uses of silver will exceed production. Those who had invested in physical silver have lost all hope that silver prices can rise. Some of the silver investors are treating silver investment as a bad debt. If you ask anyone to invest in silver, they will shake their head.
Rogue Mornings - Let's See The Memo, Face To Face & Collision Course (01/30/18) ROGUE MONEY
Streamed live 2 hours ago
"V" and CJ discuss the House Intelligence approving of the Oversight Committee findings memo, potential outcomes and the need to keep an eye on US foreign policy while majority of us focused on US politics.
We are political scientists, editorial engineers, and radio show developers drawn together by a shared vision of bringing Alternative news through digital mediums that evangelize our civil liberties.
By Jonas Cho Walsgard (Bloomberg) — After more than 3 years of taking a hammering, drillers are set to rise.
“They will rise 100 to 200 percent — a real surge,” Martin Molsaeter, portfolio manager and partner at First Fondene, said in an interview in Oslo on Wednesday.
Oil service companies suffered as crude prices fell in 2014, with explorers and producers slashing spending to weather the downturn. But as oil companies start to increase investments with crude back over $70 dollar a barrel, revenue is likely to rise for rig companies and other suppliers.
“Utilization is increasing but not the rates,” said Molsaeter, who manages about 2.3 billion kroner ($300 million). “First, the number of rigs employed increases and then one or two years later the rates come up.”
He holds stakes in Ensco Plc., Rowan Companies Plc., Shelf Drilling, Ltd. and Northern Drilling Ltd. in his funds.
“Northern Drilling is interesting,” he said. “John Fredriksen says he wants to start a new Seadrill, with only new rigs. We were one of only 13 in the whole world that were invited. We joined and it has been a fantastic investment.”
Molsaeter’s Norwegian stock fund, First Generator, has averaged 19 percent a year over the past five years, making it the best performing Norwegian equity fund, according to Morningstar. Last year he closed the fund to new inflows after reaching 1.5 billion kroner as it was getting too big for the Norwegian market to manage actively.
Molsaeter, who earlier worked as an analyst at First Securities and DNB Markets, focuses on the “Norwegian” sectors of oil, oil services, shipping and materials, with only 16 to 20 holdings in the Generator portfolio.
“It’s better to find your own universe,” he said. “You become familiar with those stocks and can trade and trade those. We’re very active. Not buy and hold.”
Molsaeter prefers to trade undervalued and unpopular stocks that offer an implied option. The biggest holding in Generator is fertilizer producer Yara International ASA.
“Fertilizer has been an industry that has performed poorly for many years due to overcapacity,” he said. “Now it’s coming back.”
Published on Jan 30, 2018
Yum. Deliciously diabolical news prevails and proud, arrogant goblins believe they are millionaires, while low and behold - a bloodbath cometh. US markets are correcting and will likely continue, Cryptos are facing a Waterloo event, the US leper dollar is falling and Gold and Silver look stoic, stout and strong. Brace for the storm.
6 More Bankers Guilty of Crashing Gold Prices | The Tao of SKWealthAcademy skwealthacademy
Published on Jan 30, 2018
Help us continue our podcast on iTunes by donating at: https://www.patreon.com/skwealthacademy
6 more bankers from UBS, Deutsche Bank, and HSBS were arrested for artificially spoofing and crashing gold prices, but since the biggest perps in New York and London were not arrested, I discuss why this is just a smoke and mirrors game meant to distract, and in the end, why this small concession by TPTB matters little. The time is coming soon when TPTB will deliberately accelerate the USD crash to cause panic and at this time, gold and silver prices will finally escape their black hole of destruction.
Bill Holter – DC So Dirty They Tried a Coup Attempt Greg Hunter
Published on Jan 30, 2018
Financial writer Bill Holter says, “This country has lost the rule of law. It’s clear, looking at the DOJ and looking at the FBI, and what will come out on that, the rule of law needs to be restored. There needs to be a confidence restoration, if you will, in those agencies. It’s a complete travesty. What has really happened is they got so dirty that they tried a coup attempt. They tried to take over the government. They tried to negate an election. . . . A lot of people are speculating on Hillary going to jail, and I would put out that with all this illegal surveillance, there is absolutely no way that could have been done without Obama’s knowledge.”
Holter, who is also a precious metals broker, says big money is piling into metal, especially silver. Holter says, “Gold should do extremely well, and silver should do four or five times as well as gold if it gets back to the 15 to 1 historical ratio. . . . The lows were put in with gold and silver back in late 2015.”
What could go wrong with all-time high debt levels facing rising interest rates around the world? Holter points out, “There is all kinds of stuff that can go wrong. Cash levels for investors are at all-time lows. Margin debt is at all-time highs. That, in and of itself, is a recipe for disaster. Also, if you look at valuation levels . . . we are at record levels never seen before. . . . There is record risk/reward.”
Join Greg Hunter of USAWatchdog.com as he goes One-on-One with financial expert Bill Holter of JSMineset.com.
S&P futures rebounded 0.3% from the worst two-day selloff since Sept. 2016, and European and Asian stocks rose modestly from early weakness after Trump's SOTU address did not deliver any major surprises, while traders were cautious ahead of the Fed’s last rate decision under Janet Yellen’s leadership expected to lean on the hawkish side.
On Tuesday, U.S. stocks tumbled amid concerns about a recent sharp rally in bond yields. Health-care shares slumped after Amazon.com, Berkshire Hathaway and JPMorgan agreed to collaborate on ways to offer health-care services to their employees; drugmakers will be in the spotlight again as Trump says prescription drug prices will come down "substantially."
Despite the recent drop, it’s been a stellar month for stock markets, with major gains across most major gauges that were followed this week by the MSCI All-Country World Index’s biggest two-day slide since September 2016. Investors will now focus on Wednesday’s Federal Reserve rate decision, the ongoing earnings season and more big economic data points to see if the uptrend can resume.
On Tuesday night, Donald Trump sought to connect his presidency to the nation’s prosperity in his first State of the Union address, arguing the U.S. has arrived at a “new American moment” of wealth and opportunity. Trump vowed the “era of economic surrender is over,” but stopped short of naming the targets of his efforts to narrow the U.S.’s ballooning trade deficit, which prevented a major market reaction.
Trump also stated the US is finally seeing rising wages and that unemployment claims have hit a 45-year low. Trump also called on Congress to produce a bill that generates at least USD 1.5tln for new infrastructure investment and said that they will work to fix bad trade deals.
Overnight, the Dollar weakened again as Trump’s State of the Union speech offers few new details, while EMs rose as Trump failed to emphasize tariffs and trade.
“There was a moment where the dollar was bought on Trump’s infrastructure remarks, but that’s because the topic was in focus and markets reacted to that,” said Koichi Takamatsu, head of G-10 currency trading for Japan at Nomura Securities Co. in Tokyo. “On the other hand, after concerns about protectionism receded at Davos, Trump made clear his stance on ‘America First.’ Overall, the reaction to his speech was limited.”
The yen weakened as the BOJ unexpectedly boosted 3-to-5 year bond purchases in today's open market operation and Kuroda affirmed stimulus policy, before erasing declines. Aussie grinds lower after inflation data misses, while the Aussie curve bull steepened as 3-year yield drops as much as seven basis points to 2.14% following a benign Australian inflation report. The British pound erased a gain as Prime Minister Theresa May headed to China to talk trade.
U.S. Treasuries were marginally firmer with 10-year yield just above 2.70%, despite Trump unveiling his plan for a $1.5 trillion debt-busting infrastructure plan.
European stocks erased gains of as much as 0.3%, with health-care shares (-0.5%) contributing the most to declines higher, after a two-day selloff as traders assess earnings and eye Federal Reserve Chair Janet Yellen’s final meeting on interest rates before her term ends. The Stoxx Europe 600 Index was flat heading for its best January in three years. Media shares lead gains, while Ericsson drags the tech sector lower after posting sales that missed analysts’ estimates. Capita is the biggest single-stock drag on the index after suspending its dividend and saying it plans to raise more equity, sending the stock for a record slump.
Asian stocks were mostly higher after Trump refrained from any comments that would have unnerved markets. As such, Australia's ASX 200 (+0.2%) pared early losses and finished positive, although the commodity-related sectors continued their underperformance, while Nikkei 225 (-0.4%) swung between gains and losses with Japanese stock news dominated by earnings. Japan’s Topix index (-1.2%) slid to its lowest this year.
The region also mulled mixed Chinese Official PMI data in which Non-Manufacturing PMI topped estimates but Manufacturing PMI disappointed, which in turn disappointed local markets. The Shanghai Composite fell for a 3rd straight day, down 0.2% to 3480, while the Chinext index, tracking mid and small caps plunged near 2.7%, its biggest drop since January 15, and is now down 1% for year after rising as much as 3.7%. Big-cap blue chips outperformed with the SSE50 index tracking the 50 biggest stocks on Shanghai Stock Exchange climbed over 1.2%. The Koran Kospi index was boosted by Samsung's stock split announcement, while the won strengthens in line with other Asian currencies. PBOC skips liquidity injections for fifth day; CSI 300 index 0.7% higher.
Of note: China's onshore yuan climbed for its best month in at least a decade as the greenback drubbing continued. The Onshore yuan jumped 0.62% to 6.2855 per dollar in Shanghai; CNY has gained 3.5% so far in January, biggest monthly advance in CFETS data going back to April 2007 according to Bloomberg. Overnight, the PBOC weakened daily reference rate by 0.04% to 6.3339, matching average estimate in a Bloomberg survey of 25 traders and analysts; the predictions ranged from 6.3250 to 6.3414
Elsewhere, UK PM May said that there was a long-term job to do in Brexit and that she will publish Brexit impact studies during February speech in Munich. Furthermore, PM May said the UK is seeking a free trade deal with China and wants more access in the interim before trade deal. EU officials are to reject the City of London's intention to strike a post-Brexit free trade deal for financial services, according to financial executives.
In commodities, oil retreated and industrial metals reversed losses. A measure of China’s manufacturing sector came in below expectations, while the services gauge topped estimates. WTI and Brent crude futures trade lower in the wake of last night’s larger than expected build in headline API crude oil inventories with energy newsflow otherwise relatively light ahead of today’s official EIA release. WTI crude slides below $64. In metals markets, gold prices are seen higher amid a lacklustre greenback while copper was marginally supported overnight by the improvement in risk tone. Finally, Chinese steel futures were seen lower overnight as adverse weather conditions capped demand in China. Dalian iron falls two percent.
Expected data include MBA mortgage applications. Anthem, AT&T, Boeing, Facebook, Lilly and Microsoft are among companies reporting earnings.
Bulletin Headline Summary from RanSquawk
European equities trade broadly higher albeit modestly so, as earnings dictate the state of play for Europe.
The DXY remains vulnerable under the 89.000 handle as January draws to a close and month end portfolio hedging indices continue to flag sell signals
Looking ahead, highlights include US ADP, Quarterly Refunding Announcement and FOMC rate decision.
S&P 500 futures up 0.3% to 2,833.00
STOXX Europe 600 up 0.2% to 396.98
MSCI Asia Pacific down 0.2% to 184.23
MSCI Asia Pacific ex Japan up 0.4% to 607.33
Nikkei down 0.8% to 23,098.29
Topix down 1.2% to 1,836.71
Hang Seng Index up 0.9% to 32,887.27
Shanghai Composite down 0.2% to 3,480.83
Sensex down 0.1% to 35,993.63
Australia S&P/ASX 200 up 0.3% to 6,037.68
Kospi down 0.05% to 2,566.46
German 10Y yield fell 1.3 bps to 0.67%
Euro up 0.3% to $1.2444
Italian 10Y yield rose 0.2 bps to 1.76%
Spanish 10Y yield rose 1.3 bps to 1.422%
Brent futures down 0.6% to $68.60/bbl
Gold spot up 0.3% to $1,343.12
U.S. Dollar Index down 0.2% to 88.95
Top Overnight News
Donald Trump sought to connect his presidency to the nation’s prosperity in his first State of the Union address, arguing the U.S. has arrived at a “new American moment” of wealth and opportunity. Trump vowed the “era of economic surrender is over,” but stopped short of naming the targets of his efforts to narrow the U.S.’s ballooning trade deficit
U.K. Prime Minister May landed in China with a message to rebels back home who want to oust her: she won’t quit. May said she would raise the sensitive topics of China’s human rights record and Hong Kong democracy
Bank of Japan offered to buy more bonds at a regular operation for the first time since July, helping to bring down yields and weaken the yen as Governor Kuroda reaffirmed a commitment to his ultra-loose monetary policy
Mark Carney said he can fully focus on tackling inflation as the drag from Brexit on investment and the economy starts to recede
U.K. banks will have limited access to the European Union’s single market after Brexit if the government refuses to weaken its red lines, the European Commission told diplomats, according to two people familiar with private discussions in Brussels
The BOJ isn’t at the point where it can change interest rates soon, says Bank of Japan Deputy Governor Kikuo Iwata, in his final press conference before leaving the board
German jobless rate dropped to a record low of 5.4 percent in January, extending its decline as companies stepped up hiring to meet buoyant demand
Siemens Reports Strengthening Orders Amid Global Economic Upturn
H&M’s Biggest Profit Drop in Six Years Puts CEO Under Pressure
Volvo Sees Rising Global Truck Demand Straining Supply Chain
A mixed tone was gradually seen in Asia, as equity markets somewhat recovered from the initial spill-over selling from Wall St. where the S&P 500 posted its worst 2-day performance since May last year. The overnight rebound in sentiment was alongside President Trump’s first State of the Union Address, which Trump was viewed to have delivered a composed and conventional speech, while he also refrained from any comments that would have unnerved markets. As such, ASX 200 (+0.2%) pared early losses and finished positive, although the commodity-related sectors continued their underperformance, while Nikkei 225 (-0.4%) swung between gains and losses with Japanese stock news dominated by earnings. Furthermore, the region also mulled over mixed Chinese Official PMI data in which Non-Manufacturing PMI topped estimates but Manufacturing PMI disappointed, which in turn clouded over the Shanghai Comp. (-0.6%) and Hang Seng (+0.1%), despite a brief turnaround which momentarily saw most stocks lifted with the tide. Finally, 10yr JGBs are higher, with prices supported from today’s Rinban operation in which the BoJ were in the market for JPY 850bln of JGBs across the curve and upped its purchases of 3yr-5yr maturities.
Chinese Manufacturing PMI (Jan) 51.3 vs. Exp. 51.6 (Prev. 51.6).
Non-Manufacturing PMI (Jan) 55.3 vs. Exp. 54.9 (Prev. 55.0)
BoJ Summary of Opinions from January meeting said must continue with powerful easing policy as inflation remains weak. There summary noted the opinion that BoJ must look at effects and costs of BoJ's ETF and risky asset purchases given stock prices and corporate profits improving sharply, while there also may be a chance for the BoJ to consider adjusting level of yield targets if economy and prices continue improving. BoJ says it plans to keep the current pace of bond purchases in Feb for all maturities.
Top Asian News
BOJ Lifts Bond Purchases as Kuroda Affirms Loose Policy Path
Dealmakers Jump Ship as China Tycoon’s $5 Billion M&A Push Ends
Japan Factory Output Surges in December on Strong Exports
Sumitomo Mitsui Profit Rises on Fee Income, Share Sale Gains
Vakrangee Tumbles by 20% Limit Amid Stock-Price Rigging Report
European equities trade broadly higher (Eurostoxx 50 +0.2%) albeit modestly so, as earnings dictate the state of play for Europe. In terms of sector specifics, utility names have seen some support with SSE (+1.6%) sitting near the top of the FTSE after lifting their guidance, while IT names are seen softer with Ericsson (-8%) lower following earnings and Infineon (-0.7%) at the bottom of the DAX after cutting guidance alongside earnings. Elsewhere, stock specifics have been dominated by earnings with reports from the likes of Electrolux (+6.3%), Volvo (+3.4%), H&M (-4.8%), Lonza (-3.6%), Julius Baer (-3.2%) and focus once again on Capita (-35%) with shares slammed following their latest profit warning.
Top European News
Italy’s Jobless Rate Falls Before Election to Lowest Since 2012
German Workers Begin Day-Long Strikes as Wage Talks Hit Snag
EU Softens Push to Keep Clients From Exiting Failing Banks
European Union’s Biggest Rate Hawks Are Poised to Hike Again
European Pharma Stocks Drop After Trump Comments, Lonza Results
VW, Continental Best Placed in Break-Up Scenarios, BofAML Says
In FX, the DXY remains vulnerable under the 89.000 handle as January draws to a close and month end portfolio hedging indices continue to flag sell signals, and strong for several USD/G10 pairs. The Dollar did derive some support from a buoyant from US President Trump’s buoyant SOTU address and clarification by Treasury Secretary Mnuchin that a strong Greenback is in the country’s best interest (long term at least). However, EUR/USD looks solid above 1.2400 and around the 1.2433 level (200 MMA), with decent option expiries between 1.2400-40 (1.5 bn) and 1.2450-55 (1.7 bn) perhaps adding to the aforementioned rebalancing bid tone. Cable briefly reclaimed 1.4200+ status before easing back again amid EUR/GBP month-end demand and news that EU officials are to reject the City of London's intention to strike a post-Brexit free trade deal for financial services. USD/JPY is back below 109.00, but still within a broad 108.50-109.50 range.
In commodities, WTI and Brent crude futures trade lower in the wake of last night’s larger than expected build in headline API crude oil inventories with energy newsflow otherwise relatively light ahead of today’s official EIA release. In metals markets, gold prices are seen higher amid a lacklustre greenback while copper was marginally supported overnight by the improvement in risk tone. Finally, Chinese steel futures were seen lower overnight as adverse weather conditions capped demand in China.
US Event Calendar
7am: U.S. MBA Mortgage Applications, Jan. 26, no est., prior 4.5%
8:15am: U.S. ADP Employment Change, Jan., est. 185k, prior 250k
8:30am: U.S. Employment Cost Index, 4Q, est. 0.6%, prior 0.7%
8:30am: U.S. Treasury’s Quarterly Refunding
9:45am: U.S. Chicago Purchasing Manager, Jan., est. 64, prior 67.6, revised prior 67.8
10am: U.S. Pending Home Sales MoM, Dec., est. 0.5%, prior 0.2%; NSA YoY, Dec., est. 1.7%, prior 0.6%
10:30am: DOE U.S. Crude Oil Inventories, Jan. 26, est. 900k, prior -1.07m
2pm: FOMC Rate Decision (Upper Bound), est. 1.5%, prior 1.5%
Looking at the day ahead, the Fed monetary policy meeting outcome will be the highlight today. Flash January CPI reports for the Euro area will be closely watched, as will the January ADP employment print change for the US. The latter will also release the Q4 employment cost index, January Chicago PMI and December pending home sales. Microsoft, Facebook, eBay, AT&T, Boeing and Paypal highlight a busy day for high profile earnings releases. The ECB’s Coeure will also speak.
DB's Jim Reid Concludes the overnight wrap
If you’re reading this in the Western Hemisphere, stand by today for an event we haven’t seen since 1866. No, not equity markets going down two days in a row but instead a “Super Blue Blood Moon”. To break this down, a blue moon is where there are two new moons in a month. A supermoon is where our satellite’s perigee (its closest approach in its orbit and appearing c.14% larger and is c.30% brighter) coincides with a full moon. A blood moon is a lunar eclipse when the moon passes into the earth’s shadow. The reddish tint that this will bring as the sun’s light is cut off and it’s visible through the filter of our atmosphere provides the blood reference.
As discussed above this astrological event coincides with a bad month end for markets with confidence suddenly sucked into a black hole. Indeed the last couple of days are perhaps a taster of what might actually happen when yields properly normalise rather than simply selling off a bit. However unless something extraordinary happens today, January will still go down as an exceptional month for risk although bond returns will see a lot of negatives in front of the numbers. We’ll do the full review of the month tomorrow.
One of the most impressive parts of the equity sell-off yesterday was that there wasn’t really a flight to quality into bonds. 10yr USTs rose a further 2.6bps and 10yr Bunds only fell 1.1bps even with a weaker than expected German inflation print.
Now reviewing the equity moves. The S&P 500 (-1.09%) saw its worse day since mid-August and worst 2-day fall (-1.76%) since May, while the Dow (-1.37%) and Nasdaq (-0.86%) also retreated. The mini-selloff in the S&P seemed to have a few contributing factors, including ongoing concerns over valuation, rising yields, a lower oil price and weakness in health care stocks (-2.13%). The latter partly reflects potentially higher competitive tensions in view of Amazon, JP Morgan and Berkshire’s plans to launch a new joint company to provide their US staff with tech solutions for simplified healthcare at lower costs. The risk off tone was also evident in Europe with key bourses down 0.9%-1.1% and the Stoxx 600 down the most for c2.5 months (-0.92%). The VIX jumped to an intra-day high of 15.42, before closing 6.9% higher to 14.79 – the highest since mid-August.
Focusing on Apple, Bloomberg reported that according to unnamed sources, the US DOJ and SEC are investigating whether Apple violated securities laws regarding its disclosures about a software update that slowed older iPhones. Notably, the inquiry is in early stages and Apple’s share price fell c1.5% intraday and closed -0.59% lower.
Staying with US equities, since tax reform was signed, banks have written off billions of dollars of deferred tax assets. Yet the effects extend far beyond finance firms. In fact, one in ten companies in the S&P 500 has net deferred tax assets.
Also in the US, President Trump’s first State of the Union address touched on many issues but was short on details on his policy proposals. He highlighted his administration’s progress to building a “safe, strong and proud America” and
noted that “c3m workers have gotten tax cuts…this in fact is our new American moment…there has never been a better time to start living the American dream”. Then he spoke of unity in politics, such as “extending an open hand to work with members of both parties” and “…call upon all of us to set aside our differences… to deliver for the people we were elected to serve”. On trade, he touched on “America has finally turned the page on…unfair trade deals…” Then on the big infrastructure plans, he proposed to allocate $200bn federal funds over the next 10 years on roads and transit projects. Then the expectation is the investments would encourage further spending from the state, local governments and private sector - as least $1.5trn.
Elsewhere the Treasury Secretary Mnuchin sought to clarify his comments last week on the USD. He noted his comments were “not anything new” and “it was no way intended to talk down the dollar whatsoever”. Further he reiterated that “I absolutely support a strong dollar as being in the long term best interest of the country and….we have a free currency market that we don’t intervene in…”. As a reminder, today’s FOMC meeting will serve in part as a farewell to Chair Yellen, but is unlikely to result in any significant new signals for the market. Our US economists expect that the FOMC will want to see some more data and go through another round of forecasts before signalling a more aggressive tightening stance of four hikes this year (DB’s forecast).
This morning in Asia, markets are mixed but UST 10y yields is down c1.5bp. The Nikkei is down 0.47% while the Hang Seng (+0.06%), China’s CSI 300 (+0.14%) and Kospi (+0.44%) are all up, with the latter supported by Samsung, which is up c5% post its 4Q results and announcing a 50 to 1 stock split. Datawise, China’s January manufacturing PMI was a tad softer at 51.3 (vs. 51.6 expected) although the services number was a bit higher. Japan’s December IP was above market at 4.2% yoy (vs. 3.3%). Elsewhere, outgoing deputy BOJ governor Iwata warned against an early turn towards fiscal austerity, in part as “…achievement of the price stability target of 2% will become difficult” Now recapping other markets performance from yesterday. The US dollar index was marginally lower (-0.14%), while the Euro and Sterling gained 0.15% and 0.52%, respectively. Core 10y bond yields traded within a c3bp range intraday and closed little changed (Bunds -1.1bp; OATs -0.7bp; Gilts +0.7bp). In commodities, WTI oil fell 1.62% ahead of the API data, which later showed that US crude inventories rose for the first time since November. Elsewhere, precious metals softened c0.1% (Gold -0.13%; Silver -0.15%) and other base metals also weakened (Copper -0.34%; Zinc -1.06%; Aluminium -0.58%).
Away from markets, the BOE Governor Carney spoke on a range of topics in front of the House of Lords. On inflation, he noted the pass through from Sterling into inflation still has a way to go, but he is happy with the BOE’s inflation target. On Brexit, he denies that the BOE has a bias against it and that a “disorderly Brexit” is not a likely scenario. Elsewhere, he noted business investments is likely 4ppt lower than it would have been if the UK voted to stay in the EU bloc but also noted that investments could also pick up next year when uncertainty from Brexit reduces. On rates, he noted “as slack in the economy has been taken out…. (the focus for monetary policy) is increasingly on returning inflation sustainably to target over an appropriate horizon”. The implied Bloomberg odds of a rate hike in June was little changed, up 2ppt to 49%.
Returning to the UK, BuzzFeed has leaked the UK government’s forecasts of the potential economic impacts from Brexit. The worse scenario suggests the UK economy will be 8% smaller than otherwise in 15 years time and the softest scenario would slow economic growth by 2%. Brexit minister Baker noted the documents “require significant further work” and “its’ not yet anywhere near being approved by the ministers”. DB’s Oliver Harvey has published an update on the state of play with Brexit. He argues that the newsflow in recent days suggests rising risks of a political crisis before agreement can be reached on transitional arrangements in March. Refer to his note for more details.
Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the January CB consumer confidence index was above market at 125.4 (vs. 123) and slightly lower than November’s 17 year high, with the mom increase mainly driven by a rebound in the expectations index. The November S&P corelogic house price index also beat at 6.41% yoy (vs. 6.3% expected).
The Euro area’s 4Q GDP was in line at 0.6% qoq and 2.7% yoy, while France’s 4Q GDP was also in line at 0.6% qoq. The Euro area’s January economic confidence (114.7 vs. 116.2) and business climate index (1.54 vs. 1.68 expected) were both softer than expected, but the final reading of consumer confidence was confirmed at 1.3 – a 17 year high. In Germany, the January CPI was lower than expected at -1% mom (vs. -0.7%) and 1.4% yoy (vs. 1.6%) – the lowest annual print since May. Elsewhere, Italy’s January consumer confidence was also slightly softer at 115.5 (vs. 116.7 expected). In the UK, the December mortgage approvals fell to the lowest level since January 2015 (61k vs. 63.5k expected) while net consumer credit was a tad higher at £1.5bn (vs. £1.4bn expected).
Looking at the day ahead, the Fed monetary policy meeting outcome will be the highlight today. Flash January CPI reports for the Euro area will be closely watched, as will the January ADP employment print change for the US. The latter will also release the Q4 employment cost index, January Chicago PMI and December pending home sales. Microsoft, Facebook, eBay, AT&T, Boeing and Paypal highlight a busy day for high profile earnings releases. The ECB’s Coeure will also speak.
Boeing says to deliver more planes in 2018 (Reuters)
Judge Dan Polster Is Singlehandedly Trying to Solve the Opioid Crisis (BBG)
Overnight Media Digest
- U.S. President Donald Trump, in his first State of the Union address, called for major, bipartisan deals on infrastructure and immigration, while reversing his predecessor's vow to close the Guantanamo Bay prison facility for suspected terrorists. on.wsj.com/2BFNCMr
- Xerox Corp is nearing a deal with Japan's Fujifilm Holdings Corp that would mark the end of the independence of the stalwart of 20th-century American industry. on.wsj.com/2BFgTXC
- Special counsel Robert Mueller is seeking an interview with Mark Corallo, the former spokesman for President Donald Trump's legal team, according to a person with knowledge of the matter, in what would be the first contact between the special counsel and a onetime member of the president's personal legal team. on.wsj.com/2BFbeAV
- Thomson Reuters Corp struck a deal to sell a majority stake in its financial-information and terminal business for $17 billion to a group led by Blackstone Group LP , a significant bet by the private-equity giant on financial data. on.wsj.com/2BF5ZkM
- Apple Inc is being investigated by the U.S. Justice Department and the Securities and Exchange Commission over potential securities violations related to the company's disclosure of a software update that slowed older iPhones, people familiar with the matter said. on.wsj.com/2BEtE4S
- French authorities have deployed boats and helicopters off the coast of southwest France to search for the boss of sportswear maker Quiksilver after his empty boat was found washed ashore Tuesday. on.wsj.com/2BFzfI1
- British Prime Minister Theresa May was starting a crucial trade visit to China on Wednesday as she admitted the two countries will not always see eye-to-eye in sensitive areas like steel over-capacity and intellectual property rights.
- Victor Cha, a former White House official who had been the Trump’s administration’s choice to be the next U.S. ambassador to South Korea, is no longer being considered for the post, two U.S. officials said on Tuesday.
- Indian ride-hailing company Ola announced plans on Tuesday to enter Australia, marking its first foray outside its home market and intensifying its tussle with U.S. rival Uber Technologies Inc.
- Facebook Inc on Tuesday said that it would ban all ads for Bitcoin and other cryptocurrencies, in order to stop promotions that it sees as "frequently associated with misleading or deceptive promotional practices." (nyti.ms/2ntfYV2)
- Exxon Mobil Corp on Tuesday said that it would triple its oil and gas production in the Permian Basin by 2025, the latest sign that the boom in national crude production is gaining momentum. (nyti.ms/2EoA8rk)
- A consortium led by Blackstone Group LP on Tuesday said that it had taken a 55 percent stake in Thomson Reuters Corp's Financial and Risk division in a deal that values the division at $20 billion, including debt. (nyti.ms/2npKwI0)
- Volkswagen AG on Tuesday suspended its chief lobbyist Thomas Steg amid a growing furor over experiments on monkeys that were meant to promote the virtues of diesel-powered vehicles. (nyti.ms/2E26H0o)
THE GLOBE AND MAIL
** Ahead of the Canadian government's July 1 date for federal legalization of recreational marijuana, two marijuana producers the Green Organic Dutchman Holdings Ltd and Tilray are planning to go public in coming weeks. tgam.ca/2BFDMu0
** Calgary-based Shaw Communications Inc confirmed on Tuesday that it has offered voluntary severance packages to 6,500 non-unionized employees of both Shaw and Freedom Mobile and expects about 10 percent of those workers to accept the offer. tgam.ca/2BFTWDB
** British Columbia's government wants to restrict shipments of oilsands crude in pipelines and on railways cars in the province through a series of proposed new rules that is set to create additional uncertainty for Kinder Morgan Canada Ltd's C$7.4 billion ($6 billion) Trans Mountain pipeline expansion. bit.ly/2BHEK9c
** Next week, the Ontario government will receive C$1 billion, the gross proceeds from its latest green bond offering. It's the fourth offering it will have completed over the past three years, the largest it has brought to the market and the biggest by any Canadian issuer. bit.ly/2BGfDn9
- Informa Plc, the British events organiser behind the Monaco Yacht Show, has agreed to the terms of a 3.9 billion pounds ($5.52 billion) deal for its rival UBM Plc as it strives to keep pace with Relx, the world leader in the sector. bit.ly/2Fv47gR
- The investigation into potential misconduct in the running of Carillion Plc will be expanded to look at up to 169 directors across the failed construction company, MPs have been told. bit.ly/2BFnql5
- The Financial Conduct Authority has agreed to publish the full confidential report into the mistreatment of small businesses by the Royal Bank of Scotland Group Plc, in a significant U-turn by the City watchdog. bit.ly/2EoAIp2
- BP Plc will add rapid charging points for electric cars at its UK petrol stations within the next two months, in the latest sign of an oil giant adapting to the dramatic growth of battery-powered cars. bit.ly/2Enqu8v
- The Governor of the Bank of England has urged the government to abandon the use of the retail prices index as a measure of inflation, especially in the issuance of government bonds. bit.ly/2BG2fzc
- Stephen Haddrill, the head of the Financial Reporting Council has called for an investigation into whether the Big Four accounting firms should be broken up in the wake of Carillion Plc's collapse, amid concerns that auditors failed to spot major financial malpractice at the contractor. bit.ly/2GvKxCn
- The British arm of TGI Fridays is being put on the menu of prospective buyers amid a steep downturn which has hit much of the casual dining sector. bit.ly/2rPfLkB
- An assessment of the likely impact of various Brexit scenarios was leaked to undermine the exit talks, a government minister has claimed. bit.ly/2DS24ac
- Ryanair Holdings Plc has agreed to recognise the British Airline Pilots' Association to represent all of the airline's 600 employed pilots based in the UK. ind.pn/2DNMIn2
By Yereth Rosen ANCHORAGE, Alaska, Jan 30 (Reuters) – Alaska Governor Bill Walker said on Tuesday he has asked U.S. Interior Secretary Ryan Zinke to pare back a Trump administration plan for oil and gas leasing off the state’s coast.
While Walker supports offshore oil development, he said the Interior Department should focus on the most prospective areas off Alaska – the Beaufort and Chukchi seas in the Arctic and Cook Inlet in southern Alaska – and drop all others from the leasing plan.
“Interior Secretary Ryan Zinke is a partner with Alaska in many resource development projects, but a key threat in the effort to achieve a vibrant offshore program in Alaska is creating the false impression that there is an imminent attempt to foster development along our entire coast,” Walker said in a statement.
Proposed lease sales for other offshore regions in Alaska, in areas spanning the Bering Sea and Gulf of Alaska, should be removed from the plan, Walker said. The Interior Department should also maintain long-established buffers for Native Inupiat whalers and a traditional 25-mile no-leasing buffer along the Chukchi coast, the statement said.
Walker’s comments echo those of the all-Republican Alaska Congressional delegation, which in a letter to Zinke on Friday asked the department to keep the Chukchi, Beaufort and Cook Inlet sales in the plan but cut the 11 proposed sales in the Bering Sea and Gulf of Alaska.
“Such a program will maximize agency resources and reflect the areas with the broadest support for development among Alaskans,” Senators Lisa Murkowski, Dan Sullivan and Don Young said in the letter.
The Beaufort Sea off Alaska’s northern coast is the federal offshore Alaska area with the most exploration drilling to date, but there is no producing oil field located entirely in federal Beaufort waters.
The more remote Chukchi Sea, off northwestern Alaska and believed to hold vast amounts of oil and gas, was targeted by Royal Dutch Shell in the multibillion-dollar exploration program that the company scrapped in 2015. The Cook Inlet basin is Alaska’s oldest oil-producing region, but all production to date has been on state territory. (Reporting By Yereth Rosen in Anchorage, Alaska; editing by Grant McCool)
The Christophe de Margerie, the first of 15 icebreaking LNG carriers ordered for the Yamal LNG project to provide transport of LNG year-round in the Arctic, loads its first cargo at the Yamal LNG plant at the Port of Sabetta on the Yamal Peninsula, December 8, 2017. In August 2017, the ship became the first to sail the Northern Sea Route from Norway to South without an escort. Photo: SCF Group
By Peter Apps Jan 30 (Reuters) – Last August, a Russian tanker sailed direct from Norway to South Korea through the Arctic Ocean, the first time such a ship had done so without an icebreaker escort. It was a defining moment in the opening up of previously frozen northern trade routes – and it looks to have supercharged an already intensifying arms race and jostle for influence on the roof of the world.
It’s a dynamic that brings particular challenge for the United States. In part because Washington has never regarded the High North as a major strategic priority, the area has been seen as falling within Russia’s sphere of influence. Now China too is stepping up its plans to become a major player in the region.
Last week, China issued its first white paper on its national Arctic strategy, pledging to work more closely with Moscow in particular to create an Arctic maritime counterpart – a “Polar silk road” – to its “one belt, one road” overland trade route to Europe. Both the Kremlin and Beijing have repeatedly stated that their ambitions are primarily commercial and environmental, not military.
Washington, however, is increasingly suspicious and – aware it risks falling behind – the Pentagon has been reviewing its Arctic strategy.
Speaking to Congress in May, the commandant of the U.S. Coast Guard, Admiral Paul Zukunft, revealed that Washington was considering fitting anti-ship cruise missiles to its latest generation of icebreakers, a major departure from these vessels’ primary research and rescue role.
It’s a suggestion mocked by pro-Kremlin news channels, with one of Russia’s top officials saying in Norway in January that the Arctic region posed no “military challenges” to any country.
In fact, Russia’s military expansion in the Arctic Circle far exceeds that of any other nation, and it has other nearby nations alarmed – particularly Norway and Canada, which have vast swathes of largely unpopulated northern territory as well as offshore oil, gas and mineral interests they worry may be increasingly challenged. (Both countries have ramped up defense spending, based more of their militaries in the North, and lobbied the United States to do the same.)
As Reuters reported last year, Moscow has plowed more resources into its northern defense than at any point since the Berlin Wall fell, in some cases giving it even greater capability and reach in the region than it enjoyed before 1989. That includes creating or reopening six military outposts and building three new, large nuclear icebreakers to add to its already 40-strong fleet.
Russia’s Northern Fleet, based in Murmansk, will also receive its own raft of new investment, including two icebreaking corvettes specifically designed to carry Moscow’s own latest anti-ship missiles. Russia says its Northern Fleet launched more than 200 missiles as part of nearly 300 exercises in 2017, almost certainly a post-Cold War record.
Moscow regards its northern waters as crucial to its defense. In particular, it sees them as a “bastion” in which to hide the nuclear ballistic missile submarines it would rely on to deter foreign attack. While U.S. and other NATO subs might potentially penetrate such waters undetected, Moscow’s defenses would make it all but impossible for any surface shipping to survive near Russian territory in any war.
The first new U.S. icebreaker is unlikely to enter service before 2023, the U.S. Coast Guard says – but that will be contingent on additional funding this year that is not yet guaranteed. The U.S. military’s only operational heavy icebreaker, the Polar Star, is seen as incapable of remaining in service more than another five years. The ship also has other commitments at the other end of the world – it is currently in the Antarctic.
China’s first indigenously-built icebreaker, Snow Dragon 2, launched in December and will operate alongside its namesake, built by Ukraine for Beijing and put in service in 1994. Neither of the Snow Dragons is believed to be armed but, given the change in direction of other Arctic-operating navies, that could easily change.
In truth, though, it is the commercial potential in the Arctic – and the diplomatic campaigns behind it – that may be even more significant. And it’s an area in which America looks even more likely to be left behind.
Russia is the only country with enough icebreakers to reliably escort other shipping through still periodically frozen waters, and that gives it massive influence over regional shipping patterns.
The U.S. Geological Survey estimates the Arctic may hold more than a fifth of the world’s undiscovered oil and gas reserves. Russia has been aggressively staking out its claims there for more than a decade, using midget submarines to plant flags on the ocean floor as part of its claim to some half a million square miles of undersea continental shelf.
China’s increasing appetite for the region is another significant dynamic in the mix. Canadian experts were shocked to see last week’s Chinese white paper categorizing the Northwest Passage as an “international strait.” Canada has long claimed that area as its own “internal waters.” The difference in wording is more than semantic – it could change who manages and uses the waterway.
In its official briefing on the paper, China said it believed any disputes or shipping routes should be handled through “friendly consultations” in accordance with international law.
Beijing’s “Northern Link” charm offensive is designed to mollify concerns, with President Xi Jinping visiting Finland, Alaska and Iceland in May last year. But that hasn’t been enough to ease concerns in Canada, Greenland and elsewhere, not least over rising numbers of Chinese migrant workers moving to the region for mining and other ventures.
The United States may never have to fight the war in the Arctic – not least because it is very hard to imagine how one might begin without sparking a wider global conflict. But that doesn’t mean it may not find itself eased out of what could become an important region without any fight at all. (Reporting by Peter Apps)
MEXICO CITY, Jan 31 (Reuters) – The Mexican government is seeking to auction off development rights to 29 deepwater oil and gas blocks in its territorial waters in the Gulf of Mexico on Wednesday, the country’s eighth tender since a landmark energy opening was finalized in 2014.
The following details the blocks up for grabs, the companies and consortia pre-qualified and registered to bid, the process by which winners are determined and previous deepwater auction winners:
* Among the deepwater contractual areas in the auction, 9 blocks are located in the Perdido Fold Belt that straddles the U.S.-Mexico maritime border.
* Ten blocks are on offer in the Cordilleras Mexicanas basin located along the southwestern rim of the Gulf, and another ten in the Salina basin clustered along the southeastern edge of the Gulf.
* Twenty-six companies and consortia have pre-qualified and registered to bid on the available blocks, meeting minimum standards for both technical and financial capability.
* The firms pre-qualified and registered as individual bidders include BHP Billiton, China Offshore Oil Corp., ExxonMobil, Noble Energy, Pemex, PC Carigali, Royal Dutch Shell, Statoil and Total.
The consortia pre-qualified and registered to bid include BP and Statoil; BP, Statoil and Total; Chevron and Pemex; Chevron, Pemex and Inpex; Chevron, Pemex and ONGC Videsh; China Offshore Oil Corp. and PC Carigali; Eni, Qatar Petroleum International and Citla Energy; Eni and Qatar Petroleum International; Noble Energy and Deutsche Erdoel; Noble Energy, Pemex and Deutsche Erdoel; Pemex and China Offshore Oil Corp.; PC Carigali, Ophir and PTTEP; Repsol and PC Carigali; Repsol, PC Carigali, Sierra Nevada and PTTEP; Repsol, PC Carigali and Ophir; Royal Dutch Shell and Pemex; and Royal Dutch Shell and Qatar Petroleum International.
* In order to meet minimum technical capacity as a potential operator, interested firms must have previous experience operating a deepwater exploration and/or production area at a water depth of at least 1,640 feet (500 meters) in the past five years.
* To meet minimum financial capacity as a potential operator, interested firms must have at least $2 billion in capital, total assets worth at least $10 billion as well as an investment-grade credit rating.
* Winners are determined based on the highest bid offered calculated as a weighted formula that favors an additional royalty offered to the government but also includes an extra investment commitment in the exploration phase of each license contract.
* In the event of a tie, a cash payment offered to the government will serve as the tie-breaker.
* Mexico’s previous deepwater Gulf oil auction took place on Dec. 5, 2016, and eight of ten blocks up for grabs were awarded.
* The winners included individual bidder China Offshore Oil Corp., and the following consortia: Total and ExxonMobil; Statoil, BP and Total; Chevron, Pemex and Inpex; PC Carigali and Sierra Coronado; and Murphy, Ophir, PC Carigali and Sierra Offshore Exploration. (Reporting by David Alire Garcia; Editing by Joseph Radford)
Gold Seeker Closing Report: Gold and Silver End Roughly 1% Higher By: Chris Mullen, Gold Seeker Report
Gold gained $8.30 to $1345.10 by midmorning in New York before it dropped back to $1334.10 after this afternoon’s fed statement, but it then shot back higher into the close and ended near its late session high of $1347.50 with a gain of 0.67%. Silver rose to as high as $17.385 and ended with a gain of 1.29%.
Container shipping could see the first widespread use of a cryptocurrency this week.
Hong Kong-based blockchain developer ETH Smart Contract Tech will tomorrow start handing out its bespoke TEU tokens to shippers, forwarders and 3PLs under its 300cubits project.
The company will release some 20m TEU tokens, “custom-designed as digital shipping booking deposits, using smart contract blockchain technology, to solve the no-show and rolling problems plaguing the container shipping industry”, to container line customers for free – but on a first-come-first basis.
Interested shippers and forwarders need to demonstrate their eligibility for 300cubits, and are currently restricted to those that bought slots in 2016.
After passing the eligibility test, container line customers will allocated TEU tokens based on how much they have spent with the lines, which cumulatively saw sales of $150bn in 2016.
“For example, if the eligible participant has paid $50m as freight payment directly to container lines during 2016, the eligible participant would be entitled to at least 0.03% [$50m as a % of $150bn, the revenue of the entire container shipping industry] of the TEU tokens to be distributed to the customers of container liners – about 6,667,”according to its prospectus.
300cubits said the total supply of TEU tokens will be fixed at 100m.
In a Q&A in this week’s Alphaliner report, 300cubits co-founder Johnson Leung said the technology could help solve the $23bn a year shipment no-show problem that has plagued both carriers and their customers for years.
“Much of the no-show or rolling happens because the counterparties (carriers and shippers) handle bookings casually. The application of booking deposit will force both sides to seriously evaluate the likelihood of making their obligations in a booking. And the booking deposit could send useful signals well in advance on whether a booked shipment may happen,” Mr Leung told Alphaliner.
300cubits will earn its money from a 0.7% transaction fee to each TEU token “committed” by lines and their customers.
A similar process will begin with making the tokens available to shipping lines, although this will be undertaken via one-on-one negotiations.
The company is also set to sell a further 18m TEU tokens to the general public by way of an initial coin offering (ICO) in March, although potential buyers will be subject to a know-your-customer vetting process.
The company is also developing a booking deposit system based on blockchain technology, due to be launched on 15 June, with a beta version ready next month.
The distribution of free tokens is set to end on 1 August.
Welcome to the post-Janet Yellen era (which technically ends on Saturday, with Jay Powell sworn in on Monday) which sees the month of February begin with solid risk appetite as S&P futures initially rallied out of the gate only to fade into the European session, despite strong performance in Europe and Asia as the MSCI Asia Pacific index rose for first time in four days, as TSY yields spiked to 2.75%, aka the 'red zone.'
MSCI's all-country equity index rose around 0.2 percent after Tokyo bounced 1.7 percent off four-week lows. European bourses opened around 0.3 percent firmer MSCI's emerging Asian index closed 0.3 percent lower however. At publication time, European stocks were green with the E-mini up 0.1%...
... although it will be the 10Y US Treasury and the US Dollar that traders will be more focused on as was the case in most of January, with global shares bouncing after recent end-Jan profit-taking but rising US yields pose a threat as 10Y TSY yields jump to 2.75%, highest since 2014.
Indeed, equity bullishness is being tempered by rising global bond yields. The Fed held interest rates unchanged on Wednesday but raised its inflation outlook, no longer saying it expected price growth to stay below 2 percent. It also flagged “further gradual” rate increases.
Treasuries pulled lower in early trade as red and green Eurodollars push through post-FOMC lows; 10-year yield edges up four basis points to 2.75%. Two-year U.S. yields are approaching decade-highs and could rise further should jobs data due on Friday confirm sustained labor market strength.
The selloff continues across the globe, with the Aussie curve bull steepening for a second day; JGB futures marginally lower after 10-year auction. The 10y German Bund yield was also shaken, jumping above 0.7% to highest level since 2015.
Meanwhile, dollar bulls were faced with another day of disappointment as London trading saw a sharp reversal of the greenback’s fortunes, with the Bloomberg spot index quickly erasing early gains, although it has since posted a modest rebound.
The weak dollar trend will not be changed by Fed rate rises, ING Bank analysts predicted. Not only was policy tightening already priced in, economic recovery elsewhere and U.S. political uncertainty suggested “the overnight dollar strength is unlikely to transform into a trend,” they told clients.
Higher Treasury yields offered little support for the dollar as the perplexing divergence between rates and the U.S. currency remains. The euro and the pound were among the main beneficiaries as real money names kept adding longs. European equities traded in a sea of green with bonds edging lower and commodities trading mixed
This week’s meeting of the U.S. Federal Reserve was more hawkish than expected, but confirmed what markets had already expected - an interest rate rise in March, said Markus Huber, a trader at brokerage City of London Markets.
“In light of today’s flood of earnings in Europe and the United States, the Fed meeting will most likely have only a limited and temporary impact on markets,” Huber predicted.
Amid a flurry of company results the Stoxx Europe 600 Index headed for the first advance in four days, led by finance and technology shares. The FTSE 100 (+0.2%) lagged its peers with GBP/USD back above 1.4250. In terms of sector specifics, all sectors trade higher with the exception of health care names in the wake of Novo Nordisk (-4.5%) latest earnings update; outperformance seen in utilities, IT and financials as earnings dictate the state of play. Notable large cap earnings this morning include, BBVA (+1.1%), Roche (+0.3%), Unilever (flat), Vodafone (-0.8%), Daimler (-0.8%) and Shell (-0.7%).
The MSCI Asia Pacific Index also rose, with a surge in Japanese stocks offsetting declines in China and India. Australia's ASX 200 (+0.9%) and Nikkei 225 (+1.5%) traded higher with the rebound in crude fuelling outperformance in Australia’s energy sector, while Japan led the gains in the region amid a softer JPY and deluge of corporate earnings. Conversely, Shanghai Comp. (-1.0%) and Hang Seng (-0.3%) were less inspiring and traded choppy after a 6th consecutive open market operation skip by the PBoC (draining 80bn yuan) and an inline Chinese Caixin Manufacturing PMI release, while a slump in Shenzhen stocks to 6-month lows also triggered further mainland pressure. e. Finally, 10yr JGBs were lower amid the positive risk tone in Japan, although prices were supported off lows after stronger demand in the 10yr JGB auction.
Global equity markets are torn between buoyant economic growth and double-digit company earnings, on the one hand, and the possibility that U.S. and euro zone central banks will tighten policy faster than expected. The growth momentum was confirmed by manufacturing activity surveys on Thursday that showed Asian factories getting off to a strong 2018 start and Europe posting solid growth.
Boeing and Facebook were the latest to reinforce the solid U.S. earnings growth picture. European markets cheered improved performance at Unilever and Royal Dutch Shell. Huber said results from the likes of Amazon and Apple would be crucial. “It will be essential that those companies not only deliver in regard to earnings expectations but also show that the momentum going forward remains strong,” he added.
WTI and Brent crude futures are seen higher alongside the softer USD with prices above USD 65/bbl and USD 69/bbl respectively; prices could also be being supported by comments from Shell who expect their 2018 CAPEX to be at the lower end of their guided range. Notable energy newsflow includes Goldman Sachs raising their Brent crude oil 3-month forecast to USD 75/bbl and 6-month forecast to USD 82.50/bbl as “rebalancing has likely been achieved”. In metals markets, spot gold trades lower amid the broader global risk sentiment and thus unable to benefit from the softer USD. Elsewhere, Chinese steel futures were seen higher overnight amid speculation over an extension to existing output curbs. Finally, Glencore, as part of their production update this morning, announced that copper output should rise to nearly 1.5mln/tonnes this year as production at their Katanga mine ramps up
S&P 500 futures up 0.2% to 2,830.30
STOXX Europe 600 up 0.4% to 397.19
MSCI Asia Pacific up 0.3% to 184.58
MSCI Asia Pacific ex Japan down 0.4% to 605.58
Nikkei up 1.7% to 23,486.11
Topix up 1.8% to 1,870.44
Hang Seng Index down 0.8% to 32,642.09
Shanghai Composite down 1% to 3,446.98
Sensex down 0.09% to 35,932.52
Australia S&P/ASX 200 up 0.9% to 6,090.07
Kospi up 0.08% to 2,568.54
German 10Y yield rose 1.8 bps to 0.715%
Euro up 0.2% to $1.2443
Italian 10Y yield unchanged at 1.76%
Spanish 10Y yield fell 1.2 bps to 1.415%
Brent futures up 0.8% to $69.62/bbl
Gold spot down 0.3% to $1,340.94
U.S. Dollar Index down 0.2% to 89.00
Top Overnight News
U.K. house prices rose in January as a shortage of properties coming up for sale offset an underlying slowdown in the market; the year-on-year increase reached 3.2%, the fastest pace since March
The EU is threatening sanctions to stop U.K. undercutting the continent’s economy after Brexit, including “tax blacklists” and penalties against subsidized companies, the Financial Times reports, citing a leaked strategy paper
Asia’s rich savers are driving up prices of the region’s dollar-denominated bonds, making it harder to find value even as they insulate the market, according to Goldman Sachs Asset Management
Manufacturing in the euro area grew at one of the fastest paces on record in January, with high demand fueling inflationary pressures
PBOC is reasonably comfortable with yuan strengthening against USD but would be a problem if it spread to other currencies in trade weighted basket, Reuters reports, citing people familiar
European Jan. Manufacturing PMIs: Spain 55.2 vs 55.6 est; Italy 59.0 vs 56.6 est; France 58.4 vs 58.1 est; Germany 61.1 vs 61.2 est. Eurozone 59.6 vs 59.6 est; U.K. 55.3 vs 56.5 est.
Brexit: EU threatens sanctions to stop U.K. undercutting the economy after split; including “tax blacklists” and penalties for subsidies: FT
In Italy, SWG poll shows 37% are undecided before the election; would make this group the largest bloc from polling numbers
Chinese Jan. Caixin Manufacturing PMI 51.5 vs 51.5 est.
Asia equity markets were mostly higher as region digested a slew of earnings and after initial momentum from the US, where stock markets looked past the widely-anticipated hawkish language tweak by the FOMC and topped off the best monthly performance in the S&P 500 and DJIA since 2016. ASX 200 (+0.9%) and Nikkei 225 (+1.5%) traded higher with the rebound in crude fuelling outperformance in Australia’s energy sector, while Japan led the gains in the region amid a softer JPY and deluge of corporate earnings. Conversely, Shanghai Comp. (-1.0%) and Hang Seng (-0.3%) were less inspiring and traded choppy after a 6th consecutive open market operation skip by the PBoC and an inline Chinese Caixin Manufacturing PMI release, while a slump in Shenzhen stocks to 6-month lows also triggered further mainland pressure. Finally, 10yr JGBs were lower amid the positive risk tone in Japan, although prices were supported off lows after stronger demand in the 10yr JGB auction. Chinese Caixin Manufacturing PMI Final (Jan) 51.5 vs. Exp. 51.5 (Prev. 51.5). PBoC skipped open market operations again today for a daily net drain of CNY 80bln. PBoC set CNY mid-point at 6.3045 (Prev. 6.3339)
Top Asian News
The Breakneck Rise of China’s Colossus of Electric-Car Batteries
India Said to Propose Long-Term Capital Gains Tax on Equities
India to Curb Cryptocurrency Use While Embracing Blockchain
India Breaches Deficit Goals, Taxes Stock Investors to Woo Votes
Bond Rout in India Set to Deepen as Modi Widens Deficit Targets
European equities trade higher across the board (Eurostoxx 50 +0.6%) amid another positive close on Wall Street which saw the best monthly performance in the S&P 500 and DJIA since 2016; FTSE 100 (+0.2%) lags its peers with GBP/USD back above 1.4250. In terms of sector specifics, all sectors trade higher with the exception of health care names in the wake of Novo Nordisk (-4.5%) latest earnings update; outperformance seen in utilities, IT and financials as earnings dictate the state of play. Notable large cap earnings this morning include, BBVA (+1.1%), Roche (+0.3%), Unilever (flat), Vodafone (-0.8%), Daimler (-0.8%) and Shell (- 0.7%). In European Fixed Income, not much chance to counter-trend and little respect for or support evident at pre-FOMC session lows as bond bears pounce on upticks to push benchmark futures deeper into negative territory. Bunds have now slumped to 158.27 at worst (-55 ticks on the day), and Gilts hit 121.50 (-64 ticks) to record a new March contract base.
Top European News
U.K. Manufacturing Growth Unexpectedly Slows as New Orders Ebb
Fox Casts Doubt on the Brexit Transition as May Vows to Fight
Dutch Regulator Recommends Slashing Groningen Gas Output 44%
Hungary Rejects Macron ‘Arrogance’ as EU Reform-Fight Looms
Vodafone Forced Into Discounts Over Southern Europe Rivalry
Euro-Area Manufacturers Start Year With Near-Record Momentum
In FX, the DXY only derived modest and fleeting support from the FOMC’s more hawkish inflation outlook and upbeat growth assessment with the Index back on the 89.000 handle having topped out some way short of 89.500. In the event, rate (hike) expectations for March and 2018 overall are barely changed in the aftermath so the Dollar has resumed its broadly weaker trend with post-Fed gains only maintained against a few G10 currencies. Usd/Jpy remains firmer within a wide 109.00-110.00 band, as loose BoJ policy is not seen shifting anytime soon, eyeing support around 109.41 (200 HMA) and resistance in the 109.60-75 area before 109.88 (50% Fib) on the narrow. Aud/Usd has rejected the 0.8100 level again, and pulled back further towards the big figure below and almost retesting last week’s 0.8005 base just ahead of key support a few pips under 0.8000 – sharp drop in Aussie building permits weighing. Conversely, Cable continues to recover and consolidate above the 1.4250 level, but capped by a small UK manufacturing PMI miss and offers said to be sitting at/over 1.4280. Eur/Usd is also back in the ascendancy having reclaimed 1.2400+ status and basing ahead of 1.2366 chart support, the 200 HMA at 1.2375 and bids from 1.2370-80. Note, however, hefty option expiries between 1.2400-25 may yet exert some influence.
In commodities, WTI and Brent crude futures are seen higher alongside the softer USD with prices above USD 65/bbl and USD 69/bbl respectively; prices could also be being supported by comments from Shell who expect their 2018 CAPEX to be at the lower end of their guided range. Notable energy newsflow includes Goldman Sachs raising their Brent crude oil 3-month forecast to USD 75/bbl (Prev. USD 62/bbl) and 6-month forecast to USD 82.50/bbl as “rebalancing has likely been achieved”. In metals markets, spot gold trades lower amid the broader global risk sentiment and thus unable to benefit from the softer USD. Elsewhere, Chinese steel futures were seen higher overnight amid speculation over an extension to existing output curbs. Finally, Glencore, as part of their production update this morning, announced that copper output should rise to nearly 1.5mln/tonnes this year as production at their Katanga mine ramps up.
Looking at the day ahead, we’ll get the final PMI revision alongside the January ISM manufacturing and December construction spending. Also due out in the US will be Q4 nonfarm productivity and unit labour costs, as well as the latest weekly initial jobless claims and January vehicle sales data. Today will be a busy day for corporate earnings releases too with Alphabet, Amazon, Apple, Royal Dutch Shell and Alibaba all reporting. Elsewhere, the ECB’s Praet and BOE’s Brazier will speak.
US Event Calendar
7:30am: Challenger Job Cuts YoY, prior -3.6%
8:30am: Nonfarm Productivity, est. 0.7%, prior 3.0%; Unit Labor Costs, est. 0.9%, prior -0.2%
8:30am: Initial Jobless Claims, est. 235,000, prior 233,000; Continuing Claims, est. 1.93m, prior 1.94m
9:45am: Markit US Manufacturing PMI, est. 55.5, prior 55.5
10am: Construction Spending MoM, est. 0.4%, prior 0.8%
10am: ISM Manufacturing, est. 58.6, prior 59.7
Wards Domestic Vehicle Sales, est. 13.5m, prior 13.7m
Wards Total Vehicle Sales, est. 17.2m, prior 17.8m
DB's Jim Reid concludes the overnight wrap
Welcome to February. I hope you all Super Blue Blood Mooned well yesterday. I’m starting to worry that the twins are werewolfs as for the last two nights they have been howling pretty much non-stop. I was going to say it’s a nightmare but at least in nightmares you’re asleep!!! Anyway at the end of today’s note - through bleary eyes - we do our usual monthly performance review. January was a fascinating month with one of the largest divergences between equity and bond returns for some time. The S&P extended its record run of positive monthly total returns to 15 months and January was in fact the strongest of these. Treasuries had their worst month since Mr Trump was elected in November 2016. Indeed bonds made up all but 2 of the 12 global tracked assets that were in negative return territory for the month (39 in total). For more on this see the full performance review at the end.
Staring in the US this morning, as widely expected, the Fed left rates unchanged but the tweaks to the FOMC statement seemed slightly hawkish. On rates, the committee expects that “economic conditions will evolve in a manner that will warrant further gradual increases in federal funds rates”, with the word “further” added this time. On inflation, there appears to be more confidence now with the Fed expecting it “…to move up this year and to stabilise” around the goal versus “remain somewhat below 2% in the near term”. Notably, it also noted that “market based measures of inflation compensation have increased in recent months but remain low”. Elsewhere, the committee reiterated that “near term risks to the economic outlook appear roughly balanced”. Our US economists continue to expect four rate hikes in 2018 and the Bloomberg implied odds of a rate hike in March jumped c9ppt to 99%.
Staying with central banks, the ECB’s Coeure seemed a bit dovish. On QE, he noted “of course (it) won’t last forever”, but “there is also a very wide…broad agreement in the Governing council” that “we have to be patient, prudent and persistent…because we’re not yet where we want to be in terms of inflation”. On Euro area inflation, he expects it will converge “only very gradually” to the ECB’s goal with “no (upside) inflation tail risk at the current juncture” and that ample degree of monetary stimulus remains necessary. On rates, he said that they will stay “very low for an extended period of time”. Elsewhere on FX, he said the ECB “have agreements that we should not target our exchange rates…we want to see rates that reflect economic and monetary conditions in different places”. Although he also noted that “we’ve seen some volatility recently” and that “if that kind of volatility would lead to an unwarranted tightening of our monetary policy, we would have to reassess and consider”.
This morning in Asia, markets are mixed. The Nikkei (+1.52%) and Kospi (+0.19%) are up while the Hang Seng (-0.31%) and China’s CSI 300 (-0.93%) are down as we type. Datawise, China’s January Caixin manufacturing PMI was in line and steady mom at 51.5, while Japan’s Nikkei manufacturing PMI was slightly above last month’s print at 54.8 (vs. 54.4). After the bell in the US, Paypal dropped c11% after eBay said it will gradually change its payments partner from Paypal to Adyen BV. Facebook’s shares recovered and is up c1% after its 4Q result while Microsoft is up c0.2% after its 2Q revenue beat estimates.
Now recapping market performance from yesterday. The S&P initially rose c0.6% following solid results from Boeing (+4.9%) and Xerox (+4.4%) but pared gains to close only marginally higher (S&P +0.05%; Nasdaq +0.12%; Dow +0.28%). Within the S&P, modest gains in the real estate and utilities sectors were partly offset by losses for health care stocks. Key European markets slightly weakened with the Stoxx 600 (-0.17%), DAX (-0.06%) and FTSE (-0.72%) all down. The latter weighed down by heath care stocks on concerns of the potential industry disruption from the Amazon consortium. The VIX fell for the first time in three days to 13.54 (-8.5%).
In government bonds, treasuries initially weakened after the government boosted the amount of longer term debt for auctions in the upcoming quarter ($42bn), but losses reversed post the FOMC statement with 10y yields closing 1.5bp lower for the day at 2.706%. Although this morning, the UST 10y yield is back up c2bp. In Europe, Bunds (+1.5bp) and OATs 10y yields (+0.6bp) rose slightly, while Gilts rose for the sixth consecutive day (yields +5bp and +c30bp since early Jan). Turning to currencies, the US dollar index fluctuated and was marginally lower (-0.03%), while the Euro and Sterling gained 0.10% and 0.31% respectively. In commodities, WTI oil was up for the first time in three days (+0.36%) despite higher US oil output for November. Elsewhere, precious metals strengthened (Gold +0.49%; Silver +1.19%) and other base metals were mixed but little changed (Copper +0.15%; Zinc +0.37%; Aluminium -0.76%).
Away from markets, former Fed Chair Alan Greenspan sees two bubbles - a stock market and a bond market bubble. He said “the bond market bubble will eventually be the critical issue, but for the short term, it’s not too bad”. The main cause for their being a bond bubble was “we’re beginning to run an ever-larger US government deficit”.
In Germany, the SPD leader Schulz said negotiations with Ms Merkel’s bloc to form the next coalition government were “very encouraging” in terms of discussions on European policy, with negotiators discussing the role of the ESM bailout fund in more detail.
Now onto some Brexit headlines. Contrary to the EU’s view of protecting its citizen rights post Brexit, the UK PM May noted “…I’m clear there’s a difference between those people who came prior to us leaving and those who will come when they know the UK is no longer a member of the EU”. Elsewhere, the Irish deputy PM Simon Coveney said that post Brexit, Ireland wants “as close to status quo as possible from a trading perspective” with Britain and sees “difficult negotiations” for Britain with the EU in terms of potentially including financial services into a trade deal.
Finally, DB’s George Saravelos has reiterated his bearish call on the USD (target of 1.30 for EURUSD) and also looked at three myths on the dollar, including: i) the market is very short dollars, ii) the rate differential is overwhelmingly in favour of a stronger dollar and iii) there is an impending wave of dollar buying because of US tax repatriation. Refer to his note for more details.
Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the January ADP employment change was above market at 234k (vs. 185k), while the Chicago PMI also beat at 65.7 (vs. 64 expected). Elsewhere, the December pending home sales was in line at 0.5% mom. The 4Q employment cost index also met expectations at 0.6% qoq, lifting annual growth to 2.6% yoy – which is the fastest rate since 3Q 2008 and likely adds to the argument that inflation is picking up.
The Eurozone’s January core CPI was in line at 1% yoy and 0.1ppt higher mom, while France’s CPI was above market at 1.5% yoy (vs. 1.1%), partly due to higher energy prices. In labour markets, the Eurozone’s unemployment rate was in line at 8.7%, while Italy’s reading was slightly lower than expected at 10.8% (vs. 10.9%). In Germany, the January unemployment rate was in line at 5.4% - marking a new post reunification low, while the December retail sales was volatile and below market at -1.9% yoy (vs. 2.8%). Finally, UK’s January GfK consumer confidence remained negative but was better than expected at -9 (vs. -13).
Looking at the day ahead, in Europe we’ll get the final manufacturing PMI revisions including a first look at the data for the UK and periphery. In the US we’ll also get the final PMI revision alongside the January ISM manufacturing and December construction spending. Also due out in the US will be Q4 nonfarm productivity and unit labour costs, as well as the latest weekly initial jobless claims and January vehicle sales data. Today will be a busy day for corporate earnings releases too with Alphabet, Amazon, Apple, Royal Dutch Shell and Alibaba all reporting. Elsewhere, the ECB’s Praet and BOE’s Brazier will speak.
by Arpan Varghese (Reuters) – The Baltic Exchange’s main sea freight index extended its slide to a fourth straight session to touch a near six-month low on Thursday, as rates fell for all vessel segments amid a seasonal slowdown in demand.
The overall index, which tracks rates for ships carrying dry bulk commodities, dropped by 38 points, or 3.3 percent, to 1,114 points, the lowest since Aug. 10, 2017. The index recorded a 15.66 percent decline in January, its biggest monthly percentage fall since May 2017.
“I think its fair to recognize that the first quarter always represents quite a much lower level of demand,” said Peter Sand, chief shipping analyst at industry lobby group BIMCO.
The capesize index shed 85 points, or 5.3 percent, to 1,528 points, having registered a 43 percent fall in January 2018. Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were down $936 at $11,791.
Iron ore on the Dalian Commodity Exchange slipped 1 percent on Thursday amid concerns that appetite from China could weaken if steel mills keep cutting production beyond winter. China’s government ordered producers in 28 cities to cut output between mid-November and mid-March to reduce air pollution.
“Anything that comes out of current weakness, we do not expect that to be a trend of a huge change,” said Sand. “But perhaps the weakness that we always see in the markets around that time of the year leading up to the Chinese New Year,”
The panamax index lost 33 points, or 2.34 percent, to 1,378 points.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, declined $263 to $11,046. Among smaller vessels, the supramax index shed 7 points to 877 points and the handysize index lost 6 points to 552 points.
Meanwhile, the Baltic Exchange on Thursday said from March 1, 2018, the main dry index will no longer include the handysize time charter average.
By Alaric Nightingale (Bloomberg) — The Baltic Dry Index, a decades-old measure of shipping costs viewed by some investors as a leading economic indicator, is getting a makeover.
The measure will now get its heaviest weighting from giant Capesize ships that haul iron ore and coal, while the smallest Handysize carriers are removed altogether. The alterations follow interest from exchange traded funds and family offices about the creation of a global freight benchmark in which they could invest, said Stefan Albertijn, Chair of the Baltic Index Council.
“Over the years there has been considerable interest from the commodity and financial community in trading the BDI,” said Albertijn, who also runs Antwerp-based shipping company Ocean Finance & Consultancy. “We’re excited by the prospect of exchange-traded funds based on the BDI.”
Known in the industry as the BDI, the Baltic Exchange-published index sometimes captures early demand surges for industrial commodities that in turn point to economic expansions. While that can make the measure appealing to investors, its usefulness as a leading indicator is fast diminished in periods when fleet expansions flood the market with vessels, thereby making rates unresponsive to increased cargo buying.
The latest shift is designed to address the fact that there’s not enough derivatives trading of Handysize rates for financial institutions to create the necessary hedges of the over-arching BDI, Albertijn said. By eliminating those smaller vessels, the BDI will now reflect charter prices where there are appropriate underlying derivatives markets, he said.
The Baltic Dry, whose origins stretch back more than three decades, has been a composite of rates for different moving commodities, which until now has been equally weighted across four ship types: Capesizes, Panamaxes, Supramaxes and Handysizes. Now, the biggest carriers will represent 40 percent of the measure while Panamaxes and Supramaxes will account for 30 percent each.
There will be an annual review of the vessel types that constitute the Baltic Dry, and tests showed a 99 percent correlation between the reweighted measure and the old one, according to Albertijn. The Baltic Exchange will continue to publish rates for Handysizes.
The big news this week was the filing of charges and settlements for price manipulation and “spoofing” brought by the CFTC, in conjunction with the DOJ and FBI, against three banks and a half dozen individual traders; mostly involving illegal trading activities in COMEX gold and silver futures. The announcement set off a debate about whether the filing proved the allegations that gold and silver prices were manipulated as many, certainly including me, have maintained.
Put simply, the filings do not prove that silver and gold have been manipulated lower in price over the years. But then again, neither do the filings show that prices have not been manipulated in the manner I contend. What the charges do prove is that spoofing is a corrupt and illegal practice that should not exist in any form and on that basis. My immediate reaction is what the heck took the CFTC this long to act? Regular readers know I have railed against spoofing for many years as being completely devoid of any redeeming or legitimate features while the CFTC stood by. The practice of placing phony orders to influence price should have been outlawed from day one.
That said, I suppose it is good that the agency finally took action, under the kindest interpretation of the cliché of it’s better late than never. Certainly, those banks and traders accused of the practice will likely not do so in the future. And seeing the CFTC actually use the word manipulation in connection with COMEX gold and silver can’t be considered bad. Beyond that, unfortunately, the charges and settlements are troubling in that they only scratch the surface of whether silver and gold prices are manipulated.
Truth be told, if the regulators were out to clean up what ails silver and gold pricing, then they didn’t come close with these filings. If the CFTC was intending that this week’s announcements showed that it was truly cracking down on bad actors in silver and gold, then it failed. I would remind you that many of the violations announced took place while the CFTC was in the midst of its infamous five year silver “investigation”.
Think I’m being too hard on the CFTC? Then try explaining how the agency has managed to ignore the activities of the most prominent gold and silver market crook of all – JPMorgan. It’s not as if the agency hasn’t been given ample evidence of JPMorgan’s dominant role in manipulating prices ever since the bank took over Bear Stearns in 2008. I know because I’ve done nothing but make the case against JPMorgan for nearly all that time.
And I must say, I am disappointed in the actions, or lack thereof, of the Enforcement Director, James McDonald. Privately, I’m still assured that McDonald is a straight arrow, although lately the question has come up whether what JPMorgan is doing is really illegal if higher ups in the government pecking order have ordered McDonald to keep off JPM’s case. To that I say balderdash – in matters silver and gold, JPMorgan is a stone cold crook and no order from above supersedes McDonald’s oath to uphold the Constitution and the law of the land. It’s disturbing that the agency seems to be going after the little fish, while the biggest market crook of them all, JPMorgan, gets a pass.
It’s not as if I haven’t gone out of my way to present the case against JPMorgan to McDonald, starting on his first day on the job last April 10. I spelled out in great detail how JPMorgan had never taken a loss on any short position it ever added in COMEX silver in nearly 10 years; a trading record that would be impossible if JPMorgan wasn’t rigging prices. And get this – since I wrote to McDonald last year, JPMorgan has added and bought back silver shorts on four separate occasions for more than 10,000 net contracts on each occasions, making close to $500 million in total trading profits. As a reminder, I base all my calculations on the data published by the agency.
In that public letter last year, I even spelled out the rationale for why JPMorgan was manipulating silver (and gold) prices, namely, to allow this crooked bank in acquiring as much physical metal as it could get at the lowest prices it could rig. This is the means, motive, opportunity and intent behind JPMorgan’s manipulation – to pick up as much cheap metal as it possibly could. In the last 10 months, in addition to racking up massive profits in paper COMEX trading, JPMorgan has added another 100 million oz of silver to a hoard now measuring nearly 700 million oz. And as I have written recently, JPMorgan has been doing the exact same thing in gold, namely, making enormous paper profits by being the largest short in COMEX gold, while picking up boatloads of physical gold on the cheap – at least 20 million oz over the past 5 years.
You can lead a horse to water but you can’t force it to drink. I can lay out the crimes of JPMorgan, using the agency’s data and taking the risk of publicly accusing the nation’s largest bank of criminality, but I can’t force to the CFTC to do its job. After all, the easiest way to dismiss these very serious allegations would be to openly address them. To be fair, should the CFTC ever get around to cracking down on the crooks at JPMorgan, I will happily eat my words and sing the regulators’ praises.
Asian Metals Market Update: February-2-2018 By: Chintan Karnani, Insignia Consultants
Gold rose on the back of rising bond yields and negative news on crypto currency news. After today’s US January nonfarm payrolls it will be a technical trade with Chinese demand and bond yields as the key. Today and Monday are big days for gold and silver. I expect $50 either side moves in gold from the current price of $1347.90. Silver on the other hand needs a daily close over $1740 today and Monday to zoom.
A scheme by the publisher of Newsweek and the International Business Times to buy fraudulent traffic in order to help secure a major ad contract from a US government agency has come to light in a new report released by independent ad fraud researchers.
According to the report, IBTimes.com won a major video and display advertising contract from the Consumer Financial Protection Bureau (CFPB) - a federal oversight agency created six years ago as the brainchild of Senator Elizabeth Warren. Social Puncher, a consulting firm that investigates online ad fraud, notes in its report that "ads purchased by the CFPB were displayed to an audience that includes a significant amount of "cheap junk traffic with a share of bots" - effectively defrauding the agency.
When it comes to IBT’s fraudulent traffic practices, Social Puncher’s findings align with reporting from BuzzFeed News on IBT India, and with separate data gathered by Pixalate, an ad fraud detection company, and DoubleVerify, a digital media measurement company. (Social Puncher and BuzzFeed News previously collaborated on ad fraud investigations, but worked separately in this case.)
Based on what it described as a detailed investigation, DoubleVerify this week classified IBT’s US, UK, India, and Singapore sites as “as having fraud or sophisticated invalid traffic,” according COO Matt McLaughlin. DoubleVerify is now blocking all ad impressions on these sites on behalf of customers.
In response to questions from BuzzFeed News, Newsweek Media Group, the parent company of IBT, acknowledged it purchases audiences from ad networks that sell pop-up and pop-under traffic. It said this traffic represents a “small percentage of traffic on our sites” and denied any fraudulent activity. -Buzzfeed
“We use third-party platforms to verify and filter this traffic to ensure it is of the highest quality. This verification process prevents poor-quality traffic being redirected to our sites and we consistently score highly on various third-party ad verification platforms,” the company said. It declined to name the third-party verification partners it works with.
The CFPB, now headed by Trump appointee Mick Mulvaney, told BuzzFeed News that the bureau is looking into the allegations.
“We take allegations of fraud very seriously. Acting Director Mulvaney is actively looking into the work done by GMMB, and these allegations [of ad fraud by IBTimes.com] will be investigated as part of that process,” the spokesperson said.
The CFPB has come under fire in recent months after it was discovered that the agency established a "secret slush fund" to funnel penalties collected from defendants to Democrat causes.
A consultant who worked with the highly politicized Consumer Financial Protection Bureau (CFPB) claims the organization funneled a large portion of over $5 billion in collected penalties to "community organizers aligned with Democrats" as part of a giant slush fund, the Post reported in early December.
[The CFPB] Funneled a large portion of the more than $5 billion in penalties collected from defendants to community organizers aligned with Democrats — “a slush fund by another name,” said a consultant who worked with CFPB on its Civil Penalty Fund and requested anonymity.
Created six years ago as the brainchild of Senator Elizabeth Warren and slipped into the Dodd Frank bill before it was passed by Congressional Democrats, the CFPB became one of the most powerful agencies in D.C., with the ability to exercise enormous power over the U.S. economy while its budget remained unencumbered by congressional oversight. As one Hill writer put it:
The problem is that this agency and its director were set up to be free from the control of the Congress. Congress’s fundamental obligation to oversee and fund such bureaus or agencies is short-circuited when it comes to the CFPB. In structuring it in the manner written by now-Sen. Warren (D-Mass.), the law abrogated the idea of a government by the people, for the people and of the people.
Instead, it established an autocratic and unaccountable power center for people of Warren’s ideological persuasion — those who view our market economy as an enemy that must be managed by a chosen few. The creation of the CFPB as a rogue agency with a dictatorial leader is one of the most significant acts of malfeasance perpetrated on the American constitutional system since the Sedition Acts of 1798.
With the reins of the CPFB handed over to Mick Mulvaney in December following the resignation of Obama-era Director Richard Cordray, it appears that IBTimes.com's government-funed gravy train has just been derailed.
The last day of an already tumultuous week is shaping up as a bloodbath for investors across the globe as the following market snapshot of global stocks and futures shows.
European equity markets and U.S. equity futures sold off sharply, however as Bloomberg notes, the traditional pre-NFP lack of market activity has so far mitigated large cross-asset reaction. S&P futures were down over 20 points and flirting with the 2,800 level.
Equities were tested by the surge in bond yields, with some fund managers saying anything between 2.7% and 3% on the 10Y TSY would signal a bond bear market. The level is seen by many stock-watchers as a potential trigger for a correction in equities.
To be sure, the correlation between higher yields and lower equities continued overnight in a particularly aggressive manner. The silver lining is that as the US 10y tests 2.80% and the US 30y at 3.04%, the USD at least appears to have found a bottom, for now. Overnight German Bund yields also reached a two-year high as core European bonds fell along with gilts.
As we pointed out last night, the risk off sentiment took shape in Asia, with Chinese stocks continuing their recent plunge...
... as core yields weighed on the EM FX space as a whole. "Markets are increasingly choppy and price action increasingly unpredictable" Citi's FX desk notes.
There was nothing obvious to trigger the move: some attributed the risk off mode to a report that 18 people were injured when a van intentionally hit pedestrians in central Shanghai, China. Additionally, WSJ reports, “Chinese stocks had their worst week since 2016, with fresh concerns about Beijing’s campaign to cut financial risk and predictions of a slowing economy...” The BoJ also knocked JPY back after it took action against the rising JGB 10y yield by announcing it would buy unlimited amounts of 10y JGBs at 11bps.
Meanwhile, Europe was a bloodbath largely due to to the previously discussed poor result from Deutsche Bank which sent the German lender's stock tumbling. The weakness quickly spread to German stocks with the DAX turning negative for 2018, giving up an advance that had reached 5%, as the DAX slides for a fifth straight day. This was the worst weekly drop for the DAX since November 2016, down 3.5%
The DAX weakness sent the broader Eurostoxx Index dropped for a 5th day, the longest losing streak since November, and sliding below its 200-DMA.
In FX, the USD/JPY rallied further toward 110 after BOJ acted to control the yield curve by placing a cap on yields as it offered to buy an unlimited amount in 10yr JGBs at a yield of 0.110%. The BoJ also announced to buy JPY 450bln in 5yr-10yr, more than the prior JPY 410bln operation.
The Bloomberg Dollar Spot Index snapped a three-day decline and headed for its biggest gain since November as stretched short positioning called for caution ahead of the U.S. payrolls report. The yen was set for its worst week in 3 1/2 months as the BOJ further damped speculation about normalizing its policy anytime soon. Monetary policy prospects weighed on Antipodean currencies as well, while the euro and the pound also came under pressure. European bonds and equities traded in the red. USD strength was particularly evident against EMFX, with USD/ZAR trading back above 12.00.
Elsewhere, core yields edge higher but without much momentum, while credit spreads widen, iTraxx Crossover through 200-DMA. As Bloomberg highlights, a hawkish Euribor put trade targeting ~80bps of ECB hikes by end-2019 caught attention; crude and metals weighed by USD move, another bitcoin selloff of more than 10%.
Traders will now be looking to U.S. jobs data, which may offer support to stocks and bonds if the trend of healthy growth in hiring but low wage inflation continues.
Elsewhere, oil traded near its highest level since 2015 in New York as forecasters paint a rosier picture for supply and demand. Bitcoin continues to slide after a miserable January, falling below $9,000.
S&P 500 futures down 0.7% to 2,803.75
STOXX Europe 600 down 0.8% to 390.55
MSCI Asia Pacific down 0.7% to 183.03
MSCI Asia Pacific ex Japan down 0.7% to 599.58
Nikkei down 0.9% to 23,274.53
Topix down 0.3% to 1,864.20
Hang Seng Index down 0.1% to 32,601.78
Shanghai Composite up 0.4% to 3,462.08
Sensex down 2.3% to 35,099.20
Australia S&P/ASX 200 up 0.5% to 6,121.39
Kospi down 1.7% to 2,525.39
German 10Y yield rose 2.0 bps to 0.741%
Euro down 0.2% to $1.2484
Italian 10Y yield fell 6.3 bps to 1.697%
Spanish 10Y yield rose 1.4 bps to 1.423%
Brent futures up 0.2% to $69.78/bbl
Gold spot down 0.2% to $1,346.44
U.S. Dollar Index up 0.2% to 88.87
Top Overnight News
Chancellor Angela Merkel’s bloc and Germany’s Social Democrats secured an agreement on education even as “large” policy differences remain, a top party official said as parties near a self-imposed weekend deadline
The U.K. must not enter into a new customs union with the European Union after it leaves the bloc, Trade Secretary Liam Fox said, setting a new red line for Theresa May’s negotiations with Brussels and her own party on Brexit
Riksbank Deputy Governor Martin Floden says “there are risks to the rate path, inflation in particular is unusually uncertain," according to an interview with Market News International
Japan’s government will likely present to Parliament its nominees of BOJ governor and deputy governors around mid- to late February at the earliest, Reuters reports, citing unidentified people familiar with the matter
BofAML says “massive” equity inflows last week helped trigger a sell signal triggered Jan 30th via record equity inflows, bullish hedge fund risk appetite indicator and global equity index breadth measure
U.K. Jan. Construction PMI 50.2 vs 52.2 est; housing activity lowest since Jul. 2016
BOJ took action today after large increase in JGB yields: senior official
Strong chance that BOJ’s Kuroda will be reappointed, according to people familiar, Reuters reports
China to allow overseas investors to trade iron ore futures on Dalian exchange
Asia equity markets traded broadly lower with sentiment in the region dampened amid a lack of catalysts and following the indecisive lead from Wall St. where most major indices finished negative and the Nasdaq 100 underperformed. ASX 200 (+0.5%) and Nikkei 225 (-0.8%) were mixed with Australia kept afloat by financials and energy, while the Japanese benchmark was the laggard and saw nearly all the prior day’s gains wiped out. Elsewhere, Shanghai Comp. (-0.4%) and Hang Seng (-0.1%) were downbeat amid Shenzhen volatility, while continued inaction by the PBoC also resulted to a weekly net liquidity drain of CNY 760bln. Finally, 10yr JGBs reversed the initial spill-over selling from US, with support from a risk averse tone and after the BoJ Rinban announcement in which it increased purchases in the 5yr-10yr range. Furthermore, the BoJ also effectively placed a cap on yields as it offered to buy an unlimited amount in 10yr JGBs at a yield of 0.110%. BoJ announced to buy JPY 450bln in 5yr-10yr (Prev. JPY 410bln), JPY 190bln in 10yr-25yr and JPY 80bln in 25yr+ JGBs, while it also announced a special bond operation to buy an unlimited amount of 10yr JGBs at a yield of 0.110%. However, there were no takers for the fixed rate operation and the BoJ stated it took the steps after a surge in yields and that it is adhering to policy of keeping 10yr yield near 0%. PBoC skipped open market operations for a net weekly drain of JPY 760bln vs. Prev. JPY 320bln drain W/W.
Top Asia News
Dollar Slide Spurs Yuan Forecast Revisions, Worry on Speed
Foreign Funds Poured $13 Billion Into Chinese Shares in January
Fosun’s $1.5 Billion Biotech Arm Is Said to Mull Hong Kong IPO
HNA-Like Debt Pileups Raise Risk of Forced Asset Sales in China
What’s on the Block in China’s Potential Sale of the Century?
World’s Biggest Pension Fund Gains $55 Billion as Stocks Climb
Mitsui & Co Surges to Highest Since 2008 on Share Buyback
European equities (Eurostoxx 50 -0.6%) are trading lower across the board following a downbeat session overnight in Asia-Pac and the US. Underperformance has been seen in the DAX (-1.1%) with the index dragged lower by Deutsche Bank (-6.1%) after reporting a larger than expected quarterly loss; Commerzbank (-1.5%) also seen lower but little contagion seen in the broader European banking sector. Elsewhere, energy names are the only sector trading higher in Europe alongside firmer energy prices, telecoms underperform with BT (-5.5%) at the bottom of the FSTE 100 following their latest earnings update.
Top European News
Germany DAX Gives Up Year’s Gain in Worst Selloff Since 2016
ECB Official Warns Markets Are Unprepared for Inflation Bogeyman
Czechs Signal Pause in Rate Hikes and Bet on Currency Gains
Wereldhave Slumps On 2018 Profit Guidance Miss, Dividend Cut
In FX, the DXY remains weak overall as its 2018 (and late 2017) bear trend continues, but the index is holding in above 88.500 and some key support levels ahead of the 88.000 level. In fact, the Dollar is firmer vs all G10 rivals as US Treasury yields continue their ascent and some benchmark maturities hit key or psychological levels (long bond over 3% for example). EUR/USD is pivoting around 1.2500, Cable still finding it tough on advances beyond 1.4200, USD/Cad sticky circa 1.2300 and similarly USD/CHF bouncing back towards 0.9300 after forays below. USD/JPY is still gradually firming within a wide 109.00-110.00 range, and sniffing out layered offers up to the top of that band, with a 50% Fib at 109.88 also providing some resistance. JPY undermined by more aggressive BoJ buying of JGBs overnight, NZD by weak building permits and the AUD extending recent losses/underperformance on disappointing data and rolled out RBA rate expectations. Ahead, NFP the main Friday focus.
In commodities, WTI and Brent crude futures have modestly extended on the prior day’s gains, albeit off best levels
with WTI back below USD 66/bbl and Brent retreating from USD 70/bbl with energy newsflow otherwise relatively light ahead of the Baker Hughes rig count and earnings from Exxon and Chevron (keep an eye out for CAPEX plans). In metals markets, Gold has traded relatively sideways ahead of NFP, whilst Chinese steel futures were seen higher overnight amid ongoing speculation over further extensions to domestic steel production curbs.
US Event Calendar
8:30am: Change in Nonfarm Payrolls, est. 180,000, prior 148,000
Unemployment Rate, est. 4.1%, prior 4.1%
Average Hourly Earnings MoM, est. 0.2%, prior 0.3%; Average Hourly Earnings YoY, est. 2.6%, prior 2.5%
10am: U. of Mich. Sentiment, est. 95, prior 94.4; Current Conditions, prior 109.2; Expectations, prior 84.8
10am: Factory Orders, est. 1.5%, prior 1.3%; Factory Orders Ex Trans, prior 0.8%
Today’s highlight will obviously be the employment report. Average hourly earnings have taken over from the headline number as the key focus of the report at the moment. DB are strongly of the view that wages are going up but we are not convinced you’ll see that in this report. They expect the number to tick down a tenth (+0.2% vs. +0.3% - consensus 0.2%) but the year-over-year trend may round up a tenth to 2.6%. For the headline number they expect a healthy gain in payrolls (+210k vs. +148k – consensus 180k) which should keep the unemployment rate steady at 4.1%. So far this week the employment and wages data has generally been positive. The latest evidence was 4Q unit labour costs yesterday which were above market at 2% (vs. 0.9% expected).
The employment report comes at a time of a continued sell off in US treasuries. UST 10y yields jumped the most in 12 months, rising 8.5bp to 2.791% and making a fresh high since April 2014. The UST 30y also closed above 3% for the first time since May 17 (3.025%) while the 2s10s steepened 6.5bp back to the highest since mid-December. The weakness seemed to have several contributing factors, such as a perception of it being a hawkish FOMC statement the night before, more data that supports the view that inflation is firming (the highest ISM prices paid reading since May 2011), and the UCL data discussed above. Over in Europe, changes in core 10y bond yields were more modest, with Bunds and Gilts up c2bp and OATs up 0.8bp. Peripherals actually outperformed, with yields down 2-6bp, in part supported by successful debt auctions in Spain.
Staying with US equities, the S&P 500 initially traded higher yesterday post Facebook’s results (shares +3.3%) but pared back gains to be marginally lower (-0.06%) while other bourses were mixed (Dow +0.14%; Nasdaq -0.35%). European markets were broadly lower, with the Stoxx 600 (-0.50%), FTSE (-0.57%) and DAX (-1.41%) down to a c4 week low. The pull back in the DAX was broad based with all sectors in the red, particularly industrials, real estate and healthcare stocks. The VIX was little changed at 13.47 (-0.5%).
After the bell, Amazon’s share price jumped c6% after reporting the strongest holiday quarter sales growth in eight years, while Apple’s shares recovered to be up c3%, in part as the CFO guided to >10% growth in iphone sales for the current quarter and investors took note of Apple’s higher average selling price for iPhone (+14% on pcp) as a potential sign of solid demand for its iPhone X after earlier reports to the contrary. Elsewhere, Alphabet is down c2% after its 4Q results missed estimates.
This morning in Asia, markets are broadly lower. The Nikkei (-0.85%), Kospi (-1.62%) and China’s CSI300 (-0.20%) are all down while the Hang Seng is up modestly (+0.13%) as we type. Elsewhere, the BOJ has announced its first unlimited fixed rate bond purchase operation since July, while also offering to buy more (40bn Yen; $365m) 5-10 year bonds at its regular operation this morning.
The yield on 10y JGBs fell from yesterday’s 9.4bp to c8bp this morning. Now turning to the ECB, Bloomberg has reported a group of unnamed ECB members had urged Mr Draghi in last week’s ECB meeting to be more specific than its current expectation that it will keep rates on hold “well past” the end of QE, but Draghi resisted a change on the wording. Elsewhere the ECB’s Praet seemed a tad dovish. On inflation, he noted “…we’re still some distance away from meeting the council’s criteria for a sustained adjustment in the path of inflation” and that “monetary policy will evolve in a data dependent and time consistent manner”.
Over in Germany, Ms Merkel noted that based on mid-term growth estimates, she expects the new government will “have additional scope” to spend beyond the EUR46bn agreed to in the exploratory talks with the SPD. The additional funds could be spent on digital transformation, development and foreign policy objectives. Elsewhere, when asked if the self-imposed Sunday deadline for coalition talks would hold, the SPD premier of the state of Mecklenburg said “we need to take the time that we need so that we can do good things for the people”.
Turning to currencies performance from yesterday, the US dollar index fell for the third consecutive day (-0.52%), while the Euro and Sterling jumped 0.77% and 0.51% respectively, with the Euro now at 1.251 – a fresh high since December 2014. In commodities, WTI oil edged up 0.4%. Precious metals were mixed but little changed (Gold +0.27%; Silver -0.62%) while other base metals advanced (Copper flat; Aluminium +0.14%; Zinc +0.71%).
Away from the markets, the ECB’s Nowotny has added to the debate on bitcoins, he noted “for a long time, I had the view that investment in Bitcoin should be a private matter, but I got the feeling that a legal provision is needed” and that “I like what the Chinese PBOC governor has said – bitcoins…are a matter for the police”. As a reminder, bitcoin fell c9% yesterday and is c54% down from its December highs. Elsewhere, he also noted “in my view, we should end the bond buying program” and that “this will also then lead to an increase in long term interest rates”.
Over in the UK, the BOE has begun simulating stresses in “stretched” bond markets to assess potential financial stability risks, in part as companies issued more bonds for funding than they did before the GFC. A key focus will be on liquidity mismatch in times of stressed markets. Across the pond, 38 US banks will have to report back to the Fed by 5 April in their annual stress test. Some of the downside assumptions include a jump in unemployment rate to 10%. Staying in the UK, the FT has reported that Brexit advisers to PM May are in “live” discussions on whether Britain can achieve a customs union deal covering trade in goods with the EU post a two year transition period.
Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the January ISM manufacturing index was above market at 59.1 (vs. 58.6) and the ISM prices paid rose to the highest since May 2011 (72.7 vs. 68.8 expected), which likely adds to the argument of higher inflation going forward. The 4Q nonfarm productivity fell for the first time in seven quarters (-0.1% vs. 0.7% expected) while unit labour costs was above market at 2% (vs. 0.9%). The December construction spending was up 0.7% mom (vs. 0.4%). Elsewhere, the final reading of the January manufacturing PMI was confirmed at 55.5. Finally, the weekly initial jobless claims was below expectations (230k vs. 235k) while continuing claims was above (1,953k vs. 1,929k). Factoring in the above, the Atlanta Fed now estimate 1Q GDP growth to be a whopping 5.4% (vs. 4.2% previous).
In Europe, the final readings for January manufacturing PMIs were broadly unchanged with the Euro area confirmed at 59.6 – 1pt below last month’s 20 year high, while Germany’s PMI was revised 0.1 lower to 61.1 and France 0.3 higher to 58.4. Elsewhere, the flash PMI for Italy was above market at 59 (vs. 57.4) but the UK PMI fell to the lowest since June 2017 at 55.3 (vs. 56.5), although still above its long run average of 51.7. Finally, the UK’s January Nationwide House price index was above expectations at 3.2% yoy (vs. 2.5%).
Looking at the day ahead, as discussed at the top it’s another payrolls Friday in the US and as usual keep an eye on other components of the January report including average hourly earnings and the unemployment rate. Also due in the US will be December factory orders, the final January University of Michigan consumer sentiment report and final December durable and capital goods orders
China's rapid, credit-fueled boom is losing its punch as new credit creation is becoming less efficient at driving growth - despite the Communist Party reporting a 6.9% growth rate for 2017 (which conveniently surpassed the party's "targeted" growth rate of 6.5% even though Chinese economic data is widely believed to be fabricated). And even though the risk of its economy collapsing in a mountain of bad debt remains ever-present, because there's no telling when it's "Minsky moment" will arrive, many economists believe its GDP will surpass the US some time during the next ten years, making it the world's largest economy.
One UK think tank projected last year that China would overtake the US by 2032. But Honda implied an even faster shift in its latest sales guidance, where Japanese automaker behemoth projected that China will surpass the US as its largest market during the next couple of years, according to Reuters.
Sales in Asia have been so strong that the company lifted its full year profit outlook by 4%, with China leading the boom.
Indeed, while US sales stagnated last year, contributing to a 3% contraction in global sales, sales in China jumped 15.5% to 1.44 million units. In fact, Asia was the only region where Honda saw year-on-year sales growth in 2017.
Honda, Toyota Motor Corp (7203.T), Nissan Motor Co (7201.T) and other Japanese automakers currently count the United States as their biggest market. But Honda has experienced explosive growth in China during the past three years, luring consumers with new offerings in the sport-utility vehicle (SUV) segment including its CR-V and Vezel models.
Last year, its China sales jumped 15.5 percent to 1.44 million units, even as overall vehicle market growth slowed to just 3 percent year-on-year, the weakest in at least two decades.
In contrast, sales in the United States, for decades Honda’s largest country market, were largely stagnant at 1.64 million vehicles last year, and significant growth is unlikely given that overall vehicle sales in the country are widely expected to retreat after peaking in 2016.
In the third quarter, Asia including China was the only region where Honda saw year-on-year growth in vehicle sales, while sales at home, North America, Europe and other regions fell. Honda expects Asia to overtake North America as its biggest source of annual vehicle sales for the first time this year.
Because it relies on joint-ventures with local Chinese companies (as practically every foreign automaker is forced to do) Honda is scrambling to raise capacity, but said there might be some short-term difficulties until it completes a new plant in 2019.
Honda has been ramping up production in China, and Executive Vice President Seiji Kuraishi said that a further, significant rise in capacity would be difficult until it completes a new plant in 2019 through a joint venture with China’s Dongfeng Motor Group.
“We’re struggling to increase production in China, so it would difficult to match our sales in the U.S. market at the moment,” Kuraishi told reporters at a briefing.
“But given the current state of the market, it’s likely that China will overtake the United States soon.”
In keeping with China's push to eventually phase out fossil fuels in cars to help combat its worsening pollution problem, Honda plans to launch a compact all-battery electric car in China later this year, and Kuraishi said that the company would also focus on developing car-sharing and other new mobility services for the country.
Expectations for stronger sales growth in Asia prompted Japan's third-biggest automaker to raise its full-year forecast for operating profit to 775 billion yen ($7.06 billion), while it sees the yen averaging 110 yen versus the U.S. dollar in the year through March, from 109 yen previously.
While the latest forecast is an upgrade from a previous forecast for 745 billion yen, it still represents a 7.8 percent slide from a year prior, as costs for quality-related issues including recalls, along with investment for research and development offset higher sales and cost reductions.
Profit was 284.5 billion yen in October-December, up 37 percent from a year earlier, and exceeding a mean 281.6 billion yenestimate from 11 analysts polled by Thomson Reuters I/B/E/S.
2018 started off with a disappointment for the auto industry with total sales at 17.07mm SAAR (missing expectations and down from 17.76mm in Dec).
Meanwhile, after briefly spiking late last year, new car sales in the US started off 2018 with a disappointment. Domestic auto sales dropped notably to 13.10mm in January - that is the biggest Dec-to-Jan drop since 2010.
Former Trump Aide Carter Page Was on U.S. Counterintelligence Radar Before Russia Dossier (WSJ)
Exclusive: U.S. to impose arms embargo on South Sudan to end conflict (Reuters)
Put That Bag Down: Flyers Ignoring Safety Pleas to Grab Luggage (BBG)
Russia says U.S. 'hunting' for Russians to arrest around the world (Reuters)
Overnight Media Digest
- The Commodity Futures Trading Commission fined Deutsche Bank Securities Inc $70 million as regulators continue to punish attempted manipulation of interest-rate benchmarks. on.wsj.com/2ntU98O
- U.S. President Donald Trump is expected to tell lawmakers as early as Friday that he has approved the release of a classified memo that Republicans allege shows improper surveillance of one of the president's former campaign aides, a White House official said Thursday. on.wsj.com/2nxBf0L
- CBS Corp and Viacom Inc said Thursday that their boards have formed special committees to evaluate a potential merger, a deal that would reunite the two big pieces of the Redstone family's media empire. on.wsj.com/2nwkGlG
- Trump said Thursday that he is willing to walk away from immigration negotiations if Democrats won't agree to his terms, and many involved in the debate said the chances of a deal appear to be fading. on.wsj.com/2nu7QEO
- Pope Francis has decided to accept the legitimacy of seven Catholic bishops appointed by the Chinese government, a concession that the Holy See hopes will lead Beijing to recognize his authority as head of the Catholic Church in China, according to a person familiar with the plan. on.wsj.com/2nuxBVf
- Carmakers that try to cheat vehicle emissions tests could face unlimited fines and criminal charges under proposals set out on Thursday by the British government.
- Britain’s Royal Mail Plc and the Communications Workers Union (CWU) said on Thursday they had reached an agreement to end a nearly 10-month dispute over plans to replace the firm’s defined benefit pension scheme, sending its shares higher.
- The White House will likely give Congress approval on Friday to make public a secret Republican memo alleging FBI bias against President Donald Trump in its Russia probe, a White House official said on Thursday, as tensions over the disputed document gripped Washington.
- CBS Corp and Viacom Inc, which were part of the same company from 2000 to 2006, said on Thursday that their boards had created special committees of independent directors to "evaluate a potential combination." (nyti.ms/2DRMonc)
- India announced on Thursday a sweeping plan to give half a billion people free access to healthcare. The healthcare plan, part of the government's 2018-19 budget presented on Thursday, would offer 100 million families up to 500,000 rupees ($7,797.88) of coverage each year. (nyti.ms/2GEeRKV)
- Chinese conglomerate HNA Group, in an email, advertised an "employee treasure" product with an 8.5 percent return if workers handed over $1,500, while a similar one dangled 9 percent, and a third mentioned a return as high as 40 percent if employees handed up $15,000. These pitches, more than a dozen of which were reviewed by The New York Times, were not part of an employee stock program. Instead, they appear to be high interest loans, with the company as borrower and its workers as lenders. (nyti.ms/2nvM0Az)
THE GLOBE AND MAIL
** The battle over the flow of oil to the West Coast has ratcheted up with Canadian Prime Minister Justin Trudeau declaring that Kinder Morgan Canada Ltd's Trans Mountain pipeline expansion will be built, and Alberta Premier Rachel Notley suspending electricity-purchase talks with B.C. tgam.ca/2nuXYdF
** Swoop, the new WestJet Airlines Ltd ultralow-cost carrier (ULCC), will begin operating in June with domestic flights, but will also announce that month how it plans to win back Canadian travellers heading to southern destinations from airports near the U.S. border. tgam.ca/2nuZ2ya
** British Columbia's public auto insurer's ability to meet its obligation to pay claims is on a crumbling footing, a key measure of the financial health of an insurance company shows. The Insurance Corp of B.C., according to its latest financial update, has only half of the capital it is required to hold in reserve to ensure that it is able to pay its claims. tgam.ca/2nvwuVn
** Canadian cannabis stocks plunged on Thursday to their lowest levels since December, and analysts covering the sector say investors should be ready for more volatility in the weeks to come. The pain was widespread, with the Canadian Marijuana Index, which tracks 24 leading cannabis stocks, down more than 11 percent at Thursday's close. bit.ly/2nzXlQr
- Royal Mail Plc and its main trade union have declared industrial peace with an agreement to cut working hours, a two-and-a-half-year pay settlement worth 12 percent and a groundbreaking new pension arrangement. bit.ly/2DWA716
- SIG Plc is attempting to strip several staff of their bonuses after revealing that its profits had been overstated by 6.6 million pounds over multiple years. bit.ly/2E5iqeL
- The UK's food regulators are launching a nationwide review of all meat cutting plants in the wake of "serious incidents" at 2 Sisters Food Group and Russell Hume. bit.ly/2E9l2Zg
- The former BHS boss Dominic Chappell has been issued with a formal demand for about 10 million pounds ($14.26 million)relating to the pension scheme of the collapsed department store chain. bit.ly/2DUhURs
- Medopad, a UK healthcare startup, is planning to raise $120 million in what would be one of the largest early-stage funding rounds for a British company. bit.ly/2BO3Jrb
- Array BioPharma on Thursday sued AstraZeneca Plc , accusing the pharmaceutical company of refusing to pay required royalties for a cancer drug after entering into an $8.5 billion collaboration with Merck & Co Inc. bit.ly/2E8VKdO
- The struggling doorstep lender Provident Financial Plc will take the unusual step on Friday of moving its acting chairman into the role of permanent chief executive. bit.ly/2FytApB
- Luke Johnson, one of Britain's most successful entrepreneurs, has hoisted a "for sale" sign over Neilson Active Holidays, the leisure business he acquired five years ago. bit.ly/2FBfsfa
- Morrisons is to axe 1,500 shop floor workers as it becomes the latest supermarket to announce large-scale job cuts. ind.pn/2nuANk2
- Less than a week after Primera Air abruptly cancelled its planned flights from Birmingham to Boston, the airline has announced a new link from Stansted to Washington D.C. ind.pn/2GE58UT
As we’ve said, Jeff Bezos clearly hates people, except as appendages to bank accounts. All you need to do is observe how he treats his workers.
In a scoop, Business Insider reports on how Amazon is creating massive turnover and pointless misery at Whole Food by imposing a reign of terror impossible and misguided productivity targets.
Anyone who has paid the slightest attention to Amazon will see its abuse of out of Whole Foods workers as confirmation of an established pattern. And even more tellingly, despite Whole Foods supposedly being a retail business that Bezos would understand, the unrealistic Whole Foods metrics aren’t making the shopping experience better.
As we’ll discuss below, we’d already expressed doubts about how relevant Bezos’ hyped Amazon model would be to Whole Foods. Proof is surfacing even faster than we expected.
But first to Bezos’ general pattern of employee mistreatment.
It’s bad enough that Bezos engages in the worst sort of class warfare and treats warehouse workers worse than the ASPCA would allow livery drivers to use horses. Not only do horses at least get fed an adequate ration, while Amazon warehouse workers regularly earn less than a local living wage, but even after pressure to end literal sweatshop conditions (no air conditioning so inside temperatures could hit 100 degrees; Amazon preferred to have ambulances at ready for the inevitable heatstroke victims rather than pay to cool air), Amazon warehouse workers are, thanks to intensive monitoring, pressed to work at such a brutal pace that most can’t handle it physically and quit by the six month mark. For instance, from a 2017 Gizmodo story, Reminder: Amazon Treats Its Employees Like Shit:
Amazon, like most tech companies, is skilled at getting stories about whatever bullshit it decides to feed the press. Amazon would very much prefer to have reporters writing some drivel about a discount code than reminding people that its tens of thousands of engineers and warehouse workers are fucking miserable. How do I know they’re miserable? Because (as the testimony below demonstrates) they’ve told every writer who’s bothered to ask for years.
Mind you, Amazon’s institutionalized sadism isn’t limited to its sweatshops. Amazon is also cruel to its office workers. The New York Times story that Gizmodo selected, based on over 100 employee interviews, included:
Bo Olson…lasted less than two years in a book marketing role and said that his enduring image was watching people weep in the office, a sight other workers described as well. “You walk out of a conference room and you’ll see a grown man covering his face,” he said. “Nearly every person I worked with, I saw cry at their desk.”
While that paragraph was the most widely quoted from that story, some reporters reacted strongly to other bits. For instance, from The Verge:
Perhaps worst of all is Amazon’s apparent approach when its employees need help. The Times has uncovered several cases where workers who were sick, grieving, or otherwise encumbered by the realities of life were pushed out of the company. A woman who had a miscarriage was told to travel on a business trip the day after both her twins were stillborn. Another woman recovering from breast cancer was given poor performance rankings and was warned that she was in danger of losing her job.
Whole Foods has a new inventory-management system aimed at making stores more efficient and cutting down on food waste. And employees say the retailer’s method of ensuring compliance is crushing morale….
Some employees, who walk through stores with managers to ensure compliance, describe the system as onerous and stress-inducing. Conversations with 27 current and recently departed Whole Foods workers, including cashiers and corporate employees – some of whom have been with the company for nearly two decades – say the system is seen by many as punitive.
They say many employees are terrified of losing their jobs under the new system and that they spend more hours mired in OTS-related paperwork than helping customers. Some are so fed up with the new system that they have quit or are looking for other jobs.
Notice the key point above, that the OTS system mires workers in tasks that reduce how much time they can spend with customers…rendering many of the requirements below counterproductive. The stress is made even worse by another Bezos-induced change, that of headcount cuts. Again from From the Business Insider account:
If anything is amiss or there is too much excess stock in storage, departments lose points on their scorecards…
The walks also involve on-the-spot quizzes, in which employees are asked to recite their departments’ sales goals, top-selling items, previous week’s sales, and other information.
Failing scores – which qualify as anything below 89.9% – can result in firings, employees said….
Employees who spoke with Business Insider said the walks have instilled fear across every department of Whole Foods’ stores.
“I wake up in the middle of the night from nightmares about maps and inventory, and when regional leadership is going to come in and see one thing wrong, and fail the team,” a supervisor at a West Coast Whole Foods said. “The stress has created such a tense working environment. Seeing someone cry at work is becoming normal.”….
“The fear of chastisement, punishment, and retribution is very real and pervasive,” another worker said.
What good is it to have perfect knowledge of where items live (as opposed to the usual “Aisle three on the left toward the rear”) if you are too frantic to stop and answer customer questions? This is the Silicon version of the classic management joke of the bus operator who is so obsessed with keeping his schedule that he can’t take the time to stop and pick up passengers.
Of course, Amazon flacks tried making the patently absurd claim that the employees were enthusiastic about the new OTS system because, among other things, it purportedly allowed them to spend more time with customers. Again from Business Insider:
“On my most recent time card, I clocked over 10 hours of overtime, sitting at a desk doing OTS work,” a supervisor at a West Coast Whole Foods said. “Rather than focusing on guest service, I’ve had team members cleaning facial-care testers and facing the shelves, so that everything looks perfect and untouched at all times.”
Some employees said recent labor cuts have made it difficult to keep up with the demands of OTS. “It’s running everyone into the ground and they absolutely hate it,” a high-level employee of a Midwest Whole Foods said…
An employee of a North Carolina Whole Foods said: “No one really knows this business model, and those who are doing the scorecards – even regional leadership – are not clear on practices and consequently are constantly providing the department leaders with inaccurate directions. All this comes at a time when labor has been reduced to an unachievable level given the requirements of the OTS model.”
Although the article doesn’t focus on quality issues, it does provide support to our thesis that the Amazon inventory management model doesn’t fit well with the grocery store requirements of availability, and for many items, freshness. For instance:
In addition to hurting morale, OTS has led to food shortages across Whole Foods stores, they say.
I go to Whole Foods rarely (we have an excellent Fairway nearby; I shop at Whole Foods only
for a particular item that Fairway does not carry). Even though the store has a terrible, I sometimes wander around out of general curiosity. I’ve noticed items not in stock and even heard customers asking about them (“I’ve been here for each of the last two days for brownies…”). And despite the PR claims about improved housekeeping, one aisle on my usual route always has clutter (ladders, stock stacked in boxes) to the degree that at least twice I’ve had to do bona fide moving and hauling to be able to get at a particular shelf.
We’d predicted that Bezos wouldn’t adapt well to the demands of fresh food…because he’s already shown to be bad at it. From a post last August, and this section discusses a scathing, recent Seattle Times review of the Amazon Fresh delivery service:
She ordered six items. Two were pretty good. The parsley, got four stars, and the asparagus, five. But the four were not good to awful, and the worst items were the most expensive.
A lousy lemon. How can you stick someone with a two star lemon? That verges on being a cosmic bad joke.
The baguette choices were frozen (ugh!) or from a local baker. But get this: there was no fresh bread option! You have to buy a shrink wrapped baguette thingie and cook it yourself, for the premium price of $5.69…
So how did this fake baguette measure up? Rating: two stars, “Very very weird!”…
Here is the piece de resistance. This is supposed to be halibut:
If you don’t buy or cook fish, the significance of this picture will be lost on you.
This is an abomination. It should have been thrown as unfit to sell at least two days prior. Fish with visible small cracks is old. This piece has a monster cracks and is dry. I’ve said before that Whole Foods has terrible “fresh” fish, so it looks as if Amazon is already down with that.
Instead of focusing Amazon’s micromanagement on things that will improve food quality, Whole Foods has lost the plot. Employees are supposed to know precisely where things are, be able to recite current promotions (pray tell why, are they supposed to be carnival barkers and call out to passing customers) and keep the shelves perfect all the time. Because most stores “level” as in tidy up their shelves and move all the items to the front only once a day, in the evening, a story with full shelves at all times creates the impression that no one every buys and the items could therefore be really old due to lack of turnover.
The article also mentions a point in passing and the authors may not have recognized its significance, that the new system also reduces the power of regional manager in buying decisions so that the stores will become more like traditional grocery stores, meaning more uniform. That means they’ve just lost me at a customer at a couple of the Whole Foods I visit when on the road, in Birmingham and Portland, Maine. The Birmingham store had a phenomenal plain grassfed milk yogurt that I’ve seen only there was phenomenal and I would go out of my way to get that. No reason to go to that Whole Foods any more. Similarly, the Maine store had some local items I liked, but between the nasty treatment of workers and the promise to have “same everywhere” stock and not support local/regional purveyors, I’ll cater to all, as opposed to some, of my health food fetish shopping at the terrific little Morning Glory store in Brunswick.
Whole Foods has the temerity to have this pitch at the top of one of the pages of its site:
Do you want your beauty routine to be cruelty-free?
Cruelty-free is a concept that has peculiarly been limited to animals not being harmed in the production and sale of goods. The time is overdue to include human-type animals.
Vegans, if you are true to your beliefs, you must never shop at Whole Foods. That should go for everyone else too. Amazon may have bought Whole Foods to engage in yet more human experiments, but there’s no reason for you to help fund them by shopping there.