• Same story, different day...........year ie more of the same fiat floods the world
  • There are no markets
  • "Spreading the ideas of freedom loving people on matters regarding high finance, politics, constructionist Constitution, and mental masturbation of all types"

R.T.M. ~ Frontrunning ~ 20th Ed., Vol.2 ~ May 16th - 20th

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#1
Frontrunning: May 16


Submitted by Tyler Durden on 05/16/2016 07:32 -0400

  • European Stocks Fall as Chinese Economic Data Disappoint (WSJ)
  • Oil Climbs to Highest Since November as European Shares Retreat (BBG)
  • Yen weakens on Japan intervention talk before G7 meets (Reuters)
  • Wall Street’s Bond Forecasters Splinter as Fed Credibility Wanes (BBG)
  • Amazon to Expand Private-Label Offerings—From Food to Diapers (WSJ)
  • Oil prices rise on Nigerian outages, Goldman forecast (Reuters)
  • 'Avengers' threaten new insurgency in Nigeria's oil-producing Delta (Reuters)
  • Amazon to Expand Private-Label Offerings—From Food to Diapers (WSJ)
  • A Battle Brews Over Negative Rates on Mortgages (WSJ)
  • Can Buffett-backed bid unlock Yahoo growth where others failed? (Reuters)
  • Top Currency Traders Warn White House Race May Echo Brexit Chaos (BBG)
  • Donald Trump Wouldn’t Have Had the Ready Cash to Self-Finance Entire Campaign (WSJ)
  • Beijing blasts Pentagon report on Chinese military as damaging trust (Reuters)
  • Central Bankers’ Wisdom Faulted as Gold Holdings Surge 25% (BBG)
  • Turkish Military’s Influence Rises Again (WSJ)
  • German politicians say Merkel left EU exposed to Turkish blackmail (Reuters)
  • Goldman Sachs emerges as growing natural gas player (FT)
  • It’s the Anti-Uber Job Market and It Still Has a Grip on America (BBG)
  • HSBC axes 850 IT jobs in Britain in first big wave of planned cuts (Reuters)
  • Bull Market Losing Biggest Ally as Buybacks Fall Most Since 2009 (BBG)
  • Professors and entrepreneurs file complaint against ECB policy (Reuters)
  • Norway’s $850bn oil fund to sue Volkswagen (FT)
  • Pfizer Agrees to Buy Anacor Pharmaceuticals for $5.2 Billion (BBG)


Overnight Media Digest

WSJ

- Amazon.com Inc is set to roll out new lines of private-label brands in the coming weeks that will include its first broad push into perishable foods, according to people familiar with the matter. (http://on.wsj.com/1VYaz5t)

- Tencent Holdings Ltd is increasing the amount of its planned bank loan to as much as $4 billion, people familiar with the matter said, as the Chinese Internet giant beefs up its war chest for potential acquisitions. (http://on.wsj.com/1TUWZwl)

- A Mississippi power plant intended as a showcase for clean-coal technology has turned into a costly mess for utility Southern Co, which is now facing an investigation by the Securities and Exchange Commission, a lawsuit from unhappy customers and a price tag that has more than doubled to $6.6 billion. (http://on.wsj.com/1VYb53y)



FT

* Norway's sovereign wealth fund, the world's largest, said on Sunday it plans to join the class-action lawsuits filed against Volkswagen AG over the German automaker's emissions scandal.

* Bank of England Governor Mark Carney denied on Sunday that he had compromised the central bank's independence by warning of the short-run costs of leaving the European Union, after criticism from "Out" campaigners.

* Bidders battling for department store BHS have been asked to sweeten their bids by Tuesday to stand a chance of buying the collapsed high street chain.



NYT

- Among those vying for Yahoo Inc is investor Warren Buffett and founder of Quicken Loans Dan Gilbert. Gilbert is leading the bid and Buffett's conglomerate, Berkshire Hathaway, is offering to provide financing. (http://nyti.ms/1NvlEYZ)

- Budweiser, which is owned by Anheuser Busch InBev SA , announced the "America Is in Your Hands" campaign last week and will use it from May 23 until after November's presidential election. It replaced the word Budweiser with "America" on can and bottle labels. (http://nyti.ms/1NvlUHv)

- App developer Rovio wants you to take out your smartphone at the movie theater. To promote the release of "The Angry Birds Movie", Rovio is offering bonus content for its newest mobile game, Angry Birds Action, to those who open the app while in the theater. (http://nyti.ms/1NvlXmS)



Canada

THE GLOBE AND MAIL

** The Ontario government will spend more than C$7 billion ($5.42 billion) over four years on a sweeping climate change plan in a bid to cut the province's carbon footprint. (http://bit.ly/1YuLey1)

** Canada's home prices climbed 1.2 percent last month, marking the largest month-over-month increase for April since 2008. There was a monthly jump of 2.2 percent in Vancouver and 1.4 percent in Toronto. (http://bit.ly/1ZWpn2N)

NATIONAL POST

** The lone surviving Canadian hostage Robert Hall in the southern Philippines has appeared in a new video, announcing that his captor Muslim extremist group Abu Sayyaf will decapitate him and a Norwegian man next month if they do not receive C$16 million in ransom first.(http://bit.ly/1Nvsuha)



Britain

The Times

* Goldman Sachs Group has been ordered by a British parliamentary inquiry to account for its role in Philip Green's disastrous 1 pound sale of BHS. (http://bit.ly/1Tcmz31)

* The Competition & Markets Authority is expected to demand this week that banks fund a price-comparison service to help customers find cheaper overdrafts and loans as part of a crackdown on the big four lenders. (http://bit.ly/1TcmxYS)

The Guardian

* Royal Shell PLC, Europe's largest oil company, has established a separate division, New Energies, to invest in renewable and low-carbon power. (http://bit.ly/1TcmwnF)

* London airport Heathrow's bosses will stand to gain from bonus payouts if the airport gets permission to build a 17.6 billion pound third runway, it has emerged. (http://bit.ly/1TcmE6N)

The Telegraph

* Premier Foods boss Gavin Darby will this week be hoping that a return to profit and more details of a noodle partnership will be enough to soothe shareholders' fury over his handling of McCormick's takeover attempt. (http://bit.ly/1TQzjGD)

* O2 chief executive Ronan Dunne is exploring a debt-fuelled 8.5 billion pound management buyout attempt following the collapse of CK Hutchison's takeover bid for the mobile operator, according to The Telegraph. (http://bit.ly/1TUGFvn)

Sky News

* The former Conservative Party treasurer Michael Spencer will announce on Monday that ICAP, the interdealer broking group he founded 30 years ago, is to be renamed NEX Group. (http://bit.ly/1TcmIn5)

* The Pension Protection Fund and KKR have been shortlisted to buy the UK's state-owned Green Investment Bank, according to Sky News. (http://bit.ly/1TcmLPC)

The Independent

* UK's Prime Minister David Cameron is struggling to convince voters he is telling the truth about why Britain should stay in the European Union and his main "Out" rival Boris Johnson is doing a better job, according to a ComRes poll for The Independent. (http://ind.pn/1Tcn2SC)

http://www.zerohedge.com/news/2016-05-16/frontrunning-may-16
 

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#2
Futures Flat Despite China Scare As Oil Rebounds Over $47


Submitted by Tyler Durden on 05/16/2016 06:42 -0400

The main risk over the weekend was that markets, which have now dropped for three consecutive weeks the longest negative streak since January, would focus their attention on the latest batch of negative Chinese economic news released over the weekend, which missed expectations across the board, most prominently in Retail Sales (10.1% vs. Exp. 10.6%, down from 10.5%) and Industrial Production (6.0% vs. Exp. 6.5% down from 6.8%), and following Friday's disappointing new credit loan data, would sell off as the Chinese slowdown once again becomes a dominant concern. However, after some initial weakness, the risks were all but gone when first the USDJPY jumped on another round of deflationary Japanese economic data (PPI Services -4.2%, Exp. -3.7%) which led to renewed hopes of more BOJ easing and a jump in the USDJPY and thus US futures.

Shortly thereafter a bearish report on oil by Goldman was misreported as bullish on oil prices (Goldman explicitly stated that the global rebalancing is taking longer than expected, but recent supply disruptions have taken off more oil from the market than expected, as a result of which Goldman cut its 2017 forecast prices while pushing up near-term expectations, a move that will also assure that 2017 prices are lower as more near-term production comes online.



With few upside anchors, traders and analysts quickly focused on oil as the driver of risk on strength: "The firmer oil price is helping emerging-market equities today despite the weaker China data over the weekend," said Michael Wang, a strategist at hedge fund Amiya Capital LLP. "Oil is being driven by what’s happening in Nigeria at the moment - that’s changed sentiment towards Brent and has brought an expected recovery forward,” said John Meyer, an analyst at broker SP Angel Corporate Finance LLP in London. “Rising oil prices tend to support the commodities complex.”

As a result of the confusion, Brent rose to a six-month high, leading a rebound in commodities and boosting the ruble and mining companies, as supply disruptions in Nigeria added to production woes, while WTI was trading above $47 for the first time since November. Precious metals rallied with aluminum and commodity producers climbed, while almost all of the other industry groups in the Stoxx Europe 600 Index fell. Irish bonds advanced, outperforming their euro-area peers, while the Polish zloty strengthened after favorable reports from Moody’s Investors Service. Asian stocks rose from a one-month low.



And so, after last week's US market losses and renewed recession concerns, the selloff was halted courtesy of the pickup in raw-materials prices which, as Bloomberg wrote, provides support for global equities after about $1.8 trillion was wiped off the value of the securities in the first two weeks of May amid weaker economic data and disappointing earnings reports.

"Concerns over the strength of the global economy are back on investors’ minds," said Jasper Lawler, a London-based analyst at CMC Markets Plc. "The resources and oil sectors have been outperforming since the February low and both of them are performing OK today. But they need to continue to outperform for us to have a sustained rally."

Elsewhere, China’s central bank issued a weekend statement saying monetary policy would continue to support growth, after data on new lending, retail sales, industrial production and fixed-asset investment missed economists’ estimates. A Friday report showing a jump in American retail sales bolstered the case for the Federal Reserve to raise interest rates.

Across global stock markets, the Stoxx Europe 600 Index declined 0.4 percent, falling for a third time in four days. German and Swiss markets were among those shut for the Whit Monday holiday, and volume of shares changing hands was about 45 percent lower than the 30-day average. Almost all industry groups in the Stoxx Europe 600 Index dropped after Chinese reports on new lending, retail sales, industrial production and fixed-asset investment missed economists’ estimates. The volume of Stoxx 600 shares changing hands was 44 percent lower than the 30-day average as German and Swiss markets were among those shut for a holiday

The MSCI Emerging Markets Index added 0.2 percent after falling as much as 0.4 percent. Benchmark gauges in Russia, Poland, South Africa and the Philippines climbed at least 0.9 percent. Shenzhen and Hong Kong stocks climbed amid speculation the start date of an exchange trading link between the two cities will be announced this week.

Futures on the S&P 500 Index expiring next month added 0.1% after the gauge completed a third weekly decline, its longest streak since January. Announced stock buybacks dropped 38 percent to $244 billion in the last four months, the biggest decline since 2009, data compiled by Birinyi Associates and Bloomberg show. Is the buyback spree officially coming to an end?

Global Market Snapshot

  • S&P 500 futures up less than 0.1% to 2045
  • Stoxx 600 down 0.4% to 333
  • FTSE 100 down 0.3% to 6121
  • S&P GSCI Index up 0.9% to 364.9
  • MSCI Asia Pacific up 0.4% to 126
  • Nikkei 225 up 0.3% to 16466
  • Hang Seng up 0.8% to 19884
  • Shanghai Composite up 0.8% to 2851
  • S&P/ASX 200 up 0.6% to 5359
  • US 10-yr yield up 1bp to 1.71%
  • German 10Yr yield down less than 1bp to 0.12%
  • Italian 10Yr yield up less than 1bp to 1.48%
  • Spanish 10Yr yieldunchanged at 1.6%
  • Dollar Index up 0.02% to 94.63
  • WTI Crude futures up 2% to $47.13
  • Brent Futures up 1.9% to $48.74
  • Gold spot up 0.7% to $1,282
  • Silver spot up 1.2% to $17.32
Top Overnight News

  • Konecranes Soars After Deal to Buy $1.3 Billion Terex Unit
  • Uber China Rival Didi Said to Consider U.S. IPO in 2017
  • Oil Climbs to Highest Since November as European Shares Retreat
  • Fed May Push Back Rate Hike With Brexit, U.S. Election: Pimco
  • Lawsuits Mount as Energy Transfer’s Williams Takeover Unravels
  • Saudi Arabia, Bahrain Ratings Cut by Moody’s on Lower Oil Prices
Looking at the overnight regional markets, Asia shrugged off the early cautious tone from Friday's losses on Wall Street and poor Chinese data over the weekend, with Nikkei 225 (+0.3%) initially outperforming on reports that PM Abe will postpone the April 2017 sales tax hike despite Chief Cabinet Secretary Suga later denying these claims. Japanese exporters were also bolstered by JPY weakness amid increased hopes for BoJ action after declining PPI figures, however the Nikkei pared gains as JPY reclaimed some ground against the USD. ASX 200 (+0.6%) was led higher by the health care sector after PM Turnbull announced a resolution to the funding dispute with pathologists. Shanghai Comp (+0.8%) was in positive territory Industrial Production, Retail Sales & lending figures missing expectations as the data increases hopes for future measures. 10yr JGBs saw subdued trade with prices in mildly negative territory amid the risk-on sentiment in Japan with participants side-lined ahead of this week's key Japanese GDP data and the upcoming 5yr/20yr bond auctions.

Top Asian News

  • China Slowdown Shows Debt Addiction Will Be Tough to Shake: Industrial output, retail, investment all missed estimates
  • Singapore Home Sales Fall as Mortgage Curbs Cool Housing Demand: Developers sold 745 units last month versus 843 in March
  • Bank of Singapore Sees Asia Rich Shift to Paying Fees for Advice: Wealth managers to rely less on transaction-based fees
  • Thailand’s Economy Expands More Than Expected in First Quarter: 1Q GDP Expands 3.2% y/y vs est. +2.8%
  • Emerging Currencies at March Low on Rallying Dollar, Weak China: S. Korean won leads decline followed by Malaysia’s ringgit
  • Bonds Trounce Stocks as Aussie Yield Latest to Drop to a Record: Australian 10-year bond yield drops to record 2.22%
  • Uber China Rival Didi Said to Consider U.S. IPO in 2017: Didi said to raise $3 billion in current round of funding
  • Konecranes Buys Terex Unit for $1.3 Billion After Merger Dropped: Zoomlion interested in buying remaining Terex business
In Europe, the week has kicked off in a subdued fashion in terms of both newsflow and volumes with much of Europe away for Whit Monday. The European equity indices that are open this morning (with the likes of DAX and SMI closed) have spent the morning in the red, weighed on by the downside seen in the US on Friday, combined with the miss on Exp. seen from Chinese data over the weekend Despite the negative trade seen in much of Europe, the energy and materials sectors trade in the green, with the former benefitting from the upside seen in WTI and Brent. Fixed income markets have also been impacted by low liquidity, with Bunds relatively unchanged on the day. However, today has seen the long end underperforming, with the steepening in the yield curve attributed by some to the upside seen in oil.

Top European News

  • Philips Lighting IPO Could Raise as Much as $1.1 Billion: To sell stock at EU18.50-EU22.50 a share, values business at as much as EU3.38b, expected to start trading May 27
  • Telecom Italia Raises Cost-Cut Target to $1.8 Billion by 2018: Almost tripled its target for reducing expenses to EU1.6b by 2018; cuts will include EU800m in operating costs and EU800m in capital spending
  • Lonmin Turns Cash-Positive as Cost Cuts Meet Higher Platinum: Net cash was $114m at March 31, compared with net debt of $185m at Sept. 30; has cut 5,400 jobs to stay alive
  • ICAP to Become NEX Group to Begin Life After Voice Broking: Will be called NEX once it completes the sale of its voice- broking business to Tullett Prebon, transforming itself into a specialist in electronic markets and post-trade services.
  • Carney Defying Brexit Critics Sees U.K. in Early 1990s Quandary: Defended the Bank of England against critics furious at his warnings about the dangers posed by a European Union exit; British Business Sees Brexit Effect as Growth Forecasts Cut
In FX it is a very quiet start to the week, with plenty of data ahead. The Bloomberg Dollar Spot Index held near its highest close since March as the greenback gained 0.3 percent versus the Japanese yen. U.S. retail sales climbed in April by the most in 13 months and a gauge of consumer confidence surged in early May to an almost one-year high, reports showed Friday. Perhaps due to market holidays in Europe, both Asia and early London have seen some extremely range bound trade in the FX majors, but the fact that we have seen limited follow through from the strong US retail sales number on Friday suggests the USD may be in for some consolidation ahead of the FOMC minutes on Wednesday.

AUD/USD has found a base in the mid .7200's ahead of the RBA minutes in the overnight session ahead, but USD/CAD has seen limited downside despite WTI piercing $47.0. EUR/USD lows under 1.1300 have held in today's session so far, as has the Cable zone from 1.4350-20, though we did eat into this a little either side of the weekend. EUR/GBP is threatening to push higher though, but this is more likely to send EUR/USD higher again rather than Cable lower in the current climate. USD/JPY is a trade many are staying away from given the erratic risk sentiment in the market. The mid 108.00's holding for now, but the quest for 110.00 held off as equities struggle.

In Commodities, Brent rose 1.8 percent to $48.70 a barrel at 10:48 a.m. in London, reaching the highest since November, after Friday’s 0.5 percent loss. China’s refineries processed crude at record rates in April, helping ease a supply glut as the number of active rigs in the U.S. declines. West Texas Intermediate climbed 1.8 percent to $47.06. Goldman Sachs raised its oil-price forecast for the second half to $50, from a March estimate of $45.

Aluminum rose 0.3 percent in London after weekend data showed China’s primary output of the metal slipped 1.2 percent in April from a year earlier. Gold added 0.6 percent after data showed holdings in exchange-traded funds increased to the highest since 2013. Silver gained 1.1 percent. Platinum gained 0.3 percent to $1,054.92 an ounce as the industry gathered in London for the annual Platinum Week meeting. The metal may climb 20 percent by the end of next year, according to a Bloomberg survey of 12 traders and analysts.

It’s a particularly quiet start to the week today with no data of note due out of Europe and just Empire manufacturing and the NAHB housing market index of note in the US session this afternoon.

Overnight Media Digest from Bloomberg and RanSquawk

  • European market closures for Whit Monday have led to subdued trade in the region with equities lower in what has been a relatively quiet session
  • WTI crude futures have reclaimed USD 47.00 while Brent eyes USD 49.00 alongside GS backtracking on some of their bearish oil calls
  • Looking ahead, highlights include US Empire Manufacturing Data and Fed's Kashkari (Non Voter, No Stance)
  • Treasuries slip during overnight trading, led by 2Y, with rise in Asian equities amid report Japanese Prime Minister Abe will postpone a 2 percentage point increase in the sales tax and Chinese data missed estimates, creating the possibility of more stimulus.
  • China’s run of disappointing April data underscore the bind facing policy makers seeking to cut capacity from the worst- performing sectors and curb credit excesses in recovering ones without stalling the economy
  • A sudden plunge by Chinese stocks in Hong Kong had traders scrambling to find a trigger for the slump that coincided with a surge in futures volumes.
  • Holdings in gold exchange-traded funds have now surged by a quarter, with investors taking advantage of lower prices over the past two weeks to enlarge stakes on rising concern about central bank policy making worldwide
  • Investors are fleeing and volumes are falling due to extreme valuations amid global uncertainties related to monetary policy and political decisions made in wake of the 2007-2009 financial crisis. It’s a flight that’s creating a negative feedback loop
  • Swedish hedge fund Informed Portfolio Management is disregarding risks from a potential Brexit and political turmoil from Brazil to South Africa, instead using an approach of looking at fundamentals and placing narrow bets on how assets perform against each other
  • Mark Carney defended the Bank of England against critics furious at his warnings about the dangers posed by a European Union exit, and described the British economy as facing similar uncertainty to the early 1990s.
  • Sovereign 10Y yields mixed; Asian equities higher while European stocks mostly lower; U.S. equity-index futures higher. WTI crude oil and precious metals rise
US Event Calendar

  • 8:30am: Empire State Mfg, May, est. 6.50 (prior 9.56)
  • 10am: NAHB Housing Market Index, May, est. 59 (prior 58)
  • 4pm: Total Net TIC Flows, March (prior $33.5b)
  • 7pm: Fed’s Kashkari speaks in Minneapolis
DB's Jim reid concludes the overnight wrap

China will dominate the headlines for different reasons this morning after a soft monthly batch of data released over the weekend. Industrial production grew +6.0% yoy in April (vs. +6.5% expected) and +5.8% ytd (vs. +6.8% yoy in March and +5.8% in Jan-March). Growth of fixed asset investment edged down from +10.7% for Jan-March to +10.5% (vs. +11.0% expected) for Jan-April, with implied monthly growth slowing from +11.2% yoy in March to +10.1%. Nominal growth of retail sales also dropped to +10.1% yoy (vs. +10.6% expected), from +10.5% in March and +10.2% in Jan-Feb.

The property market remained firm though and DB's Zhiwei Zhang suggests that Q2 growth could still be stronger than Q1 as funds available for investment continued to improve. However net-net (adding in the weak M2 number from Friday), our economists think the risks to their 7% Q2 forecast is to the downside partly because the authorities seems to be shifting from aggressive easing to neutral earlier than expected. Their forecasts for Q3 and Q4 remain at 6.6% and 6.4% respectively.

Markets this morning initially opened a touch weaker in China, but have since bounced back along with other bourses in Asia having been supported by a decent rebound in Oil. Indeed the Shanghai Comp is currently +0.23% after initially falling as much as -0.80%, while elsewhere the Nikkei (+1.33%), Hang Seng (+1.22%), Kospi (+0.10%) and ASX (+0.54%) are also up. Stocks in Japan (Nikkei) are also being helped by a report suggesting that Japan’s government might be considering a delay in the sales tax hike. Meanwhile credit markets are a bit more mixed, while WTI has rallied +1.34% and more than wiped out Friday’s loss to hover just south of $47/bbl. There’s been little in the way of data this morning although it is worth highlighting some rating action from the weekend when Moody’s downgraded a number of Gulf nations including Saudi Arabia (by one notch to A1), in light of lower oil prices.

Moving along. Last week saw markets finish on a somewhat mixed note on Friday. European equities had initially closed with some modest gains (Stoxx +0.47%) which was enough to see the majority of bourses end with a positive return week. That said a bounce for the US Dollar (Dollar index +0.49%) following the much better than expected retail sales data weighed on assets in the US. The S&P 500 eventually closed -0.85% and as a result finished with three consecutive daily declines to take in into negative territory (-0.51%) over the five days.

There was a fair bit of focus going into that retail sales data given some of the soft department store earnings from earlier in the week, so it came as a bit of a surprise to see headline sales print at +1.3% mom for April, a big gap over the +0.8% consensus. All of the other component groups beat as well. Ex autos printed at +0.8% mom (vs. +0.5% expected), ex auto and gas at +0.6% mom (vs. +0.3% expected) and the control group an impressive +0.9% mom (vs. +0.4% expected). The surge in headline sales was actually the most in a single month in 13 months (and included upward prior month revisions) with auto sales a big contributor to the surge, although in fairness the vast majority of categories did report growth.
In terms of how markets responded, that data kick-started the rally for the Dollar while US 2y Treasury yields also marched higher, at one stage touching 0.784% (and 4bps off the lows) before giving up that move into the close to finish close to unchanged on the day at 0.746%. 10y yields, while also temporarily moving higher, actually closed 5.2bps lower at 1.701% meaning the yield curve had interestingly bull flattened by the end of the day. Meanwhile, the odds of a June rate hike ended the day unchanged at 4% based on futures pricing (did get up to 6% at one stage) with a July hike currently at 17% which is also unchanged relative to prior to the data. Those moves also came despite comments from the Fed’s Williams who said that 2-3 rate hikes this year may still make some sense. That said the data did, however, help to lift the Atlanta Fed’s Q2 GDP forecast up to 2.8% from 2.2%, although in contrast the NY Fed’s Q2 GDP forecast is sitting at a much lower 1.2% (from 0.8%).

That wasn’t the only other data out on Friday however. There were also some positive signs to take from the provisional May reading for the University of Michigan consumer sentiment data. The headline index rose an impressive 6.8pts to 95.8 (vs. 89.5 expected) which is the highest level since June last year. The expectations component was actually up 9.9pts at 87.5 (vs. 78.0 expected) while the current conditions component rose 1.9pts to 108.6 (vs. 106.0 expected). That said the data did show a decline in 1y inflation expectations to the tune of three-tenths to 2.5%, although 5-10y inflation expectations nudged up one-tenth to 2.6%. Elsewhere, headline PPI came in a touch lower than expected at +0.2% mom (vs. +0.3% expected) with the core up +0.1% mom as expected. Finally business inventories rose a greater than expected +0.4% mom in March (vs. +0.2% expected).

Prior to this in Europe it was all about the GDP reports. Regionally we saw Germany print a slightly better than expected +0.7% qoq for Q1 (vs. +0.6% expected) with YoY growth now slated at +1.3%. Italy’s Q1 GDP growth came in in-line at +0.3% qoq although the reading for the wider Euro area was revised down a modest one-tenth to +0.5% qoq (in actual fact from 0.55% to 0.52%), with Spain producing the fastest rate of growth (+0.8% qoq) of the core countries.

Last week was a bumper one for new issuance in credit markets. Indeed over the five days last week just over €21bn of corporate issuance was priced in the European market across 30 tranches. Adding in a further €8bn of financials and just over €12bn of SSA issuance meant the €42bn of issuance was the fourth busiest week this year. This week looks set to be a tad lighter in Europe but the forecast range is still €8bn-€12bn. It was much the same in the USD market too where some $50bn was priced. With a bumper deal from Dell already announced and expected to price this week, it’s expected to be another busy week. While we’re with credit, a reminder that we published a Credit Bites at the back end of the week on whether there is now a resistance at zero yields for corporate bonds in Europe.

It’s a particularly quiet start to the week today with no data of note due out of Europe and just Empire manufacturing and the NAHB housing market index of note in the US session this afternoon. In terms of the Fedspeak this week we’ve got Kashkari scheduled to speak late this evening. Earnings season draws pretty much to a conclusion with just 23 S&P 500 companies set to report with some of the retailers the bigger interest including Target, Home Depot, Lowe’s, Wal-Mart and Staples. In Europe we’ll hear form 27 Stoxx 600 companies including Vodafone and Merck.

http://www.zerohedge.com/news/2016-05-16/futures-flat-despite-china-scare-oil-rebounds-over-47
 

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RANsquawk Week Ahead Preview - 16th May 2016
RAN squawk

 

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Key US Macro Events In The Coming Week


Submitted by Tyler Durden on 05/16/2016 09:08 -0400


After last week's key event, the retail sales number, which the market discounted as being too unrealistic (and overly seasonally adjusted) after printing at a 13 month high and attempting to refute the reality observed by countless retailers, this week has a quiet start today with no data of note due out of Europe and just Empire manufacturing (which moments ago missed badly) and the NAHB housing market index of note in the US session this morning.

In Asia tomorrow the RBA meeting minutes may be of interest given the cut earlier this month, while Japan will also release industrial production data for May. In Europe we’ll get the April inflation docket for the UK (CPI/RPI/PPI) where headline consumer price inflation is expected to have risen +0.3% mom. We’ll also get the Euro area trade balance while in the US it’s a big day for data on Tuesday with April CPI (+0.4% mom headline expected, +0.2% mom at the core), housing starts and building permits as well as industrial and manufacturing production.

Moving to Wednesday, the big overnight data is the Q1 GDP report out of Japan, while later on in the morning we will get April property prices data for China. In Europe on Wednesday the main focus is on the Euro area CPI report (0.0% mom headline expected) while in the UK the latest employment report is due out. There’s no data out in the US on Wednesday but we will get the FOMC minutes from the April meeting.

Thursday’s focus in the morning is on the UK again where the April retail sales print is due, before we then get the ECB minutes around lunchtime which will be of interest. Datawise in the US on Thursday we’ve got the Chicago Fed national activity index, Philly Fed PMI, initial jobless claims and the Conference Board’s leading indicators.

It’s a quiet end to the week on Friday. In Europe the only data of note is the German PPI reading, while in the US existing home sales data is due out.

In terms of the Fedspeak this week we’ve got Kashkari scheduled to speak late this evening, followed by Williams, Lockhart and Kaplan tomorrow evening and Dudley on Thursday. Over at the ECB we will hear from Praet, Nouy and Costa all tomorrow. Finally, earnings season draws pretty much to a conclusion with just 23 S&P 500 companies set to report with some of the retailers the bigger interest including Target, Home Depot, Lowe’s, Wal-Mart and Staples. In Europe we’ll hear form 27 Stoxx 600 companies including Vodafone and Merck.

* * *

A complete breakdown of just the US via Goldman:

Monday, May 16

  • 08:30 AM Empire Manufacturing, May (consensus +6.5, last +9.6) - Consensus expects a slight correction in the Empire Manufacturing survey, which jumped in March and April. The stabilization of most manufacturing surveys in April after the rebound in March from depressed levels suggests that US manufacturing has turned a corner and is now expanding at a moderate pace.
  • 10:00 AM NAHB Housing Market Index, April (consensus 59, last 58) - The NAHB homebuilders’ index—which we have found to be a decent leading indicator of housing starts—has been flat for the last 3 months, but remains near its post-crisis highs.
  • 7:00 PM Minneapolis Fed President Kashkari (FOMC non-voter) speaks - Federal Reserve Bank of Minneapolis President Neel Kashkari will be hosting a town hall meeting about the banking sector and financial stability at the University of Minnesota. Recently, President Kashkari has suggested the Fed is unlikely to aggressively raise interest rates.
Tuesday, May 17

  • 08:30 AM CPI (mom), April (GS +0.33%, consensus +0.3%, last +0.1%); Core CPI (mom), April (GS +0.13%, consensus +0.2%, last +0.1%); CPI (yoy), April (GS +1.1%, consensus +1.1%, last +0.9%); Core CPI (yoy), April (GS +2.1%, consensus +2.1%, last +2.2%) - We expect that core CPI rose by 0.13% in April, following a smaller than expected 0.07% gain in March. Airline fares are likely to decline sharply in the April print, in part due to seasonal adjustment challenges. On a year-on-year basis, core CPI likely rose by 2.1%. We estimate headline consumer prices rose by 0.33% last month as retail gasoline prices moved higher. On a year-on-year basis the headline index likely increased by 1.1%.
  • 08:30 AM Housing starts, April (GS +3.3%, consensus +3.3%, last -8.8%); Building permits, April (consensus +5.5%, last -8.6%) - We expect that housing starts rose by 3.3% in April following an 8.8% decline in March. Starts and permits softened in Q1 and point to an annualized construction rate of 1,150k. Our credit strategy analysts point out that the construction slowdown in oil-producing regions may be playing an important role.
  • 9:15 AM Industrial production, April (GS +0.4%, consensus +0.3%, last -0.6%); Manufacturing production, April (GS +0.4%, consensus +0.3%, last -0.3%); Capacity utilization, April (GS 75.0%, consensus 75.0%, last 74.8%) - We expect that industrial production increased by +0.4% in April. IP has been soft of late, mostly due to low utilities demand in a warmer than usual winter. We expect the manufacturing recovery to continue.
  • 12:00 PM San Francisco Fed President John Williams (FOMC non-voter) and Atlanta Fed President Dennis Lockhart (FOMC non-voter) Speak -
  • San Francisco Fed President John Williams and Atlanta Fed President Dennis Lockhart will discuss the future of the US economy at a Politico event in Washington, D.C. Last week, President Williams said that two to three rate increases this year still make sense. Two weeks ago, President Lockhart said that the possibility of a June rate hike should be kept open.
  • 1:15 PM Dallas Fed President Kaplan (FOMC non-voter) speaks - Federal Reserve Bank of Dallas President Robert Kaplan will speak at a moderated Q&A session followed by media availability at a community forum hosted by the Dallas Fed in Midland, Texas. Two weeks ago, President Kaplan said that he would advocate further rate hikes in June or July if the second-quarter data, especially consumer spending, are stronger and if continued progress is made on the dual mandate.
Wednesday, May 18

  • 02:00 PM Minutes from the April 26-27 FOMC meeting - The April FOMC meeting statement indicated less concern about financial market volatility and weakness in global growth, and left open the possibility of a rate hike in June. In the minutes, we will be watching for (1) any additional signs that the committee has seen a meaningful decline in risks from global economic and financial developments, (2) further hints on the interpretation of the omission of the balance of risks, and (3) any views regarding the outlook for core inflation.
Thursday, May 19

  • 08:30 AM Initial jobless claims, week ended May 14 (consensus 275k, last 294k); Continuing jobless claims, week ended May 7 (consensus 2,165k, last 2,161k) - Consensus expects initial jobless claims to edge down to 275k. Initial claims moved up last week, although we suspect that nearly all of the increase was attributable to seasonal distortions specific to New York State.
  • 08:30 AM Philadelphia Fed manufacturing index, May (GS +3.0, consensus +3.0, last -1.6) - We expect the Philly Fed manufacturing index to edge up after a significant decline last month.
  • 10:30 AM New York Fed President Dudley (FOMC voter) speaks - Federal Reserve Bank of New York President William Dudley will deliver remarks on macroeconomic trends at a New York Fed event followed by a Q&A session.
Friday, May 20

  • 10:00 AM Existing Home Sales, April (consensus +1.3%, last +5.1%)- April existing home sales probably increased slightly, according to the consensus view. Existing home sales are an input into the brokers' commissions component of residential investment in the GDP report.
* * *

Finally, a handy summary of key events from BofA:



Source: DB, Goldman, BofA

http://www.zerohedge.com/news/2016-05-16/key-us-macro-events-coming-week
 

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#9

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#12
DOLLAR COLLAPSE - MOST ARE UNPREPARED | Jim Willie (Part 4)
FinanceAndLiberty.com


Published on May 16, 2016
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#13
Frontrunning: May 17


Submitted by Tyler Durden on 05/17/2016 07:39 -0400

  • As Brexit vote looms, U.S. banks review their European commitments (Reuters)
  • Oil’s Strength Continues to Boost Global Stocks (WSJ)
  • Trump closing gap with Clinton, poll shows (Hill)
  • In Adjacent Pennsylvania Counties, Republicans Are Split on Donald Trump (WSJ)
  • Make America Gold Again: Calls for Everyone's Favorite Standard Are Back (BBG)
  • SEC, Treasury Push for Centralized Reporting of Treasurys Trades (WSJ)
  • Venezuela protesters fear Maduro will cling on at all costs (FT)
  • Alphabet Unveils Program for Carpooling Via App Waze, Fraying Ties With Uber (WSJ)
  • EU's Tusk calls Brexit advocate Boris Johnson's Hitler comments 'absurd' (Reuters)
  • Placid VIX Tells Little of Volatility Story as Futures Take Off (BBG)
  • Greece wants Eurogroup to focus on short-term, medium term debt relief on May 24 (Reuters)
  • New From Credit Suisse: Bonds for Self-Inflicted Catastrophes (WSJ)
  • Middle East Luxury Sales Fading as Oil Falls and Tourism Slows (BBG)
  • Hedge Funds Abandon Ex-Darling Valeant and Other 13F Highlights (BBG)
  • New police force finds old habits die hard in Ukraine (Reuters)
  • Apple CEO Tim Cook Visiting India, an Important Growth Market (BBG)
  • Russian Finance Minister sees 2016 budget deficit at 3 percent with oil at $40 per barrel (Reuters)
  • New York’s LaGuardia, Long in Tatters, Borrows Big for Facelift (BBG)
  • Shadow Banks Make Diciest Loans While Wall Street Retains Risk (BBG)


Overnight Media Digest

WSJ

- Warren Buffett's Berkshire Hathaway Inc disclosed Monday that it had made a $1 billion bet on Apple Inc stock earlier this year, boosting the iPhone maker's market value by more than $18 billion.(http://on.wsj.com/1TWLAMh)

- The Supreme Court, unable to resolve the dispute between religious employers and the Obama administration over contraception coverage in the government's health-care law, sent the matter back to lower courts to seek a compromise between the parties.(http://on.wsj.com/1TWLyUK)

- Facebook Inc is now selling video ads on behalf of other companies, a move that could prove lucrative for the technology giant and intensify its competition with Alphabet Inc. subsidiary Google and other online ad specialists. (http://on.wsj.com/1TWLEff)

- Phone book publisher Dex Media Inc filed for chapter 11 bankruptcy protection Monday evening after reaching a restructuring deal with creditors. (http://on.wsj.com/1TWLJPW)



FT

* World powers including the United States are ready to consider demands from Libya's new unity government for exemptions from a U.N. arms embargo to help take control of the lawless country, U.S. Secretary of State John Kerry said on Monday.

* Deutsche Bank AG has hired Thomas Piquemal, former senior executive vice president for finance at French utility company EDF Group , to head its global mergers and acquisitions practice.

* Warren Buffett's Berkshire Hathaway Inc revealed a more than $1 billion stake in Apple Inc in a rare foray into the technology sector.



NYT

- Chinese authorities are quietly scrutinizing technology products sold in China by Apple Inc and other big foreign companies, focusing on whether they pose potential security threats to the country and its consumers and opening up a new front in an already tense relationship with Washington over digital security. (http://nyti.ms/1TFHHsF)

- Lending Club, which serves as an online matchmaker between small-business borrowers and individual and institutional lenders, said it had received a subpoena from the Justice Department. (http://nyti.ms/1TFHEgn)

- Twitter Inc announced that Debra Lee, chairman and chief executive of BET Networks, was joining its board. As part of the announcement, Twitter also said a board member, Marjorie Scardino, would become the company's lead independent director. (http://nyti.ms/1TFIBp1)



Canada

THE GLOBE AND MAIL

** Alberta has put major oil sands facilities and camps under a mandatory evacuation order as the wildfire that consumed part of Fort McMurray remains out of control. All work camps and facilities north of Fort McMurray and south of Fort McKay are affected by the order issued late Monday.(http://bit.ly/1qqaVE0)

** Ontario's energy and auto industries have expressed surprise over the province's ambitious plan to slash greenhouse gases. They warned that the plan, if imposed, would drive up home heating costs for homeowners, and that automakers would not make enough electric cars to meet its targets.(http://bit.ly/1TdHjHq)

** Toronto housing developer Urbancorp is pushing ahead with a restructuring under creditor protection, saying it owes millions to major banks, home buyers and investors in Israel even as its projects require "tens of millions" more to complete. (http://bit.ly/1TX1Xsk)

NATIONAL POST

** Telecommunications behemoth AT&T Inc announced that it plans to buy Toronto-based video streaming platform Quickplay Media Inc, a company that enables consumers to watch TV and video on any mobile device.(http://bit.ly/1TdHXoz)

** The Ontario government is once again drafting major policies in "back rooms", the opposition is charging after the reported leak of a C$7 billion($5.4 billion) climate-change plan to be released later this spring. (http://bit.ly/1Tkjgoq)



Britain

The Times

Six weeks after the collapse of a $160 billion merger with Allergan, Pfizer has made a recommended bid for Anacor Pharmaceuticals worth $99.25 a share, saying that it would be a "strong fit" with its inflammation and immunology portfolio. (http://bit.ly/22e7vCh)

The Guardian

The global community is badly prepared for a rapid increase in climate change-related natural disasters that by 2050 will put 1.3 billion people at risk, according to the World Bank. (http://bit.ly/1Thb4lB)

Stephen Bubb has announced he will be stepping down as chief executive of Acevo (Association of Chief Executives of Voluntary Organisations) after 15 years in June to head up the Charity Futures Programme. (http://bit.ly/1st6zxS)

The Telegraph

House prices could crash by 25 percent and the pound could drop by a third if the UK leaves the EU, according to Fitch, which warned that social tensions risked boiling over even if Britain stays in the bloc. (http://bit.ly/1TjeEPn)

Warren Buffett has bought more than $1 billion (700 million euros) of Apple Inc stock with shares in the company falling to their lowest level for two years. (http://bit.ly/1XvEul0)

Sky News

South Korea's Environment Ministry has said that it will fine Nissan's South Korean operation for allegedly manipulating emissions tests on its Qashqai cars, which were made in Sunderland. (http://bit.ly/1TktLHe)

HSBC is to move 840 UK jobs abroad as part of a major cost-cutting plan and has told staff that it is moving the IT roles to sites in India, China and Poland by the end of March next year. (http://bit.ly/1WB2t3w)

The Independent

Warren Buffett's Berkshire Hathaway Inc disclosed a stake in Apple Inc, betting that the technology company will rebound after a slump driven by a slowdown in iPhone sales. (http://ind.pn/1VZbq5Q)

Google could be hit with a fine as high as 3 billion euros from the European Commission in the coming weeks related to an investigation of the company's alleged abuse of its dominance in the online search market, according to reports. (http://ind.pn/1OydsYf)

http://www.zerohedge.com/news/2016-05-17/frontrunning-may-17
 

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#14
Futures Fizzle After Oil Fades Bounce Above $48


Submitted by Tyler Durden on 05/17/2016 06:48 -0400

It has been more of the same overnight, as global stocks piggybacked on the strong US close and rose despite the lack of good (or bad) macro news, propelled higher by the two usual suspects: a higher USDJPY and a even higher oil, if mostly early on in the trading session.

Yes, the oil squeeze higher continues, and as the charts below courtesy of Andy Critchlow show, Brent is now 82% higher in the past 82 days...





... while crude has had its strongest rally since 2010.





However, after rising above $48 for the first time since October, crude finally pulled back modestly and was unchanged at last check while Brent was modestly in the red. This led to equities paring much of their overnight advance. In FX, in addition to the abovementioned spike in the USDJPY now well in the mid-109.50s, the other prominent mover was Australia’s dollar which advanced after central bank officials suggested authorities will hold off on cutting interest rates.

The Stoxx Europe 600 Index was still set for its third day of gains also following the crude jump above $48 a barrel. The British pound climbed by the most in four weeks as a poll indicated support is growing in the U.K. for the country to remain in the European Union. Investors got a reminder of the challenges facing central banks as a report showed U.K. consumer-price growth unexpectedly slowed in April. U.S. data on Tuesday are forecast to show inflation quickened last month. West Texas Intermediate crude was unchanged at $47.74. The pound was 0.6 percent stronger at $1.4486 and the Aussie gained 0.5 percent to 73.25 U.S. cents. US equity futures were unchanged after rising 0.3% around the European open.

"Markets seem to be in a relatively sweet spot with a steadily stronger U.S. dollar and resilient commodities prices,” Angus Nicholson, a Melbourne-based market analyst at IG Ltd., told Bloomberg "Many investors have been predicting a pullback in markets, but despite all the negativity, markets have continued to grind higher."

Spot on: which is why to all those who are itching to short the market here, our advise is to wait for Gartman to go long first.

This is where markets were at this moment

  • S&P 500 futures up less than 0.1% at 2063.5
  • Stoxx 600 up 0.5% to 337
  • FTSE 100 up 0.6% to 6191
  • DAX up 0.1% to 9963
  • German 10Yr yield up 1bp to 0.16%
  • Italian 10Yr yield down less than 1bp to 1.48%
  • Spanish 10Yr yield down less than 1bp to 1.6%
  • S&P GSCI Index down 0.1% to 367.2
  • MSCI Asia Pacific up 0.7% to 127
  • Nikkei 225 up 1.1% to 16653
  • Hang Seng up 1.2% to 20119
  • Shanghai Composite down 0.3% to 2844
  • S&P/ASX 200 up 0.7% to 5396
  • US 10-yr yield up less than 1bp to 1.76%
  • Dollar Index down 0.04% to 94.53
  • WTI Crude futures up less than 0.1% to $47.74
  • Brent Futures down 0.6% to $48.68
  • Gold spot down 0.2% to $1,271
  • Silver spot up less than 0.1% to $17.16
Top Global News

  • Oil Advances to Seven-Month High as U.S. Stockpiles Seen Falling
  • Saudi Arabia’s Treasuries Holdings Are Unveiled After 41 Years
  • Soros Cuts U.S. Stock Investments 37%, Buys Barrick Gold Stake
  • Hedge Funds Abandon Ex-Darling Valeant and Other 13F Highlights
  • LendingClub Subpoenaed by Justice Department After CEO Exit
Looking at regional m,arkets, Asian stocks traded mostly higher following a firm Wall Street close where tech and energy surged after Berkshire Hathaway took a USD 1bIn stake in Apple and WTI rose to fresh 6-month highs. This saw the energy sector underpin ASX 200 (+0.7%) and Nikkei 225 (+1.1%) as WTI extended its advances during Asia hours to above USD 48/bbl, while JPY weakness further bolstered Japanese stocks. Shanghai Comp (-0.3%) underperformed despite the PBoC injecting funds through its Medium-term Lending Facility, as debt concerns continued to linger after Evergreen Holding defaulted on bond repayments to become at least the 10th defaulter in China YTD. 10yr JGBs traded flat with a lack of demand seen amid a positive risk tone in Japan, while today's 5yr auction saw mixed results with the b/c slightly declining from prior although the lowest accepted price was higher than expected. Japanese PM Abe said the sales tax will be increased as planned unless a serious event occurs. PM Abe also commented he will make a decision at an appropriate time which will be based on expert opinions.

Top Asian News

  • BlackRock’s Fink Says ‘All Have to’ Worry About China Debt
  • China to Restrict Trading Halts, Report Says, Boosting MSCI Odds
  • ANZ to Cut About 200 Jobs in Australia as Loan Growth Slows
  • As China Revamps Regulation, PBOC Gears Up for Central Role
  • Aircastle’s Japan Venture to Buy Up to 10 Boeing, Airbus Planes
  • Japan to Seek Cheaper Plans From Operators, Official Says
European equities have been climbing higher this morning with Germany and Switzerland returning from their elongated break. Risk on sentiment has been supported by the continuation of the upside in oil prices in which Brent crude futures had sustained a move above USD 49/bbl for a large part of the morning. However, in recent trade prices have tailed off with WTI crude retesting USD 48/bbl to the downside.
Additionally, the upbeat tone has also been supported by the gains in Apple yesterday following Berkshire Hathaway announcing a USD 1bIn stake in the Co. As such, gains in equities has seen Bunds on the back foot. Alongside this, a slew of EUR-denominated bond sales is set to continue this week after near record amount of sales last week. Furthermore, as energy markets continue to climb this could continue to hamper fixed income products as markets inflation expectations adjust to the uptick in prices.

Top European News

  • U.K. Inflation Rate Unexpectedly Declines to 0.3% on Air Fares: Economists had forecast a rate of 0.5 percent, based on the median estimate in a Bloomberg survey
  • Vodafone Beats Estimate With 2.5% Quarterly Network Revenue Gain: Analysts surveyed by Bloomberg expected 1.5 percent growth, on average
  • Iliad First-Quarter Sales Increase 6.6% on Wireless Promotions: Revenue rose to 1.15 billion euros ($1.3 billion)
  • Barclays’ Ramos Emerges as Best-Value South African Bank CEO: Barclays Africa earned 508 rand ($33) in net income for every rand the Johannesburg-based company paid Ramos in base salary, long-term incentives and bonuses in 2015, according to data compiled by Bloomberg
  • Deutsche Bank Names Ex-EDF CFO Thomas Piquemal to Lead M&A: Piquemal, 47, who quit as chief financial officer of French utility Electricite de France SA in March, will be based in Paris and report to corporate and investment banking chief Jeff Urwin
In FX, Asia and early London have been pretty active today, with the ongoing levitation in USDJPY one of the most prominent trades, where a 109 stop hunt unleashed short covering above 109 and pushed the pair as high as 109.60. Cable has also been active with inflation data in both the UK and US today. The UK numbers saw some softness in the more focused-upon core read, with the y-o-y rate registering 1.2% vs median 1.4% expected. Ahead of this, the ORB/Telegraph poll saw the remains showing a significant lead to send the spot rate tearing through the 1.4400's, trading through 1.4500 but holding resistance levels ahead of 1.4550 before the data response saw us lower again. EUR/GBP was testing .7800 early on, but has survived a potential breach of the figure level. Elsewhere, the post RBA (minutes) recovery in AUD looks to have been short-lived as the spot rate sinks back into the low .7300's. US inflation now set to determine whether we test through the figure, with EUR/USD also mid-range ahead of the release. USD/JPY is higher on the positive risk tone, with the quest for 110.00 back on. USD/CAD has duly found anticipated support in the mid 1.2800's to return through 1.2900, coinciding with a turn-back in WTI through $48.0 and Brent below $49.0.

In commodities, WTI and Brent have fallen off session highs after eyeing the USD 50.00/bbl level. Gold and silver have also been falling alongside the rest of the commodities complex as the USD has been strengthening in the EU session. Elsewhere, copper and iron prices were underpinned and were in minor positive territory amid the global risk sentiment.

On today's US calendar, the big focus will be on the April inflation data. Market expectations are for a +0.3% mom headline print which should be boosted by higher oil prices and a +0.2% mom print at the core. Elsewhere this afternoon we’ll also get April housing starts and building permits data – both of which are expected to rebound. Finally we’ll cap the day off with more important data in the form of industrial production (+0.3% mom expected), capacity utilization and manufacturing production. Fedspeak wise we’ll also hear from Williams and Lockhart at noon in a joint interview, as well as Kaplan (at 1.15pm EDT) later on while the ECB’s Praet and Nouy are scheduled to speak this morning.



Bulletin Headline Summary From RanSquawk and Bloomberg

  • European equities trade higher as European equities take the lead from their US and Asian counterparts with elevated energy prices also underpinning sentiment
  • GBP has been a key focus for FX markets as UK CPI fell short of expectations, while the latest polls develop a further bias for remaining in the EU
  • Looking ahead, highlights include US CPI, Housing Starts, Building Permits and API Inventories, ECB's Praet, Fed's Williams, Lockhart and Kaplan
  • Treasuries trade slightly lower overnight, led by belly, amid rise in global equities while crude oil is off session-highs; U.S. data includes CPI and housing starts.
  • Even as the VIX sits 25 percent below its bull market average, investors are using futures on the index to hedge against trouble in equities six months from now
  • After spending years fighting the European Union, Ryanair Holdings Plc CEO Michael O’Leary has turned into one of its biggest defenders, and he’s even decorating his airplanes to prove it
  • The pound rallied the most in two weeks after the ORB/Telegraph poll showed 55 percent of respondents were in favor of remaining in the European Union, while 40 percent wanted to leave
  • U.K. inflation unexpectedly slowed in April, highlighting the struggle Bank of England policy makers face to revive price growth
  • Chinese stocks traded in Hong Kong rose the most in a month, with commodity producers gaining as oil prices climbed and President Xi Jinping vowed to press ahead with plans to cut capacity at state-owned enterprises
  • As China’s leaders consider ways to improve market oversight and avoid the kind of boom and bust in equities that shook investors around the world last year, the PBOC is already extending its oversight to areas beyond its traditional focus
  • BlackRock Inc.’s Laurence D. Fink, who oversees the world’s largest money manager with $4.7 trillion of client assets, said “we all have to be worried” about China’s mounting debt amid slowing growth, even as he remains bullish on the economy in the long run
  • Ray Dalio’s $154 billion Bridgewater Associates became the first foreign hedge fund manager to win approval to set up a wholly owned investment-management business in China, according to Shanghai-based consulting firm Z-Ben Advisors
  • Sovereign 10Y yields mostly lower; Asian, European equities higher; U.S. equity-index futures higher; WTI crude oil rises while precious metals fall
US Event Calendar

  • 8:30am: Housing Starts, April, est. 1.125m (prior 1.089m)
    • Housing Starts m/m, April, est. 3.3% (prior -8.8%)
    • Building Permits, April, est. 1.135m (prior 1.086m, revised 1.076m)
    • Building Permits m/m, April, est. 5.5% (prior -7.7%, revised -8.6%)
  • 8:30am: CPI m/m, April, est. 0.3% (prior 0.1%)
    • CPI Ex Food and Energy m/m, April, est. 0.2% (prior 0.1%)
    • CPI y/y, April, est. 1.1% (prior 0.9%)
    • CPI Ex Food and Energy y/y, April, est. 2.1% (prior 2.2%)
    • CPI Index NSA, April, est. 239.119 (prior 238.132)
    • CPI Core Index SA, April, est. 246.450 (prior 246.095)
    • Real Avg Weekly Earnings y/y, April (prior 1.1%)
  • 9:15am: Industrial Production m/m, April, est. 0.3% (prior -0.6%)
    • Capacity Utilization, April, est. 75% (prior 74.8%)
    • Manufacturing (SIC) Production, April, est. 0.3% (prior -0.3%)
  • 12pm: Fed’s Williams, Lockhart speak in Washington
  • 1:15pm: Fed’s Kaplan speaks in Midland, Texas
  • 4:30pm: API weekly oil inventories
DB's Jim Reid concludes the overnight wrap

Yesterday was all about Apple and oil. Starting with the former, Apple’s share price gained close to 4% yesterday and the most in over two months following the news that Warren Buffet’s Berkshire Hathaway has bought a $1bn slice of the company. That comes as other high-profile money managers have recently cut or exited their positions in the tech giant (including Carl Icahn). That said, after trading just above $130 in the summer of 2015, shares have since collapsed into the low $90’s and while Buffet has for a while typically avoided investment in the tech sector, the move will been as a something of a vote of confidence that Apple can halt the recent slide in sales.

Meanwhile, the other big headline grabber yesterday was Oil. An upbeat broker report suggesting that the market has moved into a deficit quicker than expected following some of the recent supply disruptions (including Nigeria, Canada and Venezuela) helped fuel a +3.27% for WTI and so taking it to close to $48/bbl and the highest close since November 3rd. Brent was up a similar amount and is edging closer to the $50/bbl mark (hovering around $49.26/bbl this morning). With the moves this morning it means that the unrelenting rally for WTI since the February intraday lows has seen it surge an impressive 84% in that time.

Unsurprisingly then it was energy and tech names which led the S&P 500 to a +0.98% gain yesterday, while the Nasdaq finished up a slightly higher +1.22%. While Oil has been on a one-way track since February, it does appear that US equities have however hit a bit of a stumbling block this month even after considering yesterday’s strong performance. In fact in the nine sessions prior to yesterday, the S&P 500 had followed three days of consecutive losses, with three days of gains and then three more days of losses again with the index back to flat for the month of May (which compares to a 4% return for Oil). So while the old adage ‘sell in May and go away’ hasn’t quite been completely true, it’s proving to be a much more directionless month for US equities compared to the positive performance of March and April.

With the rebound in oil we thought we'd update our long-term chart of the average real price of oil back to 1861. When we last published back in January we remarked that for the first time in a decade oil was actually cheap relative to its long term value. 4 months on and with the large rally its back just above its 155 year long term real adjusted average (around $47). The chart is in the PDF today for those interested.

Switching our focus now to the latest in Asia this morning, bourses are largely following the US lead with the majority advancing. The Nikkei (+0.77%), Topix (+0.76%), Hang Seng (+0.31%), and ASX (+0.56%) are all up, while it’s China which is the standout underperformer with the Shanghai Comp currently - 0.37% although it’s not obvious what has triggered that. The poor weekend data was largely ignored yesterday but perhaps it's causing a drag today. Credit markets are benefiting from the general better sentiment with indices in Asia and Australia a couple of basis points tighter. In FX markets the Aussie Dollar (+0.80%) is the big mover following the RBA minutes from the meeting earlier this month which indicated that the decision to cut rates was actually more balanced than maybe first thought.

Moving on. Aside from the Apple and oil focus there wasn’t a great deal else to drive markets yesterday although the US data did turn a few heads. Specifically it was the May Empire manufacturing print which attracted attention after the data was reported as tumbling from its recent April high by nearly 19pts to -9.0 (vs. +6.5 expected). That monthly change was actually the most since October 2014 and of further concern was the weakness in the components with new orders, shipments and inventories all negative. Our US economists highlighted that this has resulted in their ISM-adjusted manufacturing survey index now falling below 50 after two successive monthly >50 readings. The ISM manufacturing print is due to be released on June 1st but for now yesterday’s reading will see much attention placed on Thursday’s Philly Fed manufacturing survey. Meanwhile the other data yesterday was the NAHB housing market index which also came in lower than expected at 58 for May, albeit unchanged relative to the prior month.

There was also some Fedspeak to mention yesterday and it came from Richmond Fed President Lacker. The Fed official said that while he would never completely make up his mind prior to a meeting, he noted that ‘at this point it looks to me as if the case for raising rates looks to be pretty strong in June’. Lacker made mention of inflation moving ‘decidedly toward 2%’ as well as there being further evidence of tightening in labour markets. He also said that the downside risks which dominated at the beginning of the year ‘have dissipated’. The US Dollar was little changed by the end of play yesterday although there was a reasonable move in the Treasury market with the benchmark 10y finishing up over 5bps higher in yield at 1.754% and wiping out Friday’s move lower.

Wrapping up the rest of the price action yesterday, with a number of public holidays it was an unsurprisingly quiet and low volume session in Europe reflected by just the +0.01% return for the Stoxx 600. Credit markets in the region were a touch wider (Crossover +4bps) although the stronger day for risk in the US saw CDX IG finish nearly 2bps tighter. It’s the new issue market which is still taking up much of the attention - particularly the mega deal from Dell. Bloomberg is reporting that the $16bn deal will be split across 8 tranches and is set to possibly price today but notably the same article suggests that the order book has already run past the $60bn mark, with the company suggesting that it is weighing up whether or not to upsize the deal.

Before we move on to the day ahead, the latest The House View titled “A challenging road” came out overnight. Despite rising concerns about global growth, the team expects only a modest deceleration into year-end from the US, China and the eurozone in aggregate. This, coupled with central banks taking a backseat in the coming months and geopolitical risk events approaching, leaves them holding a short-term neutral view on most markets.

Moving now to today’s calendar, this morning in Europe we’re kicking off in the UK where we’ll get the April inflation docket including CPI, PPI and RPI prints. Current expectations for CPI are for a +0.3% mom headline reading. The only other notable data this morning is the Euro area trade balance reading. Across the pond this afternoon the big focus is on the April inflation data. Market expectations are for a +0.3% mom headline print which should be boosted by higher oil prices and a +0.2% mom print at the core. Our US economists have a +0.1% mom forecast for the core as they expect further moderation in the growth rate of residential rents to keep a lid on inflation. Elsewhere this afternoon we’ll also get April housing starts and building permits data – both of which are expected to rebound. Finally we’ll cap the day off with more important data in the form of industrial production (+0.3% mom expected), capacity utilization and manufacturing production. Fedspeak wise we’ll also hear from Williams and Lockhart this evening (due at 5.00pm BST) in a joint interview, as well as Kaplan (at 6.15pm BST) later on while the ECB’s Praet and Nouy are scheduled to speak this morning.

http://www.zerohedge.com/news/2016-05-17/futures-fizzle-after-oil-fades-bounce-above-48
 

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#16
Asian Metals Market Update: May-17-2016
By: Chintan Karnani, Insignia Consultants
Yesterday’s fall in gold from $1290 to $1272 was very quick. All buy stop losses got triggered. There was a chain reaction. There will be similar moves everyday. The bad thing is that gold was not able to break past $1300, despite having a good chance for the same. Momentum is still bearish for gold. Everyone wants to invest in gold. In case is not able to break past $1310 by 10th June, then frustration will come to investors and there can be short term outflows from gold ETF’s.

Gold and Silver Market Morning: May-17-2016 -- Gold and Silver consolidating in a tighter range!
By: Julian D. W. Phillips, Gold Forecaster
Yesterday and today saw global gold markets moving closely together. A glance across the currency world as well as the gold world shows a tightening of the trading range of currencies and the continued consolidation of gold. We are seeing a sideways movement in prices ahead of a very strong move, soon.
 

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#18
RAN Preview FOMC April 27th meeting minutes
RAN squawk


Published on May 17, 2016
 

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#20
ALERT: China U.S. Real Estate Buying Spree Continues
Fabian4Liberty


Published on May 16, 2016
 

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#26
Rob Kirby-Dollar Going to be Kicked Off its Perch
Greg Hunter


Published on May 17, 2016
Rob Kirby arranges gold sales between buyers and sellers by the ton. Kirby says the biggest concern for his customers is the U.S. dollar. Kirby says, “The dollar is going to be kicked off its perch. That is a guarantee. It’s only a matter of time . . . The universal message is people are trying to get, for the most part, as much of their assets into physical precious metals as they can. Precious metal is getting increasingly hard to buy.”

Has Kirby seen demand for precious metals higher than right now? Kirby says, “No, I haven’t. I also have never seen this much interest to procure or own physical precious metal. Up until 2010, central banks were net sellers of gold, and since 2010, they have been net buyers of physical precious metal, and they never bought more than last year, except this year will be bigger than last year.

Join Greg Hunter as he goes One-on-One with macroeconomic analyst Rob Kirby of KirbyAnalytics.com.
 

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#27
CEOs of America's wealthiest businesses now make 335 times more than the average worker, study shows
  • CEOs of S&P 500 companies made $12.4 million on average last year
  • While the average worker made around $36,900, up from $36,000 in 2014
  • Study shows that CEOs make 335 times more than the average worker
  • In 2017, public companies will have to disclose ratio of pay of their CEOs to the median compensation of their employees


Read more: http://www.dailymail.co.uk/news/article-3595828/CEOs-make-335-times-average-worker-study-shows.html#ixzz48z7mLuVZ
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#28
Frontrunning: May 18


Submitted by Tyler Durden on 05/18/2016 07:38 -0400

  • Stocks sag as U.S. rate rise expectations revive (Reuters)
  • Clinton, Sanders hit final stretch of nominating contest (Reuters)
  • Bernie Sanders Wins in Oregon, But He Needed Kentucky, Too (NBC)
  • Clinton less than 100 delegates from nomination (The Hill)
  • Trump needs 66 delegates to officially clinch nomination (The Hill)
  • Japan GDP Rebound Not Enough to Stave Off Stimulus (WSJ)
  • Japan Dodges Recession Thanks to Consumers, Public Spending (BBG)
  • Austrian State Dodges Default With $12.4 Billion Debt Deal (BBG)
  • Another Year of Anger for Deutsche Bank's Investors (BBG)
  • Bank of America Misled Trading Partners, Lawsuit Alleges (WSJ)
  • Mitsubishi Motors president Tetsuro Aikawa to step down over fuel-cheating scandal (ABC)
  • Obama Administration Extends Overtime Pay to Millions (WSJ)
  • Suzuki admits fuel testing issues but denies cheating (BBC)
  • Sochi doping allegations could show unprecedented criminality : IOC (Reuters)
  • Sharapova to face anti-doping hearing in London (Reuters)
  • Donald Trump, Republicans Finalize Joint Fundraising Deal (WSJ)
  • Rand Slumps as Gordhan Breaks Silence on Talk of Arrest, Firing (BBG)
  • 5 Things to Watch in the Fed’s April Meeting Minutes (WSJ)
  • Navy’s Tougher Littoral Ship Would Still Be Vulnerable, GAO Says (BBG)
  • Nevada Unrest Shows Democratic Rifts (WSJ)
  • Sanders message to Dem leaders: Let us in (The Hill)


Overnight Media Digest

WSJ

- Hillary Clinton held a narrow lead over Bernie Sanders late Tuesday in Kentucky's Democratic presidential primary, a result that blunted the Vermont senator's latest burst of momentum and likely thwarted his hopes of putting together a winning streak in the final state contests. (http://on.wsj.com/1spXEwz)

- A Bank of America Corp executive accused her employer of misleading trading clients in a lawsuit in which she called the bank a "bros club" and said it discriminated against her for being a woman. (http://on.wsj.com/1spY06k)

- Donald Trump and the Republican National Committee finalized a joint fundraising agreement late Tuesday that would allow individual donors to write checks of as much as $449,400-far higher than the $2,700 cap on what the presumptive GOP nominee's presidential campaign can accept. (http://on.wsj.com/1spYb1C)

- Millions more Americans are set to qualify for overtime pay under a final Labor Department regulation, in what could be President Barack Obama's last big push to shore up workers' wages. (http://on.wsj.com/1spYjhC)



FT

* Dennis Lockhart, the president of the Atlanta Fed, said in an interview with the Financial Times that financial markets are underestimating the chances of a June rate hike.

* The Competition and Markets Authority, UK's competition watchdog, said on Tuesday that banks should set a monthly maximum charge for unauthorised overdrafts on personal current accounts, and send alerts to people before they breached their limit.

* Sports Direct's billionaire founder Mike Ashley has agreed to face British lawmakers' questions in parliament about the treatment of workers at his sportswear retailer, but only if they visit his headquarters first.



NYT

- The International Monetary Fund is increasing demands for Greek debt relief, setting up another potential standoff with creditors over the country's bailout, and threatening to create more political and economic uncertainty at an already tumultuous time for Europe. (http://nyti.ms/1TXiauH)

- Alphabet Inc owned Google will introduce its much-anticipated entry into the voice-activated home device market on Wednesday. Named Google Home, the device is a virtual agent that answers simple questions and carries out basic tasks. (http://nyti.ms/1TXiqd8)

- Rapidly changing winds brought Alberta's huge wildfire to the perimeter of two of the oldest and largest of Canada's oil sands complexes on Tuesday, posing a new threat to an industry that just a day earlier had been preparing to resume full-scale operations. (http://nyti.ms/1TXiVnL)

- Japan's economy expanded at the fastest pace in a year during the first quarter on stronger private consumption and exports, complicating Prime Minister Shinzo Abe's decision on whether or not to delay a planned sales tax increase next year. (http://nyti.ms/1TXkPVs)



Canada

THE GLOBE AND MAIL

** Canada's two major railways are slashing expenses and eyeing more layoffs amid a slump in freight made worse by the fires in Northern Alberta. Canadian National Railway Co has laid off 1,200 people and parked 400 locomotives, whereas Canadian Pacific Railway Ltd has laid off about 1,300 people and idled 665 locomotives. (http://bit.ly/1Tnbw3Z)

** Alberta's wildfires took a sudden shift toward major oil sands plants north of Fort McMurray, overrunning at least one work camp and throwing into limbo plans to restart more than one million barrels per day of lost production. (http://bit.ly/1OzjDWQ)

** Canadian Imperial Bank of Commerce conducted an internal investigation into alleged misbehaviour on its trading floor amid claims of sexual harassment. Earlier this year, the bank hired an outside firm to question trading floor staff about a series of alleged incidents, according to three people familiar with the situation. (http://bit.ly/1V8TcxZ)

NATIONAL POST

** Canadians with the worst credit ratings are ramping up their debt, but the opposite is true for people with good credit, who continue to pay down their loans, according to a survey released on Wednesday by credit rating agency TransUnion. (http://bit.ly/1TjqV33)

** An assessment by the Conference Board of Canada estimates that the fire in northeastern Alberta resulted in a loss of 1.2 million barrels of oil per day for two weeks, translating into C$985 million ($760 million) in lost gross domestic product. (http://bit.ly/1OzlPxq)

** Hudson's Bay Co announced on Tuesday it will open 20 stores in the Netherlands beginning in 2017 - 17 under its namesake banner, and three under the discount luxury banner Saks Off Fifth. The new project is expected to create about 2,500 construction jobs and an equal number of positions in the stores. (http://bit.ly/1TjseyK)



Britain

The Times

The Bank of England is having "daily conversations" with banks to ensure they could cope with any market turmoil in the event of a vote in favour of Britain leaving the European Union. (http://bit.ly/1XkK8Gl)

Inflation has fallen for the first time since September after a drop in air fares following a temporary rise over the Easter holidays pushed it down to near historic lows. (http://bit.ly/1XkKcG5)

The Guardian

Microsoft is the latest business to come out in support of the UK remaining in the EU, in a letter to more than 5,000 of its UK staff. The tech firm said Britain's membership in the union made it one of "the most attractive places in Europe" to make investments. (http://bit.ly/1XkKFI8)

Haynes, the publisher of user manuals for everything from cars to Death Stars and famous locomotives, is to shed jobs after issuing a profit warning. (http://bit.ly/1XkKlZX)

The Telegraph

BP's head of exploration Richard Herbert is leaving the energy giant after less than three years in the job, as the firm slims down its drilling management teams and seeks to cut costs. (http://bit.ly/1XkL4KW)

Sky News

Aviva will announce on Wednesday that it is investing millions of pounds in Founders Factory, a digital accelerator launched last year by Brent Hoberman, Sky News reported on Tuesday. (http://bit.ly/1TWLIbO)

The Treasury is "determined" to resurrect the delayed sale of shares in Lloyds Banking Group to members of the public by the end of next March, a minister has said. (http://bit.ly/1TWLVMa)

The Independent

The banking regulator Competition and Markets Authority proposed a cap on unarranged overdraft fees and warnings for customers before they dip into their overdraft in a report published on Tuesday. (http://ind.pn/1TWKkpJ)

After spending years fighting the European Union, Michael O'Leary, the Irish chief executive officer of Ryanair, has turned into one of its biggest defenders and is trying to persuade the British to vote to stay in the EU in their June 23 referendum. (http://ind.pn/1TWLkKr)

http://www.zerohedge.com/news/2016-05-18/frontrunning-may-18
 

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#29
Copper Slides To Three Month Low Despite Flat Futures, Oil; Dollar Rise Continues


Submitted by Tyler Durden on 05/18/2016 06:48 -0400

After two violently volatile days in which the market soared (Monday) then promptly retraced all gains (Tuesday), the overnight session has been relatively calm with futures and oil both unchanged even as the BBG dollar index rose to the highest level since April 4. This took place despite a substantial amount of macro data from both Japan, where the GDP came well above the expected 0.3%, instead printing 1.7% annualized, which pushed stocks lower as it meant the probability of more BOJ interventions or a delay of the sales tax hike both dropped. Meanwhile, in China we got proof of the ongoing housing bubble when new property prices were reproted to have soared 12.4% Y/Y in April, which in turn pushed the local stock market to two month lows amid concerns the rampant housing bubble sector could divert funds from stocks. Yes, China is trading on the "risk" one bubble will burst another bubble.

At the end of the day, however, it was all about two Fed speakers yesterday and, as Bloomberg put it, financial markets reawakening to the risk that the U.S. expedites interest-rate increases, and that’s buoying the dollar while denting emerging markets and commodities. Additionally, the US 2s10s curve hit its flattest level since 2007. As noted above, the USD has risen rapidly in the past few weeks and as of this morning climbed to a seven-week high and Treasuries fell, pushing two-year yields to highest since April, after Atlanta Federal Reserve President Dennis Lockhart and San Francisco’s John Williams said Tuesday two rate hikes may be warranted this year. Chinese stocks tumbled to a two-month low, while the rand led the selloff versus the greenback amid mounting political tension in South Africa. Copper and gold fell for the first time in four days.

Looking at markets, DB's Jim Reid summarized the situation relatively well as follows:

The mood of markets is pretty temperamental at the moment with sudden reversals in sentiment seemingly occurring every few days. The S&P 500 closed -0.94% last night, wiping out Monday's gains. Fedspeak seemed to be a driver and it was interesting to see the US 2s10s curve hit its flattest level since 2007. Specifically it was the joint comments from Atlanta Fed President Lockhart and also San Francisco Fed President Williams that sparked interest after both suggested that they continue to see two to three rate hikes this year. Lockhart also added that markets are currently more pessimistic than he is, while Williams made mention of June being a live meeting and even went as far as to say that his view of gradual hikes also means 3-4 hikes in 2017. Balancing all this were comments from Dallas Fed President Kaplan shortly after who said that a hike may well be warranted in the ‘not-too-distant future’ but warned of the need to consider uncertainty including Brexit risk.

In any case it was the initial hawkish comments which helped to fuel a decent flattening across the Treasury curve. 2y yields ended 4.5bps higher at 0.833% with 10y yields ‘just’ 1.9bps higher at 1.773%. That means the current 2s10s spread of 94bps has marked a new tight for the year and you have to go back to December 2007 to find the last time the spread was this narrow. All of this has also resulted in a decent repricing in Fed Funds futures. The probability of a hike next month has now risen to 12% from 4% on Monday while a July hike has increased to 28% from 19%. The December meeting odds are now sitting at 65% from 56%.

And while oil is largely unchanged as of this moment with WTI trading in the mid-$48 range, buoyed by renewed fears from the Canadian wildfires which appear set to keep millions of barrels of production offline for several more days, keep a close eye on copper, which this morning is down 1.6% to $2.06/lb, hitting its lowest price in three months.



But going back to the story of the day, especially ahead of today's only notable news release the FOMC April minutes, all eyes remain on the dollar and the suddenly renewed probability of a rate hike. The dollar has rebounded in May after declining in the previous three months as the Fed pushed back expectations for rate increases this year. A strengthening U.S. economy and the biggest jump in consumer prices in three years have led traders to boost the odds of a move in June threefold to 12 percent. The Fed will release the minutes of its April policy meeting on Wednesday.



"Expectations appear to be that minutes will signal that a summer hike is on the cards," said Stuart Bennett, head of Group-of-10 currency strategy at Banco Santander SA in London. The "solidly hawkish" rhetoric from Fed non-voting members of late is proving to be dollar positive, as the possibility of a hike is not priced in by markets, he said.

Futures on the S&P 500 were little changed after equities tumbled on Tuesday. Investors will look Wednesday to earnings from retailers including Target Corp., Staples Inc., Lowe’s Cos. and Urban Outfitters Inc. for further indications on the health of U.S. consumers after a slew of disappointing results cast doubt on their willingness to spend. The Stoxx Europe 600 Index slipped 0.1 percent. Burberry Group Plc dropped 3.7 percent after the luxury-goods retailer added to the industry’s gloom by posting a second straight drop in annual earnings. Sonova Holding AG tumbled 7.1 percent after the Swiss hearing-aid maker’s second-half earnings missed estimates.

Minutes from the Fed’s April meeting will also be in focus for clues on the trajectory of interest rates after hawkish comments from regional presidents. The first month with even odds of higher borrowing costs also moved up to November from December.

Market Snapshot Summary

  • S&P 500 futures down less than 0.1% to 2043
  • Stoxx 600 down 0.1% to 335
  • FTSE 100 down 0.4% to 6141
  • DAX down 0.3% to 9864
  • MSCI Asia Pacific down 0.7% to 127
  • Nikkei 225 down less than 0.1% to 16645
  • Hang Seng down 1.5% to 19826
  • Shanghai Composite down 1.3% to 2808
  • S&P/ASX 200 down 0.7% to 5356
  • US 10-yr yield up 1bp to 1.78%
  • German 10Yr yield up 1bp to 0.14%
  • Italian 10Yr yield down less than 1bp to 1.45%
  • Spanish 10Yr yield up less than 1bp to 1.57%
  • Dollar Index up 0.37% to 94.9
  • WTI Crude futures down 0.3% to $48.16
  • Brent Futures down 0.5% to $49.05
  • Gold spot down 0.5% to $1,272
  • Silver spot down 1.2% to $17.04
Top Global News

  • Mitsubishi Motors President Resign as Mileage Scandal Widens
  • Eletrobras Sees U.S. Delisting on Deadline Miss Amid Graft Probe
  • Nasdaq Bears at 5-Year High Just as Berkshire Sees Apple Bargain
  • Goldman’s Hatzius Says Flattest Yields Since 2007 Misprice Fed
  • Goldman’s India Blue-Chip Bond Picks Gain After 2015 Junk Flop
  • BlackRock Hires Ex-Hedge Fund Founder Ferrier for Private Credit
  • Goldman Sachs Asset Said to Consider Aussie Equities Unit Sale
  • Fed Alarm Has $8.5b Swedish Fund Manager Dumping Risk
Looking at regional markets, Asia stocks traded mostly lower following losses on Wall St. where several Fed speakers suggested prospects for a June hike were still alive. This pressured ASX 200 (-0.7%) & Nikkei 225 (-0.1%) at the open, however Japanese stocks briefly staged a recovery as participants digested better than expected GDP with the annualised figure printing at a 1 year high at 1.7% vs. Exp. 0.3%, although selling later resumed. Shanghai Comp (-1.8%) was negative despite continued gains in Chinese property prices amid concerns the rampant sector could divert funds from stocks, while tech names underperformed after reports overseas users of Alipay may be restricted from the service from Friday. In addition, some analysts also noticed disappointment as NPC Head Zhang was did not mention the HK-Shenzhen stock connect at a speech in Hong Kong. 10yr JGBs were mildly lower with the increased risk appetite for Japanese equities dampening demand for the paper, despite the BoJ also entering the market to purchase over JPY 1.2tr of JGBs.

Japanese GDP SA (Q1 P) Q/Q 0.4% vs. Exp. 0.1% (Prey. -0.3%, Rev. -0.4%)

  • GDP Annualised SA (Q1 P) Q/Q 1.7% vs. Exp. 0.3% (Prey. -1.1%, Rev. -1.7%)
  • GDP Nominal SA (Q1 P) Q/Q 0.5% vs. Exp. 0.5% (Prey. -0.2%). (BBG)
China April New Home prices rose 6.2% Y/Y vs. Prey. 4.9% in March. (BBG)

Top Asian News

  • Japan Dodges Recession on Modest Increase in Consumer Spending: Expansion of GDP exceeds forecasts by all surveyed economists
  • Suzuki Plunges After Finding Flaw in Mileage Testing Method: co. used improper method to test fuel efficiency of its vehicles
  • Goldman Sachs Asset Said to Consider Aussie Equities Unit Sale: Sale or management buyout of unit said to be among options
  • China Leader Asks Hong Kong for ‘Broader Mind’ Amid Protests: Communists’ No. 3 urges integration with Beijing’s development
  • Malaysia May Bar Overseas Travel for Those Who Insult Government: Human rights activist prevented from going to South Korea
  • Midea Makes Offer to Become Biggest Shareholder in Kuka: German robot maker already helping Midea to automate factories
  • Forget About Shenzhen Link Date, Just Buy In, Legg Mason Says: Investors should seize opportunity to position for it instead of guessing a start date
European equities have followed on from yesterday's trend to trade lower this morning (Euro Stoxx: -0.4%), with energy and material sectors weighing on the index. As such, the FTSE 100 is the worst performing of the major indices, with the likes of Glencore, Anglo America and Rio Tinto among the worst performers in Europe. Bunds have continued to trade within a relatively tight range around the 164.00 level , with the German benchmark initially seeing downside given the supply due out today, combined with the recent downside in T-notes given the rise in expectations of a potential rate hike from the Fed in June. However, heading back into mid-morning , Bunds have pared some of their losses and are moving back towards the aforementioned 164.00 level.

Top European News

  • Stoxx 600 down 0.2% to 334
  • FTSE 100 down 0.4% to 6141
  • DAX down 0.3% to 9864
  • German 10Yr yield up 1bp to 0.14%
  • Italian 10Yr yield down less than 1bp to 1.45%
  • Spanish 10Yr yield up less than 1bp to 1.57%
  • S&P GSCI Index down 0.6% to 368.7
In FX, the Bloomberg Dollar Spot Index advanced 0.4 percent at 6:04 a.m in New York, hitting the highest since April 6 in early trade. Australia’s dollar lost 0.8%. The yen slipped 0.3 percent to 109.43 per dollar, after earlier strengthening as much as 0.4 percent. The euro weakened 0.4 percent to $1.1268. The MSCI Emerging Markets Currency Index fell 0.5 percent, the most in two weeks. South Korea’s won, Russia’s ruble, the Mexican peso and Malaysian ringgit dropped at least 0.8 percent.

The UK jobs report was a risk for GBP this morning, and duly continued the healthy data series to show the employment change rising a more than expected +44k, while jobless claims also fell. Earnings were healthy, but a little more mixed when looking at ex-bonus. Nevertheless, the initial Cable response was positive, but extremely short lived, with the look above 1.4450 brief and sellers keen to get long USD's against the Pound. Elsewhere, EUR/USD made fresh cycle lows just ahead of 1.1255, but USD/JPY gains — so far - have stopped just short of the 109.65 highs seen yesterday . AUD, NZD and CAD have all pushed lower again, but held off their respective (recent) lows. AUD/USD is finding buyers ahead of .7250, as is NZD/USD ahead of .6750. USD/CAD continues to eye 1.3000+ again but Oil prices keep ratcheting higher to deter a full on attack. FOMC minutes ahead are also adding to hesitation, and we expect ranges to tighten up after midday.

In commodities, WTI and Brent had been advancing overnight after draw in API's last night, but in the EU session prices have fallen from overbought levels with Brent at USD 49.00/bbl and WTI at USD 48.79/bbl respectively. Gold and Silver have also been falling in the European session alongside a broad based sell off in commodities, with Silver testing the USD 17.00/oz level and starting to consolidate at around USD 17.050/oz. Copper fell along with other metals amid rising supplies and an uncertain demand outlook in China, the world’s top consumer. Antofagasta Plc, a Chilean copper producer, said it isn’t counting on an improving global economy and expects low copper prices for another year or two, according to a statement from Chairman Jean-Paul Luksic.

There’s no data due out in the US this afternoon so the focus will be on the FOMC minutes at 7.00pm (BST) a nice warm up for the kick off in Basel 45 minutes later. Away from the data we’ll also hear from the BoE’s Haldane this evening.

Bulletin Headline Summary from Bloomberg and RanSquawk

  • European equities have followed suit from US and Asian equity performance with material and energy names also lagging in the region
  • GBP failed to benefit from a largely upbeat employment report with the USD remaining firmer against its major counterparts following relatively hawkish Fed speak
  • Looking ahead, highlight include US Fed Releases Minutes, DOE Inventories & BoE's Haldan
  • Treasuries fall during overnight trading with global equities, while USD strengthened after Fed’s Williams and Lockhart said Tuesday two rate hikes may be warranted this year; April 26-27 FOMC minutes will be released at 2pm ET.
  • Fed fund futures fully pricing next rate hike around Jan. 2017, implied rate 63bps, near midpoint of 50-75bp target range
  • A decision by the British electorate to withdraw from the European Union in a June 23 referendum could delay the next tightening move from U.S. policy makers by about three months, according to an economic model designed by analysts Jamie Murray, Carl Riccadonna and Dan Hanson
  • Jan Hatzius, the chief economist at Goldman Sachs Group Inc., warned bond investors aren’t prepared for the Federal Reserve to raise interest rates
  • The U.K. jobs market showed signs of cooling in the first quarter as Britain prepares for an increasingly bitter referendum on its European Union membership
  • A thicket of risks from the U.K.’s Brexit vote next month to the U.S. presidential election may lift gold prices even further by year-end, according to Denmark’s Saxo Bank A/S
  • With $2.7 trillion of European bonds yielding less than zero, some of the biggest fixed-income investors are looking 50 years ahead to buy government debt they consider decent value
  • Haruhiko Kuroda’s pain is China’s gain. The BOJ’s efforts to bolster economic growth have been undermined by the yen’s surge, which is a tailwind for China after the yuan dropped this month to the lowest level versus the yen since 2014
  • $28.2b IG Credit priced yesterday, brings weekly volume to $35.475b as May tops $100b mark at $120.26b; YTD $713.715b
US Event Calendar

  • 7am: MBA Mortgage Applications, May 13 (prior 0.4%)
  • 10:30am: DOE Energy Inventories
  • 2pm: FOMC Minutes, April 26-27
DB's Jim Reid concludes the overnight wrap

The mood of markets is pretty temperamental at the moment with sudden reversals in sentiment seemingly occurring every few days. The S&P 500 closed -0.94% last night, wiping out Monday's gains. Fedspeak seemed to be a driver and it was interesting to see the US 2s10s curve hit its flattest level since 2007. Specifically it was the joint comments from Atlanta Fed President Lockhart and also San Francisco Fed President Williams that sparked interest after both suggested that they continue to see two to three rate hikes this year. Lockhart also added that markets are currently more pessimistic than he is, while Williams made mention of June being a live meeting and even went as far as to say that his view of gradual hikes also means 3-4 hikes in 2017. Balancing all this were comments from Dallas Fed President Kaplan shortly after who said that a hike may well be warranted in the ‘not-too-distant future’ but warned of the need to consider uncertainty including Brexit risk.

In any case it was the initial hawkish comments which helped to fuel a decent flattening across the Treasury curve. 2y yields ended 4.5bps higher at 0.833% with 10y yields ‘just’ 1.9bps higher at 1.773%. That means the current 2s10s spread of 94bps has marked a new tight for the year and you have to go back to December 2007 to find the last time the spread was this narrow. All of this has also resulted in a decent repricing in Fed Funds futures. The probability of a hike next month has now risen to 12% from 4% on Monday while a July hike has increased to 28% from 19%. The December meeting odds are now sitting at 65% from 56%.

Notwithstanding those moves, there’s still a clearly large gap between where the market is and the recent rhetoric from the Fed. In our view though this is just in keeping with the Fed holding on to full optionality. Importantly we’re still yet to hear from either the Fed President Yellen or Vice-Chair Fischer recently. That will change tomorrow though when the latter is scheduled to speak, while Yellen is pencilled in for a talk at Harvard University on the 27th of this month and then again on June 6th. As we’ve highlighted previously there are a number of big events in June so it looks set to be an interesting six weeks or so ahead.

Meanwhile all this chatter also comes before this evening’s FOMC minutes from the April meeting. They are likely to be a bit outdated now given what we’ve heard from Fed officials and it wouldn’t be a great surprise to see the text as relatively balanced versus the more dovish tone in prior statements.

Changing tact now and switching over to Asia this morning where the bulk of bourses are following the weak lead from the US last night. Indeed the Hang Seng (-1.27%), Shanghai Comp (-1.45%), Kospi (-0.59%) and ASX (-0.19%) are in the red, while Japanese equities initially advanced with the better than expected GDP print, but have now followed the moves elsewhere and are down as we type with the Nikkei and Topix currently -0.46% and -0.14% respectively. Japan’s Q1 GDP printed at +0.4% qoq after expectations were for just +0.1% growth and it means the annualized pace has been lifted to +1.7% qoq from -1.7% previously. That data should provide some relief to an under pressure BoJ although the Yen is starting to strengthen as we type and is perhaps contributing to some of the volatile moves.

There’s also been data out of China this morning too in the form of the latest house price data. April new house prices were reported as climbing in 65 of the 70 cities tracked, compared with 62 in March. It’s the most since December 2013.

Moving on. The latest “Credit Bites" was just out around an hour ago. In it we take a brief look at the basis between CDS and cash in HY by looking at the spread level of the iTraxx Crossover index vs. the asset swap spread of the iBoxx EUR HY Non-Fin index. We specifically highlight that while the two series have followed very similar paths, the CDS-cash basis has turned consistently negative since September 2013 and has generally been lower than -100bps over the past 8-9 months. Given slightly higher ratings for the cash index the stretched relationship poses the question as to whether this highlights relative value for the cash market over CDS or simply a reflection of deteriorating liquidity. All thoughts welcome.

Staying with credit, while price action yesterday in the market largely reflected what was a weaker session for risk assets in the US (CDX IG ending 1bp wider) and a benign session in Europe (Main unchanged), the big news was the pricing of the hotly anticipated bumper deal from Dell. With a reported $85bn of orders according to the FT, the all senior secured deal was eventually upsized to $20bn from $16bn and priced across 6 tranches. Bonds eventually priced at the tight end of guidance with secondary trading said to be supportive. The same FT article suggests that this was the fourth biggest corporate bond sale on record.

Meanwhile, it wasn’t just the Fedspeak that markets had to contend with yesterday, with it also being a relatively busy day for data. Specifically it was the inflation data in the US which the market was most focused on. Headline CPI printed at +0.4% mom in April and slightly ahead of expectations (+0.3% expected) after being boosted by rising fuel prices. That had the effect of lifting the YoY rate by two-tenths to +1.1%. Meanwhile the core print of +0.2% was bang on estimates, although it did cause the YoY rate to edge down one-tenth to +2.1%. Our US economists noted that the details of the latest CPI report provide preliminary evidence that core inflation may level out as rents and medical prices, which together make up 50% of the core CPI, are possibly in the midst of stabilising.

As well as the inflation data, industrial production was reported as increasing more than expected in April (+0.7% mom vs. +0.3% expected) with capacity utilization also edging up five-tenths to 75.4% (vs. 75.0% expected). The April housing starts data showed a +6.6% mom rebound in sales (vs. +3.3% expected) to an annualized rate of 1172k. Building permits rebounded a slightly less than expected +3.6% mom (vs. +5.5% expected).

Elsewhere in Europe it was another fairly uninspiring day of price action with the Stoxx 600 (0.00%) unchanged again (it was +0.01% on Monday) after giving up gains of as much as +1.2% early in the session. While there’s been some reasonable intraday volatility the index is still effectively unchanged since May 3rd now. In the commodity space the day was characterised by yet another advance for Oil. WTI rose another +1.24% to take it past $48/bbl, while Brent closed +0.63% and is creeping closer to testing that $50/bbl level (currently $49.39/bbl). The data in Europe yesterday was focused in the UK and specifically the April inflation data docket. CPI rose less than expected last month (+0.1% mom vs. +0.3% expected) meaning the YoY rate has edged down two-tenths to +0.3%. Meanwhile the core print of +1.2% yoy also missed (+1.4% expected) and is a decline of three-tenths from March.

Looking at the day ahead, this morning in Europe the primary focus is likely to be on the CPI print for the Euro area where expectations are for a flat MoM headline reading in April. Away from that we’ll also get more data out of the UK with the latest monthly employment indicators. There’s no data due out in the US this afternoon so the focus will be on the FOMC minutes at 7.00pm (BST) a nice warm up for the kick off in Basel 45 minutes later. Away from the data we’ll also hear from the BoE’s Haldane this evening.

http://www.zerohedge.com/news/2016-...espite-flat-futures-oil-dollar-rise-continues
 

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#30
Middle Class Destitution – A Devastating Tale From America's Heartland


Submitted by Tyler Durden on 05/17/2016 22:20 -0400

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

He had made the drive enough times to already suspect what he might find. Stride Rite had left Huntington for Mexico at the tail end of the recession; Breyers Ice Cream had closed its doors after 100 years. In the weeks after each factory closing in his part of Indiana, Lewandowski had listened to politicians make promises about jobs — high-tech jobs, right-to-work jobs, clean-energy jobs — but instead Indiana had lost 60,000 middle-class jobs in the past decade and replaced them with a surge of low-paying work in health care, hospitality and fast food. Wages of male high school graduates had dropped 19 percent in the past two decades, and the wealth divide between the middle class and the upper class had quadrupled.

“These jobs aren’t the solution so much as they’re part of the problem,” Lewandowski said, and now the result of so much churn was becoming evident all across Indiana and lately in Huntington, too. Fast-food consumption was beginning to tick up. Poverty was up. Foreclosures were up. Meth usage up. Heroin up. Death rate up. In Dan Quayle’s Middle America, one of the biggest news stories of the year had been the case of a mother who had let her three-week-old child suck heroin off her finger.

“Despair is our business, and business is booming,” Lewandowski said…

“This is how it feels to be sold out by your country.”

“It’s pure greed.”

“They wanted to add another 6 feet to their yachts.”

“We’re becoming like a third-world country. We’re going to have nothing left but fast food.”

"Fast food and hedge funds. That’s where we’re going.”

– From the Washington Post article: From Belief to Outrage: The Decline of the Middle Class Reaches the Next American Town

I write a lot about the middle class. It’s been one of the core themes here at Liberty Blitzkrieg since inception, yet my posts tend to be filled with statistics and sarcasm, and often lack the crucial element of heart. In order to truly connect with the public and shift their sentiments from apathy to action, it’s imperative to create a deep emotional connection. I admittedly have not done a great job in this regard. Fortunately for all of us, Eli Saslow of the Washington Post has done just that.

I read a lot of articles, and I can’t remember anything that hit me as hard as what he published this past weekend. It tells the tale of the spirit-crushing decimation of the American middle class through the lens of eternal optimist, Chris Setser. Chris is a man who always went above and beyond in order to provide a good life for himself and his family. Working the graveyard shift at an Indiana United Technologies plant so that he could be home when his kids came home from school, Mr. Setser lived his entire life living by the mantra: “Things have a way of working in the end.” Until they didn’t.

Chris’ transformation from an optimistic Democrat, to a pissed off, jaded Trump supporter, is a microcosm for what’s happening all across the country. Through his eyes, you witness a justified desperation, and a painful recognition that working hard and staying positive simply aren’t good enough in America’s current hollowed out, oligarch-owned, shell company of an economy.

Below, I provide some excerpts from the article, but these select passages don’t do it justice. I think this piece is so important, it’s imperative you read it in full and share it with everyone you know. The future of America rests upon reversing this pernicious trend.

From the Washington Post:

HUNTINGTON, Ind. —Chris Setser worked a 12-hour graveyard shift while his children slept, cleaned the house while they were at school and then went outside to wait for the bus bringing them home. He stood on the porch as he often did and surveyed the life he had built. The lawn was trimmed. The stairs were swept. The weekly family schedule was printed on a chalkboard. A sign near the door read, “A Stable Home Is A Happy Home,” and now a school bus came rolling down a street lined by wide sidewalks and American flags toward a five-bedroom house on the corner lot.

“Right on time,” Setser called out to the driver, waving to his children as they came off the bus.

In came 14-year-old Ashley, holding a payment notice for a school field trip. “Are we going to become one of those families with a voucher?” she asked.

“Don’t worry,” he said, handing her $20 from his wallet.

All around him an ideological crisis was spreading across Middle America as it continued its long fall into dependency: median wages down across the country, average income down, total wealth down in the past decade by 28 percent. For the first time ever, the vaunted middle class was not the country’s base but a disenfranchised minority, down from 61 percent of the population in the 1970s to just 49 percent as of last year. As a result of that decline, confusion was turning into fear. Fear was giving way to resentment. Resentment was hardening into a sense of outrage that was unhinging the country’s politics and upending a presidential election.

Setser had heard rumors earlier in the day that the company had decided to move its operations to Mexico, but he found them hard to believe. While dozens of other manufactures had left Northeast Indiana, his factory, United Technologies Electronic Controls, or UTEC, was still taking back contracts from China and winning president’s awards for performance. It was the area’s largest employer and also a rare place where America’s fraying social contract had remained mostly intact: Employees helped the factory’s parent corporation earn more than $6 billion in annual profit. In return they got a decent hourly salary with good overtime, bonuses for completing work-training programs, a turkey to take home on Thanksgiving and a ham on Christmas. “Successful businesses improve the human condition,” read one sign posted on the factory wall.

But on that night in February, another announcement had come over the factory speakers, instructing all UTEC employees to report to the cafeteria. The factory manager was standing at the front of the room, holding a piece of paper and reading into a microphone.

“A difficult decision,” he said.

“Relocation is best,” he said.

“Northern Mexico,” he said.

“No questions,” he said, and then he told employees they would have an hour-long break in the cafeteria to process the news before returning to their lines.

Together between his overtime and Bowers’s small salary at another manufacturer in Fort Wayne, they had remained firmly in the middle class by finding ways to make their money stretch. When they wanted to drive to Florida for their first overnight vacation in a decade, Setser could volunteer for more overtime to save up the cash. When they wanted a new TV, he could spend the 10 percent premium he earned for working third shift. He had cashed out part of his 401(k) account to pay for his daughter’s braces, purchased some of their basic household items with credit cards and taken out a no-money-down loan on their $95,000 house.

He had made the drive enough times to already suspect what he might find. Stride Rite had left Huntington for Mexico at the tail end of the recession; Breyers Ice Cream had closed its doors after 100 years. In the weeks after each factory closing in his part of Indiana, Lewandowski had listened to politicians make promises about jobs — high-tech jobs, right-to-work jobs, clean-energy jobs — but instead Indiana had lost 60,000 middle-class jobs in the past decade and replaced them with a surge of low-paying work in health care, hospitality and fast food. Wages of male high school graduates had dropped 19 percent in the past two decades, and the wealth divide between the middle class and the upper class had quadrupled.

“These jobs aren’t the solution so much as they’re part of the problem,” Lewandowski said, and now the result of so much churn was becoming evident all across Indiana and lately in Huntington, too. Fast-food consumption was beginning to tick up. Poverty was up. Foreclosures were up. Meth usage up. Heroin up. Death rate up. In Dan Quayle’s Middle America, one of the biggest news stories of the year had been the case of a mother who had let her three-week-old child suck heroin off her finger.

“Despair is our business, and business is booming,” Lewandowski said. “Workers have lost all agency in their lives. They’ve based their lives on believing in something that turned out to be a lie. They work when they can, for what they can, for as long as they can until it ends.”

As second shift finished in Huntington, several of those UTEC workers gathered at an Applebee’s that displayed construction hats on the wall. Earlier in the day, an employee had been suspended for taping a “Run for the Border” bumper sticker to one of the company’s roving robots — the biggest act of rebellion yet. A few employees had been trying to popularize a boycott of United Technologies products, and others had started using their regular 10-minute breaks to campaign for Trump in a traditionally Democratic factory. But for the most part their work was continuing unchanged, with attendance steady and factory production on the rise. They couldn’t risk losing their jobs or their UTEC severance packages, so the only way to vent was to come here, where the discussion on this night was of a country in decline.

“This is how it feels to be sold out by your country.”“It’s pure greed.”

“They wanted to add another 6 feet to their yachts.”

“We’re becoming like a third-world country. We’re going to have nothing left but fast food.”

“Fast food and hedge funds. That’s where we’re going.”

“We’re getting to the point where there aren’t really any good options left,” he said. “The system is broken. Maybe its time to blow it up and start from scratch, like Trump’s been saying.”

Krystal rolled her eyes at him. “Come on. You’re a Democrat.”

“I was. But that was before we started turning into a weak country,” he said. “Pretty soon there won’t be anything left. We’ll all be flipping burgers.”

“Fine, but so what?” she said. “We just turn everything over to the guy who yells the loudest?”

“You said it always evens out,” she told him.

“Maybe I was wrong,” he said, but now his voice was quiet.

“You said things just have a way of working.”

“Maybe not,” he said, because with each passing day he was seeing it more clearly. The town was losing its best employer, and all around him stability was giving way to uncertainty, to resentment, to anger, to fear.

Haunting and heartbreaking. What’s worse, it’s not just in the manufacturing heartland where the middle class is getting pummeled. In fact, the middle class is getting squeezed so badly, many cities now see a need to roll out public housing projects targeting this formerly independent and relatively prosperous demographic.

Although I previously reported on this as it pertained to the extremely affluent city of Palo Alto in the post, The New “Middle Class” – Making $250,000 a Year in Palo Alto Qualifies for Housing Subsidies, it appears this may be more of a trend than an anomaly.

As the Wall Street Journal reports in the piece, Rising U.S. Rents Squeeze the Middle Class:

Rising rents in cities across the nation are hurting the poorest residents, but those who are higher on the income ladder might be bearing the brunt of the pain.

A study set to be released on Monday shows that a far bigger proportion of middle-class renters in New York were squeezed by rising rents than were the lowest-income renters.

The study by New York University’s Furman Center examined rapidly gentrifying neighborhoods such as Brooklyn’s Williamsburg section and Harlem, where rents jumped 80% and 53%, respectively, between 1990 and 2014. While the share of the poorest families struggling to afford rent in those sections increased by 7.6 percentage points from 2000 to 2014, the share of middle-income households struggling to afford rent jumped 18 percentage points.

In Boston, median asking rents have increased at an annual rate of 13.2% since 2010, far outstripping the 2.4% average annual increase in income. Mayor Marty Walsh has pledged to build 20,000 units of middle-income housing through a mix of initiatives such as rezoning neighborhoods further from the city center and offering tax breaks to developers who build more moderately priced housing.

“We really do spend the vast majority of our resources on low-income families but we know we need to serve the middle income,” said Sheila Dillon, Boston’s chief of housing.

Even in Atlanta, historically one of the most affordable cities for middle-class families, a rapid rise in rents has taken its toll on those families. The city last week passed a new ordinance requiring developers who receive tax breaks to set aside a portion of units aimed at lower-income earners. It is also considering requiring developers to include units targeted at slightly more affluent families, such as teachers and police officers.

New York City has pledged to build or preserve 44,000 units for middle-income families over the next decade. Low-income households “have been straining to pay their rents in these neighborhoods for years, and, as rents continue to rise, households in higher-income tiers are having the same experience,” said a spokeswoman for New York City’s Housing Preservation and Development Department.

I don’t know about you, but this isn’t the kind of country I want to live in.



http://www.zerohedge.com/news/2016-...itution-–-devastating-tale-americas-heartland
 

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#32
Gold and Silver Market Morning: May-18-2016 -- very heavy imposition of duties on steel imports to the USA
By: Julian D. W. Phillips, Gold Forecaster
Today saw a very heavy imposition of duties on steel imports to the U.S.A. It’s a game changer! Take a look at the ‘currency wars’ that have taken place over the last couple of years.
Why is this important to gold and silver? Because it directly affects currencies and their exchangeability! Protectionism is divisive. Such division favors gold and silver. In turn, this eventually, will affect global currency liquidity. This brings back the importance of gold as a global trade facilitator.
 

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#36

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#38
Frontrunning: May 19


Submitted by Tyler Durden on 05/19/2016 07:42 -0400

  • Fed Puts June Rate Increase on Table Provided Economy Says Go (BBG)
  • European shares drop as mining stocks weaken, airlines fall (Reuters)
  • Oil drops below $48 on Fed hike speculation, fading support from outages (Reuters)
  • Violent Struggle Over Oil and Money Rattles Global Energy Market (BBG)
  • Bayer Proposes to Acquire Monsanto (WSJ)
  • How Wall Street Led LendingClub Into Crisis (BBG)
  • Fewer Shareholders Pay U.S. Taxes on Dividends (WSJ)
  • Turkey to miss end-June deadline for EU visa-free travel (Reuters)
  • Trading Floors ‘Quiet’ as Revenue Drops, JPMorgan Analysts Say (BBG)
  • Netanyahu pulls off coalition surprise to upend Israeli politics (Reuters)
  • Najib’s Stepson Bought House in London With 1MDB Funds (BBG)
  • EU to compile common blacklist of tax havens, sanctions against them (Reuters)
  • China steelmakers attack U.S tariff move; say need more time (Reuters)
  • FMC Technologies, Technip Agree to $13 Billion Oil-Services Merger (WSJ)
  • Donald Trump Releases Names of 11 Potential Supreme Court Choices (WSJ)
  • Trump’s Dodd-Frank Plan Will Be Early Test of Republican Unity (BBG)


Overnight Media Digest

WSJ

- EgyptAir said one of its aircraft disappeared early Thursday while flying from Paris to Cairo with 66 people aboard. (http://on.wsj.com/1Vawc1j)

- Bayer AG has approached Monsanto Co about a takeover that would fuse two of the world's largest suppliers of crop seeds and pesticides, the companies said.(http://on.wsj.com/1Vawq8K)

- Theranos Inc has told federal health regulators that the company voided two years of results from its Edison blood-testing devices, according to a person familiar with the matter. (http://on.wsj.com/1VawdlV)

- Presumptive Republican presidential nominee Donald Trump on Wednesday listed 11 candidates he would consider to fill the vacancy at the Supreme Court, a move aimed at easing concerns on the right about his commitment to conservative judges. (http://on.wsj.com/1VawjtU)



FT

* Streaming service like Netflix and Amazon's video service could be forced to devote "at least" 20 percent of their catalogues to European Films and shows, according to a draft of the European Commission proposal.

* Chinese businessman Tony Xia has agreed to buy Aston Villa, the club said on Wednesday.

* Federal Reserve officials felt the U.S. economy could be ready for another interest rate increase in June, according to the minutes from the central bank's April policy meeting released on Wednesday.



NYT

- Monsanto Co said it had received a takeover bid from Bayer AG, potentially signaling another huge merger in the business of crop seeds and pesticides. (http://nyti.ms/1U0URjU)

- The Federal Reserve sent a sharp, simple message to financial markets that it is thinking seriously about raising its benchmark interest rate at its next meeting, in June. (http://nyti.ms/1U0VdqK)

- Tesla Motors Inc said it would offer about $2 billion in stock, mainly to help it ramp up production of its new Model 3 electric car over the next two years. (http://nyti.ms/1U0WaiJ)

- Ailing media mogul Sumner Redstone will no longer draw a salary from Viacom Inc, one of the big media companies he controls. Eliminating his pay is a gesture toward acknowledging that he is no longer involved in operations and deserving pay as a company executive. (http://nyti.ms/1U0Wm1o)



Canada

THE GLOBE AND MAIL

** The Canada Pension Plan Investment Board is expected to announce the promotion of Mark Machin as its CEO on Thursday, alongside releasing annual results. Machin, 49, currently senior managing director and head of international and Asia at CPPIB, will take over from chief executive Mark Wiseman. (http://bit.ly/1NzOt6J)

** Essar Group, which paid C$1.85 billion ($1.41 billion) to buy Algoma Steel Inc in 2007, has been ruled out as a potential buyer of the company it put into creditor protection last November, sources familiar with the steel company's restructuring said. (http://bit.ly/1OBbUaE)

NATIONAL POST

** Via Rail was in talks with Quebec's pension fund about building a dedicated set of passenger tracks between Quebec City and Toronto, but that fell apart after the Caisse de depot et placement du Quebec proposed a C$5.5 billion ($4.20 billion)commuter line for Montreal instead. (http://bit.ly/1TlyYwa)

** Tensions boiled over in the House of Commons on Wednesday during the lead-up to a vote to restrict debate on physician-assisted dying. Prime Minister Justin Trudeau was accused of charging across the floor, swearing, elbowing an NDP MP, "manhandling" the chief opposition whip, Gordon Brown, and exchanging angry words with NDP Leader Tom Mulcair. (http://bit.ly/1WF2t1A)

** More than 100 million LinkedIn users might be more vulnerable on Wednesday, after their email and passwords have been uploaded online and reportedly for sale. LinkedIn issued a statement saying it is aware of the situation, but added that this is not a new data breach as the information was taken during a hack in 2012. (http://bit.ly/1XmraiA)



Britain

The Times

Britain's second biggest retail energy supplier SSE is considering the sale of a 1 billion pounds stake in its gas distribution division. (http://bit.ly/1U0fI9P)

The Guardian

Burberry is to cut jobs and reduce its product range by up to one-fifth in an attempt to save at least 100 million pounds a year, following a 10 percent fall in profit. (http://bit.ly/1U0ffEz)

Britain's employment rate reached a record high and wages ticked up in March, dashing government claims that the job market was being seriously damaged by the threat of a leave vote in the EU referendum. (http://bit.ly/1U0eYS6)

The Telegraph

Vauxhall is preparing to recall 235,000 Zafira cars for a second time as it can now install a long-term fix to a problem which had been causing as many as several hundred fires. (http://bit.ly/1U0eY4g)

Spanish businessman Javier Ferrán has been named the next chairman of Diageo, bringing to an end speculation over who will lead the board of the FTSE 100 drinks giant. (http://bit.ly/1U0fb7N)

Sky News

Policy makers at the US Federal Reserve indicated that most felt it would be "appropriate" to raise rates at their meeting of 14-15 June if the jobs market and economic growth strengthens, and inflation shows signs of moving towards its 2 percent target. (http://bit.ly/1U0etXZ)

The U.S. has raised the import duty on Chinese cold-rolled steel, which is used in car manufacturing, shipping containers and construction, by more than 520 percent. (http://bit.ly/1U0eOtT)

The Independent

Excessive pay for top bosses is holding back economic growth in Britain, the chief economist of the Bank of England, Andy Haldane, has warned. (http://ind.pn/1U0dhE6)

Mitsubishi Motors President Tetsuro Aikawa will step down as the Japanese automaker looks to regroup from its widening fuel economy testing scandal with the backing of Nissan Motor. (http://ind.pn/1U0dI19)

http://www.zerohedge.com/news/2016-05-19/frontrunning-may-19
 

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#39
Global Stocks Slide, S&P Set To Open Red For The Year As Hawkish Fed Ignites "Risk Off"


Submitted by Tyler Durden on 05/19/2016 06:53 -0400

After yesterday's algo-driven mad dash to close the S&P green both for the day and for the year following Fed minutes that came in shocking hawkish, the selling has continued overnight, led by the commodity complex as rate hike fears have pushed oil back down some 2% from yesterday's 7 month highs, which in turn has dragged global stocks lower to a six-week low, while pushing bond yields higher across developed nations as the market suddenly reprices the probability of a June/July rate hike.

For now the critical S&P500 support level at 2030 continues to hold, however that may be put in test today, leading to the next leg lower in the S&P. Should stocks open here, the S&P will be red for the year.

The dollar continued to rise overnight after its biggest jump in 6 months, which led to a substantial devaluation of the Chinese Yuen as a result, which in turn may have spooked the global markets who still remember that China was the primary catalyst that unleashed the wave of selling in December and January.

The hawish Fed minutes pressed the MSCI All Country World Index which declined for a third day, and dropped to the lowest level since April 8. U.K. gilts and German bunds fell, after Treasuries posted their biggest losses of the year. Currencies in Australia, China and South Korea sank to two-month lows against the dollar, while crude oil retreated and copper fell toward levels last seen in February. Gold and silver slipped to this month’s lows.



Many were shocked by the Fed's minutes which come from a meeting where Yellen was said to be fully dovish. "There is this enormous policy uncertainty," said Randal Jenneke, Sydney-based fund manager at T. Rowe Price. "The Fed has changed the goal posts so many times, everyone is confused. No one knows when they’re going to raise rates and no one knows what’s going to be the key thing to trigger the decision."

This is what the Fed calls successful communication. There will be more of it today.

Comments from Fed Vice-Chair Fischer and President Yellen will likely be crucial in terms of really hammering home expectations and we’ll hear from the former this afternoon. Fischer’s event is closed to media so it remains to be seen how much he’ll delve into policy outlook but we will also hear from Dudley this afternoon who’s views are closely aligned to those of Yellen so that could be worth watching out for. As a reminder Dudley last said about two weeks ago that two rate hikes this year was a ‘reasonable’ expectation.

According to Bloomberg calculations, Fed Funds futures show the odds of a move surged to 32 percent on Wednesday, after tripling to 12% from 4% in the prior session as data on inflation, housing starts and industrial production beat forecasts. Following months of expectation and fluctuations last year, including a selloff caused by China’s unexpected devaluation of the yuan, markets reacted calmly when the Fed finally raised rates in December for the first time since 2006, reflecting investor conviction in the U.S. recovery’s ability to withstand tighter monetary policy.

“The markets were getting a little too complacent for the scope for rate hikes this year and next year but the fed minutes were on the hawkish side yesterday so that made investors nervous,” said Allan von Mehren, chief analyst at Danske Bank told Bloomberg. “We see some repricing on bond yields and it’s also having a negative spill-over on equity markets.”

In other, otherwise very bullish news, Moody's lowers US growth outlook to 2.0% from 2.3% and cuts G20 EM growth to 4.2% vs. Prey. 4.4%, sees China growth slowing gradually to around 6.3% this year. However this time not even a major growth forecast cut was enough to send stocks soaring.

The Stoxx Europe 600 Index dropped 0.8 percent, with BHP Billiton Ltd. and Rio Tinto Group leading miners lower as commodities retreated. The European equity gauge has gone a month without posting a daily gain of at least 1 percent, and is down 4.5 percent from its April 20 peak. Futures on the S&P 500 lost 0.3 percent, indicating equities will decline after Wednesday closing little changed. Investors will look Thursday to an index of leading indicators in the U.S. for signs of the economy’s strength. Fed Vice Chairman Stanley Fischer and New York Fed chief William Dudley are scheduled to speak, while Wal-Mart Stores Inc. is among American companies reporting earnings.

Oil fell below $48 a barrel on Thursday, pressured by a stronger dollar and as a surprise increase in U.S. crude inventories served as a reminder that supply remains ample despite output problems. As Reuters recaps, supply losses in Canada and Nigeria have lent support, but cooler weather was expected to help firefighters battling Canadian wildfires. Traders said Exxon Mobil is boosting output at Nigeria's largest crude stream.

"The main factor weighing on prices is the much appreciated U.S. dollar," said Carsten Fritsch, analyst at Commerzbank. "What is more, rain forecast in the Canadian oil province of Alberta is giving rise to hopes that the devastating wildfires there could be brought under control."

Elsehwere, Egyptian stocks slipped for the first time in four days, falling 2 percent. The government has deployed naval ships to search for an EgyptAir Airbus A320 en route to Cairo from Paris that went missing off the coast overnight.

Market Wrap

  • S&P 500 futures down 0.3% to 2035
  • Stoxx 600 down 0.8% to 335
  • FTSE 100 down 1.5% to 6075
  • DAX down 1.5% to 9797
  • S&P GSCI Index down 1.6% to 364
  • MSCI Asia Pacific down 0.9% to 125
  • Nikkei 225 up less than 0.1% to 16647
  • Hang Seng down 0.7% to 19694
  • Shanghai Composite down less than 0.1% to 2807
  • S&P/ASX 200 down 0.6% to 5323
  • US 10-yr yield up 1bp to 1.86%
  • German 10Yr yield up 2bps to 0.19%
  • Italian 10Yr yield up less than 1bp to 1.5%
  • Spanish 10Yr yield up 1bp to 1.61%
  • Dollar Index up 0.1% to 95.17
  • WTI Crude futures down 2% to $47.22
  • Brent Futures down 2.3% to $47.82
  • Gold spot down 0.3% to $1,254
  • Silver spot down 1.5% to $16.65
Top Global News

  • Stocks, Bonds, Commodities Slide as Fed Weighs June Rate Hike
  • Bayer Bids for $42 Billion Monsanto to Form Life Sciences Giant
  • Moody’s Cuts 2016 U.S. Growth Forecast, Cites Weak Global Demand
  • Technip to Combine With FMC Technologies in All-Share Deal
  • Theranos Corrects Tens of Thousands of Blood-Testing Results
  • Dollar Climbs to Seven-Week High as Templeton Backs Divergence
  • Trump Invested in Outsourcing Companies He Denounced in Campaign
  • Zuckerberg Acknowledges Trust Gap After Meeting on Bias
  • Apple, Not China, Is JPMorgan’s Biggest Risk for Taiwan Stocks
Looking at regional markets, Asia stocks traded mostly lower following a subdued lead from Wall Street where US equities pared gains following a hawkish FOMC minutes in which most Fed officials saw a June hike likely if the economy warranted. This initially set the tone across the region with the ASX 200 (-0.6%) dragged by basic materials and energy as a firmer USD post-FOMC minutes weighed on commodities. Nikkei 225 (flat) fluctuated between gains and losses as JPY weakness and strong machine orders provided some optimism in Japan, while Shanghai Comp (flat) outperformed for a bulk of the session after the PBoC continued to up liquidity injections and China continued its supportive sector adjustments. 10yr JGBs saw some spill-over selling, with demand subdued as BoJ refrained from conducting its bond purchase program, while further pressure was seen after the 20yr auction in which the b/c ratio declined from prior.

Top Asian News

  • Suzuki Says Improper Mileage Tests Used on 2.1 Million Cars: Testing didn’t follow protocol due to concerns about weather
  • Australia Adds More Jobs as Unemployment Rate Holds at 5.7%: Employment data comes in slightly under economist forecasts
  • Apple, Not China, Is JPMorgan’s Biggest Risk for Taiwan Stocks: Foreign investors pull $2.2 billion as Apple suppliers fall
  • BEA Union Cuts China Property Bond Exposure on Valuation Concern: Holdings in key fund 33 percent versus 55 percent last year
  • Two Chinese Fighters Intercept U.S. Plane Over South China Sea: Encounter in international airspace could further strain ties
  • Modi Set for Lone India State Win as Regional Parties Dominate: Modi’s BJP is ahead in Assam in 126-member state assembly
  • Vale Delivers Warning on Iron Ore After China Frenzy Fades Away: Watch out for bumpy road ahead as low-cost supply is set to pick up
European equities have slipped this morning following the fallout of the more hawkish than expected FOMC meeting minutes, having kept June as a live possibility to tighten monetary policy. Subsequently, FFR futures are now pricing in a 32% chance of a hike next month, as such financials outperform amid the prospect of higher borrowing costs for consumers. However, failed to offset the weakness across material names as they are hampered by the fall in commodity prices in reaction to the upside in the greenback. Additionally, notable weakness has been seen across airliners in the wake of reports of a missing EgyptAir flight, while Thomas Cooks underperforms in relation to other airliners after their CEO stated that FY underlying earnings is at the lower end of guidance. Despite the downside in equities European bonds have been pressured this morning amid the rise in yields, with Bunds yields bear steepening across the curve, which comes after the aforementioned hawkish FOMC minutes. Furthermore, desks are also attributing some of the price action to technical factors with downside limited by support holding around 163.00.

Top European News

  • European Stocks Slide as Fed Minutes Signal June Hike Possible: Stoxx Europe 600 Index lost 0.5 percent at 9:23 a.m. in London, with commodity producers declining the most
  • Bayer Eyes $42 Billion Monsanto in Quest for Seeds Dominance: bold attempt by Bayer to snatch the last independent global seeds producer and become the world’s biggest supplier of farm chemicals
  • Investec’s Full-Year Profit Rises 3% as Bank Lending Increases: Net income for the 12 months ended March 31 rose to 423 million pounds ($616 million) from 410 million pounds a year earlier
In FX, the Japanese yen has been modestly stronger overnight, with the USDJPY trading closely around 110, following a 1 percent slide in the last session when it hit 110.40 following the Fed minutes. Australia’s dollar weakened as much as 0.5 percent, and the MSCI Emerging Markets Currency Index fell 0.5 percent, taking its retreat in May to 3 percent. Indonesia’s rupiah and South Korea’s won led declines on Thursday, weakening at least 0.8 percent.

But the overnight highlight as previosly reported was China’s yuan which declined as much as 0.1 percent in Shanghai’s onshore market. It was more volatile in offshore trading, rebounding 0.3 percent after a 0.5 percent loss on Wednesday that marked its biggest decline since January. South Africa’s rand climbed 0.4 percent, paring this month’s slide to 10 percent, the worst performer among 31 major currencies worldwide. While the central bank will probably keep interest rates unchanged on Thursday, six of the 25 estimates from economist in a Bloomberg survey predict a quarter-point increase. The rest see the benchmark remaining at 7 percent.

In commodities, WTI dropped 2.2% to $47.15 a barrel, extending Wednesday’s retreat from a seven-month high. The dollar’s increase coupled with renewed concern over the global oil glut unsettled markets, with U.S. crude inventories unexpectedly rising by 1.3 million barrels last week, according to data issued on Wednesday. Rain in Canada may have also slowed fires that have shifted back toward the province of Alberta’s oil-sands operations. Copper, nickel and zinc fell by at least 0.8 percent in London. Gold slid to a three-week low on concern the Fed is moving closer to raising interest rates. Metal for immediate delivery fell as much as 0.5 percent to $1,252.42 an ounce.

On the US calendar today we have the Philly Fed’s manufacturing survey will be closely watched especially considering the weakness in the NY Fed survey earlier this week. We’ll also get the latest initial jobless claims numbers which are expected to come back down again following the big spike higher in the last reading, while the Conference Board’s leading index for April rounds off the data. Fedspeak wise we will hear from Vice-President Fischer who is due to speak at 2.15pm BST, while Dudley (at 3.30pm BST) is also scheduled for comments today.

Bulletin Headline Summary from Bloomberg and RanSquawk

  • European equities follow suit from the fallout of the hawkish FOMC minutes release, with Bunds also softer despite capping losses after finding support at 163.00
  • GBP has been another source of focus for FX markets in the wake of upbeat UK retail sales while USD remains firmer against its major counterparts
  • Looking ahead, highlights include ECB Minutes, Initial Jobless Claims, Fed's Fischer (Voter, Neutral), Dudley (Voter, Soft Dove) and BoE's Vlieghe (Dove)
  • Treasuries fall during overnight trading, with global equities dropping to six-week low and commodities lower against a stronger U.S. dollar as the world braces for the possibility that the Fed may raise rates in June.
  • An EgyptAir Airbus A320 en route from Paris to Cairo with 66 people on board went missing over the Mediterranean Sea in cloudless stable weather, raising concerns of a crash caused by a deliberate act or mechanical failure
  • Federal Reserve officials want to raise interest rates in June. Now, it is up to the U.S. economy to confirm their view that slow growth in the first quarter was temporary;
  • Moody’s Investors Service lowered its growth forecast for the U.S. economy this year to 2 percent from 2.3 percent to account for a weak first quarter, while anticipating underlying resilience through 2017
  • Is the link between monetary policy and inflation broken? The central bank governor of Denmark, where nominal rates have been negative longer than anywhere else in the world, says there may be signs that the link has grown weaker
  • The BOJ must drastically lower its presence in the nation’s stock market if it wants to preserve the ability to one day unwind its massive position, according to the Democratic Party’s Tsutomu Okubo, a former vice finance minister
  • Given the uncertainty of Brexit’s potential impact, a vote to leave is a risk. The question is: Is the risk worth taking?
  • Euro-area officials are weighing a proposal to purchase loans that member states made to Greece in a move that would ease the nation’s debt burden, a precondition for the International Monetary Fund’s involvement in a bailout program
  • Quiet trading floors are set to depress global investment banks’ second-quarter revenue 24 percent, with the underwriting and equities businesses facing the biggest drops, according to analysts at JPMorgan Chase & Co
  • Sovereign 10Y yields lower; Asian, European equities mostly lower; U.S. equity-index futures lower; WTI crude oil, precious metals fall
US Event Calendar

  • 7:30am: ECB issues policy meeting minutes
  • 8:30am: Chicago Fed Nat Activity Index, April est. -0.20 (prior -0.44)
  • 8:30am: Initial Jobless Claims, May 14, est. 275k (prior 294k)
  • 8:30am: Philadelphia Fed Business Outlook, May, est. 3.0 (prior -1.6)
  • 9:45am: Bloomberg Economic Expectations, May (prior 44.5)
  • 10am: Leading Index, April, est. 0.4% (prior 0.2%)
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural-gas storage change
  • 10:30am: Fed’s Dudley speaks in New York
DB's Jim Reid concludes the overnight wrap

Before we move onto a hawkish Fed and a continuation of the sudden and sharp re-pricing of interest rate risk, this morning we have published the fifth edition of DB’s annual survey of global prices of goods and services which my team has now taken over. This year we have added a number of extra European cities. In adding these it confirms that Europe is an expensive place to buy things. Indeed Swiss and Nordic/Scandinavian cities are generally the most expensive in the world. Sydney and London also require a bulging wallet. EM countries remain the cheapest places overall though and the gap between DM and EM prices has mostly widened over the past 4 years helped by the latter’s currency and economic weakness.

Our weekend getaway index neatly reflects the general cost of living around the world. Zurich leads the way, followed by Sydney, London, Milan, Stockholm, Copenhagen, NYC, San Francisco, Amsterdam and Madrid. Our cheap date index sees Zurich, Copenhagen, Tokyo, Stockholm and Amsterdam as the most expensive cities to woo a partner. At the other end of the scale, cities in Malaysia, India and South Africa are the cheapest for a weekend away and around a third of the cost of the most expensive places. For those wanting a real cheap ‘cheap date’, India, Indonesia, the Philippines and South Africa are the places to go. Indeed in all of these places you can have at least 4 dates for the price of one in Zurich but please don’t tell the other 3 people! Indeed if someone asks you out on a date in Zurich please clarify who is paying before accepting.

Elsewhere we look at the price of numerous goods and services across the world including iPhones, jeans, trainers, cars, Coke, meals out, cinema tickets, taxis, public transport, beers, cigs, gym membership, a haircut, the economist and the price of attending business school. Is your country cheap or expensive in these areas? See the report published in the last hour to find out.

So the merry dance starts. The Fed minutes last night highlight a committee that continues to want to raise rates whenever they can push it through. However what normally happens after such hawkishness in the current environment is either the data doesn't ever quite get there for them to pull the trigger or the global market takes fright by enough for them to have to postpone their plan. I'm not sure this time is any different but clearly you can try to trade the volatility between the two points. Indeed the probability of a June hike has moved from 4% on Monday to 32% after last night's minutes. Contracts further out in the year have also seen a reasonable re-pricing. The probability of a July move is now up to 47% from 28% just prior to the minutes and 19% on Monday, while a move by December has gone from 56% at the start of the week to 65% on Tuesday and to 75% post minutes.

Fixed income markets were the big mover yesterday. Looking at Treasuries the 2y yield was up another 6bps yesterday to 0.894% which is the highest yield since mid-March. In fact yields at the short-end of the curve are up an impressive 15bps since the close last Friday. The 10y yield yesterday was actually up 8bps by the end of play at 1.855% and approaching the top end of the recent range. FX markets were also particularly active and unsurprisingly it was a relatively strong day for the US Dollar with the Dollar index up +0.56% with EM currencies hit hardest across the board.

In terms of the important stuff, much of the focus was on the line concerning that ‘most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labour market conditions continuing to strengthen, and inflation making progress towards the Committee’s 2 percent objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June’. That said there was a bit of balance in that comment with the sentence that ‘participants expressed a range of views about the likelihood that incoming information would make it appropriate to adjust the stance of policy at the time of the next meeting’ with some officials expressing confidence that the incoming data would be sufficient enough to make a June increase appropriate, but offset by ‘several participants’ who seemed more concerned that the data would not provide ‘sufficiently clear signals’ to determine if a move next month is warranted. Some also cited concern about the low implied pricing in futures markets, while it was noted that participants viewed downside risks from abroad as having reduced, but that close monitoring is still warranted’.

So it’s over to the data now and the continued flow of Fedspeak. As we highlighted yesterday comments from Fed Vice-Chair Fischer and President Yellen will likely be crucial in terms of really hammering home expectations and we’ll hear from the former this afternoon. Fischer’s event is closed to media so it remains to be seen how much he’ll delve into policy outlook but we will also hear from Dudley this afternoon who’s views are closely aligned to those of Yellen so that could be worth watching out for. As a reminder Dudley last said about two weeks ago that two rate hikes this year was a ‘reasonable’ expectation.

Refreshing our screens this morning, aside from China the vast majority of bourses in Asia are in the red this morning. There are modest losses for the Nikkei (-0.05%) and Hang Seng (-0.24%), although the Kospi (-0.54%) and ASX (-0.70%) are down a bit more. China is the outlier again with the Shanghai Comp currently +0.58% with Bloomberg reporting that steelmakers in particular have surged following the news that President Xi is to push ahead with plans to reduce overcapacity at SOE’s and so support commodity prices. US equity index futures are modestly lower this morning, while the US Dollar has continued to gain.
Recapping the rest of the moves in markets yesterday. US equities were initially putting in a relatively strong performance leading into the minutes with the S&P 500 up as much as +0.6%. That quickly changed once the text was released however with the index actually plummeting to a -0.6% loss before paring that move to finish pretty much unchanged (+0.02%) by the end of play as a strong session for banks helped to offset weakness for utility and telecom names. The commodity complex was also hit hard with WTI creeping back below $48/bbl this morning (down about 2.5% from just prior to the minutes) after being weighed down by those US Dollar gains, while in the metals space it was precious metals which declined the sharpest. Gold, Silver and Platinum ended -1.60%, -1.99% and -2.45% respectively.

Moves for European equities look a bit outdated now although we did see bourses finally break out with the Stoxx 600 closing +0.85% with Banks gaining on the prior day’s Fedspeak. Meanwhile there was some data released in Europe yesterday to mention. There were no changes in the final revisions to Euro area CPI in April with the monthly headline reading of 0.0% mom meaning the YoY rate was confirmed at -0.2% and down two-tenths from March. The core print was also confirmed +0.7% yoy which is down three tenths and is the lowest print in 12 months. The other data was out of the UK yesterday with the release of the latest employment report. The ILO unemployment rate was unchanged in March as expected at 5.1%. Employment was reported as rising 44k in the first quarter compared with the three months to December which was better than expected, although surprisingly average weekly earnings ex bonuses did slow to 2.1% yoy from 2.2% after consensus had been for modest growth.

Looking over today’s calendar, this morning we’re kicking off in Europe where shortly after this goes to print the Q1 employment figures from France are released. Following that later this morning will be April retail sales data out of the UK which is expected to rebound. That comes before the ECB minutes which are due to be released around lunchtime. Over in the US this afternoon the Philly Fed’s manufacturing survey will be closely watched especially considering the weakness in the NY Fed survey earlier this week. We’ll also get the latest initial jobless claims numbers which are expected to come back down again following the big spike higher in the last reading, while the Conference Board’s leading index for April rounds off the data. As mentioned earlier, Fedspeak wise we will hear from Vice-President Fischer who is due to speak at 2.15pm BST, while Dudley (at 3.30pm BST) is also scheduled for comments today.

http://www.zerohedge.com/news/2016-...sp-set-open-red-year-hawkish-fed-ignites-risk
 

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