• "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 ~ 31st Ed., Vol.2 ~ August 1st - 5th

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#1
Euro Stocks Reverse Early Gains Dragged Lower By Slumping Banks; US Futures Flat; Crude Slides


by Tyler Durden
Aug 1, 2016 6:52 AM


Following last Friday's shocking weak US GDP print, Asian stocks jumped to an 11 month high on reduced prospects of a near-term rate hike, while the region also digested mostly encouraging in conflicting Chinese PMI data. European bank stocks initially rose following the release of the 2016 stress test then declined, tempering gains in global equity indexes, amid investor skepticism over the usefulness of stress-test results and weaker oil prices. Shares and currencies in emerging markets rallied to the highest in about a year, while miners and industrial metals jumped.

Declines in European banks put a dent in global equities, which rallied in July to their best month since March on prospects central banks will add to stimulus or refrain from reducing it. Traders peeled back bets on a U.S. rate hike this year after data Friday showed annualized gross domestic product rose 1.2 percent last quarter, less than half the 2.5 percent projected by economists. The Bank of Japan added to its easing last week and economists forecast policy makers in Australia and England will cut their benchmark interest rates from record lows this week.



As Bloomberg reports, lenders in peripheral nations weighed heaviest on an index of lenders, which sank as much as 1.9 percent after opening higher. The MSCI Emerging Markets Index jumped to the highest since last August and the equivalent currency index to the highest since July 2015, with Malaysia’s ringgit and South Korea’s won gaining the most. Zinc headed for the highest close in a year. The pound weakened against all of its 16 major counterparts.

Best summarizing trader mood as we start off another week, and month, was Saxo's Peter Garnry who told Bloomberg that “Investors are skeptical about everything these days. The problem with the stress tests is that they were too soft, only assuming a mild to moderate recession. This means that the data doesn’t tell us much, and it’s not too surprising that most banks passed.”

The Stoxx Europe 600 Index fell 0.4% as of 11:33 a.m. in London, erasing earlier gains of as much as 0.6 percent. European equities had their biggest monthly advance since October last month, with lenders jumping the most in more than a year. Yet July was marked by record outflows from European stock funds and thin volume, indicating a lack of conviction in the rally. Spain’s Banco Santander SA fell 2.9%, Banco Bilbao Vizcaya Argentaria SA lost 4%, and UniCredit SpA sank more than 7%. Banks had initially risen at the open after stress tests showed most of them would keep an adequate level of capital in a crisis. BHP Billiton Ltd. and Rio Tinto Group led miners to the biggest gain of the 19 industry groups on the Stoxx 600 as commodity prices advanced.

Futures on the S&P 500 were little changed after the benchmark index capped its longest streak of monthly gains since 2014. The MSCI Emerging Markets Index jumped 1.2 percent, the most in three weeks on a closing basis. Equity benchmarks in Taiwan, Turkey and the Philippines advance more than 1 percent while Indonesian stocks rallied 2.8 percent, rebounding from the steepest drop in five months on Friday. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong climbed 1.9 percent, the most since July 11. A private manufacturing index unexpectedly rose to the highest since February 2015, while the reading on the official government’s gauge slipped.

* * *

WTI continued to disconnect from overall risk, falling back toward $41, extending its biggest monthly decline in year as U.S. producers increased drilling, crude and fuel stockpiles remained bloated. Brent near $43. “The hope for a clear rebalancing may have to wait a couple more months, since oil’s drain is clogged in the meantime,” Barclays says in report. “Demand growth remains lackluster and has not made significant inroads into the inventory overhang.”

“There is a clear downward momentum to the market at the moment,” says Michael McCarthy, a chief strategist at CMC Markets in Sydney. “There are concerns about the oversupply situation continuing. Clearly $40 a barrel is a key point for West Texas and I’d expect to see support there given the bounces we’ve seen previously at that level.”

Drillers boosted active rigs for 5th week, longest run of gains since August. Hedge funds expanded WTI short positions in futures, options combined, by most in data back to 2006

* * *

The 10-year Treasury note yield climbed three basis points to 1.48 percent, Bloomberg Bond Trader data show. Fed Bank of New York President William Dudley said investors are underestimating how many times policy makers in the world’s largest economy will raise interest rates. “The movement in investor expectations towards a flatter path for U.S. short-term interest rates seems broadly appropriate,” Dudley said in remarks prepared for a speech Monday at a conference in Bali. However, “it is premature to rule out further monetary policy tightening this year,” he said. The yield on Japan’s 10-year bonds climbed five basis points to minus 0.145 percent, after jumping eight basis points at the end of last week.

This morning's top news stories include: Dudley Says He Won’t Rule Out More Fed Tightening This Year; Carney Nears Rate Cut After BOE Detour on Road to Stimulus; Steady Euro-Area Factory Output Masks Worries in Periphery; Uber China to Merge With Didi to Create $35 Billion Company; China Factory Gauges Splinter for July, While Services Advance.

Market Snapshot
  • S&P 500 futures up 0.2% to 2173
  • Stoxx 600 down 0.1% to 342
  • FTSE 100 up 0.1% to 6734
  • DAX up 0.5% to 10392
  • German 10Yr yield up 1bp to -0.11%
  • Italian 10Yr yield up less than 1bp to 1.17%
  • Spanish 10Yr yield up less than 1bp to 1.03%
  • S&P GSCI Index down 0.6% to 337.5
  • MSCI Asia Pacific up 0.8% to 138
  • US 10-yr yield up 2bps to 1.48%
  • Dollar Index up 0.17% to 95.7
  • WTI Crude futures down 1% to $41.18
  • Brent Futures down 1% to $43.09
  • Gold spot down 0.1% to $1,349
  • Silver spot up 0.9% to $20.51
Global Headline News
  • Apple Stock Drop Fails to Deter Magellan From Technology Spree
  • Didi Chuxing to Buy Uber China; Uber China Said to Merge With Didi to Create $35 Billion Company
  • China Factory Gauges Splinter for July, While Services Advance
  • Carney Nears Rate Cut After BOE Detour on Road to Stimulus
  • Dudley Says He Won’t Rule Out More Fed Tightening This Year
  • Steady Euro-Area Factory Output Masks Worries in Periphery
  • Global Earnings Tumble as Companies Dig Deeper for Cost Savings
  • Backlash Grows Over Trump’s Comments on Dead Muslim Soldier’s Parents
Looking at regional markets, Asia began the month mostly positive as weak Q2 US GDP figures further reduced prospects of a near-term rate hike, while the region also digested mostly encouraging Chinese PMI data. Nikkei 225 (+0.4%) shrugged off losses of over 1% as JPY pared some of the strength seen from the post-BoJ and US GDP disappointment. ASX 200 (+0.5%) ascended past 5,600 to print fresh YTD highs, as the commodities complex led the advances. Chinese markets were mixed which reflected the divergence in PMI numbers with Hang Seng (+1.1%) outperforming after Chinese Caixin Manufacturing PMI printed its first expansion in 17 months and Non-Manufacturing printed a 7-month high, while Shanghai Comp (-1.4%) failed to take heed as Official Manufacturing PMI, which reflects larger companies including SOEs, recorded its first contraction in 5 months.

Key Asian Data:
  • Chinese Official Manufacturing PMI (Jul) M/M 49.9 vs. Exp. 50.0 (Prey. 50.0); 1st contraction in 5 months. - Non-Manufacturing PMI (Jul) 53.9 (Prey. 53.7); 7-month high. (Newswires)
  • Chinese Caixin Manufacturing PMI (Jul) 50.6 vs. Exp. 48.8 (Prey. 48.6); 1st expansion in 17 months. (Newswires)
  • Japan July Nikkei PMI Mfg 49.3 no est. (prior 49.0)
  • Taiwan July Nikkei PMI Mfg 51.0 no est. (prior 50.5)
  • Indonesia July Nikkei PMI Mfg 48.4 no est. (prior 51.9)
  • India July Nikkei PMI Mfg 51.8 no est. (prior 51.7)
  • Thailand July CPI y/y 0.10% est. 0.50%
  • Indonesia July CPI y/y 3.21% est. 3.37%
Top Asian News
  • Didi Chuxing to Buy Uber China
  • Fosun Plans Asset Sales in Reversal of $15 Billion M&A Spree
  • MUFG Profit Falls More Than Expected as Negative Rates Bite
  • China Said to Mull Mergers to Create Two State Steel Giants
  • BOJ Confusion on Nomura Floor Shows Conundrum for Stock Traders
  • Sakakibara Says Yen Will Slowly Appreciate to 100 per Dollar
  • Japan Tobacco Net Forecast, Undermined by Yen, Misses Estimates
  • Macau July Gaming Beats Estimates as Resorts Draw Tourists
  • Japan Pension Whale’s $52 Billion Loss Tied to Passive Ways
  • India IPO Returns Beat U.S. as Funds Chase High-Growth Companies
  • Hong Kong Move to Bar Pro-Independence Candidates Jolts Election
European equities initially kick off the week on the front foot underpinned by the results of the EU stress test in which bank are seen to be at a better position and more resilient. The biggest gainer of the morning has been Monte Paschi (+5.8%) whereby the banks board agreed to unload NPLs and raise EUR 5bIn worth of capital. However, since the open, European bourses have pared their opening gains (Eurostoxx flat) with sentiment by the plethora of soft Mfg. PMI figures. While from an equity perspective UniCredit (-6%) has seen an 8% turnaround, with attention being given to comments from Credit Suisse stating that the Italian bank needs recapitalisation of EUR 4-9bIn while their CETI ratio had only just reached the 7% benchmark. In credit markets, the initial upside in equities saw fixed income assets gap lower with Bunds firmly below 168.00, however Italian credit has outperformed this morning in the wake of reports that 11th hour rescue deal for Monte Paschi staved off the immediate prospect of a government bailout.

European PMI Data:
  • Euro-zone Final Manufacturing PMI Revised to 52.0 vs Preliminary 51.9
  • Germany Final Manufacturing PMI Revised to 53.8 vs 53.7
  • France Final Manufacturing PMI Unrevised at 48.6
  • Netherlands Manufacturing PMI Rises to 53.2 vs 52.0
  • Spain Manufacturing PMI Drops to 51.0 vs 52.2
  • Italy Manufacturing PMI Drops to 51.2 vs 53.5
  • UK Manufacturing PMI Drops to 48.2 vs 49.1
Top European News
  • European Stocks Advance as Banks Rise After Stress-Test Results
  • Lufthansa Extends Pilot Union Negotiations Deadline Until Aug. 5
  • Vodafone Uses Voiceless Africa Plans to Get Tech-Savvy Youth
  • U.K. Business Lending Forecast to Shrink Until 2019, EY Says
  • Air Liquide Engineering Drop Leads to First-Half Profit Miss
In FX, sterling fell 0.5 percent to $1.3170 as a report showed U.K. manufacturing shrank more than initially forecast in July. The pound has fallen more than 11 percent against the dollar since Britain voted on June 23 to leave the European Union and posted its third consecutive monthly drop against the greenback last month. Hedge funds and other large speculators are the most bearish on the pound in almost 25 years amid speculation the Bank of England will cut interest rates for the first time in more than seven years this week. The yen retreated 0.2 percent to 102.28 per dollar after soaring 4 percent last week. BOJ Governor Haruhiko Kuroda’s decision to aim low at last week’s meeting raises the stakes for Prime Minister Shinzo Abe to deliver on a pledge for “bold” fiscal stimulus on Tuesday, when the government is due to announce details of a more than 28 trillion yen spending package. Former Japanese vice finance minister Eisuke Sakakibara said in an interview with Bloomberg Television that Abe’s fiscal stimulus package is unlikely to halt the rally that is taking the yen toward 100 per dollar. The won increased 1.1 percent, touching its strongest level since June 2015, while the ringgit gained 1.2 percent, after weakening 1 percent last month.

In commodities, Crude oil retreated 1.1 percent to $41.15 a barrel in New York, after slumping 14 percent in July. U.S. producers increased drilling for a fifth week amid a glut of crude and fuel supplies that are at the highest seasonal level in at least two decades. Most metals advanced, with nickel rising 1.2 percent and zinc climbing 1.3 percent on the London Metal Exchange after China’s official factory gauge unexpectedly fell below the dividing line between improvement and deterioration, leaving room for stimulus. China is considering a sweeping overhaul of its steel industry that would consolidate major steel producers into two giants, with one located in the north and the other in the south, according to people familiar with the plan. Iron ore futures on the Dalian Commodity Exchange climbed to a three-month high after gaining 7.6 percent last week.

On today's calendar, the early focus is on the final revisions to the July manufacturing PMI’s, which came in mostly in line if a little weaker than expected for peripheral nations. The UK number post Brexit will also be closely watched given the dive in the flash number: it showed an even steeper decline into contraction and pushed sterling the session lows. We’ll also get the manufacturing PMI in the US which is then closely followed by the ISM manufacturing for July, along with construction spending data.

* * *

Bulletin Headline Summary from RanSquawk and Bloomberg
  • European
    equities enter the North American crossover higher (albeit off best
    levels) in the wake of the latest ECB Stress test results and upbeat
    data from China
  • ECB stress test results showed an
    improvement in the resilience of banks although the likes of Barclays,
    RBS and Banca Monte dei Paschi di Siena's fared poorly
  • Looking ahead, highlights include US Manufacturing PMI, ISM Manufacturing and US Construction Spending
  • Treasuries lower in overnight trading, global equities mixed as emerging markets rally on reduced forecasts for Fed rate hikes.
  • Federal Reserve Bank of Dallas President Robert Kaplan said a rate increase at the next policy meeting in September is still possible even after a report last week showed second- quarter growth was a sluggish 1.2%
  • Investors are underestimating how many times the U.S. central bank will raise interest rates this year and next, but they are probably right about the pace being slower than previously thought, said Federal Reserve’s William Dudley
  • The key takeaway from the 2016 EU bank stress tests will be the message that regulators are relatively comfortable with bank solvency
  • European bank stocks declined, tempering gains in global equity indexes, amid investor skepticism over the usefulness of stress-test results and weaker oil prices
  • Corporate earnings are heading for a fifth straight quarter of declines, dragged down mostly by energy companies’ struggles with low oil prices and a tepid global economy that threatens to throttle sales growth in many industries
  • After shocking traders by leaving the key rate on hold last month, BOE Governor Mark Carney and the Monetary Policy Committee signaled that loosening would probably come this month
  • U.K. manufacturing shrank more than initially forecast in July, suffering its biggest drop in more than three years. A Purchasing Managers’ Index slumped to 48.2, below the one- off flash reading of 49.1, Markit Economics said Monday in London
  • A rule to prevent a run on the money-market industry will take effect this October and force funds to abandon a fixed $1-a-share price and float their NAV, causing a big shift into money-market funds that buy only government debt
  • Friday was a big day for Japan’s $1.3 trillion Government Pension Investment Fund which posted its worst annual loss since the financial crisis and disclosed individual equity holdings for the first time
  • Saudi Aramco lowered the pricing terms for Arab Light crude sold to Asia by the most in 10 months, signaling Saudi Arabia has no plans to back down while OPEC rival Iran tries to regain market share amid a global oversupply
  • Money managers increased bets on falling crude by the most ever as stockpiles climbed to the highest seasonal levels in at least two decades, nudging prices toward a bear market
US Event Calendar
  • 9:45am: Markit US Mfg PMI, Jul F, est. 52.9 (prior 52.9)
  • 10am: Construction Spending, June, est. 0.5% (prior -0.8%)
  • 10am: ISM Manufacturing, July, est. 53 (prior 53.2)
DB's Jim Reid concludes the overnight wrap

Although the dog days of summer are upon us, if you'd gone on holidays at 5pm Friday night only to return a week later you would have missed the results of the Euro bank stress tests, the announced proposed recap of Monte Paschi, this week's PMIs (including the most up to date post Brexit sentiment gauge of business confidence in the UK), confirmation of the latest Japanese fiscal package tomorrow, a likely first interest rate cut in the UK since March 2009 on Thursday (and to the lowest in the bank's 322 year history), and last but not least a crucial (ok we always seem to say that) US payroll report on Friday which after two volatile months will give us a better guide to the trend. You may even miss the opening ceremony of the Olympics in Rio if you're delayed on your return. I can't believe it's 4 years since the London Olympics enthralled us here. Then again I can't believe it was 50 years ago this past weekend that England won their only football World Cup. I wonder if it will ever happen in my lifetime? Please don't answer!!

I'm also not sure it feels like nearly 2 years since we saw the last European bank stress tests. The results of the latest EBA tests were out late Friday night and showed only one bank out of the 51 covered with a negative fully loaded CET1 capital at YE 2018 under the adverse scenario. 49 out of 51 were above 6% on this measure.

The overall results will probably be seen as a bit of a relief as there were no nasty surprises. Most banks were in the region of where analysts had expected them with maybe a few micro surprises. However a couple of the macro issues with the test are that a) it didn't model for a prolonged period of low or negative rates/yields or it didn't model any Brexit type scenarios. One could argue that medium to long-term profitability issues are one of the main issues at the moment (over and above capital for now) and low/negative yields are causing big problems with this. It'll be interesting to see whether equity investors are impressed with the relatively sanguine results when any short-term sighs of relief fade. European bank shares are down around 35% since the stress tests in 2014. The recent accelerated concerns over Italian banks came after Brexit flattened curves and were perceived to cement lower rates/yields for longer. This hasn't changed and worries will persist but the results will probably mean that a wider Italian rescue may not be absolutely essential immediately. This means that we may not get anything before the constitutional referendum so this could linger on for a while without coming to a head. On credit a reminder that my team published a note last week on bank capital with a relative constructive view on bonds further down the capital structure. It's likely that bank capital will respond well to these results which follows the recent trend of bank capital decoupling from bank equities.

The other big news on Friday was the US GDP report (Q2 1.2% vs 2.5% expected earlier last week) which was disappointing whichever way you look at it. The bulls might point to the decent household consumption numbers (4.2% vs 4.4% expected but improved from 1.6% in Q1) and the run down in inventories as cause for optimism but it's worth looking at the YoY numbers to illustrate a lacklustre economy that at the moment is continuing to exhibit secular stagnation tendencies.

Real GDP was a lowly 1.2% over the past year and YoY nominal GDP fell to just 2.4%, the lowest since Q1 2010 (2.1%) a year that included a quarter from the post GFC recession. In this debt overloaded world, it's always going to be tough to get very far with nominal GDP at these lowly levels - and this is the strongest major DM economy. As DB's Joe LaVorgna pointed out on Friday this is also ominous for corporate profits. It's also not great for employment prospects and we certainly think we've shifted into a new lower payroll regime. Joe expects 150k (consensus 175k) for this Friday which is in line with the 3-month average. The average monthly payroll in 2014 and 2015 was 251k and 229k respectively. Both employment and profits continue to look late cycle to us.

Over to Asia so far this morning and the highlight so far has been the latest PMIs from China. It's quite difficult to decipher too much from it with the official July manufacturing number at 49.9 (vs 50 in June) and inline with consensus. However the equivalent from Caixin/Markit climbed 2 points from last month to 50.6 - the highest since February 2015. The official non-manufacturing release was 53.9 (53.7 last month). Markets are mixed with the Shanghai Comp -1.25% but with the Hang Seng +1.31%. The Nikkei has edged into positive territory (+0.3%) and the Yen is slightly weaker (-0.4%) having rallied 4% last week as the BoJ eased less than expected, thus passing the reins to Abe who we'll hear from tomorrow.

European equities saw a small rebound on Friday following some positive surprises in Eurozone growth and inflation data. The STOXX 600 index ended the day up +0.71%, ending the week (month) marginally higher by +0.46% (+3.64%). However the market has still not managed to completely recoup its losses since the UK referendum, cumulatively down -1.28% since the day of the vote. US equities shrugged off the weak GDP numbers (probably focusing on its impact on the Fed) to also rise marginally by +0.16% on Friday but ending the week broadly flat.

Staying with equities, our European Equity strategists have published their latest update this morning and the highlight is that the FTSE 250, filled with UK domestic stocks, is now impressively within a whisker of its pre-referendum level. In the report, they argue that the rebound (up 15% from the trough) is driven by three factors: (a) the strong performance of global risk assets (the FTSE 250 tends to outperform when cyclicals do well); (b) the stabilization in the GBP and (c) the hope that the UK macro fall-out from the referendum might be limited. With our FX strategists still very bearish on the GBP, they cautious on risk assets overall and with the post-referendum UK macro indicators looking atrocious across the board (PMIs, CBI business optimism, GfK consumer confidence), they see around 10% downside for FTSE 250 relative to the more export-focused FTSE 100 by year-end. For European equities they remain cautious with the YE target 4% below current levels. Email Sebastian.Raedler@db.com for the full report.

Back to Friday, credit outperformed in Europe. iTraxx IG and Crossover tightened by -2.7bps and -6.6bps respectively to end the week flat. Over in the US CDX IG (-0.4bps) and HY (-1.3bps) also tightened marginally but ended the week wider by +3.3bps and +15.6bps respectively. The recent drop in Oil into bear market territory is starting to impact US credit again.

At the other end of the risk spectrum, we saw US and German 10Y yields drop by -3bps and -2.9bps respectively on Friday, falling by -9.1bps and -8.9bps over the course of the week. Gold was up +0.9% and gained +1.7% on the week. The US dollar index declined by -1.1% on Friday as the probability of a rate hike by December was further reduced to 34.4% (from 44.9% on Thursday). The drop capped off a week of losses (-1.9%) that erased all prior gains on the month so far.

Looking more closely now at the other main data out on Friday. In Europe we saw Euro Area GDP growth momentum slow but still come in marginally above expectations (1.6% YoY vs. 1.5% expected; 1.7% previous). French Q2 GDP numbers disappointed (1.4% YoY vs. 1.6% expected) while Spain beat expectations but saw growth slow from the quarter before (3.2% YoY vs. 3.1% expected; 3.4% previous). We also saw initial July CPI estimates for the Eurozone clocking in marginally above consensus (0.2% vs. 0.1% expected; 0.1% previous). Preliminary inflation numbers for France came in as expected (0.4% YoY; 0.3% previous) while Spain (-0.6% YoY vs. -0.8% expected) and Italy (-0.1% YoY vs. -0.2% expected) beat estimates but remained in deflationary territory. We also saw retail sales in Germany fall in June (-0.1% mom vs. 0.1% expected; 0.7% previous) but surprise on the upside on an annual basis (2.7% YoY vs. 1.5% expected; 2.8% previous). We also saw the Eurozone unemployment rate for June hold steady at 10.1% as expected.

Taking a look over at the US outside of the disappointing GDP print survey data was somewhat more positive as we saw the Chicago PMI number (MNI Business Barometer) for July decline less than expected (55.8 vs. 54 expected; 56.8 previous) from its 17-month high in June. The U.Michigan Sentiment indicator for July clocked in marginally below expectations at 90.0 (vs. 90.2 expected) but improved from the previous month’s reading (89.5).

This morning in Europe the early focus is on the final revisions to those July manufacturing PMI’s, along with a first look at the data for the periphery. The UK number post Brexit will also be closely watched given the dive in the flash number. We’ll also get the manufacturing PMI in the US which is then closely followed by the ISM manufacturing for July, along with construction spending data.

Away from the data, the only central bank speak of note comes from Kaplan when he is due to speak on Tuesday and Thursday. Earnings will continue to be a huge focus and we’ve got 115 S&P 500 companies due to report (14% of the market cap) including Proctor & Gamble (Tuesday), Pfizer (Tuesday), AIG (Tuesday), Time Warner (Wednesday) and Kraft Heinz (Thursday). In Europe we’ll also get reports from 91 Euro Stoxx companies (16% of market cap) including HSBC, Siemens, Allianz, Rio Tinto and BMW.

http://www.zerohedge.com/news/2016-...-lower-slumping-banks-us-futures-flat-crude-s
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#2
Frontrunning: August 1


by Tyler Durden
Aug 1, 2016 7:58 AM

  • Global stocks hit highest in a year but banks take shine off Europe (Reuters)
  • Fed’s Dudley Warns It Is Premature to Rule Out an Interest-Rate Increase This Year (WSJ)
  • Fed’s Kaplan Says September ‘On the Table’ If Data Support (BBG)
  • Europe's stress tests fail to ease investors' bank sector worries (Reuters)
  • Trump’s Attacks on Khan Family Roil Race But May Not Alter It (BBG)
  • Father of Slain Soldier Volleys Back at Donald Trump (WSJ)
  • Clinton says Russia behind DNC hacking, draws line to Trump (Reuters)
  • Russia says accusations it was behind DNC email hack are insulting (Reuters)
  • Islamic State calls on members to carry out jihad in Russia (Reuters)
  • Celgene Accused of Using Charities in ‘Scheme to Gain Billions' (BBG)
  • Hunt for Returns Reaches Pakistan (WSJ)
  • A $400 Billion Influx Squeezes U.S. Bond Market’s Safest Asset (BBG)
  • Abe's Japan Spending Package Likely to Come Up Light (WSJ)
  • More Companies Are Choosing a Sale Over an IPO (WSJ)
  • The Fragile U.S. Economy Now Facing a Slowdown in Building Boom (BBG)
  • China stakes a strong claim in the Greek electricity landscape (Kathimerini)
  • Goldman Bond Deals With 1MDB Under Singapore Central Bank Review (BBG)
  • U.S. judge to weigh halt to North Carolina transgender bathroom law (Reuters)
  • Britain’s scientists are freaking out over Brexit (WaPo)
  • Turkey captures 11 involved in bid to seize Erdogan during coup attempt (Reuters)

Overnight Media Digest

WSJ

- Federal Reserve Bank of New York President William Dudley argued for continued caution over the path of U.S. interest rates, given uncertainty over the global outlook, but warned that traders who have been ruling out an interest-rate increase later this year are growing too complacent. http://on.wsj.com/2ar4Y5E

- China's homegrown ride-hailing champion, Didi Chuxing Technology Co, has reached a deal to acquire Uber Technologies Inc's China operations, people familiar with the deal said, marking an end to their bruising competition for passengers. http://on.wsj.com/2ar5O2o

- Pope Francis said the inspiration for terrorism wasn't Islam but a world economy that worshiped the "god of money" and drove the disenfranchised to violence. "Terrorism grows when there is no other option, and as long as the world economy has at its center the god of money and not the person, "the pope told reporters late Sunday as he returned to the Vatican from a five-day visit in Poland. "This is fundamental terrorism, against all humanity." http://on.wsj.com/2akIL7H

- A hot-air balloon hit at least one electrical transmission line before all 16 people on board died in a fiery crash in Central Texas on Saturday, prompting accident experts to delve into weather conditions, pilot actions and equipment issues, according to the first official release of information by federal investigators. At a Sunday press conference in the middle of a rural pasture bisected by power lines and towers about 30 miles south of Austin, Robert Sumwalt, the on-scene member of the National Transportation Safety Board, said preliminary indications pointed to some type of collision between a portion of the balloon and part of that electrical grid. http://on.wsj.com/2aVmihm


FT

* High-profile British Treasury Minister Jim O'Neill, a former Goldman Sachs chief economist, could quit his post over Prime Minister Theresa May's new approach to Chinese investment, the Financial Times reported, citing a friend of O'Neill.

* Ride-hailing service Uber will invest $500 million in an ambitious global mapping project to wean itself off dependence on Google Maps and pave the way for driverless cars, the Financial Times reported on Sunday.

* U.S. bank Goldman Sachs was asked to provide details of any paid work it has done for Tina Green, the wife of retail tycoon Philip Green, as British Members of Parliament continue to evaluate the banks involvement in Green's decision to sell BHS for 1 pound.


NYT

- Didi Chuxing, the largest ride-hailing service in China, plans to buy Uber China, the Chinese arm of the American ride-sharing giant, in a deal that values the new company at about $35 billion. http://nyti.ms/2aBWKH9

- HBO's new president of programming Casey Bloys said that "Game of Thrones" would conclude after its eighth season, and he acknowledged that next season's summer premiere date would mean the show would not be eligible for the 2017 Emmys. http://nyti.ms/2aBXZq3

- A consortium of Chinese investors led by the game company Shanghai Giant Network Technology said it would pay $4.4 billion to Caesars Interactive Entertainment for Playtika, its social and mobile games unit. http://nyti.ms/2aBYgck


Britain

The Times

British taxpayers could bear the burden of 2.5 billion pounds ($3.30 billion) even if the Hinkley Point bill is dropped. EDF, the French energy giant, has already invested 2.5 billion pounds in developing the site for the nuclear plant. (http://bit.ly/2aUwzdM)

A three-member International Olympic Committee (IOC) panel will have the final say on which Russian athletes can compete at the Rio Games, reviewing all decisions taken by the international federations. The IOC earlier this month set criteria for Russians to be eligible to compete in Rio after revelations of state-backed doping in the country. (http://bit.ly/2aUx5ID)

The Guardian

The Bank of England is almost certain to cut benchmark borrowing costs when it sets policy on Aug. 4. This kind of quantitative easing could be used by policymakers to give an extra boost to the economy after the Brexit vote. (http://bit.ly/2aUxpaj)

Bernard Hogan-Howe, the Metropolitan Police commissioner, said Britain is well-equipped to prevent terror attacks, but it remained a question of 'when, not if' there would be an attack. His comment came in light of the recent Islamic State attacks on European countries. (http://bit.ly/2aUyiQt)

The Telegraph

A large number of workers could be denied flexible access to their final salary pension funds if a bill to allow companies to ditch their pension promises is passed by the government.(http://bit.ly/2aUyPSl)

Sky News

British Prime Minister Theresa May's first important order of business was meeting the bosses of four companies subject to inquiry by the Serious Fraud Office. She met with the chiefs of Barclays, GlaxoSmithKline, Rolls Royce and Tesco - each of which is being investigated for alleged wrongdoing. (http://bit.ly/2aUyQpu)

The deal worth 79 billion pounds ($104.32 billion) between SABMiller and Anheuser-Busch InBev remains to be voted on by shareholders of SABMiller. The board of SABMiller intends to persuade shareholders to approve the terms of the deal. (http://bit.ly/2aUzNxM)

The Independent

Former British Prime Minister David Cameron has reportedly offered knighthoods and other such titles to prominent campaigners from the Remain camp. Four cabinet members - Michael Fallon, David Lidington, Philip Hammond and Patrick McLoughlin - could be awarded knighthoods as well. (http://ind.pn/2aUCEXK)

The recent surge in anti-immigration hate crimes in Britain after the Brexit vote has occurred mostly in areas that strongly voted to leave the European Union. Statistics show hate crimes are on the rise in Eurosceptic areas of Britain. (http://ind.pn/2aUDaVr)

http://www.zerohedge.com/news/2016-08-01/frontrunning-august-1
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#3

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#4
Gold and Silver Market Morning: Aug-1-2016 -- Gold and silver prices returning to the upward trend?
By: Julian D. W. Phillips, Gold/Silver Forecaster - Global Watch
Shanghai prices were slightly lower but London stayed in line with Shanghai’s close. Shanghai continues to remain in synch with both New York and London despite the fact it is a far, far bigger physical gold market than the two put together. The Chinese appear to be quite happy to let the two smaller markets make the gold and silver price. But for how long?
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#5
Mornings With "V": Weekend Recap.
ROGUE MONEY


Streamed live 58 minutes ago
V Breaks Down the latest news and information of the day.
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#7
Global Shares Slide As Japan Stimulus Disappoints, RBA Underwhelems, Italy Bank Fears Return


by Tyler Durden
Aug 2, 2016 6:38 AM


European stocks slid to a two-week low amid mixed earnings, as bank stocks extended yesterday’s decline as fears that Italy is not "fixed" have reemerged sending both UniCredit and Monte Paschi tumbling, not helped by an adverse market reaction to a disappointing Japanese fiscal stimulus announcement, while the AUD first dropped but then jumped after the RBA's priced in rate cut was announced, seen as underwhelming.

As expected by both economists and the makrket, in the main central bank event overnight, the RBA cut rates by 25 bps to a new record low of 1.5%, however as Citi analysts quickly observed, much of RBA’s statement today - widely seen as hawkish - was a reproduction of the July comments, with no mention of further easing guidance, adding that the RBA appears to be sanguine about the housing market. “We wouldn’t be surprised if AUD ended up higher following the RBA’s interest rate cut,” Todd Elmer, Singapore-based strategist at Citigroup writes in note. He was right. After the AUD, which had already seen downward pressure ahead of RBA, dropped in kneejerk reaction to the rate cut, it promptly rebounded and was trading at session highs of moments ago in what has been a largely wasted "buy the currency news" rate cut.



And speaking of reacting to the news, the other notable overnight event was Japan's announcement of its JPY28 trillion stimulus plan, which however as we warned last week proved to be underwhelming, and as a result Japanese shares fell the most in almost four weeks to lead a slump in Asian equities, while the yen strengthened against all of its major peers and Japanese bonds tumbled after a 10Y debt auction drew widest tail since March 2015, which coupled with fears that that the BOJ may soon be phasing out QE, sent 10Y yields spiking higher by 8.5bp post-auction, almost back to 0%, and putting selling pressure on both US and European yields.

AS Bloomberg put it, the Japanese yen appreciated to the strongest level in three weeks against the dollar as extra spending announced by the government amounted to only a small part of a headline number flagged by Prime Minister Shinzo Abe last week. The currency climbed against all except one of its 16 major peers as Japan’s government announced 4.6 trillion yen ($45 billion) in extra spending for the current fiscal year, as Abe seeks to bolster the economy without abandoning targets for improving fiscal health. The measures are part of what Abe referred to in a speech last week as a 28 trillion yen stimulus package. Faltering stock markets also caused investors to shun riskier assets in favor of havens such as the yen.

The yen appreciated 0.7 percent to 101.70 per dollar at 10:33 a.m. in London. It touched 101.46 per dollar earlier, the strongest level since July 11.



“The acknowledgment is that the fact the fiscal package is not going to be the panacea to the ills of Japan in terms of emerging from deflation.” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “We are seeing risk appetite moving sharply on the defensive and accordingly we are seeing a flight to safety which will invariably favor a lower dollar-yen.”

The currency jumped last week as the Bank of Japan enlarged a program of buying exchange-traded funds, while keeping its negative interest rate unchanged and avoiding an increase in raising the target for the monetary base. “The headlines were 28 trillion yen, but the actual new spending will only be a quarter of that,” said Mansoor Mohi-uddin, a Singapore-based strategist at Royal Bank of Scotland Group Plc. “So another sign following Friday’s BOJ decision, policy makers aren’t beating expectations.”

Shifting to Europe, Commerzbank AG led Europe’s banking shares lower as Germany’s second-largest lender tumbled 8% after it scrapped its profit target for this year and forecast a drop in earnings. In Italy, UniCredit plunged 5.4% following yesterday's 9.4% drop, and was again halted as Il Messaggero reported that the lender
may consider a capital increase of as much as 8 billion euros.

"There doesn’t seem to be much confidence for banks making profit in this low-cost environment,” said Guillermo Hernandez Sampere, the head of trading at MPPM EK. “Oil prices were one of the main subjects in Q1 and now it’s back, but the situation hasn’t changed. There’s still too much being produced by the large oil countries."

The MSCI All-Country World Index fell 0.3% in early trading, while the Stoxx Europe 600 Index slipped 1 percent. Royal Dutch Shell Plc lost 2 percent, pulling crude producers lower. Metro AG dropped 6.9 percent after reporting third-quarter sales and profit that missed estimates because of swings in currencies. Deutsche Lufthansa AG declined 2.6 percent after saying that average ticket prices fell in the second quarter due to a combination of lower demand stemming from terrorist attacks and excess capacity across the airline industry. S&P 500 futures dropped 0.2%, signaling U.S. equities will extend losses into a second day after erasing gains in late trading Monday, while the Dow's losing streak - 6 days in a row as of yesterday - in over a year may continue

Oil stayed near $40 a barrel, after a slide that pushed it into a bear market on Monday. West Texas Intermediate crude was 0.2 percent higher at $40.13 a barrel after sliding to its lowest settlement price since April 18 on Monday. Futures have retreated 22 percent from a peak reached in June, meeting the common definition of a bear market.

On today's docket, investors will look to economic data which includes releases on personal income and spending forecast to show continued expansion for June. Earnings will also be in focus, with companies including Pfizer Inc. and American International Group Inc. posting results. About 57 percent of S&P 500 members that have reported so far beat sales projections, while 80 percent topped profit forecasts. Analysts estimate profit at S&P 500 companies fell 3.2 percent in the second quarter.

Market Snapshot
  • S&P 500 futures down 0.3% to 2159
  • Stoxx 600 down 1.2% to 336
  • FTSE 100 down 0.8% to 6642
  • DAX down 1.4% to 10186
  • German 10Yr yield up 3bps to -0.07%
  • Italian 10Yr yield up 2bps to 1.2%
  • Spanish 10Yr yield up 3bps to 1.05%
  • S&P GSCI Index up 0.2% to 333.2
  • MSCI Asia Pacific down 0.7% to 136
  • Nikkei 225 down 1.5% to 16391
  • Hang Seng closed amid typhoon
  • Shanghai Composite up 0.6% to 2971
  • S&P/ASX 200 down 0.8% to 5541
  • US 10-yr yield up less than 1bp to 1.53%
  • Dollar Index down 0.31% to 95.42
  • WTI Crude futures up 0.1% to $40.12
  • Brent Futures up 0.2% to $42.24
  • Gold spot up 0.5% to $1,360
  • Silver spot up 0.7% to $20.58
Top Global News
  • Australia Cuts Rates to Record Low to Spur Inflation, Jobs
  • Carney Quantifies Gloom With BOE Stimulus Debate at Crunch Point
  • Infineon Drops After Earnings Disappoint on Smartphone Weakness
  • Treasuries drop in overnight trading, global equities mostly lower and commodities rally as Australia’s central bank cuts rate to record low 1.5% and 10-year JGB auction drew widest tail since March 2015.
  • Japan’s government announced 4.6 trillion yen ($45 billion) in extra spending for the current fiscal year, as Prime Minister Shinzo Abe seeks to bolster the economy without abandoning targets for improving fiscal health
  • The Bank of Japan is unlikely to wind back its record monetary stimulus after completing a review of its policy, Governor Haruhiko Kuroda said
  • Six weeks after Britain’s vote to leave the European Union sent shock waves across the nation, on Thursday the Bank of England governor will present a detailed assessment of what it means for the economy as well as his plan of action
  • Euro-denominated investment-grade notes had their biggest monthly returns in four years in July as the ECB bought more and more corporate and sovereign bonds and drove yields lower
  • Around the world, governments are planning fresh spending to boost growth and support wages, heeding the advice of those who have argued that economies need the jolt as society ages and productivity sags
  • Investors managing $163 billion are throwing their weight behind what BlackRock Inc. dubbed the "great migration’’ to emerging-market debt in search of antidotes to the near-zero yields offered by their staple assets
  • Saudi Arabia may be embarking on a new phase in its efforts to stave off the worst of a cash crunch among its banks as its central bank offered domestic lenders about 15 billion riyals ($4 billion) in short-term loans
  • Fed’s Kaplan stated in speech this morning, “In light of the decline in the neutral rate, using monetary policy to help manage the economy has become more challenging”
* * *

Looking at regional markets in detail, Asia traded mostly lower amid initial cautiousness ahead of the RBA rate decision and following the weakness seen in Wall St., where declines in energy to bear market territory and discouraging data dampened sentiment. This saw Nikkei 225 (-1.5%) underperformed as participants awaited Japan's stimulus announcement which was expected to be around JPY 28TN (later confirmed), which some analysts feel may not be enough to have a sustained impact. ASX 200 (-0.8%) traded subdued with a widely expected RBA rate cut failing to provide counterbalance the commodities led weakness. Shanghai Comp (+0.6%) saw indecisive amid mixed earnings, while Hong Kong markets remained closed due to a typhoon. 10yr JGBs continued to feel the repercussions from last week's BoJ disappointment with prices down nearly a point while a poor 10yr auction, which saw the b/c and lowest accepted price decline from prior and a wider tail-in-price, further exacerbated losses in the paper.

Top Asian News
  • World Equity Traders Flip Switch From Hate to Love for China
  • Hong Kong Closes Stock Market Amid Typhoon
  • Australia Cuts Rates to Record Low to Spur Inflation, Jobs
  • Honda Profit Exceeds Estimates as Sales Climb in U.S., China
  • Nintendo Benefits From Pokemon Go Halo as 3DS Game Sales Double
  • China Said to Consider Merging Xinxing Cathay, First Heavy
  • Uber Said to Plan Boosting Resources for Southeast Asia, India
  • Noble Group Sinks in Singapore, Triggering Query From Exchange
European equities have slipped this morning with sentiment dampened by fears over the banking sector, in particular, the concerns surrounding Italian banks NPLs. As such, shares in UniCredit had been halted having fallen over 5% after reports suggest that the bank is considering raising EUR 7-8bIn worth of capital. While Monte Paschi (-8.1%) shares yet again underperform as some investors doubt the viability of a bail out for the bank. Elsewhere, the slew of poor earnings from the European banking sector continues, with Commerzbank (-8.2%) the latest bank to announce that profits have been hampered by the low interest rate environment. Furthermore, UK banking names are also feeling the squeeze amid an extension to the PPI deadline to 2019 (2018 was the originally planned date) and the UK property sector has also been hampered by the latest UK construction PMI, which although beat expectations, revealed the steepest fall in commercial building for over 6.5yrs. Another contribution to the downside in EU bourses has been the declines observed in the oil complex with WTI crude futures breaking back below USD 40. Moreover, fixed income markets were initially pressured most notably stemming from the pickup in JGB yields which rose for a 4th consecutive session after last Friday's disappointment from the BoJ and a tepid reception to the latest Japanese stimulus package. Furthermore, a disappointing 10yr JGB auction also acted as a drag on prices with UK investors also concerned ahead of the UK DMO's 2022 auction which was said to be one of their more illiquid offerings by the debt agency. However, Gilts saw a move higher in the wake of the auction which drew an impressive b/c of 2.28. Additionally, despite the initial downside, Bunds have recouped some losses after finding support at the 167.00 level allied with the softness across the oil complex.

Top European News
  • BMW Pledges to Stay Atop Luxury-Car Market as Sales Lag Mercedes
  • Metro Sales, Profit Miss Estimates on Currency and Costs
  • Commerzbank Scraps Full-Year Target, Sees Decline in Profit
  • Infineon Drops After Earnings Disappoint on Smartphone Weakness
  • Lufthansa Sees Difficult Second Half as Terrorism Damps Demand
  • Top Airbus A320neo Buyer IndiGo Considers Slowing Deliveries
  • U.K.’s May Wants ‘Economy Firing’ in Post-Brexit Industrial Plan
In FX, the yen jumped 0.7 percent to 101.61 per dollar as the government announced 4.6 trillion yen ($45 billion) in extra spending for the current fiscal year, accounting for about a quarter of the total amount Prime Minister Shinzo Abe flagged in a speech last week. “The market is buying the rumor and selling the fact, so the yen has rallied after the headlines,” said Mansoor Mohi-uddin, a Singapore-based strategist at Royal Bank of Scotland Group Plc. The announcement was another sign, after the central bank’s meeting last week, that officials are failing to beat expectations, he said. The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 peers, fell for the fifth time in six days. The Australian dollar advanced 0.4 percent to 75.48 U.S. cents, reversing earlier declines. While Australia’s economy has grown faster than the central bank predicted, core inflation and wage growth are both at record lows. The MSCI Emerging Markets Currency Index retreated 0.1 percent a day after it reached its highest level since July 2015. Malaysia’s ringgit led declines, weakening 0.8 percent, the most since July 18. The country loses 450 million ringgit ($111 million) in annual income for every $1 drop in oil and the nation derives about a fifth of its revenue from energy-related sources, according to government data. South Africa’s rand and Mexico’s peso both dropped 0.5 percent.

In commodities, West Texas Intermediate crude was 0.2 percent higher at $40.13 a barrel after sliding to its lowest settlement price since April 18 on Monday. Futures have retreated 22 percent from a peak reached in June, meeting the common definition of a bear market. While American crude and gasoline inventories are forecast to have declined last week, they’ll likely remain around the highest seasonal level in at least two decades. Nigeria has also resumed payments to former militants as the government seeks to establish a cease-fire after attacks cut the country’s oil output to the least since 1989. Factions in Libya have reached a deal to re-open oil terminals. Gold headed for its longest stretch of gains since early July, advancing 0.4 percent to $1,366.33 an ounce. Copper advanced 0.3 percent, while aluminum gained 0.1 percent and nickel rallied 0.8 percent.

Looking at today’s calendar it’s a fairly quiet start to the day this morning with Euro area PPI for the June the sole release. In the US we’ll get the core PCE and deflator readings for June along with the personal income and spending report. There shouldn’t be too much in this report because the figures were already incorporated into the Q2 GDP report on Friday. We’ll also get the ISM NY reading, while later it’s worth keeping an eye on the July vehicle sales data. Our US economists note that these should rise but only incrementally compared to June. In the past the trend in vehicle sales has tended to lead the trend in overall consumer spending and so if vehicles sales continue to moderate, it would provide early evidence that we have likely seen the peak in consumption growth for the cycle. One to keep an eye on. Away from the data the Fed’s Kaplan is due to speak again while earnings will also be back in the limelight. Today 40 S&P 500 companies report, including Pfizer and Procter & Gamble (both prior to the open).

* * *

Bulletin Headline Summary From RanSquawk and Bloomberg
  • European equities trade lower across the board as financial names continue to be pressured amid concerns around the Italian banking sector and soft Commerzbank earnings
  • Elsewhere, Japanese Prime Minister Abe's cabinet have now approved the JPY 28tr1 stimulus package and the RBA cut rates by 25bps as expected
  • Looking ahead, highlights include US Consumer Spending, PCE Deflator, API Crude Oil Inventories, earnings from BMW, AIG, P&G and Pfizer
US Event Calendar
  • 6:15am: Fed’s Kaplan speaks in Beijing
  • 8:30am: Personal Income, June, est. 0.3% (prior 0.2%)
  • 8:55am: Redbook weekly sales
  • 9:45am: ISM New York, July (prior 45.4)
  • TBA: Wards Domestic Vehicle Sales, July, est. 13.06m (prior 12.76m)
  • 4:30pm: API weekly oil inventories
DB's Jim Reid concludes the overnight wrap

The first day of August didn’t bring much joy to markets yesterday as another steep leg lower for Oil - which has been wobbling in the background for a while now - largely dictated the weaker sentiment. Yesterday WTI tumbled -3.70% and at one stage dipped below $40/bbl before steadying to finish a shade above that by the close. You have to go back to late April to find the last time Oil went below $40/bbl. It now means that since touching an intraday high of $51.67/bbl on June 8th, Oil has slid an impressive -22.25% after accounting for the very modest bounce back (+0.32%) this morning. The weekend news that Libya had provisionally reached a deal to reopen three eastern ports appeared to be the main culprit of the latest leg lower, while Saudi Aramco also announced that it had cut its export prices into Asia by the most in 10 months.

Equity markets started the new month on the back foot as a result, although declines in US markets were fairly modest as tech and healthcare names stood firm. The S&P 500 closed -0.13% with the energy component down over -3% although the index did actually briefly reach a new record high early in the session. European equities were weaker. The Stoxx 600 fell -0.59% and the Italian FTSE MIB was down a steep -1.73%. As you’ll see below much of that had to do with Banks. Meanwhile the US CDX HY index was 15bps wider reflecting that energy weakness. The index is now at the widest level since July 7th.
Meanwhile, we wondered in yesterday's EMR how long the relief rally in European bank equities would last after the results of the stress tests given that profitability concerns are no nearer to being addressed. The answer was 6 minutes as an immediate +1.27% rally in the Euro Stoxx 600 banks index reversed not long after the open and ended the day closing -1.79% lower. In fact of the 48 banks in the index, just 6 finished up on the day and it was peripherals in particular that underperformed with the likes of Unicredit (-9.40%), Bank of Ireland (-6.49%), Banco Popolare di Milano (-6.22%) and UBI (-6.20%) sharply lower. While some of this may reflect the general level of scepticism over Friday’s stress tests it’s likely that the weakness in Italian banks in particular may be down to renewed fears that more recaps are needed in the sector.

Financials credit did however hold in much better. While the iTraxx senior fins index ended up 1bp wider, the iTraxx sub-financials index was actually 2bps tighter on the day. In fact a quick glance at some of the AT1 cash bonds suggests that the asset class outperformed (Unicredit, Intesa, Lloyds and Barclays as examples were all up 1pt or so). This is probably a reflection of the comfort over capital levels in banks (current and that some will be forced higher) after the stress tests.

Looking at banks on the other side of the pond, last night we saw the latest quarterly Fed senior loan officer survey. We always look to the corporate and industrial (C&I) number as it’s well correlated with future corporate defaults. The results showed the fourth quarter of net tightening even if the figure of 8.5 was improved on the 11.6 seen last quarter. In the 26 year history of the survey we've never seen two or more successive quarters of net tightening without it eventually leading to a recession. It's quite a cyclical series. However the amount of net tightening seen so far is still mild relative to recessionary levels. The bulls would argue that the oil and gas sector has been the main negative driver. However losses in one or two sectors can cause banks to tighten the spigots elsewhere so it's still relevant.
Staying with credit, yesterday saw the latest weekly ECB CSPP numbers (as of 29 July 2016) and they've continued to make impressive progress considering the time of year even if last week did mark the second successive week of sub €300m daily purchases. They settled €1.365bn last week to leave the grand total at €13.214bn. This implies €273m of daily purchases last week against the average run rate of €367m since early June.

The monthly report is also out and it shows that 94.1% of the total now is from secondary with only 5.9% from primary. The number for July showed a slightly higher 7.8% from primary. Whilst we've been pretty bullish on the likely impact of the ECB on spreads it's fair to say that they will likely need to up the amount of primary they buy as the year progresses if they want to hit their targets. Secondary will get harder and harder once all the loose bonds are bought.

Changing tack now and switching over to Asia where markets are eagerly awaiting the latest out of Japan and specifically the confirmation and details from the Government of PM Abe’s fiscal stimulus plan. As we type there’s still no word yet, with the Nikkei (-0.68%) and Topix (-0.78%) both in the red owing largely to the weakness stemming from the move in oil. The Yen is 0.20% weaker while JGB yields continue to march higher. The 10y is currently 8bps higher. Elsewhere bourses in China are little changed and the Kospi (-0.45%) and ASX (-0.41%) are also slightly lower. The Hang Seng index is closed following a typhoon warning. Also in focus this morning is the RBA which as expected cut the cash rate by 25bps to a record 1.5%. The Aussie Dollar (-0.25%) is a touch softer post the news.

Moving on. Yesterday’s economic data didn’t move the dial all that much. Firstly we got confirmation of the final July manufacturing PMI’s. The Euro area reading was revised up 0.1pts to 52.0 helped by an upward revision to Germany. Notable was the further downgrading of the UK data to 48.2 (from 49.1). The wider periphery was also weaker last month. Indeed the PMI for Italy declined 2.3pts to 51.2 (vs. 52.5 expected) while Spain fell 1.2pts to 51.0 (vs. 51.5 expected). In the US the final manufacturing PMI was unrevised at 52.9 which represents a 1.6pt rise from June. Meanwhile the ISM manufacturing last month fell 0.6pts to 52.6 (vs. 53.0 expected). New orders were little changed at 56.9 while production rose (+0.7pts to 55.4) however the employment component did fall back below 50 to 49.4 (from 50.4) which is notable ahead of Friday’s employment report. The other data yesterday was a much softer than expected construction spending print for June (-0.6% mom vs. +0.5% expected).

Interestingly despite the fairly underwhelming data and leg lower for Oil, the US Dollar was a smidgen higher yesterday while US Treasury yields rose and are back to more or less pre-GDP report levels. Indeed 10y yields rose 6.8bps yesterday and much of that appeared to be attributed to comments from the NY Fed’s Dudley. Notable given his influence as a more dovish member of the committee and who’s views are seen as aligning with those of Yellen, Dudley said that while ‘directionally, the movement in investor expectations towards a flatter path for US short term interest rates seems broadly appropriate’, it is however ‘premature to rule out further monetary policy tightening this year’. He went on to add that should the incoming data validate his view of the outlook, then US monetary policy would need to move at a faster pace than implied by futures markets. Dallas Fed President Kaplan (moderately hawkish) also spoke yesterday although his comments didn’t offer a whole lot of new info. Kaplan said that September is ‘very much on the table’ but that we’ll have to see how events unfold.

Before we jump into the day ahead, earnings took a bit of a back seat yesterday given the fairly quiet calendar, however that gives us a good chance to take stock of where we’re up to now. Based on Friday’s close we’ve now had 316 S&P 500 companies report with 63% beating on EPS with a weighted average beat of 2.4% (20% have missed). On the sales side, 34% have beat with a weighted average beat of 0.9% and 29% have missed, with the remainder in line. Despite the earnings beats, EPS YoY growth is now -2.2% for the index, although that jumps to +2.8% ex-energy. Sales YoY growth is -0.6% and +2.8% ex-energy. We’re still seeing the same pattern of analyst EPS cuts during the quarter prior to reporting however. While it’s not quite to the same extent as Q1 (c.-9%) or the 5y average (c.-4.2%), earnings have still been cut c.-3% this quarter which is aiding the beat ratio. We highlight that this data is based off DB’s David Bianco’s US equity insights publication and he also adds that analysts are continuing to cut Q3’16 EPS during this quarter. Indeed bottom up consensus EPS for next quarter is $30.40, down from $30.85 seen on 1st of June.

Looking at today’s calendar it’s a fairly quiet start to the day this morning with Euro area PPI for the June the sole release. Over in the US this afternoon we’ll get the core PCE and deflator readings for June along with the personal income and spending report. There shouldn’t be too much in this report because the figures were already incorporated into the Q2 GDP report on Friday. We’ll also get the ISM NY reading, while later this evening it’s worth keeping an eye on the July vehicle sales data. Our US economists note that these should rise but only incrementally compared to June. In the past the trend in vehicle sales has tended to lead the trend in overall consumer spending and so if vehicles sales continue to moderate, it would provide early evidence that we have likely seen the peak in consumption growth for the cycle. One to keep an eye on. Away from the data the Fed’s Kaplan is due to speak again (11.15am BST) while earnings will also be back in the limelight. Today we’ve 40 S&P 500 companies reporting including Pfizer and Procter & Gamble (both prior to the open). In Europe BMW is due to report.

http://www.zerohedge.com/news/2016-...ppoints-rba-underwhelems-italy-bank-fears-ret
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#8
Frontrunning: August 2


by Tyler Durden
Aug 2, 2016 7:30 AM

  • European shares hit two-week lows, yen rises as Japan backs stimulus (Reuters)
  • Australia Rejoins Global Disinflation Fight With Record Low Rate (BBG)
  • Japan Cabinet Approves $274 Billion Stimulus Package (WSJ)
  • Yen Surges to Three-Week High as Japan Stimulus Underwhelms (BBG)
  • Warren Buffett Takes On Donald Trump at Hillary Clinton Rally in Nebraska (WSJ)
  • Trump campaign asks Capitol Hill to back him in Khan controversy (Reuters)
  • Government Spending Makes a Comeback While Austerity Starts to Fade (BBG)
  • Rio’s Olympics Woes Sour IOC on Developing World as Games Site (WSJ)
  • Overseas Yield Hunters Bag Record Share of U.S. Corporate Debt (BBG)
  • Turkish government has taken over military factories, shipyards, PM says (Reuters)
  • China regulator says Didi, Uber deal will need Mofcom approval (Reuters)
  • As Kremlin Ties Turn Frosty, Oligarch Nets Owner Buys Up Brooklyn (BBG)
  • Student-Loan Defaulters in a Standoff With Federal Government (WSJ)
  • These Government Rules Trap 65 Million Americans in Poverty (BBG)
  • Aetna Tops Views, Stops ACA Expansion Plans (WSJ)
  • Texas allows guns in college classrooms under new law (Reuters)
  • China says willing to explore free trade deal with Britain (Reuters)
  • Tisch Says We ‘Live by the Sword’ at Loews as Gold Bet Doubles (BBG)
  • Japan defence review expresses 'deep concern' at Chinese coercion (Reuters)
  • China's 'mosquito factory' aims to wipe out Zika, other diseases (Reuters)

Overnight Media Digest

WSJ

- The U.S. conducted airstrikes against Islamic State's primary stronghold in Libya for the first time on Monday, aiding the U.N.-backed Libyan government's attempt to retake the area and deepening American involvement in efforts to defeat the group in North Africa. on.wsj.com/2aK7aHH

- At his first campaign rally since a public spat erupted with the parents of a Muslim U.S. Army captain killed in Iraq, Republican presidential nominee Donald Trump sought to change the subject to economic issues and concerns he has about the course of the general election. on.wsj.com/2aLS5W0

- Several prominent members of the International Olympic Committee said the difficulty getting Rio de Janeiro ready for the Summer Games likely means the organization will shy away from again holding the world's biggest sporting event in cities that exhibit any signs of instability. on.wsj.com/2apiUQc

- Billionaire investor Warren Buffett lambasted Donald Trump Monday and challenged the Republican nominee to release his tax returns as Democrat Hillary Clinton campaigned for a single, up-for-grabs electoral vote in Nebraska. on.wsj.com/2arsZcB


FT

* SolarCity Corp agreed to Tesla Motors Inc's $2.6 billion offer to buy the solar panel installer, the companies said on Monday, clearing one obstacle in the way of Elon Musk's ambitious plans for a carbon-free energy and transportation company.

* GlaxoSmithKline and Google parent Alphabet's life sciences unit are creating a new company focused on fighting diseases by targeting electrical signals in the body, jump-starting a novel field of medicine called bioelectronics.

* Republican Senator John McCain, a former prisoner of war and the most prominent veteran in Congress, joined the chorus of condemnation against Republican presidential candidate Donald Trump for his comments about the family of a slain Muslim-American soldier.


NYT

- Nick Denton, the founder and chief executive of Gawker Media, filed for personal bankruptcy on Monday to protect himself from a legal judgment awarded in March to the former professional wrestler Hulk Hogan in an invasion-of-privacy lawsuit. http://nyti.ms/2aEIugZ

- Theranos Chief Executive Elizabeth Holmes tried to salvage the reputation of her embattled blood-testing company on Monday, discussing its technology and data at a scientific meeting for the first time. Holmes said Theranos was developing a new version of its technology that she called the mini-laboratory, or miniLab. She said the company was seeking approval of a test to detect infection by the Zika virus. http://nyti.ms/2aqyfjw

- McDonald's Corp on Monday announced several changes to its ingredients, including eliminating artificial preservatives from some breakfast foods and Chicken McNuggets, its most popular food item, and removing high-fructose corn syrup from its buns. Such changes affect almost half of the food on McDonald's menu, the company said. http://nyti.ms/2avYa4m

- Technology Crossover Ventures On Monday said it had raised $2.5 billion for its latest fund, which is called TCV IX. The venture capital firm is best known for investing in companies such as Dollar Shave Club, Netflix, Vice Media and Zillow. http://nyti.ms/2aIahic

- Federal health officials on Monday urged pregnant women to stay away from a Miami neighborhood where they have discovered additional cases of Zika infection - apparently the first time the Centers for Disease Control and Prevention has advised people not to travel to a place in the continental United States. http://nyti.ms/2aqOyXk


Britain

The Times

British Prime Minister Theresa May has refused to interfere with former PM David Cameron's plans to award honours to pro-Remain allies. The leak of the list of names expected to get honours put pressure on her to intervene. (http://bit.ly/2aKQakx)

The Guardian

GlaxoSmithKline Plc and Google parent Alphabet Inc's life sciences unit are creating a new company focused on fighting diseases by targeting electrical signals in the body, jump-starting a novel field of medicine called bioelectronics.(http://bit.ly/2aKU1yc)

Capital controls in Greece will be majorly eased on Monday in order to bring back billions of euros that left the country at the peak of the euro-zone crisis. The easing of capital restrictions is being done to give a boost confidence in the economy's banking sector. (http://bit.ly/2aKTvQA)

The Telegraph

China has urged the U.K. government to give the go-ahead to the Hinkley Point nuclear plant as quickly as possible. The country's state media also warned that China would not tolerate any kind of criticisms or accusations towards its investments in the U.K. (http://bit.ly/2aKVt3t)

Uber Technologies Inc will sell its China business to Didi Chuxing, the dominant ride-hailing service in the country. The valuation of the combined business will be $35 billion. (http://bit.ly/2aKY79j)

Sky News

Panasonic Corp has emerged as a contender to acquire GHD, a manufacturer of hair-care products based in the U.K. CVC Capital Partners has also made an offer to buy GHD for more than 400 million pounds ($527.20 million). (http://bit.ly/2aKZZ2b)

The Independent

Communication Workers Union, one of Britain's biggest trade unions, has promised to support Jeremy Corbyn as the Labour party leader. The union's reaffirmation came in light of Corbyn's vow to combat "injustices" in U.K. workplaces. (http://bit.ly/2aKZZ2b)

British Prime Minister Theresa May has demanded that the House of Lords get behind the decision of Brexit as decided by the voters, after reports that some peers intended to delay the process of the country exiting the EU. (http://bit.ly/2aKZZ2b)

http://www.zerohedge.com/news/2016-08-02/frontrunning-august-2
 

Argent Dragon

Site Support
Site Bus
Site Supporter
Joined
Mar 29, 2010
Messages
8,259
Likes
2,953
Location
Lone Star State
#9

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#10
SA - Real time news 08/02
http://seekingalpha.com/market-news

Lies, Rallies, Hacking and Drone Warfare 08/02
http://www.bloomberg.com/view/articles/2016-08-02/lies-rallies-hacking-and-drone-warfare

TRB - Hot Links: Lab Experiments 08/02
http://thereformedbroker.com/2016/08/02/hot-links-lab-experiments/

CWS - Morning News: August 2, 2016
http://www.crossingwallstreet.com/archives/2016/08/morning-news-august-2-2016.html

Naked Capitalism Links 08/02
http://www.nakedcapitalism.com/2016/08/links-8216.html

SA - Wall Street Breakfast: Japan Unveils Fiscal Stimulus 08/02
http://seekingalpha.com/article/3994405-wall-street-breakfast-japan-unveils-fiscal-stimulus

MtM - Greenback Slides Despite RBA Rate Cut and 7-year Low in UK Construction PMI 08/02
http://www.marctomarket.com/#!/2016/08/greenback-slides-despite-rba-rate-cut.html
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#11
Asian Metals Market Update: August 2-2016
By: Chintan Karnani, Insignia Consultants
Momentum is hyper bullish for gold and silver. Everyone is buying gold and silver on dips. US GDP numbers on Friday has only added fuel to the bullish investor sentiment of gold and silver. Europe, Japan and now even the USA is getting plagued by mentally ill people who act as terrorist and kill innocents every day. These mentally ill people are called by the name of Islamic State and other names.
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#12
Shipping & Energy 08/02:

Peak Oil Review - Aug 1 2016
http://www.resilience.org/stories/2016-08-01/peak-oil-review-aug-1-2016

The World’s Biggest Oil Discovery Just Opened For Foreign Ownership
http://oilprice.com/Energy/Crude-Oi...covery-Just-Opened-For-Foreign-Ownership.html

UPDATE 1-Singapore's port authority revokes bunker licences of AC Oil
http://af.reuters.com/article/energyOilNews/idAFL3N1AI2SL

Labour judge tells Horizon Lines to pay sacked informer US$1 million
http://www.seanews.com.tr/news/1618...Lines-to-pay-sacked-informer-US1-million.html

LOCAL: MUA linesmen members worried about stevedore job-threat
https://www.lloydslistaustralia.com...orried-about-stevedore-job-threat-531991.html

Hess Seeks Over $40 Million from Schlumberger
http://www.maritime-executive.com/article/hess-seeks-over-40-million-from-schlumberger

Tankers: Charterers take center stage ahead of pure ship owners, actively managing tanker fleet
http://www.hellenicshippingnews.com...e-ship-owners-actively-managing-tanker-fleet/

Dry Bulk: Panamaxes are traded left and right as ship owners believe current prices are favorable
http://www.hellenicshippingnews.com...-owners-believe-current-prices-are-favorable/

Live International Companies’ Shipping Stocks
http://www.hellenicshippingnews.com/live-international-shipping-stocks/
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#13
Mornings With "V" 08.02.16 Feeling The Stimulus?
ROGUE MONEY


Streamed live 2 hours ago
V Breaks down the latest news from around the world.
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#17

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#18
World Stocks Drop For Third Day On Growing Concerns About Central Bank Policy, Tumbling Oil


by Tyler Durden
Aug 3, 2016 6:49 AM

After 7 consecutive drops in the Dow Jones, the Industrial average is set for an 8th decline with US equity futures modestly lower as risk-averse sentiment persists overnight, after U.S. stocks saw their biggest drop in four weeks amid a selloff in equities from Japan to Europe. Oil’s continued slide and recent plunge into a bear market, despite some stabilization this morning just south of $40, has finally rekindled global growth concerns, and is keeping a lid on bullishness. European stocks are little changed, while Asian stocks and S&P futures fall.

S&P 500 futures were 0.2% lower even with European equities little changed as HSBC Holdings Plc, Europe’s biggest bank, jumped after announcing a share buyback. Crude halted a two-day drop before an update on U.S. oil inventories, while gold was near its highest price since July 11. Industrial metals declined and the Malaysian ringgit and Turkish lira were some of the biggest losers among developing nations’ currencies.

"Investors are slowly realizing that with every spin of the central bank policy chamber the magazine is getting emptier," said Michael Hewson, chief market analyst at CMC Markets in London. "The larger concern here given recent market reaction to policy moves by central bankers is that policymakers are losing the confidence of investors," he said.

World stocks fell for a third straight day on Wednesday, depressed by growing nervousness surrounding central bank policy and the recent spike in world bond yields, amd the MSCI's global share index fell 0.5%, for its third straight decline, a run not seen since early June. Japan's Nikkei fell 1.9 percent on ongoing fears the BOJ is no longer on the side of the market and a lower yen.

European bank shares rebounded after two major earnings reports. Shares in European banks HSBC and Societe Generale rose as much as 5% after reporting second quarter earnings, a glimmer of light for the region's financials amid the recent gloom. HSBC reported earnings that missed expectations, however the bank rose rose the most since April after it announced a $2.5 billion stock buyback for this year and said it plans more share repurchases while keeping its dividend at the current level for the foreseeable future.



“The buyback signals HSBC’s strong capital position and should reassure investors of its ability to maintain the current 51-cent dividend,” Citigroup Inc. analysts led by Ronit Ghose wrote in a note to clients. So much for the theory that buybacks no longer push stocks higher.

However, the rebound in European banks failed to lift the broader European indexes as a rebound in banks amid positive earnings was offset by a slide in automakers. U.S. futures pointed to a softer open on Wall Street, down a modest 0.2% in the premarket.

“We have marked down our expectations for eurozone growth into 2017, as Brexit shock adds to preexisting downside risks from high political uncertainty, a less supportive fiscal stance and the risk of rising oil prices. But risks remain tilted to the downside: although we expect bank lending to the economy to expand, continued bank stress could challenge this view and weigh further on growth,” Deutsche Bank strategists including Marcos Arana write in note.

Earlier today we got the final print of European Service PMIs, most of which came in slightly better than the Flash estimate with the exception of Spain and Germany:
  • Spain July Services PMI 54.1, prior 56
  • Italy July Services PMI 52.0, prior 51.9
  • France July Services PMI 50.5, prior 50.3
  • Germany July Services PMI 54.4, prior 54.6
  • Eurozone July Services PMI 52.9, prior 52.7
Asia stocks headed for their steepest drop in more than a month as oil’s selloff revived concerns over global growth and after Japan’s fiscal stimulus package fell short of what some investors had expected. All 10 sectors fall with financials, utilities underperforming and telcos, materials outperformingIt is no longer just Japan's disappointment that is pressuring risk but also the steep selloff in crude. “Lower oil prices seems to be impacting the risk sentiment negatively,” said Divya Devesh, a Singapore-based foreign-exchange strategist at Standard Chartered Plc. “If oil continues to decline it will be negative for emerging- market assets.”

The sharpest moves lately have been in sovereign bond markets where a sudden spike in yields stirred speculation that a multi-year bull run in prices might finally be nearing its end. However, this morning yields were little changed on the day, but still well up from recent lows following the shakeout in debt markets globally since the Bank of Japan's policy meeting last Friday and as eyes turn to the Bank of England on Thursday.

While Japanese bonds steadied on Wednesday they have still suffered the worst sell-off in over three years as investors feared the BoJ was out of easing ammunition and might leave it to fiscal policy to stimulate the economy. Bond bulls were worried the Bank of England might also under-deliver at its policy meeting on Thursday, putting the onus on debt-funded government spending to support growth.

"I would vote for no change in rates or QE (quantitative easing," former BoE policymaker Charles Goodhart told Reuters, adding that the Bank has effectively run out of policy ammunition and that further stimulus would be ineffective. "There's so much assumption that the Bank will cut rates that even though the effect of that will be minimal, they will do it, because not doing it would have an adverse effect on their credibility," he said. The 10-year UK gilt yield was unchanged at 0.80 percent and the comparable Bund yielded -0.4 percent, both up around 10 basis points so far this week.

Benchmark 10-year U.S. Treasuries were also little changed on the day at 1.54 percent US10YT=RR, and also up around 10 basis points this week, even though domestic data has generally been soft. The recent outbreak of weaker U.S. data has further pushed back expectations for when the Federal Reserve might hike rates -- the market is not fully priced for a move until well into 2018 -- and taken a heavy toll on the dollar.

In commodity markets, oil prices steadied in Asia but remained vulnerable to worries about a glut in both crude and refined product. Brent crude edged up 0.4% to $41.93 but remained near four-month lows reached on Wednesday. NYMEX crude rose 0.5% to $39.70 a barrel, but was still under the psychological $40 level.

Market Snapshot
  • S&P 500 futures down 0.2% to 2148
  • Stoxx 600 down 0.1% to 335
  • FTSE 100 down 0.2% to 6634
  • DAX down 0.3% to 10117
  • German 10Yr yield down less than 1bp to -0.05%
  • Italian 10Yr yield down less than 1bp to 1.21%
  • Spanish 10Yr yield down less than 1bp to 1.07%
  • S&P GSCI Index up 0.3% to 331.9
  • MSCI Asia Pacific down 1.7% to 134
  • Nikkei 225 down 1.9% to 16083
  • Hang Seng down 1.8% to 21739
  • Shanghai Composite up 0.2% to 2978
  • S&P/ASX 200 down 1.4% to 5466
  • US 10-yr yield down 2bps to 1.54%
  • Dollar Index up 0.19% to 95.24
  • WTI Crude futures up 0.7% to $39.80
  • Brent Futures up 0.8% to $42.12
  • Gold spot up less than 0.1% to $1,364
  • Silver spot up less than 0.1% to $20.64
Top Global News
  • Enbridge, Marathon Agree to Buy $2 Billion Bakken Pipe Stake: Deal follows startup of line connecting Chicago to Patoka hub
  • Ford, GM U.S. Sales Miss Estimates With Honda Rare Bright Spot: Industry-wide sales rise 0.7% as incentives start to mount
  • AIG Announces $3b Buyback as Asset Sales Boost Profit: Operating profit of 98 cents a share beats analyst estimates; AIG curtails event-driven, long-short bets in hedge fund retreat
  • Uber’s Surrender And The Humbling of U.S. Tech Giants in China: Decision to throw in the towel in China holds lessons for Facebook, Apple and others still craving success in China
  • Alphabet Joins $100b Technology Rush to Bond Market: Google parent sold $2b of bonds Tuesday
  • Viacom Held Settlement Talks With National Amusements: CNBC/DJ: talks fell apart last week
  • Oil Options Echo Citi-to-Merrill View of a Brief Bear Market: Decline into bear market to be short-lived, analysts say
* * *

Looking at regional markets, we start in Asia where Asia traded negative following US losses, after oil once again weighed on equities with WTI crude below USD 40/bbl and the DJIA posting its 7th consecutive losing streak. A firmer JPY attributed to the pessimism regarding the Japanese stimulus package led Nikkei 225 (-1.9%) into negative territory, while ASX 200 (-1.4%) was pressured by weakness in energy names and financials after yesterday's RBA rate cut. Chinese markets were mixed amid conflicting Caixin Composite and Services PMI data with the Hang Seng (-1.8%) catching up with yesterday's losses after its market closure, while the Shanghai Comp (+0.3%) is positive following rate-cut rhetoric from the NDRC. 10yr JGBs found some reprieve from its recent slump amid the risk-averse sentiment in Japan which boosted demand for the paper, whilst the BoJ entered the market for a total of JPY 750b1n in government debt. BoJ Minutes from June 15th-16th meeting stated that Japan's economy remains on its moderate recovery trend and that exports and output had been sluggish, due mainly to EM slowdown. Minutes also stated that the BoJ will check risks and add additional measures if needed. (BoJ) Note that the minutes' release is from two meetings ago and thus are out of date.

Top Asian News
  • Didi, SoftBank Said to Lead $600 Million-Plus Round for Grab: Round could close as early as this week
  • China Said to Plan Index Futures Revival After Volumes Drop:Government has sought to balance control with free markets
  • Australia Cuts Rates to Record Low to Spur Inflation, Employment: Central bank lowers cash rate to 1.5% as economists expected
  • Japan Fiscal Plan Gives $45 Billion Spending Boost for This Year: Abe seeks to prop up economy after BOJ keeps action minimal
  • Mr. Yen Sees Rally Toward 90 per Dollar Spurring Intervention: Japan’s currency could break 100 this month, Sakakibara says
  • Nidec Agrees to Pay $1.2 Billion for Assets of Emerson Electric: Buyer to pay cash, expects to close deal in 3Q
  • Honda Profit Exceeds Estimates as Sales Climb in U.S., China: Sales in China spurred by a cut in purchase tax on some models
  • Philippine Telephone Net Drops 33% on Rocket Internet Loss: Dividend payout target cut to 60% of core income from 75%
European equities have spent much of the morning oscillating between gains and losses, trading largely unchanged by mid-morning (Euro Stoxx: +0.05%). In terms of a sector breakdown, financials have been outperforming amid the slew of firm's earnings from the likes of SocGen (+4.5%), Credit Agricole (+2.6%), HSBC (+3.7%) and ING (+8.5%). While the final revisions for Eurozone Services which have fared better than expectations have somewhat lifted sentiment. Bunds have traded relatively sideways with prices flat on the day after the volatility seen during yesterday's sessions, with some modest curve steepening in German paper during today's session. As such, much of the price action stemmed from JGBs after a reprieve overnight.

Top European News
  • Standard Chartered 1H Profit Falls 46% on Revenue Drop: 1H adj. pretax misses ests.
  • HSBC Tempers Dividend Outlook, Plans Buyback as Profit Drops: ROE target dropped amid economic, political uncertainties
  • SocGen Profit Rises on Visa Gain, Lower Loan-Loss Provisions: Bank’s CET1 ratio unchanged in quarter at 11.1 percent
  • ING’s Profit Surges on Lending Growth and Lower Provisions: Net income more than triples in second three months of 2016
  • U.K. Bank Voice Warns of London’s Status Shrinking After Brexit: Britain should foster closer links to emerging markets, China
  • Rio Tinto Posts Worst Profit Since 2004 as New CEO Starts: ron ore, aluminum average prices dropped 14% in first half
  • Continental Sees 2H U.K. Car Demand Drop on Brexit: Company expects 2% rise in Europe car production in 2016
  • VW Warns of Plunge in China Industry Sales If Tax Cut Lapses: Co. posted record first-half deliveries in China
  • ECB’s Bond Buying Boosts Parts of the Market It Can’t Even Touch: Companies in Portugal take advantage of search for yield
  • Bank of England Picks Stimulus Tools on Eve of ‘Super Thursday’: At meetings on Wednesday, officials are finalizing plans to stave off a Brexit-related slowdown
In FX, the Bloomberg Dollar Spot Index climbed 0.2 percent from a five-week low reached on Tuesday and the U.S. currency advanced versus all but one of its 16 major peers. The greenback has been under pressure as wagers that the Federal Reserve will increase interest rates this year faded in recent weeks.The yen weakened 0.3 percent to 101.21 per dollar, after touching 100.68 on Tuesday, its strongest level since July 11. The Japanese government’s plan incorporates 13.5 trillion yen of fiscal measures -- including 7.5 trillion yen in new spending starting this year, and 6 trillion yen in low-cost loans. “After all the build-up, it’s a disappointment,” Shane Oliver, a global investment strategist at AMP Capital Investors Ltd. in Sydney, which manages more than $110 billion, said by phone. The MSCI Emerging Markets Currency Index slipped 0.3 percent, with the ringgit slumping 0.7 percent, the most in two weeks. South Korea’s won fell for a second day from the highest in more than a year.

In commodities, West Texas Intermediate crude added 0.6 percent to $39.76 a barrel, after falling 5 percent over the past two sessions. “The decline is not totally unexpected, but the speed and severity of the fall has been a surprise,” said Daniel Hynes, senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “Disruptions tightened the market during the second quarter and the sustainability of those was always going to be relatively short lived. There are still relatively high inventories but the market is approaching a balance.”U.S. oil inventories dropped by 1.34 million barrels and gasoline stockpiles fell, the American Petroleum Institute was said to have reported. Government data out Wednesday is forecast to show crude and motor fuel supplies decreased. Gold for immediate delivery was little changed at $1,364.25 an ounce, holding near a three-week high. Zinc fell 1 percent, while aluminum, copper and nickel all dropped more than 0.3 percent. Noble Group Ltd., the embattled commodities trader raising about $500 million in a rights issue, received a query from the Singapore exchange over trading of its shares after the stock lost as much as 15 percent.

Looking at today’s calendar, along with the ADP print and ISM non-manufacturing, the final PMI’s (services and composite) are also due out. Earnings will continue to be a big focus for markets too. 30 S&P 500 companies are set to report including Time Warner before the open and Prudential and MetLife after the close.

* * *

Bulletin Headline Summary from RanSquawk and Bloomberg
  • European equities struggle to find firm direction, while financials lead the way amid positive earnings from SocGen, Credit Agricole and ING.
  • UK Services PMI confirms 1st contraction in 43 months ahead of tomorrow's key BoE meeting.
  • Looking ahead, highlights include US ADP, Services PMI, ISM Non Mfg & Composite PMI, as well as comments from Fed's Evan.
  • Treasuries rally on long-end, global equities mixed and WTI crude rises but remains under $40/barrel; U.S. Treasury’s August refunding announcement at 8:30am ET; decision on 2-month bill introduction isn’t expected.
  • The record-setting global bond market rally is coming undone. The average yield on bonds in Bank of America Corp.’s G-7 Government Index climbed to 0.58%, the highest level in five weeks. The move is a rebound from the record low of 0.45% set in July
  • Japanese government bonds’ steepest tumble in more than three years is feeding speculation that central-bank easing is nearing its limits
  • China’s futures exchange is planning to relax the restrictions on stock-index contracts that sparked a 99% plunge in trading and heightened concern over the government’s intervention in markets, according to people familiar with the matter
  • With investment opportunities sparse amid China’s weakest economic expansion in a quarter century, Chinese firms reported an 18% jump in cash holdings during their latest quarter, the biggest increase in six years
  • China sold 35.8 billion yuan ($5.4 billion) 10-year sovereign bonds at 2.74%, the lowest cost since at least 2004 as concern over the nation’s growth prospects boosted demand for havens
  • American International Group reduced bets on event-driven and long-short strategies as the insurer scaled back hedge fund investments
  • Six years of austerity are being reviewed by U.K. Prime Minister Theresa May’s government amid signs the decision to quit the European Union is propelling the economy toward its first contraction since 2009
  • Societe Generale jumped after France’s second-largest bank reported second-quarter profit that beat analyst estimates, capping a string of positive results for the country’s lenders
  • ING Groep NV rose the most in six months after the Dutch lender said second-quarter profit more than tripled, benefiting from a boost in lending income and lower provisions for loan losses
* * *

US Event Calendar
  • 7am: MBA Mortgage Applications, July 29 (prior -11.2%)
  • 8:15am: ADP Employment Change, July, est. 170k (prior 172k)
  • 9:45am: Markit US Services PMI, July F, est. 51 (prior 50.9)
  • 10am: ISM Non-Manufacturing Composite, July, est. 55.9 (prior 56.5)
  • 10:30am: DOE Energy Inventories
DB's Jim Reid completes the overnight wrap

The week so far in markets is going to age people if it carries on like it has. Oil has consolidated in bear market territory, 10yr JGB’s saw a 48hour 25bps swing and nearly traded back above zero at one point yesterday for the first time since March 16th, the Yen has busted up against 100 vs. the USD for the first time since November 2013, Euro Bank Stocks are already -5.10% this week, the Dow (-0.49%) was down for its 7th day in a row yesterday and the S&P 500 (-0.64%) closed at its lowest level since July 13th. According to CNN, Donald Trump even confirmed that he’s sold out of equities yesterday and that there are ‘very scary scenarios’ ahead for investors!

Making sense of all this it’s worth tackling this one-by-one. Starting with Japan, outside of a weak JGB auction yesterday and disappointment from the BoJ at the end of last week, after we went to print yesterday we got confirmation from the Japanese government for a fiscal stimulus package totalling ¥28tn. That was as expected but it was the details that the market focused on and generally it was underwhelmed. Indeed our Japan economist note that it is the size of the second supplementary budget for FY2016 which is important and they estimate that the addition to final demand would be ¥1tn at most during FY2016 and ¥2tn at most during FY17. More details on all this can be found in the attached report.

There’s been little relief for Japanese equities this morning with the Nikkei and Topix -1.53% and -1.95% respectively. JGB yields are slightly lower if anything (10y 1bp lower) and the Yen is roughly unchanged.

Meanwhile, weakness for European banks continues to dominate the wires with Friday’s reasonably sanguine stress tests now quickly becoming a distant memory. Yesterday Commerzbank’s share price closed -9.2% after the bank painted a gloomier view for profits over the remainder of the year relative to the guidance given in April. The other notable piece of news for the sector was the report in Italian press Messaggero suggesting that Unicredit (which tumbled -7.2%) may be considering a €7-8bn capital increase, underscoring investor and analyst fears that more is needed for Italian banks. Staying with banks, it was interesting to note yesterday the rare decoupling between Bund yields and bank equities which was also evident on Monday. 10y Bund yields finished up 6.2bps yesterday (at -0.040%) which compares to that big slide for bank equities. Since the start of the year we’ve highlighted the very close correlation between declining bond yields (to zero and below) and bank equities. Indeed since the start of the year through to the end of July, 10y Bund yields dropped from 0.626% to -0.119% (a move of 75bps) while the Stoxx 600 banks index has a total return of -24.3% in the same time. However in the two days of August so far, 10y Bund yields are 8.3bps higher and bank equities have returned -5.10%. An interesting dynamic to keep an eye on.

Speaking of a break down in correlations, it’s also interesting to see that in contrast to what we saw in January and February, the recent leg lower for Oil into a bear market has had a much more marginal impact on US HY energy spreads so far compared to what we got six months ago. Indeed in the time that WTI Oil has tumbled 23% from the June 8th highs, US HY energy spreads are remarkably just 4bps wider (to Monday’s close of 793bps). There has been some signs of weakness in the last couple weeks however as spreads have widened nearly 70bps from the July tights. However, compare that to the 30% or so slide in Oil from the end of 2015 to the February lows, US HY energy spreads blew out 550bps to a wide mark of 1932bps.

Staying with credit, yesterday we published a Credit Bites looking at the latest quarterly senior loan officer survey we discussed in yesterday's EMR. We update the charts looking at the correlation between the net tightening of C&I lending standards and default rates and also the correlation between the US yield curve and the C&I survey. Given the yield curve is a lead indicator it points to further quarters of net tightening ahead. We also look at the weakness in bank stocks on both side of the Atlantic and speculate as to whether this will also help tighten lending standards over the next year. Overall we'd argue that recent trends are still supportive of our late cycle view, particularly in the US. The question of how late and when this should start to change our constructive view on credit markets is the main question over the coming months.

We'll get a few additional clues as to whether our late cycle thesis is correct by the week in the form of the payroll report. Ahead of this today sees the ADP appetiser where we'll see if any trend can be observed. A reminder that DB's Joe LaVorgna is expecting a below consensus 150k on Friday (vs. 180k consensus) which is broadly in line with the 3-month trailing average. The 2014 and 2015 average was 229k and 251k respectively. The consensus for ADP today is 170k and the 3month average is currently 163k. In 2014 and 2015 this series averaged 234k and 207k respectively. We’ll also get the non-manufacturing ISM survey this afternoon covering the July month which DB is expecting to print at 56.0 versus the market at 55.9 (June was 56.5). The employment component here is also worth keeping an eye on ahead of payrolls although it’s worth noting that the correlation of this component to payrolls is higher over a longer time period, rather than a reliable single monthly gauge.
Quickly looking at the rest of Asia this morning, China aside it’s been another fairly weak start across much of the region. Having stayed closed yesterday the Hang Seng (-1.73%) has reopened heavily in the red, while the Kospi (-0.70%) and ASX (-1.04%) are also down. The Shanghai Comp (+0.20%) is a touch higher despite the Caixin services PMI weakening last month (-1pt to 51.7). Oil has recouped about half a percent, while US equity index futures are marginally in the red.

In terms of the data yesterday, there wasn’t too much to take out of the June personal income and spending data in the US. Personal income rose a slightly lower than expected +0.2% mom (vs. +0.3% expected) while personal spending (+0.4% vs. +0.3% expected) was a touch higher than expected. The PCE deflator rose +0.1% mom (vs. +0.2% expected) to leave the YoY rate unchanged at +0.9% while the PCE was in line at +0.1% mom and +1.6% yoy. Later in the evening we got the latest vehicle sales numbers which came in higher than expected. Total vehicle sales rose to an annualized rate of 17.8m saar in July from 16.6m, while expectations had been for 17.3m. US auto equities had been particularly weak leading into that data yesterday after GM and Ford had earlier reported declines in light vehicle sales. 10y Treasury yields climbed higher yesterday (+3.4bps) although that more reflected the weakness in foreign sovereign bond markets and also a deluge of corporate supply including Monday’s bumper deal from Microsoft and also Alphabet’s offering yesterday.

Before we wrap up, yesterday Michal from my team published an update on the ECB's Corporate Sector Purchase Programme (CSPP). Firstly, he reviewed the pace of primary and secondary-market purchases so far, providing a list of corporate bonds currently owned by the ECB/Eurosystem. The pace of total purchases has been in line with our forecast of €5+bn per month on average but the strength of secondary-market buying has surprised on the upside. Secondly, he looked at the apparent primary market picks and pans, noting that some new issues that appear CSPP-eligible have not been bought even if the ECB does not own any bonds from the issuers yet. We point out that despite a modest amount of primary purchases, the ECB has bought 8% of the amount of newly issued CSPP-eligible bonds. Thirdly, we provide an update on the performance of CSPP-eligible, non-bank ineligible and bank senior bonds in light of our recently revised CSPP strategy. As published last week, we no longer see value in being overweight CSPP-eligible bonds and underweight bank bonds, hence our move to market-neutral weights. Email Michal.Jezek@db.com if you didn't receive a copy.

Looking at today’s calendar, this morning in Europe we’ll get the confirmation of the July PMI’s when the services and composite readings get released. We’ll also get a first look at the data for the periphery, while away from that Euro area retail sales for June will get released. In the US this afternoon, along with the ADP print and ISM non-manufacturing, the final PMI’s (services and composite) are also due out. Earnings will continue to be a big focus for markets too. 30 S&P 500 companies are set to report including Time Warner before the open and Prudential and MetLife after the close. In European there are more banks due to report including Unicredit, ING Group and Societe Generale.

http://www.zerohedge.com/news/2016-...ncerns-about-central-bank-policy-tumbling-oil
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#19
Frontrunning: August 3


by Tyler Durden
Aug 3, 2016 7:35 AM

  • European bank rebound not enough to save world stocks from further losses (Reuters)
  • Republican rift widens as Trump declines to endorse Ryan, McCain (Reuters)
  • New Rough Patch for Trump Campaign Roils Republicans as Defections Grow (WSJ)
  • Obama says Trump unfit to be president (FT)
  • World’s Largest Oil Hedge Set to Make Billions for Mexican State (BBG)
  • China's robotics rush shows how its debt can get out of control (Reuters)
  • Latest North Korea missile launch lands near Japan waters, alarms Tokyo (Reuters)
  • Bitcoin worth $72 million stolen from Bitfinex exchange in Hong Kong (Reuters)
  • The BoE’s Brexit day: what investors expect (FT)
  • Under Tesla's wing, SolarCity's future remains uncertain (Reuters)
  • Here's What U.S. Executives Are Saying About Brexit on Their Earnings Calls (BBG)
  • Consumer Advocates Wary of Digitally Coded Food Labels (WSJ)
  • Singapore Rig Giant’s Man in Brazil Says Managers Backed Bribes (BBG)
  • Japan's Prime Minister picks hawkish defense minister in limited reshuffle (Reuters)
  • Still Need Olympic Lodging? Rio Is World’s Priciest Airbnb City (BBG)
  • Euro zone business growth picks up slightly but still muted (Reuters)
  • South Africa’s Schools, Like the Nation, Are Falling Short (WSJ)
Overnight Media Digest

WSJ

- America's biggest companies logged a fourth straight quarter of shrinking profits and tepid sales, as weakness from energy companies and lower business investment more than offset U.S. consumer strength. http://on.wsj.com/2aNXVG2

- The Obama administration secretly organized an airlift of $400 million worth of cash to Iran that coincided with the January release of four Americans detained in Tehran, according to U.S. and European officials and congressional staff briefed on the operation afterward. http://on.wsj.com/2ayjkOU

- Top executives at Riverstone Holdings LLC, one of the world's largest energy investment firms, face the prospect of returning more than $300 million of profits they made from investments before the oil bust erased those gains, according to securities filings and people familiar with the matter. http://on.wsj.com/2agXrb3

- Donald Trump is confronting the roughest patch of his presidential campaign, with even some of his strongest supporters urging him to shift gears and focus more on policy than personality. http://on.wsj.com/2ak7G9R

FT

* U.S. President Barack Obama issued a scathing attack of Donald Trump on Tuesday for criticizing a Muslim family whose U.S. Army captain son was killed in Iraq, and he challenged Republican leaders to withdraw support for their "unfit" nominee.

* Banco Santander has made an offer to take over Royal Bank of Scotland's Williams & Glyn business, according to bankers briefed on the plans.

* Users of Instagram, a photo-sharing app owned by Facebook Inc, can now post picture and video slideshows that last 24 hours, a feature similar to the signature function of social media rival Snapchat.

NYT

- Keryn Redstone, claiming that she has been disinherited out of $6 million and potentially $1 billion more, the granddaughter of the mogul Sumner Redstone has joined the lawsuit challenging his mental competence, asserting that he has been unduly influenced by his daughter. http://nyti.ms/2aHuHq6

- Instagram introduced Instagram Stories, which lets people share photos and videos that have a life span of no more than 24 hours with friends who follow them. The service bears a striking resemblance - some might say it is a carbon copy - to Snapchat Stories, a photo- and video-sharing format where the stories also disappear after no more than 24 hours. http://nyti.ms/2aHv97K

- Calvin Klein named its first chief creative officer Raf Simons, formerly of Christian Dior, as the fashion industry's extraordinary game of musical chairs at the top of major houses continues this season. He will take responsibility for all Calvin Klein lines, including runway, underwear and home goods. http://nyti.ms/2aHvzLi

- Sony has received approval from the European Commission to complete its $750 million purchase of the half of the Sony/ATV Music Publishing catalog owned by the Michael Jackson estate. The merger would give Sony full control of the songwriting rights to more than two million songs - including works by Taylor Swift, Lady Gaga and the catalog's jewel, about 250 Beatles songs - more than 20 years after the company formed a joint venture with Jackson. http://nyti.ms/2aHvdEo

Canada

THE GLOBE AND MAIL

** Enbridge Inc and Marathon Petroleum Corp have formed a joint venture to buy 37 percent of the Bakken pipeline project from Energy Transfer Partners LP and Sunoco Logistics Partners LP for $2 billion. (http://bit.ly/2ahnz5s)

** TransCanada Corp has joined a consortium proposing an $800 million marine terminal, pipeline and distribution network to feed Mexico's growing appetite for gasoline, diesel and jet fuel. (http://bit.ly/2ahnuii)

** Creditors have forced Toronto-based animation studio Arc Productions Ltd to shut its doors, locking out staff at the company best known for helping produce popular children's series such as Thomas & Friends. (http://bit.ly/2ahnoad)

** Opposition parties say the Trudeau government's new method for picking Supreme Court judges is elitist in that it cuts elected members of Parliament out of a direct role in selecting potential candidates. (http://bit.ly/2ahnsqp)

NATIONAL POST

** Husky Energy Inc has agreed to a reduced price for the natural gas it extracts offshore China and sells to the country's state-owned CNOOC Ltd, ending an escalating dispute. (http://bit.ly/2ahovHb)

** Silver Wheaton Corp's $800 million gold acquisition from Vale SA shows that metal streaming firms still have good buying opportunities despite improving market conditions. (http://bit.ly/2ahoRNF)

** Canada's economy is vulnerable to the impact of a major earthquake, and policymakers and the insurance industry should be taking steps to avert a chain of events that would send fissures through the financial system, the former head of the country's top banking regulator warned on Wednesday in a report from the C.D. Howe Institute. (http://bit.ly/2ahop28)

Britain

The Times

* A former Bank of England rate-setter, Dame Kate Barker, has warned that cutting interest rates would do more harm than good as pressure grows on the monetary policy committee before this week's meeting. (http://bit.ly/2agpRlh)

* The Financial Conduct Authority said that consumers who believe they have been mis-sold payment protection insurance should make a claim before June 2019. (http://bit.ly/2b0YYPC)

The Guardian

* Belize Bank International, an offshore bank owned by Michael Ashcroft, has closed a large number of customer accounts and faced a wave of withdrawal requests after becoming increasingly caught up in a U.S. tax-evasion crackdown, the Guardian has learned. (http://bit.ly/2b0YY1L)

* Talks will start on Wednesday to avert the most extreme disruption yet for long-suffering Southern passengers, with 40 percent of trains to be cancelled as conductors prepare to strike for five days next week. (http://bit.ly/2b0ZEnN)

The Telegraph

* UK will avoid a Brexit-induced recession at the turn of the year, according to the National Institute of Economic and Social Research. (http://bit.ly/2b0ZEEt)

* U.S. Federal Aviation Authority has granted Virgin Galactic an operators licence for the SpaceShipTwo spaceplane, which Virgin says will eventually allow it to use the aircraft for commercial operations. (http://bit.ly/2as3zIE)

Sky News

* Ian Taylor, the head of global energy and commodity trading company Vitol who is reportedly included in David Cameron's leaked resignation honours, has withdrawn his name from the list amid claims of cronyism. (http://bit.ly/2b102Tr)

* Home ownership has fallen to its lowest level for 30 years in England, with northern cities feeling some of the greatest pain from rising prices, according to an analysis by Resolution Foundation. (http://bit.ly/2b0ZY6d)

The Independent

* The Bank of England's annual stress tests of the UK's banks, designed to ensure Britain's lenders will not be at the heart of another destructive financial crisis, have been branded "worse than useless," according to a new report by Kevin Dowd, professor of finance and economics at Durham University. (http://ind.pn/2b10rW2)

* The NHS is able to fund a "game-changing" preventative HIV drug, the High Court has ruled after a charity launched a legal challenge. The National Aids Trust won its battle on Tuesday after NHS England claimed it did not have the power to fund pre-exposure prophylaxis. (http://ind.pn/2b10yAI)


http://www.zerohedge.com/news/2016-08-03/frontrunning-august-3
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#20

Argent Dragon

Site Support
Site Bus
Site Supporter
Joined
Mar 29, 2010
Messages
8,259
Likes
2,953
Location
Lone Star State
#21

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#23
S&P Futures Flat As Europe, Asia Lifted By Banks, Yen; All Eyes On The Bank Of England


by Tyler Durden
Aug 4, 2016 6:39 AM

In a mostly quiet session, European and Asian stocks rose, pushed higher by financial stocks and the USDJPY which initially dipped on some hawkish comments by BOJ deputy governor Iwata, only to rebound later in the session, lifting the Nikkei 1.1%, while the Stoxx 600 rose 0.4% led higher by the banking sector. S&P futures are unchnaged after yesterday's last hour ramp. The key event is the BOE decision due in half an hour, which saw the pound dip initially only for cable to regain all losses in recent trading, despite a 100% price in expectation that Mark Carny will deliver the first interest rate cut in seven years.

Ahead of the BOE Super Thursday, currency traders are bracing for the BOE to provoke share price swings: a measure of overnight volatility for sterling against the dollar was near the highest since Britain voted to leave the European Union in June according to a Bloomberg report. After holding fire last month, the BOE is expected to cut rates amid mounting evidence that the prospect of Brexit is already hurting economic growth. There are a suite of other measures, including an expansion of its bond-purchase program, which the BOE may also adopt to tackle the fallout, and which would weigh on the pound.

"I think a cut plus 100 billion pounds in new quantitative easing is probably the barrier (to more falls)," said Richard Benson, co-head of portfolio investment at currency fund Millennium Global in London.



“There is quite a lot of speculation regarding what the BOE might do today, so the short-term volatility is to be expected,” said Mark Dowding, a London-based partner and money manager at BlueBay Asset Management LLP. “We doubt the BOE would be opposed to the idea of the pound falling further as it would support the growth outlook, which is deteriorating markedly. We see the pound falling to $1.20 or lower by the end of the year.”

The Stoxx 600 advanced 0.4 percent in London, after falling 1.9 percent in the first three days of the week. Gauges of lenders and oil companies rallied at least 1.4 percent. Banks led the Stoxx Europe 600 Index higher, while mining shares and energy producers drove the Asian index up from its lowest level since June 24. U.S. crude held above $40 a barrel after the steepest drop in gasoline supplies since April soothed concern over a glut. Industrial metals fell as maintenance-related disruptions in China’s stainless-steel production decreased demand for the raw materials. Siemens AG rose 4.1 percent after increasing its profit outlook for the second time this year. Societe BIC SA jumped 5.6 percent as the maker of pens said sales rose in the second quarter. Aviva Plc advanced 5.1 percent as the British insurer reported a gain in profit and increased its dividend. Randgold Resources Ltd. tumbled 9.5 percent, pacing declines on a measure of Stoxx 600 miners, as a decline in gold output arising from disruptions at two of its African operations led to lower profit.

The MSCI Emerging Markets Index climbed 0.7 percent, after sliding 1.6 percent in the previous two days. Benchmarks in Russia, Dubai and the Philippines gained at least 0.8 percent. S&P 500 futures were little changed, after U.S. equities Wednesday snapped a two-day losing streak amid the rally in oil prices. The index is trading near its highest multiple in more than a decade. Still, investors are looking for clear signs of economic progress after last week’s disappointing growth report, and will asses releases on jobless claims and factory orders due Thursday for clues on the strength of the U.S. economy. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong rose 0.3 percent, rebounding from the biggest drop in four weeks. The Shanghai Composite Index ended the day up 0.1 percent, after falling as much as 0.7 percent.

Treasuries were little changed, with yields on notes due in a decade steady at 1.55 percent. Ten-year rates jumped at the start of this week, as the record-setting rally in global bonds appeared to falter. Yields on German 10-year bunds lost 1 basis point to minus 0.05 percent.

After yesterday's torrid rally, WTI fell back under $41, slipping 0.5 percent to $40.50 per barrel, after Wednesday’s 3.3 percent rebound that came when U.S. government data showed gasoline stockpiles fell by 3.26 million barrels last week, the most since April. Brent crude dropped 0.7 percent to $42.82 a barrel.

Market Snapshot
  • S&P 500 futures down less than 0.1% to 2157
  • Stoxx 600 up 0.5% to 337
  • FTSE 100 up less than 0.1% to 6638
  • DAX up 0.7% to 10237
  • German 10Yr yield down 1bp to -0.05%
  • Italian 10Yr yield down 3bps to 1.19%
  • Spanish 10Yr yield down 2bps to 1.07%
  • S&P GSCI Index down 0.3% to 335.9
  • MSCI Asia Pacific up 0.7% to 135
  • Nikkei 225 up 1.1% to 16255
  • Hang Seng up 0.4% to 21832
  • Shanghai Composite up 0.1% to 2982
  • S&P/ASX 200 up 0.2% to 5476
  • U.S. 10-yr yield up less than 1bp to 1.55%
  • Dollar Index up 0.13% to 95.69
  • WTI Crude futures down 0.8% to $40.50
  • Brent Futures down 0.9% to $42.60
  • Gold spot down 0.5% to $1,351
  • Silver spot down 1% to $20.20
Top Headline News
  • What to Watch as Carney Kicks Off Defense Against Brexit Fallout: Most economists predict reduction in key rate to 0.25%
  • Berkshire Said to Draw Fed Scrutiny Over Wells Fargo Investment: Agencies weigh whether insider-credit limits exceeded at bank
  • New York State to Require Hearing on Proposed Anthem-Cigna Deal: Regulator says purchase would reduce competition, hurt firms
  • This Time, 3D Printer Makers Think They’ve Found a Sweet Spot: HP says new device cheaper, works 10 times faster than rivals’
  • Goldman Employees to Pull $350m From Och-Ziff Fund: Setback for Och as clients pull assets, U.S. probe continues
  • Tesla Forecasts Ease Sting as Quarterly Loss Trails Estimate: Loss was $1.06-share on added engineering costs for Model 3
  • Musk Declares Tesla Free From Factory Hell With Targets Intact: Assembly of electric semi, bus could begin in a few years
  • MetLife Profit Falls 90% on Review of Annuities Slated for Exit: CEO cites progress in plan to separate business
  • Fox Profit Tops Estimates as Broadcast TV Registers Gain: Film earnings slump on marketing costs for big summer pictures
  • Allstate 2Q Adj. EPS, Revenue Top Estimates: Net investment down $27m y/y
  • Ackman’s Pershing Square Sells Position in Canadian Pacific: Move comes after transformation of Canadian railway firm
* * *

Looking at regional markets, Asia traded mostly positive, tracking the US oil inspired gains where WTI rose above USD 41/bbl and the Dow snapped a 7-day losing streak. ASX 200 (+0.2%) was underpinned by the gains in energy after oil's 3% surge whilst mining names also supported the advances in Australia. Nikkei 225 (+1.1%) saw choppy trade with fluctuations in JPY driving price action. Chinese markets were mixed with bargain-buying observed in the Hang Seng (+0.5%), while the Shanghai Comp (+0.1%) underperformed following a reserved liquidity injection and after yesterday's NDRC comments regarding lower rates and RRR were retracted from the statement. 10yr JGBs resumed its post-BoJ downtrend with demand dampened as participants awaited a 10yr inflation-linked auction, which was relatively mixed with the lowest accepted price falling from prior, although b/c slightly improved and there was a lower portion of bids allotted at the bottom price.

Top Asian News
  • Offshore Yuan Forwards Signal Depreciation Bets at Two-Year Low: Bears surrendering, getting out of short trades, Mizuho says
  • $75b Stock Binge Looms After Japan Pension Whales’ Losses: Pension funds combined managed $1.9t as of March
  • Toyota Cuts Net Forecast as Yen Gains, Americans Snub Cars: Stronger yen drags on earnings after 3-year tailwind
  • SunEdison India Sale Said to Draw Khazanah, Hinduja Brothers: U.S. clean-energy giant selling $700m of India projects
  • Yum! Brands, McDonald’s Look for Buyers as Chinese Tastes Shift: Both eye spinoffs of their China operations
  • BOJ Seen Buying More Often to Reach $59b ETF Target: Bank boosts daily purchase amount only slightly this month
European equities have seen some modest upside this morning (Euro Stoxx: +0.5%) with earnings yet again dictating the latest state of play, while the FTSE 100 underperforms relative to its counterparts with pressure from mining and energy names. Financials lead the pack as analysts and traders look to the BoE's Super Thursday (full preview posted here). Fixed income markets are also relatively quiet ahead of the key risk event of the BoE and with Spanish and French supply now absorbed by the market. Heading into 1200BST Gilts will likely take focus amid speculation that asset purchasing could be re-introduced by the BoE.

Top European News
  • Siemens Raises Outlook After Quarterly Profit Beats Estimate: 3Q industrial operations profit rises 20%
  • Anheuser-Busch InBev to Dominate Combined Brewer’s Leaders: Board to include 1 executive from SABMiller
  • Merck KGaA Quarterly Profit Beats Estimates: Forecast raised
  • Nokia Raises Merger Savings Target as Sales Trail Estimates: CEO Suri promises more cut costs after Alcatel-Lucent deal
  • London Stock Exchange Says Brexit May Erode Trading Volume: Work on regulatory consent for Deutsche Boerse deal underway
  • Adidas’s North America Sales Jump 26% After Outlook Raised: Greater China is fastest-growing region with 30% growth
  • Samsung Said in Talks to Buy Assets of Fiat Auto-Parts Unit: Company most interested in lighting, entertainment, telematics
In FX, sterling declined 0.2 percent to $1.3295 in early trading as swaps pricing showed a 100 percent chance of a rate reduction. The BOE is forecast to cut its benchmark from a record low of 0.5 percent and may boost an asset purchase program that stands at 375 billion pounds ($500 billion).The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, was up 0.1 percent after rising 0.3 percent on Wednesday, when emerging-market currencies led declines. Chicago Federal Reserve President Charles Evans told reporters Wednesday that a U.S. rate hike “could be appropriate this year.” Odds on the Fed boosting benchmark borrowing costs in 2016 have dropped to 39 percent, with last week’s weaker-than-expected U.S. growth data damping prospects for tightening. The yen weakened 0.3 percent to 101.54 per dollar, adding to its 0.4 percent slide on Wednesday. Japan’s currency has gained about 0.5 percent this week, as traders weigh the BOJ’s decision last Friday to only bolster purchases of exchange-traded funds, as well as a fiscal package flagged Tuesday by Prime Minister Shinzo Abe.

In commodities, WTI crude slipped 0.3% to $40.72 per barrel, after Wednesday’s 3.3% rebound that came when U.S. government data showed gasoline stockpiles fell by 3.26 million barrels last week, the most since April. Brent crude dropped 0.7 percent to $42.82 a barrel. WTI is still down more than 1 percent this week, after the commodity sold off on Monday and Tuesday amid resurgent concern over a global glut. Citigroup Inc. to Bank of America Merrill Lynch predicted the slump would be short-lived, while Societe Generale SA said the price correction would be limited due to a better balance between supply and demand. “We’re seeing rebalancing,” Scott Darling, regional head of oil and gas at JPMorgan Chase & Co., said in a Bloomberg TV interview. “We think in the near-term, oil will be under pressure because demand is moderating.” Gold for immediate delivery dropped 0.5 percent to $1,351.47 an ounce, after declining 0.4 percent on Wednesday. Last session’s retreat halted the precious metal’s longest rally in a month. Copper dropped 1.2 percent on the London Metal Exchange and nickel fell 2.2 percent. Wheat added 1.3 percent to $415.50 a bushel as use of the crop to feed cows, chickens and pigs is set to rise to the highest level since 2007 after heavy rains in France left crops unfit for human consumption. Noble Group Ltd. rebounded as much as 16 percent in Singapore as the company’s new rights shares began trading on the exchange, extending a roller-coaster ride ahead of quarterly results next week that’ll shed light on the commodity trader’s performance, funding and plans for asset sales.

On today's calendar, the key event is the aforementioned BoE monetary policy meeting outcome followed by Governor Carney’s press conference. Away from that, in the US we’ll firstly get the latest initial jobless claims numbers, shortly followed by June factory orders data where headline orders are expected to have fallen -1.9% mom. We’ll also get confirmation of any final revisions to the June durable and capital goods orders data. Away from the data the Fed’s Kaplan is due to speak this morning in Shanghai while the IMF’s Lagarde will speak this afternoon in Brazil. There will be more corporate earnings released too with 28 S&P 500 companies scheduled including Kraft Heinz. In Europe we’ll get numbers from Adidas, Nokia and Siemens.

* * *

Headline Summary Bulletin from RanSquawk and Bloomberg
  • European equities trade modestly higher heading into the North American crossover with some participants choosing to sit on the sidelines ahead of the BoE rate decision at 1200BST
  • FX markets have also seen a relatively tame start to the session with markets pricing in a 25bps cut by the BoE later today
  • Looking ahead, highlights include BoE rate decision, minutes, QIR and press conference, US Factory Orders, Durable Goods and Initial Jobless Claims, Fed's Kaplan
  • Treasuries steady in overnight trading as global equities rally, oil and gold drop ahead of this morning’s BOE announcement.
    When the BOE publishes their first full assessment of what the Brexit vote means for the economy and their defensive plan, almost all economists in a Bloomberg survey believe the benchmark rate will be reduced to a record low
  • Negative rates “won’t happen at this meeting” but “I certainly don’t rule it out,” former Bank of England policy maker Danny Blanchflower said on BBC Radio’s Today program
  • U.S. regulators are examining whether Berkshire’s stake in one of its biggest holdings, Wells Fargo, violates rules for how much credit banks can extend to corporate insiders, according to two people familiar with the review
  • The BOJ doubled its exchange-traded fund purchases, suggesting it’s opting to increase the daily amount from now on rather than how often it buys. Investors are watching how the bank will reach its new target as Japanese equities struggle in 2016
  • Kozo Yamamoto hasn’t wasted any time pushing his policy prescriptions since Japanese PM Abe brought him into his cabinet. “I think it might be necessary to encourage a discussion throughout all ministries about a wage target policy,” Yamamoto told reporters
  • Six weeks since U.K. voters rebuked Europe’s political elite by choosing to leave the EU, the region’s establishment has reacted by carrying on as before. The revolving door of former policy makers joining the finance industry has spun again
Economic Event Calendar
  • 6:15am: Fed’s Kaplan speaks in Shanghai
  • 7am: Bank of England Bank Rate, est. 0.25% (prior 0.50%)
  • 7:30am: Challenger Job Cuts y/y, July (prior -14.1%)
  • 8:30am: Initial Jobless Claims, July 30, est. 265k (prior 266k)
  • 9:45am: Bloomberg Consumer Comfort, July 31 (prior 42.9)
  • 10am: Factory Orders, June, est. -1.9% (prior -1%)
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural-gas storage changes
DB's Jim Reid concludes the overnight wrap

As many Olympians will tell you over the next couple of weeks, records are there to be broken and another one is likely to fall in financial markets today. The Bank of England is widely expected to cut rates by 25bps and this will place them as fresh 322 year lows from the original inception of the BoE. At this stage I'd normally quote the latest hot off the press piece from our UK economist George Buckley. However George had his first child last week and is on paternity leave. If he's anything like me 11 months ago he currently won't know what's hit him.

Before he left he reaffirmed his view of a 25bps cut and that they will leave all other policy levers untouched for now. In September, as the economic news deteriorates more forcefully in response to Brexit, he expects the Bank to supplement that with another cut in the Bank Rate to the lowest he thinks they are willing to go: to 0.10%. But this further 15bps easing is likely to be insufficient, and thus he expects it to be accompanied by a restart of the QE programme (£50bn or £75bn of purchases over the following three months). So lots of easing to come.

We’ll also get the latest Inflation Report and new macroeconomic forecasts from the BoE which will be released alongside the outcome of the monetary policy meeting. It would be hard to imagine that the BoE won’t downgrade its growth forecasts in light of Brexit although the extent to which will be interesting. The inflation numbers will also be important given the big 10% drop in Sterling post the vote. What will be interesting here is how long the BoE believes that deprecation gets passed through to consumer prices.

One of George’s reasons justifying the BoE holding last month and instead waiting for today’s meeting is the benefit of seeing more post-Brexit data. Yesterday we got final confirmation of the July PMI’s and there was no change to the UK’s weak 47.4 services reading which is the lowest reading since March 2009. It meant the composite ended up at 47.5 (revised down another 0.2pts) which is a 5pt drop from June. Believe it or not the Citigroup economic surprise index has done nothing but rise post Brexit. In fact, with the reading at 58.8 it is up some 56pts post the referendum and at the highest since 2013. The current UK reading is actually well ahead of similar readings for the US and Euro area however this more than likely reflects beats on much lower expectations and also the still relatively limited post Brexit survey releases. So while interesting, probably not worth reading into that much.

Staying with the data, ahead of the second main risk event of this week - that being Friday’s payrolls - the July ADP employment change reading in the US didn’t spring too many surprises after coming in slightly ahead of estimates at 179k (vs. 170k expected). That compares to 176k in the prior month. The ISM non-manufacturing reading for last month was a bit more interesting though. The headline reading fell 1pt and a little more than expected to 55.5 (vs. 55.9 expected). The focus was on the employment component and having risen from 49.7 in May to 52.7 in June, it was back down to 51.4 in July. As we noted yesterday the series isn’t necessarily a great predictor of immediate monthly changes in payrolls, but it was interesting to see our US economists highlight that the six-month trailing average of the non-manufacturing employment series (51.1) is at its lowest level since October 2010 (50.2). At that time, the six-month trailing average of private service-sector hiring was 115k, well below the 166k average as of June.

So with the two big risk events of the week looming, markets were a bit more muted yesterday although they were helped by a decent rebound for Oil and also a much better session for European Banks. Indeed WTI Oil rallied +3.34% yesterday and is up another +1% or so this morning at slightly north of $41/bbl having actually touched an intraday low of $39.19/bbl yesterday. The trigger for the bounceback appeared to be the latest US inventory data which showed a surprising steep fall in gasoline stockpiles last week. That sent energy stocks soaring and helped the S&P (+0.31%) to its first positive day in August. The Dow (+0.23%) also closed higher and finally brought to an end a run of seven consecutive daily losses.

The rally for Oil came a bit later in the day so European markets missed out on most of it, although European Banks had a much better session following a raft of earnings reports. While the Stoxx 600 (+0.03%) was little changed, the Stoxx 600 Banks index rebounded +1.77%. ING Group (+8.20%) and Societe Generale (+3.16%) rose on better than expected profit numbers, Standard Chartered (+4.19%) surged after loan impairment charges dropped and operating costs fell, while HSBC (+4.47%), despite reporting mixed results, was higher following a share buyback announcement.

In bond markets meanwhile two days of surging bond yields took a pause for breath with government bond markets little changed by the close. Credit was a smidgen tighter (the US outperforming Europe given the moves for Oil) and it was interesting to see UBS come to market with a new USD AT1 bond which according to Bloomberg was Europe’s first sale of bonds in the AT1 market since Brexit.

Turning over to the latest in markets this morning, after initially dropping lower earlier in the session Japanese equities have bounced back in the hour or so as we to print. Having been down as much as half a percent, the Nikkei and Topix are now +0.38% and +0.35% respectively, while JGB yields are unchanged and the Yen is back to flat after initially strengthening. The rest of Asia is also broadly higher, likely reflecting those gains in the energy complex. The Hang Seng (+0.56%), Kospi (+0.19%) and ASX (+0.37%) in particular are up. China is lagging a bit, with the Shanghai Comp currently -0.19%.

In terms of the rest of the data yesterday, the final services PMI in the US was revised up half a point to 51.4 which left the composite at 51.8 (vs. 51.2 in June) and the highest since April. The European session was all about the final PMI revisions. The Euro area services PMI was revised up 0.2pts to 52.9 which left it ever so slightly ahead of June (52.8). The resulting composite print of 53.2 was up from 53.1 in June. Regionally the only country to see a big decline was Spain (composite down 2pts) with the rest of Europe ex UK resilient. Indeed our European economists noted that the July composite reading for the Euro area suggests GDP growth of between 0.3% and 0.4% qoq which is in line with their 0.3% projection.

Away from the data we also heard from one of the more dovish Fed officials in the form of the Chicago Fed’s Evans. He said that one rate hike this year ‘could be appropriate’ given his outlook and improving data in comments at a media briefing. He also said that he would prefer no hikes until ‘we saw inflation much more strongly’. On this, the Minneapolis Fed President Kashkari (who it feels like has spoken every day this week) said that he’s not seeing much inflationary pressure in the data and that we ‘have the luxury of time’ in raising rates.

Looking at the day ahead, with little in the way of economic data this morning the main event is at midday when we get the aforementioned BoE monetary policy meeting outcome followed by Governor Carney’s press conference. Away from that, this afternoon in the US we’ll firstly get the latest initial jobless claims numbers, shortly followed by June factory orders data where headline orders are expected to have fallen -1.9% mom. We’ll also get confirmation of any final revisions to the June durable and capital goods orders data. Away from the data the Fed’s Kaplan is due to speak this morning (11.15am) in Shanghai while the IMF’s Lagarde will speak this afternoon (4pm BST) in Brazil. There will be more corporate earnings released too with 28 S&P 500 companies scheduled including Kraft Heinz. In Europe we’ll get numbers from Adidas, Nokia and Siemens.

http://www.zerohedge.com/news/2016-...e-asia-lifted-banks-yen-all-eyes-bank-england
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#24
Frontrunning: August 4


by Tyler Durden
Aug 4, 2016 7:47 AM

  • Bank of England cuts rates for first time since 2009, restarts bond purchases (Reuters)
  • Obama administration denies Iran cash payment was a ransom (Reuters)
  • Mike Pence Endorses Paul Ryan After Donald Trump’s Refusal (WSJ)
  • In slap at Trump, some wealthy Republicans campaign for Clinton (Reuters)
  • Clinton leads Trump by 17 points in NH (The Hill)
  • One More Reason for Investors to Worry About ‘Earnings Before Bad Stuff’ (WSJ)
  • Two L.A. policemen who shot unarmed black man sue city for racial discrimination (Reuters)
  • Musk Declares Tesla Free From Factory Hell With Targets Intact (BBG)
  • Goldman Sachs says Brexit could adversely affect operations (Reuters)
  • New Jersey Backs Away From Hedge Funds (WSJ)
  • Goldman Employees to Pull $350 Million From Och-Ziff Fund (BBG)
  • Berkshire Said to Draw Fed Scrutiny Over Wells Fargo Investment (BBG)
  • Pentagon not to pay Pakistan $300 million in military reimbursements (Reuters)
  • Steve Cohen’s New Firm Said to Meet With Investors Ahead of 2018 (BBG)
  • Icahn to close Trump Taj Mahal casino in Atlantic City (Reuters)
  • Chicago Seeks Tax Hike to Avert Insolvency for Pension Fund (BBG)
  • Wal-Mart Said to Be in Talks to Acquire Amazon Rival Jet.com (BBG)
  • U.S. states signed pact to keep Exxon climate probe confidential (Reuters)

Overnight Media Digest

WSJ

- Senior Justice Department officials objected to sending a plane loaded with cash to Tehran at the same time that Iran released four imprisoned Americans, but their objections were overruled by the State Department, according to people familiar with the discussions. http://on.wsj.com/2aSUOx8

- Republican vice presidential nominee Mike Pence on Wednesday endorsed Paul Ryan in his primary race, a day after Donald Trump kicked off a new GOP firestorm by withholding support from the House speaker. http://on.wsj.com/2aS2wqK

- A woman was killed and five other people were wounded in a knife attack in central London late Wednesday, London's Metropolitan Police said. http://on.wsj.com/2avJDEC

- Tesla Motors Inc's loss widened in the second quarter amid higher costs, but the company stuck to an ambitious plan that calls for building nearly 80,000 cars in 2016 and pulling forward a cheaper sedan aimed at the mass market. http://on.wsj.com/2aR7K6m


FT

* EDF Chief Executive Jean-Bernard Levy knew the British government wanted to take more time to review the Hinkley Point nuclear contract before the French utility's board voted to approve the investment, he said in a letter to top executives.

* Kevin Roberts, the chairman of Saatchi & Saatchi, quit after sparking uproar by saying a lack of women in high-powered jobs in advertising was not a problem and that some women lacked the "vertical ambition" to make it to the top.

* U.S. securities-industry watchdog Finra has fined Barclays , the UK-based bank, $1.3 million for "systemic" reporting violations.


NYT

- Tronc, formerly known as Tribune Publishing, raised its guidance for the year, a move that implied confidence in the company's stand-alone strategy as it fends off a takeover attempt from the Gannett Company. http://nyti.ms/2awdG5d

- Tesla Motors said its losses deepened in the second quarter, but the electric-car maker pledged to expand production and improve the profitability of its vehicles. The company said it lost $293.2 million in the quarter, on revenue of $1.27 billion. http://nyti.ms/2awdTFG

- Investigators looking into sexual harassment accusations against the former Fox News chairman Roger Ailes are also examining whether other executives knew of alleged improper behavior by Ailes and failed to act on it. http://nyti.ms/2awetTD

- William Ackman's Pershing Square Capital Management sold its entire stake of 9.8 million shares in Canadian Pacific Railway in a series of trades. The shares were valued at about $1.5 billion based on Tuesday's closing price. http://nyti.ms/2awfP0I


Canada

THE GLOBE AND MAIL

** The Canadian government is facing another claim for more than C$1 billion in damages over its policy on competition in the wireless market. (http://bit.ly/2b4W2kW)

** The families of two women who died in federal custody at a Nova Scotia prison last year are suing the federal government, arguing in part that the Correctional Service of Canada aggravated their health issues by prescribing stints in solitary confinement rather than visits to a doctor's office. (http://bit.ly/2akeFEd)

** Arun Chandrasekaran is returning to National Bank Financial to head up energy investment banking a year after he left to join a Calgary-based private equity firm, Stream Asset Financial Management. (http://bit.ly/2akeN6P)

NATIONAL POST

** Despite U.S. President Barack Obama's rejection of the Keystone XL pipeline, new barrels of Canadian crude oil will soon make their way to the U.S. Gulf Coast following a US$2.6 billion deal led by Enbridge Inc to buy a U.S. pipeline system. (http://bit.ly/2b4QDKq)

** Wireless upstart Sugar Mobile is ramping up efforts to attract new customers to its C$19-per-month ($14.54) plans as it awaits a final regulatory decision regarding Rogers Communications Inc's attempt to stop it from using the wireless giant's mobile network. (http://bit.ly/2b4QDdC)


Britain

The Times

Banco Santander S.A has again brought up plans to buy a 300-branch bank carved out of Royal Bank of Scotland . The Scottish bank plans to rename this business Williams & Glyn. (http://bit.ly/2aUNZrE)

Wal-Mart Stores Inc is in talks to acquire Jet.com, an online retailer. Wal-Mart is aggressively trying to expand its ecommerce business as it struggles to compete with Amazon Inc. (http://bit.ly/2aT84S9)

The Guardian

Threat of further strikes is set to aggregate the crisis at Southern Railway. The Rail, Maritime and Transport (RMT) union is planning a five days strike if the deadlocked row with Southern is not resolved. (http://bit.ly/2aUPKVw)

Economic activity and jobs in Ireland are facing increasing threat post Brexit. The sharp decline in the pound against the euro are making Irish exports to the UK relatively less competitive than before. (http://bit.ly/2aT8nwv)

The Telegraph

Following Amazon Inc's footsteps, Google Inc is all set to test delivery drones in the US. Google received the seal of approval from US's Federal Aviation Administration to test drones weighing less than 25 kilograms. (http://bit.ly/2aT8OXF)

Tullett Prebon Plc will hire 300 employees by 2019 and establish a technology centre in Belfast. (http://bit.ly/2aUTzKw)

Sky News

Britain's energy regulator Ofgem said on Wednesday it would implement a number of measures to improve competition in the UK retail energy market after an investigation found that customers had been overcharged by billions of pounds. However, the regulator has drawn criticism for its proposals not going "far enough". (http://bit.ly/2aUX6IM)

Kevin Roberts, the chairman of Saatchi & Saatchi, quit after sparking uproar by saying a lack of women in high-powered jobs in advertising was not a problem and that some women lacked the "vertical ambition" to make it to the top. (http://bit.ly/2aUXYgx)

The Independent

Britain's largest police force, Metropolitan Police, is all set to hire 600 additional marksmen. The decision came in light of the recent terror attacks that plagued Europe this year. (http://ind.pn/2aUZFdR)

http://www.zerohedge.com/news/2016-08-04/frontrunning-august-4
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#25
SA - Real time news 08/04
http://seekingalpha.com/market-news

TBP - 10 Thursday AM Reads 08/04
http://ritholtz.com/2016/08/thursday-reads-19-5/

TRB - Hot Links: Powerful Forces 08/04
http://thereformedbroker.com/2016/08/04/hot-links-powerful-forces/

CWS - Morning News: August 4, 2016
http://www.crossingwallstreet.com/archives/2016/08/morning-news-august-4-2016.html

Naked Capitalism Links 08/04
http://www.nakedcapitalism.com/2016/08/links-8416.html

SA - Wall Street Breakfast: Markets Await Bank Of England Decision 08/04
http://seekingalpha.com/article/3995599-wall-street-breakfast-markets-await-bank-england-decision

MtM - Carney Gets Ahead of Market Expectations; Sterling Slumps, Gilts Soar 08/04
http://www.marctomarket.com/#!/2016/08/carney-gets-ahead-of-market.html
 

Argent Dragon

Site Support
Site Bus
Site Supporter
Joined
Mar 29, 2010
Messages
8,259
Likes
2,953
Location
Lone Star State
#26

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#27
Mornings With "V": What's Poppin?
ROGUE MONEY


Streamed live 1 hour ago
V Runs down the News from last night and what to expect today.
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#28
Michael Oliver Updates Gold and Critical Markets
FinanceAndLiberty.com


Published on Aug 3, 2016
This video was posted with permission from http://JayTaylorMedia.com

FINANCE AND LIBERTY:
SUBSCRIBE (It's FREE!) for more ►http://bit.ly/Subscription-Link
Website ►http://FinanceAndLiberty.com
Like us on Facebook ►http://fb.com/FinanceAndLiberty
Follow us on Twitter ►http://twitter.com/Finance_Liberty
Google Plus ►http://Gplus.to/FinanceLiberty

DISCLAIMER: The financial and political opinions expressed in this video are not necessarily of "Finance and Liberty" or its staff. Opinions expressed in this video do not constitute personalized investment advice and should not be relied on for making investment decisions.
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#29
Tom Cloud's Precious Metals Market Update (02/08/16)
FinanceAndLiberty.com


Published on Aug 3, 2016
This video was posted with permission from http://FTMDaily.com

FINANCE AND LIBERTY:
SUBSCRIBE (It's FREE!) for more ►http://bit.ly/Subscription-Link
Website ►http://FinanceAndLiberty.com
Like us on Facebook ►http://fb.com/FinanceAndLiberty
Follow us on Twitter ►http://twitter.com/Finance_Liberty
Google Plus ►http://Gplus.to/FinanceLiberty

DISCLAIMER: The financial and political opinions expressed in this video are not necessarily of "Finance and Liberty" or its staff. Opinions expressed in this video do not constitute personalized investment advice and should not be relied on for making investment decisions.
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#30
Nothing to see. Your best bet if interested is to listen in one window, play around on GIM or surf the web in another window. Approx 47 minutes long.

Jeff Berwick on Reluctant Preppers: The Permanent Traveller/Prior Taxpayer Theory and Living Free
TheDollarVigilante


Published on Aug 3, 2016
Jeff is interviewed bt Reluctant Preppers, topics include: the permanent traveller lifestyle, expatriation, tax credits, the relative safety of different countries, the USA being one of the most dangerous, the lack of danger in Acapulco, propaganda and lies on the mainstream media, the destruction of the family unit in the west, Mexico is booming, self reliance and community, wealth vs happiness, breaking free of government control and gaining freedom, the best ways to invest in precious metals offshore, letting go of fear and living free!

James Holman, 'A Voyage Round The World vol 1': http://www.gutenberg.org/ebooks/12528

Subscribe to the TDV newsletter at: https://www.dollarvigilante.com/subsc...

Survive Shemitah website: http://surviveshemitah.com/

Anarchapulco 2017: https://anarchapulco.com/

Subscribe to The Dollar Vigilante: https://www.dollarvigilante.com/subsc...

The Dollar Vigilante on Facebook: https://www.facebook.com/DollarVigila...

Anarchast: http://anarchast.com
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#33
Ira Epstein's Gold Report: Aug-4-2016
By: Ira Epstein
Be it failing monetary policies, war, deflation or what have you, it appears that gold has made a low that I don’t expect to be challenged for a very long period of time. Certainly not in the next couple of years if I am correct in my analysis. The one kicker that I did not discuss was inflation. Given it doesn’t exist in most western economies, why spend time on it. However, when it does kick in, it will be another bullish element for gold bulls to munch on.


What Student Debt Problem; Simple Solution ends the problem
By: Sol Palha
The student debt crisis is only a crisis because gullible parents are supporting spoilt brats, and allowing them to believe they are the chosen ones, when in fact, they are not. This debt problem like most of America’s debt problems comes down to mismanagement of finances. One should not live like a king on a soldier’s salary. When someone has to work for something they appreciate and value it, when they are given handouts, they show no appreciation and demand twice as much.

Gold Seeker Closing Report: Gold and Silver End Mixed Before Jobs Day
By: Chris Mullen, Gold-Seeker.com
Gold fell $8.86 to $1349.24 in Asia before it rallied back to $1364.86 at about 8:45AM EST, but it then drifted back lower into the close and ended with a gain of just 0.17%. Silver slipped to as low as $20.044 and ended with a loss of 0.29%.
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#34
Futures, Global Stocks Rise As Oil, USDJPY Drops: All Eyes On The Jobs Report


by Tyler Durden
Aug 5, 2016 6:41 AM


With all eyes on today's jobs report, where consensus expects a 180K payrolls gain, European, Asian stocks and S&P futures all rise amid a surge in government debt as markets digest the BOE's "kitchen sink" easing for a second day. But please don't overthink it. In deja vu fashion, Bloomberg summarizes the action simply as "stocks rose around the world on speculation central bank stimulus measures will support the global economy." We've heard that just a few times before.

We've also heard this: “There’s a lot of hope that central banks can counter any downside to growth, especially after the Bank of England shot a pretty big torpedo yesterday,” said Dirk Thiels, head of investment management at KBC Asset Management in Brussels. “But anxiety about the economy can just as easily come back as it went away. It’s important that the U.S. holds strong, as that also helped bring optimism back to markets.”

Futures are up 0.2%, despite a drop in both oil and USDJPY, with the dollar weaker ahead of what is supposed to be a relative strong jobs report forecast to show the increase in payrolls returned to the modest pace of growth, but not too good: analysts predict America’s employment market continued to improve at a pace that probably won’t trigger the Federal Reserve to push ahead with raising interest rates this year.



In other words, whatever happens stocks will end up higher as a stronger report will "confirm" the US economy is rebounding, while a weak report will suggest those central banks which are still easing, "have this." As Heo Pil Seok of Midas International Management said, “the BOE’s move looked like an inevitable choice, but it was taken as a positive signal for investors in terms of boosting expectations for increased liquidity in the global market. While improved sentiment is reflected especially in the equities market today, the U.S. data is something to keenly watch as it may fuel concerns of a rate hike.”

It wasn't all good news, however, as PIMCO parent Allianz SE slipped 3.6% after the insurer said second-quarter profit fell by almost half, missing analysts’ estimates. Elsewhere, bailed out UK banking giant, RBS declined 4.6% after the British lender posted a larger loss than projected and gave no update on the planned sale of its Williams & Glyn consumer bank. As Reuters' Jamie McGeever summarized RBS since 2007:
  • Losses £50 bln
  • Share price -95%
  • Taxpayer bailout £45 bln
  • Jobs cut 44,200 (134,000 if incl. ABN Amro acquisition in 2007
That was not enough to put a damper on global risk on mood and the MSCI All Country World Index rose 0.2 percent in early trading, advancing for a second day. The Stoxx Europe 600 Index was up 0.3 percent, with trading volumes 33 percent below the 30-day average on the final day of the week. S&P 500 Index futures also increased 0.2%. BHP Billiton Ltd. and ArcelorMittal led a gauge of miners to the best performance of the Stoxx 600’s 19 industry groups as metals prices rebounded. LafargeHolcim Ltd. jumped 5 percent as second-quarter earnings improved more than analysts had expected. Hugo Boss AG added 5.7 percent after the German fashion label posted better-than-expected revenue.

The MSCI Emerging Markets Index climbed 1 percent, bringing this week’s gain to 1.3 percent. Shares are headed for the fourth weekly advance and longest winning streak since October.

Ironically, while some explained the move higher in Asian stocks as a result of yesterday's rebound in oil, today oil is modestly lower, at least as of this moment, with WTI slipping 0.8% to $41.60 a barrel following a two-day, 6.1% rebound. Downward pressure returned as overproduction in crude and refined products has left onshore storage tanks brimming and triggered the chartering of tankers to store unsold fuel. There are also growing worries that China's imports are weakening from records set in 2015 and this year.

"Signs of fatigue are already apparent and include a notable dip in Chinese crude oil imports," PVM's Stephen Brennock wrote, adding that spare capacity in the country's strategic storage space is less than 100 million barrels. "A major pillar of oil demand is therefore on course to ease considerably over the coming months," Brennock said.

Oil prices were still more than $2 per barrel above the week's lows, which most analysts attributed to short-covering. Investors added the equivalent of 56 million barrels of short positions in the three main Brent and WTI futures and options contracts in the week to July 26. "Since there was no news yesterday that might have triggered the price rise, this points to short-covering," Commerzbank analyst Carsten Fritsch said. "Clearly many market participants were caught on the hop by the increase in prices following the publication of U.S. inventory data on Wednesday."

Yields on 10-year Treasuries were little changed at 1.50 percent, after declining five basis points over the past two sessions. U.S. debt climbed with European bonds in the last session as the BOE’s move reinforced the trend for monetary easing globally. Wagers on a 2016 increase by the Fed have been cut to 37 percent from 59 percent two months ago.

Market Snapshot
  • S&P 500 futures up 0.2% to 2164
  • Stoxx 600 up 0.3% to 339
  • FTSE 100 up 0.3% to 6759
  • DAX up less than 0.1% to 10237
  • German 10Yr yield up 1bp to -0.08%
  • Italian 10Yr yield unchanged at 1.15%
  • Spanish 10Yr yield up less than 1bp to 1.03%
  • S&P GSCI Index up 0.2% to 341.5
  • MSCI Asia Pacific up 0.7% to 136
  • Nikkei 225 down less than 0.1% to 16254
  • Hang Seng up 1.4% to 22146
  • Shanghai Composite down 0.2% to 2977
  • S&P/ASX 200 up 0.4% to 5497
  • US 10-yr yield down less than 1bp to 1.5%
  • Dollar Index down 0.16% to 95.6
  • WTI Crude futures down 0.4% to $41.77
  • Brent Futures down 0.5% to $44.07
  • Gold spot up less than 0.1% to $1,362
  • Silver spot down 0.2% to $20.31
Top Global News
  • U.S. Employment Seen Returning to Normal After Two Quirky Months
  • Pimco Sees Misunderstood U.S. Bank Bonds Offering Room for Gains: Head of credit research says U.S. lenders ‘radically improved’
  • Bayer Said to Review Monsanto’s Books as It Mulls Higher Bid: Monsanto said to allow due diligence in key step for deal
  • Mercedes to Challenge BMW, Tesla With 4-Car Electric Lineup: Move comes as Tesla struggles, BMW plans next e-car in 2021
  • LinkedIn Results Beat Expectations Ahead of Microsoft Deal: 2Q adj. EPS, revenue higher than analysts expected
  • Alibaba, Baidu Said to Prepare for Audit by U.S. PCAOB, WSJ Says
  • Kraft Earnings Top Estimates as Budget Cuts Fuel Profit Growth: 2Q adj. EPS beats analyst expectations
  • Priceline Beats Profit Estimates as Room Night Bookings Grow
  • Golfsmith Said to Consider Bankruptcy as It Seeks New Owner
  • Takata Air-Bag Report Clears Way for Cost Talks With Carmakers
  • Mercedes to Challenge BMW, Tesla With Four-Car Electric Lineup
  • Rackspace Said to Be in Talks to Be Sold to PE Firm, DJ Says
  • Yahoo Communications Chief Leaves Ahead of Verizon Takeover: Anne Espiritu leaves after 4 years at the co.
  • Disney Said to Develop ‘Star Wars’ Toys With AR Technology: WSJ: Co. is looking at using augmented reality technology for new “Star Wars” toys
  • Alibaba, Baidu Said to Prepare for Audit by U.S. Public Company Accounting Oversight Board, WSJ Says: Audit documents provided to the PCAOB may be heavily redacted
* * *

Looking at regional markets, we start as is custom in Asia, where markets trade mixed to mostly higher on the back of oil advances and after the BoE's rate cut and easing announcement, although a looming NFP has kept gains in check. Nikkei 225 (flat) traded flat with fluctuations in JPY driving price-action, while ASX 200 (+0.4%) was boosted as commodities strength supported energy and mining names. Hang Seng (+1.4%) outperformed to break above 22,000, while the Shanghai Comp (-0.2%) lagged after a net weekly liquidity drain from the PBoC. 10yr JGBs traded with minor losses as demand for the paper was dampened amid gains across riskier assets, while the BoJ's presence in the market for 1.25tr1 of government debt helped stem losses.

Top Asian News
  • India Said to Keep Rajan Inflation Target as Term Nears End: Rajan urges successor to continue war on price pressures
  • RBA Frets Over Currency, China; Sticks With GDP, CPI Outlook: Australia’s central bank says inflation likely to be below 2% most of forecast period
  • Indonesian Growth Beats Forecasts as Widodo Spending Surges: 2Q GDP increases 5.18% y/y vs est. 5.00%
  • Vanke Saga Takes New Twist With Surprise Entry of Evergrande Emergence of billionaire Hui Ka Yan injects new uncertainty
  • DBS’s Swiber Losses Put Spotlight on Provisions Before Earnings: Singapore banks’ energy provisions may be inadequate, Moody’s says
  • Goldman Summoned by New York Bank Regulator Over 1MDB Bond Sales: DFS letter seeks more information on bank’s 1MDB underwriting
European equities are trading in positive territory as the market continues to digest stimulus action from the BoE . FTSE 100 is up 0.3% despite heavy losses reported from Royal Bank of Scotland, who reported a record loss, this led to shares falling around 5% at the open. While other banking names across Europe continue to extend on gains due to BoE's plethora of stimulus measures. In terms of fixed income in the wake of the BoE's announcement, there has been a pick up in GBP denominated issuance with Barclays and Vodafone issuing GBP-denominated debt. This comes as yields plunge to record lows in gilts and GBP corporate bonds. While the decline also increases competition against the EUR and USD market. Elsewhere Bunds have slightly pulled off yesterday's best levels amid light news flow ahead of the NFP report.

Top European News
  • RBS Posts Quarterly Loss on $1.7b Litigation Expense: Lender may not reach 2019 goals amid rate cut, drop in demand
  • LafargeHolcim Pledges More Asset Sales After Profit Rises: Cement maker keeps 2016 targets, lowers demand growth outlook
  • Allianz Quarterly Profit Falls 46% on Disasters, Unit Sale: Pimco outflows grow from 1Q to EU18b
  • Hugo Boss Rises on Signs of Recovery as Sales Beat Estimates: Co. sees full-year profit down as much as 23%
  • Novo Nordisk Plummets as U.S. Market Becomes More Challenging: Co. trims sales and profit forecasts for 2016
  • German Factory Orders Slide Amid Dwindling Euro-Region Demand: Orders declined 0.4% on month vs est. 0.5% gain
  • U.K. House Prices Slide by Most in 5 Months After Brexit Vote: Values slipped 1% in July, falling most since February
In FX, the Bloomberg Dollar Spot Index, which tracks the U.S. currency against a basket of its major peers, slipped 0.2%, erasing this week’s advance. The yen climbed 0.3 percent to 100.94 per dollar. In emerging markets, Malaysia’s ringgit and Russia’s ruble advanced at least 0.5 percent. Payrolls probably rose by 180,000 workers in July, following a 287,000-person increase in June, according to the median of economists’ estimates compiled by Bloomberg. The jobless rate is projected to fall to 4.8 percent, from 4.9 percent in the previous month. The Australian dollar climbed to a three-week high after the central bank gave no interest-rate guidance in its quarterly statement Friday and left its growth and inflation forecasts little changed. It reduced the benchmark rate to a record-low Tuesday. The pound rose 0.3 percent to $1.3140, following a 1.6 percent drop Thursday. While unveiling stimulus, BOE Governor Mark Carney said a negative rate path would be wrong.

In commodities, aluminum and zinc rallied in the wake of losses on Thursday, climbing at least 0.4 percent in London. Gold for immediate delivery was up 0.1 percent at $1,362.43 an ounce before the payrolls data, headed for a 0.8 percent climb in the week, the haven asset’s second straight weekly advance. Copper is headed for its first weekly decline in four as Goldman Sachs Group Inc. forecasts a “supply storm” is about to hit the market amid a pick-up in mine supply, lower production costs and softening demand growth. West Texas Intermediate crude slipped 0.8 percent to $41.60 a barrel following a two-day, 6.1 percent rebound. U.S. government data Wednesday showed gasoline inventories decreased, while crude stockpiles unexpectedly rose for a second weekly gain. Both are at the highest seasonal level in at least two decades. Corn for December delivery headed for a 2.8 percent decline this week. November-delivery soybeans rose 1.4 percent to trim this week’s drop to 3.3 percent.

On today's calendar, all the focus will be on the July employment report which will be out at 8.30am EDT, published alonside the latest trade balance data. Later on this evening we’ll also get the June consumer credit data.

* * *

Bulletin Headline Summary From RanSquawk and Bloomberg
  • European equities trade modestly higher in the wake of yesterday's BoE stimulus despite RBS shares lagging in the wake of their pre-market update
  • FX markets have seen relatively muted trade thus far with EUR/USD pushing back to 1.1150 and USD/JPY dipping below 101.00 again
  • Looking ahead, highlights include US and Canadian jobs reports
  • Treasuries mostly steady in overnight trading ahead of today’s nonfarm payrolls (est. 180k) and unemployment (est. 4.8%) releases while global equities rally with gold on stimulus bets.
  • The European Central Bank is letting a pall of secrecy hang over the health of some of the continent’s banks as it’s decided against publicly disclosing the outcome of its test for 56 banks
  • ECB tapped Fed’s FX swap line for $800m for seven days at 0.87%, for week ended Aug. 3, most since July 6, Federal Reserve data show
  • New European rules are forcing junk-rated issuers to disclose more information to investors and some companies are considering whether to list their high-yield bonds overseas to avoid them
  • New York’s top banking regulator asked Goldman Sachs to supply more information about its work for a Malaysian investment fund amid investigations into whether any money laundering, sanctions violations or other misconduct occurred
  • German factory orders unexpectedly declined 0.4% m/m in June as demand for investment goods from within the euro area slumped in the run-up to Britain’s referendum on European Union membership
  • Italian industrial production unexpectedly fell 0.4% m/m in June in a setback for Prime Minister Matteo Renzi’s plans to put economic growth on a stable footing
  • While sterling tumbled versus the dollar as the Bank of England governor announced a suite of measures to support the U.K. economy, the currency only fell to levels seen last week
  • Mark Carney said his stimulus plans will help revive an economy reeling from the country’s decision to quit the European Union, rejecting criticism that monetary policy has reached its limits
US Event Calendar
  • 8:30am: Change in Non-farm Payrolls, July, est. 180k (prior 287k); Unemployment rate, July, est. 4.8% (prior 4.9%)
    • Change in Private Payrolls, July, est. 170k (prior 265k)
    • Change in Manufacturing Payrolls, July, est. 4k (prior 14k)
    • Average Hourly Earnings, July, est. 0.2% (prior 0.1%)
    • Average Hourly Earnings y/y, July. est. 2.6% (prior 2.6%)
    • Average Weekly Hours All Employees, July, est. 34.4 (prior 34.4)
    • Change in Household Employment, July (prior 67)
    • Labor Force Participation Rate, July (prior 62.7%)
    • Underemployment Rate, July (prior 9.6%)
  • 8:30am: Trade Balance, June, est. -$43b (prior - $41.1b)
  • 1pm: Baker Hughes rig count
  • 3pm: Consumer Credit, June, est. $16b (prior $18.558b)
DB's Jim Reid concludes the overnight wrap

Today sees the market stop for the biggest show on earth where many of us from around the world will be glued to our screens. Yes it's another payrolls Friday for us to enjoy before we see the small matter of the Olympic opening ceremony in Rio. In a moment of stupidity yesterday I wondered at what point in history my best 100m time would have put me as the fastest man in the world. Given that my best time at school was a slovenly 15 seconds and given the winning time was 10.6 seconds in 1912 (the first recorded time) then extrapolating back I figure that maybe I'd have to time-travel to early homo sapiens days to have had a sniff. And back then with my knees I probably would have been eaten by a lion first. Creative destruction at its finest.

The BoE reacted like a cornered lion yesterday as they loosened policy more than expected and in a fairly wide reaching manner. This was after the bank made its largest downgrade to its growth forecasts (including 2017 down from 2.3% to 0.8%) since the creation of the MPC back in 1997. As DB's Mark Wall expressed, the 25bp rate cut was in line with expectations, but this came with a plethora of additional policy moves: a new GBP100bn four-year Term Funding Scheme (TFS) to aid the transmission of monetary policy at low interest rates through the banking system (an unexpected innovation); GBP60bn of gilt-based QE over the next 6 months (they had thought this would wait until September, but the pace of purchasing is about half the rate they were assuming); and a corporate QE programme of up to GBP10bn. The bank did signal that all the policies have room to be expanded if necessary with the caveat that Mark Carney reiterated that he is not a big fan of negative rates. So the UK may respect the zero bound if you take his consistent comments at face value.

The breadth of the policy response was impressive but as other central banks have found you can lead a horse to water (i.e. enhance the supply of bank credit) but you can't make him drink (i.e. create aggregate demand) so these measures are unlikely to be a panacea but as Mark Wall suggests it gives the BoE some breathing space before there's a fiscal response in the autumn. That's going to be the main determinant in cushioning the growth shock in say 2017 in our opinion.

The level of fresh QE is still low as a percentage of outstanding relative to the BoJ and the ECB but given they said it could be increased then the relatively small size didn't stop it having an impact. 2, 10 and 30 year gilts rallied 8.5bps, 16.0bps and 13.7bps respectively comfortably outperforming 10yr USTs (-4.1bps) and Bunds (-5.8bps). As for corporates sterling IG non-financials were 9bps tighter on the day. This doesn't sound like a lot but a look at the records show that outside of a month end date straddling March/April 2009 - that includes an index rebalancing component - this is the largest daily move tighter since the iBoxx sterling index started in 1999.

Staying with the sterling credit purchases, this morning Michal Jezek in my team published a note entitled ‘Not Wasting Time: Bank of England to Start Corporate Bond Purchases’. In it Michal notes that while the Bank of England had clearly telegraphed it would ease policy in August, the Corporate Bond Purchase Scheme (CBPS) was a surprise at this stage. We look into the details of the scheme in the context of the other measures taken, with a particular focus on the bond eligibility criteria. We review the market reaction and current pricing, and provide our broader views. GBP non-financial corporate bonds have rallied sharply and we think this momentum has a bit more to go particularly for the CBPS-eligible bonds, similar to the ECB CSPP experience although we note that market expectations of the CBPS had been stronger prior to the announcement than was the CSPP’s case. Unlike the ECB, the BoE provided a numerical target for its purchases. We think the BoE’s option to scale up the CBPS if funding conditions deteriorate is likely to create a Carney put for the UK corporate bond market, reducing perceived risks and transforming the eligible bonds to lower-beta securities, similarly to what we have seen in the CSPP-eligible EUR space. Many market participants have taken enormous comfort in CSPP technical’s, showing limited care for the underlying credit risk since the programme was announced. This is likely to create positive spillover effects for the ineligible GBP corporate bonds, including lower down the rating spectrum.

Overall yesterday was a good day for our long standing view that global QE remains still in the early stages rather than coming to an end. That's not to say it's a good idea or that it will stay in its current form. We think it will eventually transition away from simply buying financial assets to being a partnership with governments with a view to try to increase aggregate demand. Helicopter money would be one way to describe this development. I'd be stunned if major central banks were not still buying government bonds for this purpose way into the 2020s. If they're not it's probably because they have suddenly decided to take the creative destruction/default way out. This is unlikely.

Anyway this story has slightly overshadowed an important Payrolls release given the huge range over the last two months. Indeed as it stands the market is expecting a 180k reading this afternoon which compares to 287k in July and a measly 11k in June. DB’s Joe Lavorgna is looking for a below market 150k print which is more or less in line with the 2month, 3month and 4month trailing average notwithstanding the big high to low range in that time. Wednesday’s ADP employment report (179k) validated the consensus forecast for today although there were signs of softness in the employment components of both ISM’s. It feels like we’ll need a big beat or miss to really get much of a reaction in markets particularly given that the Fed is likely sitting on its hands until we see a bounce in GDP related data too.

As always it’s also worth keeping an eye on the other important elements of the report including the unemployment rate (expected to decline one-tenth to 4.8%), average hourly earnings (+0.2% mom expected), the participation rate and average weekly hours.

In terms of rest of markets yesterday, a -1.64% decline for Sterling versus the Greenback to 1.311 (its sitting around that level this morning) helped the FTSE 100 (+1.59%) and FTSE 250 (+1.45%) outperform other European indices (Stoxx 600 +0.67%, DAX +0.57%). A boost from Oil (WTI +2.69%) helped push energy stocks up again but we did also see UK financials perform strongly with the likes of Aviva (+6.70%), Standard Chartered (+5.16%), Old Mutual (+3.37%) and Prudential (+3.13%) all outperforming while homebuilders (Taylor Wimpey +1.75%, Berkley Group +1.73%) also got a bit of a boost.

Markets in the US initially got off to a positive start too but that didn’t last long as the tone quickly turned more cautious ahead of today’s payrolls. The S&P 500 (+0.02%) was little changed by the close with some softer than expected results from MetLife (which saw shares tumble nearly 10%) offset by gains for Kellogg and Ball Corp following their latest quarterly numbers. Kraft Heinz shares were also up 3% in extended trading after Q2 earnings bettered consensus.

Refreshing our screens this morning, markets in Asia are generally slightly firmer ahead of the big event this afternoon. Indeed the Nikkei (+0.22%), Hang Seng (+1.45%), Kospi (+0.49%) and ASX (+0.42%) are all up, while bourses in China are flat. 10y JGB yields are 1.5bps lower while the Yen is little changed. US equity index futures are also modestly in the green.

Meanwhile, of the limited economic data that we did get yesterday it wasn’t really enough to move the dial. Initial jobless claims nudged up 3k last week to 269k (vs. 265k expected) with the four-week average now sitting at 260k. Claims have now been below the 300k number for 74 consecutive weeks. Factory orders (-1.5% mom vs. -1.9% expected) declined slightly less than expected in June while headline durable goods order were revised up one-tenth in June to -3.9% mom and core capex orders were revised up two-tenths to +0.4% mom. Interestingly the Atlanta Fed has pegged US Q3 GDP growth at +3.7% following its update yesterday.

Looking at the day ahead the only data due out in Europe this morning are Germany factory orders numbers for June, the latest trade balance reading for France and the latest UK house price data. This afternoon in the US all the focus is on the July employment report which will be out at 1.30pm BST. Later on this evening we’ll also get the June consumer credit data. Away from the data there’s nothing in the way of Central Bank speak due but one thing worth keeping an eye on is Moody’s sovereign rating decision for Turkey where we could see the agency follow S&P in downgrading Turkey to high yield. Earnings wise today we’ll get quarterly reports from just 8 S&P 500 companies including Berkshire Hathaway, while in Europe RBS and Allianz are due. Before we wrap up it’s also worth noting that China is due to release its July FX reserves data on Sunday.

http://www.zerohedge.com/news/2016-...ks-rise-oil-usdjpy-drops-all-eyes-jobs-report
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#35
Frontrunning: August 5


by Tyler Durden
Aug 5, 2016 7:26 AM
  • Expected solid job gains seen as boost to economy (Reuters)
  • U.S. Employment Seen Returning to Normal After Two Quirky Months (BBG)
  • Oil prices slip as short-covering rally fizzles (Reuters)
  • Hillary Clinton’s Lead Over Donald Trump Widens to 9 Points, Poll Shows (WSJ)
  • Justice Department Officials Raised Objections on U.S. Cash Payment to Iran (WSJ)
  • ECB Leaves Investors Guessing on Some Banks’ Stress-Test Results (BBG)
  • Terrorist Suspects in Europe Got Welfare Benefits While Plotting Attacks (WSJ)
  • No One Told Brazil Markets That Rio Olympics Would Be a Disaster (BBG)
  • Which Rio Will Olympic Visitors See? It Depends on Your Tickets (BBG)
  • Banks' equity trading revenues plunge in Q2 (Reuters)
  • Cash Flies Commercial and Other Secrets of Moving Money (WSJ)
  • Malaysian PM says U.S. Department of Justice suit doesn't involve him (Reuters)
  • U.S. May Finally Get a Peek at the Books of Alibaba, Baidu (WSJ)
  • China’s First Small-Cap Stock Delisting Spurs Speculative Frenzy (BBG)
  • Companies Routinely Steer Analysts to Deliver Earnings Surprises (WSJ)
  • Apple Will Pay a ‘Bug Bounty’ to Hackers Who Report Flaws (NYT)
  • Airbus A380 Customer Qantas Doesn’t Want the Last Eight on Order (BBG)
  • Tesla’s Grand Plans for SolarCity Burn a Key Israeli Solar Tech Firm (BBG)
  • Goldman Sachs Gets Second Query on 1MDB by New York Regulator (BBG)
  • This Bond Sale May Solve Wall Street’s $566 Billion Problem (BBG)
  • $75 Billion Stock Binge Looms After Japan Pension Whales’ Losses (BBG)

Overnight Media Digest

WSJ

- Belgian financial investigators looking into recent terror plots have discovered a disturbing trend: Some of the suspects were collecting welfare benefits until shortly before they carried out their attacks. http://on.wsj.com/2aUCB1P

- U.S. officials don't expect to extradite an imam Turkey blames for masterminding a failed coup because they aren't convinced by the evidence Ankara has presented and are troubled by threatening public statements from Turkish officials, according to people familiar with the discussions. http://on.wsj.com/2aMryoO

- Two months after the European Central Bank started buying corporate bonds, the Bank of England said Thursday that it would adopt a similar strategy. It will buy as much as 10 billion pounds ($13.13 billion) of UK corporate debt starting in September as part of a larger package of stimulus measures, including 60 billion pounds of additional government-bond purchases. http://on.wsj.com/2aXBEX1

- Republican Donald Trump showed signs that he is trying to get his campaign back on track amid a series of recent missteps, as a new Wall Street Journal/NBC News poll found Democrat Hillary Clinton opening a 9-point lead nationally over the New York businessman. http://on.wsj.com/2aMMY5k

FT

* The Bank of England cut interest rates to next to nothing on Thursday and unleashed billions of pounds of stimulus to cushion the economic shock from Britain's vote to leave the European Union. Acting on its chief economist's wish to use "a sledgehammer to crack a nut", the BoE reduced interest rates by 25 basis points to a record-low 0.25 percent

* David Cameron has rewarded his political aides and allies with some of Britain's highest honours to mark his resignation as prime minister, according to an official list published on Thursday.

* Goldman Sachs Group Inc said on Thursday that Britain's vote to leave the European Union may adversely affect some of its operations in the EU and could require the bank to restructure some of its businesses.

NYT

- Apple, which has been criticized in recent years for failing to pay outside hackers who report bugs in its products, said that it would begin offering a so-called bug bounty to technologists who alert the company to flaws. http://nyti.ms/2aMSgxE

- Airbags made by ARC Automotive came under heightened scrutiny after a rupture in one of its bags was linked to the death of a driver in Canada last month. The National Highway Traffic Safety Administration said it had opened a formal investigation of bags made by the company. http://nyti.ms/2aMS6X7

- The U.S. Chamber of Commerce filed a lawsuit to block new rules issued by the Obama administration that prevent American corporations from merging with foreign-based companies and moving their headquarters abroad to save on taxes. http://nyti.ms/2aMSXHp

- The Bank of England said it would cut its main interest rate to its lowest point ever and expand other measures to bolster Britain's economy over concerns that the country's decision to leave the European Union could weigh on growth. The central bank's Monetary Policy Committee voted unanimously to lower its benchmark interest rate to 0.25 percent. http://nyti.ms/2aMSox4

Canada

THE GLOBE AND MAIL

** Publicly held GMP Capital Inc announced late Thursday that it is buying privately held FirstEnergy Capital Corp for C$98.6 million ($75.78 million). GMP will pay for the deal by issuing C$58.9 million ($45.27 million) in stock, that will be paid out to FirstEnergy shareholders over four years, and the balance through the issuance of an unsecured promissory note. (http://bit.ly/2b7EMeJ)

** Malaysia's state-owned Petronas says it expects to make up its mind about whether to construct a huge energy project in Canada after it studies a crucial ruling pending from the federal Liberal cabinet. (http://bit.ly/2b7Eq7S)

** With the dismissal of the chief executive of McInnis Cement, investors led by Bombardier Inc's founding family are hoping to get the C$1.1 billion ($845.37 million)cement project in Quebec's Gaspe peninsula back on track amid massive cost overruns. (http://bit.ly/2b7ExQO)

NATIONAL POST

** Veresen Inc plans to shift away from power generation in favor of tightening its focus on midstream natural gas assets, a decision that comes as the company's proposal to build a West Coast LNG export facility remains snared in regulatory delays. (http://bit.ly/2b7G9Kn)

** Two months after it avoided insolvency by selling assets in Saskatchewan, Penn West Petroleum Ltd plans to nearly double capital spending for the rest of the year. (http://bit.ly/2b7FHvA)

Britain

The Times

Banks are facing increasing pressure to pass on the Bank of England's recent interest rate cut to borrowers. Policymakers said that the quarter point cut to 0.25 per cent would reduce the profits of banks, but said a new scheme providing cheap funds for loans would ease the pressure as it would provide them with a 750 million pound ($983.55 million) subsidy. (http://bit.ly/2aWN1y7)

Wood Group expressed disappointment as hundreds of its staff in the North Sea prepared to initiate a two day strike on Thursday. This will mark the second round of industrial action in a fortnight. (http://bit.ly/2aWN1y7)

The Guardian

London Stock Exchange chief Xavier Rolet says the merger between LSE and Deutsche Borse will not be under 'immediate threat' by Brexit. He also said that the combined company will be headquartered in London. (http://bit.ly/2aWN1y7)

Henrik Poulsen, chief executive of the biggest British wind farm developer DONG Energy, has said the country will be able to meet its future energy commitments even without the Hinkley Point nuclear plant. (http://bit.ly/2aYO79p)

The Telegraph

Netflix Inc has replaced its rival Amazon Instant Video as Britain's most popular subscription streaming service. Netflix was watched by 23% of UK adults who use streaming services on a weekly basis last year, an increase from 13% last year. (http://bit.ly/2aX3H8Z)

Approximately 576 UK jobs could be lost in AB InBev's takeover of rival brewer SABMiller Plc, with the 79 billion pounds ($103.60 billion) deal set to happen on October 10. A spokesman from AB InBev confirmed that SABMIller's existing UK locations would be significantly affected after the takeover. (http://bit.ly/2aX3mCZ)


http://www.zerohedge.com/news/2016-08-05/frontrunning-august-5
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#36

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#37
Musical Chairs
By: Jeff Thomas
You’re familiar with the children’s game of musical chairs. Ten children walk around nine chairs whilst listening to music. When the music stops, each must quickly find a chair and sit in it. One child is out of luck and is out of the game. Then a chair is removed and the nine remaining children walk around the eight remaining chairs, waiting for the music to stop again.

Asian Metals Market Update: August 5-2016
By: Chintan Karnani, Insignia Consultants
Indian demand for gold and silver will begin around the 20th of August. The Hindu festival of “Rakhee” marks the beginning of two and half months of festivals in India. Rakhee is a big gifting day also. On the emerging gifting trend in India, mobile phone and electronic gadgets are the most popular. Light weight silver jewelry, silver rakhee and other silver items are increasingly catching the fancy of the one and all in India.
 

searcher

Mother Lode Found
Sr Site Supporter
Mother Lode
Joined
Mar 31, 2010
Messages
105,895
Likes
37,115
#38
July Layoffs
http://www.dailyjobcuts.com/layoffs-july.htm

Americans Rethink Free Trade
http://www.economicpopulist.org/content/americans-rethink-free-trade-5994

The Class Struggle is Real
https://mises.org/blog/class-struggle-real

The U.S. Has Lost 195,000 Good Paying Energy Industry Jobs
http://theeconomiccollapseblog.com/archives/the-u-s-has-lost-195000-good-paying-energy-industry-jobs

The Economic Collapse In Venezuela Is So Bad That People Are Slaughtering And Eating Zoo Animals
http://theeconomiccollapseblog.com/...eople-are-slaughtering-and-eating-zoo-animals
 

Argent Dragon

Site Support
Site Bus
Site Supporter
Joined
Mar 29, 2010
Messages
8,259
Likes
2,953
Location
Lone Star State
#39
Greenspan Suggests Oil Prices Have Bottomed Out at $40
Former Federal Reserve Chairman Alan Greenspan suggested that oil prices have probably bottomed out at about $40 per barrel after tumbling more than 20 percent in the past two months into a bear market.
 

Argent Dragon

Site Support
Site Bus
Site Supporter
Joined
Mar 29, 2010
Messages
8,259
Likes
2,953
Location
Lone Star State
#40