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#1
US Futures Fall, European Stocks Rise As Stronger Dollar Sends Oil Lower


by Tyler Durden
Aug 22, 2016 6:34 AM


European stocks rose and US S&P futures fell after the dollar strengthened following the latest hawkish comments from Fed vice-chair Stanley Fischer signalled that a 2016 rate hike is still being considered and again boosted speculation that US rates will rise this year. The rising dollar pressured commodities and notably oil, which dropped 2% breaking a 7 days stretch of increases; emerging markets retreated.

Top news stories include Pfizer reportedly nearing Medivation deal, ChemChina winning CFIUS approval for Syngenta acquisition, Renesas said to be in talks to buy Intersil.

Bloomberg’s dollar index climbed to a one-week high after Fed Vice Chairman Stanley Fischer said Sunday the U.S. economy is already close to meeting the central bank’s goals and that growth will pick up. On the other side of the Pacific, the Yen fell following comments from Kuroda that more September easing may be on the table. Emerging-market shares and currencies declined for a second day, oil fell below $48 a barrel and silver led losses among precious metals. European equities advanced after their biggest weekly slide in two months and government bonds rebounded. The chart below shows the USD's reactions to just last week's Fed jawboning.



Global markets have been buffeted over the past week by comments from Fed officials flagging the possibility of higher borrowing costs as early as next month, even though minutes of the central bank’s last meeting struck a more dovish tone. The focus will shift to Janet Yellen’s speech this week at a gathering of global central bankers in Jackson Hole, Wyoming. Futures traders on Friday assigned a 22 percent probability to a September rate increase by the Fed, up from 16 percent a week earlier.

Still, as we showed last night, being hawkish - or dovish - is nothing new for the Fed, which has seen it share of contradictory statements in the past several months, all largely market, and economy, dependent.



Responses were mixed: “The Fed is a bit all over the shop so it’s going to be Janet Yellen’s job this Friday to try to centralize all of these messages into a coherent message that markets can react to,” says Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney.

“We’ve had a full spectrum of messages in the past week or so,” said Josh O’Byrne, a currency strategist at Citigroup Inc. in London. The dollar will “probably hold if indeed she backs up Fischer,” he said. “ I think the consensus is that she will be a bit more dovish.”

While it remains to be seen if Yellen will announce anything truly market moving, the recent dollar strength has led to some early selling in crude oil, while dropped 2.0% to $47.28. Selling was accelerated after OPEC’s second-biggest producer, Iraq, said it will boost exports by about 5% in coming days. Another downside catalyst was the previously reported ceasefire announcement by the militant Niger Delta Avengers, as well as the record collapse in short WTI positions, which has led to speculation the short squeeze may be largely over. Oil had jumped 9.1% last week on speculation that OPEC talks next month could lead to an output freeze. U.S. drillers added rigs for an eighth week, the longest run since April 2014.

The stronger dollar also pressured previous metals with silver dropping as much as 3% to a seven-week low, while gold was down 0.6% amid the dollar’s advance.

The MSCI Emerging Markets Index slid 0.6 percent, with shares in Shanghai dropping 0.8 percent, the most in three weeks. Saudi Arabia’s Tadawul All Share Index led losses in Gulf stocks, sliding 1.5 percent.

In equity markets, Europe's Stoxx 600 Index added 0.7%, with banks leading gains while trading volumes were about 40 percent lower than the 30-day average. Automakers advanced as the euro weakened, while miners were the only industry group to decline. Syngenta jumped 12 percent, the most in more than a year, as China National Chemical Corp. received approval from U.S. national security officials for its $43 billion takeover of the Swiss chemical company.

S&P 500 Index futures were down 0.2% after U.S. stocks slipped for the first time in three days on Friday, with a recent rally showing signs of tiring amid elevated valuations and rising speculation that borrowing costs will increase before year-end. Medivation Inc. jumped 21% in premarket New York trading after people familiar with the situation said Pfizer Inc. is close to an agreement to buy the biotechnology company for about $14 billion.

Market Snapshot
  • S&P 500 futures down 0.2% to 2181
  • Stoxx 600 up 0.8% to 343
  • MSCI Asia Pacific down 0.2% to 139
  • US 10-yr yield up 1bp to 1.59%
  • Dollar Index up 0.24% to 94.74
  • WTI Crude futures down 1.5% to $47.79
  • Brent Futures down 1.7% to $50.04
  • Gold spot down 0.6% to $1,334
  • Silver spot down 1.7% to $18.99
Top Global News
  • Fischer Signals 2016 Rate Hike With Economy Nearing Fed Goals: Fed vice chair talks days before Yellen’s Jackson Hole address
  • Pfizer Said Close to $14b Deal to Acquire Medivation: Deal may be announced as early as Monday, according to people familiar with the situation
  • ChemChina Clinches U.S. Security Nod for Syngenta Purchase: Deal would be biggest in record year of Chinese takeovers
  • Renesas Said to Be in Talks for $3b Intersil Acquisition: Discussions may not result in a deal, person familiar says
  • Nomura Back in Hiring Mode for U.S. Bankers After Cutting Costs: COO Ozaki sees “tremendous business opportunities for M&A”
  • ‘Ben-Hur’ Remake Stumbles to Fifth Place in Box-Office Debut: Warner Bros.’ ‘Suicide Squad’ holds onto No. 1 for third week
  • Marvell Said to Continue Steps Exploring Sale: DealReporter
  • China to Scrap Anti-Dumping Measures on EU, Japan Steel Tubes
  • Focus Financial Partners Said to File for IPO: WSJ
  • Former Travelers CEO Fishman Has Died, Dasburg to Be Chairman
  • Lockheed Martin Gets 10-Yr C-130J Air Force Contract for $10b
* * *

Looking at regional markets, Asian stocks began the week in a choppy fashion which followed Friday's subdued US close, where market-thin trade and a pull-back in energy hindered sentiment. Nikkei 225 (+0.3%) outperformed its counterparts, underpinned by a weaker JPY after dovish comments from BoJ Governor Kuroda over the weekend, while trade in the ASX 200 (-0.2%) was flat after mixed earnings. Markets in China were also indecisive with both the Hang Seng (flat) and Shanghai Comp (-0.8%) swinging between gains & losses despite the PBoC increasing its liquidity injections, as debt concerns persisted. Price-action in 10yr JGBs was subdued amid the increased risk-appetite seen across Japanese equities, while participants look to tomorrow's 20yr auction. BoJ Governor Kuroda commented that he wouldn't rule out cutting rates deeper into negative territory and added that there is a sufficient possibility the BOJ will add to its easing programme in September. India picked RBI Deputy Governor Urjit Patel as the central bank's next governor to succeed Governor Rajan when his term ends next month. Deputy Governor Patel is seen as a hawkish, continuity candidate to follow Rajan. PBoC set CNY mid-point at 6.6652 (Prey. 6.6211) and injected CNY 110bIn via 7-day reverse repos.

Top Asian News
  • India’s New Central Banker Faces Nervy Markets After Rajan Rally: Patel’s inflation hawk reputation seen reducing rate- cut odds
  • Paul Singer’s Elliott Seizes on Bank of East Asia’s Profit Slide: Paul Singer’s fund gets more ammunition for shake-up campaign
  • China Overseas Land 1H Net HK$19.7b vs HK$16.3b Year Ago: Co. raises FY16 sales target by 17%
In Europe, the morning has seen a subdued start to a, so far, typical mid-August week, with a particularly light calendar for the day. European equities trade in positive territory across the board, with Syngenta (+11.8%) the notable outperformer after announcing US clearance for their USD 44b1n ChemChina deal. Elsewhere, material names drag on the FTSE, with the likes of Anglo-American (-3.2%), Glencore (-1.9%) and Rio Tinto (-2.5%) among the worst performers on the continent. Finally, fixed income markets have been particularly subdued this morning, with bunds trading in modest positive territory and above 167.00. In terms of going forward, participants will be looking ahead to the BoE 3-7yr Gilt purchases this afternoon.

Top European News
  • London Housing Boom to End in 2017 as Brexit Bites, Broker Says: Countrywide sees home values falling for first time since 2009
  • VW Restarts Talks as Supplier Feud Expands to Golf Production: Six factories face partial production halt beginning Monday
  • Getinge Ousts CEO After Less Than 18 Months as Views Differ: Surgical Workflows unit head Lindoff appointed acting CEO, shares fall
  • Europe Plans for Life After Brexit as Merkel Meets Allies at Sea: Renzi hosts Merkel, Hollande on Italian warship off Naples
  • Teleperformance to Buy LanguageLine Solutions for $1.52b: Co. sees deal accretive to EPS by ~10% on a pro forma basis for 2016
  • Sanofi Updates NDA on Diabetes Product; Pdufa Date Now in Nov.
  • Linde-Praxair Plan to Put Headquarters in Europe: Handelsblatt
In FX, the Bloomberg Dollar Spot Index rose 0.3% in early trading, after losing ground in each of the last two weeks. The yen dropped 0.5% to 100.75 per dollar. Bank of Japan Governor Haruhiko Kuroda Kuroda told the Sankei newspaper that the BOJ is conducting a comprehensive review of Japan’s economy and finances and said there is "sufficient chance" of more easing at next month’s policy meeting. Hedge funds and other large speculators raised net wagers for a weaker pound to a record in the week ended Aug. 16. That’s the seventh straight week of increases. The U.K currency gained 0.3 percent against the dollar to $1.3109. The MSCI Emerging Markets Currency Index dropped 0.3 percent. South Africa’s rand, South Korea’s won and the Taiwanese dollar posted the biggest declines among 16 major currencies measured against the greenback, sinking at least 0.5 percent. Turkey’s lira lost 0.6 percent. Fitch Ratings cut the outlook on the country’s investment grade credit to negative from stable after a failed coup attempt in July increased political risks. The rupee weakened 0.2 percent after India named Urjit Patel to take over from Raghuram Rajan as central bank governor from Sept. 4.

In commodities, the Bloomberg Commodity Index declined 0.8 percent, after slipping from a one-month high in the last session. Crude oil slid 2.0% to $47.65 a barrel in New York after Iraq, OPEC’s second-biggest producer, said it will boost exports by about 5 percent in coming days. The price jumped 9.1 percent last week on speculation that OPEC talks next month could lead to an output freeze. U.S. drillers added rigs for an eighth week, the longest run since April 2014, Baker Hughes Inc. data show. Silver dropped as much as 3 percent to a seven-week low, while gold was down 0.6 percent amid the dollar’s advance. Silver has rallied 37 percent this year while gold jumped 26 percent as the Fed refrained from tightening and other central banks embraced negative rates, benefiting bullion which doesn’t pay interest. Base metals fell, with aluminum declining for a third day and nickel sagging as much as 1.8 percent.

It’s a quiet start to the week today with only the Chicago Fed national activity index in the US this afternoon to note of

Bulletin Headline Summary from RanSquawk and Bloomberg
  • European equities enter the North American crossover higher with the FTSE 100 the notable laggard amid softness in commodity names
  • JPY lost ground against the major overnight amid dovish rhetoric from Kuroda who hinted at further easing next month
  • Looking ahead, the calendar is particularly light with Chicago Fed National Activity at 1330BST
US Event Calendar
  • 8:30am: Chicago Fed Nat Activity Index, July, est. 0.20 (prior 0.16)
DB's Jim Reid concludes the overnight wrap

There won't be much skiing this weekend at the Jackson Hole symposium but there will be focus on Yellen's speech on Friday where we'll see whether she brings the Fed's message back on piste after a few recent moguls created by various Fed speakers over the last week.

Indeed the usually dovish NY Fed President Dudley caused the first bump when he said on Tuesday that a September hike was ‘possible’ and that ‘we’re edging closer towards the point in time where it will be appropriate to raise rates further’. Dudley also made the comment that he thought 10y Treasuries were ‘pretty low given the circumstances’. On the same day Atlanta Fed President Lockhart (a centrist) added that he thought at least one rate increase could be appropriate later this year. Late on Thursday we then heard from San Francisco Fed President Williams (also largely seen as a centrist) who said that every meeting should ‘be in play’, including September.

The latest addition to the debate over the weekend was Fed VC Stanley Fischer who suggested that the Fed "are close to their targets". Although he didn't comment on when they should hike it was a generally upbeat reflection on the US economy. The main theme of the speech though was the slowdown in productivity in recent years and how monetary policy wasn't equipped to reverse the slump and that fiscal and regulatory policy were likely to be more effective. Although Fischer is known to be on the hawkish side (albeit moderately) and Yellen on the more dovish side, he probably wouldn't want his comments in the week of the Jackson Hole get together to be interpreted in a manner completely different to his boss. So this sets up an interesting Friday.

In terms of Fed hike pricing, we went into last week with September and December probabilities of 16% and 42% respectively. Post Dudley’s comments we went to 22% and 51%. The FOMC minutes on Wednesday moderated things a little with September staying unchanged at 22% but December nudging down to 49%. Following Williams we ended the week back at 22% and 51% however.

Indeed the US Dollar also took heart from Williams’ comments late last week with the Dollar index finally closing up on Friday (+0.38%) for the first time in six sessions. It’s up a similar amount this morning too while US 2y and 10y Treasury yields, which closed up 4.4bps and 4.3bps respectively at 0.748% and 1.579% are also higher this morning (+2.8bps and +1.5bps respectively). Emerging market currencies were the biggest losers on Friday while US equity markets (S&P 500 -0.14%) and credit indices (CDX IG +0.9bps) ended a touch weaker.

Elsewhere this morning equity markets are off to another mixed start in Asia. A weaker sessions for the Yen (-0.55%) is providing some respite for the Nikkei (+0.24%) and Topix (+0.40%), while the ASX (+0.10%) is also up slightly. The Hang Seng (-0.45%), Shanghai Comp (-0.34%) and Kospi (-0.65%) all appear to be following the lead from the US on Friday however. US equity index futures are in the red by a similar amount this morning although there’s also been a bit of M&A focus over the weekend with the news that Pfizer is nearing a $14bn takeover of Medivation.

Moving on. Along with the various chatter out of the Fed, the relentless move higher for Oil last week was the other big focus for markets. Indeed WTI climbed +9.06% last week and even more impressively is up nearly 16% over the last 8 sessions. The prospect of some sort of coordinated major producers production freeze has been at the centre of the rally however our commodity strategists don’t think that a freeze would have much fundamental impact. Indeed they highlighted in their report on Friday that as before, the parameters of the proposed deal are likely to be very weak. They note that this is before we consider the impact of national oil companies who may try to ‘game’ the system by ramping up volume this month to set a high-water mark before the meeting on the sidelines of the International Energy Forum in Algeria on 26-28th September. They go on to note that since the terms of a deal are unlikely to pose upside constraints to Libya, Iraq or Nigeria, OPEC production could still exceed their 2017 assumption of 33.5mmb/d in the event of an agreement. Their fair value models currently suggest that oil is close to fair value of $46.6/bbl.

Elsewhere, it was a very quiet end to the week on Friday for economic data. There were no reports out in the US while in Europe the only data we got came in Germany, where PPI rose +0.2% mom (vs. +0.1% expected) in July, and also the UK where public finances (excluding bank groups) were in surplus to the tune of £1bn in July, boosted by a 3.4% rise in receipts. European equity markets actually ended the week on a bit of a sour note with the Stoxx 600 closing -0.81% as Italian equities (-2.18%) and Bank Stocks (-1.40%) struggled in particular.

Turning now to this week’s calendar. It’s a quiet start to the week today with only the Chicago Fed national activity index in the US this afternoon to note of. Tomorrow morning we kick off in Asia where we’ll get the flash manufacturing PMI reading for August in Japan and also the MNI business indicator out of China. During the European session we’ll get the August flash PMI’s for the Euro area, Germany and France (manufacturing, services and composites) along with CBI trends data for the UK. In the US we’ll also get the flash manufacturing PMI along with the Richmond Fed manufacturing index and new home sales for July. The Euro area consumer confidence reading for August will also get released in the afternoon. Turning to Wednesday the highlight of the morning session in Europe will likely be the final Q2 GDP revisions for Germany, along with the various subcomponent readings. The data in the US on Wednesday is focused on the housing market with existing home sales for July and the FHFA house price index reading due. With little in the way of data to note of in Asia on Thursday we’re starting in France where the August confidence indicators are due to be released. Shortly after that the IFO survey in Germany for August is due. There’s a number of important releases in the US on Thursday starting with the flash durable and capital goods order data for July, along with the remaining flash PMI’s (services and composite), initial jobless claims and the Kansas City Fed’s manufacturing index. The end of the week on Friday is a big one for data. In Japan we’ll get the July CPI report early on. German and France consumer confidence readings follow this, along with UK Q2 GDP. We then end the week in the US with the second reading of Q2 GDP and core PCE, the advance goods trade balance reading in July and the final University of Michigan consumer sentiment reading.

Away from the data the other big focus will be Fed Chair Yellen speaking at the Jackson Hole Policy Symposium on Friday. Another potentially interest event to keep an eye on is a meeting between Merkel, Hollande, Renzi and Tusk today in Italy where they are due to speak on Brexit

http://www.zerohedge.com/news/2016-...an-stocks-rise-stronger-dollar-ends-oil-rally
 

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#2
Frontrunning: August 22


by Tyler Durden
Aug 22, 2016 7:25 AM

  • Dollar Rises on Fed Outlook as Emerging Stocks, Commodities Fall (BBG)
  • Oil falls as China fuel exports jump, U.S. rigs rise (Reuters)
  • Dollar gains, U.S. yields rise as investors await Fed hike signal (Reuters)
  • Fischer Signals 2016 Rate Hike With Economy Nearing Fed Goals (BBG)
  • Show of European unity: Merkel, Hollande, Renzi meet to discuss gameplan (Reuters)
  • Rainy Rio wraps up challenging Games on upbeat tropical note (Reuters)
  • Japan's Abe Plays Super Mario in Rio to Promote 2020 Tokyo Games (BBG)
  • Donald Trump the Mortgage Broker Was in Trouble From Moment One (BBG)
  • Japan Inc unenthused over Abe's stimulus, BOJ easing (Reuters)
  • Donald Trump Bets Big on Online Advertising (BBG)
  • Trump campaign signals possible shift on immigration stance (Reuters)
  • Sweden Warns U.K. Against Aggressive Tax Cuts Amid Brexit Talks (BBG)
  • Companies Build Bonds for European Central Bank to Buy (WSJ)
  • Italy to hold elections in 2018 whatever referendum outcome: Renzi (Reuters)
  • Focus on VIX futures shorts hides the real story (Reuters)
  • The Justice Department Used Shaky Statistics to Drop Private Prisons (BBG)
  • Kurdish militia launches assault to evict Syrian army from key city of Hasaka (Reuters)
  • U.S. banks want to cut branches, but customers keep coming (Reuters)
  • In Scramble for Yield, Pension Funds Will Try Almost Anything (WSJ)
  • Former China boom town learns hard lessons about service economy (Reuters)
  • Valeant names former Zoetis executive Paul Herendeen as CFO (Reuters)
  • Iran says Russian use of air base for Syria strikes over 'for now' (Reuters)


Overnight Media Digest

WSJ

- Pfizer Inc is nearing a deal to buy biotech company Medivation Inc in a move that would add one of the crown jewels of the multibillion-dollar market for cancer drugs to Pfizer's portfolio, people familiar with the matter said. http://on.wsj.com/2byG9G4

- Turkey's president blamed Islamic State for turning a youth into a human bomb at a crowded outdoor wedding party in southeast Turkey's largest city, killing at least 51 people in a weekend attack that underscored how the war in neighboring Syria is destabilizing the region. http://on.wsj.com/2bG3za6

- India's next central bank chief, Urjit Patel, spent most of the past three years quietly in the shadows of charismatic Reserve Bank of India Governor Raghuram Rajan, but when he spoke he did so with conviction. "We are in the midst of the age of competitive depreciation and of beggar-thy-neighbor monetary policy," said Patel, who usually sat next to Rajan at press conferences after policy decisions. http://on.wsj.com/2btNuW2

- Valeant Pharmaceuticals International Inc is expected to announce it has hired Paul Herendeen as its new chief financial officer, luring the executive away from animal-health giant Zoetis Inc, according to sources close to the companies. http://on.wsj.com/2butPoZ

- President Barack Obama's troubled Pacific-region trade deal is threatening to become a foreign policy failure in Asia, where the U.S. loaded the accord with strategic significance as a counterweight to the rise of China. http://on.wsj.com/2boleoD

- The European Central Bank's corporate-bond-buying program has stirred so much action in credit markets that some investment banks and companies are creating new debt especially for the central bank to buy. In two instances, the ECB has bought bonds directly from European companies through so-called private placements. http://on.wsj.com/2bvP3Fq

- Volkswagen AG will resume negotiations Monday to resolve a dispute with parts suppliers that has led to reduced working hours for thousands of its employees across Germany. http://on.wsj.com/2bsxSQN

- One of China's most popular 'selfie' app makers, Meitu <IPO-XMMT.HK>, is preparing to raise up to $1 billion through a listing on the Hong Kong exchange, in a test of whether that market can compete with New York and mainland China for a wave of expected Chinese startup offerings. http://on.wsj.com/2bnbJG8


FT

London Mayor Sadiq Khan backed lawmaker Owen Smith for the Labour leadership contest and called on fellow members of Britain's opposition Labour Party to replace leader Jeremy Corbyn, in the latest sign that hopes are rising among senior figures in the party that the underdog could beat Corbyn.

Uncertainty over Britain's departure from the European Union is likely to push house prices down by one percent next year before staging a recovery in 2018, estate agency group Countrywide has predicted.

Underlying UK dividends, excluding exceptional payouts, fell 3.3 percent year-on-year in the second quarter, according to the Henderson Global Dividend Index, as cuts from Britain's biggest companies and the weakness of the pound takes its toll on the earnings of overseas investors.


NYT

- As start-ups across San Francisco and the Silicon Valley try to contend with high salaries and housing costs, many are expanding to lower-cost cities in the West, where they could grow quickly and make jobs more appealing. http://nyti.ms/2byXxKP

- As both U.S. presidential candidates campaign against Trans-Pacific Partnership, the White House is negotiating with Republicans in Congress to ratify the largest regional trade agreement ever. http://nyti.ms/2byXVca

- In the aftermath of the financial crisis, a growing army of confidential informants - better known as whistle-blowers - has helped federal securities regulators identify and prosecute wrongdoers. http://nyti.ms/2byZVRF

- 'Ben-Hur', the film, which cost about $100 million to make, arrived to a disastrous $11.4 million in domestic ticket sales and is the latest flop for Viacom's Paramount. http://nyti.ms/2bz05Zf


Britain

The Times

Woodford Investment Management founder Neil Woodford, one of the most prominent figures in the City, has taken the unprecedented step of permanently abolishing all staff bonuses at his firm. http://bit.ly/2byvuez

The UK government has turned the spending tap on after the vote for Brexit with a stunning increase of more than 50 percent in the value of public sector contracts going out to tender. Research for the Times shows that in the first half of August 26.3 billion pounds ($34.36 billion) of contracts were put out to tender. http://bit.ly/2byvMSH

The Guardian

The Guardian has learned that financial company Amicus initiated legal proceedings against the Chappell family to repossess the family home of Dominic Chappell, unless their debts were repaid. The debt was settled when the parent company of BHS paid out 1.5 million pounds. The money came from BHS and was paid out as an interest-free loan. It has not been repaid. http://bit.ly/2bywnDM

New mothers are facing increasing discrimination when they take maternity leave including being made redundant and switched to zero-hours contracts. Citizens Advice has recorded a nearly 60 percent rise in the number of women seeking advice about maternity leave issues this year. http://bit.ly/2byxxPF

The Telegraph

Tata Steel UK's giant Port Talbot steel plant has clawed itself back into profit as staff strain to boost efficiency despite having no idea whether their jobs are safe. Sources familiar with finances at the sprawling operation in South Wales revealed it made a 5 million pounds profit in June, reversing the 1 million pounds a day loss it was making six months ago. http://bit.ly/2bycxZa

House prices will fall next year as the uncertainty surrounding Brexit takes hold, but far less than the Treasury's gloomy warning before the EU referendum. In its first post-Brexit forecast, estate agency Countrywide said that house prices will fall one percent across the country in 2017, before rising by two percent in 2018. http://bit.ly/2byyNCA

Sky News

State-backed Chinese group China Everbright is plotting to buy a stake in Liverpool Football Club in a deal valuing the Premier League outfit at more than 700 million pounds - even as its American owners insist they have no intention of relinquishing control. http://bit.ly/2byxeEp

The Independent

Rebel Labour MPs are already starting to plan how they will stand up to a victorious Jeremy Corbyn, as the party's leadership contest enters what may be its most crucial week. Despite calls for the party to unite behind whoever wins the contest, some of Corbyn's opponents said fellow MPs will not take a lead from him in key policy areas like Brexit or defence. http://ind.pn/2byycRc

The number of serving and ex-forces personnel being awarded compensation for mental disorders has hit record levels, leading to fears that we are now starting to see the true cost of the Afghanistan and Iraq wars in the form of the mental scars left on those who had to fight them, according to an analysis of Armed Forces Compensation Scheme statistics by the Independent. http://ind.pn/2byyIOW

http://www.zerohedge.com/news/2016-08-22/frontrunning-august-22
 

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#3

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#4

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#5
Jackson Hole Looms: The Main Events In The Coming Week


by Tyler Durden
Aug 22, 2016 8:51 AM

The key economic releases this week are new home sales on Tuesday and durable goods on Thursday. However, the main event in what is one of the slowest summer weeks, will be the Jackson Hole symposium starting this Friday, where focus will be on Yellen's speech who will be scrutinized to see if she can bring the Fed's message back on track after various conflicting and contradictory statements by key Fed speakers in recent weeks.

The usually dovish NY Fed President Dudley caused the first bump when he said on Tuesday that a September hike was ‘possible’ and that ‘we’re edging closer towards the point in time where it will be appropriate to raise rates further’. Dudley also made the comment that he thought 10y Treasuries were ‘pretty low given the circumstances’. On the same day Atlanta Fed President Lockhart (a centrist) added that he thought at least one rate increase could be appropriate later this year. Late on Thursday we then heard from San Francisco Fed President Williams (also largely seen as a centrist) who said that every meeting should ‘be in play’, including September.

The latest addition to the debate on Sunday was Fed vice chair Stanley Fischer who suggested that the Fed "are close to their targets". Although he didn't comment on when they should hike it was a generally upbeat reflection on the US economy. The main theme of the speech though was the slowdown in productivity in recent years and how monetary policy wasn't equipped to reverse the slump and that fiscal and regulatory policy were likely to be more effective. Although Fischer is known to be on the hawkish side (albeit moderately) and Yellen on the more dovish side, he probably wouldn't want his comments in the week of the Jackson Hole get together to be interpreted in a manner completely different to his boss. So this sets up an interesting Friday.

Aside from Jackson Hole, it’s a quiet start to the week today with only the Chicago Fed national activity index in the US this afternoon to note of.

Tuesday kicks off in Asia where we’ll get the flash manufacturing PMI reading for August in Japan and also the MNI business indicator out of China. During the European session we’ll get the August flash PMI’s for the Euro area, Germany and France (manufacturing, services and composites) along with CBI trends data for the UK. In the US we’ll also get the flash manufacturing PMI along with the Richmond Fed manufacturing index and new home sales for July. The Euro area consumer confidence reading for August will also get released.

Turning to Wednesday the highlight of the morning session in Europe will likely be the final Q2 GDP revisions for Germany, along with the various subcomponent readings. The data in the US on Wednesday is focused on the housing market with existing home sales for July and the FHFA house price index reading due.

With little in the way of data to note of in Asia on Thursday we’re starting in France where the August confidence indicators are due to be released. Shortly after that the IFO survey in Germany for August is due. There’s a number of important releases in the US on Thursday starting with the flash durable and capital goods order data for July, along with the remaining flash PMI’s (services and composite), initial jobless claims and the Kansas City Fed’s manufacturing index.

The end of the week on Friday is a big one for data. In Japan we’ll get the July CPI report early on. German and France consumer confidence readings follow this, along with UK Q2 GDP. We then end the week in the US with the second reading of Q2 GDP and core PCE, the advance goods trade balance reading in July and the final University of Michigan consumer sentiment reading. As noted above, Friday is when the Jackson Hole symposium begins.

The key US events summarized:



Finally, a full breakdown together with estimates, from Goldman Sachs:

Monday, August 22
  • There are no major data releases.
Tuesday, August 23
  • 9:45 AM Markit Flash US Manufacturing PMI, August preliminary (consensus 53, last 52.9): Details from the Empire State and Philly Fed surveys were mostly soft in August, following mixed reports from regional manufacturing surveys in July. We find that the flash Markit PMI does contain some predictive power for the ISM.
  • 10:00 AM New home sales, July (GS -2.9%, consensus -2.0%, last +3.5%): We expect new home sales to decline by 2.9% in July, after new home sales rose by 3.5% in June to a post-crisis high. New home sales are highly volatile on a month-to-month basis. Housing starts saw steady gains across single-family and multi-family units in July, while single-family building permits declined by 3.7%.
  • 10:00 AM Richmond Fed Manufacturing Index (consensus +6, last +10)
Wednesday, August 24
  • 9:00 AM FHFA house price index, June (consensus +0.3%, last +0.2%): Consensus expects a 0.3% gain in the FHFA house price index in June, which has risen 5.6% over the past year. The FHFA house price index has a wider geographic coverage than the S&P/Case-Shiller home price index, but is based only on properties financed with conforming mortgages.
  • 10:00 AM Existing home sales, July (consensus -0.9%, last +1.1%): Existing home sales are expected to decline by 0.9% in June, according to the consensus view. Existing home sales are an input into the brokers' commissions component of residential investment in the GDP report.
Thursday, August 25
  • 08:30 AM Initial jobless claims, week ended August 20 (GS 260k, consensus 265k, last 262k); Continuing jobless claims, week ended August 13 (consensus 2,148, last 2,175k): We expect initial jobless claims to move down a touch to 260k, near post-crisis lows. Last week, initial claims declined slightly to 262k, with the greatest decline in Michigan, likely reflecting reduced auto-related layoffs.
  • 08:30 AM Durable goods orders, July (GS +2.0%, consensus +3.5%, last -3.9%); Durable goods orders ex-transportation, July (GS +0.5%, consensus +0.4%, last -0.4%); Core capital goods orders, July (GS +0.5%, consensus +0.2%, last +0.4%); Core capital goods shipments, July (GS +0.3%, consensus +0.5%, last -0.2%): We expect durable goods orders and core capital goods orders to rise 2.0% and 0.5% respectively in July, following two softer-than-expected reports previously. Last week, July industrial production data came in stronger than expected, while regional manufacturing surveys were mostly mixed. We also expect core capital goods shipments to increase 0.3%, on the back of an upbeat print in the ISM manufacturing index’s production component. Over the last year, core capital goods orders declined by 3.6%, while core capital goods shipments declined by 4.9%.
  • 09:45 AM Markit Flash US Services PMI, August preliminary (consensus 52.1, last 51.4)
  • 11:00 AM Kansas City Fed manufacturing index, August (consensus -2, last -6)
  • 06:00 PM Release of the program for the Jackson Hole Economic Symposium
  • 06:30 PM Kansas City Fed President George (FOMC voter) speaks: Federal Reserve Bank of Kansas City President Esther George will meet with the Center for Popular Democracy’s Fed Up campaign. Other Fed officials attending the Jackson Hole conference have been invited to attend.
Friday, August 26
  • 08:30 AM Advanced goods trade balance, July (GS -$63.5bn, consensus -$62.8bn, last -$64.5bn):
  • New U.S. Census Bureau Report on Advance Economic Indicators: Last month, the Census Bureau’s inaugural Advance Economic Indicators report showed a slightly wider trade deficit and lower inventory accumulation than we had anticipated. We expect the goods trade deficit to narrow in July.
  • 08:30 AM GDP (second), Q2 (GS +1.1%, consensus +1.1%, last +1.2%); Personal consumption, Q2 (GS +4.2%, consensus +4.2%, last +4.2%); Consensus expects GDP and personal consumption to be revised down a touch to 1.1% and 4.2% in Q2, respectively
  • 10:00 AM University of Michigan consumer sentiment (final), August (GS 90.4, consensus 90.6, last 90.4): The Michigan consumer sentiment gauge edged up to 90.4 in the August preliminary estimate and remains within range of recent observations. We forecast the index to remain unchanged in the final estimate.
  • 11:00 AM Fed Chair Janet Yellen (FOMC voter) speaks: Fed Chair Janet Yellen will give opening remarks at the annual Kansas City Fed symposium in Jackson Hole. The symposium’s topic this year is “Designing Resilient Monetary Policy Frameworks for the Future.” In her June 6 speech at the World Affairs Council in Philadelphia, Chair Yellen notably labeled the stance of monetary policy as “modestly accommodative”, adding some uncertainty about the characterization of policy in the FOMC statement.

http://www.zerohedge.com/news/2016-08-22/jackson-hole-looms-main-events-coming-week
 

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Stocks Creep Higher As Dollar Resumes Falling, Oil Slides For Second Day


by Tyler Durden
Aug 23, 2016 6:37 AM


While the summer doldrums continue, with little market-moving newsflow overnight and zombified volumes, US futures crept higher and European shares rose after EU PMIs printed modestly better than expected, while a return to dollar weakness pushed emerging markets higher, even if it failed to boost oil which as we noted last night was downgraded by Goldman on various fundamental reasons.

Commodity producers led gains in European equities and S&P 500 futures crept higher suggesting a green open. Even as markets swing between gains and losses, volatility across asset classes remained subdued, with a measure for U.S. stocks near a two-year low. Top news stories include: Bayer, Monsanto said to move closer to deal as talks advance, Google said to recruit web stars, Hulu for virtual reality push, Wal-Mart reviews Welspun records after target pulls sheets.

Perhaps the top story of the day is the ongoing dollar softness, which has promptly faded any residual Fischer/Dudley/Williams hawkishness and is back to Friday's lows. The US currency slid against all except two of its 16 major peers as market participants raise doubts that Yellen will build upon recent hawkish comments by Fed officials at her Jackson Hole speech this Friday. Cited by Bloomberg, traders in Europe and Lonaon said that real money names for once seem to share this view, as they have been actively selling the dollar this week. A report by a Fed staffer suggested that the Fed may have to unleash up to $4 trillion in QE if the US economy were to encounter a sharp recession.



As investors turn their attention to this week's main event, Yellen’s speech at an annual symposium in Jackson Hole, Wyoming, on Aug. 26, they are skeptical whether she will endorse comments from other Fed officials in the past week. The dollar capped its biggest two-day gain in a month on Monday as fed fund futures showed traders increased bets for an increase this year above 50 percent. There are “fluid expectations for Yellen’s Jackson Hole speech,” said Peter Rosenstreich, head of market strategy at Swissquote Bank SA, in Gland, Switzerland. “Hawkish comments last week and rally in yield caused traders to question their expectations for no hike in September. The data is improving but it’s still at a very soft level and there’s really no need for the Fed to tighten prematurely at this point.”

The euro-area economy maintained its momentum in August, with growth showing little sign of being curtailed by fallout from the U.K.’s Brexit vote as a composite Purchasing Managers Index for the 19-nation region posting its strongest expansion in seven months, rising for a second month to 53.3 from 53.2 in July. That was the best reading in seven months. The increase was driven by an improvement in services, while manufacturing activity slipped.
  • Eurozone Aug. Flash Composite PMI 53.3; Est. 53.1
  • Eurozone Aug. Flash Services PMI 53.1; Est. 52.8
  • Eurozone Aug. Flash Manufacturing PMI 51.8; Est. 52
  • Germany Aug. Flash Composite PMI 54.4; Est 55.1
  • France Aug. Flash Composite PMI 51.6 Vs 50.1; Est 50.4
“The PMIs suggest that growth still is more robust in the service sector than in manufacturing – a phenomenon that can be observed in many regions and that goes hand in hand with slow growth of global goods trade,” said Holger Sandte, chief European analyst at Nordea Markets in Copenhagen.

As a result, European shares advanced as commodity producers rebounded on higher metals prices while all 19 Stoxx 600 sectors rise with basic resources, retail outperforming and health care, oil & gas underperforming. 86% of Stoxx 600 members gain, 12% decline. “We’ve had a decent rebound, largely driven by the basic- resource sector and some decent data,” said Michael Hewson, a market analyst at CMC Markets in London. “Yesterday we saw a bit of a selloff, largely as a result of a decline in oil prices. Now we’re seeing some light buying on the back of some decent results from the housebuilding sector here in the U.K. and some fairly decent PMI data. There’s nothing really that came out this morning that would suggest that the rally we’ve seen thus far is under threat.”

In Asia, South Korea, Australia and Shanghai .SSEC all gained, while Japan's Nikkei .N225 went the other way, easing 0.6 percent as the yen ground higher on the dollar. A survey of Japanese manufacturing activity for August showed output rose for the first time in six months, but the improvement was marginal and investors fixed their focus on the Fed instead.

10-year U.S. Treasury yields ticked up to 1.55 percent after falling 4 basis points overnight. German Bund yields nudged up as well along with the rest of the euro zone and UK Gilts. Fed fund futures imply around a 24 percent chance of an easing in September, rising to around 50 percent by December. A quarter-point hike is not fully priced in until September 2017.

In commodity markets, oil remained under pressure after shedding 3 percent on Monday amid worries about burgeoning Chinese fuel exports, more Iraqi and Nigerian crude shipments and a rising U.S. oil rig count. Brent crude lost 25 cents to $48.96 a barrel. It hit a two-month high of $51.22 on Friday. U.S. crude futures fell 36 cents to $47.07, after the September contract expired on Monday at $47.05.

Market Snapshot
  • S&P 500 futures up 0.3% to 2187
  • Stoxx 600 up 0.7% to 343
  • FTSE 100 up 0.5% to 6863
  • DAX up 0.8% to 10577
  • German 10Yr yield up 1bp to -0.08%
  • Italian 10Yr yield up 3bps to 1.14%
  • Spanish 10Yr yield up 2bps to 0.95%
  • S&P GSCI Index down 0.8% to 361.4
  • MSCI Asia Pacific up less than 0.1% to 139
  • Nikkei 225 down 0.6% to 16497
  • Hang Seng up less than 0.1% to 22999
  • Shanghai Composite up 0.2% to 3090
  • S&P/ASX 200 up 0.7% to 5554
  • US 10-yr yield up 2bps to 1.56%
  • Dollar Index down 0.12% to 94.41
  • WTI Crude futures down 1.3% to $46.79
  • Brent Futures down 1.2% to $48.56
  • Gold spot up less than 0.1% to $1,339
  • Silver spot up 0.6% to $19.03
Global Headlines
  • Bayer, Monsanto Said to Move Closer to Deal as Talks Advance: Companies said on track to reach agreement in next two weeks. CEOs said to meet several times, price differences narrowing
  • Google Said to Recruit Web Stars, Hulu for Virtual Reality Push: Company to release Daydream virtual reality service in weeks. Google said to back games, short films with YouTube celebs
  • VW Resolves Standoff With Supplier After All-Night Negotiations: Six plants in Germany suspended production as parts withheld. Supplier’s unprecedented reaction affected 27,700 VW workers
  • The Giant of Tokyo’s Stock Market Reveals Its Investment Secrets: Japan pension fund is top owner of MUFG, Honda, many more
  • China’s Best Bank Called a ‘Mirage’ Built on Murky Shadow Loans: Case of Bank of Tangshan highlights opaque financial risks across nation
  • World Bank Said to Be Planning SDR Bond Sale Next Week in China: Notes are set to price on Aug. 31, people familiar say
  • Wal-Mart Reviews Welspun Records After Target Pulls Sheets: Retailer says it’s looking at Welspun certification records. Stock slumps 36% in two days; market value below $1b
Looking at regional markets, Asian stocks trade mixed following the subdued lead from the US in which the energy sector was the laggard after crude prices fell around 3%. Nikkei 225 (-0.6%) was weighed on by a firmer JPY as USD/JPY approached 100.00 to the downside, although the index rebounded off its worst levels and briefly turned positive with movements in the currency the main catalyst for price-action. ASX 200 (+0.7%) outperformed with advances in the financial sector spearheading the index to near 1% gains. Chinese markets were mixed with the Shanghai Comp (+0.2%) led higher on talk of reduced costs for businesses, while the Hang Seng (flat) was flat following some lacklustre earnings reports. 10yr JGBs traded higher amid a lack of risk-appetite in Japan, while today's 20yr auction also provided support after the tail in price narrowed and bid to cover increased from the prior month. Japanese Manufacturing PM! (Aug) M/M 49.6 (Prey. 49.3), 6th consecutive month of contraction. (Newswires) PBoC set CNY mid-point at 6.6586 (Prey. 6.6652) and injected CNY 100bIn via 7-day reverse repos. (Newswires)

Top Asian News
  • The Giant of Tokyo’s Stock Market Reveals Its Investment Secrets: Japan pension fund is top owner of MUFG, Honda, many more
  • China’s Best Bank Called a ‘Mirage’ Built on Murky Shadow Loans: Case of Bank of Tangshan highlights opaque financial risks across nation
  • World Bank Said to Be Planning SDR Bond Sale Next Week in China: Notes are set to price on Aug. 31, people familiar say
  • China Telecom Profit Beats Estimates on Increase in Subscribers: Co. added about 32m 4G subscribers in 1H
  • Doosan Bobcat Said to Gauge Korea IPO Demand in Early September: Korea Exchange said last week it approved co.’s share sale
EUropean equities have spent the session in the green (Euro Stoxx 50: +0.7%), with housing names among the best performers in the wake of Persimmon's earnings (+3.7%), while material names also outperform, to pare some of yesterday's losses. Separately on a stock specific note, automakers have been stealing the headlines, with Volkswagen (+2.3%) moving to session highs after making a deal with suppliers to end the recent suspension of production, while Renault (-1.6%) are among the worst performers after members of a state enquiry suggested a French government report omitted significant details of how Co.'s diesel cars were able to emit fewer emissions in official testing. Elsewhere, fixed income markets have seen another muted session of trade, with Bund futures continuing to hover around 167.50 and remain flat on the day, while the highlight may come later in the session in the form of the US 2-year note auction.

Top European News
  • VW Resolves Standoff With Supplier After All-Night Negotiations: Six plants in Germany suspended production as parts withheld. Supplier’s unprecedented reaction affected 27,700 VW workers
  • Schneider Said to Weigh Sale of Agriculture Data Service DTN: French company said to speak with potential sale advisers. Euromoney, others have previously shown interest in the unit
  • UniCredit Jumps as PZU CEO Reported to Discuss Pekao Takeover: PZU CEO Krupinski will fly to Milan for talks, Dziennik says. UniCredit has been seeking to sell assets to boost capital
In FX, the Bloomberg Dollar Spot Index lost 0.1 percent as of 6 a.m. in New York, after jumping 0.6 percent over the previous two trading days. South Korea’s won led gains among the 16 major currencies, jumping 1 percent versus the greenback. The yen appreciated 0.1 percent to 100.22 per dollar. “The U.S. dollar may have pulled back on hopes that the Jackson Hole symposium may focus on lower-for-longer type of policy rather than the need to imminently tighten policy,” said Vishnu Varathan, a senior economist at Mizuho Bank Ltd. in Singapore. “But in the run-up to Jackson Hole we do expect markets to be hyper-sensitive on U.S. policy hints, real or perceived, and so the U.S. dollar and U.S. yields will be volatile.” The New Zealand dollar surged as much as 1 percent after central bank Governor Graeme Wheeler said that while he intends to lower interest rates further to revive inflation, a series of rapid cuts is not justified. The South African rand was the next biggest gainer, appreciating 0.4 percent.

The commodity complex remains in focus, with WTI and Brent futures residing in close proximity to USD 47 and USD 49 respectively after the downside seen during yesterday's session. Separately, the precious metals complex benefitted from the aforementioned USD softness early in the session, but the likes of gold and silver have failed to sustain these gains and now trade relatively flat on the session. Goldman Sachs maintained its USD 45-50/bbl estimate for Brent crude through to summer next year and added that an OPEC freeze and the USD is not sufficient to support oil further. GS added that an OPEC freeze with some non-OPEC nations could be self-defeating because it would mean that prices could rise and enable other producers to ramp up supply.

On the event calendar today, we’ll also get the flash manufacturing PMI (expected to decline to 52.6 from 52.9) along with the Richmond Fed’s manufacturing survey for this month. New home sales data in July will also be released where sales are expected to have declined -2% mom. Away from the data the ECB’s Coeure, Lane and Smets are due to speak at a panel discussion later this morning in Geneva on alternative proposals for fundamentally improving the pre-crisis policy frameworks in the Euro area.

Bulletin Headline Summary From RanSquawk and Bloomberg
  • European equities enter the North American crossover in positive territory in what has been a quiet session once again and Eurozone PMIs dissipating some fears of a post-Brexit slowdown
  • USD has been a key focus in FX markets as participants continue to question how committed Fed Chair Yellen will be at the Jackson hole speech on Friday
  • Looking ahead, highlights include Turkish & Hungarian Interest Rate Decisions, US manufacturing PMIs, New Home Sales, APIs, ECB's Coeure, Fed Discount Minutes and a US 2yr Note Auction
  • Treasuries slip overnight, though remain in ranges, amid higher equities after Markit eurozone composite PMI rose for a second month to 53.3 from 53.2 in July; Treasury to sell $26b 2Y notes at 1pm ET, WI 0.765% vs 0.760% last month.
  • The Fed is facing two big questions related to interest rates — one short-term and one long-term — and it’s important to understand that policy makers approach them separately
  • Companies across Japan have a new name in their top 10 shareholder lists: the world’s largest pension fund as the $1.3t GPIF is top owner of Mitsubishi UFJ Financial Group Inc., Honda Motor Co. and at least 119 other Tokyo-listed firms
  • As China’s sovereign bond yields tumble to decade-lows, investors are piling into the most defensive part of the stock market in search of returns
  • China will further open its economic borders to investors from abroad in a move intended to counter sliding confidence in the outlook for the world’s second-largest economy
  • Negotiations between Bayer AG and Monsanto Co. are advancing toward a deal after the companies made progress on issues including the purchase price and termination fee, people familiar with the matter said
US Event Calendar
  • 9:45am: Markit US Manufacturing PMI, Aug P, est. 52.6 (prior 52.9)
  • 10:00am: Richmond Fed Manufacturing Index, Aug., est. 6 (prior 10)
  • 10:00am: New Home Sales, July, est. 580k (prior 592k); New Home Sales m/m, July, est. -2.0% (prior 3.5%)
DB's Jim Reid concludes the overnight wrap

August this year is proving to be very different to last year where risk assets were being routed following the fallout from the shock PBoC devaluation. In fact glancing back to the EMR on this day last year the Shanghai Comp was in the midst of a huge three-day slump in which the index capitulated 19%. Twelve months on and markets have rarely been this quiet. A little bit of to and fro from Fed speakers has at least caused some excitement but in general markets have had very little to feed off since earnings season wrapped up.

The main story over the last 24 hours has probably been the abrupt end to the recent rally for Oil with WTI (-3.46%) ending its run of seven consecutive daily gains. It barely caused a dent in US equity markets though with the S&P 500 ending -0.06% despite energy stocks coming under pressure. In fact the S&P 500 has now gone 31 consecutive sessions with daily moves up or down of less than 1% and in that time has traded in just a 61pt range.

Today we get the August flash PMI’s in Europe which should give markets something to focus on however. This will give us another important post-Brexit indicator which so far have been pretty resilient. Remember that the Euro area composite PMI actually edged up 0.1pts to 53.2 in July. Market expectations today is for the composite to stay pretty much unchanged (consensus forecast is 53.1) with the same said for both the manufacturing and services surveys. We’ll also get the readings for Germany and France with the manufacturing survey data for the UK, Spain and Italy coming next week and services data the week after.

Also out today is more data in the UK with the August CBI industrial trends orders and selling prices survey. Current market expectations are for the industrial orders data to deteriorate further. Later this afternoon we’ll also get the latest Euro area consumer confidence reading. So all that to look forward to today.

This morning in Asia it’s been yet another mixed start in markets. In Japan the Nikkei (+0.05%) and Topix (+0.04%) are little changed despite the Nikkei manufacturing PMI for Japan improving 0.3pts to 49.6 this month in the flash reading. The Hang Seng (-0.30%) is lower however while there have been gains for the Shanghai Comp (+0.47%), Kospi (+0.20%) and ASX (+0.84%). Sovereign bond markets are generally stronger while in FX Markets most emerging market currencies are up slightly. The other data out in Asia this morning came in China where the MNI business indicator for August fell 1.2pts to 54.3.
Moving on. Following on from the Fed Vice-Chair Fischer’s comments over the weekend, the initial reaction in the US Dollar was to rally with the index up as much as half a percent as we went to print yesterday. However that rally faded as the day progressed with the index eventually finishing unchanged. Treasuries followed a similar path. 2y and 10y yields were up as much as +3.2bps and +2.0bps respectively, but then unwound and actually rallied into the close, finishing -0.8bps and -3.6bps lower respectively.

The probability of a Fed rate hike by December ended up unchanged at 51% although pricing for September did actually nudge up slightly to 24% from 22%. It was the move in Oil which probably got the most attention though with that decline for WTI the largest since August 1st. The fingers of blame were pointed at increased expectations of more supply out of Iraq and also the news that a cease-fire was declared in the Niger Delta region, although this was also being met with some caution. Meanwhile metal markets were also a touch softer yesterday which weighed on commodity names in Europe. The Stoxx 600 closed +0.09% after initially climbing +0.90%.

With little in the way of economic data yesterday there was some focus on the informal European leaders meeting between Merkel, Hollande, and Renzi, intended to show their commitment to the EU post Brexit. According to the FT the leaders discussed forgoing a common plan to bolster Europe’s economy and also security, while the talks were also supposedly seen as a show of support for Renzi from Merkel ahead of the upcoming constitutional reform referendum in Italy.

Staying in Europe the latest ECB CSPP numbers were out yesterday. Impressively, given that it covers mid-August, they upped their purchases from a €250mn daily run rate the week before to €321mn this past week. The average daily number since the program started in June is around €350mn with July and Augusts’ purchases probably healthier than most would have expected given the holiday season. At this rate the €17.8bn total purchased so far is only within 2-3 weeks of exceeding the total ABS purchases of €20.3bn made since that program started in November 2014.

Looking at the day ahead, this morning in Europe the main focus will likely be on the aforementioned flash PMI’s for August, along with the UK CBI trends orders data for this month. As highlighted we’ll also receive the August consumer confidence reading for the Euro area in the afternoon where expectations are for a very modest improvement to -7.7 from -7.9. Meanwhile in the US we’ll also get the flash manufacturing PMI (expected to decline to 52.6 from 52.9) along with the Richmond Fed’s manufacturing survey for this month. New home sales data in July will also be released where sales are expected to have declined -2% mom. Away from the data the ECB’s Coeure, Lane and Smets are due to speak at a panel discussion later this morning in Geneva on alternative proposals for fundamentally improving the pre-crisis policy frameworks in the Euro area.

http://www.zerohedge.com/news/2016-...-dollar-resumes-falling-oil-slides-second-day
 

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Frontrunning: August 23


by Tyler Durden
Aug 23, 2016 7:32 AM

  • Dollar Drops on Rate Outlook as European Stocks Rise, Oil Falls (BBG)
  • Bank of Japan's rush into stocks raises fears of market distortions (Reuters)
  • With Moderate Drinking Under Fire, Alcohol Companies Go on Offensive (WSJ)
  • Merkel Says Brexit Is U.K.’s Loss While Pledging EU Results (BBG)
  • Turkey cuts rates for sixth straight month amid ratings worries (Reuters)
  • Euro-Area Economy Shrugs Off Brexit as Key Index Edges Up (BBG)
  • Donald Trump Courts Black Vote While Avoiding African-American Communities (WSJ)
  • Everyone Wants Emerging-Market Bonds, But There Aren’t Enough to Go Around (WSJ)
  • Appeals arguments begin on Kansas law requiring voters to prove citizenship (Reuters)
  • Delphi, Mobileye Join Forces to Develop Self-Drive System (WSJ)
  • What Detroit Needs Now: More Squatters (Bloomberg)
  • Anbang Group plans Hong Kong IPO of life insurance unit (Reuters)
  • Devolved government sees 2 billion to 11 billion stg Brexit hit to Scottish economy (Reuters)
  • VW, suppliers settle dispute after marathon talks (Reuters)
  • The Pentagon Takes Aim at Bomb-Carrying Consumer Drones (BBG)


Overnight Media Digest

WSJ

- A federal judge prodded the U.S. State Department to quickly review a batch of 14,900 recently discovered emails as the controversy over Democratic presidential candidate Hillary Clinton's correspondence while she served as America's top diplomat continued to simmer. http://on.wsj.com/2bPHYig

- Despite signs that Donald Trump may be softening his rhetoric on the issue that catapulted him to political prominence, cracking down on illegal immigrants, the Republican presidential nominee said Monday that he wasn't waffling and reiterated his commitment to strict anti-immigration measures. http://on.wsj.com/2bQBNdI

- A U.S. national security panel cleared China National Chemical Corp's $43 billion planned takeover of seed giant Syngenta AG, months after shooting down much smaller Chinese deals for electronics and lightbulb manufacturers. http://on.wsj.com/2bcD90W

- Ryan Lochte has lost all of his major endorsement deals as swimwear company Speedo USA, clothing line Ralph Lauren Corp , a mattress maker and a hair-removal brand have dropped their sponsorship of the Olympic swimmer in the wake of the Rio de Janeiro scandal. http://on.wsj.com/2bHf00G

- Pfizer Inc said that it had agreed to buy biotech Medivation Inc for about $14 billion, in a move that adds one of the crown jewels of the multibillion-dollar market for cancer drugs to Pfizer's portfolio. http://on.wsj.com/2bwpaW4

- New York's environmental regulator has notified federal officials that General Electric Co's seven-year, $1.6 billion dredging campaign to remove industrial pollutants from the Hudson River has been inadequate. http://on.wsj.com/2bBQ25H

- Sharp Corp will implement a large-scale corporate restructuring to achieve profitability, with the hope of restoring the brand's image as a global provider of innovative consumer electronics, the company's new chief executive said Monday. http://on.wsj.com/2b8KP7w


FT

Crucial details were excluded from a French government report about how Renault SA's diesel cars were able to emit fewer deadly gases when subject to official emissions testing, members of the state inquiry told the Financial Times.

The London Metal Exchange (LME) said it has cut fees in half for open outcry trades during August as a goodwill gesture after it had to vacate its premises because of structural problems.

More than one million low-income households in Britain are left struggling with debt problems as a result of years of stagnant wage growth, according to a report from the Trades Union Congress.

The leaders of the euro zone's biggest economies declared they would not allow Britain's shock decision to leave the European Union to propel the bloc into reverse, as they discussed plans to deepen intelligence co-operation and bolster a pan-European investment plan.


NYT

- Pfizer Inc said it would buy U.S. cancer drug company Medivation Inc in a deal valued at about $14 billion. http://nyti.ms/2bK5xWO

- The fallout from Ryan Lochte's story about being robbed at gunpoint in Rio continued Monday when four companies said they would end business partnerships with Lochte, an American swimmer and 12-time Olympic medalist. http://nyti.ms/2bK5r1y

- A lawyer for Melania Trump said Monday that he had informed several news organizations, including The Daily Mail, that they could face legal action for publishing articles that she contended were defamatory. http://nyti.ms/2bK5nPe

- Andrea Tantaros, a former Fox News host, charged in a lawsuit filed Monday that top executives at the network, including the man who replaced Roger Ailes, punished her for complaining about sexual harassment by Ailes. http://nyti.ms/2bK5LgG


Canada

THE GLOBE AND MAIL

** Ontario's Liberal government has bowed to public and opposition pressure in order to tighten caps further on political donations, but is still allowing cash-for-access fundraising. (http://bit.ly/2bdOmLS)

** Climate change is the "greatest global health threat of the 21st century," so it is incumbent that physicians take a stand to protect their patients, one of the world's leading human-rights advocates, James Orbinski, told the Canadian Medical Association. (http://bit.ly/2bbv1Rr)

** New data shows that about one-third of Toronto's public schools require critical repairs as Canada's largest school board, Toronto District School Board, faces a $3.4-billion maintenance backlog. (http://bit.ly/2bbvQth)

NATIONAL POST

** Twitter Canada has a head of News and Government again, an important position to the company as it tries to get more media and political influencers to incorporate its products into their daily workflow. The position was previously held by Steve Ladurantaye. (http://bit.ly/2bbsSoI)

** Mogo Financial Technology Inc unveiled a mobile application on Monday, hoping to attract clients with an app that gives them access to a suite of credit and loan products and services in under three minutes. (http://bit.ly/2bbsQx0)


Britain

The Times

** Senior Conservatives reacted with anger last night after a European leader warned Theresa May that handing a tax cut to businesses would make Brexit negotiations "more difficult". (http://bit.ly/2bvzFoc)

** The chairman of the parliamentary committee investigating Philip Green's handling of the BHS pension deficit is seeking talks with an American investor who owns a minority stake in the entrepreneur's Topshop chain. (http://bit.ly/2bxK2MA)

The Guardian

** Sports Direct has been heavily criticised by its own shareholders and corporate governance experts after it emerged that the sportswear retailer pays an obscure company owned by Mike Ashley's brother to deliver online orders outside the UK. (http://bit.ly/2bxKmeq)

** Volkswagen has been thrown into another crisis after a dispute with a supplier forced it to halt production at six plants and cut the hours of nearly 28,000 workers. (http://bit.ly/2bvu3dv)

The Telegraph

** Theresa May and Chancellor Philip Hammond have both scrapped George Osborne's plan to abolish the budget deficit by 2020, giving them room to hike borrowing - potentially by as much as 50 billion pounds in the next financial year. (http://bit.ly/2bvuyEB)

** Dubai-based property developer Damac has signed a 200 million pounds deal with Lendlease to build its new tower in London, signalling a vote of confidence in the post-Brexit newbuild market. (http://bit.ly/2bvvJUd)

Sky News

** The overhaul of senior management at Britain's most prominent payday lender, Wonga, will continue this week when a former Travelex executive is appointed to run its British operations. (http://bit.ly/2bvv9pH)

** The former Argos and Homebase boss Terry Duddy has been approached about taking over the chairmanship of Findel Plc , the mail order retailer, as it seeks to resolve a row over the influence of Mike Ashley, the tycoon whose sports goods chain is its biggest shareholder. (http://bit.ly/2bvAops)

The Independent

** A "collapse" in the value of pay, alongside soaring unsecured debt means 1.6 million families are now living in extreme debt in the UK, according to a new report. (http://ind.pn/2bvzWHs)

http://www.zerohedge.com/news/2016-08-23/frontrunning-august-23
 

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#10

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#11

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#12
Shipping & Energy 08/23:

Peak Oil Review - Aug 22 2016
http://www.resilience.org/stories/2016-08-22/peak-oil-review-aug-22-2016

EIA: U.S. Shale Output to Reach 7.1 Million Bpd by 2040
http://oilprice.com/Latest-Energy-N...e-Output-to-Reach-71-Million-Bpd-by-2040.html

Oil Output Continues To Fall In North Dakota
http://oilprice.com/Energy/Energy-General/Oil-Output-Continues-To-Fall-In-North-Dakota.html

Is ExxonMobil Actually Only Worth A Fraction Of What It Says?
http://oilprice.com/Energy/Energy-G...ly-Only-Worth-A-Fraction-Of-What-It-Says.html

Supply and demand imbalance only part of the problem for 'predatory' carriers
http://theloadstar.co.uk/supply-and...the-low-rates-problem-for-predatory-carriers/

Project to increase mega-ships’ visits to Port of Felixstowe
http://www.eadt.co.uk/news/project_to_increase_mega_ships_visits_to_port_of_felixstowe_1_4665683

Sea Shepherd Agrees to Stay Away From Japan Whaling Ships
http://thelakeandeswave.com/2016/08...es-to-stay-away-from-japan-whaling-ships.html

U.S. Out-of-Court Whaling Decision Means Nothing
http://www.maritime-executive.com/article/us-out-of-court-whaling-decision-means-nothing

Machine to Machine in the Container Supply Chain
http://www.maritime-executive.com/features/machine-to-machine-in-the-container-supply-chain

Pakistan Buys FSRU for Second LNG Import Terminal
http://www.maritime-executive.com/article/pakistan-buys-fsru-for-second-lng-import-terminal

Cross Mediterranean Aframax market looking in vain for Libyan oil production comeback, as negotiations still ongoing
http://www.hellenicshippingnews.com...ction-comeback-as-negotiations-still-ongoing/

More Russian Natural Gas Exports Mandate U.S. LNG Support
http://www.hellenicshippingnews.com/more-russian-natural-gas-exports-mandate-u-s-lng-support/

Opec likely to cap production at meeting
http://www.hellenicshippingnews.com/opec-likely-to-cap-production-at-meeting/

U.S. natural gas market rebalances on hot weather, low prices – Kemp
http://www.hellenicshippingnews.com...et-rebalances-on-hot-weather-low-prices-kemp/

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

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#13
Federal Reserve under growing pressure to reform system, goals
http://www.hellenicshippingnews.com/federal-reserve-under-growing-pressure-to-reform-system-goals/

Former China boom town learns hard lessons about service economy
http://www.hellenicshippingnews.com...wn-learns-hard-lessons-about-service-economy/

IMF Updates Central Legislation Database
http://www.hellenicshippingnews.com/imf-updates-central-legislation-database/

Detroit Has Gone From Being The Greatest Manufacturing City In The World To A Global Joke
http://theeconomiccollapseblog.com/...ufacturing-city-in-the-world-to-a-global-joke
 

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#14
Germans Warned To ‘Stockpile’ Cash In Case Of ‘War’
By: GoldCore
This is one of the primary reasons that one should own physical gold coins and bars outside the banking, financial and indeed the “technological system” and its dependence on electrical grids and supplies. Many of these systems are antiquated and vulnerable to attack such as from electromagnetic pulse (EMP) warfare that could quickly take out a large city or indeed a nation’s electricity infrastructure and supplies.
 

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#17
S&P Set For New Record Highs As Futures, Dollar Rise; Oil Slides


by Tyler Durden
Aug 24, 2016 6:41 AM

In a rerun of yesterday's overnight session, European indexes trade higher while US index futures were modestly in the green, set to propel the S&P 500 to new all time highs. Emerging Market dropped the most in three weeks alongside commodities, as today the market was predisposed hawkishly on a US rate hike ahead of Yellen's Friday speech, pushing the US dollar higher and oil resumed its pre "anonymous sources" headlines slide.

Meanwhile, the absolute lack of volatility continues. As DB points out, "in the S&P 500 we haven't had a +/- 1% or more day since July 8th. That’s 32 consecutive sessions which matches the run in August-September 2014. There’s some way to go to match the run of 62 consecutive sessions from April-July 2014 however." Lack of excitement is good for stocks, however, as the chart below shows.





While political and security concerns rippled through some developing nations, global sentiment has seesawed across asset groups as traders look toward Yellen’s speech in Jackson Hole, Wyoming, on Friday for clues on the timing of rate increases. At least three Fed officials have made hawkish remarks since the start of last week, though U.S. economic data remain mixed with figures on Tuesday showing a slowdown in manufacturing and strength in the housing market. A report on Wednesday is forecast to show sales of existing homes held close to a nine-year high.

In the absence of any market-moving news, all traders remained focused on Yellen's upcoming speech: “while political risks do matter, now it is all eyes on the Fed and Yellen,” said William Jackson, a London-based economist at Capital Economics Ltd. “That seems to be the biggest factor.” Daniel Weston, chief investment officer of Aimed Capital in Munich added that “Yellen’s comments are the focus. She may well signal there could be a rate hike next month, but equities should stay fairly solid, as that small upward change in interest rates won’t hugely hurt earnings.”

Crude was lower by 1.7%, as euphoria from yesterday's Iran-related headlines evaporated after contrary to WSJ reports, Iran said it still hasn't decided whether it will attend the OPEC meeting in Algiers next month, while API reported crude oil inventories rose 4.5mm bbl, before more definitive EIA data later today.

The MSCI Emerging Markets Index dropped 0.9% as of 6:02 a.m. in New York, the most since Aug. 3 on a closing basis after Fed funds futures ended Tuesday showing a 54 percent chance of a U.S. interest-rate increase by December. The Borsa Istanbul 100 Index slid 1.9 percent, the most in a month, as Turkey began its first major offensive in Syria. The military started bombing Islamic State positions in the district of Jarablus in Syria’s Aleppo province Wednesday morning, according to the prime minister’s office.



The dollar rose against the euro and the Swiss franc. South Korea’s won weakened after North Korea conducted a missile test, while South Africa’s currency and bonds declined amid speculation the finance minister will be replaced. Signs of rising stockpiles sent oil and copper lower.

The Stoxx Europe 600 Index reversed earlier losses to rise 0.4 percent after its biggest rally in more than two weeks. WPP Plc led a gauge of media companies to the biggest advance on the Stoxx 600. Shares jumped 6.1 percent after the world’s largest advertising company said profit rose 15 percent in the six months ended June 30 as a favorable currency translation more than offset Brexit’s drag on the British economy. S&P 500 Index futures rose 0.1% to 2,187.25 in early trading. Stocks ended up 0.2% on Tuesday, paring gains that briefly sent the equity benchmark above its Aug. 15 record close. Commodity and energy producers fell the most, with Glencore Plc down 4.8 percent after reporting a plunge in first-half earnings.

Market Snapshot
  • S&P 500 futures up less than 0.1% to 2185
  • Stoxx 600 up 0.3% to 345
  • FTSE 100 down 0.2% to 6857
  • DAX up 0.2% to 10612
  • German 10Yr yield up less than 1bp to -0.09%
  • Italian 10Yr yield up less than 1bp to 1.12%
  • Spanish 10Yr yield down less than 1bp to 0.93%
  • S&P GSCI Index down 0.9% to 363.6
  • MSCI Asia Pacific up less than 0.1% to 139
  • Nikkei 225 up 0.6% to 16597
  • Hang Seng down 0.8% to 22821
  • Shanghai Composite down 0.1% to 3086
  • S&P/ASX 200 up 0.1% to 5562
  • US 10-yr yield unchanged at 1.55%
  • Dollar Index down 0.03% to 94.51
  • WTI Crude futures down 1.6% to $47.31
  • Brent Futures down 1.3% to $49.33
  • Gold spot up 0.2% to $1,340
  • Silver spot up 0.5% to $18.91
Top Global Headlines:
  • Pfizer to Buy Antibiotics From AstraZeneca for $725 Million: U.K. drugmaker to get up to $850 million if certain goals met. Deal gives Pfizer Zavicefta for drug-resistant infections
  • Lockheed’s F-35 Still Falls Short, Pentagon’s Chief Tester Says: Fighter is ‘on a path toward failing to deliver,’ Gilmore says. Memo came a week after Air Force declared its version ready
  • South Africa finance minister Gordhan has taken legal advice on letter received from special police unit
  • At BlackRock, even a 40% gain can’t save ETFs from the trash; in spite of their strong performance they’re just not that popular with investors
  • Germany 2Q final GDP in-line with ests. at +0.4% (q/q) and +1.8% (y/y)
  • Norway June unemployment rate higher than expected at 4.8% vs 4.7% prev. and est.
  • July BBA loans for house purchase fell to lowest level since January 2015; BBA says “the data does not currently suggest borrowing patterns have been significantly affected by the Brexit vote, but it is still early days”
  • Glencore Widens Debt Plan to Weather Rout After Worst Profit: Trader and miner wants to cut debt to as low as $16.5 billion. Stock price has doubled this year after 70% slump last year
  • Exxon’s Pacific Partner Sees LNG ‘Revolution’ Among Buyers: LNG buyers use glut to recalibrate future contracts: Botten. Company to start new supply contract negotiations next year
* * *

Looking at Asian markets, stocks outside Japan fell as Hong Kong shares retreated and investors grew cautious before Federal Reserve Chair Janet Yellen’s speech this week. Japanese equities gained as exporters rallied. “While recent U.S. data has been mixed, the base case for the Fed is probably to increase rates in the absence of any compelling reason not to,” Michael McCarthy, chief market strategist in Sydney at CMC Markets, told Bloomberg. “The Fed is aware that there’s a substantial risk that if economic conditions deteriorate, they have very little room to move. Given this, the central bank wants to normalize rates as soon as they can.” 5 out of 10 sectors fall with tech, staples underperforming and consumer, health care outperforming.

Top Asian News

PetroChina Posts Smallest Half-Year Profit on Oil’s Meltdown: China’s biggest producer able to overcome first- quarter loss. Domestic crude output fell 4.2% to 385.3 million barrels
  • PBOC Adds Funds in 14-Day Reverse Repos First Time in Six Months: Benchmark seven-day money rate rises to highest since March
  • China’s Postal Bank Said to Seek Approval for $8 Billion IPO: Lender moves closer to world’s biggest share sale this year
  • Credit Suisse Asia Markets Bankers Said to Plan Macro Hedge Fund: Kiely, Firth to start cross-asset fund under Rafiki Capital
  • Qantas Pays First Dividend Since 2009 After Record Profit: Underlying profit rises 57% to A$1.53 billion in year to June
  • North Korea Successfully Launches Ballistic Missile From Sub: Japan protests over missile that flew ~500 km toward nation
In Europe, equities traded relatively flat this morning (DAX +0.2%) despite the early morning drop with the FTSE 100 (-0.05%) the initial laggard due to Glencore earnings (-4.5%), the Co. reported a 13% drop in underlying earnings for the first six months of the year and as such dragging the whole materials sector lower. Fixed income price action have been particularly muted this morning, as has been the case during European mornings throughout the week, also of note we saw this week's most significant European auction in the form of the Buba's Bobl auction, which saw a b/c of 1.4, higher than the previous.

Top European News
  • VW’s Crippling Supplier Feud Shows Limits of Penny Pinching: German carmaker to compensate supplier to end production halt. Labor leaders also resist making workers bear brunt of crisis
  • UBS Joined by Peers to Promote Blockchain-Backed Digital Cash: UBS joined by ICAP, Deutsche Bank, Santander, BNY Mellon. Banks are trying to speed transactions that can take days
In FX, the Bloomberg Dollar Spot Index held a three-day gain after futures traders priced in an increased probability of a rate increase by December. The JPMorgan Chase & Co. gauge of currency price swings was at 10.22, matching the highest since July 26 on a closing-market basis. MSCI Emerging Markets Currency Index fell 0.7 percent. The won weakened 0.6 percent versus the dollar after North Korea test-launched a ballistic missile from a submarine off its east coast. The rand fell to a three-week low after a news website said that South Africa’s Finance Minister Pravin Gordhan had been summoned to report to police on Thursday, signaling a deepening rift between Gordhan and President Jacob Zuma.

In commodities, WTI fell 1.7% to $47.30 a barrel in New York after API figures showed inventories increased by 4.46 million barrels last week. It rallied 2.2 percent in the last session after Reuters cited unidentified sources in OPEC and the oil industry as saying that Iran is sending “positive signals” it may support joint action to bolster the market. Copper slid 0.5 percent to a six-week low after inventories tracked by the London Metal Exchange climbed to the highest level since January. Jiangxi Copper Co., China’s biggest producer, said Wednesday that prices may soon bottom out given looser monetary policies adopted by countries to stimulate growth.

* * *

Bulletin Headline Summary from RanSquawk and Bloomberg
  • FTSE 100 is the main laggard in Europe as losses in the mining sector drag the index lower
  • GBP strength pushes GBP/USD to the highest level in 3 weeks.
  • Looking ahead, highlights include weekly DoE crude oil inventories, US Existing Home Sales and Earnings from HP
  • When the Fed Chair Yellen speaks Friday in Jackson Hole, Wyoming, any description she offers of the U.S. economy will probably be crafted to keep an interest-rate rise on the table for the FOMC meeting next month -- without committing it to act
  • Trade was the main driver of German economic growth in the second quarter as domestic demand suffered from a slump in investment
  • Derivatives users are the latest group to be hurt by negative interest rates as they get penalized for the cash they park at Europe’s biggest clearinghouses. Traders can thank European Central Bank President Mario Draghi
  • The central bank in Reykjavik cut its benchmark interest rate for the first time in 20 months amid an increase in capital inflows that have pushed inflation below target, pushing it into the global currency war that has dominated monetary policies from Japan to Switzerland
  • Denmark’s biggest pension fund, which manages about $115 billion in assets, says it’s growing increasingly worried about how markets will react when crisis-era correlations across asset classes start to reverse
  • China’s central bank injected cash into the financial system using 14-day reverse-repurchase agreements for the first time since February amid speculation policy makers are looking to increase the use of more expensive, longer-term funding to cool a bond rally
  • Chinese President Xi Jinping may feel a bit smug when he hosts global leaders at next month’s G-20 summit. The heralded hard landing of the world’s number two economy hasn’t materialized -- instead many Western nations are facing economic and political upheaval
  • August 2015 was a terrifying time for investors, with the imminent withdrawal of Federal Reserve stimulus and China’s currency devaluation sending stocks on their wildest ride in four years. Twelve months later, it’s nothing but calm
US Event Calendar
  • 7:00am: MBA Mortgage Applications, Aug. 19 (prior -4%)
  • 9:00am: House Price Purchase Index q/q, 2Q (prior 1.3%)
  • 9:00am: FHFA House Price Index m/m, June, est. 0.3% (prior 0.2%)
  • 10:00am: Existing Home Sales, July, est. 5.51m (prior 5.57m); Existing Home Sales m/m, July, est. -1.1% (prior 1.1%)
DB's Jim Reid concludes the overnight wrap

If you want an idea of how dull things are then Bloomberg published a good chart last night showing that the monthly trading range in 10 year US Treasuries is so far in August the lowest for 10 years. It’s impressive given that Fed speakers have recently been doing their best to persuade the market that they are close to raising rates from a point where expectations were very low at the start of the month. Obviously post Yellen at Jackson Hole on Friday, yields could fluctuate more aggressively but so far the month has been pretty dull. Indeed in the S&P 500 we haven't had a +/- 1% or more day since July 8th. That’s 32 consecutive sessions which matches the run in August-September 2014. There’s some way to go to match the run of 62 consecutive sessions from April-July 2014 however.

With markets in a bit of a sit and wait mode ahead of Yellen, yesterday our Global Economic Perspective’s team published their latest piece in which they take a look at the outlook for the neutral fed funds rate. In their view it is an issue that is likely to garner considerable attention during the Jackson Hole symposium and with the rate at persistently near or at record low levels it has drawn intensifying scrutiny from key Fed officials. In the report they derive projections of the future path for the neutral fed funds rate based on various economic scenarios using framework based on Laubach and Willliams methodology. Their findings reveal that there are three key implications that are potentially crucial for the Fed outlook. Firstly, if US real GDP growth averages about 2% as the Fed and most other forecasters expect, the real neutral fed funds rate is unlikely to rise significantly over at least the next several years and it is also likely to remain below the Fed’s long-term projection of 1% over this time frame. Consequently, a rising neutral rate is unlikely to be a key driving force for near-term rate increases, contrary to Fed forecasts and commentary. Over the longer-term, in the absence of shocks to the economy, the real neutral rate would likely approach the Fed’s long-run estimate of 1% if economic growth remains around 2%. But the high persistence of the neutral rate implies that the convergence toward 1% is likely to be very gradual, taking many years. If instead real GDP growth slows persistently below 1.5%, the real neutral rate is likely to remain stuck at around 0%.

In terms of markets yesterday, while dull, the overall tone was at least more positive compared to Monday. This was particularly the case in Europe where the Stoxx 600 (+0.93%) had its strongest day in over two weeks. Financials appeared to be at the heart of it with the Stoxx 600 Banks index rising +2.38% which is the most since July 14th. The robust PMI readings helped (we’ll touch on those shortly) while Italian Banks had a better day somewhat boosted by a +6.63% rally for Unicredit after Polish press reported that the Bank is looking to weigh a sale of its stake in Bank Pekao. Across the pond the S&P 500 edged up a more modest +0.20% after initially looking at the 2016 highs before paring back a little.

Oil is probably the one market consistently generating headlines at the moment. Yesterday WTI rebounded +1.46% although at one stage did rally nearly 4% off the intraday lows following a report on Reuters suggesting that Iran was becoming more willing to support OPEC action to prop up the market. As we’ve highlighted before there was no shortage of headlines in the build up to the last OPEC meeting so this comes as little surprise and as we noted earlier this week our expectation is that a coordinated output freeze will have little meaningful fundamental impact anyway. Elsewhere fixed income markets ended up little changed yesterday. The USD was flat for the second consecutive day while Treasuries also paused for breath with yields little changed.

Refreshing our screens this morning WTI Oil (-1.10%) has given up more of yesterday’s gains following the latest US inventory data. That appears to have taken some momentum out of markets in Asia this morning with the Hang Seng (-0.99%), Shanghai Comp (-0.20%) and Kospi (-0.35%) in particular in the red. The Nikkei (+0.50%) is up with the Yen a touch weaker. The ASX (+0.20%) has also edged slightly higher following a raft of corporate earnings reports this morning while sovereign bond markets are little changed. On the whole though newsflow is again pretty quiet in the Asia session.

Moving on. Data-wise the big focus yesterday were the Europe PMI’s. The overall feeling was one that was relatively positive. The Euro area composite PMI edged up 0.1pts to 53.3 (vs. 53.1 expected) which is actually the highest since January although the reading has consistently sat at or around 53 since then. Services were a standout (+0.2pts to 53.1 vs. 52.8 expected) while the manufacturing reading faded 0.2pts to 51.8 (vs. 52.0 expected). Across countries there was a reasonable positive services surprise in France which offset a slightly softer services reading in Germany. Our European economists highlighted that the data also implies a slight improvement on average in the periphery. Importantly though the data signals ongoing resilience of the domestic Euro area economy, particularly post Brexit. Our colleagues also highlight that the data points to GDP growth of between 0.3% and 0.4% qoq in Q3 which is broadly in line with their forecast.

Away from this in the UK the latest CBI trends orders data weakened 1pt to -5 although that was a little better than the -10 expected by the market. Meanwhile the flash August consumer confidence reading for the Euro softened 0.6pts to -8.5 and is now at the lowest since April. Economic data in the US was a much more mixed bag. Manufacturing data in particular disappointed with the flash manufacturing PMI in August dropping 0.8pts to 52.1 (vs. 52.6 expected) and the Richmond Fed manufacturing survey weakening 21pts to -11 (vs. +6 expected). It’s worth noting that while that’s the weakest reading since January 2013, the series does have a tendency to be extremely volatile. The better news came in the housing sector where new home sales surged to a near nine-year high of 654k annualized after rising +12.4% mom in July (vs. -2.0% expected).

Looking at the day ahead, this morning in Europe we’re kicking off in Germany where shortly after this goes to print we’ll get the final revision to Q2 GDP (expected to stay unchanged at +0.4% qoq). We’ll also get the various components of the growth report. This afternoon in the US it’s relatively quiet with only the June FHFA house price index reading and July existing home sales data. Glencore is among the companies due to report earnings.

http://www.zerohedge.com/news/2016-08-24/sp-set-new-record-highs-futures-dollar-rise-oil-slides
 

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#18
Frontrunning: August 24


by Tyler Durden
Aug 24, 2016 7:34 AM

  • 'Voices under the rubble' after quake hits Italy; at least 38 dead (Reuters)
  • Turkish tanks, special forces launch first major push into Syria to battle IS (Reuters)
  • A Year After Stocks Armageddon, It’s Smooth Sailing for Markets (BBG)
  • Global stocks ease, dollar holds ground as U.S. rate bets abound (Reuters)
  • Merkel Tells Renzi He Can’t Bend Euro Rules to Boost Growth (BBG)
  • Fine-Print Fortune: Two Ex-Goldman Traders Look for Bonanza in Mortgage Bonds (WSJ)
  • Derivatives Users Hit as Negative Rates Raise Collateral Costs (BBG)
  • Philippines says sea dispute not led to shift in ties with China or U.S. (Reuters)
  • Lavrov, Kerry to meet on Syria and Ukraine in Geneva on Friday (Reuters)
  • France's DCNS does not rule out 'economic war' after documents leak (Reuters)
  • Largest Oil Companies’ Debts Hit Record High (WSJ)
  • Secret Cameras Record Baltimore’s Every Move From Above (BBG)
  • EU calls on Greece to defend statistics office (FT)
  • Voters With Student Debt Flock to Clinton in Poll (BBG)
  • Lockheed’s F-35 Still Falls Short, Pentagon’s Chief Tester Says (BBG)
  • Tesla touts speed and driving range with new upgraded battery (Reuters)
  • The Senator’s Daughter Who Raised Prices on Anti-Allergy EpiPen (BBG)

Overnight Media Digest

WSJ

- Two former Goldman Sachs Group traders snapped up beaten-down mortgage bonds, wagering that unusual wording in their contracts would net them millions when a bank settlement paid out. http://on.wsj.com/2bdZ62x

- The U.S. is considering providing military support for hundreds of Turkish-backed rebels massing at the border with Syria for a major offensive meant to sever Islamic State supply routes. http://on.wsj.com/2bfbrxZ

- A magnitude 6.2 earthquake struck central Italy early Wednesday, levelling buildings in several towns as residents slept. The mayor of hard-hit Amatrice said "The town isn't here anymore." http://on.wsj.com/2bAGrgW

- Consumption of soda and other sugary drinks fell by more than a fifth in low-income neighborhoods of Berkeley after the California city became the first in the U.S. to introduce a special tax last year, according to a study published Tuesday. http://on.wsj.com/2bdoAgC

- Best Buy Co posted results for the latest quarter that reversed a sales slump, easing fears about its ability to lure shoppers amid a long battle with Amazon.com Inc and other online rivals. http://on.wsj.com/2bMfbsT

- As Spotify AB gears up for a potential initial public offering next year, the music-streaming service is missing one key component in its pitch to investors: rights to play the music in years to come. http://on.wsj.com/2bLUkoL

- Gillette, the largest seller of shavers, filed a lawsuit against Edgewell Personal Care Co, maker of Schick brand razors and Edge shave gels, alleging patent infringement and saying its closest competitor made misleading claims against the Procter & Gamble Co unit. http://on.wsj.com/2bcMJUo

- Anbang Insurance Group plans an initial public offering of its life-insurance unit, a move that could increase disclosure at the opaque Chinese insurer that made an aborted $14 billion bid for Starwood Hotels & Resorts Worldwide Inc this year. http://on.wsj.com/2bEO1Gc

- Postal Savings Bank of China, the world's biggest initial public offering planned this year at more than $7 billion, is setting sail with a $2 billion backing from another Chinese state firm. http://on.wsj.com/2buIAZY


FT

Four of the world's biggest banks are together developing a new form of digital cash that they see as the future industry standard to clear and settle financial trades over blockchain, the technology underpinning bitcoin.

The Federal Bureau of Investigation is investigating cyber breaches targeting reporters at the New York Times by Russian hackers, a person familiar with the matter told the Financial Times.

American International Group Inc is in early talks to sell Lloyd's of London Ltd's operations in Bermuda, as it seeks to meet a pledge to streamline its sprawling operations and return $25 billion of capital to shareholders over the next two years.


NYT

- The New York Times' Moscow bureau was the target of an attempted cyber attack this month. But so far, there is no evidence that the hackers, believed to be Russian, were successful. http://nyti.ms/2bENQKS

- A federal court will hear arguments Wednesday in a suit to stop the Dakota Access pipeline, which the Standing Rock Sioux tribe says threatens its water supplies and sacred lands. The tribe has sued to block the pipeline and plans to ask a judge in Washington to effectively halt construction. http://nyti.ms/2bENQKK

- Mobileye, a key supplier of vision-based sensing systems, and Delphi, a provider of automotive safety systems, said they plan to begin testing a jointly developed turn-key system for self-driving cars early next year. http://nyti.ms/2bENYdc

- Federal regulators on Tuesday delivered the latest blow to a giant private equity firm, announcing an enforcement action against affiliates of Apollo Global Management for an array of securities law violations. http://nyti.ms/2bEOrMq


Britain

The Times

Brewer SABMiller Plc has won the backing of the High Court in London to hold two polls among its shareholders over the 79 billion pound ($104.21 billion) takeover offer from Anheuser Busch InBev SA. http://bit.ly/2bEi6FJ

UK employers are adopting a "business as usual" approach to hiring and investment since the Brexit referendum, despite confidence falling over the past three months, a report from the Recruitment & Employment Confederation says. http://bit.ly/2bEiFzv

The Guardian

Britain appears to be bouncing back from the post-Brexit panic in better shape than expected, after a string of indicators showed growth across the manufacturing sector, the building industry and in consumer spending. http://bit.ly/2bEiyDJ

Local authority pension funds are planning to back a shareholder resolution calling for an independent review of Sports Direct International Plc's treatment of employees. The retail group will hold its annual general meeting on Sept. 7 in Shirebrook, Derbyshire, where shareholders will vote on a trade union-backed plan to commission an investigation into working practices that will report back within six months. http://bit.ly/2bEhX52

The Telegraph

Geert Bourgeois, the minister-president of Flanders, has proposed a radical North Sea Union linking Britain to a cluster of regional states to cushion the Brexit shock, a sign that European leaders are starting to look for creative ways to heal the referendum rift. "More and more people now agree that there has to be a 'soft Brexit," he told the Daily Telegraph. http://bit.ly/2bEjF6l

Hopes the steel crisis which has cost thousands of UK jobs might be easing have been dashed by new production data for the global industry. Worldwide production of steel rose 1.4 percent year-on-year in July - the first increase since January 2015 - but output from Britain's embattled steel sector plunged, highlighting the continuing pressure it is under. http://bit.ly/2bEk4FX

Sky News

Lloyds Banking Group Plc Chief Executive Antonio Horta-Osorio will circulate a memo to the bank's 75,000 employees on Wednesday in which he will express "deep regret" for any embarrassment that an alleged extramarital affair had caused to the company reputation, Sky News has learnt. http://bit.ly/2bEgcEW

Workers at Southern Railway are going to stage a 48-hour walkout next month in the long-running row over train guards. The Rail, Maritime and Transport union has announced its members will walk out on Sept. 7 and 8. http://bit.ly/2bEgkEz

The Independent

Former BHS boss Dominic Chapell has been banned from driving for six months for speeding. The 49-year-old was driving a green Range Rover on Churchill Way, Andover, when police clocked him driving at an average speed of 63.9 miles (103 km) per hour in a 40 mph zone on April 6. http://ind.pn/2bEgTyj

http://www.zerohedge.com/news/2016-08-24/frontrunning-august-24
 

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#25
Global Stocks Decline Along With The Dollar, As Jackson Hole Begins


by Tyler Durden
Aug 25, 2016 6:44 AM

Global stocks declined broadly, led by European equities which fell for the first time this week, suffering their biggest fall in three weeks, while currency markets continued their subdued tone even as the recent 4-day rally in the USD appears to have topped out, as investors took to sidelines ahead of the Jackson Hole meeting which begins tonight. Japanese and Chinese stocks had suffered modest drops in Asia. S&P 500 Index futures slipped 0.2%, continuing yesterday's modest selloff.

Stubbornly low oil prices and warnings about steel demand kept the pressure on miners, while pharma stocks were also hit with traders citing social media comments from U.S. presidential candidate Hilary Clinton chastising EpiPen price hikes

A rally that’s driven global equities to their highest level in a year has petered out as the prospect of higher U.S. rates risks thwarting efforts by other central banks to stimulate growth by cutting borrowing costs. While German business confidence dropped to the lowest level in six months in August, a U.S. report on Thursday will probably show a pickup in durable goods orders.

Once again, all attention remains focused on the Jackson Hole symposium which begins tonight with a speech by the Kansas Fed's George. "There is renewed caution ahead of Yellen’s appearance at Jackson Hole tomorrow,” said Michael Ingram, a market strategist at BGC Partners in London. “It won’t take a great deal for sentiment to turn from glass half full to glass half empty." Michael Hewson of CMC Markets said that "there is basically just a bit of risk aversion ahead of Jackson Hole. I think expectations are way too high, though, I don't think Yellen sets as much importance on Jackson Hole as Ben Bernanke did."



Equity markets retreated in Europe after the August Germany IFO data fell, printing weaker than survey estimates, which called for increases; the drop was broad-based, across business climate, current assessment and expectations components. "Business confidence in Germany has clearly worsened," Ifo head Clemens Fuest said in a statement. "The German economy has fallen into a summer slump."

Iron ore fell on the prospect of shrinking steel production in China and crude oil traded near a one-week low. The Bloomberg Dollar Spot Index snapped a four-day winning streak as investors await comments by Federal Reserve Chair Janet Yellen at a symposium in Jackson Hole, Wyoming, on Friday.

In Asian equities, Japan's Nikkei ended down 0.3 percent following on from losses on Wall Street overnight. Chinese stocks fell 1 percent to extend their slide this week as investors took profit on recent red hot property shares which dropped 2 percent. Banks stumbled too ahead of earnings and a crackdown on some lending practices. "The whole (property) sector had surged more than 20% at one point this month, and falls in share prices this morning were purely a result of investors' trading strategy as they want to lock in profits," said Joe Qiao, a Shanghai-based analyst at Xiangcai Securities.

Europe's Stoxx 600 slid 0.8% in early trading. Glencore Plc and Anglo American Plc led a gauge of miners to the worst performance on the equity gauge as iron ore retreated. Total SA dragged energy producers lower as oil held near its lowest close in a week. Jimmy Choo Plc jumped 5.3 percent after the maker of luxury shoes posted higher first-half revenue and earnings and said it remains optimistic on this year’s prospects. CRH Plc rose 2.6 percent after the Irish construction company posted higher-than-expected first-half sales and profit.

S&P 500 Index futures slipped 0.2%, after a late selloff in drugmakers helped drag U.S. equities down 0.5 percent on Wednesday. HP Inc. dropped 6.7 percent in early New York trading after the seller of personal computers and printers forecast fiscal fourth-quarter profit that may fall short of analysts’ estimates.

West Texas Intermediate crude rose 0.3% to $46.89 a barrel on the back of the dollar's modest decline. It dropped 2.8% in the last session as data showed U.S. inventories unexpectedly rose last week.

2Y Treasuries were little changed with their yield at a two-month high of 0.76%. The securities are the cheapest they’ve been relative to 30-year notes since the start of 2008 following a run of hawkish comments from Fed officials including Vice Chairman Stanley Fischer and the heads of the New York and San Francisco branches. The rate on 10-year Treasuries fell one basis point to 1.55%. Fed fund futures indicate a 54 percent chance of a U.S. interest-rate hike this year, up from 36 percent at the start of August. The yen was little changed at 100.37 per dollar and South Korea’s won gained 0.6 percent.

* * *

Market Snapshot
  • S&P 500 futures down less than 0.2% to 2171
  • Stoxx 600 down 0.6% to 343
  • FTSE 100 down 0.2% to 6819
  • DAX down 0.6% to 10556
  • German 10Yr yield up less than 1bp to -0.08%
  • Italian 10Yr yield up 2bps to 1.14%
  • Spanish 10Yr yield up less than 1bp to 0.94%
  • S&P GSCI Index up 0.2% to 362.3
  • MSCI Asia Pacific up 0.1% to 139
  • Nikkei 225 down 0.2% to 16556
  • Hang Seng up less than 0.1% to 22827
  • Shanghai Composite down 0.6% to 3068
  • S&P/ASX 200 down 0.4% to 5542
  • U.S. 10-yr yield down less than 1bp to 1.55%
  • Dollar Index down 0.19% to 94.61
  • WTI Crude futures up 0.6% to $47.04
  • Brent Futures up 0.5% to $49.29
  • Gold spot up less than 0.1% to $1,325
  • Silver spot up 0.5% to $18.64
Global Headline News
  • Apple’s Cook Reaped $373m in Stock in Five Years as CEO: He met his performance goal of beating two-thirds of S&P 500. About half of Cook’s original grant has vested so far
  • Nordea Plans More Synthetic Swaps After Doing $9.5b Deal: Scandinavia’s biggest bank says it’s planning to do more deals to remove risk from its balance sheet through synthetic swaps after completing the region’s first such transaction.
  • Shanghai Said to Plan More Curbs to Cool Home, Land Prices: City to hold meetings to discuss stepped-up cooling measures
  • Mobius Says Helicopter Money Will Be Japan’s Next Big Experiment: Templeton investment guru sees BOJ acting after more yen gains
  • High-Speed Trader IMC Under China Stock-Index Futures Probe: Dutch firm is in discussions with regulator, says spokesman
  • European Health Stocks Fall on Negative U.S. Drug Price Comments: SXDP falls as much as 2.3%, the most since June 24, with all but two members declining.
  • As Welspun Awaits Wal-Mart Review, Investors Brace for Worst: Target cuts ties to supplier over cotton sheet product claims
  • Alipay Owner Said to Plan Hong Kong IPO in 1H 2017: Ant Financial’s Shanghai listing said to face hurdles
Looking at regional markets, Asian stocks traded in a choppy fashion with participants cautious ahead of the Jackson Hole symposium and following the weak lead from Wall St. in which commodities were pressured and gold shed USD 13/oz. The downbeat tone saw Nikkei 225 (-0.3%) and ASX 200 (-0.4%) open lower, with weakness in energy adding to the glum after WTI fell below USD 47/bbl in the wake of an unexpected build in DoE Inventories, however markets then recovered from their lows amid widespread indecisiveness. Chinese markets were also subdued with the Shanghai Comp (-0.6%) underperforming after dismal earnings from large industry names including PetroChina, CNOOC and Citic Securities, while the Hang Seng (0.0%) was resilient and recovered from early losses to return flat. 10yr JGBs were marginally higher amid the cautiousness seen across stocks, while at today's enhanced liquidity auction for 10yr, 20yr and 30yr attracted a greater number of bids vs. the prior month.
Japanese PPI (Jul) Y/Y 0.40% vs. Exp. 0.10% (Prey. 0.20%); highest reading in 10 months. PBoC injected CNY 140bIn in 7-day reverse repos and CNY 80bIn in 14-day reverse repos; which is the 2nd consecutive day the PBoC utilised 14-day reverse repos after a 6-month halt. PBoC set CNY mid-point at 6.6602 (Prey. 6.6420).

Top Asian News
  • Shanghai Said to Plan More Curbs to Cool Home, Land Prices: City to hold meetings to discuss stepped-up cooling measures
  • Mobius Says Helicopter Money Will Be Japan’s Next Big Experiment: Templeton investment guru sees BOJ acting after more yen gains
  • High-Speed Trader IMC Under China Stock-Index Futures Probe: Dutch firm is in discussions with regulator, says spokesman
  • Alipay Owner Said to Plan Hong Kong IPO in 1H 2017: Ant Financial’s Shanghai listing said to face hurdles
  • Galaxy’s Profit Beats Estimates as New Resorts Woo Tourists: Quarterly profit up 22% on Galaxy Macau expansion, Broadway
  • Monsanto Withdraws GMO Cotton Seed Application in India: Application pulled because of “regulatory uncertainties”
In Europe, equities are trading in the red as traders and analysts await the outcome from the Jackson Hole Symposium. Adding to the negative sentiment, German IFO data added to the subdued start to the session with equities trading lower (Euro Stoxx -1%) and the DAX (-1.3%) is the major laggard as the as stronger EUR weighs on the exporting names in the index. The worst performing sector this morning is healthcare, after Hilary Clinton stated that the price of Mylan's Epipen was too high and needed to be reviewed. In terms of fixed income markets, there has been not too much supply of Europe, while Bunds have failed to benefit from the downside in equities and continue to trade within a tight range.

Top European News
  • Nordea Plans More Synthetic Swaps After Doing $9.5b Deal: Scandinavia’s biggest bank says it’s planning to do more deals to remove risk from its balance sheet through synthetic swaps after completing the region’s first such transaction.
  • European Health Stocks Fall on Negative U.S. Drug Price Comments: SXDP falls as much as 2.3%, the most since June 24, with all but two members declining.
  • BMW, Daimler Downgraded; Peak Auto Demand in Sight, Redburn Says: Market has been anticipating peak auto demand for 18 months, growing evidence this peak is now visible, Redburn analysts write in note. BMW stock down 1.9%, Daimler down 1.8% at 10:04am in Frankfurt, vs Stoxx 600 down 1%
In FX, The Bloomberg Dollar Spot Index declined 0.1 percent, after climbing 0.8 percent over the last four trading sessions. “The market’s just trying to get through the whole event risk” of Yellen’s speech, said Andy Ji, a Singapore-based currency strategist at Commonwealth Bank of Australia. “But after that, what’s driving the market is back to the search for yield and it’s good for emerging markets in general." Emerging markets rebounded, with South Africa’s rand leading gain, advancing 0.7 percent. South Korea’s won strengthened 0.6 percent and Turkey’s lira rose 0.5 percent. Currencies tumbled on Wednesday as political and security concerns resurfaced in South Korea, South Africa and Turkey. A JPMorgan Chase & Co. gauge that measures the volatility of developing-nation currencies was the highest since July 6. The flare-ups eroded returns on carry trades, borrowing where interest rates are relatively low and investing the proceeds where they are higher. Turmoil in South Africa’s leadership sent the rand tumbling, cutting the return on this quarter’s best carry trade in half from 10 percent.

In commodities, West Texas Intermediate crude rose 0.3 percent to $46.89 a barrel. It
dropped 2.8 percent in the last session as data showed U.S. inventories
unexpectedly rose last week. Iron ore dropped 2.8 percent in Singapore after Li Xinchuang, a vice chairman at the China Iron & Steel Association, said falling steel production in China should weigh on prices for the raw material. The price is still up by about 40 percent for the year. Gold was little changed at $1.324.17 an ounce, after sliding 2.1 percent over the last four days.

On today's calendar, the main data of note is the flash durable and capital goods orders report for July. Market expectations are for a +3.4% mom increase in headline durable goods orders thanks to firmer aircraft orders, while core capex orders are expected to rise a more modest +0.2% mom. Elsewhere, the latest weekly initial jobless claims reading is due along with the remaining US flash PMI’s (services and composite) and finally the Kansas City Fed’s manufacturing survey.

* * *

Bulletin Headline Summary from RanSquawk and Bloomberg
  • The Jackson Hole Symposium remains firmly in focus, with European equities experiencing downside this morning with a softer than expected German IFO survey
  • FX markets remain in a tight range as August trade continues and European newsflow remains light
  • Looking ahead, German IFO, US weekly job report, Services PMI, Durable Goods and the Jackson Hole Symposium begins
  • Treasuries show upside bias in overnight trading amid global equity weakness, while crude oil still trades below $47/bbl; Treasury concludes this week’s auctions with sale of $28b 7Y notes, WI 1.400%.
  • German business sentiment unexpectedly declined the most in more than four years in August in a sign that companies took some time to weigh the consequences of Britain’s decision to quit the EU
  • China’s central bank watchers have something new to puzzle over. The PBOC sold 50 billion yuan ($7.5 billion) of 14-day reverse-repurchase agreements on Wednesday, its first offering of anything with a tenor other than seven days since February
  • The world’s biggest bond traders are getting fed up with Fedspeak as weeks of conflicting economic reports have whipsawed investors seeking to handicap the path of interest rates
  • Not everyone’s a fan, but Thomas Jordan has little choice when it comes to negative interest rates. Since his principal headache is the exchange rate, they’re the best available tool -- along with currency interventions -- for the SNB
  • Recent flare-ups in political risk in emerging markets weakened their currencies and helped send returns on carry trades tumbling from the highest in a year
  • Scandinavia’s biggest bank says it’s planning to do more deals to remove risk from its balance sheet through synthetic swaps after completing the region’s first such transaction
  • U.S. companies feeling pain in short-term debt markets are seeking relief by borrowing longer term, pushing already- high levels of corporate bond issuance toward fresh records


US Event Calendar
  • 8:30am: Durable Goods Orders, July P, est. 3.4% (prior -3.9%)
  • 8:30am: Initial Jobless Claims, Aug. 20, est. 265k (prior 262k)
  • 9:45am: Markit US Services PMI, Aug. P, est. 51.8 (prior 51.4)
  • 9:45am: Bloomberg Consumer Comfort, Aug. 21 (prior 43.6)
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural-gas storage change
  • 11am: Kansas City Fed Manufacturing Activity, Aug., est. -2 (prior -6)
  • 6:30pm: Fed’s George speaks at Jackson Hole conference
* * *

DB's Jim Reid concludes the overnight wrap

Markets continue to behave like they've eaten too much cake and need to lie in the corner and do nothing in order to recover. Inactivity rules. However a late day US sell-off after a notable fall in oil and also the wider commodity complex, along with the prospects of Yellen's speech tomorrow are at least giving us something to discuss.

Indeed the S&P 500 closed -0.52% yesterday which is actually the fourth biggest move up or down this month. Still, it marked the 33rd consecutive session that the index has failed to break +/- 1%. The excitement came in Oil again though where WTI tumbled -2.77% and back below $47/bbl. A surprise pick up in US crude inventories took the blame although it was actually a broadly weaker day all round in commodity markets. Gold and Silver slumped -1.00% and -1.41% respectively while it was a similar story for base metals with Aluminium (-1.38%), Copper (-1.66%) and Nickel (-2.63%) all sharply lower. It was hard to gauge what was driving that weakness although the USD did rebound after a couple of stagnant sessions which perhaps weighed on metals.

All in all though it was largely a day for single news stories rather than any broader macro themes. Healthcare names across the pond where under pressure following a tumble for Mylan shares (-5.45%). That came after Presidential candidate Hilary Clinton commented on the rising drug prices debate in Washington, referring specifically to the furor over EpiPen price increases. The Nasdaq BioTech index slumped -3.37% as a result while the broader Nasdaq composite index was -0.81%. Another interesting stat is that the Nasdaq index has now gone 41 consecutive sessions without declining for two consecutive days. That is the longest such streak since 1978.

In contrast to markets across the pond, it was actually a broadly stronger session in Europe with the Stoxx 600 closing +0.39% as financials once again led the charge (Stoxx 600 Banks +2.00%). The Bank index is quietly back to within just 7% of its pre-Brexit level having at one stage been down as much as -23%. The one caveat to the stronger performance in Europe yesterday was the UK where the FTSE 100 fell -0.48% after Glencore fell -3.06% following its latest earnings report.

Staying with the U.K., yesterday our economics team put out a fascinating report yesterday boldly predicting a UK Industrial Revolution 2.0. The premise for the report is that Brexit is a structural shock. Monetary policy is unsuitable to deal with this and Theresa May’s government is already laying the organisational groundwork for a more suitable response – an industrial strategy. Governments here and abroad have tried this before. What’s different this time? There is a better opportunity for the UK today. There is a confluence of events that should increase the success of an industrial strategy. First, a clear, comprehensive and most importantly committed plan should help counterbalance Brexit-related uncertainties. Second, sterling has depreciated and will fall further. Production costs are already low in the UK. A good industrial policy can cement these benefits. Third, public sector funding costs are low and QE has re-started. We should probably view the Chancellor’s “reset” of UK fiscal policy through the lens of the industrial strategy.

In our opinion the UK does have a unique opportunity to reset policy that is not necessarily as easy for other countries. Brexit provides the perfect excuse to change course. It could all still go wrong but there is an opportunity. Back to yesterday, the other interesting news story came in emerging markets and specifically in South Africa where Finance Minister Pravin Gordhan reportedly refused to heed to police over allegations regarding his actions when he ran the national tax agency. After falling 3% on Tuesday after Gordhan had been issued with a warning statement, the South African Rand was down another 1% yesterday and is at the lowest level since July 28th.

Elsewhere Treasury markets were a touch weaker but continue to trade in a super tight range. Apologies to our readers for the absence of the chart in the PDF as promised yesterday. We've added it today and as a reminder it shows the monthly 10y Treasury range which is currently at its lowest for a decade. We'll see if Yellen changes this tomorrow.



Looking at markets this morning that weaker tone on Wall Street last night is generally weighing on the Asia session, while Oil is also holding that decline from yesterday. The Nikkei (-0.25%), Shanghai Comp (-0.86%), ASX (-0.08%) and Kospi (-0.23%) are all in the red, while the Hang Seng is little changed. FX markets are generally lacking any obvious direction while sovereign bond markets are flat.

With regards to the data flow yesterday, in the US existing home sales were weaker than expected in July (-3.2% mom vs. -1.1% expected) resulting in a drop in the annualized rate to 5.39m from 5.57m. It was actually the first monthly drop in sales since February with the blame seemingly being put on a lack of inventory. The other data out in the US yesterday was the FHFA house price index for June which rose +0.2% mom.

In Europe the sole release came in Germany where we got confirmation that Q2 GDP grew +0.4% qoq and +1.8% yoy. Our Europe economists noted however that the details were weaker than the solid headline suggests. Net exports compensated for a small decline of final domestic demand, but only due to tumbling imports. Investment growth was weaker than expected. They believe that payback to strong Q2 net exports will weigh on Q3 GDP, while domestic demand should pick up again. Still, they have toned down their outlook for the next couple of quarters taking account of muted external demand weighing on sentiment, weaker than expected wage dynamics lifting real income gains and a slower than expected refugee influx.

In terms of the day ahead, the early data this morning will come from France where the August confidence indicators are due out. Shortly following that Germany will release its August IFO survey where a modest improvement in the headline business climate reading is expected which would be consistent with what the PMI’s largely showed. Later this morning the UK will then release the CBI Distributive Trades Survey which will present another post-Brexit indicator. This afternoon in the US the main data of note is the flash durable and capital goods orders report for July. Market expectations are for a +3.4% mom increase in headline durable goods orders thanks to firmer aircraft orders, while core capex orders are expected to rise a more modest +0.2% mom. Elsewhere, the latest weekly initial jobless claims reading is due along with the remaining US flash PMI’s (services and composite) and finally the Kansas City Fed’s manufacturing survey.

http://www.zerohedge.com/news/2016-08-25/global-stocks-decline-along-dollar-jackson-hole-begins
 

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#26
Frontrunning: August 25


by Tyler Durden
Aug 25, 2016 7:50 AM
  • Stock futures lower as countdown to Yellen speech begins (Reuters)
  • Italy quake death toll nears 250 as rescuers search demolished towns (Reuters)
  • Central bankers eye public spending to plug $1 trillion investment gap (Reuters)
  • Chelsea Clinton Plans to Stay on Board of Family Foundation (WSJ)
  • Bond Traders Are Desperate for Direction From Yellen in Jackson Hole (BBG)
  • China’s Central Bank Moves to Clamp Down on Speculation (WSJ)
  • Iran vessels make 'high speed intercept' of U.S. ship: U.S. official (Reuters)
  • How to Stay Rich in Europe: Inherit Money for 700 Years (BBG)
  • Companies made deals that could run afoul of U.S. whistleblower rules (Reuters)
  • Tiffany Sales Miss Estimates as Global Uncertainty Hurts Demand (BBG)
  • Chicago's detective force dwindles as murder rate soars (Reuters)
  • SEC Seeks Review of Treasury Market Trading Rules (WSJ)
  • Uber to let Londoners book journeys weeks in advance (Reuters)
  • Boeing Dreamliner Engine Issue Prompts ANA to Check Entire Fleet (BBG)
  • German military mulls options if planes withdrawn from Turkish base (Reuters)
  • A $67,000 Home Robbery Exposes $500 Billion Problem in Argentina (BBG)
  • Look Who’s Coming to Private Equity’s Defense on Fee Secrecy (BBG)


Overnight Media Digest

WSJ

- The Clinton Foundation is considering exceptions to its plan to stop accepting corporate and foreign donations and reduce family involvement as a way to insulate Hillary Clinton from potential conflicts of interest if elected president. http://on.wsj.com/2bPfl1u

- The Dow Jones Industrial Average's recent rise has lifted many stocks in Berkshire Hathaway portfolio, but the rally in Dow Chemical has put the chemical firm's dividends to Warren Buffett's company at risk. http://on.wsj.com/2bOgciU

- A 6.2-magnitude earthquake struck central Italy early Wednesday, flattening towns and killing at least 159 people, with dozens missing and many trapped beneath the rubble of buildings that collapsed while they slept. http://on.wsj.com/2bODQfc

- Mylan NV became the latest pharmaceutical company to face popular outrage about higher drug costs, as attacks mounted Wednesday on the company's substantial price increases for the EpiPen emergency allergy treatment. http://on.wsj.com/2bOBkWC

- Hyundai Motor reached a tentative wage deal with its unions, which puts an end to damaging strikes and paves the way for a similar deal at its Kia affiliate. http://on.wsj.com/2bOZvUW

- HP Inc revenue and earnings shrank in its most recent quarter, but the company showed signs of stabilizing its declining personal-computer business, its largest revenue generator. The company said its personal-systems revenue was flat in the latest quarter after five quarters of declines, with unit PC sales up 4 percent. http://on.wsj.com/2bPVyAr

- China's central bank has made a subtle change to the way it supplies the financial system with cash, a move that market watchers see as an attempt to cool investments in assets such as bonds, which have ballooned on an influx of cheap, short-term money. http://on.wsj.com/2bGS57v

- Some of the world's largest energy companies are saddled with their highest debt levels ever as they struggle with low crude prices, raising worries about their ability to pay dividends and find new barrels. Exxon Mobil Corp, Royal Dutch Shell Plc, BP Plc and Chevron Corp hold a combined net debt of $184 billion - more than double their debt levels in 2014. http://on.wsj.com/2bEbQg6

FT

The U.S. Treasury department said on Wednesday that the European Commission was becoming a "supranational tax authority" that threatened international agreements on tax reform.

Nigel Farage intends to address a Donald Trump rally in Mississippi on Wednesday to push his message of how the "anti-establishment beat the establishment" to bring about Britain's impending departure from the European Union - and draw parallels with the Republican presidential candidate's insurgent campaign.

Swedish bank Handelsbanken said on Wednesday it planned to sell its 29.4 million shares in its parent Industrivarden to institutional investors.

Credit Suisse Group AG, UBS Group AG, Swisscomm AG have joined other local companies to invest 3.8 million Swiss francs ($3.9 million) to launch Kickstart, an "accelerator" that will help develop 30 start-ups from 19 countries in areas including financial technology, robotics, and drones.

NYT

- Detailed plans for stealth submarines being built by a French military manufacturer for the Indian navy have been leaked, raising concerns over the company's digital security just months after it signed a multi-billion dollar deal to build submarines for Australia. The data leak leaves France and India scrambling to assess the damage. http://nyti.ms/2bP1gSd

- Mylan's price hikes for the allergy treatment device - EpiPen - highlight a common tactic in the industry: raising prices just before a generic competitor reaches the market. http://nyti.ms/2bP1hpf

- The Williams Companies, which recently lost a court battle to preserve a takeover by another pipeline operator, is facing a new fight. This time, it is from a former director who owns a big stake in the company and has an unconventional plan to overhaul the entire board. http://nyti.ms/2bP2cWO

- The ride-hailing service Uber told drivers in four large American cities on Wednesday that it had teamed up with the robo-adviser Betterment to offer individual retirement accounts. http://nyti.ms/2bP131b

Canada


Britain

The Times

** An employment agency that supplies warehouse workers to Sports Direct has put itself on a collision course with Members of Parliament after declining to amend evidence it gave at a parliamentary hearing. bit.ly/2bB4sQz

** The pound's sharp fall after the Brexit vote is boosting results at WPP Plc but the world's biggest advertising group said that it was having to "grind out" growth when slow global expansion was making clients fearful of spending. bit.ly/2bB4nwc

The Guardian

** The United States has warned the European Commission that it will consider retaliating if Brussels goes ahead with plans to demand billions of dollars in unpaid taxes from Apple Inc and other U.S. multinational companies. bit.ly/2bB4vvr

** Sports Direct will open its doors to the public on the day of the retailer's annual general meeting, giving people an opportunity to speak to board directors following months of criticism over the treatment of workers. bit.ly/2bB4F6l

The Telegraph

** LoopUp, a Shoreditch-based start-up that provides software for conference calls, has been valued at 40 million pounds ($52.94 million) in the first technology stock market float since the UK voted to leave the European Union. bit.ly/2bB5ImC

** Global youth unemployment is on course to rise for the first time in three years in 2016 as commodity exporters grapple with recession and advanced economies stagnate, according to the United Nations. bit.ly/2bHb82U

Sky News

** Lloyds Banking Group Plc boss Antonio Horta-Osorio has broken his silence over allegations about his private life in a memo to staff expressing his deep regret for any "damage done to the group's reputation". bit.ly/2bB62St

** Britain's biggest supermarket Tesco Plc is planning to offer a new same day "click and collect" service on grocery orders at nearly 300 stores nationwide. bit.ly/2bB5LPu

The Independent

** Investors pulled 5.7 billion pounds ($7.54 billion) out of UK-based stock market funds, preferring to put their cash into safe havens due to concerns over Britain's vote to leave the EU. ind.pn/2bB7VOI

http://www.zerohedge.com/news/2016-08-25/frontrunning-august-25
 

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#29
Gold and Silver Market Morning: Aug-25-2016 -- Gold and silver prices fall to support!
By: Julian D. W. Phillips, Gold/Silver Forecaster - Global Watch
Shanghai lifted prices slightly in both the morning and afternoon fixes. But they did allow the U.S. prices to guide them. While Shanghai can lead gold prices we feel that at least until October 1st they will take a low profile by remaining roughly in synch with western gold markets. Perhaps the fall in gold prices was a dealer-led pull back ahead of Janet Yellen’s Friday speech. This discounts an announcement that a rate hike will happen very soon. If she does not imply that, then we see the gold market moving higher.
 

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#31
Hump Day With Bix & "V"
ROGUE MONEY


Streamed live 2 hours ago
Bix and V run down the news of the day. Follow Bix on RoadToRootA.com and V over at RogueMoney.net.
 

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#33

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#34
With Janet Yellen Just Hours Away, Directionless Markets Wait For A Signal


by Tyler Durden
Aug 26, 2016 6:42 AM

With Yellen's much anticipated speech just hours away, the already comatose market flatlined overnight in another directionless session, with European stocks and US equity futures practically unchanged, while Asian shares to a two-week low, led by Japan, as investors showed a reluctance to take on risk before Yellen’s speech. The dollar was a tad lower, along with oil which continues to move on every single OPEC-meeting headline, and is set for its first weekly drop in a month.

The MSCI All-Country World index was down 0.1% in early trading, after slipping to its lowest level since Aug. 9, while the European STOXX 600 fell 0.2%. Cable extended a second weekly advance amid an ongoing short squeeze and optimism that the Brexit fallout may not be as severe as the doomer and gloomers had warned, after a report showed a pickup in U.K. consumer confidence and GDP of 2.2% which came in line.

That said, with volatility at generational lows, and "pent up" eagerness to break out on deck, stocks may just be waiting for the Yellen signal to break out in any direction.

As even NY hotdog vendors know by now, Yellen speaks Friday where she is expected to lay out the near-term future Fed policy, after comments by Fed officials in the past week signaled the economy is strong enough to withstand an increase in borrowing costs. Fed funds futures indicated a 57 percent chance of a rate hike this year even as evidence of uneven global growth casts doubt over the central bank’s willingness to tighten policy amid monetary easing in Asia and Europe. The probability of a September rate hike has rien to 32%, up from 22% a week ago, and the highest since Brexit.



Still, there is little hope Yellen will do or say much to clear up the prevailing confusion. Here are some last minute takes by financial analysts:

“Don’t expect Yellen to give a clear guidance in Jackson Hole,” said Ulrich Leuchtmann, the Frankfurt-based head of currency strategy at Commerzbank AG. “The Fed is data dependent at this point. Yellen’s topic is the ‘Fed’s toolkit’ and in talking about this she has to speak about expansionary instruments as well. She may say she can act in all directions. There is risk of market misinterpretation."

"Definitely in focus today is the Jackson Hole meeting and Ms. Yellen’s speech,” said Michael Kapler, a portfolio manager at Mittelbrandenburgische Sparkasse in Potsdam, Germany. “Markets have been very, very quiet over the last few days. Most market participants are a little bit uncertain about the policy of the Fed because you’ve seen that over the last couple months they’ve been talking about interest rate hikes and then stepping back."

"It’s a wait-and-see holding pattern now," Chris Green, of First NZ Capital Group told BBG/ “In some ways, markets may be disappointed if they are looking for clarity for the rate decision. The usual modus operandi would be not to comment explicitly.”

"Markets are a bit worried about the upcoming comments from Yellen, which is understandable given how much of the market strength is due to central bank action," said Philippe Gijsels, head of research at BNP Paribas Fortis in Brussels. "The fact that some of her disciples have indicated that it may be time to raise rates again has not done much in terms of calming sentiment. She will probably try to strike a balance between an improving U.S. economy and risks abroad."

Chris Scicluna, head of economic research at Daiwa Capital Markets, took a similar line. "Yellen won't be able to ignore the current debate but she can't make a commitment either because there's a range of views on the FOMC," he said.

So with the main show looming, the dollar edged down and global shares slipped to a two-week low on Friday.

Europe's Stoxx 600 Index slipped 0.1%, paring its weekly advance to 0.5%. The gauge has been trading in a tight range for most of the month, struggling to find a direction after a rebound of as much as 12 percent following the aftermath of the U.K. secession vote. French media company Vivendi SA fell 4.2 percent after reporting quarterly earnings that missed analyst estimates. Gemalto NV climbed 5.3 percent as the software firm posted an increase in net profit and said it is interested in buying Safran SA’s Morpho. Rio Tinto Group and Glencore Plc led a gauge of commodity producers to the best performance of the 19 industry groups on the Stoxx 600 as metals prices advanced.

In the US, S&P Index futures were little changed after U.S. equities slipped 0.1 percent on Thursday. The MSCI Emerging Markets Index has dropped 1.2 percent since Aug. 19, halting six weeks of gains, the longest winning streak in more than three years.

As well as Yellen, investors will also look to data today, including reports on wholesale inventories and consumer sentiment, for indications of the health of the world’s biggest economy.

Market Snapshot
  • S&P 500 futures up less than 0.1% to 2174
  • Stoxx 600 down less than 0.1% to 342
  • FTSE 100 down less than 0.1% to 6814
  • DAX down 0.2% to 10510
  • German 10Yr yield down less than 1bp to -0.08%
  • Italian 10Yr yield up less than 1bp to 1.13%
  • Spanish 10Yr yield up 1bp to 0.93%
  • S&P GSCI Index down 0.4% to 361.8
  • MSCI Asia Pacific down 0.5% to 138
  • Nikkei 225 down 1.2% to 16361
  • Hang Seng up 0.4% to 22910
  • Shanghai Composite up less than 0.1% to 3070
  • S&P/ASX 200 down 0.5% to 5515
  • US 10-yr yield down 1bp to 1.56%
  • Dollar Index down 0.14% to 94.64
  • WTI Crude futures down 0.5% to $47.11
  • Brent Futures down 0.9% to $49.24
  • Gold spot up 0.2% to $1,325
  • Silver spot up 0.6% to $18.66
Top Global News
  • Icahn Said to Have Discussed Selling Herbalife Stake, WSJ Says: Carl Icahn has recently discussed selling his stake in Herbalife to a group incl. William Ackman, WSJ says, citing unidentified people familiar
  • Blackstone Unleashes Cash Hoard in Texas Shale Oil Land Grab: Permian attracting most investment during crude slump. Private equity giant commits $1.5b in two deals
  • VW Dealer Accord Said to Add $1.2b to Scandal Costs: Carmaker will buy back vehicles under same terms as consumers. VW given new deadline by judge for devising plan to fix cars
  • CEO of Denmark’s $120b ATP Pension Fund Steps Down; Carsten Stendevad plans to move back to U.S.
  • BOJ’s Impact Waning Even Before Review, Shadow Gauge Shows: BOJ easing has not fed into real economy, says Bank of America
  • Alphabet’s Nest Wants to Build a ‘Citizen-Fueled’ Power Plant: Nest targets 50,000 SoCalEd utility customers for thermostats. Program part of effort to address potential energy shortages
  • Citic’s Profit Plunges on ‘Lackluster’ Share Market, Yuan: 1H net income falls 46% y/y
* * *

Looking at regional markets, Asia stocks traded mixed following the weak lead from Wall St. as participants remained tentative ahead of the Jackson Hole symposium. Nikkei 225 (-1.2%) underperformed with the index briefly declining below 16,400 on a firmer JPY and CPI data which some feel dampens the likelyhood of further BoJ action next month. Financials dragged the ASX 200 (-0.5%) lower, although a mild rebound in commodities has stemmed losses. Chinese markets bucked the downbeat trend with Hang Seng (+0.5%) buoyed by reports the HK-Shenzhen connect regulations will be announced today, while the Shanghai Comp (+0.1%) was underpinned by better than expected earnings including Big-4 China Construction Bank and the largest weekly interbank liquidity injection in nearly 3-months. 10yr JGBs tracked T-notes lower despite the cautious tone in Japanese stocks, while the BoJ's buying operations were also for a relatively reserved amount. China's NDRC said there is plenty of room for China to guide interest rates lower. PBoC injected CNY 95b1n via 7-day reverse repos and CNY 50bIn in 14-day reverse repo for a net injection of 310bIn vs. Prey. net injection CNY 15.5bIn; which represents the largest weekly net injection in nearly 3-months

Top Asian News
  • Hong Kong Regulator Wants a Tighter Grip on IPOs in Blow to HKEx: Plan would see balance of power over IPOs shift to city’s SFC
  • BOJ’s Impact Waning Even Before Review, Shadow Gauge Shows: BOJ easing has not fed into real economy, says Bank of America
  • China’s Postal Savings Bank Said to Win $8b IPO Approval: Postal Savings Bank has more outlets than any listed lender
  • World’s Biggest Pension Fund Loses $52b as Stocks Slump: Japan’s GPIF wipes out all gains since shift to shares
  • Hong Kong Tribunal Finds Citron’s Left Culpable of Misconduct: Andrew Left claimed Evergrande Real Estate was insolvent
  • Citic’s Profit Plunges on ‘Lackluster’ Share Market, Yuan: 1H net income falls 46% y/y
  • Top Lotte Lieutenant Found Dead Amid Probe Into Korean Group: Prosecutors probing allegations of slush funds, embezzlement
  • Duterte Courts Risk in Deadly Drug War That Echoes Thai Crusade: Popular for now, Philippine leader could suffer as list of enemies grows
In Europe, similar to the lead up to Nonfarm Payrolls, markets are tentative ahead Fed Yellen's speech. European equities are softer this morning (DAX -0.3%) as the markets remain within their tight ranges. The FTSE 100 is the best performer only down 0.1 % after energy sector names benefit from a slight early morning uptick in oil prices. Also of note, GDP readings from France and the UK both came inline with expectation and markets subsequently failed to react. In fixed income markets, supply from Europe remains light today with no real notable price action in the sector.

Top European News
  • AB InBev Said to Plan 5,500 Job Cuts After SABMiller Deal: Brewer to eliminate 3% of combined workforce over three years. Job cuts will form part of $1.4b cost savings from deal
  • VW Dealer Accord Said to Add $1.2b to Scandal Costs: Carmaker will buy back vehicles under same terms as consumers. VW given new deadline by judge for devising plan to fix cars
  • Vivendi Profit Declines as France Pay-TV Unit Remains Pressured; Earnings missed analyst ests. as Canal Plus lost money and subscribers in France
  • CEO of Denmark’s $120b ATP Pension Fund Steps Down; Carsten Stendevad plans to move back to U.S.
In FX, the Bloomberg Dollar Spot Index slipped 0.1% in early trade, leaving it up 0.2 percent for the week. Dallas Fed chief Robert Kaplan said Thursday the pace of interest-rate increases in the U.S. should be “patient and gradual” to limit impact on the dollar, while his Kansas City counterpart said it’s already time to move. Futures put the probability of a September rate hike at 32 percent, up from 22 percent a week ago. “The outcome of the Fed’s Sept. 21 meeting will be largely determined by the tone of Janet Yellen’s speech at Jackson Hole,” said Sean Keane, an Auckland-based analyst at Triple T Consulting and a former head of Asia-Pacific rates trading at Credit Suisse Group AG. If she continues the confident tone of some of her colleagues, “market expectations for a September rate increase will likely move up closer to 60 percent to 70 percent,” he said. The pound rose 0.2 percent and was headed for a 1.1 percent weekly advance, after a report showed U.K. consumer confidence rose the most in more than three years this month as the shock from Britain’s decision to leave the European Union faded. That adds to data last week that showed the initial economic effect of the U.K.’s secession may not be as severe as some economists feared. The yen traded at 100.45 per dollar, set for a 0.2 percent weekly decline. Japanese inflation data on Friday showed a fifth straight month of consumer-price declines, underscoring the challenges facing the Bank of Japan as it uses unprecedented monetary stimulus to try and revive the economy and inflation.

In commodities, crude oil slipped 0.3% to $47.17 a barrel. Saudi Arabia’s energy minister said an output freeze would be positive for the market, ruling out a cut. Oil fell earlier this week after a government report showed that U.S. crude inventories unexpectedly rose. Gold advanced 0.3 percent, paring its biggest weekly decline in more than a month, having fallen this week as speculation built that the U.S. will boost interest rates this year.

Looking at the day ahead, the calendar will be dominated by Yellen at Jackson Hole. The second reading of Q2 GDP will also be important, as well the Core PCE data. The Advance Goods Trade Balance data for July will also be released along with wholesale inventories, while finally the last revision to the University of Michigan consumer sentiment in August is due. Over the weekend we’ll also get industrial profits data out of China.

* * *

Bulletin Headline Summary from RanSquawk and Bloomberg
  • Markets remain steady ahead of a slew of tier 1 US data points and Fed Chair Yellen's appearance at the Jackson Hole Symposium
  • Looking ahead, highlights include US GDP, US Trade Balance, U. of Michigan Sentiment and Fed Chair Yellen (Dove, Voter) speaks at the Jackson Hole Symposium at 1500BST/0900CDT
  • Treasuries show upside bias during overnight session before Fed Chair Yellen speaks at Jackson Hole Symposium at 10am; “the most active sector overnight was the U.S. bond market and that’s not saying much,” independent strategist Marty Mitchell said in note.
  • Fed Chair Janet Yellen probably won’t offer clear signals on the near-term policy outlook in her speech 10am Friday during annual Jackson Hole symposium, analysts say.
  • Fed fund futures pricing 50/50 chance of rate hike Dec. 2016; fully pricing next rate hike June 2017, implied rate 62.5bp, midpoint of 50-75bp target range
  • Federal Reserve Bank of Dallas President Robert Kaplan said the “jury is out” on whether the Bank of Japan’s negative rate policy is working, and monetary policy alone won’t fix the key problems Japan faces
  • Japan’s Government Pension Investment Fund posted a $52 billion loss last quarter as stocks tumbled and the yen surged, wiping out all investment gains since it overhauled its strategy by boosting shares and cutting bonds
  • Consumer prices in Japan fell for a fifth straight month, underscoring the central bank’s struggle to spur inflation to its 2 percent target
  • The man in charge of managing Sweden’s state debt signaled the Riksbank may soon be reaching the limits of its government bond purchase program amid signs that liquidity is suffering.
  • The Fed and other agencies are poised to issue a long- overdue report required by the law that lays out recommendations beyond the Volcker Rule to prevent financial firms from blowing up the economy, said two people with knowledge of the matter who asked not to be named before its release
  • The EU is overhauling the way supervisors set bank-specific capital levels for current and potential risks that aren’t covered by the minimum requirements in EU law
US Event Calendar
  • 8:30am: Advance Goods Trade Balance, July, est. -$63b (prior -$63.3b, revised -$64.5b)
  • 8:30am: GDP Annualized q/q, 2Q S, est. 1.1% (prior 1.2%)
  • 10am: U. of Mich. Sentiment, Aug. F, est. 90.8 (prior 90.4)
  • Fed’s Yellen to speak at Jackson Hole conference
  • 1pm: Baker Hughes rig count
DB's Jim Redid concludes the overnight wrap

Will Yellen shock today? Because the month has been so dull, perhaps markets are getting too excited by the prospects of a meaningful speech by Yellen today that will give us a lot more clues on immediate Fed policy. However be warned because as DB's George Saravelos pointed out yesterday, she has not traditionally used Jackson Hole as a vehicle to focus on policy guidance. Last year she didn't attend and the year before her speech had no real immediate policy focus. Will this year be any different? The title of the speech is ‘The Federal Reserve’s Monetary Policy Toolkit’ and scheduled for 3pm BST/10am EST. There is no Q&A which might also lessen the impact. After listening to Saravelos yesterday, this morning I had a quick think back as to whether even Bernanke used Jackson Hole as a policy shaping platform. From a quick scurry through the archives, perhaps the only time was when QE2 was hinted at in 2010. So markets have probably subconsciously elevated the importance of the symposium for FOMC clues ever since.

Even if Yellen does comment on near-term policy would she really want to pre-commit to an imminent hike before September's payroll? Probably not and therefore we'd expect her to be more 'data dependent' and more dovish in her comments than some of the recent Fed speakers who have been clearly itching to raise rates with less regard for the data.

It’s worth also noting that ECB President Draghi is skipping the Jackson Hole for a second successive year. There is however a potentially interesting panel discussion taking place on Saturday which will see the ECB’s Coeure and the BoJ’s Kuroda participate alongside the Governor of the Bank of Mexico. With high expectations for further BoJ action in September it’ll be interesting to see if Kuroda in particular is any more transparent.

The last 24 hours in markets have largely summed up what we’ve been put through for much of the past few weeks. US equities chopped and changed in a tiny range (0.42%) and eventually closed in the red (S&P 500 -0.14%). European equities were down a bit more (Stoxx 600 -0.84%) and were already weak heading into a disappointing Germany IFO survey (more on that shortly).

Credit markets were fairly unchanged and all this caution came despite Oil (WTI +1.20%) rebounding after Iranian news sources reported that Iran’s Oil Minister would attend an informal discussion with fellow OPEC members next month. There was no comment on the position that Iran would take at the meeting but the jawboning had another positive effect on the Oil price. Elsewhere Treasury yields edged slightly higher (10y +1.2bps to 1.574%) in part reflecting comments from Kaplan and George who lived up to their more hawkish reputation. The latter said that ‘when I look at where we are with the job market, when I look at inflation and our forecast for that, I think it’s time to move’. Kaplan said that ‘the case is strengthening’ for tightening soon. We go into today with a September hike now priced at 32% (from 22% this time last week) and December at 57% (from 51%).

Markets also seemingly chose to ignore what was much better than expected durable and capital goods orders data. Headline durable goods orders rose +4.4% in July (vs. +3.4% expected) while ex-transportation (+1.5% mom vs. +0.4% expected) also rose more than expected. Core capex orders (+1.6% mom vs. +0.2% expected) also beat and encouragingly have risen for two consecutive months for the first time since early 2015. Core shipments did fall slightly (-0.4% mom vs. +0.3% expected) although that was somewhat blamed on timings. Meanwhile, initial jobless claims held steady last week at 261k (down 1k) with the four-week average now at 264k. The services PMI declined 0.5pts this month to 50.9 which was disappointing relative to expectations (51.8 expected) and is actually the lowest reading since February. Finally the Kansas City Fed’s manufacturing survey rose 2pts to -4 (vs. -2 expected). The Atlanta Fed Q3 GDP forecast is now down to 3.4% (from 3.6%) reflecting Wednesday’s soft existing home sales data.

Speaking of data, also important today will be the first revision to Q2 GDP in the US, released just prior to Yellen’s speech at 1.30pm BST. Neither our US economists nor the market is expecting much change from the initial +1.2% qoq reading. What could be interesting however is what corporate profits show. As our US economists highlight corporate profits in the NIPA accounts have declined in four out of the last five quarters, an extremely rare occurrence outside recession. The weakness in the energy sector and the deleterious effects of a strong dollar have been well advertised however they highlight that domestic corporate profits (before tax with inventory valuation adjustment) excluding the energy sector and Federal Reserve Banks were still down -5.2% over the four quarters ending in Q1. The risk is that this eventually weighs on employment and wage growth, something Vice-Chair Fischer touched on last week. So it’s worth keeping an eye on those numbers.

Refreshing our screens it’s been another fairly mixed session in Asia this morning. While there are gains for the Hang Seng (+0.54%) and Shanghai Comp (+0.57%), the Nikkei (-0.97%), Kospi (-0.30%) and ASX (-0.17%) are all lower. The Yen is little changed but had been trading slightly stronger following a disappointing July inflation report in Japan. Headline CPI printed at -0.4% yoy as expected which was unchanged from June. The core excluding fresh food declined one-tenth to -0.5% yoy (vs. -0.4% expected) and the core-core fell two tenths to +0.3% yoy (vs. +0.4% expected). The figures were also weak on a seasonally-adjusted MoM basis. The data will only further increase the pressure on the BoJ to take action next month.

Moving on. The weaker Germany IFO survey which we highlighted earlier saw the headline business climate reading fall 2.1pts to 106.2 (vs. 108.5 expected) which is the lowest reading since February and also the biggest monthly decline since May 2012. Both the current assessment and expectations surveys tumbled 2pts. Aside from stable construction sentiment, weakness was fairly broad based across industries and will likely weigh on GDP estimates. France confidence indicators (particularly business and

manufacturing) were also a touch softer this month, however there was better news to come out of the UK where the CBI’s Distributive Trade Survey revealed a big pickup in retail sales volume to +9 from the post-Brexit -14 reading in July.

Staying with Europe, DB's Marco Stringa yesterday updated us on Spanish politics where next week Rajoy will try to break a nine-month-long political stalemate by attempting to win a confidence vote in parliament. The first vote, which requires an absolute majority, should take place on 30 or 31 August. If unsuccessful, a second vote, which requires a simple majority, should take place on 2 September. While the report is not optimistic of a sustainable stable political outcome immediately after September 2nd, the central case scenario is for a centre-right PP-led minority government being formed before the 1 November deadline. They also think some volatility could be seen in the near-term for Spanish assets, but that the ECB's buying program should ensure resilience.

Looking at the day ahead, this morning in Europe we’re kicking off with the latest Germany consumer confidence reading which could be interesting in light of yesterday’s IFO survey, while France consumer confidence and Q2 GDP follows. The ECB will release its latest money and credit aggregates data while the UK will also report its second reading for Q2 GDP (expected to stay unchanged at +0.6% qoq) along with the various growth components. As noted this afternoon will be dominated by Yellen at Jackson Hole. However the aforementioned second reading of Q2 GDP will also be important, as well the Core PCE data. The Advance Goods Trade Balance data for July will also be released along with wholesale inventories, while finally the last revision to the University of Michigan consumer sentiment in August is due. Over the weekend we’ll also get industrial profits data out of China.

http://www.zerohedge.com/news/2016-...-hours-away-directionless-markets-wait-signal
 

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#35
Frontrunning: August 26


by Tyler Durden
Aug 26, 2016 7:34 AM
  • Global equities set 2-week low before Yellen speech, dollar dips (BBG)
  • Lochte signs new endorsement deal, legal woes persist in Brazil (Reuters)
  • Blackstone Unleashes Cash Hoard in Texas Shale Oil Land Grab (BBG)
  • China to prosecute former statistics bureau chief for corruption (Reuters)
  • Turkey fires on U.S.-backed Kurdish militia in Syria offensive (Reuters)
  • U.S.-Backed Groups at Odds in Syria (WSJ)
  • EU Hopes Helping Workers Will Blunt Populism (WSJ)
  • Suicide truck bomb blamed on PKK kills 11 police in Turkey (Reuters)
  • Lotte vice chairman found dead amid probe; suicide suspected (Reuters)
  • Donald Trump’s Mixed Signals on Immigration Roil Campaign (WSJ)
  • Judge orders search of new Clinton emails for release by September 13 (Reuters)
  • Facebook ‘likes’ illustrate the personal differences between Republicans and Democrats (WSJ)
  • Millions From Maxed-Out Clinton Donors Flowed Through Loophole (BBG)
  • Ramos call for media bias against Trump unethical, compromising (Hill)
  • Russia backs 48-hour Aleppo truce, U.N. wants other sides to commit (Reuters)
  • Thought Volcker Rule Went Too Far? There’s More Coming for Banks (BBG)
  • Why Citron Case Leaves Hong Kong Investors Squeezed (WSJ)
  • AB InBev expects to cut three percent of jobs after SABMiller takeover (Reuters)

Overnight Media Digest

WSJ

- Donald Trump's mixed signals about easing his plan to deport all illegal immigrants are dividing his closest allies and prompting warnings he could lose core supporters if he abandons the signature issue of his campaign. http://on.wsj.com/2bEaJea

- Blackstone Group said Thursday that it has agreed to invest $1.5 billion in a pair of drilling deals in West Texas. One came about after the New York investment firm early this year lost out to a big oil company bidding on about 12,000 acres south of New Mexico. http://on.wsj.com/2bLpCxc

- Growth in overall health-care spending is slowing, but middle-class families' share of the tab is getting larger, squeezing households already feeling stretched financially. Overall, health-care spending across the economy reached 18.2 percent of gross domestic product as of June, up from 13.3 percent in 2000, according to Altarum Institute, a health research group. http://on.wsj.com/2bjY70H

- Most of Volkswagen AG's diesel-powered vehicles on U.S. roads can't be retrofitted to fully comply with air-pollution regulations, though its larger vehicles likely can, an attorney for the company said on Thursday. The company is close to offering regulators a fix for the larger vehicles. http://on.wsj.com/2bDbgwP

- Presidential contenders Hillary Clinton and Donald Trump delivered searing indictments of one another, trading charges of racism and corruption, and setting the tone for a bitter fight until the November election. http://on.wsj.com/2bR4FzN

- The messaging service WhatsApp will start sharing phone numbers and other user data with Facebook Inc, a moneymaking strategy that strays from its promise that little would change when the app was acquired by the social network in 2014. http://on.wsj.com/2blz47q


FT

Apple Inc has agreed a deal with BT Group's EE to offer customers of the mobile phone network a six-month free subscription to Apple Music.

The European Commission is finalising a radical copyright reform that with give European news publishers the right to levy fees on internet platforms, such as Google, if search engines show snippets of the publishers' stories.

The U.S. court handling the Volkswagen AG diesel emissions scandal ordered the German carmaker on Thursday to move quickly to decide whether to fix or buy back 85,000 3.0 liter luxury vehicles with polluting engines which VW has said it can fix without any affect on their performance.

Vivendi SA said it would implement a 300 million euro ($338.58 million) cost-cutting plan to stem losses from the French channels of its pay-TV unit Canal Plus. The goal is to reach breakeven in 2018 for Canal Plus channels in France, it added.


NYT

- U.S. President Obama on Thursday nominated Jim Yong Kim for a second five-year term as president of the World Bank despite persistent complaints among employees about his leadership at a time when the mission of the global development institution is in question. http://nyti.ms/2bRIt8H

- Responding to a growing furor from consumers and politicians, the pharmaceutical company Mylan said it would lower the out-of-pocket costs to some patients who need EpiPens, which are used to treat life-threatening allergy attacks. http://nyti.ms/2bRHSE5

- Uber recorded losses of roughly $1.2 billion in the first half of 2016, according to a person briefed on the company's financial data, who spoke on the condition of anonymity. http://nyti.ms/2bRIgT8

- Apple Inc released a patched version of its mobile software to fix a dangerous security hole in iPhones and iPads after researchers discovered that a prominent United Arab Emirates dissident's phone had been targeted with a previously unknown method of hacking. Users can get the patch through a normal software update. http://nyti.ms/2bRIbPi


Canada

THE GLOBE AND MAIL

** A takeover proposal to rescue debt-hobbled Twin Butte Energy Ltd is in jeopardy as debt holders angry over the prospect of a major markdown in the value of their securities pledge to reject the deal. (http://bit.ly/2bSk3Mf)

** As the Liberals prepare to launch their signature anti-terrorism initiative, they have closed the door on a previous one by the Conservative government called Kanishka Project. (http://bit.ly/2bSlGd8)

NATIONAL POST

** General Electric Co is set to break ground Friday on a new factory in Welland, Ontario, that will employ 220 people with the possibility of significant expansion. (http://bit.ly/2bSlQ3X)

** Rick Peterson, a Vancouver-based financial services executive, is mulling a bid to lead the Conservative Party of Canada and plans to enter the race in late September. (http://bit.ly/2bSmPRS)


Britain

The Times

** Japan's largest airline, All Nippon Airways, said that it has been forced to cancel up to 300 flights over the next month while it investigates a problem with the Rolls-Royce Holdings Plc engines in its fleet of Boeing Co 787 Dreamliners. http://bit.ly/2bEML6Y

** One of the City's most influential investor groups, whose members manage 14 trillion pounds ($18.47 trillion) of assets, has called on Sports Direct to reform fundamentally its corporate governance as shareholder pressure mounts on Mike Ashley's sportswear group. http://bit.ly/2bENuVK

The Guardian

** UberEats riders will demonstrate outside the group's London headquarters on Friday after the company cut the amount it pays per delivery, which some drivers say leaves them at risk of earning less than the minimum wage. They are calling on the company to pay the independently backed London living wage of 9.40 pounds ($12.40) an hour. http://bit.ly/2bENDbK

** The government is to launch a tourism action plan including cutting red tape for bed-and-breakfasts and ready-made train tours as an increasing number of Britons take bank holiday breaks in the UK. http://bit.ly/2bEMxwN

The Telegraph

** BT Group's mobile arm, EE, has become the first British operator to bundle Apple Music with mobile contracts in a move to increase subscriber loyalty and help the iPhone maker's music streaming app challenge Spotify. http://bit.ly/2bEMZuH

** News organisations in Europe will be given the right to charge internet giants such as Google to link to their content in a major shake-up of copyright reforms planned by Brussels. http://bit.ly/2bENW6r

Sky News

** Liberty Media Corp, backed by American media tycoon John Malone, is leading a 6.4 billion pound ($8.44 billion) battle for control of Formula One motor racing after proposing a deal that would see the sport's owner listed on New York's Nasdaq stock exchange. http://bit.ly/2bEOjOz

** ITV has abandoned its 1 billion pound ($1.32 billion) attempt to take over Peppa Pig owner Entertainment One . The broadcaster said the two companies differed on price. http://bit.ly/2bEOtFB

The Independent

** British shoppers have shrugged off uncertainty caused by the UK's vote to leave the EU with retail sales growing at their best level in six months, pushed by the summer weather and foreign visitors lured by a weaker pound, according to a survey by the Confederation of British Industry (CBI).


http://www.zerohedge.com/news/2016-08-26/frontrunning-august-26
 

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#36

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Here's How to END THE FED | Ron Paul
FinanceAndLiberty.com


Published on Aug 25, 2016
IN THIS INTERVIEW:
- Why end the Fed? ►0:56
How to End The Fed:
- Audit the Fed ►4:54
- Establish gold standard ►7:50
- Make free market currencies legal ►10:52

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This interview was recorded on Aug 24, 2016.

DISCLAIMER: The financial and political opinions expressed in this interview are those of the guest and 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.
 

Argent Dragon

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COT Gold, Silver and US Dollar Index Report - August 26, 2016
By: GoldSeek.com
COT Gold, Silver and US Dollar Index Report - August 26, 2016

Gold Seeker Weekly Wrap-Up: Gold and Silver Fall Over 1% and 3% on the Week
By: Chris Mullen, Gold-Seeker.com
Gold gained $10.41 to $1332.91 at about 9AM EST before it dropped down to $1319.39 just after the release of Yellen’s Jackson Hole speech and then jumped to a new session high of $1341.96 in the next fifteen minutes of trade, but it then fell back off again in late morning trade and ended with a loss of 0.11%. Silver rose to as high as $19.049 before it fell back to $18.58, but it still ended with a gain of 0.43%.