Month: August 2014

• Clearly it’s time to bomb Assad (on Qatar instructions): Islamic State executes dozens of Syrian army soldiers (Reuters)
• Ukraine Declares Russian Invasion as Sanctions Threat Raised (BBG)
• Ukraine Reports Russian Invasion on a New Front (NYT)
• German Unemployment Rises as Risks to Economy Build (BBG)
• Ebola spreads to Nigeria oil hub Port Harcourt (BBC)
• FBI Probes Possible Hacking Incident at J.P. Morgan (WSJ)
• FBI, Secret Service investigate reports of cyber attacks on U.S. banks (Reuters)
• If you like your Venezuela, you can stay in Venezuela: Airlines Abandon Fliers Amid Currency Dispute (WSJ)
• Boomer Wealth Dented by Mortgages Poses U.S. Risk (BBG)
• People Aren’t Buying Guns (BusinessWeek)
• Icelandic Bardarbunga Volcano Update: Fractures, Sinkholes Spotted During Research Flight (Weather Channel)
• Silva Shakes Up Brazilian Election (FT)
• Samsung unveils smartwatch that can make calls (Reuters)

 

Overnight Media Digest

WSJ

* The Islamic State runs a self-sustaining economy across territory it controls in Syria and Iraq, pirating oil while exacting tribute from a population of at least eight million, Arab and Western officials said, making it one of the world’s richest terror groups and an unprecedented threat. (http://on.wsj.com/1lg9Qvt)

* The Federal Bureau of Investigation is probing a computer-hacking attack on J.P. Morgan Chase & Co and as many as four other banks, in what people familiar with the probe described as a significant breach of corporate computer security. (http://on.wsj.com/1td4fso)

* Argentina’s international reserves are starting to dwindle in the wake of the country’s second sovereign-debt default in almost 13 years, putting added stress on the peso and an economy believed to be in recession. (http://on.wsj.com/1zHU1Pu)

* Alibaba Group Holding Ltd <IPO-BABA.N> reported big growth in revenue from mobile devices, which may bolster its case next month when the Chinese e-commerce giant begins to pitch investors on its long-awaited initial public offering. (http://on.wsj.com/1qAtKl3)

* A federal judge on Wednesday denied a request from Apple Inc to bar Samsung Electronics Co from selling smartphones and tablets in the United States that infringe on Apple patents. Apple had sought a permanent injunction against certain Samsung products after a judge and jury found in May that the Korean firm had infringed on three of its patents in a high-profile intellectual property dispute. (http://on.wsj.com/1tEPAVN)

* With Venezuela holding back on releasing $3.8 billion in airline-ticket revenue because of strict currency controls, Delta Air Lines Inc, American Airlines Group Inc and other airlines have slashed service to Venezuela by half since January. (http://on.wsj.com/1pjKopL)

 

FT

The head of the International Monetary Fund, Christine Lagarde, is facing a formal investigation by a French court for alleged negligence in a political fraud affair dating from 2008 when she was finance minister.

The European Central Bank has hired BlackRock Solutions to provide consultancy services in its preparations for a programme to buy asset-backed securities.

Sales at Tesco slipped 4 percent on a quarterly basis according to industry data, highlighting the wounds inflicted by the supermarket price war on Britain’s No.1 grocer.

The battle for Brazil’s telecoms market is hotting up after one of the country’s largest phone companies, Grupo Oi SA , unveiled plans to take over Telecom Italia’s local mobile business.

Europe’s largest budget carrier Ryanair is set to offer “business class” service on all of its flights as it tries to gain a bigger share of the European corporate travel market.

Fashion chain Zara, owned by Spain’s Inditex, pulled from sale on Wednesday a striped children’s top decorated with a large six-pointed star following public outcry that it resembled clothing worn by inmates in Nazi concentration camps during the Holocaust.

 

NYT

* A number of United States banks, including JPMorgan Chase & Co and at least four others, were struck by hackers in a series of coordinated attacks this month, according to four people briefed on a continuing investigation into the crimes. (http://nyti.ms/VREJu6)

* Christine Lagarde, the head of the International Monetary Fund, said on Wednesday that French prosecutors had placed her under formal investigation, in an escalation of a long-running inquiry into a murky business affair that dates to her time as finance minister under President Nicolas Sarkozy. (http://nyti.ms/1sBSnfy)

* With less than a month before its initial public offering, the Alibaba Group Holding Ltd <IPO-BABA.N> is intent on showing just how profitable – and focused on mobile – it truly is. The Chinese e-commerce behemoth disclosed on Wednesday that its profit nearly tripled in the quarter that ended June 30, to $2 billion. Its sales climbed 46 percent, to $2.5 billion. (nyti.ms/1tXKbHr)

* A British regulator fined Royal Bank of Scotland Group PLC 14.5 million pounds, or about $24 million, on Wednesday for failing to offer proper advice to mortgage customers, and criticized the bank for its delays in responding to the initial complaints. (nyti.ms/1qgvMFK)

* Tyson Foods Inc has reached a deal with the U.S. Justice Department to sell its hog-purchasing business as part of its planned $7.7 billion acquisition of Hillshire Brands Co . The Justice Department said Wednesday that it would require Tyson to sell its Heinold Hog Markets unit to win antitrust approval for the merger. (nyti.ms/1rBpkwM)

* Lawmakers and governor Jerry Brown of California on Wednesday said they had reached an agreement to expand the California film incentive program, capping a drive by entertainment industry unions, filmmakers and executives to bolster sagging movie and television production in the state. (http://nyti.ms/1qiJBn7)

* The Securities and Exchange Commission unanimously approved rules on Wednesday that would require issuers of asset-backed securities – complex investments based on mortgages, auto loans or other types of debt – to disclose more information about the underlying loans. (nyti.ms/1nFOJ14)

* Chiquita Brands International and Fyffes PLC tried to reassure investors about their planned merger, saying on Wednesday that they now expected the combined company to achieve an additional $20 million in annual cost savings by 2016. (nyti.ms/1leh17k)

* The federal government is expected to finish its fiscal year with a relatively modest budget deficit as the gap between revenue and spending continues a sharp decline, the Congressional Budget Office said Wednesday. (http://nyti.ms/1q6GjEO)

 

China

CHINA SECURITIES JOURNAL

– Yu Shengfa, vice president of e-commerce giant Alibaba’s <IPO-BABA.N> future financial company, said the company has submitted applications to related regulators to set up “Ali Bank” which could be approved in September.

SHANGHAI SECURITIES NEWS

– Shanghai’s municipal government has published a document outlining its strategies to develop the city into a global trading centre, including plans to build international trading platforms for commodities such as natural gas and iron ore in its free-trade zone.

SECURITIES TIMES

– China could implement real estate registration system in 2017, said Leng Hongzhi, an official at the Ministry of Land and Resources.

CHINA DAILY

– Lenovo Group Ltd will soon settle a year-old class action lawsuit over laptop malfunctions in the United States for approximately $70 million.

Britain

The Times

SALMOND’S SCOTLAND WILL LIVE IN ETERNAL POVERTY, SAYS BROWN

Inequality and poverty could “survive until doomsday” if Alex Salmond wins Scotland’s independence referendum, according to former British Prime Minister Gordon Brown.

TESCO’S WOES DEEPEN AS SHOPPERS CHECK OUT

Sales at Britain’s largest supermarket group have plunged and its market share has slipped again, highlighting the challenge facing Dave Lewis, Tesco’s incoming chief executive.

The Guardian

DAVID CAMERON MULLS JOINING OBAMA IN BOMBING ISIS IN IRAQ

David Cameron is planning to indicate to U.S. President Barack Obama and other NATO leaders at a summit in Wales next week that Britain is keeping open the option of joining the United States in launching air strikes against forces of the Islamic State in Iraq.

CHRISTINE LAGARDE TO BE INVESTIGATED FOR ALLEGED ROLE IN POLITICAL FRAUD CASE

The head of the International Monetary Fund, Christine Lagarde, has been charged with “simple negligence” over her handling of a controversial 400 million euro payout to French business tycoon Bernard Tapie when she was finance minister.

The Telegraph

DECLARE THE SOCIAL MIX OF YOUR STAFF, BRITISH COMPANIES TOLD Alan Milburn, head of the Social Mobility and Child Poverty Commission, condemns the scale of “elitism” at the top of British public life as he calls for companies to engineer a more socially balanced workforce.

Sky News

RYANAIR LAUNCHES ‘BUSINESS CLASS’ BENEFITS The no-frills carrier sees advantages of offering the business traveller a more flexible experience as part of its new approach.

 

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Second estimate of Q2 GDP at 8:30–consensus up 4.0%
Jobless claims for week of August 23 at 8:30–consensus 300K
Pending home sales index for July at 10:00–consensus up 0.5% for the month

ANALYST RESEARCH

Upgrades

Cott Corp. (COT) upgraded to Buy from Hold at Stifel
First Horizon (FHN) upgraded to Outperform from Market Perform at Keefe Bruyette
National Bank of Canada (NTIOF) upgraded to Perform from Underperform at Oppenheimer
Randgold Resources (GOLD) upgraded to Neutral from Underweight at HSBC

Downgrades

Brown Forman downgraded to Hold from Buy at Deutsche Bank
GT Advanced (GTAT) downgraded to Underperform from Market Perform at Raymond James
Genuine Parts (GPC) downgraded to Neutral from Buy at SunTrust
InterMune (ITMN) downgraded to Neutral from Buy at UBS
Sungy Mobile (GOMO) downgraded to Perform from Outperform at Oppenheimer
Visa (V) downgraded to Market Perform from Outperform at Raymond James
Williams-Sonoma (WSM) downgraded to Equal Weight from Overweight at Morgan Stanley

Initiations

Advance Auto Parts (AAP) initiated with a Buy at SunTrust
Allstate (ALL) initiated with a Neutral at Compass Point
AutoZone (AZO) initiated with a Neutral at SunTrust
Cooper Tire (CTB) initiated with a Neutral at SunTrust
Farmland Partners (FPI) initiated with an Outperform at FBR Capital
FireEye (FEYE) initiated with a Buy at Stifel
GasLog Partners (GLOP) initiated with an Overweight at Barclays
Goodyear Tire (GT) initiated with a Buy at SunTrust
ITC Holdings (ITC) coverage resumed with an Equal Weight at Barclays
Mercury General (MCY) initiated with a Neutral at Compass Point
Monro Muffler (MNRO) initiated with a Reduce at SunTrust
Monro Muffler (MNRO) initiated with a Reduce at SunTrust
O’Reilly Automotive (ORLY) initiated with a Buy at SunTrust
PGT, Inc. (PGTI) initiated with a Neutral at SunTrust
Safety Insurance (SAFT) initiated with a Buy at Compass Point
WEX Inc. (WEX) initiated with a Hold at Deutsche Bank
Whole Foods (WFM) initiated with a Neutral at Wedbush

COMPANY NEWS
DuPont (DD) to pay $1.28 to resolve toxic gas leak allegations with DOJ, EPA
Deutsche Bank (DB) fined GBP4.7M by FCA for failing to properly report transactions
CME Group (CME) promoted John Pietrowicz to CFO
China Recycling Energy (CREG) chairman said its chairman made additional $18.9M investment in the company
Lear (LEA) signed a definitive agreement to acquire Eagle Ottawa for $850M
Keurig Green Mountain (GMCR) announced the appointment of José Octavio Reyes Lagunes, the retired vice chairman of The Coca-Cola Export Corporation (KO), to its board effective August 25

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Violin Memory (VMEM), Workday (WDAY)

Companies that missed consensus earnings expectations include:
Coty (COTY), Greif (GEF), Exa Corp. (EXA), Sungy Mobile (GOMO), Guess (GES), Bally Technologies (BYI), Gordmans Stores (GMAN)

Companies that matched consensus earnings expectations include:
Williams-Sonoma (WSM), Jiayuan.com (DATE), DHT Holdings (DHT), Casella Waste (CWST), Tilly’s (TLYS)

NEWSPAPERS/WEBSITES

Hackers targeted JPMorgan Chase (JPM), ‘at least’ four other banks, NY Times reports
FBI investigating whether Russia involved with JPMorgan (JPM) hacking, Bloomberg says
GSK (GSK), Shire (SHPG) rumored to be interested in Tekmira (TKMR), Daily Mail says
Samsung (SSNLF) hit by new allegations of child labor in China, FT reports
Samsung (SSNLF), Lenovo (LNVGY) China supplier rejects child labor claims, Reuters says
Judge denies Apple (AAPL) request to block sale of Samsung (SSNLF) devices, AP says
Tiffany (TIF) stock should continue higher, Barron’s says

SYNDICATE

Castle Brands (ROX) files $30M mixed securities shelf
Gramercy Property Trust (GPT) files to sell 22.24M shares of common stock
Nordstrom (JWN) files to sell common stock, no amount given
Orient Paper (ONP) raises $2.5M in a registered direct offering
Tiffany (TIF) files automatic mixed securities shelf

via Zero Hedge http://ift.tt/VSBMt3 Tyler Durden

It has been a busy morning: following a substantial surge in Ukraine separatist activity in the past 24 hours, which saw them capture the strategic Sea of Azov port town of Novoazovsk, a move which the NYT classified as “Ukraine Reports Russian Invasion on a New Front“, Ukraine has turned on the disinformation spigot to max resulting in a constant verbal, and headline, diarrhea as follows:

• POROSHENKO CONVENES SECURITY COUNCIL ON RUSSIAN `INVASION’
• POROSHENKO: SITUATION IN UKRAINE’S EAST DETERIORATED SHARPLY
• UKRAINE EU AMBASSADOR CALLS FOR JOINT EFFORT TO `STOP THIS WAR’
• POROSHENKO SAYS SECURITY COUNCIL WILL DRAW UP FURTHER PLANS
• RUSSIAN ARMY CONTROLS NOVOAZOVSK: UKRAINE SECURITY COUNCIL
• YATSENYUK URGES UN SECURITY COUNCIL TO DEBATE UKRAINE SITUATION

So sure was Ukraine that this time (unlike all those previous disinformation launches) Russia has invaded that Anton Herashchenko, adviser to Ukrainian Interior Ministry, actually commented on his Facebook page saying “Invasion of regular Russian army of Putin to Ukraine is an accomplished fact,” Adding that Putin “de-facto places Ukraine on a war-footing at a time when a decree was signed to dissolve parliament.”

Well, yes, Ukraine has no government, but Russia of course denied all of it:

• PESKOV WON’T COMMENT ON REBEL CLAIM OF RUSSIAN TROOP SUPPORT

All of this latest disinformation propaganda was summarized by Reuters best:

Ukraine accused Russia on Thursday of mounting an invasion in the southeast of the country in support of pro-Moscow separatist rebels. Ukraine’s security and defense council said the border town of Novoazovsk and other parts of Ukraine’s south-east had fallen under the control of Russian forces who together with rebels were staging a counter-offensive.

 

“A counter-offensive by Russian troops and separatist units is continuing in south-east Ukraine,” the council said in a post on Twitter.

 

President Petro Poroshenko, in a statement explaining his decision to cancel a visit to Turkey, said: “An invasion of Russian forces has taken place.”

 

Russia denies intervening in Ukraine by arming the rebels or sending soldiers across the border. The defense ministry declined to comment on reports of Russian tanks in Novoazovsk.

 

“The Russian authorities clearly said many times there are no regular Russian troops there. Russia is not taking part in this armed conflict,” said a Russian diplomatic source. The latest escalation in the five-month crisis came only two days after the presidents of the two countries held their first talks in more than two months and agreed to work towards launching a peace process.

 

Ukrainian Prime Minister Arseny Yatseniuk appealed to the United States, European Union and G7 countries “to freeze Russian assets and finances until Russia withdraws armed forces, equipment and agents”. Rebel advances this week have opened a new front in the conflict just as Ukraine’s army appeared to have gained the upper hand, virtually encircling the separatists in their main strongholds of Donetsk and Luhansk.

 

Anton Gerashchenko, an adviser to Ukrainian Interior Minister Arsen Avakov, said on Facebook: “The invasion of Putin’s regular Russian army of Ukraine is now an established fact!”

 

French President Francois Hollande said it would be “intolerable and unacceptable” if it was proved true that Russian troops had entered Ukrainian territory.

So a lot of words all of which were best summarized by Ukraine’s Prime Minister in dissolutia, Yatseniuk, who as a reminder does not have an official role any more after the Ukraine government was dissolved (on Twitter) last week:

• PUTIN STARTED WAR IN EUROPE, UKRAINE’S PREMIER YATSENYUK SAYS

Ok so far so good: accusations, counteraccusations – we are used to that.

But where things once again got surreal, making everyone not only laugh but wonder how the CIA has lost the plotline so badly, was the following “clarification” headline from Reuters, which noticed some rather substantial change in the language on the website of the Ukraine president:

• CORRECTED-UKRAINIAN PRESIDENT POROSHENKO SAYS RUSSIAN TROOPS HAVE BEEN BROUGHT INTO UKRAINE (NOT ‘RUSSIAN MILITARY INVASION HAS TAKEN PLACE’) – PRESIDENTIAL WEBSITE

Indeed, instead of explicitly saying a “Russian military invasion has taken place”, the website now reads: “I have made a decision to cancel my working visit to the Republic of Turkey due to sharp aggravation of the situation in Donetsk region, particularly in Amvrosiivka and Starobeshevo, as Russian troops were actually brought into Ukraine,” the President noted.“

For all those wondering if to BTFATH or STFR, please sit tight until Ukraine gets its marching orders from the US State Dept whether to brand the “Russian troops being brought into Ukraine” as an invasion, or merely an accidental crossing, depending on how all of this will impact US strategy in Syria, which all of this is really all about: because remember, if and when the US begins to bomb the Assad regime under the guise it is fighting ISIS, all it will do is greenlight Qatar sending its gas pipeline to Europe… which after all has been the plan all along since 2012.

So stay tuned as this “socially-networked war” comedy unfolds before our eyes.

via Zero Hedge http://ift.tt/1pl8joQ Tyler Durden

If you like your de-escalation, you can keep your de-escalation. To think that heading into, and following the Russia-Ukraine “summit” earlier this week there was so much hope that the tense Ukraine civil war “situation” would somehow fix itself. Oh how wrong that thinking was considering overnight, following rebel separatists gains in the southeast of Ukraine which included the strategic port of Novoazvosk and which is “threatening to open up a new front in the war” including setting up a land corridor to Russia controlled-Crimea, Ukraine’s president Poroshenko for the first time came out and directly accused Russia of an “Invasion”, or at least a first time in recent weeks, saying he has convened the security council on the recent Russian actions.

And while none of this is particularly new or unexpected, that it happens on a day in which Europe reported yet another batch of very adverse data, including a big drop in European confidence as well as Spain sliding again into outright deflation, is hardly supportive of risk especially following yesterday’s Reuters comment that no ECB action is to be expected absent a dramatic slide in inflation. As a result bond yields have fallen to fresh record lows across the board, pushing US TSYs higher as well, while for the first time equities can’t find solace in the hope that bad news out of Europe is really great news out of the ECB, and as a result have tumbled.

In the Asian session overnight, major bourses are mostly trading softer following the lackluster performance in US and European equities yesterday. The Nikkei and the Shanghai Composite are down -0.5% and -0.6%, respectively. Away from equities, Treasuries have firmed further following on from yesterday’s rally. As we go to print the 10yr and 30yr UST yield is around 2.35% and 3.10%, respectively. Indeed following the 4bp and 6bp decline in the 10yr and 30yr UST yield yesterday, the 10s30s curve is now around 75bps and the flattest as it has ever been since 30 Sept 2009. The 10s/30s was nearly as wide as 100bps in February but in reality it has been on a flattening trend throughout the course of this year. The flatter US rates curve is also providing support to longer dated USD sovereigns in Asia.* Asian stocks fall with the Sensex outperforming and the Hang Seng underperforming. MSCI Asia Pacific down 0.3% to 148.3, Nikkei 225 down 0.5%, Hang Seng down 0.7%, Kospi up 0%, Shanghai Composite down 0.6%, ASX down 0.5%, Sensex up 0.3%. 2 out of 10 sectors rise with telcos, health care outperforming and energy, utilities underperforming

European shares fall with the basic resources and financial services sectors underperforming and utilities, food & beverage outperforming. The Swedish and Italian markets are the worst-performing larger bourses, the Dutch the best. Spanish 2Q GDP in line with estimates. Italy’s top banks said to seek up to $36b from ECB. The euro is stronger against the dollar. Greek 10yr bond yields rise; Portuguese yields increase.   1 out of 19 Stoxx 600 sectors rise; utilities, food & beverage outperform, basic resources, financial services underperform; 20.2% of Stoxx 600 members gain, 77% decline.

Looking to the day ahead we have quite a busy day for data. In Europe we have Spanish August inflation data (expected -0.6% MoM) and the second read on Spanish Q2 GDP (expected unch at +0.6%), German August unemployment and inflation reads (expected at 6.7% and +0.0% MoM respectively), Italian June retail sales and business confidence (expected at -0.5% MoM and 99.2 respectively) and also Euro area August economic, industrial, consumer and services confidence which are expected to come in at 101.5, -4.5, -10 and 3.5 respectively). Over in the US we have August initial jobless claims (expected in at 300k), the second read on Q2 GDP (BBG consensus is for a read of +3.9% whilst DB expects it at +3.8%) and the second read on Q2 Core PCE (BBG consensus is for a read of +2%), July Pending Home Sales (expected +0.5% by the market and +1.5% by DB) and the Kansas City Fed manufacturing index (expected in at 7).

Market Wrap

• S&P 500 futures down 0.4% to 1989.5
• US 10Yr yield down 3bps to 2.327%
• German 10Yr yield down to at 0.88%
• MSCI Asia Pacific down 0.3% to 148.3
• Gold spot up 0.5% to $1289.3/oz

Bulletin Headline Summary from RanSquawk and Bloomberg

• European fixed income markets retreat from all-time highs as German and Spanish inflation data dampen the case for ECB action next Thursday
• European equities slump on further evidence of Russian activity in eastern Ukraine and dwindling prospects of ECB action
• Attention turns to US GDP (expected to be revised to 3.9% from 4.0%) and the final issue from the US Treasury (USD 29bln 7yr Notes)
• Treasuries gain, 10Y notes near 2.339% support as ECB rally continues; 10Y bunds yield 0.89% as Ukraine warns of Russian invasion, Germany threatened Moscow with further sanctions.
• Week’s auctions conclude with $29b 7Y notes, WI yield 2.032% vs 2.250% award in July
• Pro-Russian rebels widened their attacks on government forces, taking several towns outside the strongholds of Donetsk and Luhansk, including near the Sea of Azov, opening a new front and supply channel, according to a Ukrainian official
• Euro-area economic confidence fell more than forecast, Spanish consumer prices dropped the most in five years and German unemployment unexpectedly rose in a burst of data backing Draghi’s warning that more stimulus may be needed
• Rising stress in China’s $6t shadow banking industry is testing central bank Governor Zhou Xiaochuan’s resolve to limit monetary easing as risks to the government’s growth target climb
• Emmanuel Macron’s appointment as France’s  economy and industry minister in place of Arnaud Montebourg shows the gulf between rank-and-file members of Hollande’s Socialist Party and the competing visions of France’s economic future
• A year after he threatened attacks on Syrian forces loyal to President Bashar al-Assad, Obama is weighing airstrikes against Islamic State extremists in Syria that could benefit Assad
• More than 20,000 people may be infected with the Ebola virus before the outbreak in West Africa is controlled, the World Health Organization said as it sought $490m in funding
• The IMF’s board will meet as early as this week to hear Managing Director Christine Lagarde explain her involvement in a French court decision that threatens to tarnish the lender’s reputation
• Sovereign yields extend declines. Asian, European stocks, U.S. stock futures decline. WTI crude and copper lower, gold gains

US Econ Docket

• 8:30am: GDP Annualized, 2Q revised, est. 3.9% (prior 4%);
• Personal Consumption, 2Q revised, 2.4% (prior 2.5%)
• GDP Price Index, 2Q revised, est. 2Q revised, est. 2% (prior 2%)
• Core PCE, 2Q, est. 2% (prior 2%)
• 8:30am: Initial Jobless Claims, Aug. 23, est. 300k (prior 298k)
• Continuing Claims, Aug. 16, est. 2.51m (prior 2.5m)
• 9:45am: Bloomberg Consumer Comfort, Aug. 24 (prior 36.6)
• 10:00am: Pending Home Sales m/m, July, est. 0.5% (prior -1.1%); Pending Home Sales y/y, July, prior -4% (prior -4.5%)
• 11:00am: Kansas City Fed Manufacturing Activity, Aug., est. 7 (prior 9)
• 1:00pm: U.S. to sell $29b 7Y notes

 

FIXED INCOME

Bund futures softened from the open as markets pulled back their expectations of ECB easing as soon as next Thursday. Spanish and German CPI data continued to show a dire inflation picture across the Eurozone, however failed to provide what ECB sources referred to as an ‘inflation slump’ yesterday, in order to drive the ECB toward ABS purchases. Furthermore, ECB money supply data ticked higher than expected (1.5% vs. Exp. 1.3%), supporting the view that June’s easing measures could be sufficient to drive inflation expectations higher. As such, Eurozone spreads modestly widened against the German benchmark, with Italian underperforming as EUR 6.5bln of BTP issuance came onto the market at an unsurprisingly record low of 2.39% on 10yr debt.
Final Barclays month end extension for Pan-Euro Agg at +0.03y (Prev. 0.12yrs, 12m average +0.03yrs), Sterling Agg Tsy at +0.08y, US Treasuries +0.13yrs (Prelim. +0.12yrs, 12m average +0.09yrs)

EQUITIES

European equity markets trade softer, with underperformance in the benchmark DAX as dwindling expectations of ECB ABS purchases, or ‘private QE’, alongside further militarization in eastern Ukraine drags equities away from multi-month highs printed earlier in the week. The leader of the pro-Russian separatists Zakharchenko stated that serving Russian soldiers are among the rebel ranks, however are operating on leave from their posts in order to fight with the separatist military – further heightening concerns that Russia could fall under further sanctions pressure. Separately, UK miners sharply underperform, with Rio Tinto and Anglo-American falling as much as 2.5% after Chinese iron ore futures slumped as much as 3% to contract lows overnight as a clampdown on credit weighed on industrial metal purchases. US stock futures have been dragged down by their European counterparts, indicating a lower open on Wall Street.

FX

EUR/USD reclaimed 1.32 on the back of stronger than expected ECB money supply figures, and continues to trade in between large expiring option strikes at 1.3200 (USD 1.14bln) and 1.3250 (USD 2bln), due to roll off at the 1500BST NY cut. Elsewhere, AUD/USD broke above the 50DMA after Q2 Australian Private Capital Expenditure posted the first positive reading since September 2013 (1.1% vs. Exp. -0.9% (Prev. -4.2%, Rev. -2.5%), a result likely to be welcomed by the RBA ahead of their rate decision next week, especially given the recent poor data out of Australia.

COMMODITIES

Spot gold and silver have been supported from the open by the weaker USD and the tensions in eastern Ukraine. Silver sharply outperforms, lifting spot gold toward the 100DMA at USD 1,295.50. WTI and Brent crude futures trade lower after yesterday’s build in Cushing OK stockpiles, further pressured by expectations of Libyan production coming back online (expected to reach 1mln bpd by the end of September).

* * *

DB’s Jim Reid concludes the overnight recap

Yesterday European government bond yields once again hit new all-time lows as the 10 year yields on Dutch, German, Spanish, Italian and French government bonds all shed around 2-4bps. The 10Y Bund has been trading sub-1% in yield since August 21st and reached an intraday low of 0.895% yesterday before closing at 0.91%. This all comes on the back of what has been a truly impressive month for the asset class which has seen 10 year government yields across Europe drop, including on Dutch (-28bps), German (-22bps), Spanish (-41bps), Italian (-37bps) and French (-26bps) govies. These moves have come on the back of a darkening picture for the euro area economy and a rise in the probabilities being attached to ECB QE (more on this later) but have also been part of a broader global downward trend in yields. UK and US 10Y government bond yields have also dropped 18bps and 12bps respectively this month. We have talked previously about the ongoing debate as to the destination of long-term bond yields in this cycle and in an interesting recent paper entitled, “The Revived Bretton Woods System’s First Decade” DB Group Chief Economist David Folkerts-Landau adds to this debate whilst discussing the current global macroeconomic system and the role China has played in it over the past decade. On the real rates issue the piece highlights how, “China’s … export-driven development strategy has depressed long-term real interest rates in industrial countries at every stage of the business cycle. This occurred because exchange rate undervaluation generated massive exports of capital via official intervention, absorbed principally by the US. Even as the China phase of the system gradually ends, long-term real rates are likely to stay unusually low because there is still a large pool of surplus labor for the global system to absorb.”

Moving back to yesterday’s moves, one of the big pieces of news was that the ECB has hired BlackRock to advise it on developing a program to buy asset-backed securities (Bloomberg News). Our main take-away from this news is that it is further evidence (if more were required) that the ECB is very much walking down the path to QE. As we noted in yesterday’s EMR, our European economists expect the ECB to announce private QE at their next meeting on September 4th. Yesterday’s weak confidence data probably increased the pressure on the ECB to act as French August business confidence fell to 91 (vs expectation it would hold at 93) and manufacturing confidence fell to 96 (from 97), the Italian August consumer confidence index read came in at 101.9 (vs 104.6 previously and 104 expected) and German September consumer confidence fell to 8.6 (from 9 previously and 8.9 expected). French July jobseekers data also disappointed, rising +26.1k vs expectation it would rise +14.5k. On the back of this data equity markets seemed in wait and see mode yesterday and were broadly flat in Europe and the US. European credit underperformed with iBoxx Main widening +0.5bps and Xover +3bps wider.

Turning to the Asian session overnight, major bourses are mostly trading softer following the lackluster performance in US and European equities yesterday. The Nikkei and the Shanghai Composite are down -0.5% and -0.3%, respectively. Although the Hang Seng (+0.2%) and KOSPI (+0.2%) are somewhat more resilient this morning. Away from equities, Treasuries have firmed further following on from yesterday’s rally. As we go to print the 10yr and 30yr UST yield is around 2.35% and 3.10%, respectively. Indeed following the 4bp and 6bp decline in the 10yr and 30yr UST yield yesterday, the 10s30s curve is now around 75bps and the flattest as it has ever been since 30 Sept 2009. The 10s/30s was nearly as wide as 100bps in February but in reality it has been on a flattening trend throughout the course of this year. The flatter US rates curve is also providing support to longer dated USD sovereigns in Asia.

Before we wrap up with the day ahead, there are fresh reports that Russian troops have launched an incursion into south-east of Ukraine (BBC). Ukraine said Russian forces had crossed the border and were supporting separatist attacks and the US State Department said it suspected a Russian directed counter-attack was underway. German Chancellor Merkel has demanded an explanation from Mr Putin. A rebel leader in Donetsk told reporters that Russia was not involved in the current offensive. Clearly this remains an ongoing story but geopolitics seems to have taken a backseat for now given the focus on ECB’s upcoming policy moves.

Looking to the day ahead we have quite a busy day for data. In Europe we have Spanish August inflation data (expected -0.6% MoM) and the second read on Spanish Q2 GDP (expected unch at +0.6%), German August unemployment and inflation reads (expected at 6.7% and +0.0% MoM respectively), Italian June retail sales and business confidence (expected at -0.5% MoM and 99.2 respectively) and also Euro area August economic, industrial, consumer and services confidence which are expected to come in at 101.5, -4.5, -10 and 3.5 respectively). Over in the US we have August initial jobless claims (expected in at 300k), the second read on Q2 GDP (BBG consensus is for a read of +3.9% whilst DB expects it at +3.8%) and the second read on Q2 Core PCE (BBG consensus is for a read of +2%), July Pending Home Sales (expected +0.5% by the market and +1.5% by DB) and the Kansas City Fed manufacturing index (expected in at 7).

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Bloomberg Chart of Day: Gold Shines Most in September on Seasonal Buys


BLOOMBERG CHART OF THE DAY – September Sees 3% Gains Over 20 Years

Gold investors hurting from recent price falls and a long period of consolidation will be encouraged by the historical record and research and showing gold performs best in September.

The BLOOMBERG CHART OF THE DAY shows bullion averaged gains of 3% each September over the past 20 years, beating next best month November, when prices rose an average 1.8% according to Bloomberg based on a market update by GoldCore. We covered gold’s seasonality and gold’s best performing months here.

Buying increases with India’s festival period, which runs from late August to October and is followed by the wedding season. At these times, bullion is bought for part of the bridal trousseau or in jewelry and bar form as gifts from relatives.

Chinese purchases may also increase toward year-end, before the country’s Lunar New Year celebration in February. China  replaced India as the largest gold buyer in 2013.

“Indian jewelers and dealers will be stocking up in the coming weeks, so it should affect prices,” said Mark O’Byrne, a director at brokerage GoldCore Ltd. in Dublin.

“A lot of traders are aware of this trend towards seasonal strength, so that may contribute to higher prices. They tend to buy and that creates momentum.”

See Gold’s Sweet Spot – Strongest Months Are August, September, November And January here

Gold in U.S. Dollars – 2 Years (Thomson Reuters)

This morning gold in Singapore ticked higher to $1,285/oz and gold in London has been bid higher to $1,293/oz.

Gold is now trading above its 200 moving average of $1284, and the gold price remains relatively strong despite a stronger dollar, rallying equity market indexes, and a relative easing of geopolitical tensions. Geopolitical risk remains heightened and yet complacency remains extremely high.

The gold/silver ratio is currently 66.10, near its one year high showing silver remaining very good value versus gold.


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Submitted by Mike Krieger via Liberty Blitzkrieg blog,

The relationship between those who are constantly watched and tracked, and those who watch and track them, is the relationship between masters and slaves.

– Chris Hedges

Below you will find an extremely powerful and inspiring speech by Chris Hedges. The award winning journalist has been ahead of the curve on many issues of national and global importance, including being one of the earliest critics of the Iraq war. Chris has an unshakable moral compass and a passion to match it. He has been a shining light in a sea of darkness and cowardice when it comes to public figures speaking truth to power, including having led the charge to sue the Obama administration on the right to imprison American citizens without trial.

Thank you for all you do, Chris.

 

Here is Chris Hedges' infamous comparison of two frightening visions of the future…

The two greatest visions of a future dystopia were George Orwell’s “1984” and Aldous Huxley’s “Brave New World.” The debate, between those who watched our descent towards corporate totalitarianism, was who was right. Would we be, as Orwell wrote, dominated by a repressive surveillance and security state that used crude and violent forms of control? Or would we be, as Huxley envisioned, entranced by entertainment and spectacle, captivated by technology and seduced by profligate consumption to embrace our own oppression? It turns out Orwell and Huxley were both right. Huxley saw the first stage of our enslavement. Orwell saw the second.

 

We have been gradually disempowered by a corporate state that, as Huxley foresaw, seduced and manipulated us through sensual gratification, cheap mass-produced goods, boundless credit, political theater and amusement. While we were entertained, the regulations that once kept predatory corporate power in check were dismantled, the laws that once protected us were rewritten and we were impoverished. Now that credit is drying up, good jobs for the working class are gone forever and mass-produced goods are unaffordable, we find ourselves transported from “Brave New World” to “1984.” The state, crippled by massive deficits, endless war and corporate malfeasance, is sliding toward bankruptcy. It is time for Big Brother to take over from Huxley’s feelies, the orgy-porgy and the centrifugal bumble-puppy. We are moving from a society where we are skillfully manipulated by lies and illusions to one where we are overtly controlled. 

 

…

 

The corporate state does not find its expression in a demagogue or charismatic leader. It is defined by the anonymity and facelessness of the corporation. Corporations, who hire attractive spokespeople like Barack Obama, control the uses of science, technology, education and mass communication. They control the messages in movies and television. And, as in “Brave New World,” they use these tools of communication to bolster tyranny. Our systems of mass communication, as Wolin writes, “block out, eliminate whatever might introduce qualification, ambiguity, or dialogue, anything that might weaken or complicate the holistic force of their creation, to its total impression.”

 

The result is a monochromatic system of information. Celebrity courtiers, masquerading as journalists, experts and specialists, identify our problems and patiently explain the parameters. All those who argue outside the imposed parameters are dismissed as irrelevant cranks, extremists or members of a radical left. Prescient social critics, from Ralph Nader to Noam Chomsky, are banished. Acceptable opinions have a range of A to B. The culture, under the tutelage of these corporate courtiers, becomes, as Huxley noted, a world of cheerful conformity, as well as an endless and finally fatal optimism. We busy ourselves buying products that promise to change our lives, make us more beautiful, confident or successful as we are steadily stripped of rights, money and influence. All messages we receive through these systems of communication, whether on the nightly news or talk shows like “Oprah,” promise a brighter, happier tomorrow. And this, as Wolin points out, is “the same ideology that invites corporate executives to exaggerate profits and conceal losses, but always with a sunny face.” We have been entranced, as Wolin writes, by “continuous technological advances” that “encourage elaborate fantasies of individual prowess, eternal youthfulness, beauty through surgery, actions measured in nanoseconds: a dream-laden culture of ever-expanding control and possibility, whose denizens are prone to fantasies because the vast majority have imagination but little scientific knowledge.”

 

Our manufacturing base has been dismantled. Speculators and swindlers have looted the U.S. Treasury and stolen billions from small shareholders who had set aside money for retirement or college. Civil liberties, including habeas corpus and protection from warrantless wiretapping, have been taken away. Basic services, including public education and health care, have been handed over to the corporations to exploit for profit. The few who raise voices of dissent, who refuse to engage in the corporate happy talk, are derided by the corporate establishment as freaks.

 

…

 

The façade is crumbling. And as more and more people realize that they have been used and robbed, we will move swiftly from Huxley’s “Brave New World” to Orwell’s “1984.” The public, at some point, will have to face some very unpleasant truths. The good-paying jobs are not coming back. The largest deficits in human history mean that we are trapped in a debt peonage system that will be used by the corporate state to eradicate the last vestiges of social protection for citizens, including Social Security. The state has devolved from a capitalist democracy to neo-feudalism. And when these truths become apparent, anger will replace the corporate-imposed cheerful conformity. The bleakness of our post-industrial pockets, where some 40 million Americans live in a state of poverty and tens of millions in a category called “near poverty,” coupled with the lack of credit to save families from foreclosures, bank repossessions and bankruptcy from medical bills, means that inverted totalitarianism will no longer work.

 

…

 

The noose is tightening. The era of amusement is being replaced by the era of repression. Tens of millions of citizens have had their e-mails and phone records turned over to the government. We are the most monitored and spied-on citizenry in human history. Many of us have our daily routine caught on dozens of security cameras. Our proclivities and habits are recorded on the Internet. Our profiles are electronically generated. Our bodies are patted down at airports and filmed by scanners. And public service announcements, car inspection stickers, and public transportation posters constantly urge us to report suspicious activity. The enemy is everywhere.

 

…

 

“Do you begin to see, then, what kind of world we are creating?” Orwell wrote. “It is the exact opposite of the stupid hedonistic Utopias that the old reformers imagined. A world of fear and treachery and torment, a world of trampling and being trampled upon, a world which will grow not less but more merciless as it refines itself.”

And while Hedges nails it, we leave it to Emmet Scott to sum up the present in relation to Huxley and Orwell's prophecies:

The most striking parallel of course is that both men foresaw the future as totalitarian rather than democratic and free. Neither presumably believed their vision of the future to be inevitable, though it is equally clear that each saw aspects of mid-twentieth century life which clearly pointed in the totalitarian direction. Thus 1984 and Brave New World may be seen as warnings against what might be if the trends identified by the two authors persisted. What these trends were and why the authors saw them leading towards totalitarianism is an important question and one that will be addressed presently.

 

The totalitarian states described by Orwell and Huxley differed in most details, though there were also many correspondences. Both Big Brother’s world and the Brave New World are ruled by authoritarian elites of a basically socialist/communist nature, whose only real purpose is the maintenance of their own power and privileges.

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By EconMatters

 

Italy 10-Year Bond Yield

Greece 10-Year Bond Yield

 

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Yesterday, as the S&P closed above 2,000 for the first time, mainstream media pundits were trotted out to proclaim that either “stocks are ‘fairly’ valued” or “stocks are cheap” and the “money on the sidelines” must come in now. Aside from the ‘idiocy’ of the last comment, we thought BMO’s Jack Ablin’s comments were of note. “Valuation is the market’s biggest headwind,” he wrote, adding that sales “have to catch up” for stocks to sustain the rally. One glimpse at the following chart and it is clear that not only are stocks “not cheap” or “not fair” they are extremely rich with the only fall-back now being that “they’re not as expensive as they were at the top of the biggest bubble in stocks ever.”

 

 

 

Seems like BTFATH makes perfect sense in that light…

Source: Bloomberg

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Submitted by David Stockman via Contra Corner blog,

America’s spanker-in-chief is at it again – threatening to bomb Syria owing to the uncivilized actions of its inhabitants. And when it comes to Syria, Washington avers that there are punishable malefactors virtually everywhere within its borders.

Exactly one year ago Obama proposed to take Bashir Assad to the woodshed because he had allegedly unleashed a vicious chemical attack on his own citizens. That was all pretext, of course, because even the CIA refused to sign-off on the flimsy case for Assad’s culpability at the time—-a reluctance corroborated since then by the considerable evidence that hundreds of Syrian civilians were murdered during a false flag operation staged by the rebels with help from Turkey. The aim of the rebels, of course, was to activate American tomahawk missiles and bombers in behalf of “regime change”, which was also the stated goal of the Obama Administration.

Now the White House is threatening to bomb Syria again, but this time its “regime change” objective has been expanded to include both sides! In 12 short months what had been the allegedly heroic Sunni opposition to the “brutal rule” of the Assad/Alawite minority has transmuted into the “greatest terrorist threat ever”, according to the Secretary of Defense.

So Obama has already unleashed the drones and surveillance apparatus to identify targets of attack that will help bring down a regime in northern and eastern Syria—the so-called Islamic State—which did not even exist a year ago. And a regime that is now armed to the teeth with America’s own latest and greatest weaponry as previously supplied to the disintegrated Iraqi army and the Syrian rebels trained by the CIA in Jordan.

Adding to this blinding farce is the warning of Syria’s Foreign Affairs minister that Obama should please to request permission before he rains destruction from the sky on the Opposition—-that is, the opposition to the very same Damascus regime which the White House has vowed to eradicate. Needless to say,  the Washington apparatus is having nothing to do with aiding the enemy of its new enemy:

White House spokesman Josh Earnest on Monday tried to tamp down the notion that action against the Islamic State group could bolster Assad, saying, “We’re not interested in trying to help the Assad regime.” However, he acknowledged that “there are a lot of cross pressures

In fact, there is apparently an option emerging from the bowels of the war machine that calls for an odd/even day plan to bomb both sides, thereby making clear that Washington is an equal opportunity spanker. Apparently, whether you use a 12th century sword or 20th century attack helicopter as a means of rule, you will be bombed by the “indispensable nation”, as Obama put it, adding that “no other nation can do what we do”.

Well, that involves some “doing”. According to AP, it appears that Syrian airstrikes are imminent, but could be carried out under the odd/even day plan:

“In an effort to avoid unintentionally strengthening the Syrian government, the White House could seek to balance strikes against the Islamic State with attacks on Assad regime targets.”

Is any more evidence needed that Washington has gone stark raving mad than even the possibility that such an absurd option could  be under consideration? Has not the imperial city on the Potomac become so inured to its pretensions of global hegemony and to instant resort to deployment of its war machine that any semblance of rationality and coherence has been dissolved?

Indeed, in the context of Syria’s fractured and riven tribal, religious and political splinters how could anyone in their right mind think that a bombing campaign without boots on the ground will accomplish anything other than function as a potent recruiting tool for ISIS, and a generator of jihadist blowback for years to come. By the same token, the White House’s polling machine surely documents that an outright Iraq-style invasion of the Islamic State is overwhelmingly opposed by the American people, and rightly so.

Accordingly, the silly, hapless man in the Oval Office stumbles forward, apparently unaware that he’s not merely playing video games during his sojourns in the Situation Room. Indeed, the make-believe “nuanced” bombing options that are likely to be ground out by the national security machinery are destined to fail and drag Washington ever deeper into the violent cauldron of Mesopotamia and the Levant. The trillions of treasure wasted, the millions of lives lost and the venomous tribal enmities resulting from Washington’s misbegotten ventures in Iraq and Afghanistan provide all the proof that is needed.

The fact is, the artificial states created by the Sykes-Picot map drawn up by the French and British foreign offices in 1916—- as they carved up the Ottoman empire— are now destined for the dustbin of history. The fracturing remnants of Syria and Iraq cannot be fused back together by means of lethal deposits of metal and chemicals delivered by tomahawks and F-16s.

So let the region rearrange itself without Washington’s unwelcome meddling and mayhem. If Turkey and an independent Kurdistan can make mutually acceptable political and economic arrangements, which are already well-advanced, so be it. If the Shiite south in Iraq and the  Alawite/Shiite southwest in Syria break-off from their present Europe-bequeathed boundaries and form independent regimes, how does that jeopardize the safety and security of the citizens of Lincoln NE and Spokane WA?

And, yes, if the Islamic State temporarily manages to coalesce within the Sunni lands of the Euphrates Valley and the upper Tigress why is that really a national security threat which requires launching an unwinnable war, a new round of hostility to America in the Islamic world and the blowback of legions of jihadi with a score to settle?

Now that you know about the Yazidis, did you ever hear of the Sheitaat tribe of Sunnis who inhabit the minor oil province around Deir al-Zor in northeastern Syria?  There appear to be about 100,000 members of that sect in the region and they have been declared apostates by the medieval butchers who run ISIS:

Hundreds of members of the Sheitaat clan have been executed after their tribe refused to submit to Islamic State. The entire tribe have been deemed “hostile apostates” by the group, an offshoot of al Qaeda that has declared a “caliphate” in the territory it holds.

 

Islamic State has declared the Sheitaat tribe “an unbelieving sect” that should be fought as if they were infidels, according to a report from the Syrian Observatory for Human Rights, which tracks violence in the Syrian war.

 

At least 700 hundred members of the tribe have already been executed, the Observatory reported on Aug. 16.

 

Another 1,800 are still missing after being detained by Islamic State, according to the Observatory, which gathers information from all sides in the Syrian war. Its efforts to pledge allegiance to Islamic State have been rebuffed.

 

Pictures of the bodies of men apparently slain by Islamic State fighters in Sheitaat areas are surfacing every day, said Rami Abdelrahman, founder of the Observatory. “We have repeatedly expressed concerns about extermination,” he said.

 

“It is the first time that the Islamic State has used these (religious) concepts against an entire tribe,” he said.

 

Three Sheitaat villages seized by Islamic State have been designated as a military zone, the rebel and another activist from the area said. The clan’s property and livestock have also been seized, another person from the area said.

 

Islamic State has declared that no truce is possible with the Sheitaat, that its prisoners can be killed, and its women are unfit for marriage, according to the Observatory.

 

“We’re still seeing Islamic State trucks loaded up with furniture and rugs from Sheitaat homes in those villages, which are now totally abandoned,” said one person from the area contacted by internet link, speaking on condition of anonymity.

 

Islamic State has started to use house demolitions as a punishment. A video posted over the weekend shows what appears to be the detonation of a rural home as the narrator, who identifies himself as from Islamic State, explains that the home belongs to Sheitaat “apostates”.

Why would you believe that a viable state can be built in today’s world on the tactics of Genghis Kahn? The Islamic State, such as it is, is not rich, does not have enough oil to make a difference, will soon be bogged down in the insuperable problems of governance by the sword and will flounder on the impoverished economics of the dusty villages and desert expanse which comprise its natural territory. And it will eventually mobilize its neighbors—-Turkey, Hezbollah, the rump regime of Assad’s Alawite Syria, Kurdistan, the Shiite alliance of Iran and lower Iraq, and even Saudi Arabia and the oil sheikdoms—to contain its external ambitions.

So Washington should call off the bombers and get out of harm’s way. The American Imperium has failed and the prospect of bombing both sides of an irrelevant non-country’s ancient tribal wars ought, at last, to make that much clear.

via Zero Hedge http://ift.tt/1tLWyat Tyler Durden