Month: August 2014

Following the ‘success’ of the first humanitarian convoy, Bloomberg reports that Russian foreign minister Sergei Lavrov said the nation plans to send a second convoy loaded with humanitarian aid to Ukraine. he U.S. and the European Union condemned the decision to send the first convoy of about 280 trucks, which the government in Kiev called an “invasion,” and the US accused Russia of painting military vehicles white. This time will be different, according to Lavrov, as the government in Moscow is maneuvering to avoid the border standoff and uproar that marred its first convoy last week, adding “We’ll work on ensuring security guarantees from the side of the militias.” Ironically, Lavrov also reminded a “disinformation”-prone media that Russia remains the only nation that continues to seek an MH17 probe as Ukraine has still not released Dnipropetrovsk air traffic control recordings.

 

As Bloomberg reports,

Russia has informed Ukraine of plans to dispatch another column of trucks this week, with the convoy taking the same route through rebel-held territory as the tractor-trailers that returned to Russia two days ago, Lavrov told reporters in Moscow today.

 

The U.S. and the European Union condemned the decision to send the first convoy of about 280 trucks, which the government in Kiev called an “invasion.”

“We want to coordinate our actions with Ukrainian authorities, which are also planning to send additional humanitarian aid to the southeast,” Lavrov said. “We’ll work on ensuring security guarantees from the side of the militias.”

 

The government in Moscow is maneuvering to avoid the border standoff and uproar that marred its first convoy last week.

But we are sure the US will spin this one way or another…

Lavrov said he had no information about the incident and accused Ukraine of providing “a lot of disinformation about our invasions.”

Furthermore, Lavrov notes, Russia Is Only Country Seeking MH17 Incident Probe

Those who accused Russia over Malaysian airplane crash in Ukraine are now silent, Russian Foreign Minister Sergei Lavrov says at briefing in Moscow.

 

“In substance we are the only ones trying to keep attention on this very serious problem”: Lavrov

 

Ukraine is not providing Dnipropetrovsk air traffic control recordings: Lavrov

Ukraine, it would appear remains mired in problems… despite the market’s pricing-in de-escalation…

Speaking at the parade in Kiev, President Petro Poroshenko announced a military spending increase, pledging to allocate more than 40 billion hryvnia ($3 billion) in 2015-2017.

 

“Unfortunately, there will always be a military threat to Ukraine,” Poroshenko said. “War has come from the side nobody expected.”

 

German Chancellor Angela Merkel, who met Poroshenko in Kiev two days ago, said a breakthrough is unlikely at talks between him and Russian President Vladimir Putin tomorrow.

 

The meeting won’t bring about “one big breakthrough” though “you have to talk with each other if you want to find solutions,” Merkel said in an interview with Germany’s ARD television yesterday.

*  *  *

But stocks are at record highs?

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After a week of punishment, precious metals are kneejerking higher this morning on the heels of a Citi FX note explaining they are cutting all USD longs – “This is an opportunistic exit as we feel we may be due for a squeeze of USD long positions similar to what happened at this point in the cycle last year.” The USD Index is sliding quickly and Treasury yields inched higher (but remain -1.5bps despite equity strength).

The USD Index is slding..

 

and PMs are moving higher…

 

Charts: Bloomberg

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Key highlights in the coming week: US Durable Goods, Michigan Conf., Services PMI, PCE, and CPI in Euro area and Japan. Broken down by day: Monday – US Services PMI, New Home Sales (Consensus 4.7%); Singapore CPI; Tuesday – US Durable Goods (consensus 7.5%) and Consumer Confidence; Wednesday – Germany GfK Consumer Confidence; Thursday – US GDP 2Q (2nd est., expect 3.70%, below consensus) and Personal Consumption; Euro area Confidence; CPI in Germany and Spain; Friday – US Michigan Conf. (consensus 80.1), PCE (consensus 0.10%), Chicago PMI; Core CPI in Euro area and Japan (consensus 2.30%). Additionally, with a long weekend in the US coming up, expect volumes into the close of the week to slump below even recent near-record lows observed recently as the CYNKing of the S&P 500 goes into overdrive.

And the daily breakdown from Goldman Sachs:

Monday, August 25

• Events: US states congressional primary elections, Danish Finance Ministry Statement Release, Portugal Budget Report.
• United States | Markit US Services PMI (Aug P): Consensus 57.0, previous 60.8
• United States | New Home Sales MoM (Jul): GS 3.00%, consensus 4.70%, previous -8.10%
• United States | Dallas Fed Manf. Activity (Aug): Consensus 13, previous 12.7
• Singapore | CPI NSA MoM (Jul): Consensus 0.40% (2.00% yoy), previous -0.70% (1.80% yoy)
• Taiwan | [MAP 4] Industrial Production YoY (Jul): Consensus 4.90%, previous 8.63%
• Israel | MP Decision: We expect rates on hold (at 0.50%, in line with consensus) and do not expect any unconventional policy measures. Market pricing points to a 30% probability of a rate cut over the following three months. We believe the tone of the statement will remain dovish and highlight the soft July CPI print and the recent decline in inflation expectations. Regarding more ‘hawkish’ points, it will be interesting to see whether the Bank discusses the recent pick-up in credit growth and the development in financial stability risks.
• Peru | [MAP 5] GDP YoY (2Q): GS 1.50%, consensus 1.80%, previous 4.80%
• Also interesting: [DM] US Markit Composite PMI; Germany IFO Expectations; Spain PPI [EM] Hong Kong Trade Balance; India CA; Taiwan Money Supply; Czech Republic Consumer Confidence; Israel Unemployment; Brazil Trade Balance and Consumer Confidence; Mexico CA and Retail Sales.

Tuesday, August 26

• United States | Durable Goods Orders (Jul): GS 23.60%, consensus 7.60%, previous (r) 1.70%
• United States | [MAP 4] Durables Ex Transportation (Jul): GS 1.00%, consensus 0.50%, previous (r) 1.90%
• United States | [MAP 3] Consumer Confidence Index (Aug): GS 88.5, consensus 88.5, previous 90.9
• United States | [MAP 1] Richmond Fed Manufact. Index (Aug): Consensus 8, previous 7
• Singapore | [MAP 5] Industrial Production YoY (Jul): Consensus 3.70% (2.40% mom), previous 0.40% (-0.10% mom)
• Hungary | MP Decision: We expect rates on hold (at 2.10%, in line with consensus), with the base rate unchanged for the first time after a two-year-long easing cycle, which reduced the base rate by a cumulative 490bp. The MPC signaled an end of the easing cycle after the latest, 20bp cut in July. At that time, the MPC said that policy rates were low enough to stimulate growth and ensure the return of inflation to the target in the medium term.
• South Africa | GDP YoY (2Q): Consensus 1.20%, previous 1.60% (-0.60% qoq)
• Also interesting: [DM] US FHFA House Price Index and S&P/CaseShiller Home Price Index; Sweden PPI; Japan PPI and Small Business Confidence; New Zealand Trade Balance [EM] Philippines Trade Balance; Poland Retail Sales and Unemployment; Brazil Total Outstanding Loans.

Wednesday, August 27

• Germany | GfK Consumer Confidence (Sep): Consensus 9, previous 9
• Turkey | MP Decision: We expect a 25bp cut in the benchmark repo rate (to 8.00%, above consensus 7.88%) and in the overnight borrowing rate to 7.25% (below consensus 7.50%). We do not, however, expect any change to the overnight lending rate (in line with consensus). The language will probably be balanced but still leave the door open to further easing. The risk to our forecast would be on the downside (‘on hold’), should market conditions deteriorate further in the run-up to the MPC meeting.
• Also interesting: [DM] US MBA Mortgage Applications; Italy Consumer Confidence; Norway Unemployment; Sweden Trade Balance and Economic Tendency Survey; Switzerland UBS Consumption Indicator; Australia Construction Work Done; New Zealand Food Price Index [EM] Taiwan Leading Index; Hungary Unemployment; Mexico Trade Balance.

Thursday, August 28

• Events: Speeches by ECB’s Liikanen, Poland Central Bank’s Belka.
• United States | [MAP 4] GDP Annualized QoQ (2Q S): GS 3.70%, consensus 3.90%, previous 4.00%
• United States | Personal Consumption (2Q S): GS 2.40%, consensus 2.40%, previous 2.50%
• United States | [MAP 2] Pending Home Sales MoM (Jul): Consensus 0.50%, previous -1.10% (-4.50% yoy)
• Euro area | [MAP 4] Consumer Confidence (Aug F): Previous -10
• Euro area | [MAP 4] Business Climate Indicator (Aug): Previous 0.17
• Germany | CPI EU Harmonized MoM (Aug P): Consensus 0.00% (0.80% yoy), previous 0.30% (0.80% yoy)
• Spain | GDP QoQ (2Q F): Previous 0.60% (1.20%)
• Spain | CPI EU Harmonised YoY (Aug P): Previous -0.40%
• Philippines | [MAP 5] GDP YoY (2Q): Consensus 6.10% (2.20% qoq), previous 5.70% (1.20% qoq)
• Also interesting: [DM] US Jobless and Continuing Claims and Kansas Fed Manf. Activity; Canada Current Account; Euro area Money Supply and Economic and Industrial Confidence; Denmark Unemployment; Germany Unemployment; Italy Retail Sales, Business Confidence and Hourly Wages; Sweden Retail Sales; UK CBI Reported Sales; Australia Private Capital Expenditure [EM] China Industrial Profits; Hong Kong Retail Sales; South Korea CA; Thailand Capacity Utilization and Manufacturing Production Index; Hungary PPI; South Africa PPI; Turkey Consumer Confidence; Brazil Budget Balance.

 
Friday, August 29

• United States | [MAP 4] Chicago Purchasing Manager (Aug): GS 57.0, consensus 56.5, previous 52.6
• United States | [MAP 1] Univ. of Michigan Confidence (Aug F): GS 80.3, consensus 80.1, previous 79.2
• United States | [MAP 1] Personal Spending (Jul): GS 0.10%, consensus 0.20%, previous 0.40%
• United States | PCE Deflator MoM (Jul): GS 0.10%, consensus 0.10% (1.60% yoy), previous 0.20% (1.60% yoy)
• Canada | [MAP 5] Quarterly GDP Annualized (2Q): Consensus 2.60% (0.20% mom), previous 1.20% (0.40% mom, 2.30% yoy)
• Canada | Consumer Price Index (Jul): Consensus 125.9, previous 125.9
• Euro area | CPI Core YoY (Aug A): Consensus 0.80%, previous 0.80%
• Italy | CPI EU Harmonized MoM (Aug P): Previous -2.10% (0.00% yoy)
• Italy | GDP WDA QoQ (2Q F): Previous -0.20% (-0.30% yoy)
• Japan | Natl CPI Ex Food, Energy YoY (Jul): GS 2.30%, consensus 2.30%, previous 2.30%
• Japan | Industrial Production MoM (Jul P): GS 0.80%, consensus 1.00% (-0.10% yoy), previous -3.40% (3.10% yoy)
• India | [MAP 5] GDP YoY (2Q): GS 5.30%, previous 4.60%
• South Korea | [MAP 5] Industrial Production YoY (Jul): GS (0.00% mom s.a.), consensus 1.80% (0.20% mom), previous 0.60% (2.90% yoy)
• Czech Republic | [MAP 5] GDP YoY (2Q P): Previous 2.60% (0.00% qoq)
• Poland | [MAP 5] GDP YoY (2Q F): Previous 3.20% (0.60% qoq)
• Argentina | [MAP 4] Industrial Production YoY (Jul): Previous -0.30% (2.10% mom)
• Brazil | [MAP 5] GDP YoY (2Q): GS 0.10%, consensus -0.30% (-0.40% qoq), previous 1.90% (0.20% qoq)
• Chile | [MAP 4] Manufacturing Index YoY (Jul): GS -2.00%, previous -0.70%
• Colombia | MP Decision: We expect a 25bp hike (in the Overnight Lending Rate to 4.50%, in line with consensus). This hike would be the fifth consecutive rate hike, and we expect the policy statement to signal a pause in the tightening cycle. The July minutes showed that the MPC is somewhat divided with respect to the cyclical position of the economy and the appropriate stance of monetary policy.
• Also interesting: [DM] Euro area Unemployment; Denmark GDP; France PPI; Norway Unemployment; Spain CA and Retail Sales; UK GfK Consumer Confidence and Hometrack Housing Survey; Japan Housing Starts, Construction Orders, Vehicle Production, Jobless Rate, Overall Household Spending and Retail Trade; Australia Private Credit; New Zealand Building Permits, ANZ Business Confidence and Credit Growth [EM] South Korea Business Survey; Thailand Trade Balance; South Africa Trade Balance and Private Sector Credit; Turkey Trade Balance; Argentina Construction Activity; Brazil Fiscal Balance; Chile Unemployment, Retail Sales and Copper Production; Colombia Unemployment; Mexico Unemployment and Bank Lending.

Source: BofA, Goldman Sachs

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Earlier this morning, those expecting an out of control European deflationary tumble got one step closer to their goal when French President Francois Hollande asked his prime minister, who only assumed the post a few short months ago in March, to form a new government, following what Reuters reported was him “looking to impose his will on the cabinet after rebel leftist ministers had called for an economic policy U-turn” spearheaded by economy minister Arnaud Montebourg demanding an end to French “austerity.” The Guardian is somewhat more direct and to the point: “France has entered uncharted political waters after the prime minister, Manuel Valls, presented his government’s resignation amid a political crisis triggered by his maverick economy minister who called for an end to austerity policies imposed by Germany.”

In short: just days after we reported that trouble was brewing in socialist paradise, when the rating of Venezuela’s Maduro tumbled to all-time lows, socialism is once again in turmoil, this time in France.

The details:

The prime minister, a social democrat who has been compared to Tony Blair, acted with characteristic swiftness in a bid to reassert his authority. His aides had let it be known on Sunday that the economy minister, Arnaud Montebourg, had crossed a “yellow line” for his dual crime of criticising both the president of France and a valued ally.

 

Montebourg, 51, fired his first broadside in an interview with Le Monde on Saturday and followed up with a speech to a Socialist party rally the following day. In a veiled reference to President François Hollande, he said that conformism was an enemy and “my enemy is governing”. “France is a free country which shouldn’t be aligning itself with the obsessions of the German right,” he said, urging a “just and sane resistance”.

 

He was joined in his criticism by the education minister Benoit Hamon, who on Monday denied that he had been disloyal. A third minister, Aurélie Filipetti, also appeared in danger of losing her job after wishing a “good day” on Twitter to her two dissident colleagues.

Perhaps in an ironic case of poetic justice, she will also be terminated via Twitter? Meanwhile, nothing changes for France where other people’s money appears to have run out:

Hollande, who is politically weakened with his approval rating at an all-time low of 17%, asked Valls to form a new government “consistent with the direction set for the country”, which is expected to be announced on Tuesday. Valls has pledged to stick to a course in which deficits would be cut while the tax burden on businesses would be eased, bringing him into conflict with the left wing of the party represented by Montebourg. The changes have not yet been carried out, unemployment is at nearly 11% and growth in 2014 is forecast to be only 0.5%.

 

Now, with the fragmentation of the left bursting into the open, Montebourg is scheduled to deliver a speech later on Monday.

 

Centre-right politicians had called for the economy minister to step down, while some Socialists recognised that it was illogical for an economy minister to attack his own government’s economic policies. The National Front is demanding the dissolution of parliament.

 

The challenge for Valls will be to put together a government that can win the approval of the national assembly, despite the revolt by the Socialist party’s left flank and desertion by the ecologists.

There is some hope that not every minister will become a ward of the state:

Analysts said that Valls was likely to keep Hollande loyalists in the cabinet, including the finance minister, Michel Sapin, the agriculture minister, Stephane Le Foll, and the defence minister, Yves Le Drian. But the justice minister, Christiane Taubira, could be among those to pay the price of falling out with Valls.

 

It remains to be seen whether Valls, who became prime minister in March, will be allowed more leeway in forming his new government, compared with the outgoing cabinet that reflected the internal contradictions of Hollande himself. Le Parisien reported on Monday that he had said to Hollande “it’s him or me”. referring to Montebourg.

Finally, it is not just the left that is turmoiling. So are the moderates on the center/right:

The crisis is unfolding as politicians already have an eye on the next presidential elections in 2017. Montebourg may now see himself as the flag-bearer of the left, while Valls until now has remained popular in the country as a whole although his popularity ratings have also shrunk.

 

The centre-right UMP is also in crisis, however. Former president Nicolas Sarkozy has not yet announced whether he intends to run although he is widely expected to do so. But former prime minister Alain Juppé, mayor of Bordeaux, and former agriculture minister Bruno Lemaire , have said in the last few days that they would take part in a primary.

The biggest winner from the latest socialist fiasco: the extreme, far right National Front, whose leader Marine Le Pen was one of the biggest winners in this year’s European Parliament elections. And so Europe once again goes full circle as the rise of nationalism inevitably follows the now cyclical economic collapse which follows Europe every few decades.

Meanwhile, European stocks soar thanks to both this, and the weaker than expected German IFO Business Climate print, as an out of control European deflationary collapse simply means more “easing” by the ECB (if only for the 1%), which after already being backlogged by the previously announced OMT, TLTRO, and ABS, now has QE on its “to do” list as well.

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• Jackson Hole Theme: Labor Markets Can’t Take Higher Rates (BBG), or anything else for that matter
• Kidnappers free American missing in Syria since 2012 (Reuters)
• More unpatriots: Burger King in merger talks with Canada’s Tim Hortons (Reuters)
• California Quake to Cost Insurers Up to $1 Billion, Eqecat Says (BBG)
• Congo declares Ebola outbreak in northern Equateur province (Reuters)
• Missouri Governor Defends Ferguson Prosecutor (BBG)
• Kuroda Douses Japan Stimulus Expectations (WSJ)
• London Jihadi Call Vies With Banks in Canary Wharf Shadow (BBG)
• Netanyahu Signals Expansion of Air Attacks in Gaza (WSJ)
• Libya’s Islamist Militias Claim Control of Tripoli (WSJ)
• Iceland Monitors Tremors After Retracting Eruption Alert (BBG)
• Dutch Rage Over MH17 Strengthens Rutte in Putin Standoff (BBG)
• Roche to Acquire InterMune for $8.3 Billion (WSJ)
• McDonald’s Faces ‘Millennial’ Challenge (BBG)
• Syria says ready to cooperate in anti-terror fight (Reuters)

 

Overnight Media Digest

WSJ

* Burger King is in talks to buy Canadian coffee-and-doughnut chain Tim Hortons Inc, a deal that would be structured as a so-called tax inversion and move the hamburger seller’s base to Canada. (http://on.wsj.com/1pvlPWa)

* The extremist group Islamic State captured a major air base in northeastern Syria, marking another strategic gain and an end to any presence of Syrian regime forces in the province of Raqqa. (http://on.wsj.com/1t5lZWN)

* Roche Holding AG agreed to buy biotech company InterMune Inc for $8.3 billion in cash, the biggest acquisition in years for the Swiss pharmaceutical giant. (http://on.wsj.com/1tuYCEB)

* Federal Reserve officials are signaling they are on track to start slowly raising interest rates next year, a shift that means a delicate balancing act for investors.(http://on.wsj.com/1vdlKcK)

* Valeant Pharmaceuticals International Inc and William Ackman are seeking a judge’s help to speed up their $53 billion hostile takeover bid for Allergan Inc in hopes of overturning the Botox maker’s board before the company can strike a deal of its own. (http://on.wsj.com/XKZMAn)

* Best-selling novel “The Goldfinch” is giving Hachette Book Group a much-needed boost this summer as the publisher weathers the fallout from a lengthy e-book contract dispute with Amazon.com Inc. (http://on.wsj.com/1vdmvmk)

* Goldman Sachs Group Inc is likely to bestow its prestigious partner designation, which often comes with millions of dollars in annual pay, on no more than 70 employees, the Wall Street Journal reported, citing people familiar with the matter.(http://on.wsj.com/1qEPfxb)

* General Motors Co is considering whether to delay the expansion of its Russian plant near St. Petersburg amid lackluster sales and weakening consumer sentiment.(http://on.wsj.com/1ru8srT)

* Private-equity firm Oak Hill Capital Partners reached a deal over the weekend to acquire Berlin Packaging LLC for $1.43 billion including debt, said people familiar with the matter.(http://on.wsj.com/1smGaeK)

* President Obama faces pressure at home and in the Middle East to quickly step up strikes at Islamic State militants, but also reluctance from some within his own party and European allies to do so.(http://on.wsj.com/1qeHoKj)

* Engine Capital LP, which along with a partner controls more than 1 percent of ANN Inc stock, believes a strategic or private-equity buyer would be willing to pay between $50 and $55 a share for the women’s retailer, 47 percent above Friday’s closing price of $37.52 at the high end, according to people familiar with the matter.(http://on.wsj.com/YSWew3)

 

NYT

* Companies like Box Inc <IPO-BOX.N>, Dropbox and Hightail pioneered a new kind of internet service that allows people and companies to store all kinds of electronic files in an easy-to-use online locker. But as often happens, the much bigger companies like Amazon.com Inc and Google Inc liked the idea so much they decided to do the same thing, at a much lower price. To tackle the price issue, Box is trying to cater to special data storage needs, Hightail is trying to do something similar for customers like law firms, and Dropbox is trying to make sure that its consumer-minded service stays easier to use than what the big guys provide. (http://nyti.ms/1tJr3g8)

* Burger King Worldwide Inc may be home of the Whopper. But the fast-food chain may soon start calling Canada its new corporate residence. The restaurant operator said on Sunday that it is in talks to buy Tim Hortons Inc, the Canadian donut-and-coffee chain, in a potential deal that would create one of the world’s biggest fast-food chains. (http://nyti.ms/1qEV2D7)

* The Swiss drug maker Roche Holding AG agreed on Sunday to buy InterMune Inc, which sells a drug to treat a deadly lung disease, for $8.3 billion, as pharmaceutical companies continue to seek new products to bolster their offerings. (nyti.ms/1zpCn2L)

* Goldman Sachs Group Inc is paying its largest bill yet to resolve a government lawsuit related to the financial crisis. The bank said on Friday that it had agreed to buy back $3.15 billion in mortgage bonds from Federal Home Loan Mortgage Corp and Federal National Mortgage Association to end a lawsuit filed in 2011 by the Federal Housing Finance Agency, the federal regulator that oversees the two mortgage companies. The agency estimates that Goldman is paying $1.2 billion more than the bonds are now worth. (http://nyti.ms/VK6epu)

* Richard Handler, the chief executive of the Leucadia National Corp, will join the board of a new hedge fund company, Folger Hill Asset Management LLC, run by a former executive of SAC Capital Advisors, according to a regulatory filing on Friday. (http://nyti.ms/VNnGt6)

* Vogue is expected to unveil a new website on Wednesday, its latest attempt to reflect the magazine’s ethos online. Both the editor-in-chief, Anna Wintour, and the creative director for digital, Sally Singer, acknowledge that Vogue’s site has yet to fulfill its potential and hope that this revamping represents a deeper change in what it offers web and mobile readers. (http://nyti.ms/1mFXDvr)

* The German government has approved the sale of the utility RWE AG’s oil and natural gas subsidiary, RWE Dea, to a team of Russian investors, the company confirmed on Friday. (http://nyti.ms/1pWPbfZ)

* The City of Chicago and two California counties are challenging the drug industry’s way of doing business, contending in two separate lawsuits that “aggressive marketing” by five companies has fueled an epidemic of addiction and cost taxpayers millions of dollars in insurance claims and other health care costs. The lawsuits assert that drug makers urged doctors to prescribe the drugs far beyond their traditional use to treat extreme conditions, such as acute pain after surgery or injury or cancer pain, while underplaying the high risk of addiction. (http://nyti.ms/1zpJdFs)

* Medicare, which has been assigning hotel-style ratings to nearly every nursing home in the country for the last five years, has assigned a five-star rating to Rosewood Post-Acute Rehab, a nursing home in this Sacramento suburb. But an examination of the rating system by The New York Times has found that Rosewood and many other top-ranked nursing homes have been given a seal of approval that is based on incomplete information and that can seriously mislead consumers, investors and others about conditions at the homes. (http://nyti.ms/1zpP8dw)

* Now Motif Investing, a new online broker backed by JPMorgan Chase & Co, has started a product that lets investors buy stock in 25 companies viewed as potential inversion targets. (http://nyti.ms/1smRlnD)

 

Canada

THE GLOBE AND MAIL

** The Toronto Port Authority has won a key early showdown with the city on the controversial issue of expanding the island airport to allow jets. City staff are participating in an environmental assessment for the expansion without the port authority having signed off on limits on the numbers of passengers and aircraft. This comes only months after Toronto’s deputy city manager warned that agreement on that issue was “essential for moving forward.” (http://bit.ly/1mH1acQ)

** Colder summer weather across Ontario has put pressure on tourism-dependent businesses that rely on July and August to generate the bulk of their profits. The bad weather has also had an impact on the boating industry in Ontario and the marinas and gas bars that support them. (http://bit.ly/1tvz6io)

Reports in the business section:

** Bank of Canada Governor Stephen Poloz wants to make something perfectly clear: When the Federal Reserve starts raising interest rates, Canada’s central bank won’t necessarily follow immediately. “The main thing people should understand is that our policy is quite capable of being fully independent, as it has been these past few years,” Poloz said in an interview at the annual gathering of central bankers and economists at Jackson Hole, Wyoming, over the weekend. (http://bit.ly/1nsPieJ)

NATIONAL POST

** Prime Minister Stephen Harper is “on the wrong side of history” in his refusal to launch a public inquiry to study the high number of missing and murdered aboriginal women, federal Liberal Leader Justin Trudeau said on Saturday. Trudeau was in Moncton, New Brunswick, where he said the recent case of Tina Fontaine, a 15-year-old aboriginal girl found dead in Winnipeg, highlights the need to begin an inquiry. Harper said earlier this week that Fontaine’s death was a crime and should not be viewed as a “sociological phenomenon.” (http://bit.ly/1p7LVPG)

** Seeking to profit from Canada’s new medical marijuana regulations – which put the production and sale of high-grade weed into the hands of corporations and penny-stock outfits – promoters are turning to former police chiefs and prominent politicians to help sell their products and attract mom and pop investors. (http://bit.ly/1AMkLk1)

FINANCIAL POST

** Tim Hortons Inc’s coffee could soon be the property of Burger King Worldwide Inc, with the two companies confirming late Sunday night that they are in discussions for the U.S. burger chain to buy Canada’s coffee and donut chain. The big draw for Burger King, according to a report from the Wall Street Journal, is the potential for tax inversion – effectively relocating the company’s home base to Canada to take advantage of the country’s comparatively lower tax base. (http://bit.ly/XLryg9)

** Eugene Melnyk, the billionaire owner of the Ottawa Senators and founder of drugmaker Biovail Corp, is waging war against the company that now controls his one-time business. Melnyk alleges that Valeant Pharmaceuticals International Inc is masquerading as a Canadian company to make use of this country’s international fiscal treaties and dodge U.S. taxes. He predicts it will all eventually implode if American authorities claw back the taxes he believes Valeant may owe. (http://bit.ly/1t5LLKi)

 

Hong Kong

SOUTH CHINA MORNING POST

— The National People’s Congress Standing Committee kicks off a week-long meeting on Monday that will play a decisive role over whether Hong Kong will elect its new leader by one person, one vote for the first time in 2017. (bit.ly/1tJ6JM2)

— The $6.3 million lawsuit filed by Deutsche Bank against Industrial and Commercial Bank of China (ICBC) executive Zhang Hongli will hurt the German lender’s long-term relationship with the mainland bank, people who worked at Deutsche Bank at the same time as Zhang said. (bit.ly/1ok7FBV)

— Outdoor advertising firm Clear Media is looking to aggressively acquire advertising locations as the rates for bus-shelter panels on the mainland drop and small advertising firms go out of business in the economic slowdown. (bit.ly/1smc8Yp)

THE STANDARD

— MTR operations director Jacob Kam Chak-pui should not have apologized for the killing of a stray dog on the tracks before the investigation has been completed, the staff union says. The corporation does not have guidelines on how to handle animals on the track, a union spokesman said. (bit.ly/1qEvCpd)

— Five volunteers of Macau’s unofficial referendum on electoral reform, including one of its organizers, were held by police for hours after the activists ignored strong objections from Beijing. (bit.ly/1qdTxiA)

— Sound Global expects further profit growth from its wastewater treatment business in small towns, after posting a net profit of 239 million yuan ($39 million) in the first half, up 38.2 percent from the previous year. (bit.ly/1qaD7Xw)

HONG KONG ECONOMIC JOURNAL

— Tianhe Chemicals Group Ltd saw its first-half net profit surging 45 percent year on year to 1.48 billion yuan ($240.6 million) and said it would continue to expand production capacity on the mainland.

HONG KONG ECONOMIC TIMES

— Jiangsu Expressway Co Ltd said its first-half net profit fell 6.36 percent from the same period a year ago to 1.34 billion yuan ($217.85 million) while revenue rose 7.04 percent at 3.93 billion yuan.

— BYD Co Ltd , which posted a 16 percent year on year decline in first-half net profit, warned that it net profit for the January to September period may fall by 11 to 22 percent due to shrinking market share of China’s local brands and persistent losses in its solar business.

MING PAO DAILY NEWS

— ENN Energy Holdings Ltd said it had entered into a strategic cooperation framework agreement with Sinopec’s unit Sinopec Sales Co Ltd to strengthen ties in procurement and transportation of natural gas.

Britain

THE SUNDAY TIMES

BG PRIMED TO SELL TANZANIA GAS FIELD STAKE

Oil giant BG Group has quietly begun looking for a buyer for part of its prized Tanzanian operation. It is understood the company wants to sell its entire 60 percent stake in an exploration area in Tanzania known as Block 3, while holding on to Blocks 1 and 4.

BALFOUR POLISHES HIDDEN JEWELS TO SOOTHE CITY

Balfour Beatty is to embark on a City charm offensive to appease disgruntled investors – including a hike in the value of its book of infrastructure investments – after the collapse of merger talks with smaller rival Carillion.

Balfour is expected this week to pump up the value of its book of private finance initiative contracts from 766 million pounds to more than 1 billion pounds.

HAMBRO TO BARTER GOLD FOR BAILOUT

Mining veteran Peter Hambro is in talks over a bailout that would hand over future gold production to a Chinese state bank in exchange for an immediate cash injection.

Petropavlovsk, which Hambro founded in 1994, has been caught out by an ill-timed decision to take on more than $1 billion in debt to expand its eastern Siberian gold mines just as the price of the precious metal slumped.

HEDGE FUND BACKS MAN U

One of London’s top hedge funds has emerged as owner of most of the Manchester United shares recently sold by the football club’s owners, the Glazer family. Lansdowne Partners is understood to have bought about 3 percent of the 5 percent sold by the Glazers last month.

MINISTERS SEIZE CONTROLS AT NETWORK RAIL

Ministers are to tighten their grip on Network Rail, the operator of Britain’s railway network, with a package of sweeping reforms, including new powers to hire and fire its chairman and board.

The changes will be put this week to a special meeting of Network Rail’s “members”, 43 people who take the place of shareholders.

CENSURED MORTGAGE FIRM PLOTS STOCK MARKET LISTING

A specialist mortgage lender whose founder was censured by the City watchdog for “serious” failings two years ago is considering a stock market float.

Jerrold Holdings, which offers first and second charge home loans under the brands Blemain Finance, Cheshire Mortgage Corporation and Lancashire Mortgage Corporation, is considering a float or partial sale next year to provide an exit for one of its backers.

It has yet to appoint investment bankers, although it has a close relationship with Rothschild.

CHINA WANTS TO BUILD NUCLEAR PLANT IN ESSEX

China’s nuclear power giants are in early talks about building an atomic reactor on the Essex coast at Bradwell.

The site, home to a partly decommissioned Magnox power plant, has emerged as the favourite for a new Chinese-built and designed plant, industry sources said.

TATA AND GM JOIN BUSINESS RATES REVOLT

Two of the nation’s biggest industrial investors have called for reform of business rates, which contribute 22 billion pounds to the Treasury every year but are blamed for harming high streets.

General Motors, which makes Vauxhall Cars, and Tata Steel, which owns Jaguar Land Rover, said the tax on commercial property was making Britain less attractive for industry.

JUMBO HEADACHE FOR BA AS DOUBLE-DECKERS TAKE OFF LATE

British Airways’ punctuality is suffering on key routes where it has introduced the Airbus A380 superjumbo, with more than a third of BA flights from Heathrow to Hong Kong, Johannesburg and Los Angeles failing to take off on time in May and June.

THE SUNDAY TELEGRAPH

CITY POISED FOR WAVE OF FLOTATIONS AFTER SUMMER LULL

The City is gearing up for another float frenzy with a wave of listings expected to be unveiled immediately after the summer lull.

In the coming weeks, a raft of household names including Jimmy Choo, the upmarket shoe brand; RAC, the breakdown service; and United Biscuits, are preparing to announce plans to go public. Countryside, the house builder; British Car Auctions, the second-hand car seller; and Aldermore, the challenger bank, are also expected to be among the flurry of companies rushing to join the London stock market.

CLIMATE CRUSADER GORE BACKS UK POWER MINNOW’S BATTLE WITH BIG SIX

Al Gore, the former U.S. Vice President and climate change campaigner, has invested 8 million pounds in Ovo Energy, one of the UK’s fastest growing new power suppliers.

The U.S. politician-turned-investor began talks with the firm last year through his sustainable investment fund, Generation Investment Management. The mezzanine finance deal was completed in January. Mr Gore’s fund has taken a minority stake and will share in the growth of the challenger brand.

SOCGEN TO FIGHT LIBYAN CASE

Societe Generale has opted to allow a bribery case brought by Libya’s sovereign wealth fund to go to court, having previously indicated it would attempt to have the case thrown out.

The French bank is accused by the Libyan Investment Authority (LIA) of paying some $58 million in bribes to key officials in the Gaddafi regime and at the top of the fund to smooth over trades that lost the LIA hundreds of millions, in the years before Muammar Gaddafi was overthrown in 2011.

Societe Generale says it “refutes the claims which it believes are entirely without merit”.

ITSU SHARPENS CHOPSTICKS AHEAD OF AMERICAN EXPANSION PLAN

ITSU, the takeaway sushi chain, is preparing to battle the giants of the fast-food industry on their home turf, by launching its first stores in America.

The business aims to open its doors on the East Coast next year, tapping into demand for affordable, healthy food, which founder Julian Metcalfe says has been largely ignored by the fast-food giants.

GYM CHAIN GETS READY FOR SALE

Gym group LA Fitness has hired a private equity specialist as its new chairman, fuelling speculation that the rump of the chain will be sold after it offloaded scores of clubs to survive.

Sports Direct founder Mike Ashley has bought 13 of 33 clubs LA Fitness is offloading via a CVA – a controversial insolvency procedure.

 

Fly On The Wall Pre-market Buzz

FUTURES:
Near 7:00 am ET:
S&P: +8 vs. fair value
Dow: +61 vs. fair value
Nasdaq: +19 vs. fair value

ECONOMIC REPORTS

Chicago Fed national activity index for July at 8:30–consensus 0.2
Markit services PMI for August at 9:45–consensus 58.0
New home sales for July at 10:00–consensus up 5.7% to 429K rate

ANALYST RESEARCH

Upgrades

CBOE Holdings (CBOE) upgraded to Outperform from Market Perform at Raymond James
Silver Bay Realty (SBY) upgraded to Overweight from Neutral at JPMorgan
U.S. Steel (X) upgraded to Outperform from Underperform at Credit Suisse

Downgrades

Foot Locker (FL) downgraded to Neutral from Overweight at Piper Jaffray
HNI Corporation (HNI) downgraded to Market Perform from Outperform at Raymond James
InterMune (ITMN) downgraded to Hold from Buy at Stifel
Steel Dynamics (STLD) downgraded to Neutral from Outperform at Credit Suisse
Thoratec (THOR) downgraded to Neutral from Overweight at Piper Jaffray

Initiations

Avalanche Biotechnologies (AAVL) initiated with an Overweight at Piper Jaffray
Camden Property (CPT) initiated with a Buy at Mizuho
HealthEquity (HQY) initiated with an Overweight at JPMorgan
Home Properties (HME) initiated with a Neutral at Mizuho
J2 Global (JCOM) initiated with a Neutral at Citigroup
Macrocure (MCUR) initiated with a Buy at Jefferies
Mid-America Apartment (MAA) initiated with a Buy at Mizuho
Spark Energy (SPKE) initiated with an Outperform at RW Baird
UDR, Inc. (UDR) initiated with a Neutral at Mizuho

COMPANY NEWS

Roche (RHHBY) said it will acquire InterMune (ITMN) for $74.00 per share for a total transaction value of $8.3B on a fully diluted basis.
Tim Hortons (THI), Burger King (BKW) confirmed talks regarding potential strategic transaction. The new publicly-listed company would be headquartered inCanada
Goldman Sachs (GS) will pay $3.15B to settle mortgage claims
Engine Capital, Red Alder urged Ann Inc. (ANN) to explore strategic alternatives
Boeing (BA) announced an order by BOC Aviation for 50 737 MAX 8s, 30 Next-Generation 737-800s and two 777-300ERs valued at $8.8B at list prices
Allergan (AGN) confirmed Pershing written request regarding a Special Meeting of stockholders, board still views Valeant (VRX) offer inadequate

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Qihoo 360 (QIHU)

Qihoo 360 (QIHU) sees Q3 revenue $360M-$365M, consensus $357.39M
IF Bancorp (IROQ) reports Q4 EPS 25c vs. 22c a year ago

NEWSPAPERS/WEBSITES

Roche (RHHBY) drops pursuit for remainder of Japan’s Chugai to focus on $8.3B acquisition of InterMune (ITMN), Bloomberg reports
FCC seeks more data from Comcast (CMCSA) regarding Time Warner Cable (TWC) deal, Reuters reports
Twitter (TWTR) collaborates with Stripe on commerce strategy, Re/code reports
Russian official says no plans to close McDonald’s (MCD), Reuters reports
Occidental Petroleum (OXY) in talks to sell $3B gas stake to Mubadala, Bloomberg reports
Amazon (AMZN) develops ad sales program in challenge to Google (GOOG) and Microsoft (MSFT), WSJ reports
Dresser-Rand (DRC) not currently running formal sales process, dealReporter says 
Hasbro (HAS) shares could return 20% in a year, Barron’s says
PepsiCo (PEP) holders would benefit more from split up, Barron’s says
Home Depot (HD) holders should hold on, Barron’s says

SYNDICATE

ONEOK Partners (OKS) files to sell $650M of common units representing limited partners
Summer Infant (SUMR) files $30M mixed securities shelf
Web.com (WWWW) files to sell 213,200 shares of common stock for holders

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

It’s been one of those days. First, the CME broke for 4 hours due to what some suggested were HFT connectivity issues, then Russia announced it would send a second humanitarian convoy into Ukraine (a big risk off move the first time it was announced, now not even an algo stirred), then Germany reported that the IFO Business Confidence/Climate dropped for the fourth consecutive month to 106.3 from 108.0, below the 107.0 expected, with the IFO chief economist stating that German GDP expectations are likely to be cut to 1.5% from 2.0% later in the year, and finally the French government collapsed due to disagreement over policy between finance minister Valls and economy minister Montebourg. All in all, a typical day in Europe’s slow-motion implosion. So why are Spanish and Italian bank stocks soaring and European bond yields reaching new record highs? Simple: following Draghi’s speech on Friday at Jackson Hole, which at initial read was hardly as dovish as many had expected, the FT and various other media outlets promptly changed the narrative and made it seem as if the ECB head was about to unleash QE.

European QE that is, of course, assuming Draghi ever goes about revealing either the TLTRO or the ABS plan he revealed months ago. Then again, this being the ECB it is all about speculation and innuendo, with QE almost virtually assured not to happen unless European GDP (adjusted for hookers and blow or otherwise) is in freefall mode and rioting is on the street, well even more than usual.

It will be a quieter week than even usual (keep in mind volumes last week were the lowest in years) with a US holiday on the horizon (there will be nobody manning trading desks on Friday as everyone rushes to catch one last weekend on Hamptons frat boy fun) and so attention turns to US New Home Sales, the Markit Composite PMI, the Dallas Fed and tomorrow’s meeting between the Ukrainian and Russian Presidents, which Merkel previewed over the weekend saying not to expect much if anything.

Bulletin headline summary from RanSquawk and Bloomberg

• EUR/USD slumps to an 11-month low as markets bet on diverging policy between the Fed and ECB, widening the US/GE 10yr yield spread to levels not seen since 1999
• US stock futures sit at all-time highs ahead of the US open as markets price-in the increasing likelihood of ECB asset purchases
• UK bank holiday keeps volumes muted, but attention turns to US New Home Sales and tomorrow’s meeting between the Ukrainian and Russian Presidents
• Long Treasuries gain, curve spreads flatten led by 5/30; overnight volumes light as U.S. Labor Day weekend looms.
• With euro-area data this week likely to show the weakest inflation since 2009, Draghi pushed the ECB closer to QE by warning in his Jackson Hole speech that investor bets on prices have “exhibited significant declines”
• Jackson Hole Roundup: Yellen shift to neutral vs Draghi easing
• Germany’s Ifo institute business climate index fell to 106.3 in August, more than expected and a fourth consecutive monthly decline, from 108 in July
• French President Hollande asked Prime Minister Valls to form a new government amid a cabinet dispute over the direction of the euro area’s second-biggest economy
• Greece plans to reopen its 3Y & 5Y bond issues in next two weeks to top them up by up to EU1.5b; payment to be in outstanding T-bills instead of cash, Reuters reports, citing unidentified senior govt. official
• Sellers of bonds backed by mortgages and auto loans would have to give investors details including the borrowers’ income and credit scores under rules the SEC is poised to consider this week, according to two people briefed on the plan
• Russia plans to send a second convoy loaded with humanitarian aid to eastern Ukraine, Foreign Minister Lavrov said, days after the first delivery sparked international condemnation by crossing its neighbor’s border without authorization
• The Democratic Republic of Congo said as many as 13 people have died of Ebola in a separate outbreak from the one raging in three West African nations
• Islamic State militants seized a Syrian air base, dislodging forces loyal to Assad from the last stronghold in the northeastern Raqqa province
• An alliance of Islamist militias said it wrested control of Tripoli’s international airport from a rival force after weeks of fighting that triggered an exodus of foreigners and threatened to plunge Libya deeper into chaos
• Sovereign yields decline. Asian stocks mixed, European equities gain. U.S. stock futures higher. WTI crude and copper gain; gold lower

US Event Calendar

• 8:30am: Chicago Fed National Activity Index, July, est. 0.20= (prior 0.12)
• 9:45am: Markit U.S. Composite PMI, Aug. preliminary (prior 60.6)
• Markit U.S. Services PMI, Aug. preliminary, est. 57 (prior 60.8)
• 10:00am: New Home Sales, July, est. 426k (prior 406k); New Home Sales m/m, July, est. 4.9% (prior -8.1%)
• 10:30am: Dallas Fed Manufacturing Activity, Aug., est. 12.5 (prior 12.7)
• No POMO

FIXED INCOME

German, Italian and Spanish 10yr yields hit all-time lows this morning after the continued dovish digestion of Draghi’s comments at Jackson Hole on Friday. Draghi highlighted that the ECB will acknowledge the deterioration in inflation expectations seen over the past few months – leading to more speculation bets of QE and further easing from the ECB. The upside in Bund futures was cemented by the lower than expected IFO Business Climate survey, with the IFO chief economist stating that German GDP expectations are likely to be cut to 1.5% from 2.0% later in the year. T-notes trade higher, but underperform their European counterparts as traders highlight the policy divergence themes evident in Yellen’s speech on Friday against Draghi’s particularly dovish tones.

Prelim Barclays month end extension for Pan-Euro Agg at +0.03y (Prev. 0.12yrs, 12m average +0.03yrs)
Prelim Barclays month end extension for Sterling Agg Tsy at +0.08y
Prelim Barclays month end extension for US Treasuries +0.12yrs (Prev. 0.08yrs, 12m average +0.09yrs)

EQUITIES

European equities surged from the open, led higher by Italian and Spanish banks (Banca Monte dei Paschi up over 5%) as markets eye the increasing likelihood of broad-based asset purchases from the ECB. French markets have shrugged off the resignation of the French government, after the PM Valls handed in notice of the dissolution of the parliament after economic policy hit the rails after slashing growth forecasts last week. US stock futures have struck all-time highs (E-Mini S&P all-time high now at 1997.50) on the back of ECB easing hopes, indicating a strong open on Wall Street later today.

FX

USD-index trades at its best levels since September 2013 as policy divergence between the Fed and ECB continues to support the USD, which saw EUR/USD hit an 11-month low following Draghi’s comments. Separately, USD/JPY touched a 7-month high following dovish comments from BoJ Governor Kuroda, who said that QE will continue until inflation expectations are anchored which may take “some time”. Nonetheless, the pair has drifted back towards the 104.00 handle which is said to be a large option expiry worth USD 1bln.

COMMODITIES

Energy markets trade relatively unchanged, with traders looking ahead to the meeting between the Ukrainian President Poroshenko and Russian President Putin tomorrow, where the two are to discuss de-escalation in Ukraine. The Russian foreign minister this morning announced a second aid convoy is to cross over to Luhansk by the end of the week, despite the controversy over last week’s violation of the Ukrainian border. Spot gold and silver trade slightly softer after the USD-index struck the best levels since Sep’13 on the continued digestion of Yellen’s less-dovish speech on Friday.

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