Month: November 2014

It’s one thing for several different outlets to be unable to get their story straight, but when one media flips 180 in under 2 hours using the same underlying “driver” for two different story conclusions, what happens?

Because when “global shares rise as oil prices extend fall“…

… Only to “edge down with energy in focus amid oil slump“…

Perhaps it is time to go for a cigarette break.

via Zero Hedge http://ift.tt/1E0GdBR Tyler Durden

via Zero Hedge http://ift.tt/1GkcWG7 williambanzai7

• Republicans expect gains, but many races close on election day (Reuters)
• Ahead of tough election, White House blames dismay with Washington (Reuters)
• On Election Day, a Tale of the Young and the Old (WSJ)
• Because the recovery: Sprint to Cut 2,000 Jobs as Mobile Customers Keep Leaving (BBG)
• Ukraine’s rebel leader is sworn in, crisis deepens (Reuters)
• Brilliant: Burkina Faso Army Promises Religious Leaders It Will Step Down (BBG)
• More Unknowns Leave Central Banks Facing Greater Internal Strife (BBG)
• Scapegoat found: IBM to Change Leadership at Global Services Unit (WSJ)
• Explains why Europe just slashed its GDP forecast: Don’t Be Fooled by Warm Spell as Cold Air About to Return (BBG)
• China Jumps Into Mexico With $4.3 Billion Rail Deal (BBG)
• Woman Sets Herself On Fire in Bulgaria (Novinite)
• Portugal Finds Chinese Make 90% of Bids at Property Sale (BBG)
• Another Deutsche Rat leaving the sinking ship? Deutsche Bank’s Amrolia Said Stepping Down (BBG)
• Xiaomi Said to Seek Funds at About $50 Billion Valuation (BBG)
• U.S. soda makers headed for tax showdown in California (Reuters)
• China Said to Plan $16.3 Billion Fund for ‘New Silk Road’ (BBG)
• Peshmerga, Syrian rebels battle Islamic State in besieged Kobani (Reuters)
• Gunmen kill five in Saudi Arabia, six suspects arrested (Reuters)

 

Overnight Press Digest

WSJ

* JPMorgan Chase & Co said the Justice Department is conducting a criminal investigation of its foreign-exchange-related matters and bumped up a figure measuring the bank’s potential legal costs by $1.3 billion, according to a regulatory filing that the bank released Monday. (http://on.wsj.com/1GijzIS)

* South Korean auto makers Hyundai Motor Co and Kia Motors Corp agreed to pay a combined penalty of $300 million for overstating fuel-economy claims, the largest such punishment ever, in a settlement that could create a pricey precedent for other car companies. (http://on.wsj.com/1s88jFB)

* International Business Machines Corp plans to replace the head of its struggling technology-services unit, the latest move by Chief Executive Virginia Rometty to get Big Blue growing again. Martin Jetter, who has been leading IBM operations in Japan, has been named a senior vice president and will become head of IBM Global Technology Services. (http://on.wsj.com/1qmQzWn)

* Time Warner Inc’s Turner Broadcasting cable-TV unit will tap a former executive of Twenty-First Century Fox Inc and NBC, Kevin Reilly to oversee two of the company’s biggest channels, according to people familiar with the matter. (http://on.wsj.com/1x1G3Yr)

* Google Inc, which fell behind Amazon.com Inc in the fast-growing business of renting out computing horsepower to others, is now making a renewed effort to catch Amazon. At a conference on Tuesday, Google will highlight new offerings that make it easier for customers to set up so-called cloud services more quickly. (http://on.wsj.com/1vDi13Y)

* Federal antitrust regulators sued to stop the proposed $375 million merger of the country’s two leading movie-theater advertising firms, National CineMedia Inc and Screenvision LLC, hitting pause on a major deal in the exhibition industry that many said would further consolidate power in a top-heavy marketplace. (http://on.wsj.com/1rW4m5T)

 

FT

A Florida court has acquitted Raoul Weil, former head of wealth management at UBS, of helping rich U.S. clients in evading as much as $20 billion in taxes. In 2009, Switzerland-based UBS paid $780 million to settle allegations of abetting tax evasion and also handed over 4,450 names of U.S. clients.

The Royal Bank of Scotland will appoint Ernst & Young as its new auditor, putting an end to a 14-year old relationship with its current auditor, Deloitte. The RBS contract will enable EY to overtake Deloitte in market share by number of FTSE 100 audits, behind PwC and KPMG.

Pop star Taylor Swift’s record label Big Machine has removed the singer’s entire catalogue of music from Sweden-based music streaming service Spotify, saying the star can make more money selling recordings than streaming. The removal is a big setback to the world’s largest music streaming service, which is currently valued at $4 billion (2.50 billion British pounds).

Leaders of the European Union are considering a plan to allow Greece to exit its four-year-old bailout by the end of 2014, by converting about 11 billion euros ($13.74 billion) of unused funds into a backstop for Greece, when it raises funds from its own markets. (1 British pound = 1.5981 US dollar)

 

NYT

* Korean automakers Hyundai Corp and Kia Motors Corp, owned by the Hyundai Motor Group, will pay a combined penalty of $300 million to the U.S. government for overstating vehicle fuel-economy standards on 1.2 million cars. (http://nyti.ms/1rVD5QM)

* Chrysler Group posted an October sales increase of 22 percent on robust sales of its Jeep and Ram pickup brands due to American car buyers’ increasing affinity for trucks and sport utility vehicles spurred by falling gas prices. (http://nyti.ms/1xVrYw3)

* The benchmark American oil price fell below the symbolic $80-a-barrel threshold on Monday, plummeting to two-year lows, after Saudi Arabia aimed to shore up its dwindling exports to the United States by cutting its selling price for the American market. (http://nyti.ms/1x2Om7r)

* JP Morgan Chase & Co added $2.4 billion to its estimate of the amount of legal costs it may face for current investigations into the possible manipulation of the currency market. (http://nyti.ms/1wZ0BEo)

* Two recent accidents, one of them fatal, involving commercial rockets have underscored the high risks and soaring costs involved in any spaceflight. (http://nyti.ms/1sb2Q0N)

* Virgin America Inc <IPO-VA.O>, the low-cost airline, partially owned by Richard Branson’s Virgin Group, has moved a step closer to a Wall Street debut, filing a price range on Monday for its planned initial public offering. (http://nyti.ms/1yRb4jc)

* Nearly nine months after General Motors began recalling millions of its cars for a dangerously defective ignition switch, almost half of the vehicles still have not been fixed. (http://nyti.ms/13C47sb)

 

Canada

THE GLOBE AND MAIL

** Acknowledging “security gaps” that could leave airliners vulnerable to a terrorist attack, the federal government is moving ahead with a new system that would allow shippers to screen cargo before it gets to the airport. Transport Canada says the system will bring air cargo screening up to the standards of key trading partners and result in a net benefit to Canadians of C$202 million ($177.6 million) over 10 years. (http://bit.ly/1oeYetW)

** Voters in three ridings in Newfoundland will be casting ballots this month after two byelections were called on Monday. Elections Newfoundland and Labrador says byelections will take place on Nov. 25 in Trinity-Bay de Verde and Humber East. Those two ridings became vacant after the resignations of former cabinet ministers Charlene Johnson and Tom Marshall. (http://bit.ly/1x2ZzVq)

** Bank of Nova Scotia, Canada’s third-largest lender by assets, said it would take a charge of C$451 million as it cuts about 1,500 jobs, writes down its investment in Venezuela and loans sour in the Caribbean. (http://bit.ly/1tWcgS0)

NATIONAL POST

** French President Francois Hollande told Parliament on Monday that Western nations must not show “weakness” in the face of domestic terrorism and must battle Islamic terrorists in Iraq – a message that appeared to bolster the agenda of Canada’s Conservative government. (http://bit.ly/1rXtEAy)

** It’s billed as a “breathtaking” display of Tibet’s culture, but Canadian-Tibetans are denouncing programs about the contested region as an “insulting” and “deeply disrespectful” display of propaganda. The Canada China Tibetan Culture Week opens in Toronto on Tuesday at the TIFF Bell Lightbox with a documentary screening, followed by traditional song and dance performances by a Tibet-based troupe at the Bluma Appel Theatre. Events are also being held in Vancouver. (http://bit.ly/1x2DpUr)

** Barrick Gold Corp is in talks with state-owned Chinese miner Zijin Mining Group Co Ltd to form a partnership on the botched Pascua-Lama project, according to a government official in Argentina. (http://bit.ly/1tvXG22)

 

China

CHINA SECURITIES JOURNAL

– China’s government departments are drafting policy to support financial institutions, particularly banks, to quicken the write-off of non-performing loans, the newspaper reported.

– The Ministry of Industry and Information Technology will formulate a five-year plan for the robotics industry to boost development of this emerging sector.

SHANGHAI SECURITIES NEWS

– Chinese banks, which halted the sales of private-equity products in 2013 due to a slump in China’s stock market, restarted the sales following the recent rally, accelerating financial funds from banks enter the market.

– Non-financial institutions with real fund-raising needs are qualified to enter China’s interbank bond market by conducting trade in the Beijing Financial Assets Exchange, the newspaper reported.

SHANGHAI DAILY

– Beijing is setting up more checkpoints, rural roadblocks and police stations to ensure security during the upcoming Asia-Pacific Economic Cooperation (APEC) week, according to an official with the Beijing Municipal Security Bureau.

– The Shanghai People’s Procuratorate issued the first judicial guidelines for criminal cases involving Shanghai’s Pilot Free Trade Zone (FTZ) recently, the newspaper reported.

CHINA DAILY

– Pro-democracy protests in Hong Kong will jeopardize the launch of the Shanghai-Hong Kong Stock Connect programme, said an official of a top think tank on Monday.

– Sony Mobile Communication Inc, a subsidiary of Sony Corp , will cut about 15 percent of its jobs in China and stop producing smartphones only targeted at the Chinese customer.

– Lei Chunian, a hero of the 2008 Wenchuan earthquake, was charged by a local court for cheating more than 460,000 yuan ($75,190) from 21 people on Monday.

 

Britain

The Times

* HSBC misses forecasts as it sets aside $387 mln for forex investigation

Bills for past misconduct including rigging of foreign exchange markets dashed the cost-cutting plans of HSBC Holdings Plc in the third quarter, sending underlying profits 12 per cent lower to $4.4 billion. (http://thetim.es/1x34xAH)

* UK demand helps manufacturers defy slowing eurozone

Strong domestic demand led to a rebound in UK manufacturing activity last month despite the slowing eurozone dragging down export orders. A closely-watched purchasing managers’ index beat economists’ expectations, rising to a three-month high of 53.2 in October from 51.5 in September. (http://thetim.es/1x2NKyz)

The Guardian

* Osborne accused of using new tax statements as ‘political propaganda’

Britain’s finance minister George Osborne has been criticised for sending millions of households annual tax statements that show the biggest chunk of their contribution going towards welfare, with trade unions describing it as “political propaganda masquerading as neutral information”. (http://bit.ly/1tB9ba3)

* Ryanair puts 32 pct jump in profits down to being nicer

Ryanair Holdings Plc announced a 32 percent jump in first-half profits a year after its pledge to transform its customer service. Ryanair’s chief executive, Michael O’Leary, said business was booming since a decision in late 2013 to change its image and stop “unnecessarily pissing people off”.(http://bit.ly/1qmIXmB)

The Telegraph

* JP Morgan sets aside $6 bln for legal costs after revealing US forex probe

JPMorgan Chase & Co has raised the amount it has set aside to cover legal costs to almost $6 billion, after revealing it faces a US criminal probe over its foreign-exchange business. The US bank said on Monday night that it is cooperating with the Department of Justice as well as the Commodity Futures Trading Commission and the UK’s Financial Conduct Authority. (http://bit.ly/10PCHy4)

* Struggling supermarkets face huge increase in business rates bill

Britain’s under-pressure supermarkets are facing the prospect of a huge increase in business rates, adding to the challenges facing the industry. The rates bill for supermarkets could grow by as much as 40 percent on the back of a revaluation of Britain’s property scheduled for next year, according to new research. (http://bit.ly/1x2NRKt)

Sky News

* Virgin Money Revives IPO after Carney Boost

Sir Richard Branson’s banking arm is to revive plans to list on the stock market just days after receiving a boost from new Bank of England rules dictating the amount of capital that lenders must hold to protect them against losses. (http://bit.ly/1GgB64d)

* Emirates ends FIFA world cup sponsorship

Airline Emirates will not renew its sponsorship of the 2018 or 2022 FIFA World Cup tournaments, it has emerged. The decision comes after a slew of corruption allegations against football’s world governing body, and ends an association that dates back to the 2006 tournament in Germany. (http://bit.ly/13BbWOV)

The Independent

* Diageo swaps tequila for whiskey in $1 bln deal

Diageo Plc,the owner of Guinness and Johnnie Walker whisky, has stirred up its drinks cabinet by swapping Irish whiskey for Mexican tequila in a $1 billion. The spirits giant has agreed with Mexico’s Casa Cuervo to gain control of tequila brand Don Julio in return for Irish whiskey Bushmills. (http://ind.pn/1pgMIzf)

* Dunkin’ Donuts unveils calorie-packed snickerdoodle and sugar cookie latte ahead of Christmas

The battle for Christmas drink sales is heating up with Dunkin’ Donuts launching a snickerdoodle and sugar-cookie latte as it takes on Starbucks Corp. Dunkin’ Donuts is hoping to replicate the success of last year’s Christmas red velvet lattes and salted-caramel hot chocolates, which helped boost revenue 27 per cent in the fourth quarter. (http://ind.pn/1wYCPZh)

 

 

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
International trade balance for September at 8:30–consensus ($40.7B)
Factory orders for September at 10:00–consensus down 0.7%

ANALYST RESEARCH

Upgrades

Anadarko (APC) upgraded to Outperform from Market Perform at Bernstein
AngloGold (AU) upgraded to Overweight from Neutral at HSBC
Cytokinetics (CYTK) upgraded to Buy from Hold at MLV & Co.
Eastman Chemical (EMN) upgraded to Buy from Neutral at SunTrust
Genesis Energy (GEL) upgraded to Outperform from Neutral at RW Baird
Kite Realty Trust (KRG) upgraded to Buy from Hold at Stifel
Leidos (LDOS) upgraded to Outperform from Market Perform at Cowen
Level 3 (LVLT) upgraded to Buy from Neutral at Citigroup
McCormick (MKC) upgraded to Outperform from Market Perform at Bernstein
Penn National (PENN) upgraded to Neutral from Underperform at BofA/Merrill
STMicroelectronics (STM) upgraded to Neutral from Underweight at HSBC
Sallie Mae (SLM) upgraded to Buy from Neutral at Goldman
Shire (SHPG) upgraded to Buy from Neutral at UBS

Downgrades

Agilent (A) downgraded to Market Perform from Outperform at Wells Fargo
Agilent (A) downgraded to Neutral from Outperform at RW Baird
ArcelorMittal (MT) downgraded to Hold from Buy at Deutsche Bank (yesterday)
Cintas (CTAS) downgraded to Sector Perform from Outperform at RBC Capital
IDACORP (IDA) downgraded to Hold from Buy at KeyBanc
LeapFrog (LF) downgraded to Neutral from Overweight at Piper Jaffray
Lumber Liquidators (LL) downgraded to Hold from Buy at Canaccord
Midcoast Energy (MEP) downgraded to Underweight from Equal Weight at Morgan Stanley
MoneyGram (MGI) downgraded to Sell from Hold at Evercore ISI
Navient (NAVI) downgraded to Neutral from Buy at Goldman
Navios Maritime Partners (NMM) downgraded to Underweight at Morgan Stanley
Nokia (NOK) downgraded to Underperform from Market Perform at Bernstein
Nokia (NOK) downgraded to Underperform from Market Perform at Bernstein
QTS Realty Trust (QTS) downgraded to Equal Weight from Overweight at Morgan Stanley
RCS Capital (RCAP) downgraded to Neutral from Buy at Citigroup
RetailMeNot (SALE) downgraded to Neutral from Buy at Goldman
Ultra Petroleum (UPL) downgraded to Underweight from Equal Weight at Barclays
Valley National (VLY) downgraded to Neutral from Buy at Guggenheim
Xcel Energy (XEL) downgraded to Hold from Buy at Evercore ISI

Initiations

Achaogen (AKAO) initiated with a Buy at SunTrust
Achaogen (AKAO) initiated with a Neutral at Wedbush
Avanir (AVNR) initiated with a Buy at Deutsche Bank
Cempra (CEMP) initiated with a Buy at SunTrust
Cubist (CBST) initiated with a Buy at SunTrust
Cubist (CBST) initiated with a Neutral at Wedbush
Datawatch (DWCH) initiated with a Buy at Drexel Hamilton
Dave & Busters (PLAY) initiated with a Buy at Jefferies
Dave & Busters (PLAY) initiated with a Buy at Stifel
Dave & Busters (PLAY) initiated with an Outperform at William Blair
Dave & Busters (PLAY) initiated with an Overweight at Piper Jaffray
Halyard Health (HYH) initiated with an Equal Weight at Morgan Stanley
ImmunoGen (IMGN) initiated with a Market Perform at Cowen
Nordstrom (JWN) initiated with a Hold at Brean Capital
PDF Solutions (PDFS) initiated with an Outperform at Northland
PennyMac Financial (PFSI) initiated with an Outperform at Keefe Bruyette
Seattle Genetics (SGEN) initiated with a Market Perform at Cowen
Smart & Final Stores (SFS) initiated with a Neutral at Citigroup
Smart & Final Stores (SFS) initiated with a Neutral at Credit Suisse
Tetraphase (TTPH) initiated with an Outperform at Wedbush
Travelport (TVPT) initiated with a Buy at Deutsche Bank
Travelport (TVPT) initiated with a Buy at Jefferies
Travelport (TVPT) initiated with a Buy at UBS
Travelport (TVPT) initiated with an Outperform at Credit Suisse
Travelport (TVPT) initiated with an Overweight at Morgan Stanley
Travelport (TVPT) re-initiated with an Outperform at Imperial Capital
Wal-Mart (WMT) initiated with a Neutral at Sterne Agee

COMPANY NEWS

JPMorgan (JPM) said DOJ conducting criminal investigation of firms FX trading, sees possibility of up to $5.9B in legal losses as of September 30
Stryker (SYK) agreed to pay $1B to settle hip lawsuits, said it has recorded charges to earnings of $1.425B related to the issue
Avon Products (AVP) downgraded by S&P to BB+, outlook stable
Sprint (S) said it will cut an additional 2,000 jobs and said it expects FY15 adjusted EBITDA to be ‘neutral to modestly higher’ vs. FY14
RetailMeNot (SALE) CFO Douglas Jefferies said he will step down, effective November 30
Burger King (BKW) to accept PayPal (EBAY) to pay at U.S. locations

EARNINGS

Companies that beat consensus earnings expectations last night and today include:

Achillion (ACHN), Targa Resources (TRGP), CytRx (CYTR), Northwest Natural Gas (NWN), Northern Tier (NTI), Western Refining (WNR), Headwaters (HW), Becton Dickinson (BDX), HMS Holdings (HMSY), Time Inc. (TIME), Talisman Energy (TLM), Allot Communications (ALLT), Agrium (AGU), Aqua America (WTR), Atlas Pipeline Partners (APL), EPAM Systems (EPAM), Otter Tail (OTTR), RockTenn (RKT), Tidewater (TDW), Seaspan (SSW), Skilled Healthcare (SKH), EarthLink (ELNK), Mindray Medical (MR), Albany International (AIN), Marathon Oil (MRO), Emerald Oil (EOX), Protective Life (PL), Acura Pharma (ACUR), Chesapeake Lodging (CHSP), Alleghany (Y), West Corp. (WSTC), Checkpoint Systems (CKP), Galena (GALE), Black Hills (BKH), Chegg (CHGG), Black Diamond (BDE), Fabrinet (FN), Greenlight Capital (GLRE), Vanguard Natural (VNR), Integra LifeSciences (IART), Douglas Dynamics (PLOW), Mid-Con Energy (MCEP), Nutrisystem (NTRI), Prothena (PRTA), Advanced Energy (AEIS), Ruckus Wireless (RKUS), Corrections Corp. (CXW), Lannett (LCI), RetailMeNot (SALE), Rudolph Technologies (RTEC), Alder Biopharmaceuticals (ALDR), RealD (RLD), Qualys (QLYS), Continental Building (CBPX), Sykes Enterprises (SYKE), Navigator Holdings (NVGS), Nautilus (NLS), AIG (AIG), Interactive Intelligence (inin), Frontier Communications (FTR), DXP Enterprises (DXPE), Sykes Enterprises (SYKE)

Companies that missed consensus earnings expectations include:

Sprint (S), Tesco (TESO), Tesco (TESO), Triple-S (GTS), Regeneron (REGN), United Fire & Casualty (UFCS), Santander Consumer (SC), Westlake Chemical Partners (WLKP), Hi-Crush Partners (HCLP), State Auto Financial (STFC), Vitamin Shoppe (VSI), Western Refining Logistics (WNRL), DISH (DISH), Regis (RGS), CyrusOne (CONE), Quotient (QTNT), Northwest Pipe (NWPX), TPG Specialty Lending (TSLX), RLJ Lodging Trust (RLJ), Nortek (NTK), Rosetta Resources (ROSE), MDU Resources (MDU), Allied Nevada Gold (ANV), Sun Hydraulics (SNHY), Herbalife (HLF), Apollo Residential Mortgage (AMTG), Community Health (CYH), Endurance Specialty (ENH), Correction: Black Diamond (BDE), U.S. Auto Parts (PRTS), xG Technology (XGTI), Borderfree (BRDR), Macrocure (MCUR), Procera Networks (PKT), LeapFrog (LF), Imprivata (IMPR), Texas Roadhouse (TXRH), Kaman (KAMN), Cutera (CUTR), eGain (EGAN), Superior Industries (SUP), Stone Energy (SGY), PetroQuest (PQ)

Companies that matched consensus earnings expectations include:
Regal-Beloit (RBC), ONE Gas (OGS), Tenet (THC), Neurocrine (NBIX)

NEWSPAPERS/WEBSITES

Apple (AAPL) may stop making iPad mini as 12-inch iPad is introduced, Phone Arena says
Many GM (GM) faulty ignition switches still not repaired, NY Times reports
Sony (SNE) to stay active in Chinese smartphone market, China Daily reports
Blackstone (BX) allegedly close to $8B agreement for IndCor division, Bloomberg  reports
Good chance Petrobras (PBR) CEO remains at the helm during Rousseff’s term, WSJ reports
NHTSA investigates Honda (HMC) communication of faulty Takata airbags, Reuters reports
BlackRock (BLK) looks like a ‘buy’, Barron’s says

SYNDICATE

Aerie Pharmaceuticals (AERI) files to sell 8.75M shares for holders
Apple (AAPL) to offer bonds in euros via Goldman, Deutsche Bank
DCT Industrial (DCT) files to sell 13.5M shares of common stock
Healthcare Trust (HTA) files to sell 8M shares of common stock
Hilton (HLT) 90M share Secondary priced at $25.00
Intercloud Systems (ICLD) files to sell 2.4M shares for selling stockholders
Newtek Business Services (NEWT) files to sell 2M shares of common stock
NorthWestern (NWE) files to sell $348M of common stock
Platform Specialty Products (PAH) fies to sell $402.5M shares of common stock
StoneCastle (BANX) plans to offer 1.6M shares of common stock
Umpqua Holdings (UMPQ) files to sell 31.2M shares for stockholders

via Zero Hedge http://ift.tt/1E0q13j Tyler Durden

Despite last night’s Nikkei futures smash, in the hours that immediately followed, algos had an easy time levitating both European stocks and US futures on the usual no volume, until suddenly, a little after the European open, the European commission released an Easter egg when it finally admitted, with less than 2 months left in the year, that a European triple dip is in the card, when it slashed its May growth and inflation forecasts across the board for not only Europe but the rest of the world as well.

The commission said it now expects gross domestic product in the 18-country Eurozone to grow 0.8% this year, down from 1.2% growth it forecast this spring. In 2015, the eurozone economy will likely grow 1.1%, also less than the 1.7% growth seen in the spring. In 2016, growth in the currency union will rise to 1.7%, the commission said, as the WSJ summarized. Needless to say this latest set of expectations by Jean-Claude “You have to lie” Juncker, will also be severely over-optimstic, and we eagerly look ahead to 2015 growth being slashed to negative at the next EC growth revision in six months.

Yet what is strange is that while traditionally such a major downward growth revision would have been sufficient to send futures soaring – why: because in a world where only central banks are left, it means more central bank global bailouts of course – this time the adverse update actually had the impact of sending futures to their lows of the session, granted just a few tiny points since the market is clearly disconnected with even the most pro forma, non-GAAP version of reality, but the reaction direction was clearly unexpected.

Perhaps this is explained by the ongoing devastation in both WTI and Brent, which were trading at $76.70 and $82.50 at last check, both down almost 3% as the plan to use Saudi Arabia to crush Russia has instead backfired and the Saudi princes are now openly looking at destroying the US shale infrastructure, as we forecast in the worst, for Obama, scenario.

So looking at fixed income and equity markets, European equities enter the North American open, mostly in negative territory as participants shrug off initial BoJ-inspired gains, with attention instead turning towards the EU Commission who cut their Euro-Area growth and inflation forecasts for 2014 and 2015. The continuation of the slide seen in WTI prices has placed further heavy pressure on energy-related names, with the energy-heavy FTSE 100 being squeezed as a result. In terms of this morning’s earnings reports, they painted a relatively mixed picture with the notable outlier Hugo Boss (-5.7%) after they cut their FY forecasts. On an index specific basis, the FTSE MIB leads the way for Europe, with Banca Monte dei Paschi (+12.2%) higher after NIT Holding Limited said it has proposed a EUR 10bln investment for the Co.’s restructuring. Elsewhere in Italy, both Snam and Terna trade firmly in the green after yesterday’s heavy losses that buoyed the index.

Fixed income products initially softened alongside the higher open in European equities, with news that Apple are to launch Euro-denominated bonds and hawkish comments from ECB’s Nowotny who went against his ‘never say never’ attitude on Friday, also adding to the downside. Nonetheless, heading into the North American open Bunds have staged a turn around with some analysts suggesting that yesterday’s sell-off is somewhat overdone, with other analysts also suggesting short-covering head of the ECB on Thursday and thus prices have broken back above 151.00. However, this move was then further extended by the aforementioned EC forecasts, with German, France and Italy’s growth prospects all being cut.

In FX markets, AUD continues to recover from overnight losses, which stemmed from the Australian ABS revising their unemployment rate higher to 6.2% from 6.1%, with markets instead focusing on the RBA dropping their ‘AUD remains historically high’ phrase. Elsewhere, EUR/USD continues to remain magnetised by 5.9bln due to roll-off at 1.2500 for today’s NY cut, while GBP has slipped back below 1.6000 following the lacklustre UK construction PMI release (61.4 vs. Exp. 63.5 (Prev. 64.2)) which came in at a 5-month low. Furthermore, the USD-index has given back some of yesterday’s gains underpinning JPY and thus dragging USD/JPY back below 114.00.

WTI crude futures trade down USD 1.60 after extending on yesterday’s losses, with WTI closing below USD 80/bbl for the first time since 2012 after Saudi Arabia lowered its prices for US crude exports amid speculation that stockpiles increased. Saudi Arabia cut its price of oil to the US in December while raising prices to Asia. The state-owned producer Saudi Aramco lowered the premium for Arab light relative to us gulf coast benchmarks by USD 0.45 per barrel. Some analysts also suggest that the European Commission slashing their growth forecasts have also hampered energy prices due to the impact on demand for future oil consumption. Elsewhere, spot gold consolidated above recent lows overnight as the USD-index marginally weakened overnight while a lack of physical demand and weak technicals present a bleak outlook for the yellow metal.

Market Wrap

European shares reverse earlier gains and fall with the oil & gas and tech sectors underperforming and real estate, financial services outperforming. The European Commission cut its growth forecasts for the euro area. Companies including Glencore, Santander, BMW and Continental had results.
Saudi Arabia cut prices for crude exports to U.S. customers. The Spanish and Dutch markets are the worst-performing larger bourses, the Swedish the best. The euro is stronger against the dollar. German 10yr bond yields fall; French yields decline.
Commodities decline, with WTI crude, Brent crude underperforming and natural gas outperforming. U.S. ISM New York, factory orders, trade balance due later.

• S&P 500 futures down 0.2% to 2007.5
• Stoxx 600 down 0.1% to 333.8
• US 10Yr yield down 2bps to 2.32%
• German 10Yr yield down 4bps to 0.81%
• MSCI Asia Pacific up 1.4% to 142.3
• Gold spot up 0.3% to $1169/oz

Bulletin headline summary from Bloomberg and Ransquawk

• European equities slip mostly into negative territory, shrugging off initial gains as focus shifts towards the EU Commission cutting their Euro-Area growth and inflation forecasts for 2014 and 2015.
• Energy markets continue to see further misery, with WTI at its lowest level since Oct’11 as participants continue to react to Saudi Arabia slashing prices for US crude exports.
• Looking ahead, attention turns towards the release of US trade balance, factory orders, API inventories and US mid-term elections
• Treasuries gain, led by long end, as traders await ADP tomorrow, ECB Thursday, October nonfarm payrolls Friday; bunds higher as European Commission cuts  growth forecasts for euro region.
• European Commission lowers 2014 GDP forecast for euro region to 0.8% from 1.2%, 2015 to 1.1% from 1.7%; says inflation in the euro area will be even weaker than ECB predicts
• Japan’s Government Pension Investment Fund will have to buy $187b of Japanese and foreign equities to meet the asset-allocation targets it set last week, based on June holdings
• JGB 30Y yield has fallen as much as 20.5bps in two days to reach 1.39%, lowest since April 2013, following BOJ decision last week to boost bond purchases to JPY80t ($704b) annual pace
• Republicans appears poised to gain the six seats needed to win control of the Senate, even if that outcome isn’t immediately known late Tuesday or early Wednesday
• JPMorgan said it faces a U.S. criminal probe into forex dealings and boosted its maximum estimate for “reasonably possible” losses on legal cases to the highest in more than a year
• Oil tumbled, with West Texas Intermediate falling 2.6% to $76.75/bbl, as Saudi Arabia cut the cost of its crude to the U.S.
• Ukrainian President Petro Poroshenko said rebel-held elections in the country’s east violate a two-month-old cease-fire, as he threatened to scrap the law granting greater autonomy to the separatist regions
• Israel pushed forward with plans to build homes in east Jerusalem, defying U.S. criticism of measures that would expand the Israeli presence on territory the Palestinians claim for a future state
• China plans a $16.3b fund to finance construction of infrastructure linking its markets to three continents as President Xi Jinping pushes forward with his plans to revive the centuries-old Silk Road trading route
• Sovereign yields lower. Asian stocks mostly higher, Nikkei +2.7% as Japan returns from holiday. European stocks, U.S. equity-index futures decline. Brent crude lower, copper and gold gain

US Event Calendar

• 8:30am: Trade Balance, Sept., est. -$40.2b (prior -$40.1b)
• 9:45am: ISM New York, Oct. est. 62 (prior 63.7)
• 10:00am: Factory Orders, Sept., est. -0.6% (prior -10.1%)
• 10:00am: IBD/TIPP Economic Optimism, Nov., est. 46.5 (prior 45.2)

* * *

DB’s Jim Reid concludes the overnight recap

The conclusion from yesterday’s global PMIs was that the US are behaving like Real Madrid and Europe, and in particular Italy, like Liverpool. The final European manufacturing PMIs were generally a touch weaker with the Eurozone print revised lower to 50.6 with Italy the underperformer (49 vs 50.6 expected and 1.7 points lower than last month). The US surprised on the upside coming in at 59.0 (vs. 56.2 expected, +2.4 points on last month and the highest since March 2011). In the pdf today we’ve updated our PMI vs YoY equity table to take into account yesterday’s numbers. The data is based on a regression between the two variables over several years of data. This simple analysis suggests that given current ISMs, equity markets are too low in the US, Germany, UK and Spain and too high in Japan and Italy. However can the US PMI really stay at these levels if global activity continues to be soft and will Japan’s increased asset buying mean that Japan equities stay above where activity suggests it should be in a similar way to US equities did during QE3. The answer to the latter question is probably yes so we only use the table as a guide to valuations.

Markets in Europe were weaker yesterday following the softer data and some weaker corporate earnings. There also seemed to be fairly low expectations ahead of the ECB on Thursday which weighed on markets. The Eurostoxx closed -1.0% and the Dax -0.8% although the main underperformers were the peripheral assets led by the FTSE MIB with a 2.1% decline whilst 10 year yields in Italy and Spain rose 7bps with Portugal and Greece 12bps and 10bps higher respectively. The Euro sold off 0.35% versus the Dollar.

Italy’s data didn’t help the peripherals yesterday, and Spanish politics is quietly bubbling under the surface due to both ongoing Catalonian tensions and also with some chatter about Sunday’s El Pais poll putting Podemos – a left wing insurgent party set up only 10 months ago – in the lead nationally having seen support surge over the past month. Most observers think this is largely a protest reaction after recent political scandals but the evidence from Syriza in Greece, the Five Star movement in Italy and even UKIP in the UK (to name but a few) show that these new radical parties can create serious political shockwaves even if they’ve yet to make the leap into power. However the risk is that one day we may wake up to a maverick political leader elected somewhere in Europe given recent trends. The irony is that the ECB don’t want to let politicians off the hook and are therefore being careful with public QE. However the longer they leave it the higher the risk that they help elect politicians that will be much more confrontational towards them and ones that they will struggle to do business with at all.

Talking of elections, it’s the US mid-terms today and in my career I can’t remember such a low level of interest in it from a financial market point of view. Perhaps that’s because there’s been such a gridlock politically in recent years that nobody really expects much to change afterwards. Governments around the world are not really politically able to drive or shape growth at the moment and everything is being left to central bankers. It’s unlikely that much will changes after these elections.

Whilst we’re on the US price action was fairly volatile yesterday as an early boost from the PMI print was offset later in the day with a sell-off in the energy sector causing the S&P to close fairly flat (-0.01%). Credit markets mirrored the moves in equities whilst the DXY Index rallied a further 0.4%. Interestingly we saw the Fed’s Fisher applauding the FOMC’s action, or lack of it, in response to the recent market volatility after reporting that he chose to vote with the majority of policy makers last week. After dissenting against the September policy decision, Fisher acknowledged the positive wording in the statement this time round with regards to the labour market and mentioned that the US economy is headed towards increasing employment and inflation rising to the 2% target. Just wrapping up the US, yesterday we had the quarterly Fed bank lending survey which was fairly uneventful on the whole with a ‘modest net fraction of banks easing their standards’ during the period. The report also stating that a large majority of banks expect an increase in retail business lending over the next year.

Looking at markets in Asia this morning, there seems to be no sign of a breather in Japan following yesterdays public holiday as the Nikkei (+3.3%) and Topix (+3.0%) extend Friday’s rally, the former index briefly rose above the 17,000 level for the first time since 2007 whilst the Yen is 0.51% lower versus the Dollar and 30y JGB’s 13bps tighter. Elsewhere in Asia markets are largely muted with bourses in China, Hong Kong and Taiwan broadly unchanged. The Aussie Dollar is +0.46% versus the US Dollar as we type following strong retail sales data and a wider trade deficit whist the RBA kept rates on hold as expected.

Core markets aside, the Russian ruble weakened 0.8% versus the Dollar yesterday to extend declines to nearly 25% over the calendar year after Germany warned the nation of stronger sanctions following news that elections organized by pro-Russian rebels in eastern Ukraine were backed by a Russian foreign minister. Meanwhile a Reuters report yesterday quoted a senior NATO general as saying that ‘Russia’s border with eastern Ukraine has softened to the point of becoming completely porous’.

Before we look at the day ahead, it’s worth noting the movements in the oil price yesterday. Brent declined 2.1% and WTI -0.7% after Saudi Arabia, the largest OPEC producer, slashed prices for oil sold to the US. This follows price cuts earlier last month which prompted concerns over OPEC members looking to capture market share. As we reported in yesterday’s EMR, October was the month that Oil officially dipped into bear market territory and so far this month we’ve seen little evidence of this trend correcting.

Looking at the agenda today, we’ve got the European Commission forecasts to look forward to which will be interesting ahead of the ECB on Thursday. Peripheral nations will be worth keeping an eye on with the Spanish unemployment figure and ECB member Costa speaking at a conference on the Portuguese economy. Away from Europe and other than the mid-terms in the US, we’ve got the September factory orders print and the latest trade data which our US team highlighted yesterday could influence the Q3 GDP number.

via Zero Hedge http://ift.tt/1yUch9g Tyler Durden