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Having surged to six-month highs, initial jobless claims dropped modestly on the week but the smoother 4-week average that is broadly used pushed to new cycle highs at 285k – the highest since March 2015 confirming The Fed’s concerns over the economy. This is a trend that is certainly not the friend of Janet and her friends… but we are sure this is all just transitory.
Charts: Bloomberg
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Submitted by Claire Bernish via TheAntiMedia.org,
Residents in Sebring, Ohio, can commiserate with those in Flint, Michigan, considering their water supply has also been contaminated with lead that “exceeds the action level,” according to the state’s EPA. Like Flint, the case of Sebring — involving some 8,100 water customers in Sebring, Beloit, Maple Ridge, and parts of Smith Township — already has the appearance of criminal negligence and a possible cover-up.
“The first the notifications were discussed with the EPA and my staff was [Thursday] morning [January 21],” said Village of Sebring Manager Richard Giroux, as reported by WKYC. This statement is virtually inexplicable, as evidenced by an Ohio EPA notice posted by WKBN, dated the same day, that the village was in violation for its failure to inform residents back in November of elevated lead levels in the drinking water supply.
Yet, on Thursday, according to WKBN, pregnant women and children received the first warning not to drink the city’s water due to lead contamination. That warning, as local NBC affiliate WKYC reported, was expanded to include the entire Village of Sebring on Saturday.
Documents posted online by WKBN clearly show the EPA’s ongoing contact and discussion with village officials, who were aware of the lead contamination — and who were repeatedly advised to issue notice to residents.
A letter from the Ohio Environmental Protection Agency addressed to Giroux states the agency’s testing found the “water system has exceeded the lead action level” and lists steps the village should have taken to inform the public — by November 29, 2015. According to the EPA’s requirements for actionable lead levels, as stated clearly in that letter, dated December 3, Giroux was supposed to “distribute informational notices to each person served by the [village’s water] system,” as well as “post informational notices” in public common areas “in each building.” According to WKBN, Giroux “initially denied” having received letters from the EPA. Another EPA letter, dated January 15, reiterates a public notice should have been issued by November 29.
A letter from the EPA, originally dated November 23, includes a Verification of Lead Consumer Notice Issuance form signed by Bates, whose hand-written date indicates delivery of alerts about lead contamination to customers on December 18. However, according to the agency, a drinking water alert had been in effect officially since December 3 — which residents would have been aware of had notifications been delivered on or before November 29, as required.
“We agree it took too long for the village of Sebring to notify its customers,” said Heidi Greismer, Ohio EPA Director of Communications, in an email Friday, according to WKYC. “When it became clear they weren’t taking the corrective action necessary in a timely manner, we issued a notice of violation to force them to take action. The village does have a good water system, but they must take steps to stop the corrosion that is causing some residents to see higher than allowed levels of lead.”
On Monday, the state EPA issued an emergency order barring Bates from working in Sebring’s water treatment facility and giving notice of intent to revoke his operating license for endangering public health and submitting “misleading, inaccurate or false reports,” according to CBS News. Ohio EPA Director Craig Butler has requested the U.S. EPA conduct a criminal investigation of Bates, calling Sebring’s questionable fumbling of the situation — despite the agency’s continual prodding for action — a “‘cat and mouse’ game.”
Sebring schools were closed Friday, and again Monday and Tuesday, as a precautionary measure and for further testing after residents were finally informed Thursday about excessive lead levels. In some locations, they measured at 21 parts per billion, exceeding the EPA action level of 15 ppb. On Friday, the Mahoning County Emergency Management Agency began distributing bottled water from the Sebring Community Center.
Residents attending a village council meeting Monday night were outraged at having been left uninformed for so long. “A lot of us have kids in the home and we’re extremely afraid, and we need a mayor to stand up, be honest with us, hold people accountable, and fix this problem,” said one man, reported WKBN.
According to local WFMJ, the Ohio EPA said it suspects Bates of falsifying documents, though he denied that claim.
With two cities now having been exposed for epic and likely criminal mishandling of lead contamination of public water, it’s reasonable to imagine similar problems in other locations will be revealed.
via Zero Hedge http://ift.tt/1OZPv6M Tyler Durden
Just when you want that 100% correlation with crude to lift stocks from their post-Fed quagmire, it breaks down. Just as WTI was breaking back red this morning, Interfax headlines hit that confirmed Russia and OPEC in talks for a potential production cut and sure enough old news is good news and WTI ramped back up towards $33. The problem is… higher oil is no longer great news for stocks (for now)…
Russia has confirmed participation in the meeting of OPEC member-states and other oil producers for discussing low oil prices and coordination of a potential crude production cut due in February, Energy Minister Alexander Novak said on Thursday.
“Currently the OPEC member-states are trying to convene a meeting with participation of other OPEC (member-states) and non-(member-states) in February. Certain countries have come forward with this initiative, currently the issue is being worked out with the countries. On our part we’ve confirmed our potential participation in such a meeting,” Novak said. According to the minister, the date for the meeting has not been set yet.
“The date does not depend on us. We can meet any time. The date is being agreed with other countries now,” he added.
Similar meetings have been held earlier, Novak said, though now the situation has changed due to continuing plunge of prices. “Everyone estimates how long those prices will be recovering. We think it’s reasonable to discuss the situation,” the minister said.
He added that the consultations concern issues “related to estimation of the situation on the market, low prices and possible options of production coordination.”
Old news is good news…
But stocks don’t care anymore…
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Submitted by Nicholas Colas of Convergex
Three Fed Thoughts, One Conclusion
We learned one thing yesterday: the U.S. Federal Reserve is in the same position as the rest of us when it comes to forecasting the future path of economic growth. Nobody really “Knows” anything right now. From that touchstone observation, we add two additional points. First, if you think the Fed is going to reverse course any time soon, be aware that neither Fed Funds Futures nor the 2 Year Treasury agree with you. Both discount a slow but perceptible increase in rates this year. Second, it pays to think a little more long term than just 2016. For example, consider that Chair Yellen has exactly 2 years left in that role before the next U.S. President can opt for someone else. What does she want her legacy to be? Not, I think, the Chair that failed to get (and keep) Fed Funds off the zero lower bound.
There is an old adage in economic circles that “Stock market indexes have predicted nine of the last five recessions”. The author of that statement is none other than Nobel Prize winner Paul Samuelson, who concluded the observation with “And its mistakes were beauties”. Fair enough – equity markets are notoriously fickle. But market watchers would be fair in asking, “Fine… But how many recessions have “Blue chip” economists called correctly?”
It is in that philosophical cage match that investors and the Federal Reserve find themselves just now. Global equity market volatility combined with ever-lower crude oil prices are like a traffic signal turning from yellow to red. And red is also pretty much all you see on the screen. The economics-minded stewards at the Fed see an entirely different picture: low notional unemployment, the dry powder for consumer spending in the form of lower oil prices, and easy monetary policy around the world. For them, the light is turning green.
But one side will be right, and one side will be wrong. The dichotomy is too stark for any other conclusion.
Looking through the Fed’s statement today, I had three observations about how the central bank is weighing these facts versus how capital markets perceive them.
Point #1: The Federal Reserve’s cautious stance shows they don’t know any more than capital markets do about the current trajectory of global economic growth. They see the volatility in equity markets and oil’s slippery slope but are keenly aware that markets are fickle. Just think back to the August 2015 bout of volatility and how the Fed seemed to put off a September rate increase because of it. Whether that was optics or reality, it set a precedent that global equity market volatility could alter Fed policy. Look for the Fed to wait on the real economic data that surrounds its dual employment and inflation mandate before it fundamentally changes course.
There’s one exception to that observation, at least by historical Fed policy standards: a market crash caused by external events. A 1987-style meltdown isn’t enough since the central bank playbook there is to simply ensure the system has the liquidity it needs. If there were a geopolitical shock, however, that’s a different page in the playbook. Barring such an event, however, the Fed is going to take its time in 2016. An S&P 500 that grinds lower by another 5-10% isn’t likely going to change that.
Point #2: While plenty of market watchers are calling for a return to zero interest rates and maybe more quantitative easing, some tell-tale capital markets disagree those events are in the cards. Fed Funds Futures peg the chance of a July rate increase at 50% and put the chance of higher rates by year-end at 68%. Two year Treasuries – the hair trigger of the yield curve for changes in Fed policy – yield 83 basis points. That’s down from over 100 basis points late last year but still higher than September 2015 when the market was sure the Fed was going to increase rates. The point here is that these markets are not forecasting a return to zero interest rates. Not even close.
For the sake of completeness, there are two markets that have their doubts. Gold prices are up from their 2015 lows of $1,050/troy ounce to $1,125 currently. Given that the yellow metal has been in a vicious bear market since 2011, that is a notable reversal of fortune and could be the canary in the coalmine chirping a warning about further fiat currency debasement. The other market worth a mention is the 10-year U.S. Treasury note. At a 2.0% yield, it signals a vote of no confidence in the Fed’s hope that inflation will return to desired levels any time soon.
Point #3: Fed Chair Janet Yellen has exactly 2 years left in that position before the next President has a chance to consider reappointing her or choosing a new person to fill the slot. Think of the Federal Reserve as either a blue chip public company or major branch of the U.S. government. In both cases, the people that run them give serious thought to their legacy – what they did to shape the organization’s goals and what specific accomplishment they achieved.
Through that lens, the conversation about Fed policy in 2016 takes on a different hue. In retrospect, every Fed Chair has their emblematic “Achievement”: Paul Volcker (tamed inflation), Alan Greenspan (the 90s expansion), Ben Bernanke (saved the financial system). For Janet Yellen, her prospective accomplishment must be “Got things back to normal”. That means getting interest rates far away from the zero lower bound if at all possible. If for this reason, and no other, the Fed is going to raise rates in 2016 barring a shock to the system.
The conclusion here: you dance with who you brung, and this Fed is our date to the prom. They don’t have any greater level of clarity about how this year is going to shape up than the marginal investor setting equity prices or an oil trader looking for direction in that market. This is patently different from the period from 2008 – 2015, when the Fed was clear about its perspective and knew exactly which policy levers to pull. Perhaps they were wrong, but they were never in doubt.
Now, there’s enough doubt for everyone: markets, central banks, consumers, governments. Everyone. The best thing we can say about that: if markets accept that the Fed is no better informed than they are, maybe investors will devote more time to stock fundamentals and intrinsic value analysis. Without a doubt there are cheap stocks in the current global equity market. Now, perhaps, we have the time to look for them instead of worrying so much about the Fed.
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On a day when the political media will be salivating over the drama of Donald Trump vs. Megyn Kelly vs. Sean Hannity vs. Bill O’Reilly (or whatever the latest 6th Avenue dynamic is), I have an op-ed in the L.A. Times making the argument that well, maybe ol’ Ted Cruz was right after all: There are too many New York values in this race. Excerpt:
Take eminent domain. Since the Supreme Court’s Kelo vs. City of New London decision, governments have had constitutional cover not only to seize private property for public use — to build a school or freeway, for instance — but also to transfer land from one private owner to another for the “public good,” a vague term that sometimes means replacing tenements with sports stadiums or luggage stores with luxury hotels.
The Republican Party has long opposed such transfers as contrary to free market principles; so do 4 out of 5 Americans. But in cheek-by-jowl Manhattan, the property rights of small homeowners and business people are like bugs on the windshield of the city’s swashbuckling real estate developers and the ribbon-cutting politicians who enable them.
Bloomberg as mayor relied on eminent domain so much that he campaigned against the post-Kelo legislative backlash, warning that “You would never build any big thing any place in any big city in this country if you didn’t have the power of eminent domain.” Trump has said he supports Kelo “100%.”
There’s more on guns, surveillance, fracking, minimum wage, and so on. Read the whole thing here.
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As we do every quarter, just before CAT announces its result, we show the monthly retail sales for the heavy industrial conglomerate, and in the month of December things went from really bad to even worse, when the company reported what in our estimate was the worst month since the financial crisis, with global retail sales matching the worst annual decline this decade, while the duration of the sales contraction is now unprecedented in company history.
Today, CAT confirmed the flow through from this depressed picture when it announced that not only did revenue tumble by 23% to $11 billion, but it missed already deeply cut estimates of $11.4 billion, leading to a 111% collapse in operating profit which from $1.1 billion turned into a $114 million loss in the quarter. To be sure, the company tried to pull an Alcoa and stuff massive restructuring charges in the quarter amounting to $689, boosting non-GAAP EPS by $0.89 to $0.74, however one can simply ignore this latest accounting fudge attempt.
Then there was the topic of ongoing inventory liquidation:
Inventory declined about $1.45 billion during the fourth quarter of 2015. For the full year, inventory decreased about $2.5 billion. “Caterpillar inventory declined $1.45 billion during the fourth quarter of 2015, compared to a decline of about $1.1 billion during the fourth quarter of 2014. A fourth-quarter decrease is not unusual, as some of our businesses ship long lead-time capital goods in the fourth quarter. For the full year of 2015, Caterpillar inventory declined about $2.5 billion. While we believe our inventory levels are not excessive, we are anticipating that lower sales and our ongoing Lean initiatives will result in some reduction in inventory in 2016.”
Expect much more GDP-reducing inventory liquidation in the months ahead.
The 2015 summary via the CEO:
This past year was a difficult one for many of the industries and customers we serve. Sales and revenues for 2015 were nearly 15 percent lower than 2014 and 29 percent off the 2012 peak. The two most significant reasons for the decline from 2014 were weakening economic growth and substantially lower commodity prices. The impact of weak economic growth was most pronounced in developing countries, such as China and Brazil. Lower oil prices had a substantial negative impact on the portion of Energy & Transportation that supports oil drilling and well servicing, where new order rates in 2015 were down close to 90 percent from 2014.
“We anticipated about $5 billion of the $8 billion sales and revenues decline in our January 2015 outlook as we started the year. Actual sales and revenues were about $3 billion below that $50 billion outlook because of steeper than expected declines in oil prices, a stronger U.S. dollar, weaker construction equipment sales and lower than expected mining-related sales in Resource Industries,” added Oberhelman.
Who is to blame? Why China… and the strong dollar of course:
In Asia/Pacific, the sales decline was primarily due to lower sales in China and India and the unfavorable impact of currency. The most significant decline was in China, a result of continued weak residential and nonresidential construction activity. The unfavorable impact of currency was primarily due to the weaker Japanese yen and Australian dollar.
But where things get really messy was the company’s guidance which was absolutely obliterated, and saw CAT slashing its 2016 revenue projection cut from the $45.5 billion forecast as recently as last October to a range of $40-$44, or a $42 billion midpoint, a cut of nearly nearly 8 in just three months! This is what the company said:
The outlook for 2016 sales and revenues does not anticipate improvement in world economic growth or commodity prices. Sales and revenues are expected to be in a range of $40 to $44 billion – a mid-point of $42 billion. The mid-point of the range reflects a decline of about $3.5 billion from last October’s preliminary outlook for 2016 sales and revenues and a year-over-year decline of about 10 percent. The decrease from last October’s preliminary outlook is largely a result of continued declines in commodity prices and economic weakness in developing countries.
Some additional color from CEO Oberhelman:
“Our outlook reflects struggling oil and other commodity markets, and continued economic weakness in developing countries. While the U.S. and European economies are showing signs of stability, the global economy remains under pressure. While we manage through these difficult economic times with substantial restructuring actions to lower costs, we are also preparing for the long term. We are continuing substantial investments in R&D and our digital capabilities. These investments will be positive for Caterpillar and our customers through connected fleets and jobsites and access to data and predictive analytics. Investing in the future is important to improving productivity and the bottom line – for Caterpillar and our customers over the long term. While it is tough to predict when an economic recovery will happen, the investments we are making and the actions we are taking to lower our cost structure and improve quality and our market position will help deliver better results when a recovery comes,” said Oberhelman.
Good luck.
via Zero Hedge http://ift.tt/1WPtmNQ Tyler Durden
Japan’s economy minister Akira Amari “searched his memory” and doesn’t recall putting an envelope of cash in his pocket.
Nevertheless, the 66-year-old resigned on Thursday amid reports he accepted a $100,000 bribe from a construction company in exchange for political favors.
“I haven’t broken any laws,” Amari said last Friday, before promising to answer further questions once he had a chance to “conform his memories.”
As it turns out, Amari does recall receiving gifts from the company but those gifts were accepted as a “political donation.” No mafia-style cash envelopes were exchanged, he insists. “Putting money in my suit pocket in front of a visitor would be lacking dignity as a human being,” he said.
But even as the minister maintained his innocence, he decided to fall on his sword for the sake of Japan’s Quixote-esque fight against deflation. “We need to pass legislation through Parliament for steps to beat deflation and create a strong economy as soon as possible,” he said on Thursday. “Anything that hampers this must be eliminated, and I’m no exception.”
As Reuters notes, “Amari is a close ally of the prime minister, is a core member of his policy team, and led Japan’s negotiations for the Trans-Pacific Partnership free trade bloc.”
“This is definitely not good news for Abe and it’s going to make it harder to sell the TPP,” Jeffrey Kingston, director of Asian studies at Temple University’s Japan campus told Reuters. “Corruption is just not something that goes down well with voters [and] it’s going to be a bit of a rough road.”
Yes, “a bit of a rough road,” or as BBC’s Mariko Oi puts it, “the biggest scandal the Abe administration has faced” thus far.
Amari was the architect of Abenomics and “his resignation will probably raise even more questions over Abe’s economic policies,” Oi continues.
As for the “political donations,” Amari says the confusion arose because the cash was mishandled by his “secretaries” who allegedly spent 3 million yen of the illicit funds.
“I decided to resign my cabinet position today in consideration of my responsibility to oversee my secretary as a national lawmaker, my duty as a minister, and my pride as a politician,” a tearful Amari declared.
As Bloomberg reports, Amari is “the most influential minister to step down since Abe took office in December 2012.”
“The resignation of one of the leading members in the Abe cabinet hurts the policy implementation capacity of Abenomics,” Minori Uchida, head of global markets research at Bank of Tokyo-Mitsubishi UFJ said, earlier today.
Right. Of course the other thing that “hurts the policy implementation capacity of Abenomics” is that Abenomics simply hasn’t worked to pull the country out of deflation. Amari was one of three officials (Abe and BoJ governor Kuroda being the other two) who delivered near daily soundbites promising that the government would hit its 2% inflation target even if it killed them.
To whatever extent the market doubted the viability of Abenomics, Amari’s exit will only make the situation worse according to pretty much every commentator who’s weighed in thus far.
Nobuteru Ishihara, a former minister and secretary-general of the ruling Liberal Democratic Party, will step in as economy minister.
In the end, we suppose it says something about Abe’s cabinet that they can’t even seem to do graft right. $100,000 isn’t exactly a large sum when it comes to bribes and illicit kickbacks. Just ask a politician in Brazil.
We close with a quote from the disgraced minister, who says he risked his own life tilting at deflationary windmills.
“I worked without sleep or rest. After Prime Minister Abe put my self at the helm of Abenomics, I put my life on the line for my national duty over the past three years.”
* * *
Full article from Shukan Bunshun on the alleged bribes
And in public secretary Amari Akira TPP Minister (66), that there is a suspicion of mediation gain punishment law violations and Political Funds Control Law it found an interview of Shukan Bunshun.Depending on the coverage Affairs personnel of Shukan Bunshun of construction company in Chiba Prefecture, it was testimony to exchange money on the basis of the notes and recordings.
According to this man, Tour of the compensation of road construction Urban Renaissance Agency (UR) is doing, and request a man of influence in the Amari office. Over the past three years, Minister Amari and local Yamato office director, shaking Kenichi (public first secretary) and continued funding and entertainment Suzuki RyoMakoto policy secretary, only those total that remains is evidence 12 million yen and that up to.?
Qing Island director you have set a meeting was responded that they “do not was brought in the form of donations” to the coverage of Shukan Bunshun. However, there is no description in Amari’s political fund income and expenditure report.?The November 14, 2013, and met with the Minister of room to Amari minister. Along with Toraya of jelly that entered the box of paulownia, the ¥ 500,000 cash was placed in an envelope that was me, “This is a thank-you.”
Nobuo Mr. Gohara of attorney in the original Tokyo District Public Prosecutors Office prosecutor, a series of financial interactions Political Funds Control Law violation was pointed out that there is a suspicion of mediation gain punishment law.
TPP is in the refrain of the Diet approval, likely to raise the voices questioning the eligibility of Amari minister.
* * *
via Zero Hedge http://ift.tt/1nAoz71 Tyler Durden
Overnight Media Digest
WSJ
– Alibaba Group Holding Ltd reached a roughly $900 million deal to sell its stake in Meituan-Dianping, which is China’s largest online provider of movie ticketing, restaurant bookings and other on-demand services, as the Internet giant builds its own competing platform. (http://on.wsj.com/1SkMend)
– Federal Reserve officials expressed worry about financial-market turbulence and slow economic growth abroad, leaving doubts about whether the central bank will raise interest rates as early as March. (http://on.wsj.com/1SkMvqc)
– Facebook Inc posted more than $1 billion in quarterly profit for the first time, showing the social network’s mobile strength as advertisers increasingly look to reach younger users. (http://on.wsj.com/1SkMCBV)
– Federal inspectors found “deficient practices” at a Theranos Inc laboratory that “pose immediate jeopardy to patient health and safety”,. The Centers for Medicare and Medicaid Services said an inspection completed in November uncovered five major infractions that violate the federal law governing clinical labs. (http://on.wsj.com/1SkMNNK)
– If BG Group Plc investors support the deal on Thursday as analysts and investors expect, the combination would nearly double Royal Dutch Shell Plc’s production of liquefied natural gas within two years, and turn it into the world’s largest marketer of the fuel by the end of the decade. (http://on.wsj.com/1SkN6YU)
FT
French utility EDF said in a statement on Wednesday that its board had agreed to buy the reactor business of Areva based on a value of 2.5 billion euros.
British Prime Minister David Cameron will fly to Aberdeen, Scotland, on Thursday to announce a 250-million-pound ($356.20-million) package to prop up the North Sea oil industry.
In October last year, Zeus Capital announced that it will acquire rival broker Novum Securities. However, that plan appears on the brink of falling apart as the Financial Conduct Authority plans to bring tax fraud charges against Zeus co-founder Richard Hughes.
Five former brokers were acquitted on Wednesday of conspiring with convicted trader Tom Hayes to manipulate crucial benchmark interest rates as London’s second Libor trial dealt a blow to the UK’s Serious Fraud Office.
NYT
– Even as petroleum prices plummet and the kingdom burns through its financial reserves, the Saudis are betting they can win an oil war of attrition. (http://nyti.ms/1PUnxsX)
– A report from the New York attorney general portrays a complex business in which technologically adept ticket brokers are able to profit at the expense of ordinary fans. (http://nyti.ms/23vhOnh)
– Gilead Sciences may face legal action in Massachusetts unless it drops prices for its hepatitis C drugs. In California, it is being sued over patents for an H.I.V. treatment. (http://nyti.ms/1KcfUBy)
– The quarter was another blockbuster for Facebook Inc and its shares jumped in after-hours trading. (http://nyti.ms/1SLtQoO)
Canada
THE GLOBE AND MAIL
** Bombardier Inc was sued on Wednesday for at least C$14.2 million ($10.1 million) by a unit of Comerica Inc , after the Canadian aircraft maker was unable to find buyers for four planes whose leases had expired. (http://bit.ly/1Sl1L6c)
** Rogers Communications chief executive Guy Laurence is defending the escalating prices of wireless plans, comparing the value customers get from the money cellular carriers pour into their networks every year to the cost of a daily coffee. (http://bit.ly/1Sl1MHk)
** Housing markets across the Prairies are showing major signs of stress as job losses mount in the energy sector and rental vacancy rates soar, Canada’s federal housing agency, Canada Mortgage and Housing Corp, warned in a quarterly assessment. (http://bit.ly/1Sl1Yqh)
NATIONAL POST
** The federal government will take extra time to weigh approvals for both the Energy East and Trans Mountain pipeline projects, and will assess both projects’ impacts on Canada’s greenhouse gas emissions. (http://bit.ly/1Sl2fcy)
** Canada’s top energy regulator, the National Energy Board, forecasts crude oil production in the country to grow 56 percent to reach 6.1 million barrels per day by 2040 from its current level of 4.3 million bpd. (http://bit.ly/1Sl2oge)
** Canadian vehicle sales will be flat in 2016 as weakness in commodity-producing provinces is offset by strength in the industrial heartland, according to a new report from Scotiabank. (http://bit.ly/1Sl2rbX)
Britain
The Times
The trial of six brokers accused of rigging Libor ended in defeat for the Serious Fraud Office yesterday when a jury cleared five of the men. (http://thetim.es/1OZ9hPG)
The chances that the payment protection insurance scandal will exceed £30 billion rose yesterday after Santander took a fresh £450 million provision to pay compensation. (http://thetim.es/1KGeJ8p)
The Guardian
Shell has won shareholder approval for its £35bn takeover of BG Group despite nearly a fifth of investors opposing the deal. (http://bit.ly/1VrjqIQ)
One of the most powerful opponents of Google’s controversial tax structures, European tax commissioner Pierre Moscovici, is expected on Thursday to call on Britain and Ireland to drop their objections to radical tax reform across the EU. (http://bit.ly/1Vshi3M)
The Telegraph
Royal Bank of Scotland has set aside an extra £2.5bn to cover legal bills, compensation payouts and reduced income due to low interest rates, just weeks before it announces its financial results for 2015. (http://bit.ly/20rZMjj)
The City watchdog has issued a warning to people considering taking out a self-certification mortgage from a company based outside the UK. (http://bit.ly/1nxKhsz)
Sky News
A fund backed by Britain’s biggest banks has agreed to back a fast-growing app-based advertising platform founded by a trio of 20-something entrepreneurs. (http://bit.ly/1UrHzPi)
Apple’s Safari browser suddenly crashed on iPhones, iPads and Macs worldwide on Wednesday. (http://bit.ly/1SbPgvA)
The Independent
Scotch whisky makers have called on the UK Government to cut tax on the bottle from an “onerous” 76 per cent. (http://ind.pn/1OZ4ca7)
America’s central bank stressed today that it is “closely watching” global markets in the wake of January’s turmoil, suggesting that it is likely to slow the pace of its monetary tightening. (http://ind.pn/1PTLqRr)
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Lawyers for Nicole Eramo—the University of Virginia dean of students currently suing Rolling Stone for defaming her—prevailed in their quest to compel “Jackie” to submit her correspondence with author Sabrina Rubin Erdely.
Earlier this week, the judge in the case ordered Jackie to surrender all records of her conversations relating to the alleged sexual assault. Specifically, Jackie must provide messages she exchanged with Erdely, Rolling Stone, and UVA. The judge’s order also covers correspondence between Jackie and her friends relating to “Haven Monahan,” the fictitious person that Jackie claimed was involved in her rape.
Jackie’s lawyers attempted to argue that her communications were privileged for a variety of reasons. But U.S. District Judge Glen Conrad rejected their reasoning.
The documents will remain confidential, however, according to The Daily Progress—meaning the press won’t get a hold of them unless they are leaked. That’s a bummer.
Eramo is suing Rolling Stone and Erdely for defamation. She is seeking $7.5 million.
Andy Phillips, counsel for Eramo, was pleased with the judge’s decision.
“Jackie was the primary source for Rolling Stone‘s false and defamatory article,” he wrote in a statement. “It appears that Jackie fabricated the account of the sexual assault portrayed in Rolling Stone, and that Rolling Stone knew she was an unreliable source. We look forward to moving forward with discovery and taking this case to trial.”
It’s become undeniable that Erdely was fooled—perhaps not for the first time—by a serial fabulist. Jackie had a crush on her friend, Ryan Duffin, and catfished him by pretending to have a fictional boyfriend, “Haven,” who sent Duffin text messages revealing Jackie’s secret desires. Since Haven does not exist, all available evidence suggests these texts were actually sent by Jackie herself. She also claimed to be suffering from a terminal illness—and that she was the victim of a horrific gang rape orchestrated by Haven. Charlottesville police determined that the assault she described in Erdely’s article never took place.
Of course, for Eramo to win her lawsuit she must prove that not only is Jackie a liar, but that Rolling Stone acted with actual malice in choosing to believe her.
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Following the Fed’s disappointing “dovish, but not dovish enough” statement which effectively admitted Yellen had committed policy error by hiking just as the US economy “was slowing down” which in turn lowered the odds of a March rate hike to just 18%, it was up to oil to pick up the correlation torch, and so it did, rising in an otherwise mixed session which has seen European stocks slide on continued weakness surrounding Italian banks, many of which have been halted limit down, while Asia was unable to pick a direction after the resignation of Japan’s “Abenomics” minister Akira Amari to over a graft scandal and yet another rout for Chinese stocks.
Before we get to the US, we should note what is going on in China where the Shanghai Composite Index fell by another 2.9% to 2655.66, capping a 9.6 percent retreat over three days, as concern a weakening economy will reduce corporate profits overshadowed the biggest cash injection into the financial markets in three years. The SHCOMP closed at the lowest level since November 2014, taking its decline for the year to 25 percent, the most since 2008. As Bloomberg notes, authorities continue to take measures to stabilize the nation’s financial markets but having most of their time focused on propping up the devaluing currency, they appear to have left equity investors to fend for themselves.
This week’s net injection of 590 billion yuan ($90 billion) into the money markets ahead of the start of the Chinese new year was the biggest since February 2013, however it wasn’t big enough. Further declines in the equity benchmark could be on the way. Strategists and technical analysts surveyed by Bloomberg are targeting a bottom of 2,500, compared with 2,656 today. Since the Shanghai Composite Index reached a record high on June 12 it has plummeted 48 percent. As can bee seen on the chart below, it remains the world’s worst performing major equity index in 2016.
Away from Asia, futures on the Nasdaq 100 Index climbed driven by Facebook which jumped 12% in early New York trading after posting another record earnings period. Technology peers also rallied, with more than 2 percent gains each in Google parent Alphabet Inc., Apple Inc., Netflix Inc., Amazon.com Inc. and Microsoft Corp. Amazon and Microsoft are due to report results today, along with some 50 other Standard & Poor’s 500 Index members.
And while Europe was initially happy to track oil modestly higher, it has since then stumbled deep in the red following the latest bout of risk in Italy where banks fell for the second day, leading the FTSE MIB to underperform the broader European market, and pushing the FTSE Italia All-Share Banks index down 4.2% as of 12:18pm CET. Indeed, this morning has been a a freeze fest, with Pop. Milano, UniCredit, Monte Paschi, Pop. Emilia shares halted; down ~5% or more after Banca Akros says price of the “bad bank” guarantee looks rather costly, doubts many Italian banks will be interested in using it to offload bad loans.
The one silver lining has been the MSCI Emerging Markets Index which rose for a second day and Gulf stocks were on course for their best week since December 2014. as U.S. crude headed for a three-day advance, helping boost currencies of commodity-exporting nations. “Emerging-market assets are rallying across the board today as the Fed sounded relatively dovish watching global developments,” said Bernd Berg, an emerging markets strategist in London at Societe Generale SA. “A March Fed rate hike looks increasingly unlikely now. I think we are now entering a risk-on phase and oil-related currencies will post a sizable rally.”
However, that may not last: with the futures picture changing dramatically, moments ago US equity futures slid as Oil erased all of its losses for the day:
And then as oil was sliding, a familiar headline reappeared:
Maybe it can work for a second day in a row.
And while risk levels are changing rapidly and violently by the minute, this is roughly where we stand
A quick stroll through regional markets, we find Asian equity markets traded mixed having initially shrugged off the negative lead from Wall St . ASX 200 (+0.6%) outperformed amid gains in commodity names after crude briefly regained the USD 32/bbl level, while the Nikkei 225 (+0.7%) saw indecisive trade with participants tentative ahead of the BoJ policy decision tomorrow. Shanghai Comp (-2.9%) extended on its weakening trend, although is off its worst levels after the PBoC injected CNY 340b1n into the inter-bank market. 10yr JGBs traded lower, amid a suspected lack of buyers as participants await tomorrow’s conclusion to aforementioned policy meeting in which the BoJ is widely expected to remain on hold.
European indices trade in negative territory amid choppy trade with stabilizing oil markets failing to give stocks a lift. As North American participant come to their desks, stocks are gradually approaching their post-FOMC levels, after a cautious Fed revealed they are not blind to the risks the global economy faces, which resulted in pressure upon stock markets and a flight to safe-haven assets. Energy is supporting stocks, with the sector outperforming in the Euro Stoxx 600. The SMI (-1.5%) is the notable underperformer amongst the premier indices, its second largest component Roche (-4.3% ) weighing it down after predicting a less than stellar outlook for the coming year, with sales expected to grow in mid to low single digits.
In FX, Risk tone is mixed and as such short term speculators have taken the opportunity to buy USD/JPY this morning, taking encouragement from the domestic and offshore buying seen overnight. News that the Japanese Econ Min Amari will step down prompted a brief hit, but this looks to be short lived with the push for 119.00 back on in anticipation of the BoJ meeting this evening.
A gauge of 20 emerging-market currencies rose for a third day, gaining 0.4 percent. Russia’s ruble led the advance, climbing 1.3 percent in a third day of gains. Malaysia’s ringgit strengthened 1.1 percent, after Prime Minister Najib Razak maintained his fiscal-deficit target and announced measures to shore up an economy hit by a plunge in oil. Turkey’s lira and South Africa’s rand appreciated at 0.7 percent.
The pound advanced versus most of its 16 major peers after a report showed the U.K.’s economic expansion accelerated in the fourth quarter. Britain’s economy grew 0.5 percent in the final three months of 2015, from 0.4 percent in the third quarter, matching to the median forecast of analysts surveyed by Bloomberg.a
In commodities, West Texas Intermediate crude rose 0.7 percent to $32.54 a barrel after gaining 6.4 percent over the past two days. It’s recovering after falling to $26.19 on Jan. 20, its lowest since 2003.
The worldwide surplus will decline this year even after Iran adds an expected 500,000 barrels a day of output, United Arab Emirates Energy Minister Suhail Al Mazrouei said on his Twitter account. U.S. crude inventories increased by 8.38 million barrels last week, the biggest gain in volume since April, according to a weekly report from the Energy Information Administration.
Looking at the US calendar we’ve got last week’s initial jobless claims reading before the important preliminary December durable and capital goods orders data. Last month’s pending home sales data follows this and we close with the Kansas City Fed manufacturing activity index reading. Earnings wise today we’ve got 52 S&P 500 companies set to report with the highlights being Amazon (after-market), Caterpillar (before the open), Microsoft (after-market) and Ford Motor (before the open).
Global Top News
Bulletin Headline Summary from RanSquawk and Bloomberg:
US Economic Calendar
DB’s Jim Reid concludes the overnight wrap
Looking at our screens this morning, it’s been a relatively mixed start for bourses in Asia but after a weak open, some positive sentiment is returning as we reach the midday break. There’s been gains this morning for the Hang Seng (+0.18%), Kospi (+0.31%) and ASX (+0.60%) after all three opened in the red, while in Japan the Nikkei is currently -0.44% but opened down nearly -1.5% following the FOMC selloff in the US last night. China is bucking the trend with markets seemingly struggling to trade with any conviction. The Shanghai Comp is currently -0.59% but has swung between gains and losses this morning. Elsewhere WTI is off around a percent in Asia and back below $32/bbl. Datawise the only release of note has been a softer than expected Japanese retail sales print (-0.2% mom vs. +1.0% expected).
Moving on. Earnings season is ramping up with a number of bellwether corporates reporting. Much like what we saw with Apple, despite Boeing’s quarterly earnings coming in ahead of analyst estimates investors latched onto the soft outlook for the quarter and year ahead which sent shares plummeting nearly 9% lower by the close. After the close we also got some bumper numbers out of Facebook (beat both earnings and revenue expectations) which sent shares up as much as 12% in extended trading (while US equity index futures are also up this morning). That was in stark contrast to eBay however who saw its share price down double digits after the close with management outlining a slightly more difficult quarter ahead than analysts had expected. All told yesterday we saw 33 S&P 500 companies report with 18 beating revenue expectations (55%) and 27 (82%) coming ahead of earnings estimates. That was slightly better than the overall trend so far after 133 companies having reported with 52% and 80% beating sales and earnings expectations respectively.
Elsewhere, the rest of the price action in markets played second fiddle to the FOMC. European equities managed to eke out small gains yesterday after trading with losses for much of the session (Stoxx 600 closing +0.31%). Meanwhile in terms of the economic data we saw both German (9.4 vs. 9.3 expected) and French (97 vs. 96 expected) consumer confidence indicators come in a smidgen ahead of expectations. In the US the only data of note was a greater than expected surge in December new home sales (+10.8% mom vs. +2.0% expected) which rose to a ten-month high after being put down to the unseasonably warm weather last month.
Looking at the day ahead, it’s a busy one for economic data and we kick off in Germany this morning where we’ll get the December import price index print. That’s before we turn to the UK where the advanced Q4 GDP print is due to be released (+0.5% qoq expected) followed by various confidence indicators for the Euro area. Germany’s preliminary CPI report for January is due out after this. Over in the US this afternoon, we’ve got last week’s initial jobless claims reading before the important preliminary December durable and capital goods orders data. Last month’s pending home sales data follows this and we close with the Kansas City Fed manufacturing activity index reading. Earnings wise today we’ve got 52 S&P 500 companies set to report with the highlights being Amazon (after-market), Caterpillar (before the open), Microsoft (after-market) and Ford Motor (before the open).
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