Month: April 2017

• No big bets ahead of Trump-Xi meeting; oil, metal prices firm (Reuters)
• Senate on the Brink of ‘Nuclear Option’ in Gorsuch Vote (WSJ)
• Le Pen Ambushed on Euro in French Debate (BBG)
• Trump touts coal but utilities aren’t listening (Reuters)
• Trump Officials Alarmed China May Bid for Westinghouse Unit (BBG)
• EU lawmakers adopt Brexit resolution, reject pro-Gibraltar hint (Reuters)
• EU, Greece urge deal on bailout review on Friday (Reuters)
• Russia Detains Terror Suspects in St. Petersburg After Blast (BBG)
• Apple Pay Promised to Make Plastic Obsolete. Then Came Wary Shoppers, Confused Clerks (WSJ)
• Global Shipping Fleet Braces for Chaos of $60 Billion Fuel Shock (BBG)
• Ultralow rate driving Japan’s public pension fund out of JGBs (Nikkei)
• ETFs Are the New Bond Kings (BBG)
• Arianna Huffington Leads Crusade to Deal With Uber’s Scandals (WSJ)
• JAB Holding to buy bakery chain Panera Bread in $7.5 billion deal (Reuters)
• Ferguson mayor re-elected in his first election after shooting (Reuters)
• South Africa’s ANC stands by Zuma, rejects calls for president to quit (Reuters)
• EU clears ChemChina takeover of Syngenta with conditions (Reuters)
• Deutsche Bank Loses Senior Executives After Bonuses Slashed (BBG)
• Apple aims for more control, less cost as it accelerates in chip design (Reuters)

 

Overnight Media Digest

WSJ

– U.S. companies are poised to report their strongest quarterly earnings in years, another sign that the stock market rally could have further to run. http://on.wsj.com/2nVWZ5f

– Federal Reserve Bank of Richmond President Jeffrey Lacker unexpectedly stepped down Tuesday after revealing his involvement in a 2012 leak of confidential information that sparked a criminal investigation, prompted outrage on Capitol Hill and deeply embarrassed the Fed. http://on.wsj.com/2nVX1Kp

– The House Intelligence Committee wants Susan Rice, a top aide in the Obama administration, to testify in a probe of alleged Russian election interference, as the investigation widens to include allegations that Obama officials improperly used intelligence information involving President Donald Trump or his associates. http://on.wsj.com/2nW54Hd

– Staples Inc is exploring a sale to possible private-equity bidders, the retailer’s latest move to revive its turnaround effort after a failed merger with rival Office Depot Inc and as competition stiffens with web retailers such as Amazon.com Inc http://on.wsj.com/2nVXPPH

– McDonald’s Corp U.S. marketing chief Deborah Wahl will leave the company as part of another management shake-up aimed at reviving the burger chain’s fortunes. http://on.wsj.com/2nVXmgq

– The Senate is barreling toward a bitter showdown over the confirmation of Supreme Court nominee Neil Gorsuch, as Republican Leader Mitch McConnell said Tuesday he has enough votes to change the Senate rules and eliminate the filibuster on Supreme Court nominations. http://on.wsj.com/2nW2LEh

 

FT

* The Business, Energy and Industrial Strategy Committee recommended that half of the UK’s senior executives should be female and long-term incentive bonuses should be abolished.

* British Prime Minister Theresa May hinted on her Jordan trip that Britain will not finalise a new trade deal with the EU until after Brexit is complete in 2019.

* Richmond Federal Reserve President Jeffrey Lacker abruptly left the U.S. central bank on Tuesday after admitting that a conversation he had with a Wall Street analyst in 2012 may have disclosed confidential information about Fed policy options.

 

NYT

– The National Football League has reached an agreement with Amazon.com Inc to allow Amazon Prime customers to stream 10 “Thursday Night Football” games in the coming season, NFL and Amazon representatives said. http://nyti.ms/2oB4Uba

– Spotify and Universal Music Group — whose hundreds of artists include Drake, U2, the Weeknd and Lady Gaga — reached a multiyear license deal, the companies announced on Tuesday. http://nyti.ms/2nC7SYq

– New York State’s highest court dealt a blow to Facebook Inc and other social media companies seeking to expand privacy protections, ruling on Tuesday that Facebook had no right to ask an appellate court to quash search warrants ordering the company to hand over information from hundreds of accounts in a disability fraud case. http://nyti.ms/2nCrxHu

– Boeing Co announced a tentative agreement on Tuesday to sell up to 60 737s to Iran’s Aseman Airlines, a transaction valued at $6 billion that angered American critics of Iran and appeared likely to test the Trump administration’s avowed hostility toward that country. http://nyti.ms/2n9f7f2

 

Canada

THE GLOBE AND MAIL

** The Liberal governments in Ottawa and Quebec City appear to be trying to close the door on the pay hike controversy at Bombardier Inc, saying the plane maker took appropriate action in wake of the uproar. https://tgam.ca/2nDkEFU

** As the International Criminal Court struggles to quell a mutiny by its African members, the Canadian government has begun a quiet backroom effort to find a compromise with South Africa, the court’s most powerful African opponent. https://tgam.ca/2nDjdqX

NATIONAL POST

** The heads of Bank of Montreal and Bank of Nova Scotia defended their organizations’ sales practices to shareholders on Tuesday, with the latter’s chief executive calling allegations of aggressive tactics at some banks “largely unsubstantiated.” http://bit.ly/2nDbE3F

** Realtors in Vancouver, Canada’s most expensive city for housing, predict prices will continue to rise amid a shortage of listings they maintain is stifling the market. http://bit.ly/2nDmdE2

 

Britain

The Times

– British Prime Minister Theresa May has added some prime ministerial clout to the London Stock Exchange’s attempt to persuade Saudi Arabian Oil Co <IPO-ARMO.SE> mco to list its shares in the UK. http://bit.ly/2o7cWb1

– PA Consulting Services, brought in by UK Trade and Investment in 2014 for a three-year contract, exploited poor decision-making by the government agency responsible for boosting overseas trade to increase profits and pass costs to the taxpayer, MPs have found. http://bit.ly/2o7dnCb

The Guardian

– Britain’s North Sea oil and gas sector received 396 million pounds ($492.58 million), net of tax payments, from the government in 2016 compared with a contribution to the exchequer of £381m the previous year, according to analysis by energy specialist Carbon Brief. http://bit.ly/2o78KYT

– The Bank of England has flagged up new concerns about the rapid growth in consumer borrowing as Britons rack up debt on credit cards, car purchase schemes and personal loans. http://bit.ly/2o7sbRd

The Telegraph

– Telecom company Vodafone Plc is closing in on a multi-million pound deal to rename West Ham’s football ground. The company is in advanced talks with the owners of the former Olympic Stadium in East London with a six-year agreement possible this month, according to multiple sources. http://bit.ly/2o75ZXo

– JPMorgan’s head Jamie Dimon has admitted he will not move many jobs out of Britain in the next two years as a result of Brexit, in a U-turn on his pre-referendum warning that a vote to leave the European Union could mean as many as 4,000 jobs moving across the Channel. http://bit.ly/2o7bEgn

Sky News

– Crisis-hit Toshiba Corp is being forced to buy out a French firm’s stake in the venture behind a proposed new nuclear power station in Cumbria – throwing its future into further doubt. http://bit.ly/2o7c5qR

– Ministers and regulators should act swiftly to curb soaring bosses’ pay in British boardrooms, a report from the Business, Energy and Industrial Strategy Select Committee of MPs has warned. http://bit.ly/2o7gqKN

The Independent

– Food inflation in Britain hit 1 per cent year-on-year last month, the sharpest rise since February 2014 and marking the second month in a row of rising prices, according to the latest BRC-Nielsen Shop Price Index. http://ind.pn/2o7ahxV

– Around 100,000 jobs may now be at risk after a top EU lawmaker warned that financial business denominated in euros must move from the UK to the EU after Brexit. http://ind.pn/2o7c46t

via http://ift.tt/2o9cQQ6 Tyler Durden

For the first time since his election, president Trump is set for a direct collision course with Vladimir Putin after Russia said on Wednesday it stands by Syrian President Bashar al-Assad despite widespread popular outrage over a chemical weapons attack which the media was quick to pin on the Syrian president, in a carbon-copy of events from 2013 which nearly launched a US invasion of the middle-eastern nation, when a YouTube clip – subsequently shown to be a hoax – served as proof that Assad had used sarin gas on rebels in a Damascus neighborhood.

As reported yesterday, Western countries including the US accused Assad’s armed forces for the chemical attack, which choked scores of people to death in the town of Khan Sheikhoun in a rebel-held area of northern Syria hit by government air strikes. While Washington said it believed the deaths were caused by sarin nerve gas dropped by Syrian aircraft, Moscow offered an alternative explanation, claiming the poison gas had leaked from a rebel chemical weapons depot struck by Syrian bombs.

Hasan Haj Ali, rebel commander of the Free Idlib Army rebel group, and quoted by Reuters called the Russian statement a “lie”.

“Everyone saw the plane while it was bombing with gas,” he told Reuters from northwestern Syria. “Likewise, all the civilians in the area know that there are no military positions there, or places for the manufacture (of weapons). The various factions of the opposition are not capable of producing these substances.”

The incident is the first time Washington has accused Assad of using sarin since 2013, when hundreds of people died in an attack on a Damascus suburb. At that time, Washington said Assad had crossed a “red line” set by then-President Barack Obama. Back then Obama threatened an air campaign to topple Assad but called it off at the last minute after the Syrian leader agreed to give up his chemical arsenal under a deal brokered by Moscow, a decision which Trump has long said proved Obama’s weakness.

The latest incident, which comes at a very odd time – just days after the White House it will no longer pursue the ouster of Assad, cementing the Syrian leader’s resolve not to do anything to infuriate the US administration – means Trump is faced with the same dilemma that faced his predecessor: whether to openly challenge Moscow and risk deep involvement in a Middle East war by seeking to punish Assad for using banned weapons, or compromise and accept the Syrian leader remaining in power at the risk of looking weak.

As reported last night, Trump described Tuesday’s incident as “heinous actions by the Bashar al-Assad regime”, but also faulted Obama for having failed to enforce the red line four years ago. Obama’s spokesman declined to comment. Washington, Paris and London have drawn up a draft U.N. Security Council statement condemning the attack and demanding an investigation. Russia has the power to veto it, as it has done to block all previous resolutions that would harm Assad.

As a result, all eyes will now be on Trump’s response.

As Reuters puts it, “Trump’s response to a diplomatic confrontation with Moscow will be closely watched at home because of accusations by his political opponents that he is too supportive of Russian President Vladimir Putin. He has previously said the United States and Russia should work more closely in Syria to fight against Islamic State.”

Should Trump engage, devolving relations between Russia and the US to a level last seen under the Obama administration, it will be interesting to watch the justification provided by the “Russia-hacking” conspiracy theorists.

Aside for US-Russia relations, the chemical attack in Idlib province, one of the last major strongholds of rebels that have fought since 2011 to topple Assad, will complicate diplomatic efforts to end a war that has killed hundreds of thousands of people and driven half of Syrians from their homes.

It is worth recalling that “Jihadist groups have a strong presence in Idlib alongside other rebel groups, some of which have received backing from powers including Turkey and the United States”. It is in their interest to not only watch the conflict between Russia and the US escalate, but to do everything in their power to create false flag events that achieve this.

Finally, it is worth noting that over the past several months Western countries, including the United States, had been quietly dropping their demands that Assad leave power in any deal to end the war, accepting that the rebels no longer had the capability to topple him by force. The use of banned chemical weapons would make it harder for the international community to sign off on any peace deal that does not remove him, something that Assad – and the rebels – are all aware of. It goes without saying, that the Syrian president had the most to lose from launching a chemical attack just as both the military and diplomatic tide was turning in his favor.

British Foreign Secretary Boris Johnson, who two months ago shifted his country’s policy by saying Assad should be allowed to run for re-election, said on Wednesday that he must go. “This is a barbaric regime that has made it impossible for us to imagine them continuing to be an authority over the people of Syria after this conflict is over.”

And now, all eyes on Trump.

via http://ift.tt/2p0abpl Tyler Durden

European stocks rebounded after a downbeat start, aided by a return to the post-Euro open momentum ignition in the USDJPY while Asian stocks rose after China shares surged 1.5%, the most since August. For now S&P futures are fractionally in the red, although we expect them to turn progressively higher as US traders get to their desks to frontrun the now traditional “post open” ramp.

Treasuries steadied ahead of today’s Fed Minutes release and tomorrow’s key weekly political event, the first meeting between Trump and China’s president. Elsewhere, oil continued its rise while gold declined from a multi-week high.

In an otherwise quiet session, China was the outlier as the Shanghai Composite Index rose 1.48%, the most since August, while Taiwan’s Taiex advanced 1.4 percent as both markets reopened after a holiday. China announced Saturday it would develop an economic zone in Xiongan, Hebei province, prompting prospective buyers to throng to the region, snapping up local construction companies many of which soared by the daily 10% limit, while commodities such as coking coal, iron ore and steel rebar soaring.

For once it was not the US but France that grabbed the political spotlight, where last night we had the second of three live televised presidential debates. As DB’s Jim Reid recounts, much like the first it tested viewers’ stamina again with the clock running close to 4 hours in the end. In terms of the key takeaways the general feeling was that it was the six less popular candidates which largely stole the show, frequently questioning and attacking the front runners. Of the candidates in contention, Macron was largely on the defensive for most of the night, standing his ground but never seemingly coming under too much pressure. Melenchon was the most attacking. Fillon failed to really standout and took on a barrage of attacks on ethics and Hamon was largely in the shadows. Le Pen was heavily questioned at times and looked under pressure and very much in defence-first mode. Le Pen’s comments were also typically defiant and she closed out by making remarks including to “take back our sovereignty”, “civilisation in danger” and also “the owners of their country with the right to a border”.

In terms of the early results an Elabe poll covering 1,024 viewers following the debate found that Melenchon was seen as the most convincing with 25% of the votes followed in order by Macron (21%), Fillon (15%) and Le Pen (11%). A separate Opinionway survey had Melenchon, Macron and Fillon all tied on 18% a piece followed by Le Pen with 11%. So that result would suggest that the debate has done little to further Le Pen’s chances with the Elabe pollster highlighting that the fierce competition on the anti-European issues contributed to Le Pen’s mediocre score. As we said following the first debate though, Hilary Clinton was seen as the comfortable winner in all the US Presidential debates so it’s worth taking these results in context.

Interestingly leading into the debate yesterday the 2y OAT-Bund spread hit a near 5-year high at 47bps, surpassing the high from earlier the year in February when the spread hit 42bps. To be fair this might be as much to do with the supply and demand issues for bunds as anything else.

In any case, with polls showing Marine Le Pen was far from convincing at the latest French presidential debate, risk-off sentiment has lost momentum and risk reversals in EUR/JPY have kept moving higher. Two-week volatility smile steepens in favor of EUR calls, while puts on two-month tenor flatten slightly.

Global markets may have reflected some of this with the the MSCI All-Country World Index climbed 0.1 percent. The Stoxx Europe 600 added 0.2 percent after fluctuating between gains and losses. Futures on the S&P 500 Index were little changed. The underlying gauge advanced 0.1 percent on Tuesday.

Crude continued its advance before DOE oil inventory data which is expected to show U.S. stockpiles retreated from a record. West Texas Intermediate crude climbed 1.2% to $51.64 a barrel, adding to Tuesday’s advance. Base metals increased after a plan to develop an economic zone near Beijing boosted the outlook for demand, with zinc climbing 1.8 percent as a smelter in Peru was also affected by flooding

Oil and gas companies led the Stoxx Europe 600 Index toward a second day of gains after the gauge fluctuated in early trading. The greenback, 10-year U.S. Treasuries and futures for the S&P 500 were all  little changed. South Africa’s rand reversed gains after President Jacob Zuma survived calls to quit. As Bloomberg reiterates, investors and markets remain in a holding pattern, awaiting the next major catalyst to either end or extend the global rally that pushed stocks to a record last month. A series of major data releases this week, culminating in a payrolls report Friday forecast to show 175,000 jobs added by U.S. employers in March,  is offering clues to the strength of the world’s biggest economy.

As Reuters notes, the dollar lost its grip on earlier gains as concerns over a North Korean missile test worsened sentiment ahead of the summit between the U.S. and Chinese leaders. Topping the agenda at Trump’s Mar-a-Lago resort in Florida will be whether he makes good on his threat to use U.S.-China trade ties to pressure Beijing to do more to rein in its nuclear-armed neighbor North Korea, which is working to develop missiles capable of hitting the United States. The dollar index, which tracks the U.S. currency against a trade-weighted basket of six peers, was down on the day at 100.48 , as slumping U.S. Treasury yields also gave investors little incentive to buy dollars.

“The meetings are expected to be informal, unscripted discussions of how the two countries will address, but not immediately resolve, their differences,” said strategists at Morgan Stanley in a note to clients.

“Any commentary on how the US specifically wants to try to reduce the trade deficit with China will be watched by FX investors,” the strategists wrote.

Meanwhile, oil climbed to a near one-month high on signs of a gradual tightening in global oil inventories and on concern about a supply outage at a field in the United Kingdom’s North Sea that feeds into an international benchmark price. Brent crude futures the international benchmark for oil, were up 1 percent at $54.73 per barrel. U.S. West Texas Intermediate (WTI) crude futures was also up 1 percent. London copper rallied as Chinese traders returned from a two-day break to buy up metals following brighter global manufacturing reports. Zinc and nickel tracked a rally in steel. Safe-haven gold steadied helped by sluggish moves in riskier assets. Spot gold edged up 0.1 percent.

Key near-term catalyst include minutes from the Fed’s March meeting, scheduled to be released Wednesday, and a similar account of the ECB’s latest policy gathering is due Thursday. China’s president will meet his U.S. counterpart for two days starting Thursday. U.S. non-farm payrolls are due Friday.

Bulletin Headline Summary from RanSquawk

• Energy and material names have soared in early trade to see the commodity-heavy FTSE outperform its European counterparts
• The big data release this morning was the UK services PMI number, which exceeded expectations to print 55.0.
• Looking ahead, highlights include US Services PMI, ADP Employment Change and ISM Non-Manufacturing PMI, DoEs and FOMC Minutes

Market Snapshot

• S&P 500 futures down 0.1% to 2,354.00
• STOXX Europe 600 up 0.06% to 380.24
• MXAP up 0.3% to 147.61
• MXAPJ up 0.5% to 482.40
• Nikkei up 0.3% to 18,861.27
• Topix up 0.01% to 1,504.66
• Hang Seng Index up 0.6% to 24,400.80
• Shanghai Composite up 1.5% to 3,270.31
• Sensex up 0.1% to 29,949.61
• Australia S&P/ASX 200 up 0.3% to 5,876.20
• Kospi down 0.01% to 2,160.85
• German 10Y yield fell 0.7 bps to 0.25%
• Euro up 0.04% to 1.0678 per US$
• Brent Futures up 1.1% to $54.77/bbl
• Italian 10Y yield fell 4.7 bps to 1.981%
• Spanish 10Y yield fell 1.0 bps to 1.607%
• Gold spot down 0.2% to $1,254.00
• U.S. Dollar Index down 0.09% to 100.45

Top Overnight News from Bloomberg

• Trump Officials Alarmed China May Bid for Westinghouse Unit
• North Korea Fires Ballistic Missile Before Xi-Trump Meeting
• Fed Leak Probe Dooms Lacker But Leaves Key Question: Who Leaked?
• Deutsche Bank Loses Senior Executives After Bonuses Slashed
• Zuma Said to Survive Calls to Quit in South Africa’s ANC
• ChemChina Wins U.S. Approval for $43 Billion Syngenta Deal
• Taser CEO to Make Announcement in Live Broadcast Tomorrow
• JAB Holding Said in Advanced Talks to Acquire Panera Bread
• Euronet-MoneyGram Talks Said to Progress Slowly on Data Access
• McDonald’s Names Morgan Flatley as U.S. Chief Marketing Officer
• Cheniere Head Sees 30 New LNG Trains Needed to Meet 2030 Demand
• Energy Transfer Expects Dakota Access in Service in Coming Weeks
• Devon, Chesapeake Get Sierra Club’s Quake Fracking Suit Tossed
• CME Cuts Margin Requirement for Front-Month WTI Oil by 6.9%
• Plains Files Rate for Bridger-to-DAPL Service Effective April 15
• Euro-Area Economy Accelerates Less Than Forecast on Services

Asia equity markets traded choppy following the mild gains on Wall St. which was led by the energy sector after WTI crude futures reclaimed the USD 51/bbl level to the upside. ASX 200 (+0.3%) swung between gains and losses as strength in commodity-related sectors was counterbalanced by losses in financials, while Nikkei 225 (+0.3%) saw a similar indecisive tone as USD/JPY and JPY-crosses teetered. Hang Seng (+0.3%) and Shanghai Comp. (+1.5%) were higher on return from holiday despite the PBoC refraining from liquidity injections, with the mainland outperforming amid strength in materials after a 7% surge in coking coal prices due to supply concerns following Cyclone Debbie. 10yr JGBs traded flat amid an indecisive tone in the region, while the BoJ’s presence in the market for a respectable JPY 1.135t1n of JGBs failed to spur demand, as the bank also slightly reduced its buying in 1yr-3yr maturities. PBoC refrained from conducting open market operations today, for a net drain of CNY 90bIn.

Top Asia News

• China Market Access in Spotlight as First Trump-Xi Meeting Nears
• China Likely to Be Named Currency Manipulator by U.S.: StanChart

Energy and material names have soared in early trade to see the commodity-heavy FTSE outperform its European counterparts on what has been an otherwise dreary morning for equities. Other than the FTSE 100, indices are flat across Europe, with little in the terms of a tangible trend in direction so far this week. On a more macro scale, services PMIs have been the main focus of the session, with French and Eurozone readings both printing lower than the preliminary readings, however any impact on financial markets has been offset by the German composite beating on Exp. As such fixed income markets have been particularly muted, with Bunds lower by a modest 10 ticks. Gilts slipped on the latest services PMIs, with the stellar reading seeing the June’17 futures slips below yesterday’s 128.22 nadir with bears now eyeing a potential test of a minor Fib retracement level at 127.91.

Top European News

• U.K. Services Grow Faster Than Forecast; Price Surge Intensifies
• Sick of Brexit Limbo, Foreign Bankers Are Asking to Be Sent Home
• German Cabinet Backs Facebook Bill to Counter Fake News, Hate
• Wood Group Gains After Raising Expected Synergies From Amec Deal
• EU’s Juncker Says No Brexit Deal Would Mean Everyone Loses
• Serb Protests Against ‘Dictatorship’ Spread After Vucic Elected
• OATs Gain With Small Relief Rally as Le Pen Struggles in Debate
• EU’s Verhofstadt: Brexit Is a Cat-Fight That Got Out of Hand
• Seadrill Plunges for Second Day Amid Speculation Over Bankruptcy

In currencies, the Bloomberg Dollar Spot Index was little changed after a two-day gain. The euro edged lower to $1.0668. The pound climbed 0.3 percent to $1.248, advancing for the first time in three days as U.K services grew faster than economists expected. The South African rand jumped as much as 1.1 percent before falling 1.1 percent. The big data release this morning was the UK services PMI number, which exceeded expectations to print 55.0. This went against the manufacturing and construction components as new orders were attracted by the weak exchange rate, but despite this, thin market conditions have made for a tight range in Cable, as support ahead of 1.2400 has been tempered by sellers coming in ahead of 1.2500. Similarly in EUR/GBP, .8545-50 and 0.8600 limits contain. Range bound markets further highlighted by a 25 tick range in EUR/USD, where a test of 1.0700 on the upside was rebuffed. The USD perspective has been largely behind this, with US Treasury yields grinding higher, but to a modest degree as yet. This has produced a tentative move higher in USD/JPY, but we continue to trade south of the 111.00 level, but we have now twice survived a test on 110.00. A modest recovery in Copper has given AUD some relief after yesterday’s selling across the board. No real change in sentiment at the RBA, citing concerns over domestic debt levels but cautiously optimistic on the global outlook, so yield plays will carry favour here when the risk mood is calm. The same goes for the NZD, but we are getting pulled further away from 0.7000, but 0.6900 will be hard fought.

In commodities, the Bloomberg Commodities Index rose to a one-month high, buoyed by oil and base metals. West Texas Intermediate crude climbed 1.2 percent to $51.64 a barrel, adding to Tuesday’s advance. Base metals increased after a plan to develop an economic zone near Beijing boosted the outlook for demand, with zinc climbing 1.8 percent as a smelter in Peru was also affected by flooding. With oil tipping above the $51.50 mark, we could see some renewed consolidation inside these limits, but traders will be looking ever closely to the inventory data for signs of further impact from the production cuts. The market is still hoping for an extension to the agreement, and this hope reflects some of the recent gains seen. Base metals are up right across the board, with Copper up another 1.5% today, but outpaced by Nickel which is up near 2.0% so far. Gold has come back off the highs, where $1260 looks to be providing some clear resistance. Silver continues to stall ahead of the USD18.40-50 area, with USD resilience weighing on both.

Looking at the day ahead, this morning in Europe the main focus should be on the final March services and composite PMI revisions where we’ll also get a look at the data for the UK and periphery. This afternoon in the US we will also get the final PMI revisions along with the ISM non-manufacturing for March (expected to decline to 57.0 from 57.6) and the ADP employment change print for March. The consensus for the latter is 185k while our US economists are forecasting a below market 140k. Later this evening we will also get the aforementioned FOMC minutes from the March 15th meeting. Away from that there is no Fedspeak today although over at the BoE policy maker Vlieghe is due to speak this afternoon in London.

US event calendar

• 7am: MBA Mortgage Applications, prior -0.8%
• 8:15am: ADP Employment Change, est. 185,000, prior 298,000
• 9:45am: Markit US Services PMI, est. 53.1, prior 52.9; US Composite PMI, prior 53.2
• 10am: ISM Non-Manf. Composite, est. 57, prior 57.6
• 2pm: FOMC Meeting Minutes

DB’s Jim Reid concludes the overnight wrap

We’re kicking off in France this morning where last night we had the second of three live televised presidential debates. Much like the first it tested viewers’ stamina again with the clock running close to 4 hours in the end. In terms of the key takeaways the general feeling was that it was the six less popular candidates which largely stole the show, frequently questioning and attacking the front runners. Of the candidates in contention, Macron was largely on the defensive for most of the night, standing his ground but never seemingly coming under too much pressure. Melenchon was the most attacking. Fillon failed to really standout and took on a barrage of attacks on ethics and Hamon was largely in the shadows. Le Pen was heavily questioned at times and looked under pressure and very much in defence first mode. Le Pen’s comments were also typically defiant and she closed out by making remarks including to “take back our sovereignty”, “civilisation in danger” and also “the owners of their country with the right to a border”.

In terms of the early results an Elabe poll covering 1,024 viewers following the debate found that Melenchon was seen as the most convincing with 25% of the votes followed in order by Macron (21%), Fillon (15%) and Le Pen (11%). A separate Opinionway survey had Melenchon, Macron and Fillon all tied on 18% a piece followed by Le Pen with 11%. So that result would suggest that the debate has done little to further Le Pen’s chances with the Elabe pollster highlighting that the fierce competition on the anti-European issues contributed to Le Pen’s mediocre score. As we said following the first debate though, Hilary Clinton was seen as the comfortable winner in all the US Presidential debates so it’s worth taking these results in context.

Interestingly leading into the debate yesterday the 2y OAT-Bund spread hit a near 5-year high at 47bps, surpassing the high from earlier the year in February when the spread hit 42bps. To be fair this  might be as much to do with the supply and demand issues for bunds as anything else. The ECB isn’t helping as we’ll see below. Price action in and around the debate hasn’t been particularly material however and if anything the Euro is firmer and is in fact up about +0.40% from yesterday’s intraday low. We’ll wait to see if there is much of a reaction in markets in Europe when they open this morning but the focus in the Asia session has for the most part turned over to the news of another missile launch by North Korea into the Sea of Japan. This has been confirmed by the Pentagon and as a reminder comes just before President Trump is due to host China’s President Xi Jinping tomorrow. That news hasn’t failed to stem what has been a mostly positive start to trading led by the reopening of bourses in China where the CSI 300 and Shanghai Comp are both up over 1%. The Hang Seng is also +0.29% while the Nikkei is +0.27%. The Kospi and ASX are currently flat, as are US equity futures.

The moves in Asia this morning follow a fairly directionless session on Wall Street last night. The S&P 500 passed between gains and losses 28 times during the day before finishing with a modest +0.06% gain. While Banks underperformed (-0.34%) they did recover from heavier losses at the open helped by some comments from President Trump around Dodd-Frank, and on separate reports on tax talks. The President confirmed that his administration is working on changes to the Dodd-Frank act which is intended to make it easier for banks to lend and which will include a “very major haircut”. On the tax front  the debate was about an article in the Washington Post which suggested that the Trump administration is exploring a VAT and carbon tax as part of the tax code overhaul, although this has been somewhat downplayed by a White House spokesman since.

Meanwhile energy stocks had a decent session after energy prices crept higher. Despite no data or newsflow, WTI Oil (+1.57%) rose for the fifth time in the last six sessions to close above $51/bbl for the first time since March 7th. Natural Gas (+5.27%) also had its strongest day in almost three months and closed at the highest since January 27th. It’s worth noting that US HY energy spreads have now hit the tightest (446bps) since March 8th and are about 40bps tighter relative to the wides of the year made just last week. Elsewhere, Treasuries did their best to reverse much of Monday’s rally with the 10y yield rising +4.1bps to close at 2.361%. It’s hovering around similar levels this morning. Instead of the usual focus on deciphering Fedspeak the focus was instead on the resignation of the Richmond Fed’s Jeffrey Lacker with immediate effect following the news that he had disclosed confidential information in an analyst meeting. Lacker was due to retire later this year and while the news should have no real monetary policy impact (he was a non-voter) one would expect the Fed Chair to be questioned about the issue. While we’re on the Fed today we will get the FOMC minutes from last month’s meeting where it’ll be interesting to see how much of a debate around tapering of the balance sheet there was given all the recent forward guidance.

The most significant news yesterday for credit was the latest ECB CSPP data which was released a day later than usual yesterday and incorporated the data up to month end and was the last release before we see the first impact of tapering. Last week they bought an average of €335mn corporates per day which was up from the prior week’s non-holiday period low (€308mn) but below the daily average of €365mn since the program started. So a continuation in the slowdown in the run-up to QE tapering. We’ll see next week if there is more trimming as the overall buying program officially reduces. One could argue credit easing via CSPP makes more sense than PSPP, given scarcity issues in government bonds, and so they could decide to continue CSPP at the usual pace even as the broader QE gets trimmed. On the other hand, making the QE cut fall squarely on govies might send the wrong signal to the periphery/semi-core. There are no clues at the moment as to how they split the taper other than perhaps the hint of a slowdown in corporate purchases in the last two weeks. My personal view is that they do taper CSPP as well as PSPP. Related to this we learnt that the average maturity of German bund purchases (the benchmark for Euro credit) remained at very low levels (4.72 vs. 4.34 last month) in March. In December and January this was over 12 and 9 respectively. This matters for credit as if the ECB buying is concentrated at this maturity bucket it’s more competing with the average life of the credit index and as such makes it more difficult for credit to keep up with the performance of bunds in what is essentially a risk on environment. For more on this see our credit bite (https://goo.gl/ddv05Y) we published last month after the initial shock shortening of average life of bund purchases.

The rest of the macro data did little to really move the dial. In the US, the February trade balance revealed a deficit of $43.6bn which was a little narrower than the consensus had expected and also $4.6bn narrower than the January deficit. Meanwhile factory orders were reported as rising +1.0% mom in February which was in line with expectations and so putting them up +7.3% yoy. Durable goods orders in February were revised up one-tenth at the final count to +1.8% mom however core capex orders were confirmed as declining -0.1% mom. In Europe the only data concerned the retail sales numbers for February which printed at +0.7% mom for the Euro area and more than expected.

Looking at the day ahead, this morning in Europe the main focus should be on the final March services and composite PMI revisions where we’ll also get a look at the data for the UK and periphery. This afternoon in the US we will also get the final PMI revisions along with the ISM non-manufacturing for March (expected to decline to 57.0 from 57.6) and the ADP employment change print for March. The consensus for the latter is 185k while our US economists are forecasting a below market 140k. Later this evening we will also get the aforementioned FOMC minutes from the March 15th meeting. Away from that there is no Fedspeak today although over at the BoE policy maker Vlieghe is due to speak this afternoon in London.

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Presenting yout latest dose of early morning misery, or perhaps joy, from Richard Breslow, a former FX trader and fund manager who writes for Bloomberg

Analysts Who Need to Be Miserable to Be Happy

I don’t know what kind of a market environment we’re eventually going to be in, but there’s little to suggest we’ve been living through anything approximating risk-off mode. If it has looked like that to you, you are going to have a really uncomfortable time of it, if and when, markets are allowed to trade in a two-way manner.

I accept and agree that there are oodles of valuations that seem stretched. That there’s plenty of reasons to be concerned about all sorts of issues. I wouldn’t argue that caution may be warranted, especially for the retail investor. But so far, from a trading perspective, it’s just conjecture. Asset prices have done little wrong.

The analytical response continues to be that there’s no risk-off or risk-on. There’s calamity versus the divine right to have everything go continuously higher. We decry the greater-fool investor and then furiously bemoan his absence when there’s no one willing to cross the spread and pay your offer at every price point.

If you need to hate equities, at least let them take out the 55-day moving average. It’s moving up anyway. Know why? Because prices have gone higher. If they are going to collapse, missing the first one percent is a reasonable price to pay.

Do the exercise with other assets of your choice. U.S. high- yield OAS spreads tested and held a beautiful trend line. Ten-year Treasuries are trying to turn 2.30% into a quadruple bottom. If they break, they break. Pre-emption sounds an awful lot like presumption.

 

Is the rest of the global carry trade really dead because South African politics is a mess? Only for a trade. Maybe. And the people running for cover were probably in these trades because the charts looked good and they were being sold on the notion that nothing could go wrong. Everyone’s doing it. Remember that wrong and dangerous nonsense that politics or terror don’t matter to traders? Welcome to a crowded emerging market trade.

We should institute a rule that says you can’t put on an emerging market carry trade unless you can find the country on a map and name its capital.

And when something does happen that really shakes up markets, ignore the person screaming, “I knew it.”

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If the truth can be judged by the reaction of establishment propagandists, it looks like we’ve hit paydirt…

MSNBC’s Chris Matthews and Mother Jones D.C. bureau chief David Corn engaged in a lively round of mental gymnastics over the Susan Rice ‘unmasking’ controversy – claiming it’s nothing more than a racist and sexist ploy by the President to “distract attention from the investigation.”

While groping through his addled mind for reasons for why poor Susan Rice is getting hounded by the media after it was revealed she was behind unmasking the Trump team, Matthews bloviated like a turtleneck-wearing coffee shop philosopher.

Notice it’s always a female? Just a thought.

Doubling down on the identity politics, Matthews then throws race into it!

So they are making her, you know, basically they’re defaming her without any reason to do so because she’s a woman. Maybe because she’s a black woman?

Unbelievable…

Chris Matthews and David Corn Call Susan Rice Bombshell Racist and Sexist – wait, WHAT? #SusanRice #SpyGate #Farkas https://t.co/MtBiUWo3jw http://pic.twitter.com/PdxKuv14Ut

— ZeroPointNow (@ZeroPointNow) April 5, 2017

 

Meanwhile, CNN’s resident party enthusiast Don Lemon was sure to caution the network’s tiny audience that the Rice and Farkas news – plus anything House Intel Chair Devin Nunes said – is all FAKE NEWS!

Don’s such a tool. Look at that bowtie.

Consider the following from National Review:

 

People are going to jail, and it’s becoming more and more evident that the entire Russian hacking narrative may be nothing more than a giant smokescreen to justify egregious misuse of intelligence assets on political opposition. Hillary, after all, was supposed to have won – in which case none of the Trump surveillence would have ever come to light. Also consider that the ‘deep state’ probably knew in early 2016 how deeply in trouble Hillay Clinton was – thanks to their ability to tap into google searches, emails, tweets, and Facebook posts. The government’s ability to gauge national sentiment in real time is undoubtedly far beyond what most people realize – and as soon as Trump became a threat, the “Fake News” and “Russian” narratives were hatched. That 35 page dossier was ordered and paid for, the CrowdStrike report was cobbled together, and a barrage of allegations related to Rusia were queued up readied to discredit Donald Trump.

And it’s all unraveling in spectacular fashion…

 

sd

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Authored by Giulio Meotti via The Gatestone Institute,

• A sterile Europe apparently thought that civil liberties could be bargained away in exchange for a temporary peace. Everything became negotiable.
• As British author Douglas Murray has asked, why were workers not brought in from European countries suffering high unemployment, such as Portugal, Italy, Greece or Spain?
• A clear-eyed U.S. Congressman, Rep. Steve King, correctly said recently that, "You cannot rebuild your civilization with somebody else's babies." He instantly drew that white-hot fire reserved for people who tell truths that threaten treasured fantasies (think Giordano Bruno or Galileo).

The new data released by Italy's National Institute for Statistics for 2016 sounds again like a death knell. There has been a new negative record of births: 474,000 compared to 486,000 for 2015, which had already fallen to historic lows. There were 608,000 deaths in 2016. In one year, Italy lost 134,000 people — the equivalent of a city of the size of Ferrara or Salerno.

The demographic "illusion" is kept only by the influx of immigration (135,000). If one needs an idea of what Italy would be without immigrants, look at Emilia-Romagna, one of Italy's most populated and affluent regions: in 2035 it will have 20% fewer residents.

Italy is sometimes thought of Europe's guinea pig: wherever Italy goes, much of Europe follows it, especially in the central and southern countries. In 1995, Antonio Golini, a professor at La Sapienza University and a former president of the National Institute of Statistics, was contacted by the director-general of Plasmon, Italy's largest producer of baby food. Looking at the declining birth rates, the firm asked him if something could be done to prevent the company from going out of business. Plasmon started to make dietary products for adults.

A year ago, European geographers went in search of "the most desolate place in Europe". They discovered it not in northern and cold Lapland, but in sunny Spain, specifically in the area of Molina de Aragon, two hours from Madrid. Depopulation has not been the consequence of the climate, as in the Russian steppe or northern forests, but of a demographic crisis.

A report by the National Statistical Institute of Spain explained how the Iberian peninsula has become the sick man of Europe: Spain loses 72 inhabitants every day; 20% fewer children are born there than two decades ago. Demographers draw a line where Spain has no future and 30% of the population will be over the age of 65. In some Spanish regions, the fertility rate barely reaches one child per woman. Deaths already exceed births. Even the newspaper El Pais asked, "Are the Spanish people in danger of extinction?". The Spanish government just appointed a "sex czar" to try to figure out how to sustain the shrinking population.

Spain, in 2050, will be a depopulated nation dominated by older people and singles. The country will lose 5.3 million inhabitants: 11% of the current population. By that time, there will be 1.7 million Spanish children fewer than there are today. No children means that, in the long run, there will be no economic growth or prosperity; democracy will become a gerontocracy and Spain will embrace global irrelevance. Alejandro Macarrón Larumbe, director of the Foundation for Demographic Revival, has provided figures on the number of Spanish provinces that have already seen a loss of population.

The Islamic world has launched a demographic challenge to a sterile Europe. Turkish President Recep Tayyip Erdogan recently exhorted Muslims in Europe to have five children, "because you are the future of Europe". It echoes what the President of Algeria, Houari Boumedienne, said in 1974: "The wombs of our women will give us victory". They dream of conquering Europe through demography instead of terror — and it seems they are succeeding.

While Italian and Spanish statistics were released, another headline should have captured our attention: "Islam will surpass Christianity" — to become the world's largest religion in 2070. There is a link not only between Europe's empty cradles and Islam's expansion, but also between Europe's demographic suicide and its passivity facing its many troubles during the last two years: mass immigration, terrorism, intimidation.

No modern, affluent society ever stopped having children before. The influx of Muslim immigrants is a symptom, not a cause of Europe's decline. Members of a healthy continent, who embrace the future in its most elementary form (raising a new generation), would have never have allowed foreign immigrants carving out separate spheres of sharia law in Europe's multicultural enclaves.

As the British author Douglas Murray, has asked, why were workers not brought in from European countries suffering high unemployment, such as Portugal, Italy, Greece or Spain? A sterile Europe apparently thought that civil liberties could be bargained away in exchange for a temporary peace. Everything became negotiable, because everything seemed perishable. An entire continent is filled with aging occupants indulging in childlike illusions of "internationalism", and claiming that all conflicts can be resolved peacefully, non-lethally and diplomatically. Europe's culture is essentially pacifist. It demonizes war, and seeks pleasure and comfort above all else.

Europe's demographic suicide also has serious consequences for the security of a society. During the transition to an elderly-majority state, democracy will be endangered. Welfare redistribution depends on younger workers providing payroll taxes to fund social security. What happens when an elderly majority can vote for itself more and more, at the expense of the dwindling young? National defense will be endangered. Today Europe already refuses to invest in the NATO alliance. Old people's entitlements will take precedence over defense spending. States that will not spend money on defense will be vulnerable to those that do.

A clear-eyed U.S. Congressman, Rep. Steve King (R-Iowa), correctly said recently that, "You cannot rebuild your civilization with somebody else's babies." He instantly drew that white-hot fire reserved for people who tell truths that threaten treasured fantasies (think Giordano Bruno or Galileo).

Decline is a choice, not a destiny. There is still time, but not much, for Europeans to choose not to disappear.

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For just $1000 per month, you too can live in Chiswick High Street, London – in a studio flat with a shower in the kitchen…

As The Standard reports, the flat has been “refurbished to a high standard” according to an advert on Gumtree, and has a price tag of £850 per month (around $1050 per month).

 The ad describes it as having its “own shower” and an “open plan kitchen” – however it fails to mention that the shower is situated right next to the kitchen work surfaces.

Pictures of the flat, located in Chiswick High Road, reveal the unusual quirk – showing the kitchen sink with a shower on one side and a stove on the other.

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Authored by Daniel Lang via SHTFplan.com,

By now most people are completely desensitized to stories involving North Korea (just look at the lack of mainstream media coverage of tonight's missile test-launch). One can only hear about so many blustering threats, missile launches, and state sanctioned executions, before those incidents are no longer surprising. Over the years we’ve seen it all, and most folks don’t really pay much attention to what’s going on in the Hermit Kingdom. That’s unfortunate, because they’re not paying attention as the Trump administration inches towards war with North Korea.

The first definite sign that the current administration was going to take a different approach to North Korea, was when Secretary of State Rex Tillerson stated emphatically last month that “all options are on the table.”

“Let me be very clear. The policy of strategic patience has ended. We are exploring a new range of diplomatic, security and economic measures. All options are on the table,”

Tillerson told reporters during a joint news conference with South Korean Foreign Minister Yun Byung-se on Friday.

 

“Certainly we do not want to, for things to get to military conflict,” Tillerson said.

 

However, he went on to say that “if they (North Korea) elevate the threat of their weapons program to a level that we believe requires action, then, that option’s on the table.”

 

He added that a “comprehensive set of capabilities” is being developed to deal with the country.

And at least one of those options is already in place. Before that interview even took place, US special forces were already training to decapitate the North Korean regime.

Despite that threat, North Korea has refused to back down on their nuclear program, and for good reason. Kim Jong-un’s regime believes that they won’t be safe from foreign invasion unless they have a nuclear tipped ICBM that can be launched at targets that are thousands of miles away.

The US government on the other hand, has taken a different position. Our government believes that North Korea can’t be trusted with that kind of military capability. In a sense both sides are correct, but clearly those opinions are diametrically opposed. Unless one side backs down, there will be war before North Korea demonstrates that it can launch a nuclear tipped ICBM.

And President Trump has tacitly admitted that he’s willing to go to war with North Korea. During a recent interview with Financial Times, he stated if China can’t or won’t reign in North Korea, then our government is willing to “act alone.”

POTOMAC FALLS, Va. (AP) — President Donald Trump says that the United States is prepared to act alone if China does not take a tougher stand against North Korea’s nuclear program.

 

Trump’s comments in an interview with the Financial Times come just days before he is set to host Chinese President Xi Jinping at his Mar-a-Lago estate in South Florida. The two are expected to discuss a number of issues, including North Korea, trade and territorial disputes in the South China Sea during their meeting on Thursday and Friday.

 

“Yes, we will talk about North Korea,” Trump told the newspaper for a story that appeared Sunday on its website. “And China has great influence over North Korea. And China will either decide to help us with North Korea, or they won’t. And if they do that will be very good for China, and if they don’t it won’t be good for anyone.”

Without China’s help, there can’t be any peaceful resolution with North Korea, because China is the closest thing to a friend that country has on the global stage. Unfortunately, there isn’t much of a chance that China is going to defang this regime anytime soon. If they could they would have done so a long time ago. They may enjoy having a communist buffer state between their capital and an American ally in the south, but they don’t want to live right next door to a certifiably insane regime with nuclear weapons.

I don’t think that China could ever convince North Korea to give up its nuclear program. Kim Jong-un saw what happened to countries like Libya and Iraq after they abandoned their WMD programs. And North Korea is probably just as afraid of regime change at the hands of China as they are of America, because China would prefer a buffer state that is much more obedient and prosperous (and you know, not armed with nukes that at the command of a lunatic). Even North Korea’s closest friend is kind of an enemy, and they need capable nukes to defend themselves from China as well.

So if China can’t convince them to give up their nukes, and the United States won’t tolerate a nuclear armed North Korea, then there’s only two possible outcomes. Either our government is going to blink in this standoff, or there’s going to be war.

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