Month: March 2019

Trump was probably too preoccupied on Wednesday to comment on Michael Cohen’s seven-hour marathon testimony before the House Oversight Committee, but now that he’s back on US soil, the president isn’t holding back.

Taking aim at Michael Cohen’s insistence that he had a change of heart regarding his relationship with the president after Charlottesville and Helsinki, as well as the former Trump lawyer’s decision to break attorney client privilege and turn over financial documents detailing some of Trump’s dealings with Deutsche Bank (which Maxine Waters once described as“the biggest money laundering bank in the world”), Trump slammed his longtime employee for his “fraudulent and dishonest” testimony.

Contrary to Cohen’s claims that he had lost all respect for the president since Trump became “the worst version of himself” after taking office, Trump claimed that Cohen had circulated a “love letter to Trump” book manuscript to publishers not all that long ago – in fact, the manuscript was submitted, Trump said, after Charlottesville and Helsinki.

Wow, just revealed that Michael Cohen wrote a “love letter to Trump” manuscript for a new book that he was pushing. Written and submitted long after Charlottesville and Helsinki, his phony reasons for going rogue. Book is exact opposite of his fake testimony, which now is a lie!

— Donald J. Trump (@realDonaldTrump) March 1, 2019

Trump added that Congress must “demand the transcript of…Cohen’s new book” because “Your heads will spin when you see the lies, misrepresentations and contradictions against his Thursday testimony.”

Congress must demand the transcript of Michael Cohen’s new book, given to publishers a short time ago. Your heads will spin when you see the lies, misrepresentations and contradictions against his Thursday testimony. Like a different person! He is totally discredited!

— Donald J. Trump (@realDonaldTrump) March 1, 2019

Of course, Cohen’s focus on Trump’s alleged financial improprieties – he alleged that Trump would inflate or deflate the value of his assets depending on whether he was seeking inclusion on Forbes’ wealthiest list, or paying taxes, or applying for a loan – serves a very specific purpose. Now that the Russian collusion narrative has decidedly fizzled (even Cohen said he had no concrete evidence of collusion), Cohen’s testimony is part of a broader Democratic effort to shift public scrutiny toward Trump’s finances (a push that has already been wholeheartedly embraced by Waters, Adam Schiff and their respective committees).

Oh’ I see! Now that the 2 year Russian Collusion case has fallen apart, there was no Collusion except bye Crooked Hillary and the Democrats, they say, “gee, I have an idea, let’s look at Trump’s finances and every deal he has ever done. Let’s follow discredited Michael Cohen…..

— Donald J. Trump (@realDonaldTrump) March 1, 2019

Trump signed off by demanding an end to the “corrupt and illegally brought Witch Hunt” and declared that “Republicans have been abused long enough”.

…and the fraudulent and dishonest statements he made on Wednesday. No way, it’s time to stop this corrupt and illegally brought Witch Hunt. Time to start looking at the other side where real crimes were committed. Republicans have been abused long enough. Must end now!

— Donald J. Trump (@realDonaldTrump) March 1, 2019

Of course, Trump isn’t the first – nor will he be the last – person to point out inconsistencies and flaws in Cohen’s testimony. Two Congressional Republicans, including Oversight Committee Ranking Member Jim Jordan and Mark Meadows, have already referred Cohen’s testimony to the DOJ.

In yesterday’s hearing, Michael Cohen made at least six false statements.@RepMarkMeadows and I have referred Mr. Cohen to the Justice Department for perjury.

Looks like he lied to Congress. Again.https://t.co/q3cj0AywFU

— Rep. Jim Jordan (@Jim_Jordan) February 28, 2019

via ZeroHedge News https://ift.tt/2NAsn6h Tyler Durden

Following government shutdown delays, data for Dec and Jan spending and income has just been released and its a bloodbath.

Confirming the collapse in retail sales that was called an outlier, December personal income fell 0.1% MoM (against expectations of a 0.3% rise) – the worst drop since Jan 2013; and personal spending plunged 0.5% MoM in January – the worst drop since Sept 2009…

On a YoY basis, spending grew 4.0% in December – the weakest since Aug 2017; and in January incomes grew 4.3% YoY – back to the flattest in two years…

The BEA decideds to leave half of their spreadsheet empty…

Additionally, real personal spending crashed 0.6% MoM…

That is the biggest drop since Sept 2009.

One thing is for sure – the collapse in the savings rate to placate the exuberance in spending confidence may have just hit a wall…

As the savings rate just soared… this is the biggest one-month jump in the savings rate in 56 years!

Is terrible news on America’s consumer, great news for the market? We shall see.

via ZeroHedge News https://ift.tt/2GPnDsU Tyler Durden

Authored by former fund manager Richard Breslow via Bloomberg,

This year has given us some impressive moves. Equities come to mind, with some tortuous moves that have frustrated both bulls and bears. Ten-year Treasury yields certainly fit the description.

There have been assets that have defied expectations. The dollar, hanging in as well as it has, goes into that bucket. And trades that simply worked without a great deal of drama. Emerging-market currencies have done that despite being a very popular expression of risk. While the price action doesn’t fit the story line, it makes plenty of sense in retrospect. The BTP-bund spread is a poster child for this.

Of course, I would be remiss not to mention the profound shift from central banks, especially the Fed, to a dovish stance. The word they prefer to use is “patient”. That’s a euphemism. What they really mean, but can’t say, is “wary.” Which should, and maybe at some point will, add a modicum of caution to investor behavior.

The extreme tightening of financial conditions in December has been eliminated by the extraordinary loosening so far this year. So perhaps it isn’t such a bad idea, in order to provide a little context, to look back to where things stood before the zig and the zag.

Of course that’s a little misleading now that we have a completely different perception of what global rate-setters are thinking. Not to mention, commodity markets looking quite a bit different. Oil is grinding higher rather than in free fall. Which certainly has to be taken into account when judging whether things like high-yield and emerging-market credit spreads can continue to narrow.

Nothing is ever just the same as it was. Time marches on. I do have to say, that it would take a pretty sharp pencil to draw a chart that says these moves have run out of steam. But if I had to, well, you know I could. But it is of the canary in the coal mine sort.

So what are my big questions?

It isn’t whether the S&P 500 will manage to punch through resistance or keep stalling near 2800. For all the strong feelings on the subject, it has actually done nothing so far this week. So how it finishes out is really the interesting issue. The funny thing is, that despite last year’s 20% range, it has essentially gone nowhere since mid-March 2018.

First and foremost at the moment, I’m watching global bond yields.

The change in mood from even the beginning of the week is nothing short of extraordinary. Such is the technical prowess of reaching the narrow point of descending triangle patterns. My guess is the big driver is yield-curve flatteners being liquidated and flipped. Nothing like rate-cut expectations replacing hikes in traders’ minds.

There are a fair number of chartists suddenly arguing that not only Treasury yields, but German, French, Australian, even Chinese 10-year yields have put in potentially significant bases. This is big news. And no bond market is an island.

The price action for emerging-market currencies also warrants close scrutiny. They’ve done nothing wrong except to run out of steam altogether. It’s not that they are obviously failing in any meaningful way, but you look at them and say, meh. It remains an incredibly well-subscribed trade. Today’s low for the MSCI Index will be a good pivot to key off of.

The dollar itself is doing its best to break my spirit. It gets the day off. I find most of the commentary surrounding it uninspiring. And unconvincing. So instead I’ll spend the time watching how gold trades as it continues to sell off into major support. But at the end of the day, it will be all about yields

via ZeroHedge News https://ift.tt/2tSHu29 Tyler Durden

Commenting on the disappointing outcome of Trump’s second Kim summit, UBS’ economist Paul Donovan writes that “the US president (like the rest of us) is subject to the economic problem – limited time, and lots of demand on that time. Time focused on Korea is time that cannot be spent tweeting about trade. The president may want a quick win on trade to offset the Korean situation. There are media reports of a mid-March summit with China and a “quick” trade deal.”

Indeed, at 1:37am ET overnight, Bloomberg reported that U.S. officials are preparing a “final trade deal” that President Trump and Chinese counterpart Xi Jinping could sign in weeks. As Bloomberg further adds, “the U.S. is eyeing a summit between the two presidents as soon as mid-March” although the planning has been complicated by Xi’s need to lead China’s annual National People’s Congress in early March, as well as make other foreign trips.

Naturally, the report goes on to say that Trump will have the final call on the U.S. side, and references what he said in Vietnam when he showed he’s willing to walk away if he doesn’t like the terms on the table, including with China.

“Speaking of China we’re very well on our way to doing something special. But we’ll see,” Trump said at a press conference in Hanoi on Thursday. “I am always prepared to walk. I’m never afraid to walk from a deal, and I would do that with China, too, if it didn’t work out.”

The latest news of preparations for a Trump-Xi summit come amid conflicting signals from the Trump administration over the prospect of a deal. Treasury Secretary Steven Mnuchin said on Thursday the two nations are working on a 150-page document that would turn into a “very detailed agreement,” though he cautioned that “we still have more work to do.”

Boosting the optimistic case, on Thursday Trump’s chief economic adviser Larry Kudlow said the countries are on the verge of an “historic” pact that would commit Beijing to cut subsidies on state-owned companies and disclose when its central bank intervenes in currency markets.

“The progress has been terrific,” Kudlow, director of the White House’s National Economic Council, said in an interview on CNBC. “We have to hear from President Xi and the Politburo of course, but I think we’re headed toward a remarkable historic deal.”

The comments by Kudlow, the trade “good cop”, came just a day after Trump’s top trade negotiator struck a far more pessimistic tone: trade “bad cop” USTR Robert Lighthizer told lawmakers that more work needs to be done and said the administration won’t accept a deal that doesn’t include significant “structural” changes to China’s state-driven economy. He also stressed the need for a enforcement mechanism, allowing the U.S. to take unilateral action if China breaks the rules.

So is a trade deal with China imminent? Perhaps, although as skeptics have repeatedly pointed out, any such “deal” wouldn’t be worth the paper it is printed on. One such skeptic is Rabobank’s Michael Every who provides the following commentary on “what might have happened” in Vietnam to force Trump to come home empty-handed without even a hint of an agreement:

Perhaps Trump had no game plan other than to dangle the keys to Disneyland under Kim’s nose. Perhaps Kim saw Trump was under pressure domestically and thought he needed an easy win of a signing ceremony meaning nothing. Perhaps Trump is under pressure from looking weak on China so had to look tough here. Or perhaps it was the menu: marinated tender sirloin grilled served with kimchi fermented inside a pear may have been a bit OTT for DT. (Indeed, CNN’s Will Ripley —believe it or not— prophetically tweeted ahead of the walkout: “A source close to the planning of tonight’s dinner in Hanoi with Donald Trump and Kim Jong Un says it has been a struggle to get the menu approved by the US and North Korea. If they had a hard time negotiating what’s for dinner, what does that say about denuclearization talks?!”)

Yet just perhaps China wasn’t prepared to sign off on Kim making nice with the US. Consider that the editor of China’s snarky Global Times backs Kim’s “reasonable demand” to lift some sanctions first. So let’s presume China played a spoiler role: what do you think is going to happen with the US-China trade deal the markets are so certain is in the bag? Yes, Trump might still need a quick ‘win’: but he’s also just shown he will walk away from a bad deal even when there is a Nobel Prize on the line, and has won bipartisan support at home from doing so. Meanwhile, Bloomberg has a report on US-China trade suggesting it is the US that is taking the larger hit to its exports at USD40bn. That doesn’t say the US is “losing” a trade battle with China due to tariffs: it shows exports to China have plummeted because Beijing has boycotted US goods entirely. So what’s the real message? That China is not a market economy and if you want to win a trade war with it you have to walk away from it too. Yes, Bloomberg also reports Larry Kudlow says the US is on the cusp of a “remarkable, historic deal” where China will buy more, “significantly” cut subsidies to SOEs, and disclose PBOC intervention in the FX market. But let’s see how the reality matches the hype, especially over enforcement. For example, the US just won a WTO case against China over its price support for wheat, corn, and rice: are they really going to act on the back of it? Like they did with Mastercard and Visa?

So where does that leave Trump according to Every:

Wait for Kim to ring and hope he doesn’t start testing again? Or talk to the real boss further north – the one not buying US goods? Nothing is certain – but that still includes the comfortable assumption of the best outcome in the best of all possible worlds, which is what markets are still pricing for.

Whatever the outcome of the “imminent” trade deal with China, with the S&P set to open back over 2,800, it appears that all the best case outcomes are once again in the market.

via ZeroHedge News https://ift.tt/2GRyi6n Tyler Durden

In his first Twitter comment on his relationship with North Korea since senior officials in Kim Jong Un’s government contradicted Trump’s narrative of why he decided to walk away without a deal on Thursday, President Trump appeared to shrug off a warning that Kim may have “lost the will” to continue negotiating and instead insisted that the negotiations were “very substantive” and that the relationship between the two countries remained “very good.”

Offering a degree of validation to North Korean officials’ insistence that Kim’s staked out a “reasonable” position during the talks – and preempting any speculation that there might have been a miscommunication on par with Trump’s summit with President Xi in Buenos Aires – Trump said “we know what they want and they know what we must have.”

Great to be back from Vietnam, an amazing place. We had very substantive negotiations with Kim Jong Un – we know what they want and they know what we must have. Relationship very good, let’s see what happens!

— Donald J. Trump (@realDonaldTrump) March 1, 2019

The tweet followed a statement from Beijing urging the partial rollback of some of the UN sanctions against North Korea, as well as a BBG report warning that Kim could face pressure to restart his belligerent missile tests if the country’s sanctions-inspired economic recession worsens.

via ZeroHedge News https://ift.tt/2TaIAVI Tyler Durden

The US State Department has issued a whopping $1 million bounty for information leading to the whereabouts of Hamza bin Laden, son of al Qaeda leader Osama bin Laden, who was reportedly killed by US Navy Seals in Pakistan in 2011. 

US intelligence and counter-terror officials believe the son, now estimated to be 30 to 33 years old, has emerged as leader of the al-Qaeda terror network and is currently trying to track him, especially after new audio and video messages have emerged of him calling for terror attacks against the United States and its allies. 

The US State Department said in a statement this week, “He has released audio and video messages on the Internet, calling on his followers to launch attacks against the United States and its Western allies, and he has threatened attacks against the United States in revenge for the May 2011 killing of his father by US military forces.” 

The new information was posted on the State Deptartment’s “Rewards for Justice” program website further says he married the daughter of Mohammed Atta, who was the lead hijacker and a assumed mastermind of the 9/11 terror attacks.

Citing letters recovered from the Abbottabad, Pakistan compound where bin Laden was found, Osama was apparently “grooming Hamza to replace him as leader” of the terror network, according to the US government press release. 

While the global manhunt is on, United Nations member nations are required to to freeze Hamza bin Laden’s assets and to enforce an arms and travel ban on Hamza. 

Long considered bin Laden’s “favorite son,” Hamza was not at the compound with his parents when his father was killed. Immediately after Osama’s death Ayman al-Zawahiri, the Egyptian longtime leader of the Islamic Jihad terror group, took over leadership.

The CIA released the last known video of Hamza bin Laden in 2017, said to be filmed as part of a wedding ceremony. 

However, over the past few years it’s believed that Hamza has come the new “charismatic” face of al-Qaeda, especially after al-Qaeda in 2015 released an audio message from Hamza, which urged followers across the Middle East and central Asia to wage jihad on Washington, London, Paris and Tel Aviv.

The US State Department had called the sanction a “powerful tool” for mobilizing a new wave of terror recruits.

Zabihullah (known Afg Taliban spox) release video of Hamza bin Laden in Ghazni province giving bayah/oath of allegaince to Mullah Omar in 2002.
Hamza is fondly protected by Afg Taliban with pride. pic.twitter.com/sKjbCPjn1J

— Trilochana (@Trilochana888) January 1, 2019

However, al-Qaeda leadership in the Levant, which has long been active and gaining experience in the Syrian war and in Idlib, appears to be the more militarily powerful threat.

Kentucky Senator Rand Paul once called Idlib “a jihadi wonderland” and lamented that instead of allowing regional forces like Syria and Russia to uproot the terror safe-haven, Washington has long actually seemed more interested in protecting it. 

via ZeroHedge News https://ift.tt/2EsSMyG Tyler Durden

As the backlash from the biggest scandal of his political career intensified, Canadian Prime Minister Justin Trudeau has seen his standing in the polls slip, losing his lead in the October race for the first time since June. Following Wednesday’s damning testimony from his former justice minister, Jody Wilson-Raybould, who accused Trudeau and his staff of a months long campaign of veiled threats and political pressure to try and coerce her into offering a deferred prosecution agreement to SNC-Lavalin, a Quebec-based engineering firm facing years old financial fraud charges.

During her testimony, Wilson-Raybould created an image of Trudeau that was strikingly at odds with the public’s perception: The cheerful liberal crusader was cast as conniving and paranoid about his electoral prospects. Intensely worried that the SNC-Lavalin case could harm his reelection prospects by moving out of Quebec and killing thousands of jobs in his district, Trudeau was willing to unduly use his office to try and influence a criminal prosecution, and, when he didn’t get his way, unceremoniously demoted the cabinet member who stood in his way.

Trudeau and Wilson-Raybould

Now, as his political opponents demand an official investigation, Trudeau’s liberals are circling the wagons. And with the conservatives already leading in the polls – one recent poll showed Trudeau’s team with 33.9% of the vote, below the conservatives with 35.8% – the Liberals worry that any break in their ranks could be fatal. So far, almost no members of Trudeau’s party have spoken out against the PM (other than Wilson-Raybould, that is, who remains a Liberal MP after resigning from Trudeau’s cabinet).

The goal now, according to one pollster, is to convince the public that Trudeau did nothing wrong. Though, the fact that one of the government’s most high-ranking members has emerged as Trudeau’s biggest critic could seriously complicate that narrative.

Any divisions within his government on the matter could be fatal for efforts to convince voters the Liberals have done nothing wrong, said Nik Nanos, a pollster with Nanos Research Group. Trudeau, at the center of the crisis and with his own popularity waning, will also need a more team-oriented campaign in the next election to win voters who may blame him for the current crisis.

“If a narrative emerges that the caucus is divided on this, that will be lethal for Justin Trudeau,” Nanos said in a telephone interview. “I can’t remember any party leader winning an election with his caucus divided. If the caucus can’t even agree, how is it that they can govern?”

Still, no current members of the cabinet have broken ranks, and some of the government’s most visible members have publicly declared their support for Trudeau, and their confidence in his judgment.

Foreign Minister Chrystia Freeland told the CBC she couldn’t imagine Trudeau applying inappropriate pressure, and signaled frustration that Wilson-Raybould was now taking aim at cabinet. “At the end of the day, when you leave the room, you have to play as a united team,” Freeland said.

Infrastructure Minister Francois-Philippe Champagne said he believes Trudeau was within the “box of what’s legal” with his actions, and that no one should jump to conclusions. “We should take the time to listen to the other witnesses.” Champagne and another minister, border security chief Bill Blair, each brushed aside a question on whether Trudeau should replace key staff. “I remain very confident in the work of this government,” Blair said.

Parliament adjourns on Friday for a two-week break, due to return in time for Morneau’s March 19 budget. The path of the scandal could also depend on what Liberal lawmakers hear while away from Ottawa, in their home districts scattered across Canada.

“They’re going to get earfuls,” Collenette said. “If the truth is really two perceptions, then voters will make up their minds. But they need facts.”

[…]

Infrastructure Minister Francois-Philippe Champagne said he believes Trudeau was within the “box of what’s legal” with his actions, and that no one should jump to conclusions. “We should take the time to listen to the other witnesses.” Champagne and another minister, border security chief Bill Blair, each brushed aside a question on whether Trudeau should replace key staff. “I remain very confident in the work of this government,” Blair said.

Meanwhile, Trudeau’s finance minister and one of his former top aides – who resigned after Wilson-Raybould exposed his role in the scandal – are doing everything they can to push their version of what transpired between them and the former justice minister.

Among those Wilson-Raybould accused of improper pressure is Bill Morneau, who she said she spoke to in the House of Commons. The finance minister said Thursday it was Wilson-Raybould who approached him, and defended the actions of his chief of staff, Ben Chin, in stressing the magnitude of potential job losses at the company.

“My role is, and continues to be, to think about how protect Canadian jobs,” Morneau told reporters in Toronto. “I will continue do that. I think that’s critically important for us to understand in every decision we take as a government.”

Wilson-Raybould also took aim at Gerald Butts, Trudeau’s former principal secretary, who on Thursday asked to be allowed to speak to a committee of lawmakers to tell his version of events. The former attorney general – whose absence from cabinet will be filled in a shuffle Friday, according to CBC – may also end up testifying again.

So far, Trudeau has told reporters that he has no plans to resign, even as the opposition and members of the press demand that he resign. Still, if MPs return from a two-week break that begins Friday having lost faith in Trudeau’s ability to win in October, we could see the party adopt a very different strategy – perhaps one that doesn’t involve Trudeau retaining his position as leader.

via ZeroHedge News https://ift.tt/2EFdXPB Tyler Durden

Just as the official Chinese manufacturing PMI’s disappointing Thursday print (3 year low) pressured stocks on the last day of February, and sent both the MSCI World Index and the Dow Jones to three consecutive days of declines, the longest such stretch of 2019 yet, overnight’s Caixin PMI which unexpectedly posted a sharp rebound in February, rising to 49.9 from 48.3 in January, offered some reassurance to investors concerned about the global growth outlook that the global economic drop may have troughed while “optimism” for a trade deal returned; Treasuries extended their recent decline and the dollar pushed higher for a third day before easing back. The result is a sea of green in global stocks with the S&P trading back over the critical 2,800 level.

Bullish sentiment stormed back led by China, where shares outperformed with the Shanghai Composite closing 1.8% higher following confirmation that MSCI Inc. will quadruple the weight of Chinese stocks in its global benchmarks from 5% to 20%, while in contrast to the small decline in NBS manufacturing PMI reported just one day earlier, the Caixin manufacturing PMI bounced back in February from the dip in January. It rose by 1.6pp to 49.9, although January-February combined, Caixin manufacturing PMI averaged at 49.1, lower than 49.7 in December last year. Most sub-indexes of the survey rebounded in February vs January. The fact that the index remained just barely in contraction territory was offset by a sharp increase in the forward-looking new orders index component.

According to Goldman, the Caixin manufacturing PMI showed “some early signs of better growth momentum in the manufacturing sector in February. However, the floating holiday and continued weakness shown in other indicators such as NBS manufacturing PMI added uncertainties to the above view, and for the period of January to February on average, growth momentum still likely softened from late last year. We continue to expect more policy easing to support the economy, and Jan-Feb industrial production data to be released in two weeks’ time will shed more light on the underlying growth trend early this year.”

As a result, China’s blue-chip CSI300 index surged 2.2% to land its best week since November 2015 after the MSCI announcement. It could potentially draw up to $80 billion of fresh foreign inflows to the world’s second-biggest economy.

“The news surrounding China and the Chinese economy has been better than news we’ve seen elsewhere,” Andrew Cole, head of multi asset at Pictet Asset Management Ltd., told Bloomberg TV in Hong Kong. “Clearly the central bank and the authorities are providing both fiscal and monetary stimulus.”

Elsewhere in Asia, Australia’s ASX 200 (+0.4%) extended on opening gains as IT and healthcare names led the advances, whilst heavy-exporter Nikkei 225 (+1.0%) outperformed after the yen dropped to a 10-week low against the greenback.

Later in the session, European shares opened notably higher, with the Stoxx Europe 600 Index rising to the highest in almost five months, as 18 of 19 industry sectors were in the green and car makers leading the charge, even after PMI data showed that euro-area manufacturing contracted last month, offset by the fastest rise in German retail sales since Oct 2016.

“We are seeing a fairly decent uptick in European markets,” said CMC Markets analyst David Madden, citing the combination of U.S. and China data as well as encouraging comments from the United States on China trade talks.

To be sure, the bad data in Europe continued and Spain’s manufacturing sector contracted for the first time for more than five years in February data from Madrid showed while in eastern Europe Czech manufacturing sentiment fell at its fastest rate in six years.

However, market reaction showed that “bad news can be good news” because it could well encourage the European Central Bank to hand out cheap TLTRO loans to euro zone banks in the coming months. Boosted by strong Chinese data and weak European data, futures on the S&P 500, Dow Jones and Nasdaq gained, with the EMini back over the critical 2,800 “quad top” resistance level. Emerging-market stocks snapped a three-day losing streak.

Traders will be relieved to see a strong close to the week after a 16% surge from Christmas through the start of this week, MSCI’s gauge of global equities has tread water as investors await progress in U.S.-China trade negotiations. American officials are preparing a final deal that Donald Trump and China President Xi Jinping could sign in weeks, even as a debate continues in Washington over whether to push Beijing for more concessions. Meanwhile, as Bloomberg notes, geopolitical concerns remain in the background, amid tensions between India and Pakistan and the failure of a summit between Kim Jong Un and Trump to achieve an agreement between the U.S. and North Korea on denuclearization.

U.S. President Donald Trump on Thursday fueled concerns over U.S.-China trade talks, warning that he could walk away from a trade deal with China if it were not good enough. But in subsequent comments Thursday, White House economic adviser Larry Kudlow called progress in the negotiations “fantastic” and said the countries were “heading towards a remarkable, historic deal.”

Mixed messages on trade combined with the collapse of the summit between Trump and North Korean leader Kim Jong Un on denuclearization, and data from China showing slowing factory activity to pressure U.S. stocks as Reuters notes. “News that President Trump walked out of the meeting with Supreme Leader Kim, because the two sides couldn’t reach an agreement over North Korea’s nuclear disarmament, dashed hopes for an easing in geopolitical tensions,” analysts at ANZ said in a morning note.Overnight, president Trump said he believes a good deal with North Korea will happen and added that North Korea did not want to fully denuclearise. Meanwhile, North Korea Foreign Minister said if US lifts sanctions, North Korea will denuclearise, whilst adding that Pyongyang will not change its stance even if the US seeks further talks. US Secretary of State Pompeo said that North Korea basically asked for all sanctions to be lifted.

In the latest Brexit news, UK’s Labour Party is reportedly moving towards a compromise plan which would allow PM May’s Brexit deal to pass but makes it clear that Parliament “withholds support” until the deal has been put to a public vote; according to multiple party sources.

Following a stronger than expected Q4 GDP print, Dallas Federal Reserve Bank President Robert Kaplan said on Thursday that it will take time to see how much the U.S. economy is slowing, supporting views of the Fed’s rate-hike holiday at least through to June.

In rates, long-dated government bond yields in Germany, the euro zone’s benchmark issuer, were set on Friday for their biggest weekly increase in more than year, reflecting easing concern about the global growth outlook and hopes that a no-deal Brexit will be avoided, and ignoring today’s equity euphoria. 10Y TSY yields meanwhile continued to rise, and were trading at 2.73% today after trading 10bps lower earlier in the week.

In FX, the Bloomberg Dollar Spot Index rose a third day, tracking a rise in Treasury yields; the dollar index which tracks the greenback against major rivals, was up 0.2 percent at 96.302, though it remained fractionally lower for the week overall. The yen led losses among G-10 currencies after better-than-expected China data sapped haven demand. The euro edged lower as PMIs out of the euro-zone confirmed a contraction in the manufacturing sector amid a slump in orders, while core CPI for the region slowed to 1.0% y/y, falling short of a 1.1% estimate. Britain’s pound has been the star of the week, jumping more than 1.5 percent after another set of twists in Brexit saga has cut the chances of the UK crashing out the EU at the end of the month with a transition deal. It was down a fraction on the day at $1.3250.

Elsewhere, iron ore extended its rally, stoking a gain in the Bloomberg Industrial Metals Subindex to the highest since early October. West Texas oil futures nudged toward $58 a barrel as strengthening economic trends in the U.S. signaled tightening supplies, and gold’s third successive drop set it up for the worst week since November.

 

 

 

Market Snapshot

• S&P 500 futures up 0.6% to 2,802.00
• STOXX Europe 600 up 0.8% to 375.62
• MXAP up 0.2% to 159.00
• MXAPJ up 0.4% to 524.20
• Nikkei up 1% to 21,602.69
• Topix up 0.5% to 1,615.72
• Hang Seng Index up 0.6% to 28,812.17
• Shanghai Composite up 1.8% to 2,994.01
• Sensex up 0.7% to 36,108.55
• Australia S&P/ASX 200 up 0.4% to 6,192.73
• Kospi down 1.8% to 2,195.44
• German 10Y yield rose 0.4 bps to 0.187%
• Euro down 0.1% to $1.1360
• Italian 10Y yield fell 3.2 bps to 2.393%
• Spanish 10Y yield rose 0.3 bps to 1.176%
• Brent futures up 0.3% to $66.51/bbl
• Gold spot down 0.5% to $1,306.59
• U.S. Dollar Index up 0.2% to 96.34

 

Top Overnight News from Bloomberg

• U.S. officials are preparing a final trade deal that President Donald Trump and his Chinese counterpart Xi Jinping could sign in weeks, people familiar with the matter said. The U.S. is eyeing a summit between the two presidents as soon as mid-March, said one of the people, who spoke on condition of anonymity because the preparations are confidential
• Federal Reserve Chairman Jerome Powell repeated the central bank’s recent mantra of pledging patience in the face of conflicting economic signals and subdued inflation. signals and subdued inflation. “The Federal Open Market Committee will be patient as we determine what future adjustments to the target range for the federal funds rate may be appropriate to support our dual-mandate objectives,” Powell said in the text of a speech Thursday evening in New York
• Federal Reserve Bank of Dallas President Robert Kaplan says “global growth is decelerating” and due to potential spillovers from this headwind and other sources of uncertainty, he has been advocating that “we should pause and be patient” on monetary policy.
• MSCI Inc. will expand the weighting of China-listed shares in benchmark indexes tracked by global investors, a decision that could see billions of dollars flow into one of the world’s most volatile major stock markets
• Oil was poised to eke out a third weekly gain after Saudi Arabia defied U.S. President Donald Trump’s call for lower prices, and a drop in American crude inventories signaled supplies are tightening.
• North Korean leader Kim Jong Un vowed to meet again with President Donald Trump to continue nuclear negotiations after a two-day summit between the leaders collapsed Thursday amid discord over sanctions and conflicting accounts of Pyongyang’s demands
• Bank of England Governor Mark Carney says the drop in business investment due to Brexit uncertainty will hamper the U.K. economy
• U.S. officials are preparing a final trade deal that President Donald Trump and his Chinese counterpart Xi Jinping could sign in weeks, people familiar with the matter said, even as a debate continues in Washington over whether to push Beijing for more concessions
• Underlying price pressures in the euro area remain weak, according to the latest inflation figures for the region, giving European Central Bank policy makers more to digest ahead of their crucial meeting next week

Asian equities started the first trading day of the month on an optimistic note, despite a relatively downbeat session on Wall Street where the three main indices closed lower by around three-tenths of a percent. The Dow was weighed on by UnitedHealth shares which trimmed around 50 points off the index, meanwhile Nasdaq was pressured as heavyweights Facebook, Apple and Netflix all fell over 0.5%. In terms of February performance, Dow rose 3.7%, S&P gained 3.0% and Nasdaq advanced 3.4% in the month. ASX 200 (+0.4%) extended on opening gains as IT and healthcare names led the advances, whilst heavy-exporter Nikkei 225 (+1.0%) outperformed on the back of a weaker domestic currency. Elsewhere, Shanghai Comp (+1.8%) was choppy as the third straight month of contraction in China’s manufacturing sector capped upside in the index, despite MSCI quadrupling China A-share weightings in global benchmarks to 20%. Goldman Sachs estimates that the MSCI move would lead to a potential USD 70bln net buying in A-shares, skewed towards the healthcare and consumer sectors. Finally, Hang Seng (+0.6%) edged higher during the session as the index felt support from its heavy-weight financial and energy sectors.

Top Asian News

• Hong Kong Dollar Near Weak End of Band Raises Tightening Risk
• New Philippines Central Bank Chief Eyed by Dominguez This Month
• Carlyle Buys Stake in Indian Life Insurer From BNP Paribas

Major European equities are in the green [Euro Stoxx 50 +0.7%], as markets follow from the positive risk sentiment seen overnight in Asia. Dax (+1.0%) is the outperforming index with all components in the green on the positive risk sentiment following concerns over China’s economy being somewhat alleviated after Chinese Caixin manufacturing PMI came in stronger than expected; as such the Auto sector is outperforming its peers. Other notable movers include Rheinmetall (+7.3%) leading the Stoxx 600 after the Co’s FY18 revenue was in-line with expectations. WPP (+8.2%) are also firmly in the green in-spite of the Co’s outlook for 2019 being rather downbeat, particularly regarding the first half, as they reported results that marginally beat on expectations. Elsewhere, Man Group (-4.2%) are towards the bottom of the Stoxx 600 after stating that their funds under management fell in 2018.

Top European News

• Italy’s Di Maio Trusts Salvini to Stand by Him for Long Term
• Deficit Conquered, Germany Is Finally Boosting Public Spending
• WPP Dodges Another Results Shock After Year of Client Losses
• Jupiter Rises Most in Five Years as Payout Beats Expectations

In FX, although the Dollar has pared some of its post-GDP and Chicago PMI gains vs certain major counterparts, the index has rebounded further from sub-96.000 lows towards 96.400, largely at the expense of safe-haven currencies, and especially the Jpy.

• JPY – No respite for the Yen after yesterday’s slide through 111.00 and accelerated losses below the 200 DMA as US Treasury yields continue to rally and the 10 year benchmark clears 2.70% in wake of the aforementioned stronger than forecast data and survey news. Usd/Jpy is now just a whisker away from the next big figure where more offers are touted, and with key Fib resistance residing not far above at 112.08.
• CHF/GBP – Also victims of the broad Greenback revival, but the former unwinding more of its safe-haven premium as well, with the Franc back under parity vs the Buck and below 1.1350 against the Euro. Meanwhile, Cable’s pull-back from recent Brexit no deal highs has extended to 100+ pips and not far from Fib support around 1.3215, with little reaction or independent direction gleaned from a bang in line with consensus UK manufacturing PMI.
• EUR – The single currency has pulled back further from best levels too (1.1400+), but holding up relatively well amidst mixed Eurozone data and perhaps with the aid of hefty option expiry interest at the 1.1350 level for today’s NY cut (2 bn) plus M&A news that has lifted Eur/Jpy very close to a key Fib. On that note, the 30 DMA in Eur/Usd at 1.1363 could also be influential on a closing basis along with 0.8593 in Eur/Gbp.
• CAD/NZD/AUD – All on a firmer footing vs their US peer, and particularly the Loonie that has rebounded strongly from sub-1.3200 lows on Thursday ahead of Canadian GDP data and gleaning some traction from steadier oil prices. Usd/Cad is currently near the bottom of a 1.3132-77 range, and a big option expiry between 1.3140-50 may also have a bearing on trade given 1.4 bn rolling off later today. Meanwhile, the Kiwi and Aussie have both managed to regain composure and round number status after falling below 0.6800 and 0.7100, with some comfort drawn from the overnight Caixin Chinese manufacturing PMI that was sub-50 again, but not as weak as the official version.

In commodities, Brent (U/C) and WTI (+0.1%) prices are essentially flat, in-spite of trading positively overnight and initially during the European session, although they are once again trading within a fairly narrow range of less than USD 2/barrel. Elsewhere, since the imposition of US sanctions on the 28th January on Venezuelan oil, Venezuela’s oil exports have dropped by 40% for the month to around 920k BPD. Separately, Lukoil have agreed to reach the OPEC+ targets in April, and Rosneft’s VP state that they fully comply with the pact. Gold (-0.3%) is weaker as the USD moves higher recouping recent losses, with the yellow metal hitting a two-week low and currently trading around USD 1306/oz; however, analysts do highlight that the metal has strong support at the USD 1300/oz level. Elsewhere, copper weakened following China printing a 3rd month of contraction in their Caixin Manufacturing PMI, although the metal did recover as the figure was above expectations and risk sentiment remained positive. Separately, Goldman Sachs trade ideas include Long Dec’19 copper vs. Dec’19 zinc, Long jun’19 and short June’20 aluminium.

Looking at the day ahead, the big highlight in the US today meanwhile is the December PCE report which is expected to show a +0.2% mom core reading (+1.9% yoy and unchanged versus November). We’ll also get the December personal income and spending reports, January manufacturing PMI and February ISM manufacturing – the latter of which is expected to fall just under 1pt to 55.7. The final revisions to the February University of Michigan consumer sentiment survey round out the data. Away from all that, it’s the turn of the Fed’s Bostic to speak this evening.

US Event Calendar

• 8:30am: Personal Income, est. 0.3%; Personal Spending, est. -0.3%, prior 0.4%
• 8:30am: Real Personal Spending, est. -0.3%, prior 0.3%
• 8:30am: PCE Deflator MoM, est. 0.0%, prior 0.1%; PCE Deflator YoY, est. 1.7%, prior 1.8%
• 8:30am: PCE Core MoM, est. 0.2%, prior 0.1%; PCE Core YoY, est. 1.9%, prior 1.9%
• 9:45am: Markit US Manufacturing PMI, est. 53.7, prior 53.7
• 10am: ISM Manufacturing, est. 55.8, prior 56.6
• 10am: U. of Mich. Sentiment, est. 95.9, prior 95.5; Current Conditions, prior 110; Expectations, prior 86.2

DB’s Jim Reid concludes the overnight wrap

With it being the first day of March, this morning Craig was up in the middle of the night publishing the February performance review as a standalone document which you should see in your inbox an hour or so before this one. You’ll find the usual charts and tables in that document too which will help show that it’s actually been one of the better starts to a year on record.

Overnight we’ve already seen China’s Caixin February manufacturing PMI. It came in at 49.9 (vs. 48.5 expected), marking the third consecutive month below 50 but obviously showing some signs of improving. Sub-index level details were more mixed with new orders returning above 50 (at 50.2) after 2 months below while new export orders slipped back ( at 49.4 vs. 50.4 last month). The accompanying statement from Markit with the release stated that the domestic manufacturing demand improved significantly in February while foreign demand was not deteriorating as quickly as last year. However, we need to be cautious on over interpreting domestic demand in February as the significant improvement could be on the back of higher spending on account of Lunar New Year holidays. Nevertheless some signs of green shots. Elsewhere, Japan’s final February manufacturing PMI came +0.4pts above the preliminary read at 48.9 (vs. 50.3 last month). In other news, MSCI has said that it will expand the weighting of China-listed shares in its benchmark indexes which is helping sentiment there.

Geo-political tensions are also showing signs of de-escalation as the week closes with Pakistan’s PM Imran Khan saying yesterday that he will return the captured Indian pilot back to India today while overnight, North Korea’s Kim Jong Un said that he will meet again with President Donald Trump to continue nuclear negotiations after a two-day summit between the leaders collapsed yesterday and expressed appreciation for Trump’s “active efforts toward results” and called the summit talks “productive.”

The better than expected China’s PMI, China’s MSCI news and de-escalation of geo-political risks has helped sentiment overnight with markets in Asia trading largely up with the Nikkei (+1.13%), Hang Seng (+0.31%) and Shanghai Comp (+0.21%) advancing while the Kospi (-1.76%) is down after the disappointing end to the summit yesterday. Elsewhere, futures on the S&P 500 are up +0.40% and the Japanese yen is weak (-0.30%) this morning.

As we start a new month, markets will do well to match the heady gains of the last two months however the last day of February proved to be a bit of a damp squib for risk assets. That being said, it’s bond markets that continue to remain (relatively speaking) lively with yields finally deciding to move against zero’s gravitational pull in the last 48 hours. Better than expected Q4 GDP and Chicago PMI readings in the US – more on those below – was as good an excuse as any yesterday and it helped Bunds (+3.5bps) climb to 0.183% and the highest since 30 January. Treasuries were also up as much as +7.2bps from the intraday lows at one stage and ultimately finished +3.6bps on the day at 2.719%. Amazingly, despite all the excitement of the last two days, on an intra-day basis the range for Treasuries in February was just 11.6bps and we’d completed that by February 5th. If we look at the period since then, the range is just 9.3bps. So it wasn’t exactly the most exciting month for Treasuries despite the mini tantrum in the last couple of days.

By contrast, there was some divergence across risk assets yesterday. The various geopolitical noise hasn’t helped sentiment this week, including talks between Trump and Kim Jong Un being cut short in Hanoi. This was offset to some degree by the more upbeat trade comments from Kudlow and Mnuchin. The S&P 500 ended -0.28%, and traded in an intraday range of just 40bps, its tightest range since last September. The STOXX 600 finished +0.06%, while there were outsized gains for the IBEX (+0.72%) and FTSE MIB (+0.78%). Banks appeared to play a role in that, with European Banks as a sector up +2.01% reflecting the bond move and Spanish and Italian Banks up +1.86% and +2.12%. Meanwhile, HY credit spreads were -4bps and -3bps tighter in the US and Europe. The euro traded close to flat versus the dollar at 1.1374, capping its narrowest three month stretch ever, with a range of just 2.9% over that period.

Back to that data yesterday, Q4 GDP in the US printed at a better-than-expected +2.6% qoq saar (vs. +2.2% expected). The breakdown was equally supportive with private domestic demand up +3.1% and consumer spending reasonable following concerns post the odd December retail sales report. Trade also subtracted less than expected from the overall headline number. Core PCE prices rose at an annualized pace of 1.7% on the quarter, a touch above expectations, which presents some upside risks to today’s December print. As for the Chicago PMI, the February reading jumped a whopping 8pts to 64.7 and far exceeded expectations for a more moderate 57.5. That is the highest reading since December 2017 and like the GDP report, the details also made for pleasant reading with new orders up over 15pts and production over 8pts higher. As you’ll see in the day ahead at the end, we’ve got the ISM manufacturing reading today which is expected to fall slightly from 56.6 to 55.8 however recent regional surveys perhaps indicate some upside risk to the headline reading now, since the Chicago, Dallas, Empire, and Richmond prints all moved higher this month, leaving the weak Philly print as an outlier.

The other data of note in the US yesterday was the latest weekly initial jobless claims print, which rose 8k and a bit more than expected to 225k. That said, the four-week average has dropped for two consecutive weeks now to 229k. As for the data in Europe, it was a busy day for inflation releases. In a nutshell, Germany (+0.5% mom vs. +0.6% expected) and France (+0.1% mom vs. +0.3% expected) missed, Spain (+0.2% mom vs. +0.1% expected) beat and Italy (-0.2% mom) was in line. Today we’ve got the broader Euro Area reading with the consensus pegged at an unchanged +1.1% yoy for the core reading. Our economists had expected it to also come in at a weak +1.1% yoy however yesterday’s country level data likely puts the risk at that coming in below market.

Turning to Fedspeak, where the most interesting comments were from Vice Chair Clarida, who noted that “market-based measures of inflation compensation have moved lower, on net, since last summer, though they have increased some recently.” This suggests that Clarida wants to see higher inflation pricing before endorsing another rate hike, which is the rationale behind one of our rates strategists’ favorite trades of being long US breakevens. The rest of Clarida’s comments conformed to recent FOMC rhetoric emphasizing patience and data dependence as a response to financial market volatility and slower global growth. Elsewhere, Philadelphia Fed President Harker reiterated his preference for one hike each this year and next. That was likely also his view as of December, so his stasis suggests reduced scope for the dots to fall at the March FOMC meeting.

Finally to the day ahead, which kicks off this morning with January retail sales data in Germany before all eyes turn to the final revisions of the February manufacturing PMIs. For what it’s worth, no change in the Euro Area reading of 49.2 is expected, while the same applies for Germany and France at 47.6 and 51.4, respectively. Italy and Spain are expected to fall slightly to 47.2 and 51.7, respectively. Away from that this morning we also get February employment data in Germany and January money and credit aggregates data in the UK, as well as the advanced February CPI reading for the Euro Area as mentioned above. The big highlight in the US today meanwhile is the December PCE report which is expected to show a +0.2% mom core reading (+1.9% yoy and unchanged versus November). We’ll also get the December personal income and spending reports, January manufacturing PMI and February ISM manufacturing – the latter of which is expected to fall just under 1pt to 55.7. The final revisions to the February University of Michigan consumer sentiment survey round out the data. Away from all that, it’s the turn of the Fed’s Bostic to speak this evening.

via ZeroHedge News https://ift.tt/2Eo7h6W Tyler Durden