After May’s surprisingly positive rebound, income and spending growth was expected to slow in June and both printed right at expectations (+0.4% MoM and +0.3% MoM respectively).
This is the 4th month of slowing spending growth in a row…
However, thanks to the historical revisions, incomes are rising at 4.9% YoY as spending growth slows to 3.9% YoY…
Which has stabilized the savings rate…
And finally, The Fed’s favorite inflation indicator – Core PCE Deflator – rose 1.6% YoY, cooler than the +1.7% YoY expectations.
So maybe, just maybe, there’s one item for Powell to hang his rate cut on.
via ZeroHedge News https://ift.tt/2ymamSt Tyler Durden
The U.S. is moving against big tech in a big way. Last week, the Department of Justice (DOJ) announced a broad antitrust investigation into whether unnamed technology companies have engaged in anti-competitive activities. This is in addition to DOJ’s joint antitrust efforts with the Federal Trade Commission (FTC); DOJ is tackling Apple and Google, while the FTC has Amazon and Facebook. The FTC formed a separate task force to monitor competition in the technology industry earlier this year. Oh yeah, and the House Judiciary Committee is sniffing around for Silicon Valley shenanigans, too.
So far, the DOJ has not named names. Since “search, social media, and some retail services online” were specifically mentioned, it’s a good bet that Google, Facebook, and Amazon are among the targets. We can probably throw in the Apple App Store, as well.
We also don’t know whether the investigations will be voluntary, or if DOJ will exert authority to compel discovery on heretofore unknown dirty deeds. So it’s hard to say exactly what DOJ has up its sleeves.
But if the Trump administration’s posture towards big tech is any indication, we should expect a fairly aggressive examination of possible anti-competitive actions.
During his nomination hearing, Attorney General Robert Barr stated that he wondered “how such huge behemoths that now exist in Silicon Valley have taken shape under the nose of the antitrust enforcers” and advocated for “vigorous enforcement of the antitrust laws to preserve competition.” In particular, Barr worries that large platforms enjoy network effects so substantial that “particular sectors could essentially be subsumed into these networks.”
The writing was always on the Facebook Wall. It’s true that until fairly recently, most technology companies had something of a neon halo about them. We used and enjoyed social media platforms every day, those harmless and amusing outlets for comradery and cat-posting. Amazon gave us great cheap junk, Apple had the coolest products. Google gave us, well, everything else.
It’s an illustration of general U.S. attitudes to antitrust. On paper, enforcers like the DOJ and FTC are only supposed to intervene when a firm restricts output and raises prices, or when it possesses an “essential facility” available nowhere else. In other words, officials should get involved where consumers are demonstrably harmed, as gauged by measurable economic outcomes like price increases or output restriction.
In practice, however, many call for firms to be broken up anytime we feel they are getting too big. We forget today, but at one point, the hot talk in tech was that MySpace and AOL were due for the antitrust treatment. Today, these names do not conjure images of anti-competitive activity because they were successfully competed against—by Facebook and Google. Yet their actions remain the same.
Under the “market structure” conception of antitrust, it’s not so much about protecting consumers as it is about protecting competition—that is to say, protecting current and future competitors.
It’s hard to argue, for instance, that Windows users were harmed by the free Internet Explorer browser that came preinstalled on their computers. Microsoft’s aggressive behind-the-scenes campaign to convince vendors to snub alternative browsers didn’t really affect user experience. If you wanted a different browser, you could just use IE to download another browser. But competitors like Netscape clearly were harmed by such structural defaults, which is why DOJ eventually intervened.
Microsoft was big and seemed unassailable. Of course, it wasn’t, but not along the dimensions over which ’90s antitrust regulators so agonized. The fall came, to regulators at least, out of nowhere: Apple’s streamlined strategy and the open source operating system Linux dealt major blows to Microsoft’s seemingly untouchable positions in the personal computing (hello, iPhone) and server markets. Browsers were the wrong battle—dirty as the fight may have been for poor Netscape—and today Microsoft browsers are considered a bit of a joke.
In a similar way, successes spelled trouble for tech titans. It was only a matter of time until they got big enough and unpopular enough to draw antitrust scrutiny. It’s almost tautological: The most competitive companies in hindsight become the most “anti-competitive.” (Is there a major company who got there by playing nice?) You can always find something to point to as an unfair and unbreakable barrier to competition.
It doesn’t sound great to say you are breaking up firms to benefit other companies. Today, aggressive antitrust enforcement is couched in terms of “innovation.” It’s not that we are shoring up businesses that couldn’t keep up. We are taking down today’s titans so that they little guys can get a crack at them. With more breathing room, tomorrow’s paradigm shifts can sooner take flight today. Some go so far as to claim that without the DOJ’s antitrust case tying up Microsoft, Google would have never taken off.
The Justice Department’s statements on their investigations hew to this new conception of antitrust as a harbinger of tomorrow’s innovation. Its press release singles out practices that have “reduced competition” and “stifled innovation” for scrutiny. Last on that list, by the way, are activities that “otherwise harmed consumers.”
We’ll have to wait and see what the DOJ will dig up as evidence of anti-competitive behaviors. Perhaps they will discover some truly heinous deeds. Or maybe something fairly benign will be touted as proof that online platforms’ gains were ill-gotten, or that their very size is on its face is bad for competition. After all, antitrust regulators will want to come up with something.
They walk a fine line. It’s not hard to imagine scenarios where actions that are bad for competitors are also bad for consumers. Let’s say Microsoft’s browsers blocked users from downloading alternative options. That would clearly limit choice and competition, and would probably stall browser innovation as well. But it’s not always the case that what makes competitors’ jobs harder makes consumers’ lives worse. Regulators should keep the distinctions clear.
The big guys are ready for a fight, and their lawyers are surely fashioning preemptive rebuttals to defend their most notorious business practices from antitrust affronts. It’s how the game is played.
Should we expect these antitrust efforts to do much for innovation? If the past is any guide, the Davids that will take down our Goliaths are probably putting together their slingshots as we speak, far from the eyes of antitrust regulators. And then the next decade’s Justice Department will puzzle over just how those new giants got where they are in the first place. After all, if they had actionable information on what the next major markets will be, they might be in a different line of work.
from Latest – Reason.com https://ift.tt/32ZqeZh
via IFTTT
Deal or No-Deal, when it comes to Brexit, the euro is toast. Markets, however, believe the fantasy of its survival. As we approach the end of July the euro clings to support at $1.11, mere pips away from a technical breakdown.
That breakdown will trigger a wave of asset liquidation and another round of negative headlines emanating from troubled German banks.
With 10 Downing St. now saying No-Deal is acceptable, the hard line negotiating tactics of the European Union have hit a rocky shore.
Because it looks like Boris Johnson is ready to give as good as he gets.
I’ve been saying this for a long time. The EU is not a tough nut to crack. They have no leverage in these Brexit negotiations.
What they had was a stacked deck of British officials negotiating with Brussels on Brussels’ terms.
It’s not a negotiation if both sides agree on terms. It’s a surrender.
The only negotiation that went on during May’s administration was with the British people on accepting the horrific treaty written by German Chancellor Angela Merkel’s staff and rubber-stamped by May.
Today Britain looks different, at least on the surface. The market is punishing them for entertaining No-Deal.
The pound is falling out of bed today below $1.24 because Johnson looks serious about re-opening negotiations or opting for No-Deal.
So the forex markets are offside today. Way offside.
Johnson came out and bypassed the Withdrawal Treaty completely saying let’s just move to Stage 2 of Brexit, the free-trade agreement.
You never would have heard that under Theresa May.
That’s why the pound is getting crushed today. At some point, however, that move will get overdone. The EUR/GBP pair is way overbought and was looking toppy before Monday’s massacre in the pound.
What’s clear, however, is that in the short term, the pound will be allowed to collapse to assist the ‘Remain’ case. As the media focuses on the pound falling it neglects the pound is now more attractive to U.S. investors.
It’s making Trump’s offer of a free-trade deal more attractive to wobbly Tory MP’s.
The pound has been over-valued for years thanks to being slaved to the euro-zone. President Trump knows this and this is why he backs Brexit as well as both Johnson and Nigel Farage.
It’s also why Trump is going after France for its new taxes on U.S. tech firms. The wine tariff is political cover.
Trump is attacking the French side of the brewing war for control of the EU. France’s President Emmanuel Macron, while ignoring the rising potential for domestic revolution via the Gilet Jaunes, has positioned himself as the de facto leader of the EU as Angela Merkel’s political power wanes.
Would Macron allow a no-deal to hurt rival Germany since Germany’s trade deficit with the U.K. is more important to them than France?
I think so.
Johnson would be happy to sit down with Trump and cut a free-trade deal yesterday. But being in the EU forbids this. And it’s France that is the biggest obstacle, regardless, just as it was for any EU/US trade deal.
The restrictions on trade imposed by Brussels are impossible to manage because all 28 members have a say in any trade deal. This is why the deal with the USA took so long to start with and it became unworkable. Trump offered a free trade deal and France was the one screaming the loudest. Germany cannot cut a deal with the USA because of France and neither could Britain.
A breakdown in the Euro below $1.11 puts it on the path to its low at $1.034. Markets are screaming for the Bank of England to cut rates alongside the Fed on Thursday.
In essence the market is front-running a rate cut and it means we could see the pound at $1.20. But euro-traders are still clinging to hope that Jay Powell and the Fed won’t disappoint this week.
Europe can’t and won’t respond to Johnson until the last possible minute. Its hardball tactics on Brexit are all it has.
Johnson’s initial calls with EU leadership left things exactly as they are. It’s clear they hate him. It’s also clear the EU still thinks its agents in British parliament can block Johnson’s plans to exit without a deal on October 31st.
Those people are now the EU’s best hope, but they don’t have many if any tools left if Johnson is serious about October 31st.
A pending election won’t stop Brexit. The government won’t allow a revocation of Article 50. If it were possible Theresa May would have done it.
All they have is delay and attrition. The road, however, looks like a dead end.
Johnson, for his part, is smart in using the Irish backstop as his wedge issue. He’s turning it around on the EU who used it as a cudgel wielded by Theresa May earlier this year to bludgeon Tories, including both Johnson and prominent Brexiteer Jacob Rees-Mogg, into voting for the deal as the threat to Brexit looked existential.
Johnson knows this. Brussels knows this. And if their planned sabotage of Brexit fails over the next ninety-plus days, the markets will finally come to terms with it.
Farage has played this smartly, as I pointed out last week, handing Johnson the talking points he needs to consolidate power after he delivers Brexit. If Johnson is serious about bringing about a post-EU golden age for the U.K. then he would be taking Farage up on his offer of help to deliver wins in the Labour-heavy Midlands where Brexit did so well in the EU elections in May.
That’s the way things look like right now. Johnson is creating an environment for a post-Brexit general election to consolidate power, destroy the Tory Remainers and crush the resurgent Liberal Democrats who have become the single-issue Remain party.
But he can, only with Farage’s help, take control of the Midlands, England’s version of “Les Deplorables” for a generation. That’s the thing markets will have to come to terms with.
The EU will then have to stop distracting itself with trifles and turn back to the reality that it is a club that fewer and fewer want to be a part of. Just wait until the markets figure that out.
* * *
Join my Patreon and Install Brave if you aren’t interested in the EU’s dystopian vision for control over humanity.
via ZeroHedge News https://ift.tt/2T0pRJv Tyler Durden
The Bank of Japan chose to leave its monetary policy unchanged at its 29-30 July monetary policy meeting. This was an unsurprising outcome, as forecasters had by a wide margin expected no policy changes: 38 of 47 of those surveyed by Bloomberg in July indicated that they expected the BOJ to leave its policy as is. This BOJ monetary policy meeting was lined up to occur just prior to an FOMC meeting that is widely expected to end in a rate cut, and the concern has been raised that the BOJ may have no viable options with which to respond to the yen appreciation that could result from a US rate cut. For this reason, some forecasters had posited that the BOJ might extend the timeline given in its forward guidance that currently indicates that the Bank will “maintain the current extremely low levels of short- and long-term interest rates…at least through around spring 2020”. (14 of those surveyed by Bloomberg indicated that they expected forward guidance to be adjusted in a more accommodative direction.) Ultimately, the BOJ decided not to adjust its forward guidance at this meeting.
Why the BOJ took a pass on amending its forward guidance
There are two possible reasons why the BOJ chose not to revise its forward guidance on this occasion.
First, USD/JPY was quite consistently parked in the 108.5-109.0 range in the immediate run-up to the meeting.
Second, the BOJ may have worried that frequent adjustments to forward guidance might give off the impression that the Bank had used up all of its actual monetary policy ammunition.
However, we note that the statement that the BOJ will “make policy adjustments as appropriate…with a view to maintaining the momentum toward achieving the price stability target” is now followed by the assertion that the Bank “will not hesitate to take additional easing measures if there is a greater possibility that the momentum toward achieving the price stability target will be lost”. This addition was arguably inserted as an alternative to the sort of change in forward guidance that some forecasters had expected.
Forecasts in the Outlook Report also left mostly untouched
On the same day as the Statement on Monetary Policy, the BOJ also issued the July 2019 edition of its Outlook for Economic Activity and Prices (the Outlook Report). Policy Board members’ median forecasts for FY19 real GDP growth, FY19 CPI, FY20 CPI, and FY21 real GDP growth were all slightly lowered, but Policy Board members continued to forecast sustained gradual improvement in both real GDP growth and CPI (Figure 1).
In the Outlook Report, the BOJ reiterated its view that momentum toward achieving the price stability target of 2% has been maintained, and this seems to have been used as a justification for standing pat on monetary policy.
Policy will likely be left alone barring a steep rise in the yen
The BOJ has publicly stated that it would pursue additional easing measures if needed, but its only practicable option for further easing is that of accelerating its expansion of the monetary base, accomplished by means of stepped-up purchases of JGBs made in coordination with increased fiscal outlays and increased issuance of JGBs to fund those outlays. Nomura expects the BOJ to pursue additional easing only if yen appreciation were to take USD/JPY to around 100. In any other circumstances, we expect the BOJ to simply carry on with its current monetary policies.
via ZeroHedge News https://ift.tt/2YuKLS6 Tyler Durden
One day before the Fed’s 25bps rate cut, traders are suddenly getting cold feet and global stocks are a (shallow) sea of red, with US equity futures and European markets all sliding, weighed down by corporate results and economic data while awaiting news from the resumption of U.S.-China trade talks even as Trump launches another anti-China tirade on twitter.
Meanwhile, Europe’s markets suffered a stormy start as the pound followed its worst day of the year with another 0.5% swoon against all the major currencies. A blizzard of fiery talk on Monday that included the new UK Prime Minister Boris Johnson calling his predecessor’s Brexit plans dead and its new foreign minister labeling the European Union “stubborn” kept the slide intact. Sterling fell as far as $1.2120, which was its lowest against the dollar since March 2017, and to 91.85 pence per euro, the weakest since September 2017.
Options markets were pointing to more pain too. Three-month implied volatility, a contract that expires just before the Oct. 31 Brexit deadline, jumped to over 11 vols, the highest since before March 29, the original date for Britain to leave the European Union.
“The pound is in a very precarious state, it is as simple as that,” said TD Securities’ European head of currency strategy Ned Rumpeltin. “We are now in a different regime,” he said, referring to Johnson’s explicit agenda of taking Britain out of the EU, whether or not transitional trading agreements are in place.
US equity futures, down -0.3% and below yesterday’s lows, were hit following a plunge in the stock of Beyond Meat which used its surprise outlook boost to surprise markets with a 3.25 million share offering, while traders looked for earnings reports due from industry leaders including Procter & Gamble, Pfizer and Mastercard. Disappointing forecasts from Reckitt Benckiser and Bayer weighed on the Stoxx Europe 600 Index, while grim forecasts from German chemicals and drugs giant Bayer and airline Lufthansa soured sentiment, although the weakness of the pound kept London’s blue-chip index just about out of the red. The EuroStoxx 50 dropped -0.9%, pushing lower through the European morning as disappointing earnings weighed on European stocks. The U.K.’s FTSE 100 index outperformed as the pound plunged and strong earnings boosted shares of BP.
With concerns about global growth still bubbling among investors, a GfK survey also showed German consumer morale worsening for the third month in a row heading into August as trade disputes bit in Europe’s biggest exporter.
“Most markets are down this morning,” said Simona Gambarini, a markets economist at Capital Economics. “The S&P closed lower yesterday. We have a few data releases regarding the eurozone that could push equity prices down but I think everyone is waiting for the Fed meeting.”
Earlier, stocks were higher across Asia, rising in Japan, South Korea and China, and closed at a record in Australia, while Hong Kong stocks also rose despite continuing protests in the city. Investors awaited headlines from U.S.-China trade talks and the Federal Reserve’s rate decision later this week. The region’s benchmark MSCI Asia Pacific Index gained 0.3%, led by Indonesia and Japan stocks. The Jakarta Stock Price Index jumped as much as 1.2% after the central bank said there is room for accommodative policy in future. Japan’s Nikkei rose 0.4%, showing limited reaction to the Bank of Japan’s widely anticipated decision to stand pat on monetary policy. Shanghai rose 0.3% and Hong Kong’s Hang Seng edged up 0.2%. Elsewhere, Hong Kong’s Hang Seng Index rebounded on a rally in Chinese insurance companies. India’s Sensex Index fell 0.2% in its second day of decline.
As expected, the BOJ did nothing, but added that it would ease policy again “without hesitation” if the economy loses momentum for achieving the central bank’s 2% inflation target. Specifically, Kuroda kept all monetary policy settings unchanged as expected with NIRP held at -0.1% and 10yr JGB yield target at around 0% with the decision made by vote of 7-2 in which Kataoka and Harada dissented again. BoJ also maintained its forward guidance on keeping rates at extremely low rates at least through to Spring 2020 and added that it will ease without hesitation if momentum to reaching the price goal is lost, while it reduced FY19/20 Real GDP forecast to 0.7% from 0.8% and cut FY19/20 Core CPI forecast to 1.0% from 1.1%.
Also drawing some attention were U.S.-China trade negotiations which begin in Shanghai on Tuesday, although expectations for progress during the two-day meeting are low with the markets hoping the two sides can at least detail commitments for “goodwill” gestures.
In rates, Irish government bond yield spreads over Germany hit their widest levels in over a month at 24 basis points, on worries about the damage a no-deal Brexit would do to Ireland’s economy. Other euro zone government bond yields were holding near recent lows ahead of the Federal Reserve meeting which is expected to deliver a 25 basis point rate cut on Wednesday and potentially signal more on the way. Germany’s 10-year government bond yield was hovering near the minus 0.40% mark. In the US, Treasury yields edged lower and the dollar touched its highest in almost two months.
In FX, as noted above, the slump in the pound dominated the overnight trading session as the currency headed for its biggest four-day drop since 2016. Besides the pound’s slow motion crash, the Euro drifted and core euro-zone bonds were steady as the latest data added to the gloomy outlook for the region’s economy. The yen gained as the Bank of Japan left interest rates unchanged. Oil extended gains after rising the most in three weeks on Monday.
In commodities, crude oil extended the previous day’s gains, with the Fed’s expected easing fueling optimism that it would boost the economy and fuel demand in the world’s biggest oil consumer. U.S. crude futures were up 0.65% at $57.24 per barrel and Brent crude added 0.6% to $64.09. Gold was down 0.1% at $1,425 per ounce.
Expected data include personal income and spending, and Conference Board Consumer Confidence. Altria, Conoco, Mastercard, Merck & Co., Amgen, Apple, and Mondelez are among companies reporting earnings.
Market Snapshot
S&P 500 futures down 0.2% to 3,017.25
STOXX Europe 600 down 0.7% to 388.18
MXAP up 0.3% to 159.77
MXAPJ up 0.2% to 524.10
Nikkei up 0.4% to 21,709.31
Topix up 0.5% to 1,575.58
Hang Seng Index up 0.1% to 28,146.50
Shanghai Composite up 0.4% to 2,952.34
Sensex up 0.2% to 37,752.99
Australia S&P/ASX 200 up 0.3% to 6,845.08
Kospi up 0.5% to 2,038.68
German 10Y yield fell 0.8 bps to -0.399%
Euro down 0.02% to $1.1143
Italian 10Y yield rose 0.7 bps to 1.221%
Spanish 10Y yield fell 0.3 bps to 0.355%
Brent futures up 0.9% to $64.27/bbl
Gold spot up 0.1% to $1,428.03
U.S. Dollar Index up 0.1% to 98.12
Top Overnight News from Bloomberg
Prime Minister Boris Johnson will not start talks with European Union leaders over Brexit unless they first agree to his demand to reopen the divorce deal they struck with his predecessor, Theresa May, his office warned. So far, EU leaders have refused. U.K. will push EU to negotiate a new Brexit deal within weeks
The Bank of Japan kept its monetary policy unchanged while trimming its inflation forecasts, taking a wait-and-see stance ahead of an expected interest rate cut from the Federal Reserve tomorrow.
French economic growth unexpectedly slowed, adding to risks for a euro area already shaken by a manufacturing slump and frailties in its largest economy, Germany.
The U.S. Treasury Department said it plans to borrow more than twice as much as previously anticipated in the third quarter, assuming lawmakers free up spending by lifting the debt ceiling
Mexico’s interest rates are too high for a slowing economy, President Andres Manuel Lopez Obrador said in an interview, though he added that he respects the central bank’s freedom to set them independently
Japan’s factory output suffered its second-largest drop in the last five years in June as trade tensions and a slowdown in the global economy dragged exports lower for a seventh straight month
Oil extended gains on speculation that demand will get a boost from a potential rate cut by the Federal Reserve, while investors await news from the resumption of U.S.-China trade talks
Citigroup Inc. is preparing to cut hundreds of jobs in its trading division — stark new evidence that an industry wide slump in revenue this year may be more permanent than the tweets and policy moves rattling clients
Asian equity indices shrugged off the lacklustre lead from their global peers and traded higher across the board, but with gains mostly modest as there was not much in terms of fresh catalysts and as markets look ahead to the looming risk events. ASX 200 (+0.3%) gained from the open with continued strength in telecoms leading the index to unprecedented highs, while the Nikkei 225 (+0.4%) ignored disappointing Industrial Production data and what has so far been a predominantly softer earnings season, with early outperformance fuelled by recent currency weakness although BoJ disappointment later saw some of the gains pared. Elsewhere, Hang Seng (+0.1%) and Shanghai Comp. (+0.4%) conformed to the mild optimism despite further liquidity inaction by the PBoC as focus turned to the resumption of US-China trade talks in Shanghai today. Finally, 10yr JGBs traded sideways with price action indecisive heading into today’s BoJ policy conclusion where the central bank kept policy settings unchanged as expected but also maintained its forward guidance which disappointed some outside calls for a potential dovish tweak.
Top Asian News
BOJ Stands Pat and Trims Inflation Outlook Ahead of Fed Meeting
Japan’s Industrial Output Falls More Than Expected in June
Singapore Property Developer Top Global Slumps After Acquisition
Indonesia’s FSA Orders Duniatex to Restructure, Pay Off Debt
European equities are firmly in negative territory this morning [Euro Stoxx 50 -1.0%]; however, once again the FTSE 100 (U/C) is the notable outperformer continuing to be buoyed by the weak sterling performance and also benefitting from BP (+2.6%) post earnings where adj. net beat on Exp. and Co. stated that at the mid-point of their 5yr plan they are on target. Unsurprisingly, sectors are all in the red with Energy names outperforming on the aforementioned BP release, with the Co. compromising around 15% of the sector. Other notable movers include Centrica (-13.0%) at the bottom of the Stoxx 600 as both revenue and adj. operating profit missed on the prior figures, though the Co. did caveat this by stating they expect earnings to be weighted towards H2. Separately, Bayer (-3.9%) are also in the red after Q2 revenue missed on Exp. and even though the Co. confirmed outlook this did come with a warning that the outlook is becoming increasingly ambitious for them to achieve. Finally, both Fresenius SE (-2.8%) and Fresenius Medical Care (-6.3%) are under-pressure post earnings with focus being on the Co. anticipating net income growth as flat and as some metrics came in softer than their priors for Q2 respectively.
Top European News
ABB Is Said to Pick Sandvik CEO as Front-Runner for Top Job
BP Bucks Trend of Big Oil Earnings Misses as Output Rises
Centrica CEO to Step Down After First Dividend Cut Since 2015
Delivery Hero Pours Cold Water on Just Eat Counter-Bid Talk
In FX, the broad Dollar and Index remains cautious as US-China talks are underway and as participants gear up for tomorrow’s FOMC meeting, with money markets currently pricing in a 78% chance of a 25bps cut and 22% for a 50bps cut to the Fed Fund Rate. DXY had earlier eclipsed yesterday’s high (98.17), ahead of the YTD peak at 98.37. Looking ahead on the docket, US PCE could influence a short-term move in the Buck, although sentiment for the currency is largely constrained to trade talks in Shanghai and positioning ahead of the Fed.
GBP – More torment for the Pound as further no-deal woes engulf investor sentiment with the latest reports from the Telegraph further solidifying PM Johnson’s hard-line stance. Cable downside was exacerbated during Asia-Pac hours in which the pair retreated below the 1.2200 level for the first time since March 2017 to a current intraday low of 1.2121 (vs. 1.2217 at the open), albeit the pair saw a small bounce in recent trade as the Buck drifted off highs and potentially on some short covering. To the downside, technicians will be eyeing the following levels for support: 1.2110 (March 17 low), 1.2085 (Jan 17 low), 1.2000 (psychological) and 1.1841 (Flash crash low).
JPY – Firmer on the day in the aftermath of the BoJ Policy Decision in which the Central Bank failed to satisfy some dovish calls by holding its NIRP at -10bps and its 10yr JGB yield target at around 0% whilst maintaining its forward guidance. The vote split also showed no change from the prior meeting (7-2) despite the recent sources suggesting divergence between board members on the timing of easing. USD/JPY currently hovers closer to the bottom of its 108.50-94 range ahead of tis 50 DMA at 108.35. Moreover, today’s NY cut sees 764mln expiring at strike 108.15-25 and around 860mln at 108.00.
EUR, AUD, NZD – All largely unchanged intraday and mostly moving at the whim of the Buck, albeit the EUR is again somewhat cushioned by its EUR/GBP cross. EUR/USD remains just under the 1.1150 level and was overall little impacted by slightly cooler Y/Y German state CPIs, which is in-fitting with the National forecast due to be release at 1300BST. Elsewhere, the Antipodeans await developments from US-Sino talks with little to report on a domestic front. AUD/USD and NZD/USD remain within tight ranges (0.6887-6907 and 0.6619-34 respectively), with the latter hovering around its 50DMA (0.6624).
In commodities, Brent and WTI prices are firmer this morning, and currently trade just below the USD 64.50/bbl and USD 57.50/bbl marks respectively. This positivity is in-spite of a quiet session of newsflow for the complex, though today does see the resumption of US-China trade talks which alongside the ongoing geopolitical tension. Additionally, markets are likely looking ahead to today’s API release in which participants expect a headline crude draw of 2.5mln. Elsewhere, gold is flat in a tight range as the yellow metal awaits this week’s main events. Finally, copper trades lacklustre and is back below 2.7/lb amid cautious ahead of trade developments.
US Event Calendar
8:30am: Personal Income, est. 0.4%, prior 0.5%; Personal Spending, est. 0.3%, prior 0.4%
Real Personal Spending, est. 0.2%, prior 0.2%
PCE Deflator MoM, est. 0.1%, prior 0.2%l PCE Deflator YoY, est. 1.5%, prior 1.5%
PCE Core Deflator MoM, est. 0.2%, prior 0.2%; PCE Core Deflator YoY, est. 1.7%, prior 1.6%
9am: S&P CoreLogic CS 20-City MoM SA, est. 0.2%, prior 0.0%; S&P CoreLogic CS 20-City YoY NSA, est. 2.4%, prior 2.54%
10am: Pending Home Sales MoM, est. 0.5%, prior 1.1%; Pending Home Sales NSA YoY, est. 0.7%, prior -0.8%
Yesterday I mentioned how we’ve all been getting it wrong in discouraging children not to play video games all day as it’s becoming clear that the e-sports revolution is the path to untold riches after the weekend’s Fortnite World Cup. Well here in the UK we saw an alternative route to success last night as the final of “Love Island” concluded with the winners expected to earn a few million each in endorsements etc. I’ve never watched it but I read over the weekend that a hard Brexit may mean problems for next year’s show given it’s hosted in the EU. If there was a second referendum this is the sort of news I’d have to consider when allocating my vote!!
The main event today is the resumption of trade talks between the US and China, which are taking place in Shanghai. So watch for any headlines. To recap where we are, following the escalation in May where the US imposed higher tariffs on China and President Trump accused China of trying to renegotiate the agreement at the last minute, the US and China reached a truce and agreed to resume talks last month at the G20 meeting in Osaka. At the meeting, President Trump opted not to put tariffs on the remaining $300bn of Chinese imports which had been threatened, and also offered a concession on Huawei, while China agreed to buy more products from the US. Little has been heard since though on how things are progressing. The longer things remain uncertain the more risks there are to the global economy. This is one of the biggest dilemmas for the FOMC as they today start their 2-day meeting ahead of tomorrow’s announcement.
US markets were in wait-and-see mode yesterday ahead of tomorrow’s main planned event of the summer, with S&P 500 trading volumes around -11% lower than usual. The index ultimately ended -0.17% lower, while the NASDAQ dropped -0.44%. The DOW (+0.11%) outperformed, the first time in over a month that it gained in the same session when the S&P 500 fell. Company-specific news drove the biggest moves, with drug maker Mylan up +12.57% after it announced plans to merge with Pfizer (-3.81%). Pfizer will spin off a few of its popular brands into a new company along with Mylan, and its shareholders will receive 57% of the new company. Mylan owners will get 43% of the new combined firm. The utilities (+0.49%) and real estate (+0.46%) sectors led sector gains as bond yields slid, with 10-year treasury yields -1.4bps. Two-year yields traded sideways, taking the 2y10y curve -1.0bps flatter.
European markets were also in that same holding pattern with the STOXX 600 up +0.03% as the UK led advances on a weaker currency, up +1.82%, which was the biggest gain for the index since last August. The London Stock Exchange Group surged by +15.34% as investors reacted to the news of its $27bn acquisition of Refinitiv. Meanwhile the DAX, CAC 40 and the FTSE MIB slid a bit, by -0.02%, -0.16%, and -0.59% respectively. Bond yields fell, with ten-year bunds -1.5bps, ten-year French debt -1.7bps, and ten-year gilts falling –3.3bps to yield their lowest since 2016. European HY credit spreads tightened -1.4bps and are now at their narrowest level in almost a full year. There was little in the way of data to impact proceedings, although data ahead of this Thursday’s Bank of England meeting showed UK consumer credit growth continued to slow, falling to 5.5% yoy in June, the lowest since April 2014. Mortgage approvals were stronger than expected however, at 66.4k in June (vs. 65.8k expected).
Sticking with the UK, Sterling weakened by -1.31% against the dollar, its steepest drop since last November, and has continued to slide (-0.52%) this morning with heavier volumes than normal in Asia trading hours. It is currently trading at 1.2157, the lowest level since February 2017, and just a percent away from hitting a 34-year low. With 93 days until the UK’s scheduled departure from the EU on October 31, and with Johnson’s policy of leaving that day “no ifs or buts”, fears of a no-deal outcome are increasingly being reflected in the currency.
Turning to Asia, the BoJ kept its monetary policy unchanged at their meeting overnight maintaining the settings on its yield curve-control program and asset purchases while also keeping its interest rate pledge the same as before. The accompanying statement added a new sentence that, “In particular, in a situation where downside risks to economic activity and prices, mainly regarding developments in overseas economies, are significant, the Bank will not hesitate to take additional easing measures if there is a greater possibility that the momentum towards achieving the price stability target will be lost.”
We are slowly moving that way as the BoJ revised down both the core inflation and growth forecasts for 2019 by one-tenth to +1.0% and +0.7%, respectively. The Japanese yen is trading up (+0.14%) this morning while yields on 10yr JGBs are unchanged at -0.156%. Elsewhere, Japan’s June industrial production came in at -3.6% mom (vs. +2.0% mom last month), the biggest drop since January 2017 and was dragged down by the decline in output of autos and flat panels.
Asian equity markets are largely trading higher with the Nikkei (+0.27%), Hang Seng (+0.34%), Shanghai Comp (+0.65%) and Kospi (+0.56%) all advancing. However, the Nikkei has pared back gains of around +0.8% earlier in the session, prior to the BoJ announcement. Elsewhere, futures on the S&P 500 are up +0.12%.
In other overnight news, USTR Robert Lighthizer said that the US has a growing trade shortfall with Vietnam, and the government “has been clear with Vietnam that it has to take action to reduce the unsustainable trade deficit,” in written responses to the US Senate Finance Committee while adding that, Vietnam should take action including “expanding its imports of goods from the United States and by resolving market access restrictions related to goods, services, agricultural products, and intellectual property.” In May, the US Treasury had added Vietnam to a watch list of countries being monitored for possible currency manipulation with President Trump calling the country out as “almost the single-worst abuser of everybody” when asked if he wanted to impose tariffs on the nation.
Bloomberg reported yesterday that in the race to succeed Christine Lagarde as Managing Director of the IMF, the EU had narrowed its shortlist down to 3, although the French finance ministry denied this. The candidates mentioned are Jeroen Dijsselbloem, the former Eurogroup chair and Dutch finance minister; Olli Rehn, the central bank governor of Finland; and Kristalina Georgieva, the chief executive of the World Bank. Although of course it’s not solely up to the EU who gets the position, the IMF has always been run by a European since its formation, while the World Bank has always been headed by an American. It should also be noted that for Georgieva to get the position, the IMF would need to change its age-limit rules, as currently the Managing Director has to be under 65 years old when they’re appointed. Nominations for the position opened yesterday and close on September 6, and the IMF Executive Board are aiming to conclude the process by October 4.
As for US politics, the second Democratic party presidential debates are due tonight, with front-runners Bernie Sanders and Elizabeth Warren due to take the stage with 8 other candidates. Joe Biden and Kamala Harris will join the second group of candidates tomorrow night. Ahead of the debate, Warren released the details of her trade plan, which includes provisions to bar preferential trade with countries that manipulate their currencies, violate human rights, or fail to protect labour standards. Such measures could ensnare China and other current US trading partners, illustrating that trade confrontation is, at least for now, a bipartisan initiative.
In terms of rounding out yesterday’s data before we move to the day ahead, the Dallas Fed Manufacturing Survey came in slightly below expectations at -6.3 in July (vs. -6.0 expected), although this was a rebound from the previous month’s 3-year low of -12.1. Combining this print with other regional Fed surveys from New York, Philadelphia, and Richmond, results in an ISM estimate of 51.6, slightly below last month’s reading of 51.7, which would be the lowest since September 2016 but wouldn’t sink into contractionary territory. The ISM is due on Thursday.
In terms of the day ahead, in addition to the resumption of US-China talks, the FOMC will begin their much-anticipated 2-day meeting, although the decision won’t of course be announced until tomorrow. In terms of data, from the US we have personal income and spending releases for June, as well as the Conference Board’s consumer confidence reading for July. Meanwhile in Europe, we’ve got the first look at Q2 GDP from France, Eurozone consumer confidence figures, and from Germany we have CPI data for July, and the GfK consumer confidence reading. There are also a number of earnings highlights including Apple, BP, Procter & Gamble, Mastercard and Pfizer, while it’s the first of two nights of Democratic primary debates.
via ZeroHedge News https://ift.tt/2ylIqOy Tyler Durden
Why should we be concerned about U.S. Attorney General Bill Barr’s proposal last week to resume federal executions for some particularly horrendous crimes? Because there’s no reason to believe that the flaws that originally cast doubt on capital punishment have become less of an issue.
In his announcement of resumed executions, Barr focuses on “bringing justice to victims of the most horrific crimes.” He wants to begin with prisoners “convicted of murdering, and in some cases torturing and raping, the most vulnerable in our society—children and the elderly.”
There’s no doubt that we’re discussing horrific acts. But can we be sure that we’ve arrested, tried, and convicted the actual perpetrators?
The proportion of death row inmates executed to those set free isn’t exactly encouraging. Since 1972, 1,500 people have been executed in the United States. Over that same time, “166 former death-row prisoners have been exonerated of all charges and set free,” according to the Death Penalty Information Center.
Extrapolating from the cases in which death row inmates were proven to have not committed the crimes of which they were convicted, a 2014 study estimated that 4.1 percent of all death row inmates could be exonerated. “We conclude that this is a conservative estimate of the proportion of false conviction among death sentences in the United States,” the authors added.
That’s an awful lot of people cooling their heels behind bars for crimes they didn’t commit.
When former Illinois Gov. George Ryan declared a moratorium on executions, in 2000, he decried his state’s “shameful record of convicting innocent people and putting them on Death Row. He said he wouldn’t allow executions “until I can be sure that everyone sentenced to death in Illinois is truly guilty.”
Capital punishment was formally abolished in Illinois in 2011, inspired by a Chicago Tribune exposé of the human error and malice plaguing the criminal justice system. In the years leading to Ryan’s moratorium, 13 state inmates condemned to die had been exonerated instead. Nobody knows how many prisoners who had been executed had not really committed the crimes for which they’d been convicted.
Nothing quite so earthshaking brought about the unofficial suspension of federal executions in 2003, but similar concerns have dogged the practice for every jurisdiction in the country.
Those concerns about getting it right—imprisoning and killing only criminals guilty of the crimes for which they were convicted—continue to cast a shadow over Barr’s plan to resume capital punishment, starting with judicial killings of five inmates.
Nationally, the death penalty was struck down by the U.S. Supreme Court in 1972’s Furman v. Georgia over concerns that it was applied in a capricious and discriminatory manner. Further limitations followed in later court cases. And jurisdictions that wished to retain execution as an option reworked their laws in the years that followed to bring their administration of capital punishment into line with the Supreme Court’s standards.
The death penalty was restored at the federal level in 1988, and three executions followed: Timothy McVeigh, in 2001: Juan Raul Garza, in 2001; and Louis Jones, in 2003. Without fanfare, the Jones execution was the last such killing by the federal government until—it seems—whatever results from Barr’s recent announcement.
Some of the flaws in the criminal justice system that lead to false convictions are probably inevitable in anything designed by and for imperfect human beings. Others seem fixable, but remain broken because of a lack of political will. In either case, that’s plenty of reason to hesitate before imposing an irrevocable penalty on people who might well have been misidentified or even railroaded into convictions for crimes of which they are innocent.
At least something can be done to make things right for the wrongfully convicted and imprisoned. “The federal government, the District of Columbia, and 35 states have compensation statutes of some form,” notes the Innocence Project. These jurisdictions offer (often inadequate) monetary compensation, public apologies, counseling, and assistance in reentering society.
In other cases freed inmates have to fight in court to win some redress for the years of their lives stolen from them by the state. But at least they’re free and often gain public sympathy.
What do we have to offer innocent people killed by the state because of false convictions for crimes? A lovely bouquet won’t do it.
While the evidence suggests that the system is pretty good about getting it right, we do get it wrong. We have lots of room for improvement in the system, including better standards for forensics labs, disincentives to cops to lie and to prosecutors to conceal exculpatory evidence, better legal representation for defendants, and so much more. All of that needs to be done to improve a system that has the inherent power to destroy lives as completely as the the worst criminals it confines do.
Even then, however, we’ll never get it completely right. There’s always going to be room for malice, incompetence, and corruption. That’s why we should punish people for committing the sort of horrendous crimes that Barr highlights while leaving ourselves room to make good when we inevitably convict innocent people.
from Latest – Reason.com https://ift.tt/2YuPHKJ
via IFTTT
Just as the US trade delegation was set to leave for the first round of in-person talks with their Chinese counterparts since the latest Trump-Xi truce, President Trump sent out a furious series of tweets accusing Beijing of failing to live up to its promise to buy more American agricultural products – apparently “there are no signs that they are doing so” – while bashing the Chinese economy and suggesting that it might be better for the US in the long run to wait until after the 2020 election to make a deal, because “when I win, the deal that they get will be much tougher than what we are negotiating now…or no deal at all. We have all the cards, our past leaders never got it!”
Though, if Beijing gets lucky, they might get “one of the Democratic stiffs like Sleepy Joe. Then they could make a GREAT deal, like in the past 30 years…”
China is doing very badly, worst year in 27 – was supposed to start buying our agricultural product now – no signs that they are doing so. That is the problem with China, they just don’t come through. Our Economy has become MUCH larger than the Chinese Economy is last 3 years….
..My team is negotiating with them now, but they always change the deal in the end to their benefit. They should probably wait out our Election to see if we get one of the Democrat stiffs like Sleepy Joe. Then they could make a GREAT deal, like in past 30 years, and continue
…to ripoff the USA, even bigger and better than ever before. The problem with them waiting, however, is that if & when I win, the deal that they get will be much tougher than what we are negotiating now…or no deal at all. We have all the cards, our past leaders never got it!
Surprisingly, the market ignored Trump’s comments, despite the President’s suggestion that the talks with Beijing are essentially already doomed. This, of course, says a lot about what’s really driving the market.
Amazing how the China deal bullshit supposedly added hundreds of points to the S&P and now that it’s collapsing there’s minimal reaction. Clearly, this entire move is REALLY about money-printing. https://t.co/wYUkhaXuVp
Authored by Mark Cudmore, Bloomberg Markets Live reported and former Lehman trader.
The events that matter most for investors this week won’t be the ones dominating short-term price-action — those headline-grabbing moments will be old news within a month.
Next weekend’s newspapers and strategy notes may well be focused on the Fed and the jobs report, but by mid-August, we’ll still care far more about three other things happening this week — trade, forward-looking economic indicators and the outlook for future earnings.
It’s been dubbed the most important week of the year for markets: U.S.-China trade talks back on in Shanghai, the likely Fed’s first rate cut in more than a decade, and Friday’s U.S. payrolls are some of the highlights. People are most excited by Wednesday’s FOMC meeting and, by Friday, that will likely have had the largest impact on asset prices.
Not the actual rate decision — where a 25bps cut, and no more, is all but guaranteed — but the guidance around what policy moves are likely to come next and why.
And it’s in that context that Friday’s labor data is being hyped up as almost the second most important event of the week. It’s hard to fight the crowd and a good narrative, but the true relevance of this release is being overstated. Most importantly, unemployment is a lagging indicator.
The U.S.-China trade relationship matters far more for the global economy longer-term and will drive future Fed policy anyway. There’s little expectation something concrete will come from this week’s meeting, but the nuanced signaling from both sides at the end will be key for setting expectations for what comes next.
For a forward looking economic indicator look to Wednesday’s PMIs, given they’re a survey of future spending and hiring plans. They are also global, rather than just U.S. focused. They may be the less glamorous data release, with the retail audience less aware, but it’s what investors should focus on when considering where the global, and U.S., economy is headed.
And to get a sense of whether U.S. stocks can extend their record high or will come under pressure — corporate earnings guidance is key. Estimates continue to be downgraded, and 3Q is set to be the first quarter of shrinking earnings for the S&P 500 since December 2015.
Estimates are also falling for 4Q and 1Q 2020 (and still appear too high) and at some point, equity investors are going to have to face that reality.
So while traders should get plenty of short-term volatility this week to dip in and out around the high-profile events, investors with a longer-term focus may want to step back from the noise and focus on the events that really matter.
via ZeroHedge News https://ift.tt/312cV8z Tyler Durden
The ‘great British peso’ has had a rough week, and it’s only Tuesday. Adding to Monday’s sharp selloff, sparked by fears that Boris Johnson is planning to take the UK out of the EU without a deal, the pound tumbled to fresh two-year lows on Tuesday, bringing the currency’s total drop over the past four trading days to 2.5%, and 4% since the end of June.
The market’s anxieties about a no-deal Brexit are probably here to stay (at least until Oct. 31), with neither the EU nor Johnson willing to compromise on the hated “Irish Backstop”. Monday was a “huge day” of selling for GBPUSD, according to Robert Turner, a quant trader at RBC in London, per the FT.
Turner said flows out of sterling were the highest since Dec. 11 last year, which coincided with “the height of the concern over an imminent no-deal exit.”
If the currency doesn’t see a sharp rebound in the near future, it will be on track for its worst run of losses in nearly three years over the past four trading sessions.
Still, some analysts insisted that they don’t see a no-deal Brexit as their ‘base case’, though they believe the weakness in the pound will get worse before it gets better, according to Bloomberg.
Karen Ward, market strategist at JPMorgan Asset Management, added: “Whilst ‘no deal’ is still not our expected outcome, the newsflow – politically and economically – is likely to get worse before it gets better, so sterling may have further to fall.”
Johnson will travel to Wales on Tuesday where he will meet with farmers and try to quiet their fears about a ‘no deal’ Brexit, which some have warned could lead to civil unrest. Johnson was booed in Scotland on Monday, and will visit Northern Ireland later this week.
Johnson’s no-deal planning minister, Michael Gove, will chair on Tuesday the first daily ministerial meeting to perepare for a disorderly Brexit on Oct. 31.
via ZeroHedge News https://ift.tt/2Kf9VyG Tyler Durden
Why should we be concerned about U.S. Attorney General Bill Barr’s proposal last week to resume federal executions for some particularly horrendous crimes? Because there’s no reason to believe that the flaws that originally cast doubt on capital punishment have become less of an issue.
In his announcement of resumed executions, Barr focuses on “bringing justice to victims of the most horrific crimes.” He wants to begin with prisoners “convicted of murdering, and in some cases torturing and raping, the most vulnerable in our society—children and the elderly.”
There’s no doubt that we’re discussing horrific acts. But can we be sure that we’ve arrested, tried, and convicted the actual perpetrators?
The proportion of death row inmates executed to those set free isn’t exactly encouraging. Since 1972, 1,500 people have been executed in the United States. Over that same time, “166 former death-row prisoners have been exonerated of all charges and set free,” according to the Death Penalty Information Center.
Extrapolating from the cases in which death row inmates were proven to have not committed the crimes of which they were convicted, a 2014 study estimated that 4.1 percent of all death row inmates could be exonerated. “We conclude that this is a conservative estimate of the proportion of false conviction among death sentences in the United States,” the authors added.
That’s an awful lot of people cooling their heels behind bars for crimes they didn’t commit.
When former Illinois Gov. George Ryan declared a moratorium on executions, in 2000, he decried his state’s “shameful record of convicting innocent people and putting them on Death Row. He said he wouldn’t allow executions “until I can be sure that everyone sentenced to death in Illinois is truly guilty.”
Capital punishment was formally abolished in Illinois in 2011, inspired by a Chicago Tribune exposé of the human error and malice plaguing the criminal justice system. In the years leading to Ryan’s moratorium, 13 state inmates condemned to die had been exonerated instead. Nobody knows how many prisoners who had been executed had not really committed the crimes for which they’d been convicted.
Nothing quite so earthshaking brought about the unofficial suspension of federal executions in 2003, but similar concerns have dogged the practice for every jurisdiction in the country.
Those concerns about getting it right—imprisoning and killing only criminals guilty of the crimes for which they were convicted—continue to cast a shadow over Barr’s plan to resume capital punishment, starting with judicial killings of five inmates.
Nationally, the death penalty was struck down by the U.S. Supreme Court in 1972’s Furman v. Georgia over concerns that it was applied in a capricious and discriminatory manner. Further limitations followed in later court cases. And jurisdictions that wished to retain execution as an option reworked their laws in the years that followed to bring their administration of capital punishment into line with the Supreme Court’s standards.
The death penalty was restored at the federal level in 1988, and three executions followed: Timothy McVeigh, in 2001: Juan Raul Garza, in 2001; and Louis Jones, in 2003. Without fanfare, the Jones execution was the last such killing by the federal government until—it seems—whatever results from Barr’s recent announcement.
Some of the flaws in the criminal justice system that lead to false convictions are probably inevitable in anything designed by and for imperfect human beings. Others seem fixable, but remain broken because of a lack of political will. In either case, that’s plenty of reason to hesitate before imposing an irrevocable penalty on people who might well have been misidentified or even railroaded into convictions for crimes of which they are innocent.
At least something can be done to make things right for the wrongfully convicted and imprisoned. “The federal government, the District of Columbia, and 35 states have compensation statutes of some form,” notes the Innocence Project. These jurisdictions offer (often inadequate) monetary compensation, public apologies, counseling, and assistance in reentering society.
In other cases freed inmates have to fight in court to win some redress for the years of their lives stolen from them by the state. But at least they’re free and often gain public sympathy.
What do we have to offer innocent people killed by the state because of false convictions for crimes? A lovely bouquet won’t do it.
While the evidence suggests that the system is pretty good about getting it right, we do get it wrong. We have lots of room for improvement in the system, including better standards for forensics labs, disincentives to cops to lie and to prosecutors to conceal exculpatory evidence, better legal representation for defendants, and so much more. All of that needs to be done to improve a system that has the inherent power to destroy lives as completely as the the worst criminals it confines do.
Even then, however, we’ll never get it completely right. There’s always going to be room for malice, incompetence, and corruption. That’s why we should punish people for committing the sort of horrendous crimes that Barr highlights while leaving ourselves room to make good when we inevitably convict innocent people.
from Latest – Reason.com https://ift.tt/2YuPHKJ
via IFTTT
