A.M. Links: VA Scandal Keeps Growing, Edward Snowden Gets His Own Comic Book, Russian Prime Minister Says ‘Second Cold War’ Approaching

scandal over alleged mismanagement at the U.S. Department of
Veterans Affairs
keeps growing

is recording
every cellphone call in the Bahamas. Meanwhile, a
new comic book
about NSA whistle-blower Edward Snowden will hit the shelves

In a commencement speech at Baltimore’s Morgan State University,
Attorney General Eric Holder
the U.S. Supreme Court, and Chief Justice John
Roberts in particular, for failing “to take account of racial
inequality, especially in its less obvious forms.”

Russian Prime Minister Dmitry Medvedev
“we are slowly but surely approaching a second cold

Martial law has been
in Thailand.

Police in the Michigan town of Brighton have started ticketing
people for
swearing in public

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Erroneous Subsidies for Obamacare Coverage Nothing New for Feds, Who Make $100 Billion in Mistakes Per Year

Yesterday Peter Suderman reported that about 1
million people who have signed up for Obamacare have gotten
inaccurate subsidies
for their coverage

The law’s subsidies are doled out based annual income, and
people who apply for coverage are responsible for submitting income
data in order to prove eligibility for the subsidies. The problem
is that a million or so people have entered incomes that differ
substantially from what the Internal Revenue Service (IRS) has on

Normally this would be reconciled through a follow-up auditing
process; when the system identifies people whose submitted incomes
don’t match IRS records, those people are asked to send in further
paperwork as proof. But only “a fraction” of those people have
responded, according to
[The WashingtonPost. And even when
they have provided additional documentation, it doesn’t matter.

It doesn’t matter because the government isn’t following up on
the mismatches. It will be interesting to see how many people
mistakenly claim they don’t smoke, either (smoking is the one
activity—it’s not a pre-existing condition precisely—that will
increase your premiums).

But as Reason columnist and Mercatus Center economist
Veronique de Rugy and her Mercatus colleague Jason J. Fichtner have
pointed out, erroneous payments by the federal government are
nothing new. Programs such as the Earned Income Tax Rate (EITC),
the school lunch program, Medicare Advantage, and unemployment
insurance all have improper payment rates in the double digits.

Based on data from the Office of Management and Budget (OMB), de
Rugy and Fichtner note that “over
$100 billion in taxpayer funds were improperly spent in 2012
the latest year for which numbers are fully available. Some
programs (such as Social Security) have low error rates but
nonetheless fork over huge amounts in mistaken payments. Social
Security’s Retirement, Survivors, and Disability Insurance (RSDI),
explain the Mercatus analysts, has an error rate of just 0.4
percent but still sent out $3.2 billion in improper payments.

Other programs

not only have a high improper payment amount but also a
relatively high improper payment rate. The $12.6 billion in
misspent EITC outlays represents a substantial portion, 22.7
percent, of total EITC spending—suggesting that the EITC is prone
to fraud, waste, and abuse. As the chart displays, Medicare
Advantage (Part C), Unemployment Insurance (UI), and Supplemental
Security Income (SSI) face problems similar to the EITC, with
anywhere approximately from one in nine to one in eleven dollars in
these programs being disbursed improperly.

Read more here
. Below is a chart showing error rates. We can
look forward to future charts that will include Obamacare
subsidies, for which most people on the individual insurance market

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China Signs Non-Dollar Settlement Deal With Russia’s Largest Bank

Slowly – but surely – the USD’s hegemony is being chipped away whether by foreign policy faux pas, crossed red-lines, or economic fragility. However, on Day 1 of Vladimir Putin’s trip to China it is clear that the two nations are as close as ever. VTB – among Russia’s largest banks – has signed a deal with Bank of China to pay each other in domestic currencies, bypassing the need for US Dollars for “investment banking, inter-bank lending, trade finance and capital-markets transactions.” Kirill Dmitriyev the head of Russia’s Direct Investment Fund notes, “together it’ll be possible to discuss investment in various projects much more efficiently and clearly,” as Russia’s pivot to Asia continues to gather steam.


As RT reports, Day 1 for Putin is going well…

VTB, Russia’s second biggest lender, has signed a deal with Bank of China, which includes an agreement to pay each other in domestic currencies.


“Under the agreement, the banks plan to develop their partnership in a number of areas, including cooperation on ruble and renminbi settlements, investment banking, inter-bank lending, trade finance and capital-markets transactions,” says the official VTB statement.


The deal underlines VTB Group’s growing interest in Asian markets and will help grow trade between Russia and China that are already close trading partners, said VTB Bank Management Board Vasily Titov.

But it’s not just the banking relationships…

In the first day of a two-day trip to China Russia’s President Vladimir Putin said the two countries will be increasing their bilateral trade to reach a new level.


Our countries have done a huge job to reach a new historic landmark…. China has firmly settled in a position of our key trade partner,” Putin said.


Putin also said that trade turnover between Russia and China grew almost 2 percent during 2013 to reach about $90 billion.


“If we sustain this pace the level of bilateral trade of $100 billion will be reached by 2015 and we’ll confidently move on,” Putin said.


Increasing investment cooperation is crucial, Putin added.



“Together it’ll be possible to discuss investment in various projects much more efficiently and clearly,” as Interfax quotes Kirill Dmitriyev the head of Russia’s Direct Investment Fund.

Nothing lasts forever… remember…

via Zero Hedge http://ift.tt/1jz9KNv Tyler Durden

Gold Slammed As ‘Panic-Seller’ Dumps $520 Million In Futures

You can’t make this up. An initial dump in gold happened when Europe was getting going late last night but as the US wakes up and markets get active, someone (panic-seller) decided it was an entirely optimal time to sell $520 million notional gold futures – sending the price of the precious metal down $7. Intriguingly, though the notional size was large, the actual move is not as large as we have become used to with the ubiquitous Slamdowns (and it’s a Tuesday). At the same time, USDJPY was ramped… because we must maintain the appearance that stock markets are operating normally despite civil wars, coups, global growth slowdowns, and de-dollarization growing.


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Frontrunning: May 20

  • “May?” New Cold War May Emerge in Ukraine Crisis, Medvedev Says (BBG)
  • Wristslaps will be fast and furious: EU Commission charges HSBC, JPMorgan, Credit Agricole with rigging (Reuters)
  • Credit Suisse Rises as U.S. Guilty Plea Ends 3-Year Probe (BBG)
  • After Martial Law Declaration, Thailand Waits for General’s Next Move (WSJ)
  • China property slowdown spells trouble for Asia bonds (FT)
  • Russia Close to $400 Billion Gas Pipeline Deal in Pivot to China (BBG)
  • Dimon-by-the-Sea Shows London Banking’s Engine of Growth (BBG)
  • Modi Faces Greece-Sized Snag to Economic Revival (FT)
  • U.K. Inflation Accelerates on Airfare Surge (BBG)
  • Prosecutors Announce Charges Against Makers, Users of Blackshades Software (WSJ)
  • Prices rising faster than wages again, ONS to warn (Telegraph)
  • ECB Said to Weigh Fed-Style Meeting Schedule on Policy (BBG)


Overnight Media Digest


* Credit Suisse Group AG became the first financial institution in more than a decade to plead guilty to a crime Monday when the Swiss bank admitted it conspired to aid tax evasion and agreed to pay $2.6 billion to settle a long-running probe by the U.S. Justice Department.(http://ift.tt/1lYHjHz)

* Federal prosecutors in New York on Monday announced charges against the creators of software called Blackshades that hackers around the world allegedly used to hijack hundreds of thousands of computers, allowing them to spy on victims through computer webcams and steal financial information. (http://ift.tt/1jz0rgB)

* U.K.-based defense products maker Cobham PLC has reached a deal to buy Aeroflex Holding Corp, according to people familiar with the matter. Cobham has agreed to pay $10.50 a share in cash, said the people, or about $900 million. The price represents a 26 percent premium to where Aeroflex’s shares closed on Monday. (http://ift.tt/1lYHjHK)

* Activist investor William Ackman sent an open letter Monday to Allergan Inc’s board, claiming that the group failed in its duties when it rejected an unsolicited takeover bid from fellow pharmaceutical company Valeant Pharmaceuticals International Inc. (http://ift.tt/1lYHjav)

* Cisco Systems Inc unveiled two special-purpose desktop computers for videoconferencing, along with a new service enabling users of different devices and services to connect for online meetings. (http://ift.tt/1lYHjHM)

* Chipotle Mexican Grill Inc is asking customers not to bring guns into stores after gun-rights activists carried rifles in one of its restaurants, making it the latest big consumer name to be drawn into the debate over firearms. (http://ift.tt/1lYHjax)

* Billionaire Donald Bren’s Irvine Co has reached a deal to buy a 60-story Chicago tower for $850 million in what would be the city’s highest price ever paid a square foot for an office building. (http://ift.tt/1lYHjY3)



Europe banks are expected to face a clampdown on debt sales as regulators fear investors not aware of hazards of buying debt that is not protected by deposit guarantee schemes.

AstraZeneca Plc shareholders have been split on the company’s rejection of Pfizer’s final offer of 55 pounds a share, with some arguing that the management has betrayed its shareholders while others praising the board for believing in long-term prospects.

British insurer RSA Insurance Group Plc said on Monday it had reached agreement to sell its majority-owned Canadian brokerage business – Noraxis Capital Corp – to U.S. insurance brokerage Arthur J. Gallagher & Co for C$500 million ($460.60 million).

The London Stock Exchange Group Plc has emerged as the preferred bidder for asset management group Russell Investments according to people familiar with the discussions.

Mitie has won an eight-year contract to run immigration centres near Heathrow for the Home Office, making the FTSE-250 outsourcer responsible for a third of Ministry of Justice’s immigration estate.



* As part of a deal announced on Monday, Credit Suisse met the demands of federal prosecutors, agreeing to one count of conspiring to aid tax evasion in a scheme that “spanned decades.” Credit Suisse, which has a giant investment bank in New York and whose chief executive is an American, will also pay about $2.6 billion in penalties and hire an independent monitor for up to two years. (http://ift.tt/1jz0p8C)

* Opponents of the consolidation in the telecommunications industry – including on Capitol Hill – latched onto the AT&T Inc and DirecTV deal, arguing that such rapid merging in the markets for cable television, high-speed Internet and telephone service should lead regulators to hit the brakes on all such deals. But while both sides declared that the latest deal helped their cause, antitrust experts said the truth was more murky. (http://ift.tt/1jz0rgF)

* General Motors Co on Monday hired one of its former executives to manage public relations and help steer it through a safety crisis linked to 13 deaths. GM said that Tony Cervone, who spent a decade with the automaker before leaving in 2009 and who has worked with its current chief executive, Mary Barra, will join the company immediately as its senior vice president for global communications. (http://ift.tt/1lYHjY8)

* The Obama administration’s first transportation secretary is joining Meridiam, an investment concern focused on public infrastructure projects, the firm plans to announce on Tuesday. Meridiam is expected to say that it has hired the former cabinet official, Ray LaHood, as a senior adviser to the firm’s North American operations. (http://ift.tt/1jz0rgH)

* Target Corp’s former chief executive received $13 million in compensation in his last year at the company’s helm, down from $20 million the year before, according to regulatory documents filed on Monday. The company’s filings indicated that the significant reduction in Gregg Steinhafel’s pay package resulted from shareholders’ complaints that Steinhafel made too much money relative to the company’s performance. (http://ift.tt/1lYHjYe)




– China will embrace international cooperation in energy, with an improvement in supply capability and development in the downstream industries including pipeline construction, oil-gas storage and product sales to be expected, analysts said. The development follows the news that Russian President Vladimir Putin hopes to sign a multi-billion dollar gas agreement with China during a two-day visit that kicks off on Tuesday .

– The ongoing ownership reform of China’s state-owned enterprises (SOEs) should not serve as a means for SOEs to offload bad assets, but as a way to attract profitable investment from private capital, an editorial said.


– China is going to systematically push forward its capital market reform process to achieve the long-term effect of reform, said chief securities regulator Xiao Gang.

– China has moved forward on upgrading its “third board” over-the-counter market by implementing a trade settlement system.


– The Shanghai Shipping Insurance Association has been granted permission by the China Insurance Regulatory Commission (CIRC) to be treated as an industry association instead of an individual company.


– China’s army purchased more than 1,000 domestically manufactured Hongqi (Red Flag) H7 cars, following instructions issued by the military – approved by Xi Jinping and the Central Military Commission – in January that said the armed forces were required to buy domestic auto brands as part of the nationwide drive to cut waste.


– Shanghai will accelerate economic restructuring, deepen reforms and encourage innovation to sustain the city’s status as a leader in China’s growth and development, Shanghai Vice Mayor Tu Guangshao told a media briefing ahead of the Asian summit.


The Telegraph



Prices are rising faster than wages again, official figures could show on Tuesday, days after Mark Carney, the Bank of England governor, said that the cost of living crisis was over.



Sir Richard Lambert, who was asked to set up the Banking Standards Review Council (BSRC) by the chairmen of Britain’s biggest banks, said the body would be a champion for better banking standards in the UK, even though it would not have powers to punish banks or individuals.

The Guardian



Royal Bank of Scotland has handed its new finance director, Ewen Stevenson, almost 2 million pounds in shares on his first day in the job at the bailed out bank.



The Co-operative Group is facing further boardroom upheaval after the resignation of its longest-standing director, Ben Reid.

The Times



A proposal to run Heathrow 24 hours a day would inflict “untold misery on more than a million” people, mayor of London Boris Johnson said.



The long-awaited report into the collapse of HBOS has been delayed again, with officials now resigned to publication not taking place before next year at the earliest, more than six years after the bank’s costly demise.

Sky News



Politicians should leave the fate of corporate takeover bids to boards and shareholders, a leading City fund manager Neil Woodford said on Monday as he backed AstraZeneca’s rejection of Pfizer’s 69.3 billion pound offer.



A Dallas-based hedge fund boss has snapped up a stake in the struggling Co-operative Bank. Hayman Capital Management is understood to be one of a group of City and Wall Street investors which were assigned shares in the Co-op Bank as part of a 400 million pound fundraising.



Fly On The Wall 7:00 AM Market Snapshot


No major domestic economic reports scheduled today.



Abraxas Petroleum (AXAS) upgraded to Buy from Hold at Canaccord
Acxiom (ACXM) upgraded to Outperform from Market Perform at Wells Fargo
Carnival (CCL) upgraded to Equal Weight from Underweight at Morgan Stanley
DealerTrack (TRAK) upgraded to Outperform from Neutral at Macquarie
Devon Energy (DVN) upgraded to Overweight from Equalweight at Barclays
Dow Chemical (DOW) upgraded to Outperform from Market Perform at Wells Fargo
Enerplus (ERF) upgraded to Buy from Neutral at BofA/Merrill
Invesco (IVZ) upgraded to Overweight from Neutral at JPMorgan
Oil States (OIS) upgraded to Outperform from Sector Perform at RBC Capital
Seaspan (SSW) upgraded to Overweight from Equalweight at Barclays
Ultra Petroleum (UPL) upgraded to Equalweight from Underweight at Barclays


Anadarko (APC) downgraded to Equalweight from Overweight at Barclays
Campbell Soup (CPB) downgraded to Underperform from Neutral at Credit Suisse
DirecTV (DTV) downgraded to Equal Weight from Overweight at Morgan Stanley
J.C. Penney (JCP) downgraded to Underperform from Market Perform at Wells Fargo
LifeLock (LOCK) downgraded to Neutral from Buy at Goldman
Molycorp (MCP) downgraded to Underweight from Equal Weight at Morgan Stanley
Onex (ONEXF) downgraded to Sector Performer from Outperformer at CIBC
Questcor (QCOR) downgraded to Neutral from Buy at Mizuho
Ryanair (RYAAY) downgraded to In-Line from Outperform at Imperial Capital


Ally Financial (ALLY) initiated with a Buy at Citigroup
Ally Financial (ALLY) initiated with a Hold at Deutsche Bank
Ally Financial (ALLY) initiated with a Neutral at Goldman
Ally Financial (ALLY) initiated with an Outperform at Keefe Bruyette
Ally Financial (ALLY) initiated with an Overweight at Barclays
Ally Financial (ALLY) initiated with an Overweight at JPMorgan
Ally Financial (ALLY) initiated with an Overweight at Morgan Stanley
Aruba Networks (ARUN) initiated with an Outperform at Imperial Capital
CyrusOne (CONE) initiated with a Buy at UBS
Dynagas LNG (DLNG) initiated with an Outperform at Clarkson Capital
Dynagas LNG (DLNG) initiated with an Outperform at Clarkson Capital
GasLog Partners (GLOP) initiated with an Outperform at Clarkson Capital
Lombard Medical (EVAR) initiated with an Overweight at Barclays
Lukoil (LUKOY) initiated with an Outperform at Credit Suisse
Navient (NAVI) initiated with a Buy at Janney Capital
Netflix (NFLX) initiated with a Buy at Topeka
WABCO (WBC) initiated with a Hold at Stifel


U.S. AG Holder: Credit Suisse (CS) to pay $2.6B, admits ‘criminal wrongdoing’
EU says JPMorgan (JPM), Credit Agricole (CRARY) and HSBC (HSBC) may have breached antitrust rules
Merck (MRK), Endocyte (ECYT) withdrew CMA for vintafolide in Europe
Aeroflex (ARX) to be acquired by Cobham plc for approximately $1.46B
Sprint (S) to pay $7.5M to resolve Do-Not-Call investigation by FCC
Pfizer (PFE) confirmed its final proposal for AstraZeneca (AZN), comprising, for each AstraZeneca share, 1.747 shares in the combined entity and 2,476 pence in cash, representing an indicative value of GBP55.
Ophthotech (OPHT) entered into an ex-U.S. licensing and commercialization agreement with Novartis (NVS) for Ophthotech’s lead product candidate, Fovista
Clovis Oncology (CLVS) said the FDA granted Breakthrough Therapy designation for CO-1686


Companies that beat consensus earnings expectations last night and today include:
Home Depot (HD), E-House (EJ), Perfect World (PWRD), NeoPhotonics (NPTN)

Companies that missed consensus earnings expectations include:
Staples (SPLS), Donaldson (DCI), Phototronics (PLAB), CUI Global (CUI), Paragon Shipping (PRGN), Fibrocell Science (FCSC), Urban Outfitters (URBN)

Companies that matched consensus earnings expectations include:
h.h. gregg (HGG), Stage Stores (SSI), Tarena (TEDU)


JPMorgan (JPM) CEO Dimon says he’s ‘going nowhere,’ WSJ reports
Microsoft (MSFT) to expand Surface lineup as tablet sales slow, WSJ reports
Pfizer (PFE) may be holding out hope of rekindling AstraZeneca (AZN) deal before the May 26 deadline, FT reports
Sources say Pfizer’s (PFE) $117B AstraZeneca (AZN) pursuit likely to fail, Bloomberg says
Lockheed (LMT), Boeing (BA) venture says launch expenses less than thought, Reuters reports
Commerzbank (CRZBD) in talks to sell some assets to JPMorgan (JPM), Lone Star, WSJ reports
Intercept (ICPT) knew of abnormal cholesterol levels, The Street says
Source says BuzzFeed considering IPO, secondary share sale, Fortune reports


AcelRx (ACRX) files to sell 3.07M shares of common stock for holders
Chimerix (CMRX) announces offering of 6.2M shares of common stock
Graphic Packaging (GPK) offers 43.65M shares of common stock for holders
HCA Holdings (HCA) files to sell 15M shares of common stock for holders
Meridian Interstate Bancorp (EBSB) announces common stock offering
Orbitz (OWW) announces secondary common stock offering by holder
Physicians Realty Trust (DOC) files to sell 9.5M common shares of beneficial interest

via Zero Hedge http://ift.tt/1jz0pFr Tyler Durden

China “Sanctions” US, Bans Use Of Windows 8 On Government Computers

Considering the epic production and sales flop that Windows 8 has been, one probably does not need an actual sales ban from preventing anyone sane from using it let alone buying it, however in yet another symbolic step, banning its government employees from using the latest Windows operating system is precisely what China did in retaliation to yesterday’s DOJ announcement it was charging five PLA members with hacking offenses against the US. According to Reuters, this latest blow to Microsoft came when the Central Government Procurement Center issued the ban as part of a notice on the use of energy-saving products. So Windows 8 lead to global warming? Who knew…

The implication is clear: if the US charges its hackers, China will no longer condone such porous proxies of NSA activity as Internet routers and, of course, Windows operating systems, which as has been documented in the past, is a stroll in the park for NSA infiltration attempts.

More from Reuters:

The official Xinhua news agency said the ban was to ensure computer security after Microsoft ended support for its Windows XP operating system, which was widely used in China.


Neither the government nor Xinhua elaborated on how the ban supported the use of energy-saving products, or how it ensured security.


China has long been a troublesome market for Microsoft. Former CEO Steve Ballmer reportedly told employees in 2011 that, because of piracy, Microsoft earned less revenue in China than in the Netherlands even though computer sales matched those of the U.S. Microsoft declined to comment.


Last month, Microsoft ended support for the 13-year-old XP to encourage the adoption of newer, more secure versions of Windows. This has potentially left XP users vulnerable to viruses and hacking.


China’s decision to ban Windows 8 from public procurement hampers Microsoft’s push of the OS to replace XP, which makes up 50 percent of China’s desktop market,” said data firm Canalys.

And while this escalation in Chinese “sanctions” against the US may lead to a modest topline miss for MSFT, one company everyone should be watching is Cisco, which in late 2013 saw its China sales crater when the anger at the NSA was most acute. Now that the animosity between the US and China over cyberhacking has been rekindled, watch for the government to promptly block yet another quarter of sales growth for the switching giant, whose CEO unsucessfully pleaded for Obama to tone down NSA tensions over the weekend, and which should preannounce a weak quarter shortly.

via Zero Hedge http://ift.tt/1jm0bjE Tyler Durden

Futures Taking Their Time Before The “Turbo Tuesday” Ramp

Not much going on tonight, except for the non-coupy martial law announcement in Thailand where the government is said to still be in charge of everything except for martial law decisions taken by the army of course, which in turn is in charge of everything else apparently including the central bank which intervened so extensively in the market, the Baht was barely changed at one point. There was also news of explosions and clashes in Benghazi but as everyone knows, what difference does Libya make at this, or any other, point. Additionally overnight there were reports that the cities of Slavyansk and Kramatorsk in east Ukraine were being shelled by the Ukraine army but that too barely registered as bullish for the USDJPY (which in now traditional fashion ramped during the US day session then sold off during Asia hours).

Since there are no major economic announcements in the US today, one day ahead of the FOMC minutes due tomorrow, markets will be focusing on headlines out of China where Putin has started his 2-day visit and is expected to announce some groundbreaking deals and alliances with China shortly. Additionally, overnight Russian Prime Minister Medvedev said that “Russia is being pulled into a new Cold War with the U.S. and its allies, who are using economic warfare reminiscent of the Soviet Union under Brezhnev, blaming Obama, for a lack of political tact.”

Also keep an eye on peripheral European bonds all of which have seen another day of significant weakening even as the US 10 Year is back down to 2.53% after briefly threatening yesterday to be sold off.

But don’t forget: only two things really matter today:

  1. there is a ~$2.5 billion POMO, and
  2. it’s a Tuesday.

Which as every E*trade baby knows is the most bullish combination for centrally planned markets anywhere. For now the USDJPY and the spoos are slow to recall these two facts but give them time – after all one needs “confidence” that the successful manipulation of markets will continue come Polar Vortex or El Nino.


Bulletin headline summary from RanSquawk and Bloomberg

  • EUR underperformed GBP as projected interest rate paths between UK and EU rates continued to diverge, though today’s UK CPI (1.8% vs Exp. 1.7%) was skewed by transitory effects and failed to lift GBP/USD even higher.
  • RBA minutes struck a dovish tone as the bank is to remain accommodative for the time being, which consequently sent AUD/USD below the 0.9300 level and the 50DMA line.
  • Treasuries steady, 10Y yields holding near YTD lows, curve spreads little changed after 5/10 yesterday reached steepest in a month. NY Fed’s Dudley speaks on economy and monetary policy at 1pm ET today; no eco data.
  • Russia is being pulled into a new Cold War with the U.S. and its allies, who are using economic warfare reminiscent of the Soviet Union under Brezhnev, Russian  Prime Minister Medvedev said, blaming Obama, his one-time partner in a reset of relations, for a lack of “political tact”
  • Putin starts a two-day visit to China today, seeking to complete an agreement on natural gas supplies to the world’s second-largest economy, held up for more than a decade because of a debate over the price
  • Thailand’s army imposed martial law nationwide after months of political turmoil that brought down an elected leader and tipped the economy into a contraction
  • JPMorgan Chase & Co., HSBC Holdings Plc and Credit Agricole SA were accused today by the EU’s antitrust arm of colluding to manipulate interbank lending rates
  • From centuries-old pubs to Mayfair clubs to the halls of Parliament, London is abuzz with talk of escalating property values, foreign buyers with piles of cash and half-built garages selling for vast sums
  • Sovereign yields higher. Nikkei +0.5%, Shanghai +0.2%. European equity markets decline, U.S. stock futures decline. WTI crude and gold little changed, copper higher

US Event Calendar

  • No major economic reports
  • TBA: Bank of Japan monetary policy statement
  • 12:30pm: Fed’s Plosser speaks in Washington
  • 1:00pm: Fed’s Dudley speaks in New York Supply
  • 11:00am POMO: Fed to purchase $2.25b-$2.75b notes in 2021-2024 sector

EU & UK Headlines

Peripheral bond yield spreads gradually erased initial yield spread tightening to trade broadly wider, as softer stocks saw Bunds come off the worst levels of the session. In terms of macroeconomic releases, the focus was on the UK based inflation data, which as noted by the ONS was boosted by transitory effects including Easter and air fares. Looking elsewhere, the price action across EU money market rates continued to indicate that markets have now more or less priced in a small rate cut, which when combined with a lack of commitment regarding the implementation of QE or negative rates, resulted in only modest flattening of the Euribor curve.


Stocks are seen broadly lower in Europe, as less than impressive earnings report by Vodafone (-3.91%) weighed on telecommunications sector, while the ongoing price pressure on iron ore futures meant that basic materials was the second worst performing index. Of note, HSBC (-0.73%) and Credit Agricole (-0.54%) shares came under pressure this morning after the EU Commission charged the two and also JP Morgan of rate rigging.


GBP/USD failed to benefit from higher than expected inflation related data and instead pared part of early gains after the ONS said the increase inflation was due to transitory effects including Easter and air fares, thus boosting the figure. Nevertheless, EUR underperformed GBP as the outlook between the monetary policy outlooks between the ECB and the BoE continued to diverge.

Of note, AUD remains broadly lower, with AUD/USD below the 50DMA line, after the RBA minutes released overnight noted that inflation forecasts are consistent with target for next two years, adding that markets expect no change to the cash rate in 2015. The outlook for the pair remains bearish, amid decline as capital inflows and weakness in iron-ore prices.


The release of the latest World Gold Council demand report which revealed that gold demand in India and China has fallen in Q1, failed to result in a sustained pressure on gold, as report also noted that demand in India will likely recover as import restrictions are relaxed. Prices were also supported by the uncertainty surrounding looking elections in Ukraine and FOMC minutes tomorrow (Of note, London GOFO fixes showed first time all months have been positive since early April). Elsewhere, iron ore futures on the DCE touched CNY 695 (USD 110) overnight, a record low for the contract, on oversupply concerns in China.

* * *

DB’s Andy Reid concludes this overnight summary

As we look across Asia, gains in cyclical and tech stocks from the US session has carried through to overnight markets. Gains are being paced by the Nikkei (+0.8%) and Hang Seng (+0.8%). There are pockets of weakness though, for example in Thailand, where the Baht (-0.05%) and Thai equities (-0.9%) are both weaker after the Thai military declared marshall law nationwide. The Thai army chief has said that the move is not a coup but is part of an attempt to restore law and order with the political landscape still at a gridlock. Thai sovereign CDS is quoted about 6bp wider today at around 130bp.

Elsewhere in the Asia Pacific region, a drop in iron ore prices below $100/mt and continuing evidence of a rapidly cooling Chinese housing market has been shrugged off by markets with shares in Australian miners Rio Tinto and BHP largely unchanged today. Speaking of Australia, S&P’s sovereign analyst warned late yesterday that he was “looking for a narrowing of budget deficits as evidence of ongoing commitment to running finances prudently” and the importance of that to Australia retaining its AAA rating. This also has been largely shrugged off by investors – the Australian 10yr yield is up a couple of basis points today though that is largely as a result of the US moves. The RBA’s May meeting minutes contained little in the way of surprises and the central bank reiterated that policy will remain accommodative for some time to offset slower export growth, mining spend and fiscal consolidation. AUDUSD is down 0.2% today, at around 0.930.

Yesterday could be summed up by stronger equities, weaker yields and an especially weak European periphery. In Europe there was decompression between core and non-core with Spanish and Italian yields up more than 6bp, compared to Bunds which were up around 2.5bp in yield. EM sovereign cash had a stronger session with bonds 2-3bp tighter in general in both EMEA and LATAM. Indeed, EM has a had a fairly strong run this month with the MSCI index up for three weeks in almost uninterrupted fashion. During this period it has added around 4.3%. Sentiment in EM yesterday may have been helped by Russia’s Putin who reportedly ordered Russian troops near the Ukrainian border back to base, six days ahead of Ukrainian presidential elections. Putin told forces in the Rostov, Belgorod and Bryansk regions to return to their bases after completing exercises but the White House and NATO officials said they saw no immediate evidence of a withdrawal.

Ahead of next month’s ECB, Bloomberg’s monthly economist survey has indicated that 90% of respondents expect the ECB to ease policy at the June meeting. This probably doesn’t come as much of a surprise given the degree of pre-commitment offered by Draghi and various other ECB officials over the past week or so. This includes the ECB’s Mersch, one of the more hawkish members of the ECB executive board, who said yesterday that the likelihood of the governing council acting in the next meeting has grown substantially. He also said that the governing council is unanimous in its willingness to deploy conventional and unconventional measures to counter low inflation. Of the 47 economists who predicted an easing, a little less than two-third thought that the policy easing would include a cut in the repo and deposit rate. A much lower percent of respondents (8%) thought that the ECB will introduce an asset purchase program or extend its LTRO program.

Turning to the day ahead, there is not a lot on the calendar outside of a number of central bank speakers. The ECB’s Barnier and Nouy speak in Frankfurt today. The NY Fed’s Bill Dudley and Philly Fed’s Plosser will be speaking about the economy. Dudley has recently commented on the Fed’s exit strategy with regards to rate hikes and portfolio wind downs so his speech will be of interest. In terms of data, UK CPI and German PPI are the major releases today.

via Zero Hedge http://ift.tt/1oathn6 Tyler Durden

Jesse Walker on Multimedia from WWII to the Psychedelic ’60s

How much autonomy does a video
game player have? Unlike a viewer watching a movie or TV show, the
gamer makes decisions with consequences for the unfolding story. He
controls a character, and he determines how that figure moves
through a virtual space. And yet he does this all within the
parameters set out by the game’s designers, which constrain his
choices and often guide him, with a heavy or a light hand, to
predetermined outcomes. There are new freedoms here, but there are
new forms of manipulation too, and they interact in complicated,
ever-shifting ways. Jesse Walker reviews The Democratic
, a smart and fascinating new history that explores
the development of such freedoms and manipulations as our
multimedia world blossomed.

View this article.

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Brickbat: You Will Be Assimilated

Hall monitors at Hinsdale Central High
School in Illinois stopped Chris Borg when they saw he was wearing
a shirt with the outline of an AK-47. School officials then ordered
Borg to turn the shirt inside out, put on another shirt or
be suspended
for the day
. Borg chose suspension. Borg says they told him the
shirt violated a section of the dress code that bans clothing that
is unsafe or disruptive.

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