Europe’s Stoxx 600 turned negative on Tuesday after Bloomberg published a document showing the Italian government’s projected budget deficit for 2019 is even larger than the Italian Treasury had suggested last week, putting Italy’s populist leaders on the path to anotheer destabilizing showdown with Brussels.
Italy is now projecting a budget deficit equivalent to 2.5% of GDP, larger than the 2.3%-2.4% from projections released last week, and nearly 50 basis points above the agreed-upon 2.04% target from a peace accord with Brussels reached late last year. The leaked document, cited by Bloomberg, affirmed that the government anticipates GDP growth to slide to just 0.1%, down from 1% in prior forecasts.
Italian bond yields climbed on the headline…
…while Italian stocks dragged the broader European market lower.
We now await a reaction from Brussels, which we imagine will have something to say given that the Italian government has now been exposed for lying to the European Commission.
via ZeroHedge News http://bit.ly/2uUDlej Tyler Durden
Elijah Shaw came to Nashville in the 1990s to study music. At first, that meant spending a lot of time on the road. “The first decade of my career, [I was] traveling all over the place and interacting with major record labels and sort of going where ever work would take me,” he says.
Eventually, Shaw built The Toy Box, a soundproofed home studio located in his detached garage. Being able to work at home, he says, allowed him the opportunity to raise his daughter while still tapping into one of the world’s best music scenes, bringing stability to an unpredictable business.
“Nashville is one of the few places remaining in the world where some of the very best musicians get together face to face to make music,” says Shaw, who has worked with recording artists ranging from Jack White to Wilco to Adele. “That’s why I wanted to be here and why I wanted to create a home studio.”
But for the last four years, the city of Nashville has been trying to shut that studio down.
In August 2015, Shaw received a letter from the Department of Codes and Building Inspection informing him that his studio was an unpermitted home business and was therefore illegal. Shaw was given two weeks to cease and desist his recording operations or else face daily fines of $50 and potentially be taken to court.
“My heart just dropped completely,” Shaw says. “For the next week I couldn’t even sleep, like what am I going to do? This is my entire life, this is my everything.”
After the letter came a phone call from a code enforcement officer, followed by a home inspection, and then a mounting series of demands from officials. Shaw was told to remove recording equipment from his house, strip his prices and address off his business’ website, and take videos of his studio recordings off his YouTube channel. Failure to comply would mean fines and possibly even jail time.
Shaw had violated of an obscure provision in Nashville’s zoning code that bans home businesses from serving clients on site. The code effectively outlaws his studio and thousands of others like it in a city made famous for its music. As written, it may even prevent home studio owners from inviting fellow musicians into their homes.
He and another local entrepreneur are now suing the city with the help of a libertarian law firm, the Institute for Justice. Their suit claims that Nashville’s home business ban is an unconstitutional restriction on the right to earn a living. More than that, the suit is an attempt to protect Nashville’s storied music scene from outdated zoning codes that segregate cities into commercial and residential categories while criminalizing the sort of creative spontaneity from which great music is born.
Could it be that you are getting a better deal from big technology companies than you realize? George Mason University economist Tyler Cowen thinks so, and he has penned a new book to convince you that you should love big businesses as much as he does.
It’s called Big Business: A Love Letter to An American Anti-Hero, and it indeed sings the praises of today’s bêtes noires. In true Cowenesque fashion, the book starts out with a markedly contrarian premise that by the last page seems so evident that you wonder why it first felt outlandish at all. Even the most dogged big business critic may feel just a little tenderer towards today’s titans by the end (whether they want to admit it or not).
The simple fact is this: most of what we love and need—”ships, trains and cars; electricity, lighting, and heating; most of our food supply; most of our lifesaving pharmaceuticals; clothes for our children; telephones and smartphones; the books we love to read; the ability to access the world’s information”—comes from businesses, and usually big businesses at that. Andrea O’Sullivan (who works for Cowen at the Mercatus Center) explains the book’s thesis.
Quadriga’s bankruptcy was reportedly approved today by Nova Scotia Supreme Court Justice Michael Wood, and follows the court monitor Ernst & Young’s (EY) recommendation that it should be declared bankrupt earlier this month.
EY’s legal team then argued that the ongoing restructuring process for QuadrigaCX under the Companies’ Creditors Arrangement Act (CCAA) should shift to an alternative process under the Bankruptcy and Insolvency Act (BIA).
The ruling now grants EY enhanced investigative powers as a trustee under the BIA, which means the company can require production of documents and testimony from witnesses.
Today, Wood also granted a so-called asset preservation order from EY, which extends to all assets held by Jennifer Robertson – the wife of Quadriga’s late co-founder Gerald Cotten – and the Cotten estate. The order prohibits Robertson from selling, removing and transferring any assets.
As previously reported, Quadriga filed for creditor protection when – following Cotten’s death – it lost access to its cold wallets and corresponding keys, that ostensibly held the assets owed to various clients. Currently, the exchange reportedly owes more than $195 million to over 115,000 customers.
In late March, Quadriga’s legal representatives – law firms Miller Thomson and Cox & Palmer – formed an Official Committee of Affected Users of the exchange. The committee is set to help the law firms represent all affected users in the court proceedings against QuadrigaCX.
via ZeroHedge News http://bit.ly/2I9BWZW Tyler Durden
Offering yet another lesson in how raising the minimum wage can destroy jobs, particularly for the most poorly compensated workers whom activists had intended to help, the Wall Street Journal reported on Tuesday that Wal-Mart is deploying robots to carry out mundane tasks like mopping its floors and tracking inventory as it seeks to cut down on labor costs after raising wages last year, while also expanding into new services like grocery delivery.
Wal-Mart, which is the largest employer in the US, said at least 300 stores will introduce machines that scan shelves for out-of-stock products. Meanwhile, so-called “autonomous floor scrubbers” will be deployed in 1,500 stores, and conveyor belts that automatically scan and sort products as they are loaded off of trucks will more than double to 1,200. Another 900 stores will install 16-foot-high towers that will allow customers to pick up their online grocery orders without interacting with humans.
One of Wal-Mart’s automated shelf scanners
Of course, Wal-Mart tried to portray the robots not as job killing machines, but as tools to help free up employees to do other things like pack groceries for its delivery service. But since grocery delivery is still a business in search of a sustainable business model, as WSJ pointed out last month, these tasks will likely soon be automated, too.
The company said the addition of a single machine can cut a few hours a day of work previously done by a human, or allow Walmart to allocate fewer people to complete a task, a large saving when spread around 4,600 U.S. stores. Executives said they are focused on giving workers more time to do other tasks, and on hiring in growing areas like e-commerce.
Instead, Walmart is spending to battle Amazon.com Inc. and serve more shoppers buying online. Walmart has hired around 40,000 store workers to pick groceries from shelves to fulfill online orders. The company is also raising wages, adding worker training, and buying e-commerce startups.
Store workers spend two to three hours a day driving a floor scrubber through a store using the manual machines, said a company spokesman last year. The automatic conveyor belts cut the number of workers needed to unload trucks by half, from around eight to four workers, said executives at a company presentation last June.
“With automation we are able to take away some of the tasks that associates don’t enjoy doing,” said Mark Propes, senior director of central operations for Walmart US. “At the same time we continue to open up new jobs in other things in the store.”
Brain Co., which makes the software that powers Wal-Mart’s floor scrubbers, described a workplace where machines and humans would work in harmony as “operational partners.” And in a tight labor market, it’s difficult for employers to fill some of these low wage positions.
“It’s very hard for employers to get the workforce they need,” Mr. Duffy said. “None of the customers we’re working with are using our machines to reduce their labor costs; they’re using them to allow their teams, their janitorial teams, to perform higher-value tasks.”
Retailers and other companies that hire large numbers of low-skilled hourly workers are increasingly looking to automation as they face higher labor costs and aim to improve retention amid the lowest unemployment in decades. Target Corp. added machines to count cash to backrooms of stores last year, following a similar move by Walmart.
Last week Target said it has raised starting wages for store workers to $13 an hour and has previously said it will raise starting wages to $15 next year. Last month, Costco WholesaleCorp. raised starting wages for U.S. and Canadian store workers to $15. Amazon did the same for U.S. workers last year.
Walmart raised starting wages for store workers to $11 last year. Executives said at a recent investor conference that Walmart is keeping wages competitive by store and market.
Now if they could only teach the robots to hand out stickers and greet customers at the door…
via ZeroHedge News http://bit.ly/2D5wwey Tyler Durden
The global equity rally stumbled for the second day, and risked running out of steam ahead of Wednesday’s action-packed event bonanza, even as Asian and European shares gained while US equity futures pared losses as investors appeared to shrug off threats from President Trump for new tariffs on goods produced in the EU in retaliation for Airbus subsidies. Treasuries were unchanged, as the dollar drifted lower.
Amid a generally muted tone, Asia rose to an 8-month high overnight with European shares initially opening flat after the office of the U.S. Trade Representative sent its proposals to the World Trade Organisation, saying the EU had provided $11 billion worth subsidies to Airbus; however the Stoxx Europe 600 inched higher in morning trade, up 0.1%, with the banking sector rising before the ECB meeting Wednesday, overshadowing losses in the tech sector, led lower by SAP.
In notable moves, SAP fell 2.5% after being downgraded to hold from buy at HSBC, cut to neutral from buy at UBS ahead of the software company’s 1Q results later this month. Airbus shares dropped as much as 2.5 percent in early deals, with many of its key suppliers lost between 0.7 percent and 1.2 percent, though much of the early losses were then recovered.
While most Asian markets were higher, Chinese stocks dipped modestly, down 0.2%, but it was the ongoing surge in Chinese 10-year sovereign yields that continues to grab attention, with the paper rising another 4bps to 3.294%, the highest level of the year following a torrid surge last week, when yields jumped 19bps, the most since November 2013.
Aberdeen Standard Investment’s head of global multi-asset strategy, Andrew Milligan, told Reuters that “signals like this just remind people… that the strategic rivalry between the U.S. and other countries is serious and is not going to go away.”
Ahead of “Super Wednesday”, the other focus was set to be the International Monetary Fund’s half-yearly forecasts, which will reinforce the message that the global economy continues to slow down for a variety of reasons, which in turn will likely push stocks even higher. According to Reuters, the Fund is expected to make quite a sizable cut to its growth number and Germany’s benchmark 10-year bond yield stayed just below zero percent on bets interest rates are set to stay extremely low globally.
Finally, the reason why markets may be subdued today is because all hell is set to break loose tomorrow when the EU emergency Brexit summit, ECB meeting, US CPI report and FOMC minutes all take place.
In currencies, Sterling was largely unchanged, after earlier jumping on speculation Germany would accept a 5-year time limit on the Irish backstop; the jump quickly fizzled after a German government spokesman denied the report. Additionally, Prime Minister Theresa May is set to meet Germany’s Angela Merkel and France’s Emmanuel Macron to ask for another Brexit delay. Elsewhere, the The Australian and Canadian dollars and Norwegian crown and Russian rouble also rose as a surge in oil prices to five-month highs lifted most other commodity-linked currencies too, as the dollar continued its 2-day slide.
In commodities, Brent rose as high as $71.34 a barrel, the highest since November, while WTI crude also hit a November 2018 high of $64.77 and was up 22 cents at $64.62. Oil prices are up more than 40 percent this year, jumping on expectations that global supplies will tighten due to fighting in Libya, OPEC-led cuts and U.S. sanctions against Iran and Venezuela.
Levi Strauss is due to release earnings after its IPO last month. Economic data include JOLTS job openings, small business optimism.
Market Snapshot
S&P 500 futures down 0.1% to 2,894.75
STOXX Europe 600 up 0.09% to 387.85
MXAP up 0.3% to 163.34
MXAPJ up 0.4% to 543.47
Nikkei up 0.2% to 21,802.59
Topix down 0.09% to 1,618.76
Hang Seng Index up 0.3% to 30,157.49
Shanghai Composite down 0.2% to 3,239.66
Sensex up 0.3% to 38,800.85
Australia S&P/ASX 200 up 0.01% to 6,221.82
Kospi up 0.1% to 2,213.56
German 10Y yield fell 0.9 bps to -0.002%
Euro up 0.08% to $1.1272
Brent Futures up 0.2% to $71.26/bbl
Italian 10Y yield rose 0.8 bps to 2.132%
Spanish 10Y yield fell 0.6 bps to 1.081%
Brent Futures up 0.2% to $71.26/bbl
Gold spot up 0.3% to $1,301.75
U.S. Dollar Index down 0.1% to 96.95
Top Overnight News from RanSquawk
The EU is preparing retaliatory tariffs against the U.S. over subsidies to Boeing, significantly escalating transatlantic trade tensions hours after Washington vowed to hit the EU with duties over its support for Airbus SE. Trump’s administration on Monday said it would impose tariffs on $11 billion in imports from the EU because of the European aid
The EU and China managed to agree on a joint statement for Tuesday’s summit in Brussels, papering over divisions on trade in a bid to present a common front to Trump, EU officials said
The slump in the Chinese car market showed no signs of easing, with retail sales of sedans, sport utility vehicles, minivans and multipurpose vehicles dropping 12 percent to 1.78 million units in March, the China Passenger Car Association said Tuesday. That follows an 18.5 percent drop in February and 4 percent decline in January
Turkey’s ruling party will demand a rerun of last month’s local election for the mayor’s seat in Istanbul after tallies showed it lost the vote, according to Recep Ozel, a ruling party official assigned to the election board. The election looked like it had stripped the city from President Recep Tayyip Erdogan and parties affiliated to him for the first time in 25 years
Societe Generale SA said it plans to cut about 1,600 jobs after a slump in trading revenue pushed Chief Executive Officer Frederic Oudea to intensify efforts to boost profit at the investment-banking unit
Asian equity markets eventually turned mostly positive on what was a predominantly cautious session following a mixed performance on Wall St amid tentativeness ahead of upcoming earnings season and this week’s central bank activity including FOMC Minutes and ECB policy meeting. ASX 200 (U/C) and Nikkei 225 (+0.2%) were indecisive but with losses in Australia stemmed by strength in the energy sector as the escalating conflict in Libya lifted oil prices, while Tokyo sentiment mirrored a choppy currency. However, the region was not without its success stories as Crown Resorts surged over 20% after it announced it was in discussions regarding a takeover approach by Wynn Resorts and with Sony higher by more than 7% on news Third Point was building an activist stake in the Co. and called for a review on ownership of several divisions. Hang Seng (+0.3%) and Shanghai Comp. (+0.1%) were also tepid amid a lack of any firm drivers and as trade-related news quietened down, while the PBoC also continued to refrain from open market operations. Finally, 10yr JGBs were lacklustre amid an indecisive risk tone and as participants awaited a 5yr auction, as well as Saudi Aramco’s USD 10bln bond offering which was more than 7x oversubscribed. Prices later recovered off their lows as the 5yr JGB auction later proved to better than previous with an improvement seen across most metrics including a higher b/c and accepted prices.
Top Asian News
China Investor Loves This Tiny Maker of Floating Flamingos
Malaysia’s Felda Is Said to Seek $1.5 Billion Government Rescue
Japan to Cut Japan Post Stake to >1/3 in Sale This Year: Nikkei
Tumbling China Bonds May Soon Look Good to Foreign Investors
Choppy trade for European equities thus far [EuroStoxx 50 +0.2%] following a cautious Asia-Pac session where China was tepid amid the lack of any firm drivers ahead of tomorrow’s risk-packed session. Analysts at HSBC believe that the Chinese economy has bottomed, and growth will pick-up in the coming months as the private sector feels the effects from corporate tax cuts. Over in Europe, stocks nursed some of the losses seen at the open after jitters from the US’ release of prelim tariffs on USD 11bln of EU products [Full list available on the headline feed] somewhat waned after sources noted that the legal actions taken against Airbus (-1.5%) subsidies are “greatly exaggerated”, and the EU remains open to dialogue with the US. Furthermore, upside in equities was initially exacerbated amid reports that German Chancellor Merkel is reportedly willing to put a 5yr time limit on the Northern Irish backstop, although equities shed some gains after this was dismissed, but remain in positive territory. Sectors are relatively mixed with no clear outperformer or laggard. In terms of individual stocks, Swiss heavyweight Novartis’ (-9.8% unadj.) Alcon unit (+5.2%) began its first trading day on the front foot and opened above the CHF 46.50-53.50 indicative range at CHF 55.00. Elsewhere, SAP (-2.1%) fell to the foot of the DAX in light of downgrades at HSBC and UBS. Finally, Italy’s Prysmian (-3.9%) extended on losses seen at the open following further failed commission tests.
Top European News
U.K. Minister Sees ‘Common Ground’ With Labour: Brexit Update
Debenhams Lenders Poised for Control as Ashley Falls Short
Telenor Takes on Telia in Nordics With $1.7 Billion DNA Deal
Porsche Bets on 911 Demand to Rally Sales to Record After 1Q Dip
In currencies, Sterling leapt towards the top of the G10 table amidst reports that German Chancellor Merkel may be open to a fixed backstop timeframe (5 years touted), which could appease some of those unwilling to back the WA, according to a Brexiteer. Cable cleared the 55 DMA (1.3096) and 1.3100 handle on its way to 1.3121 in response, while Eur/Gbp retreated to 0.8595 from 0.8627 at one stage before a denial by the German Government. Looking ahead, UK PM May’s is in Berlin to see her German counterpart and has a subsequent meeting with French President Macron before Wednesday’s emergency EU Summit. Meanwhile, talks between Tory Cabinet members and the Labour party are ongoing to try and strike a deal, and interim updates remain mixed.
AUD/NZD – The Aussie has extended gains to 0.7150 vs its US counterpart and 1.0600 against the Kiwi as commodities continue to rally and overnight data in the form of housing finance confounded expectations to the upside. Aud/Usd is now looking at bullish chart levels including the 100 DMA and a 50% Fib at 0.7142 and 0.7149 respectively to maintain momentum on a closing basis, with decent if not insurmountable option expiries between 0.7150-55 (circa 770 mn) also on the radar. Meanwhile, Nzd/Usd is trying to tag along and trying to breach 0.6750 ahead of offers said to be sitting at 0.6760.
JPY – Usd/Jpy has drifted down within a 111.57-24 range and into a relatively heavy expiry zone, as 1.8 bn runs off from 111.20-25 vs 1.7 bn at 111.35-40, with the Yen seeing some safe-haven demand due to renewed US/EU tit-for-tat tariff posturing. Chart-wise, 111.25 also represents the 10 DMA, while resistance ahead of the 112.00 big figure comes via a daily formation around 110.78.
EUR – The single currency has consolidated yesterday’s clearance of 1.1250 vs the Dollar and is eyeing 1.1280 as the DXY slips a bit further below 97.000 to test support at 96.806 amidst broad declines in Usd/major pairings. However, a thick cluster of option expiries may drag Eur/Usd back down given 5.8 bn rolling off between 1.1245-75, not to mention a further 3.1 bn lower down.
CAD/NOK – Both benefiting from the ongoing strength in oil prices, and the latter to the extent that a knee-jerk spike in Eur/Nok in wake of weak Norwegian GDP data has already been reversed, with the cross currently straddling 9.6200 vs a high just shy of 9.6500. Meanwhile, the Loonie is pivoting 1.3300 vs its US counterpart and just eclipsed its previous April high.
EM – More thrills and spills for the Lira, as an initial rebound made on a reduced recount in Istanbul was thwarted by another rejection of the electoral board’s decision by the AKP that is insisting on a full election rerun. Usd/Try back up near 5.6700 vs 5.6425 and 5.6949 at the extremes.
In commodities, another day of gains in the energy complex with WTI and Brent futures trading in proximity to USD 64.50/bbl and USD 71.00/bbl respectively; although the complex is trading towards the bottom of the days range. Developments in Libya remain a key factor in the upside seen recently with analysts at TD noting that “military tensions in Tripoli, Iranian sanctions and difficulties in Venezuela may cause deficits as OPEC+ is reducing supply and US shale activity is flattening — USD 68/bbl WTI in the cards”. That said, analysts at Goldman Sachs, due to lower projected inventories, expect further backwardation and modest upside in oil prices whilst forecasting the WTI/Brent spread to tighten to USD 4.50/bbl from Q4 2019 onwards. GS also raised its Q2 2019 Brent forecast to USD 72.50/bbl (Prev. USD 65.00/bbl) and maintained its USD 60.00/bbl 2020 forecast. Meanwhile, Russian Energy Minister Novak stated that there is no need to extend the OPEC+ output deal if the market is forecast to be balanced by H2, which his Saudi counterpart previously said was only 70-80mln barrel away. Elsewhere, metals are benefitting from the recent pullback in the Buck, with gold also profiting from recent flows into the yellow metal ahead of tomorrow’s risk-filled day. Copper gained amid continued strength in Chinese commodity prices in which Dalian iron ore futures gained for a 7th consecutive session amid tightening supply. Finally, Platinum caught a bid as markets speculate the impact of labour strikes in South Africa, which saw the metal break through key resistance levels whilst also triggering CTA short covering, according to TD.
US Event Calendar
6am: NFIB Small Business Optimism, est. 102, prior 101.7
10am: JOLTS Job Openings, est. 7,550, prior 7,581
DB’s Jim reid concludes the overnight wrap
I know that all parents think their children are special and highly gifted but I have to tell you that I genuinely think that one of my twins – 19 month old Jamie – is showing serious skills that already could mark him down as a future professional footballer. I’ve asked a few people who have seen him perform and they agree that they’ve never seen someone so proficient at his age. Yes, Jamie is going through a phase at the moment that whenever he doesn’t get his own way he launches into the most theatrical dive and bursts into tears. He then rolls about all over the floor and demands action. At times I swear he’s waving an imaginary card at the referee (usually mum). All that’s left is to try to teach him how to kick a ball and the family can retire off his 2035 Premier League contract. On that good luck to all those fans of teams in the Champions League quarter-finals over the next couple of evenings… unless of course you are a Porto fan where I instead wish you all the bad luck in the world (but please still vote for us in II).
In footballing terms if tomorrow is the Champions League of bumper days for markets, yesterday was like watching a lethargic pub team training session as Easter holidays seemed to have started in earnest. News flow has livened up overnight though as the US Trade Representative office has released a list of EU goods which will be subjected to additional tariffs if the EU continues to provide subsidies to Airbus. In the accompanying statement, the USTR office cited the WTO’s finding that the aid to Airbus has “repeatedly” caused “adverse effects to the United States.” The threatened tariffs are on some $11bn of imports from the EU and will be implemented only after the WTO give the final go-ahead this summer. The Trump administration hasn’t always trusted the WTO on these matters so its interesting that they are here. Proposed items in the list include new passenger helicopters, various cheeses and wines, ski-suits and certain motorcycles. This news might also remind investors that the US report on the national security risk of auto imports was delivered back in February without any official response yet. Having said that the US first complained to the WTO about Airbus subsidies 15 years ago so this has been a long running dispute.
Despite the tariff threat, markets are eking out modest gains overnight with the Hang Seng (+0.31%), Shanghai Comp (+0.14%) and Kospi (+0.11%) all up after erasing early losses while the Nikkei (+0.02%) is trading flattish. Elsewhere, futures on the S&P 500 are trading flat (-0.08%).
Before this the S&P 500 spent most of yesterday in the red, but clawed back during the New York afternoon (+0.10%) to extend its winning streak to eight consecutive days. That’s the longest stretch since October 2017. The NASDAQ also squeaked out a positive day (+0.19%) while the DOW (-0.32%) limped to a small loss, suffering from another drop for Boeing (-4.44%). Prior to this, the STOXX 600 (-0.19%) closed lower with all but three sectors in the red, while the story in bond markets was a slight tick up in Treasury yields (10y +2.3bps) and the 2s10s curve back up +0.7bps to 15.9bps. It’s worth noting that ever since the curve went below 20bps in December last year it’s traded in just a 10bp range. Meanwhile in commodities, WTI oil rose +2.16% following the Libya conflict news over the weekend, putting it at the highest since October 31st. The main story in EM was further weakening for the Turkish Lira (-1.14%) after President Erdogan suggested that there were “widespread irregularities” in the local elections. Other emerging markets performed well, with the Russian ruble (+0.72%) and Mexican peso (+0.52%) gaining alongside the advance in oil prices.
As for the daily Brexit update, Mrs May is travelling to see Mrs Merkel and Mr Macron today ahead of tomorrow’s summit that will decide on the UK extension request. So expect headlines from these meetings. Yesterday saw Labour receive an updated offer from the government as part of the ongoing Brexit negotiations. Supposedly there are still ongoing discussions about whether it will include a clear offer of moving to a customs union. The BBC’s Laura Kuenssberg also suggested that there is anxiety on the Labour side as even primary legislation could still be unpicked by the next Tory leader. This means that even if both sides can reach an agreement on a customs union it’s not entirely clear that they’ll be able to deliver a deal politically. It’s worth recapping that our house view base case is for no agreement between Labour and the Tories this week, but indicative votes going forward instead of a compromise solution. Later last night, the House of Lords passed its version of the bill to prevent a no-deal Brexit, though the issue has been a bit overtaken by events since PM May has already promised not to allow a no-deal outcome and is committed to following Parliament’s decision. Sterling floated between gains and losses during the European session before rallying +0.21% during the US session and overnight it has strengthened +0.14%.
As mentioned at the top this week should really kick into gear from tomorrow with a main course of the ECB meeting, the emergency EU Council meeting to discuss the Brexit extension, the FOMC minutes and US CPI data all on the cards. However we’ve got a couple of appetisers to look forward to today with the World Bank/IMF Spring Meetings kicking off, as well as the latest Euro Area bank lending survey covering Q1. A reminder that the survey for Q4 had a much softer tone. The net percentage of banks reporting tightening standards to enterprises was closer to even with -1 in Q4 compared to -6 in Q3. Demand for loans also continued its slowing trend from recent quarters with the net balance to enterprises falling to +9 versus +12 in Q3. It was a similar story for housing loans although demand for the latter did pick up. At a country level the softness was mostly reserved for Italy and Spain. Notably the outlook for Q1 also implied further moderation. So worth keeping an eye on today’s survey to see whether or not there are pockets of improvements. Given the only recent China rebound it might be too early to expect too much.
While we’re on the ECB there was a Bloomberg story doing the rounds yesterday which suggested that Committee members “are said not to have discussed tiering options” since Draghi’s comments towards the end of last month. There was a slight knee jerk reaction for European Banks post that headline however the story didn’t really seem to gather much momentum thereafter. European Banks did however still close down -0.72% while Bunds ended broadly flat and a notch above 0% at 0.007%.
In other news, there wasn’t much to write (or WhatsApp) home about from the data yesterday. In the US February factory orders were confirmed as declining -0.5% mom, matching consensus expectations. Core capex orders were also unrevised at -0.1% mom. Prior to this, in Europe the Sentix investor confidence reading for the Euro Area improved slightly to -0.3 (from -2.2) while February export data in Germany was weaker than expected at -1.3% mom (vs. -0.5% expected).
Finally to the day ahead, which is notably sparse for data releases with nothing due in Europe and only the March NFIB small business optimism print and February JOLTS report due out in the US. Away from that the Fed’s Clarida is set to speak at a “Fed Listens” event in Minneapolis late tonight, while as mentioned above the annual Spring Meetings of the World Bank and IMF begin today, and at some stage we’re expecting to get an update of the IMF’s World Economic Outlook. So expect headlines there. As discussed earlier, we’ll also get the Euro Area bank lending survey today.
via ZeroHedge News http://bit.ly/2G3ufRw Tyler Durden
On February 2, Gov. Ralph Northam (D–Va.) held a now-infamous press conference at which he admitted to having once “darkened” his face with shoe polish while dressing up as Michael Jackson. For his sins, he faced calls to resign from a range of erstwhile allies, including Hillary Clinton, Planned Parenthood, and the Virginia state House Democratic Caucus. (He has so far declined.)
Two days earlier, many of the same state House Democrats had stood proudly behind Northam, vigorously applauding, during another press conference at which he defended himself. The difference was that the first controversy was over his views on abortion—specifically his support for a bill to legalize the procedure in Virginia through the end of the third trimester, writes Stephanie Slade.
Yesterday, when previewing the massive Aramco bond offering coming in a time of sheer yield desperation, and when the offering was “only” 4x oversubscribed, we said that demand could even surpass the record $53 billion in bids that Qatar received for its $12 billion bond sale last year. Well, fast forward just 24 hours later when not only is the Saudi murder of Jamal Khashoggi long forgotten, but demand for the inuaugural bond has doubled and with hours to go before the 6-part bond offering prices, there is now a staggering $85 billion of orders from investors.
The Saudi state-backed oil giant, which last week revealed that it was the world’s most profitable company, earning over $110 billion each year…
… opened up the six-part bond sale to investor orders on Monday. At that point the historic $10 billion (but soon to be upsized) offering was already 3x oversubscribed from investors in Europe, Asia and the US. And, as the FT reports, by Tuesday morning the order book had risen to a staggering $85 billion, “a potential record for an emerging-market bond sale, surpassing the $67bn of demand Saudi Arabia itself saw in its wildly popular 2016 bond market debut.”
But wait, because with hours still left for the underwriters to allocate demand, the order book may eventually surpass even the developed market record, when six years ago Verizon drew $100BN of orders for a record-breaking $49BN corporate bond sale.
And while Aramco said it was seeking to raise about $10 billion from the sale (it remains unclear why when the company earn over 10x each year), according to the kingdom’s energy minister as Saudi Arabia combines the oil producer with chemical maker Saudi Basic Industries Corp, the likely proceeds will be far greater thanks to what may soon be 10x oversubscription.
As a reminder, Aramco is turning to the dollar bond market as the company raises cash ahead of the purchase of a $69 billion majority stake in domestic petrochemical giant Sabic. The bond sale represents an alternate way for Saudi Arabia to raise money and diversify from oil after an IPO of Aramco was postponed last year. Saudi Arabia has valued Aramco at a whopping $2 trillion, though not all investors are convinced it’s worth that much.
Ironically, if the underwriters allowed every order to be filled, the entire transaction could be funded today with the $85 billion in already committed orders!
Where it gets even more ironic, is that Saudi Aramco’s treasurer has told investors that the company does not need to raise the money, because of its “fortress-like corporate position”, and is focused solely on opening up the historically secretive group to public investors for the first time. In other words, Aramco is doing international creditors a favor by issuing $10 billion in debt (which may end up trading at a lower yield than Saudi Arabia itself).
As the FT notes, “the bond sale is intimately tied to Saudi Crown Prince Mohammed bin Salman’s vision to open up the desert kingdom’s economy to the wider world, after his grander plan of listing a stake in Aramco on stock markets faltered.” And in what is certain to infuriate the world’s liberal elites, “neither banks nor investors have been deterred from taking part in the high-profile deal despite displays of outrage over the death of Jamal Khashoggi, the journalist, in the Saudi consulate in Istanbul last year.”
And here is the peak irony: the Riyadh conference in October, dubbed “Davos in the desert,” was boycotted by several prominent business leaders — including Jamie Dimon, the chief of JPMorgan Chase, which is now leading the Aramco bond sale.
And speaking of what price the bonds price at, the Saudi state-backed oil company is marketing the new bonds at a yield in line with Saudi government bonds. As borrowers typically look to tighten pricing levels before the close of a bond sale, it suggests that Aramco is targeting a cheaper cost of borrowing than the Saudi government, which may deter at least some buyers, although with $85 billion in committed orders, their caution will hardly be noticed.
A banker close to the bond issue said orders were skewed towards the deal’s longer tranches, with Aramco offering investors the chance to buy 20- and 30-year bonds at higher yields. The rush of demand for the Aramco deal has also seen yields on Saudi Arabia’s government bonds fall sharply over the past week, meaning that prices have risen. The country’s 30-year US dollar bond yield has fallen about 20 basis points to 4.58 per cent.
Meanwhile, since rating agencies rate Aramco in line with the Saudi government, in the single A bracket, the oil company has told investors that Moody’s would have given it a top-notch triple A rating, if it were a standalone company, as it produces enough cash each year to cover its debt many times over.
In other words, in today’s bizarro world, Aramco has a higher credit rating than the United States.
via ZeroHedge News http://bit.ly/2G38bqd Tyler Durden
Investors who had hoped that President Trump’s apparent willingness to cave on trade negotiations with China – despite all the tough talk from the administration – might spell an end to the global trade conflict are about to be sorely disappointed. Just hours after the US released a list of EU products targeted for additional tariffs following a favorable WTO ruling that aerospace company and Boeing arch-rival Airbus has benefited from anticompetitive government subsidies, the European Union has shot back with trade threats of its own.
According to Bloomberg, the European Union reacted to threats of US tariffs on $11 billion of EU goods by preparing similar action against American products in a tit-for-tat case at the World Trade Organization concerning aid to Boeing Co.
“In the parallel Boeing dispute, the determination of EU retaliation rights is also coming closer and the EU will request the WTO-appointed arbitrator to determine the EU’s retaliation rights,” the European Commission, the bloc’s executive arm, said in an e-mailed statement in Brussels.
“The commission is starting preparations so that the EU can promptly take action based on the arbitrator’s decision on retaliation rights in this case,” it added.
The commission added that it believes the $11 billion figure proposed by the US is significantly higher than the WTO would allow.
“The EU is confident that the level of countermeasures on which the notice is based is greatly exaggerated; the amount of WTO-authorized retaliation can only be determined by the WTO-appointed arbitrator,” the commission said.
“The figure quoted by the USTR is based on U.S. internal estimates that have not been awarded by the WTO.”
Echoing its stance from 10 years ago, before the long-running battle over aircraft subsidies was put before the WTO by the US, the commission said it would be willing to negotiate a settlement with the US.
“The EU remains open for discussions with the US, provided these are without preconditions and aim at a fair outcome,” the commission said.
As we pointed out last night, America’s latest shot across the bow in its simmering trade spat with Europe – which has so far involved US tariffs on steel and aluminum, retaliatory EU tariffs on uniquely American products like bourbon and motorcycles, as well as Trump’s looming threat to impose tariffs on EU auto imports – comes as i) Trump is reportedly preparing to fold in his trade war with China, punting enforcement to whoever is president in 2025, and ii) Boeing has found itself scrambling to preserve orders as more airlines cancel orders for Boeing 737s, or putting their orderbook on hold.
Whatever happens next, critics will decry the spat as yet another threat to global trade, which is coming at a particularly inopportune time, as it risks aggravating a “synchronized slowdown” in the global economy.
But somehow, we imagine, markets will find a way to read this as bullish, as every step back from the ledge will be heralded as yet another reason for ‘trade-deal optimism’.
via ZeroHedge News http://bit.ly/2Z33HIO Tyler Durden
Q4 was a notoriously difficult quarter for investment bank trading revenues, as the explosion of volatility caught banks flat-footed, despite an old truism on Wall Street that the sell-side typically benefits from the frenzied trading that typically comes with it. Yet, as global equities embarked on a torrid rally last quarter, it appears trading revenues haven’t improved in Q1, as both volatility and trading volume have fallen sharply.
Hence, after reports about impending cuts to its commodities business and its prop-trading arm surfaced earlier this year, it appears SocGen has finally made it official: The French bank said Tuesday that it’s planning to cut 1,600 investment-banking jobs. Most of the cuts – close to 1,200 positions – will be positions at its global banking and investor solutions division, according to Bloomberg.
While 750 of the cuts will focus on France, the rest will be spread across the bank’s international hubs in London and New York. All told, they represent about 8% of the bank’s GBIS unit, which houses its trading divisions and has a total headcount of about 20,000.
The cuts follow CEO Frederic Oudea’s decision to abandon his growth goals for the bank. The CEO’s failure to reverse a 40% drop in the bank’s share price over the past month have led to scorching criticism of his tenure, most notably by “bond king” Jeffrey Gundlach. Oudea, who has led the bank for 11 years, is facing a shareholder vote on his renewal at the bank’s May meeting.
Fresh 5 year low share price for tanking SocGen as Oudea continues to have no idea what he is doing except running the bank into the ground.
Striking a relatively optimistic tone, one analyst said the cuts suggest the bank is on track to deliver on Oudea’s new target for a return on tangible equity of between 9% and 10% by 2020, down from a previous target of 11.5%.
“This news confirms that management is on a target to deliver the plan; however, the focus at first-quarter results will be on the,” bank’s financial position, Jefferies analysts Maxence Le Gouvello Du Timat and Martina Matouskova said in a note to investors.
The Financial Times reports that the cuts will focus on less-profitable businesses like commodities, prop trading, and fixed-income as the bank focuses on what it does best: namely, equity derivatives trading.
It will close its commodities business and proprietary trading unit and reorganise its fixed-income division to make it more profitable, particularly the underperforming rates, credit, currencies and prime services operations, as was first flagged in February. The international retail unit is also being overhauled.
Unfortunately for the carbon-based traders who will soon be carrying their possessions out of the office in a cardboard box, there are plenty of able-bodied machines ready to take these jobs.
via ZeroHedge News http://bit.ly/2D69lRh Tyler Durden
Elijah Shaw came to Nashville in the 1990s to study music. At first, that meant spending a lot of time on the road. “The first decade of my career, [I was] traveling all over the place and interacting with major record labels and sort of going where ever work would take me,” he says.
Could it be that you are getting a better deal from big technology companies than you realize? George Mason University economist Tyler Cowen thinks so, and he has penned a new book to convince you that you should love big businesses as much as he does.
On February 2, Gov. Ralph Northam (D–Va.) held a now-infamous press conference at which he admitted to having once “darkened” his face with shoe polish while dressing up as Michael Jackson. For his sins, he faced calls to resign from a range of erstwhile allies, including Hillary Clinton, Planned Parenthood, and the Virginia state House Democratic Caucus. (He has so far declined.)
