Category: zerohedge

The Bank of Canada did not surprise moments ago when it kept the overnight rate at 0.5%, as expected The Bank said that the “current stance of monetary policy is still appropriate” adding that risks to inflation profile are roughly balanced. It also said that “fundamentals remain in place for a pickup in growth over the projection horizon, albeit in a climate of heightened uncertainty.”

Where the BOC did surprise was in its latest cut to Canada’s economic outlook: the central bank now expects GDP to grow 1.3% in 2016, 2.2% in 2017, down from 1.7%, 2.3%, respectively.

The BOC said that Real GDP is expected to fall 1% in 2Q, pulled down by “volatile trade flows, uneven consumer spending, and the Alberta wildfires.” It does expect Real GDP to grow 3.5% in 3Q as oil production resumes, rebuilding in Fort McMurray occurs, and the Canada Child Benefit boosts consumer spending. However, that won’t offset the full year slowdown, which sees 2016 growth slased by 0.4%.

Some other points:

• Brexit to decrease the level of Canada’s GDP by 0.1% over projection period
• Contribution of exports to average annual real GDP growth in 2016 revised downwards to 0.3 from 1.1 percentage points
• Bank: Output gap will close near the end of 2017, later than estimated in April, due to downward revisions to business investment
• Contribution of business fixed investment to average annual real GDP growth in 2017 revised downwards to 0.2 from 0.4 percentage points
• Recent housing market developments in Vancouver and Toronto have “exacerbated” financial vulnerabilities in the household sector
• Contraction of investment spending in the oil and gas sector will be nearly complete by end of 2016

The Loonie’s kneejerk reaction shows an immediate relief that the BOC did not cut, although rate cuts may still be coming.

 

Full statement below:

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent.

Inflation in Canada is on track to return to 2 per cent in 2017 as the complex adjustment underway in Canada’s economy proceeds. The fundamentals remain in place for a pickup in growth over the projection horizon, albeit in a climate of heightened uncertainty.

In this context, the forecast for the global economy has been marked down slightly from the Bank’s April Monetary Policy Report (MPR). Global GDP growth is projected to be 2.9 per cent in 2016, 3.3 per cent in 2017, and 3.5 per cent in 2018. In particular, after a weak start to 2016 the US economy is showing signs of a rebound, with a healthy labour market and solid consumption growth. In the wake of Brexit, global markets have materially re-priced a number of asset classes. Financial conditions, already accommodative, have become even more so.

In Canada, the quarterly pattern of growth has been uneven. Real GDP grew by 2.4 per cent in the first quarter but is estimated to have contracted by 1 per cent in the second quarter, pulled down by volatile trade flows, uneven consumer spending, and the Alberta wildfires. A pick-up to 3 1/2 per cent is expected in the third quarter as oil production resumes and rebuilding begins in Fort McMurray. Consumer spending will also get a boost from the Canada Child Benefit.

While the fundamental elements of the Bank’s projection are similar to those presented in April, the forecast has been revised down in light of a weaker outlook for business investment and a lower profile for exports, reflecting a downward adjustment to US investment spending. Real GDP is expected to grow by 1.3 per cent in 2016, 2.2 per cent in 2017, and 2.1 per cent in 2018. The Bank projects above-potential growth from the second half of 2016, lifted by rising US demand and supported by accommodative monetary and financial conditions. Federal infrastructure spending and other fiscal measures announced in the March budget will also contribute to growth.  Despite recent volatility, the Bank expects the underlying trend of export growth to continue, leading to a pick-up in business investment. Higher global oil prices are helping to stabilize Canada’s energy sector and household spending is expected to increase moderately.

The Bank forecasts that the output gap will close somewhat later than estimated in April, towards the end of 2017. Underlying this judgement is the downward revision to business investment, which lowers the profile for both real GDP and, to a lesser extent, potential output. 

While inflation has recently been a little higher than anticipated, largely due to higher consumer energy prices, it is still in the lower half of the Bank’s inflation-control range. Most measures of core inflation remain close to 2 per cent but would be lower without the impact of past exchange rate depreciation. The temporary effects of exchange-rate pass-through and past declines in consumer energy prices are expected to dissipate in late 2016, and the Bank projects that inflation will average close to 2 per cent throughout 2017 as the output gap narrows.

Overall, the risks to the profile for inflation are roughly balanced, although the implications of the Brexit vote are highly uncertain and difficult to forecast. At the same time, financial vulnerabilities are elevated and rising, particularly in the greater Vancouver and Toronto areas. The Bank’s Governing Council judges that the overall balance of risks remains within the zone for which the current stance of monetary policy is appropriate, and the target for the overnight rate remains at 1/2 per cent.

via http://ift.tt/29HnaIX Tyler Durden

Submitted by David Stockman via Contra Corner blog,

Since last Friday’s phony jobs report the casino has become so unhinged that analysis is beside the point. A picture worth an eventual thousand point drop on the S&P 500 will do the job.

While we are waiting it might be wondered, however, whether nearly two decades of central bank financial repression have not merely destroyed honest price discovery on Wall Street. Perhaps it has actually extinguished brain function entirely among the corporal’s guard of carbon units that remain.

Yes, it is not surprising at all that the robo-machines are now gunning for the 2200 point on the S&P 500 charts. That’s what they do.

What defies explanation, however, is that the several dozen humans left on Wall Street who apparently talk to Bob Pisani are actually attempting to rationalize this “breakout” of, well, madness.

According to JPMorgan’s latest thoughts, for example, it’s all explained by Mr. Market hard at work discounting a meme called “17x/$130”.

Market update – more of the same for this market. The 17x/$130 argument continues to resonate (that combination of numbers points to 2200). It’s still very, very early in the CQ2 season but the indications so are more positive than negative (AA, Daimler, PEP, Samsung, SIMO, STX, WDC, etc) and that is helping investors look past the earnings recession and is bolstering confidence in a ~$130 number for next year.

Let’s see. Before we get to whatever massaged and medicated version of “earnings” JPM is talking about with its $130 per share number, it would be useful to start with reality.

According, to Howard Silverblatt, the S&P’s authority on these matters, reported (GAAP) earnings for the March LTM finally came in at $86.44 per share.

So barring some near-term earnings miracle, the market is now valued at a nosebleed 24.9X. The last time it was near that level outside of outright recession was on May 16, 2008.

At that point, March 2008 LTM earnings on a GAAP basis had posted at $60.39 per share. So when the market hit an intraday high of 1430 the implied multiple was nearly 24X.

Needless to say, it was a long way down from there. In fact, ten months later the market was 53% lower, and S&P reported earnings actually bottomed that quarter at $6.86 per share, or 90% lower.

 

But then, of course, who would credit GAAP?

That is, besides the the several thousand white collar “criminals” domiciled in Federal hospitality facilities who undoubtedly rue the day they violated it; or the tens of thousands of bureaucrats at the SEC, DOJ and state attorneys general offices who make a living enforcing it; or the far greater numbers of white collar defense attorneys who make an even better living parsing its fine points.

Then again, you don ‘t have to make a fetish of GAAP, even if several billion dollars annually of law enforcement and regulatory intrusion insist upon it. In fact, back in May 2008—–at a time that even the White House council of economic advisers said there was no recession in sight and Bernanke was preaching mainly blue skies ahead—-LTM operating earnings had posted at $76.77 per share, according to Howard Silverblatt.

So even using the ex-items style of earnings, the market was trading at a pretty sporty 18.6X.

Alas, a recession had already been underway for six months, but no one had bothered to tell the Eccles Building and their Wall Street acolytes. The latter are otherwise known as “street economists” and “equity strategists” of the JPMorgan ilk quoted above.

Here’s the thing. Even the LTM “operating earnings” number at the time was down by 16% from its cyclical high of $91.47 per share that had posted three quarters earlier (June 2007 LTM). But like now, the street insisted that the “earnings bottom” was in, and that 2008 profits would come in at over $100 per share or 30% higher than the March 2008 LTM actual.

At it happens, Silverblatt’s certified operating earnings number for the March 2016 LTM period was $98.61 per share.

That means that today’s market traded at 21.8X Wall Street’s preferred earnings measure. That’s even above the 18.6X delusion back in May 2008, and also something more.

Like eight years ago, the March operating earnings number is down 14% from its peak of $114.50 posted for September 2014. And also like back in 2008, expected forward earnings of $130 per share are 30% above current levels.

In truth, all of this is worse than deja vu. That’s because the casino’s financial narrative has been so corrupted by recency bias and accounting promiscuity that it has no idea what the profits picture really is or where it is going.

In a moment we will put a bullet through JPM’s $130 per share fantasy. But it is worth reiterating just how far the “earnings” narrative has departed from GAAP, and that near the end of a cycle this GAAP gap becomes especially wide.

As the WSJ recently documented,  Wall Street’s ex-items or pro forma  version of S&P 500 earnings came in at $1.040 trillion in CY 2015 compared to GAAP earnings of $787 billion. It would appear that CEOs and CFO’s who filed their SEC statements on penalty of prison time, averred that their actual profits were exactly $256 billion smaller than what they told their investors.

As it happens, that quarter trillion dollar fib is exactly the size of the ex-items charade back in 2007. It seems as if companies actually need a periodic recession so that they can toss into the kitchen sink the write-offs for all the dumb deals and investment mistakes they made while the bubble was still inflating.

In any event, not only are Wall Street’s hockey sticks extremely crooked from an accounting point of view, but they are also egregiously predictable in the magnitude by which they deflate as one-year forward estimates are eventually overtaken by reality.

To wit, in March 2014, the one-year forward estimate for CY 2015 came in at $135 per share of “operating earnings” for the S&P 500. At length, CY 2015 unfolded—-bringing with it a collapse of oil and materials prices and a sharp slowdown of global growth that came as a big surprise to Wall Street.

Accordingly, Silverblatt now certifies that actual operating earnings for CY 2015 came in at $100.45 per share. Apparently, in a world where “one-timers” don’t count, that gigantic 26% miss doesn’t count, either.

That’s because in March 2015, the street “bottoms up” consensus for 2016 was pegged at, yes, $135 per share, again.

The problem is that the 2015 hockey stick has already been rolled-down to just $114 per share as of June. Yet even if Q2 comes in at the current estimate of $28 per share and there is no further earnings decline in Q3 and Q4, earnings will total just $100 per share for 2016. That would be another 25% miss.

Never fear. The street consensus estimate for 2017 as of this March was $136 per share for the third year in a row.

That JPMorgan has already walked it down to $130 per share, therefore, is not the least bit surprising. Walking it back is what equity analysts do.

Then again, according to Howard Silverblatt, operating earnings for the current LTM period (June 2016) are expected to come in at just $100.55 per share.

Yet why is the implicit 30% climb from here to get to JPM’s magic “17X” on next year’s earnings any more plausible than was the outlook back in July 2014?

Back then, LTM operating earnings posted at $112 per share and the expectation was for a 20% gain on a year forward basis for 2015.

In fact, since July 2014 total business sales in the US economy have declined by 6% and the inventory to sales ratio has soared from an already high 1.3X sales to 1.41X. That’s recession territory.

In the case of wholesale sales as reported today, Jeff Snider notes in a nearby post that the warning signs of recession are flashing even brighter. At 1.44X, the non-petroleum inventories-to-sales ratio is heading for the highs of the Great Recession.

Likewise, unlike the BLS’s monthly random numbers generator, the treasury tax collections do not lie. And they do not reflect taxes paid by real world employers for phantom workers on account of seasonal maladjustments, birth-death imputations or trend-cycle adjustments to actual payroll records.

As we showed last week, the 90-day moving average of payroll tax collections in June had dropped from last year’s 5-6% Y/Y trend to barely 3%. This means that after allowance for average hourly pay gains of 2.6% since last June,  labor hours worked in the US economy are evidently at stall speed.

That probability is reinforced by two other straws in the wind.

First, total Federal tax collections—-including upper income estimated payments, corporate taxes and excise taxes—-at $181 billion in June were flat over prior year. That’s a radical departure from the hefty gains registered since anti-recession tax cuts expired in 2013.

Likewise, the recovery of incomes among the top 10%-20% of households since 2009 has generated solid gains in restaurant and bar sales. During the seven years after the May 2009 bottom, sales growth averaged 5.5% per annum.

But in June, the Knapp Track data for the core fast casual sector showed that traffic was down 4.8% compared to last year and sales were down 2.3%.

In a similar matter, the Cass freight index is now running sharply lower than at any time since 2013, meaning the pace of business activity in the US economy is cooling rapidly.

At the end of the day, the “17x/$130” meme is not even a case of eye’s wide shut daredevilry.

That is, not in a world with $13 trillion in subzero sovereign debt, liquidity soaked markets riddled with FEDs (financial explosive devices), the Red Ponzi teetering more dangerously every week, the Italian and European banking system slinking toward the brink, crude oil heading back down for the count, Japan contemplating fiscal hari kari, and countless more.

It’s also an insult to intelligence in a world where bulging inventories remind that the business cycle has not been abolished, where faltering US exports matter on the margin, where 90% of households are tapped out and where corporate America is buying back its stock, not investing in maintenance of the capital stock, let alone improvement and growth.

To say the least, there is no reason whatsoever to believe that the domestic and global economies will come bounding back anytime soon. A 30% gain in corporate profits during the next 18 months is not even a remote possibility.

Actually, the latter proposition is proof positive that the casino has been largely emptied of human intelligence. It apparently remains occupied by a motely assembly of brigands and snake oil vendors who are calling the greater fools to one final slaughter.

Given the evident facts of life, you can’t say the latter don’t deserve exactly the condign punishment the economic gods surely have in store.

via http://ift.tt/29Eiy53 Tyler Durden

Yesterday, JPM’s Adam Crisafulli explained the simplistic explanation why according to his trading desk, the JPM is headed promptly toward Goldman’s 2017 year end target of 2,200: $130 in EPS and a 17x multiple. This morning, Crisafulli shifts from the quantitative and focuses on the qualitative, laying out the three narratives that explain the persistent equity bid.

From JPM’s Early Look at the Markets

Three narratives are at work presently and explain the persistent equity bid:

1. relative valuations. While yields have ticked off their lows investors are confident they won’t have dramatic upside and thus are increasingly comfortable buying into the relative valuation argument (equity PEs vs. TSY yields). Domestic economic trends are healthy and in a vacuum would prob. justify a Fed policy mildly more hawkish than it currently is but the effects of int’l trends will continue to act as a ceiling for US yields. Just a few weeks ago investors considered 16.5-17x to be extremely stretched but lately psychology has evolved w/the latter half of that range thought to be a base (this could all wind up being nothing more than an ephemeral excuse made by sidelined money to justify chasing the SPX at alltime highs but the media at least has shifted pretty dramatically in the last few days to where PEs are now being considered more relative to Treasuries instead of on an absolute basis);
2. earnings confidence. It is still very early in the CQ2 season but indications so far are more positive than negative (AA, Daimler, PEP, Samsung, SIMO, STX, WDC, etc) and this is helping to bolster confidence around a ~$130 number for ’17 (and 17x the $130 figure points to a ~2200 SPX);
3. rotation. The most dramatic feature of the Tues session was the rotation that occurred beneath the surface as traditional safe-havens (utilities, REITs, telecoms, staples) not only underperformed but saw outright selling too. On the flip side cyclicals and financials did very well (banks, brokers, asset managers, tech hardware, semis, materials, autos, airlines, etc). Investors are hesitant to embrace the rotation given so many false starts these last several months but money is beginning to respond.

At the moment the relative valuation narrative and the rotation theme are coexisting and eventually the two will come into conflict w/one another but that would require a dramatic increase in yields (i.e. a quick spike in 10yr TSY yields to ~2%). Bottom Line: equities have a lot of momentum and investors are much more willing to make the relative valuation argument w/respect to multiples to justify an SPX up to 2200 at least. However, the tape’s absolute multiple shouldn’t be ignored and the SPX has struggled historically to sustain a PE in the high-teens or higher w/only a few brief exceptions (granted the rate environment now is dramatically different than it’s been).

* * *

Alas, JPM forgot the one and most important narrative that explains not only the recent equity bid, but the bid ever since 2009: central banks.

 

via http://ift.tt/29D1yz0 Tyler Durden

Following the much anticipated ruling by the international court which found yesterday that China does not have a right to claims on the South China Sea, an unexpected supporter for China’s position – which has vocally warned it won’t comply with the tribunal’s ruling – emerged overnight when Taiwan, which shares territorial claims with China in the disputed area – sent a naval frigate to patrol the disputed waterway Wednesday, to show the government’s “determination” to defend its national interest.

The order from Taiwan’s president Tsai Ing-wen came just hours after the Permanent Court of Arbitration found found that the largest natural feature in the contested Spratly Islands, the Taiwanese-held Itu Aba, was a “rock” rather than an island and didn’t qualify for a 200-nautical mile (370 kilometer) exclusive economic zone. The frigate’s planned patrol included a resupply stop at the feature, which Taiwan calls Taiping, a defense ministry spokesman said.

Taiping island

As Bloomberg writes, confirming what we said yesterday after the tribunal’s ruling, the decision to deploy the warship could further escalate tensions in the area. China has said it doesn’t recognize the court’s jurisdiction. Overnight, China firmly rejected the verdict claiming its ruling on the South China Sea is both “null and void” with no binding force. Chinese Foreign Minister Wang Yi Tuesday called the South China Sea arbitration a political farce made under the pretext of law.

As a reminder, the ruling, resulting from a challenge brought by the Philippines, invalidated China’s “nine-dash line” claim. China’s assertions cross over with those from countries like Malaysia, Vietnam and the Philippines, and are based on a map created by Taiwan’s Republic of China government in 1947. Taiwan has administered Itu Aba since the 1950s.

The chart below, showing that 40% of Chinese oil imports pass through the contested region, explains why the disputed territory is of vital importance to China. The region is also home to 10% of the world’s commercial ocean fish stock, and lies above an estimated 11 billion barrels in oil reserves.

China also warned Wednesday it was ready to set up an air defense identification zone over disputed waters, repeating a threat it first made one month ago. “If our security is being threatened, of course we have the right to demarcate a zone,” Chinese Vice Foreign Minister Liu Zhenmin said on Wednesday. 

A new air defence identification zone (ADIZ) would likely increase tensions not only with the Philippines, but also with other rivals to claims in the South China Sea, including Brunei, Malaysia and Vietnam. China declared an ADIZ over disputed islands in the East China Sea in 2013, a move which caused anger with Japan and the United States.

Vice minister Liu said the islands were China’s “inherent territory”, as he launched a policy paper in response to the ruling. “We hope that other countries will not take this opportunity to threaten China and to work with China to protect the peace and stability of the South China Sea, and not let it become the origin of a war,” he told reporters.

For now, however, focus is on naval deployments, and China’s Vice Foreign Minister Liu Zhenmin on Wednesday praised Taiwan’s efforts to defend rights shared by the one-time civil war foes. “The arbitration has damaged the rights of all Chinese, and it’s the common interest and responsibility of both sides to protect the maritime rights of the South China Sea,” Liu said at a briefing in Beijing. He accused the tribunal judges in the case of bias and a lack of common sense.

While China refused to participate in the tribunal proceedings, it did submit a paper outlining its position and worked behind the scenes to lobby the court, according to the decision. Taiwan, under former President Ma Ying-jeou, filed a brief to the panel stating a case for an exclusive economic zone around Itu Aba, citing its ability to support life.

South China Sea Islands are China’s inherent territory: Chinese government’s white paper https://t.co/0jrvk7OiXL http://pic.twitter.com/CYOhKEVDSc

— China Xinhua News (@XHNews) July 13, 2016

 

As Bloomberg adds, in a statement echoing China’s own response Tuesday, Tsai said the Hague ruling had no binding effect on Taiwan and undermined her government’s rights. The former law professor, who ousted Ma’s Nationalist party in a landslide election in January, called for multilateral talks to promote stability in the region.

What is most surprising is that the president’s remarks put Taiwan’s new leader at odds with its chief security protector, the U.S., which has called on China to abide by the ruling. They also provide a rare area of agreement between Tsai and Communist Party leaders, who have cut off communications over her refusal to affirm the contention the two sides represent “one China.”

Tsai’s Democratic Progressive Party officially supports independence for Taiwan. New York University law professor Jerome Cohen, a specialist in Chinese law who counts Ma among his former students, said Tsai was struggling to “adjust to an uncomfortable situation.”

“Today’s response openly rejecting the decision is a big mistake and different from what even Ma would have done,” Cohen wrote in a blog post Tuesday. “Tsai will be criticized at home for following Beijing’s lawless line at the same time that Beijing was responsible for excluding Taiwan from participation in the arbitration.”

Taiwan’s Coast Guard Administration also stations vessels at Itu Aba, and another Wei-Shin frigate arrived at the feature late Tuesday, the agency said.

Tsai Ing-wen’s position “is really hard” because the claims of Taiwan and China are practically identical, said Nick Bisley, a professor of international relations at La Trobe University in Melbourne. “How you chart a course that maintains a Taiwanese position without sounding like you are China is very tricky. ”

“Suddenly, you are back to large areas of the South China Sea that are high seas, open to freedom of navigation and travel,” said Eric Shrimp, a former U.S. diplomat who’s now a Washington-based policy adviser at law firm Alston & Bird. “The question then becomes: how do the interested parties cooperate to secure those high seas?”

The answer: it will be increasingly more difficult for them to do so.

Meanwhile, defense stocks were mixed in Wednesday trading on Chinese exchanges. AVIC Aircraft Co. and AVIC Helicopter Co. fell 0.8% while Jiangxi Hongdu Aviation Industry Co. slipped 1%. AviChina Industry & Technology Co. rose 1.4% and AVIC Jonhon Optronic Technology Co. gained 3.1%.  Expect these to surge if and when the territorial conflict escalates further, as it is almost certain to do in the aftermath of the international court’s politically-motivated ruling.

via http://ift.tt/29IM1vb Tyler Durden

Dow futures are now up 450 points from the pre-payrolls levels as the pre-open ramp takes hold once again…

 

As stocks lead post-payrolls…

 

But today is different as bonds are rallying too…

 

And don’t forget, someone is hedging in size as stocks move higher…

 

 

Charts: Bloomberg

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Submitted by Claire Bernish via TheAntiMedia.org,

A nation known for brutality against civilians has just slammed the United States for hypocrisy following two police fatal shootings last week in Minnesota and Louisiana — as Egyptian lawmakers phrased it, the U.S. has “an alleged respect for human rights.”

As Margaret Azer, deputy chairman of the country’s parliamentary human rights committee, denounced the killings, saying, according to Foreign Policy, the U.S. “was caught red-handed violating human rights and crushing the peaceful protests of black Americans in the city of Dallas and other U.S. cities.”

Azer also stated the deaths of civilians at the hands of police “expose the bloody face of the United States and its politicized use of the issue of human rights to extort other nations.”

Egypt earned a reputation for human rights abuse after protests erupted over the ousting of Egyptian President Mohamed Morsi. A brutal crackdown from the country’s security forces led by then-army chief Abdel Fattah al-Sisi — who later became president — saw some 900 demonstrators gunned down.

Police and military forces have continued brutalizing Egyptian citizens and others since that time. When Italian student Giulio Regeni disappeared in January only to be found dead with indications he’d been tortured, Western politicians suspected al-Sisi’s forces — though the Egyptian government has denied the allegations.

Further, in February, Foreign Policy recalled, “hundreds of civilians stormed Cairo’s streets to protest the brutal murder of 24-year-old Mohamed Ismail, a taxi driver who was arguing with an Egyptian cop when the officer took out his pistol and shot him in the head.”

By all indicators, law enforcement officers in Egypt appear to have unspoken impunity when acting violently against civilians. Sound familiar?

Last week, U.S. police gunned down Alton Sterling and Philando Castile in separate but equally contentious incidents that drove activists and anti-police brutality activists into streets in cities across the country. Further exacerbating the issue, police in Baton Rouge, Louisiana — appearing ready for full-on military conflict in riot gear with MRAPs to back them up — cracked down on an otherwise peaceful protest, forcing protesters from the front lawn of a private residence into the streets, and proceeded to arrest them for obstructing a highway.

This menacing human wall of riot gear-laden officers immediately drew parallels to a standing army inside the United States.

Both the killings and the excessive use of force against ensuing protests infuriated a number of Egyptian lawmakers, Foreign Policy noted, including Ilhami Agina, who wrote to Foreign Minister Sameh Shoukry requesting he ‘summon’ U.S. Ambassador Stephen Beecroft over these issues, saying:

“Obama, who came to Cairo in 2009 to give us a long lecture on human rights, might have forgotten that it is America that needs radical reform.”

via http://ift.tt/29Eb7KU Tyler Durden

Following May’s 1.4% MoM spike – the most since 2011 – June’s import prices rose just 0.2% MoM, less than half expectations. Import prices actually declined ex-petroleum. However, this is the 23rd month in a row of year-over-year import price declines with China’s exported deflation at 2010 lows.

The June spike has disappeared…

 

As YoY import prices have dropped for the 23rd straight month…

 

The breakdown shows a notable drop in imort prices ex-petroleum products…

• Import prices ex-fuels fell 0.3% after rising 0.3% in May
• Import prices ex-petroleum fell 0.3% after rising 0.4% in May
• Industrial supplies prices rose 2.1% after rising 6.2% in May
• Capital goods prices fell 0.3% after no change in May
• Auto prices unchanged after rising 0.4% in May
• Consumer goods prices fell 0.2% after rising 0.2% in May
• Import prices fell 4.8% y/y in June
• Import prices ex-food and fuel fell 1.7% y/y in June

 

With China’s exported deflation flat at 2010 levels…

 

 

Charts: Bloomberg

via http://ift.tt/29wFQYf Tyler Durden

Think “helicopter money” is/will be confined only to Japan, which has been sending conflicting trial balloons about this unprecedented next step in monetary policy for the past two days (first Japan’s Senkei reported that the government will be adopting “helicopter money” followed by a government spokesman denying the report, then followed by a separate Bloomberg report about a 10T yen stimulus plan, the concluding with Abe advisor Koici Hamada saying that “boosting fiscal and monetary stimulus at the same time would be effective” in Japan)? Think again.

Speaking overnight in Australia, the Fed‘s Loretta Mester said “helicopter money” could be considered to stimulate America’s economy if conventional monetary policy fails.

As Australia’s ABC reports, Mester, president of the Federal Reserve Bank of Cleveland and a member of the rate-setting Federal Open Market Committee (FOMC), signalled direct payments to households and  businesses to stoke spending was an option if interest rate cuts and quantitative easing fail.

“We’re always assessing tools that we could use,” Mester told the ABC’s AM program. “In the US we’ve done quantitative easing and I think that’s proven to be useful.

“So it’s my view that [helicopter money] would be sort of the next step if we ever found ourselves in a situation where we wanted to be more accommodative.

Mester’s qualified support for the use of “helicopter money” comes amid expectations that the Bank of Japan is poised to unleash a major fiscal stimulus package of at least 10 trillion yen ($130 billion) to kickstart its flat-lining economy.

The surprising comments from a Fed hawk, come on the heels of two other Fed presidents hinting that more QE could be used as additional “ammo” should the US economy relapse back into recession, and as major central banks consider unconventional policy tools in a world of slowing growth, low inflation and record low interest rates. Mester said that concerns about the Brexit vote were a consideration in June when the Federal Reserve left rates at between 0.25 and 0.5 per cent, a consideration  While the immediate impact of Brexit rattled financial markets, Mester said the Fed would be looking to medium and long term fallout.

“Between now and our next meeting and future meetings we are all going to be assessing what the impact of that decision will mean in terms of economic conditions and how they effect the medium term outlook for the US economy,” she explained.

Ironically, the same Mester said she believes there are risks in keeping US interest rates too low for too long. “For the US, if we overstay our welcome at zero then of course there would be financial stability risks,” Dr Mester acknowledged. So her “solution” is not just more easing, but outright monetary paradrops.

“I don’t think we’re behind the curve in the US on interest rates, but it’s something we have to assess going forward and where the risk balance is.”

With the next FOMC rate setting meeting scheduled for July 28, Dr Mester declined to be drawn on whether there would be another US rate rise this year. However, she signalled her support for moving rates higher and that rising employment and inflation meant “a gradual increasing pace in interest rates is appropriate.”

“I’ve been one of the more positive members in terms of the US economy. I do think we’ve made significant progress on the employment part of our mandate and the recent inflation data has been encouraging,” Dr Mester said.

“But of course the timing of the next and the ultimate slope of that gradual pace will depend on how the risks around the outlook evolve.”

And if all else fails, there is always Bernanke’s helicopter, first in Japan then coming to the US.

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Following two days of inexplicable attacks by none other than a Supreme Court Justice, who said she would move to New Zealand if Trump were elected, as well as calling Trump “a faker”, the Donald finally snapped and ripped Supreme Court Justice Ruth Bader Ginsburg in a Twitter message late Tuesday. “Justice Ginsburg of the U.S. Supreme Court has embarrassed all by making very dumb political statements about me,” Trump wrote on his Twitter account. “Her mind is shot — resign.”

As Fox notes, Trump has been on the defensive after Ginsburg told the Associated Press last week that she felt he was unqualified for the position. She said in an interview that she didn’t want to think about the possibility that Trump would be president and predicted that Democrat Hillary Clinton would win.  Trump told the New York Times earlier Tuesday that her comments were “highly inappropriate” and a “disgrace to the court.”

“It’s highly inappropriate that a United States Supreme Court judge gets involved in a political campaign, frankly … I think she should apologize to the court. I would hope that she would get off the court as soon as possible,” he added.

Senate Majority Leader Mitch McConnell said that it was “totally inappropriate” for Ginsburg to criticize Trump. McConnell said that members of the Supreme Court shouldn’t weigh in on American elections.

“It raises a level of skepticism that the American people have from time to time about just how objective the Supreme Court is, whether they’re over there to call the balls and strikes, or weigh in on one side or another,” he said.

None of the above was unexpected, but in a truly surprising twist none other than liberal media bastion, the NYT, issued an Op-Ed overnight titled “Donald Trump Is Right About Justice Ruth Bader Ginsburg“, in which it said “Justice Ruth Bader Ginsburg needs to drop the political punditry and the name-calling.”

In this election cycle in particular, the potential of a new president to affect the balance of the court has taken on great importance, with the vacancy left by the death of Justice Antonin Scalia. As Justice Ginsburg pointed out, other justices are nearing an age when retirement would not be surprising. That makes it vital that the court remain outside the presidential process. And just imagine if this were 2000 and the resolution of the election depended on a Supreme Court decision. Could anyone now argue with a straight face that Justice Ginsburg’s only guide would be the law?

Judging by the surprising move in swing states which now support Trump over Hillary, it appears that Ginsburg’s intervention may have once again ended up helping Trump at a time when he sorely needed an outside intervention to prop up his presidential chances.

The full NYT Op-Ed is below:

Justice Ruth Bader Ginsburg needs to drop the political punditry and the name-calling.

Three times in the past week, Justice Ginsburg has publicly discussed her view of the presidential race, in the sharpest terms. In an interview with The Times published Sunday, Justice Ginsburg said, “I can’t imagine what the country would be — with Donald Trump as our president,” joking that if her husband were alive, he might have said, “It’s time for us to move to New Zealand.”

Earlier, in an interview with The Associated Press that appeared on Friday, when asked to consider a Trump victory, Justice Ginsburg replied, “I don’t want to think about that possibility, but if it should be, then everything is up for grabs.”

On Monday Justice Ginsburg doubled down, calling Mr. Trump “a faker,” who “has no consistency about him.” In that interview, with CNN, she added: “He says whatever comes into his head at the moment. He really has an ego.”

Mr. Trump responded on Tuesday. “I think it’s highly inappropriate that a United States Supreme Court judge gets involved in a political campaign, frankly,” he told The Times. “I couldn’t believe it when I saw it.”

There is no legal requirement that Supreme Court justices refrain from commenting on a presidential campaign. But Justice Ginsburg’s comments show why their tradition has been to keep silent.

In this election cycle in particular, the potential of a new president to affect the balance of the court has taken on great importance, with the vacancy left by the death of Justice Antonin Scalia. As Justice Ginsburg pointed out, other justices are nearing an age when retirement would not be surprising. That makes it vital that the court remain outside the presidential process. And just imagine if this were 2000 and the resolution of the election depended on a Supreme Court decision. Could anyone now argue with a straight face that Justice Ginsburg’s only guide would be the law?

Mr. Trump’s hands, of course, are far from clean on the matter of judicial independence. It was just weeks ago that he was lambasting Gonzalo Curiel, the United States District Court judge overseeing a case against Trump University, saying that as a “Mexican,” the Indiana-born judge could not be impartial.

All of which makes it only more baffling that Justice Ginsburg would choose to descend toward his level and call her own commitment to impartiality into question. Washington is more than partisan enough without the spectacle of a Supreme Court justice flinging herself into the mosh pit.

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• Brexit, what Brexit? Shares near 2016 highs (Reuters), Global Stocks Inch Higher (WSJ), Stocks Climb With Copper as Brexit-Induced Volatility Subsides (BBG)
• Yen under pressure as global stock markets rally (Reuters)
• Spanish Banks Surge as Fears Subside Over EU Mortgage Ruling (BBG)
• Pimco Loads Up on Treasuries as Gundlach to Gross Voice Caution (BBG)
• U.S. Presses China to Be Responsible Power After Sea Ruling (BBG)
• Tesla Has No Plans to Disable Autopilot Feature in Its Cars (WSJ)
• China vows to protect South China Sea sovereignty, Manila upbeat (Reuters)
• ‘Pokémon Go’ Craze Raises Safety Issues (WSJ)
• Record Stock-Market Rally Powered by Companies Analysts Despise (BBG)
• U.S. arms sales approvals on track to reach nearly $40 billion (Reuters)
• Venezuela Trucks Food Directly to the Poorest as Chaos Spreads (BBG)
• New Black Panther Party says to carry arms in Cleveland if legal (Reuters)
• Trump Counts on Clinton Aide Case to Keep Video Testimony Off TV (BBG)
• Slump Might Turn Anti-Bank SoFi Into a Bank (WSJ)
• Carney Opens Lehman Playbook at Bank of England (BBG)
• Unicredit to raise €1bn in two days by selling stakes in other European banks (Telegraph)
• France has identified leader of Nov. 13 attacks, documents show (Reuters)

 

Overnight Media Digest

WSJ

– Tesla Motors Chief Executive Elon Musk has no plans to disable the company’s Autopilot function in the wake of a May crash of a Model S electric car using the technology, and the auto maker instead plans to redouble efforts to educate customers on how the system works. http://on.wsj.com/29CRjqa

– Pokemon Go is giving millions of people their first taste of futuristic augmented-reality technology. It is also raising questions about whether the game’s location and mapping features are luring players into danger. http://on.wsj.com/29CRyBL

– Fiat Chrysler Automobiles is launching a so-called bug bounty program aimed at compensating hackers between $150 and $1,500 every time they uncover potential cyber security flaws in the vehicles and alert the company. http://on.wsj.com/29CRWQL

– Airbus Group SE slashed production of its A380 superjumbo jet in a retreat from one of its most ambitious projects after it said it would build just 12 A380 planes a year starting in 2018, down from the 27 it built last year. http://on.wsj.com/29CS1Uq

 

FT

*Airbus is slashing production of its A380 superjumbo, which has struggled to win new customers amid a lacklustre market for widebody aircraft.

*JPMorgan Chase has promised to lift basic hourly pay for 18,000 of its lowest paid U.S. workers by at least a fifth by 2019.

*The UK’s markets watchdog, Financial Conduct Authority, warned the Bank of England in the immediate aftermath of the UK’s vote to leave the EU that commercial-property funds could start temporarily trapping investors’ money.

 

NYT

– Airbus Group’s said on Tuesday that it would sharply curtail production of the A380 superjumbo jet, the world’s largest passenger plane, as airline demand dwindles for supersize aircraft. http://nyti.ms/29OfqWz

– Even as regulators are asking new questions in the wake of a fatal crash involving Tesla Motor Inc’s Model S car, executives say their technology is safe if properly used. http://nyti.ms/29Offuq

– Taser International Inc, best known for its stun guns, has drawn criticism for its relationships with the police and its sales tactics, which it says are common. http://nyti.ms/29Of3eC

– Hyperloop One co-founder Brogan BamBrogan and three other former executives sued the start-up on Tuesday, claiming that they were harassed and wrongfully fired. http://nyti.ms/29OfXb4

– A firm that put “Happy Birthday” into the public domain now wants to rescind copyright protection for “We Shall Overcome” and “This Land Is Your Land.” http://nyti.ms/29OglpX

– Ireland, the country which attracts companies with a low corporate tax rate, saw its economy being revised in 2015 to 26.3 percent from a preliminary estimate of 7.8 percent, according to new figures. http://nyti.ms/29Ogv0M

 

Canada

THE GLOBE AND MAIL

** Halifax-based Minas Energy announced on Tuesday that it was partnering with Netherlands firm Tocardo International BV and Ontario-based International Marine Energy Inc to form the Minas Tidal Limited Partnership, to test the powerful tidal currents in the Bay of Fundy, by late 2017. (http://bit.ly/29vcRYv)

** Low-income earners will receive little benefit from the planned expansion of the Canada Pension Plan despite paying higher premiums, unless governments provide more help to offset a corresponding reduction in other government payments, according to an analysis of the new model. (http://bit.ly/29vcE7X)

** In a report issued late on Tuesday ahead of a City Council debate this week, staff urged politicians to increase new spending on road safety by about 30 percent to about C$52 million ($39.9 million) over the next five years. (http://bit.ly/29vcJIO)

NATIONAL POST

** Bell Canada sees no good reason to continue offering payphone lines at a lower price than regular business lines as it no longer views the service as essential in a society dominated by mobile phones. (http://bit.ly/29vd0LD)

** Royal LePage, in a report out on Wednesday, says economic uncertainty around the globe and low interest rates continue to fuel the Canadian existing-home market, adding that prices will rise by 12.4 percent in 2016 from 2015 to an average of C$563,000 ($431,947). (http://bit.ly/29vd1z4)

** The Canada Revenue Agency’s continuing campaign against the underground economy has come to roost in small-town Canada, where special audits have confirmed the pervasiveness of tax evaders in the construction industry. (http://bit.ly/29vdbqe)

 

Britain

The Times

Burberry pay is ‘manifestly out of touch’

A leading independent City voting adviser has criticised Burberry Group Plc over the handling of its recent management reshuffle and has attacked its pay to senior executives as being excessive and “out of touch”. (http://bit.ly/29BL6iv)

The Guardian

Airbus to cut back production of A380 aircraft

Airbus Group SE is to cut production of the A380 superjumbo, highlighting the lacklustre performance of the biggest passenger jet ever built. The plane-maker aims to cut production to just 12 A380s in 2018, compared with 27 deliveries in 2015. (http://bit.ly/29wGwwd)

M&S to create small investors panel to scrutinise performance

Marks and Spencer Group Plc is offering small investors a direct line to the boardroom with the creation of a shareholder panel to scrutinise performance. The plan was announced on Tuesday by M&S chairman Robert Swannell at the company’s annual investor meeting, where management regularly faces fierce criticism of its underperforming clothing business, which last week reported its biggest fall in sales since the 2008 banking crisis. (http://bit.ly/29Pw8lk)

The Telegraph

Unicredit to raise 1 billion euros in two days by selling stakes in other European banks

Italian bank UniCredit SpA is selling off a 10 percent stake in Polish lender Bank Pekao, in a deal which could raise more than 700 million euros in proceeds. (http://bit.ly/29BJSne)

Sky News

Wonga To Name Kneafsey As New Chief Executive

Wonga will name a new group chief executive this week, handing her the daunting task of returning Britain’s biggest payday lender to the black after years of mounting losses. Wonga will announce that Tara Kneafsey, who already runs its UK business, is to assume control of the wider business in a move that will eventually pave the way for its chairman to step back to a non-executive role. A statement about Kneafsey’s promotion is expected to be made on Wednesday. (http://bit.ly/29BPgCP)

Tata Wants Speciality Steel Bids This Week

Tata Steel Ltd has given bidders for a division employing more than 1,500 people just days to table offers, even as the rest of its British workforce faces months of uncertainty about the company’s future ownership. Parties interested in buying Tata’s speciality steel unit, which includes five UK manufacturing sites, have been told to table indicative proposals by 15 July. (http://bit.ly/2a7iWHE)

Deutsche Floats Surprise RBS Shipping Bid

Germany’s biggest lender has emerged as a surprise contender to take on a multibillion-dollar shipping finance business even as its share price barely hovers above record lows. Deutsche Bank has expressed an interest in buying part or all of a $3 billion Greek shipping portfolio owned by the taxpayer-backed Royal Bank of Scotland Group Plc. (http://bit.ly/2a7jhud)

The Independent

UBS boss Andrea Orcel says jobs could be moved from London after Brexit

Andrea Orcel, president of UBS investment bank, has warned the Swiss bank is considering moving its staff to a European country, following the UK’s vote to leave the EU. UBS Group AG , considered to be the world’s largest manager of private wealth, previously warned that London is likely to see an exodus of finance jobs in the wake of the Brexit vote. (http://ind.pn/29ECc1Z)

 

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