Germany Wants A German Internet To Keep The NSA Out

As the 'diplomatic' debacle continues to rage between the US and Europe (most loudly France and Germany) over the Obama administration's ongoing eavesdropping on its allies' cell phones, Reuters reports that (state-backed) Deutsche Telekom is calling for German comms companies to cooperate to shield local internet traffic from foreign intelligence services. "It is internationally without precedent that the internet traffic of a developed country bypasses the servers of another country," notes one academic, warning that if more countries wall themselves off, it could lead to a troubling "Balkanisation" of the Internet, crippling the openness and efficiency that have made the web a source of economic growth. Despite Obama's denials, the situation is not fading away, and Germany and France continue to demand a "no spying" agreement.

 

Via Reuters,

As a diplomatic row rages between the United States and Europe over spying accusations, state-backed Deutsche Telekom wants German communications companies to cooperate to shield local internet traffic from foreign intelligence services.

 

 

More fundamentally, the initiative runs counter to how the Internet works today – global traffic is passed from network to network under free or paid-for agreements with no thought for national borders.

 

If more countries wall themselves off, it could lead to a troubling "Balkanisation" of the Internet, crippling the openness and efficiency that have made the web a source of economic growth, said Dan Kaminsky, a U.S. security researcher.

 

Controls over internet traffic are more commonly seen in countries such as China and Iran where governments seek to limit the content their people can access by erecting firewalls and blocking Facebook and Twitter.

 

"It is internationally without precedent that the internet traffic of a developed country bypasses the servers of another country," said Torsten Gerpott, a professor of business and telecoms at the University of Duisburg-Essen.

 

"The push of Deutsche Telekom is laudable, but it's also a public relations move."

 

 

Government snooping is a sensitive subject in Germany, which has among the strictest privacy laws in the world, since it dredges up memories of eavesdropping by the Stasi secret police in the former East Germany, where Merkel grew up.

 

The issue dominated discussions at a European summit on Thursday, prompting Merkel to demand that the U.S. strike a "no-spying" agreement with Berlin and Paris by the end of the year.

 

 

Brazil's President Dilma Rousseff, angered by reports that the U.S. spied on her and other Brazilians, is pushing legislation that would force Google, Facebook and other internet companies to store locally gathered or user-generated data inside the country.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/6ia7M3CZSss/story01.htm Tyler Durden

Another Durable Goods Debacle, This Time Masked By Boeing Order Deluge

The headline September Durable Goods number was great: rising at 3.7%, this was well above the August revised 0.2% increase and far above expectations of a 2.3% increase. However, a quick glance into the reasons shows why the reality is – once again – far uglier. Actually, the reason is just one: Boeing, which reported 127 plane orders in September compared to just 16 in August. This translated into a 57.5% monthly increase in non-defense aircraft orders in September (and Syria’s contribution can’t be denied either, leading to a 15.2% increase in defense airplane orders). So what does the US capital spending climate look like when stripped away from very volatile (and very cancelable) Boeing orders? In a word ugly: Durable Goods ex transports actually declined by -0.1, on expectations of a rebound to 0.5%, following an even more downward revised August print of -0.4%.

But aside from the broader durable goods, and focusing on pure CapEx, in the form of Capital Goods Orders non-Defense Shipments (not so much order which too can be canceled), it is here that we get yet another validation of our thesis from early 2012, namely that the Fed has killed all corporate CapEx-driven growth. Cap Goods orders declined -1.1%, from a sharply downward revised 0.4% (was 1.5%) in August and wildly missing expectations of a 1.0% increase: this was the third consecutive miss in a row in this series. As for the shipments: at -0.2%, sliding from a downward revised 1.1%, and also missing expectations, this was the 6th miss in the Shipments category in the past 7 months. So much for any hopes of a recovery.

But wait until we get the October print when the government was “shut down” for more than half the month: it is here that the real plunge in Corporate CapEx will arguably be felt and the chart below will look like it suddenly had a downward facing heart attack.

Summarizing the above: with such horrible news, it is impossible for the S&P to not hit a fresh record high today. After all: not only is the Noctaper guaranteed, but the scenario of an increase in QE is becoming ever more likely…


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/p-vlxf0X6vw/story01.htm Tyler Durden

Blatant Housing-Bubble: Stating the Obvious

There are people in the world that go to work every day to end up stating the damn obvious. Oh! They get paid for doing that too. Heaven forbid that they should do that for free. They get paid for saying what we have all been shouting from the roof-tops for years and that has been complacently ignored, pooh-poohed, laughed at, lambasted and pulled apart. Well, now it’s our turn to do the same to the German Central Bank, the Bundesbank for stating the obvious in a report on Monday in which it has been admitted that the German housing market is ready to bust its bubble since housing is overvalued by 20%Dankeschön Bundesbank!

Housing Bubble at the Bundesbank?


Housing Bubble at the Bundesbank?

What is worth celebrating is only that at last someone from a central bank has actually admitted what the rest of the world has been harping on about and griping over for years now. Do people that get appointed to central banks come from planets where they can’t see properly or where they at least see the world from that rose-colored spectacle point of view? Do they have some perception of the world that is entirely different from our own one? Up until now, it may well have been what they have been making us believe.

In a report published yesterday the Bundesbank states that house rises: “are difficult to justify based on fundamental factors”. We all saw that coming in a bis-repetita placent fashion. One housing bubble is never ever enough. It’s like a double shot of vermouth. It might hurt the next morning, but it’s a damn good feeling as it slips down the throat and then we forget and hot the bottle again when the headache has somewhat subsided. That’s what’s been happening for months now around the world in our economies; and the headache still hasn’t gone. Banks are still being injected with drip-fed cash propping them up from all sides in the hope (against hope) that the economy will be rescued and revamped.

  • The bank went on to state that housing prices have increased in the entire country by an average of 8.25% over the past three years.
  • But, that figure reveals in no way the reality of the growing bubble that is at last recognized by the German central bank.
  • Urban areas have increased by sometimes up to 25%, while rural areas have remained relatively low, thus bringing down the overall increase in percentage terms.

According to some analysts, there’s yet again no need to worry and any alarm bells that are sounding are the pure fantasizing of alarmist plot theories of a growing bubble issue on the housing market. Germany isn’t in any danger according to some of an explosion since:

  • Mortgage growth is limited
  • The lending rates that are offered in Germany are usually fixed rather than variable.
  • Loans have also stood at about 80% of the value of the properties being bought.

But, that won’t stop the bubble growing since there is a lack of available housing in German cities as well as in other major places in the world as migrationary workers and increases in population size outstrip the availability of space and building projects. In the short-term there will be a further increase in housing prices in these cities. Limited supply coupled with reduced interest rates will inevitable make demand greater than supply and prices will in back-to-basic economics increase. There should be the ‘housing bubble for dummies’ coming out in the very near future. But, even then, someone will turn around and say that they never saw it coming.

It’s not just Germany it’s all over the world from Shanghai to New York. In the UK two financial schemes set up by the government (Help to Buy and Funding for Lending) have already caused reminiscent memories of the US mortgage guarantee programs and a disguised subprime set-up. No matter. We shall just end up with the same bricks and mortar on our faces as the banks and the investors rake in the money and then end up getting propped up and injected with more greenbacks (still).

  • The average price of a house in the UK is set to increase by 25% over the next five years
  • The average house in London will cost £566, 000.
  • That means a 43.5% increase in prices between now and 2018.
  • That’s a record level.
  • The number of mortgages granted in the UK has hit record levels recently that haven’t been seen for the past 5years.

There are those out there who are still saying that the word bubble is only premature and let’s not put the cart before the horse. Only trouble is: the horse went to the knacker’s yard long ago and there really won’t be any point in bolting the financial (un-)stable door when it all happens again.

The growing bubble will explode and what’s bad enough is that the countries we live in haven’t even got governments that have been able to admit and recognize the economically blatantly obvious situation that we have been preparing for now for the past five years. Even when they have admitted it, they turn round and just like the Bundesbank say that there is no ‘macroeconomic risk to financial stability’.

Here we go again for another round of financial roller-coaster strife.  But, that is stating the obvious too. So, no prizes there either!

hould we get rid of the rating agencies? Rate them yourself!

Originally posted: Blatant Housing-Bubble: Stating the Obvious

 

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Technical Analysis: Bear Expanding Triangle | Bull Expanding Triangle | Bull Falling Wedge Bear Rising Wedge High & Tight Flag

 

 

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/EnSJKcW1DPk/story01.htm Pivotfarm

Mario Draghi’s Worst Monetary Zombie-Infested Nightmare Just Got Worse… In Two Charts

As frequent readers will recall, one of our favorite series of posts describing the “Walking Dead” monetary zombie-infested continent that is Europe is the one showing the abysmal state Europe’s credit creation machinery, operated by none other than the Bank of Italy’s, Goldman’s ECB’s Mario Draghi, finds itself in. As a reminder, it was as recently as September when we found that “Mario Draghi’s Nightmare Gets Worse” because “European Loans Declined At Record Rate.” To our complete lack of surprise, when a few hours ago the ECB released the latest monetary and credit creation update for the month of September, it showed… no change. Or rather, while loans to the private sector are at all time record lows, that other metric which Draghi at least has some direct control over (since he obviously can’t control the amount of confidence in the system aside from threats of brute force), M3, just had its lowest pace of increase since January 2012.

But here’s the kicker: while the US at least has the Fed to step in and forcefully push credit into the private sector void as it has been doing every day since Lehman, in Europe, with the ECB’s balance sheet actively declining, the continent is well, on its own to fend against the monetary zombies horde shown below.

SocGen agrees:

The European Central Bank reported that money supply growth (M3) in the euro area decelerated further in September, dropping to an annual rate of 2.1% – the slowest pace of increase since January 2012 – well below the ECB’s 4.5% target. Looking at credit, the picture is once again one of fragmentation. While the French corporate sector proved rather resilient to credit crunch, the total amount of credit to corporates plunged by 4.9%yoy in Italy, 7% in Portugal, and an alarming 19.9% in Spain. Undoubtedly, this weakness in monetary and credit developments will add pressure on the ECB, which could decide to ease financial conditions further. But this will not be sufficient.

 

Our view is that a rate cut would require an additional weakening in either the growth or the inflation outlook.

The combination of currency in circulation and overnight deposits (M1) increased by only €6bn in September, after the average €38bn jumps recorded over the  July/August time span. On an annual basis, the growth of M1 continued to slow. Indeed, the closely-followed aggregate stood 6.6% above year-ago levels in September, after 6.8% in August and 7.1% in July.

 

On that matter, the ECB recently communicated on the fact that the solid increase in the M1 aggregate seen since the beginning of the year would ultimately foster a recovery in credit – and Investment – even though the overall money supply growth (M3) was decelerating.

 

Yet, it is not clear to us how a movement in overnight deposits would be such as to stimulate investment. What we rather believe is that the flow of credit remains negative, which suggests that the strong recovery in investment everyone expects is unlikely to happen for, at least, six to nine more months.

Not only is it not clear to SocGen, worst of all it is not clear to Mario Draghi, which is why his nightmares will only get worse and worse, as loan creation collapses further, as non-performing loans accumulate, and as Europe’s credit-money zombies finally escape their cages and start biting chunks of meat off of (Europe’s unemployed) people.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/uS-EygqJ6SU/story01.htm Tyler Durden

Mario Draghi's Worst Monetary Zombie-Infested Nightmare Just Got Worse… In Two Charts

As frequent readers will recall, one of our favorite series of posts describing the “Walking Dead” monetary zombie-infested continent that is Europe is the one showing the abysmal state Europe’s credit creation machinery, operated by none other than the Bank of Italy’s, Goldman’s ECB’s Mario Draghi, finds itself in. As a reminder, it was as recently as September when we found that “Mario Draghi’s Nightmare Gets Worse” because “European Loans Declined At Record Rate.” To our complete lack of surprise, when a few hours ago the ECB released the latest monetary and credit creation update for the month of September, it showed… no change. Or rather, while loans to the private sector are at all time record lows, that other metric which Draghi at least has some direct control over (since he obviously can’t control the amount of confidence in the system aside from threats of brute force), M3, just had its lowest pace of increase since January 2012.

But here’s the kicker: while the US at least has the Fed to step in and forcefully push credit into the private sector void as it has been doing every day since Lehman, in Europe, with the ECB’s balance sheet actively declining, the continent is well, on its own to fend against the monetary zombies horde shown below.

SocGen agrees:

The European Central Bank reported that money supply growth (M3) in the euro area decelerated further in September, dropping to an annual rate of 2.1% – the slowest pace of increase since January 2012 – well below the ECB’s 4.5% target. Looking at credit, the picture is once again one of fragmentation. While the French corporate sector proved rather resilient to credit crunch, the total amount of credit to corporates plunged by 4.9%yoy in Italy, 7% in Portugal, and an alarming 19.9% in Spain. Undoubtedly, this weakness in monetary and credit developments will add pressure on the ECB, which could decide to ease financial conditions further. But this will not be sufficient.

 

Our view is that a rate cut would require an additional weakening in either the growth or the inflation outlook.

The combination of currency in circulation and overnight deposits (M1) increased by only €6bn in September, after the average €38bn jumps recorded over the  July/August time span. On an annual basis, the growth of M1 continued to slow. Indeed, the closely-followed aggregate stood 6.6% above year-ago levels in September, after 6.8% in August and 7.1% in July.

 

On that matter, the ECB recently communicated on the fact that the solid increase in the M1 aggregate seen since the beginning of the year would ultimately foster a recovery in credit – and Investment – even though the overall money supply growth (M3) was decelerating.

 

Yet, it is not clear to us how a movement in overnight deposits would be such as to stimulate investment. What we rather believe is that the flow of credit remains negative, which suggests that the strong recovery in investment everyone expects is unlikely to happen for, at least, six to nine more months.

Not only is it not clear to SocGen, worst of all it is not clear to Mario Draghi, which is why his nightmares will only get worse and worse, as loan creation collapses further, as non-performing loans accumulate, and as Europe’s credit-money zombies finally escape their cages and start biting chunks of meat off of (Europe’s unemployed) people.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/uS-EygqJ6SU/story01.htm Tyler Durden

Rumors Of Spain’s Housing Market Resurrection Are Greatly Exagerated

Two days after Spain reported its first positive sequential GDP print (unclear just how adjusted the definition of GDP was to get to this watershed moment after 9 quarters of declines) and a day after it unemployment supposedly dropped more than expected (what was left unsaid is that the Spanish working age population dropped 85,200 in Q3 and -279,000 YoY and that of the 39,500 “jump” in Q3 employed people, virtually all were self-employed or temps while employees on permanent contracts were down by 146,300), the 5 second attention span investing herd is now convinced the housing market in Spain has dropped. This was “formalized” after billionaire Bill Gates invested $155 million, also known as pocket change, in Spain’s infrastructure group Fomento de Construcciones & Contratas. Surely, if anyone knows how to time housing market turns it is the guy who brought us MS-DOS 3.1.

Unfortunately, the mythical housing bottom may have been just that – mythical – following news that Spain’s bad bank (oh yeah – lest we forget, Spain has a wonderful rug under which it can hide all insolvent bank NPLs)  failed to attract high enough bids in its first sale of commercial real estate and will cut the size of the portfolio being offered to make it easier to sell, according to Bloomberg which cited three people familiar with the matter.

Bloomberg reports why rumors of the Spanish housing market’s resurrection, may have been exagerated:

The bad bank, known as Sareb, received more than 30 offers for the portfolio that were lower than it expected, said one of the people, who declined to be named because the information isn’t public. It will reduce the number of buildings in the package known as Corona to four from seven, the person said. A spokeswoman for Madrid-based Sareb declined to comment.

 

Spain created Sareb last year to absorb 50 billion euros ($69 billion) of real-estate assets from lenders including Bankia group that took aid as part of the nation’s European bailout. Its failure to attract high enough bids may undermine growing optimism in Spain as the stock market has surged 21 percent this year and foreign investors including Microsoft Corp. founder Bill Gates buy into Spanish companies.

 

In August Sareb agreed to sell a majority stake in a group of almost 1,000 homes known as Project Bull to private-equity firm H.I.G. Capital LLC. It also sold loans advanced to Inmobiliaria Colonial SA with a nominal value of 245 million euros to Burlington Loan Management Ltd.

Also known as two greatest fools. So far, all alone.

On the bright side, this only means that the Fed will need to send out some more memos to banks (and hedge funds) warning about lax lending practices, which will remain unread until the next crash, in the meantime the same banks, and hedge funds, will scramble to pick up whatever carry trades are left in the global fungible  market – if it means ultimately rushing into whatever dregs the Sareb has to sell to the greater fool, so be it.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Gxwqucf9DHs/story01.htm Tyler Durden

Rumors Of Spain's Housing Market Resurrection Are Greatly Exagerated

Two days after Spain reported its first positive sequential GDP print (unclear just how adjusted the definition of GDP was to get to this watershed moment after 9 quarters of declines) and a day after it unemployment supposedly dropped more than expected (what was left unsaid is that the Spanish working age population dropped 85,200 in Q3 and -279,000 YoY and that of the 39,500 “jump” in Q3 employed people, virtually all were self-employed or temps while employees on permanent contracts were down by 146,300), the 5 second attention span investing herd is now convinced the housing market in Spain has dropped. This was “formalized” after billionaire Bill Gates invested $155 million, also known as pocket change, in Spain’s infrastructure group Fomento de Construcciones & Contratas. Surely, if anyone knows how to time housing market turns it is the guy who brought us MS-DOS 3.1.

Unfortunately, the mythical housing bottom may have been just that – mythical – following news that Spain’s bad bank (oh yeah – lest we forget, Spain has a wonderful rug under which it can hide all insolvent bank NPLs)  failed to attract high enough bids in its first sale of commercial real estate and will cut the size of the portfolio being offered to make it easier to sell, according to Bloomberg which cited three people familiar with the matter.

Bloomberg reports why rumors of the Spanish housing market’s resurrection, may have been exagerated:

The bad bank, known as Sareb, received more than 30 offers for the portfolio that were lower than it expected, said one of the people, who declined to be named because the information isn’t public. It will reduce the number of buildings in the package known as Corona to four from seven, the person said. A spokeswoman for Madrid-based Sareb declined to comment.

 

Spain created Sareb last year to absorb 50 billion euros ($69 billion) of real-estate assets from lenders including Bankia group that took aid as part of the nation’s European bailout. Its failure to attract high enough bids may undermine growing optimism in Spain as the stock market has surged 21 percent this year and foreign investors including Microsoft Corp. founder Bill Gates buy into Spanish companies.

 

In August Sareb agreed to sell a majority stake in a group of almost 1,000 homes known as Project Bull to private-equity firm H.I.G. Capital LLC. It also sold loans advanced to Inmobiliaria Colonial SA with a nominal value of 245 million euros to Burlington Loan Management Ltd.

Also known as two greatest fools. So far, all alone.

On the bright side, this only means that the Fed will need to send out some more memos to banks (and hedge funds) warning about lax lending practices, which will remain unread until the next crash, in the meantime the same banks, and hedge funds, will scramble to pick up whatever carry trades are left in the global fungible  market – if it means ultimately rushing into whatever dregs the Sareb has to sell to the greater fool, so be it.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Gxwqucf9DHs/story01.htm Tyler Durden

Frontrunning: October 25

  • Contractors describe scant pre-launch testing of U.S. healthcare site (Reuters)
  • Carney Says BOE Revamp Offers Wider Access to Cheaper Funds (BBG)
  • Help wanted in Fukushima: Low pay, high risks and gangsters (Reuters)
  • Merkel and Hollande to change intelligence ties with US (FT)
  • Twitter IPO pegs valuation at modest $11 billion (Reuters)
  • NSA monitored calls of 35 world leaders after US official handed over contacts (Guardian)
  • Officials alert foreign services that Snowden has documents on their cooperation with U.S. (WaPo)
  • Scottish Nationalists Lose Vote After Plant Threatened With Axe (BBG)
  • Fernández contemplates a train wreck in Argentine elections (FT)
  • Irish Government will consider ‘best options’ for bailout exit (Irish Times)
  • China court throws out Bo Xilai appeal (FT)
  • Electrolux closes refrigerator factory in Australia, concentrating production to the major appliances plant in Rayong, Thailand (PR)
  • FDA recommends tightening access to hydrocodone pain-killers (Reuters)

 

Overnight Media Digest

WSJ

* A flurry of recent attacks by al Qaeda-linked militants in Iraq – strengthened by their alliance with jihadist fighters in Syria – is threatening to undo years of U.S. efforts to crush the group.

* Activist investor Carl Icahn boosted his investment in Apple Inc by 22 percent to 4.73 million shares, and continued to push for a massive $150 billion buyback at the company, according to a letter he sent to Apple Chief Executive Tim Cook.

* Former employees at USIS, the company that did the background check of Edward Snowden, the leaker of national-security information, say they were pushed to speed through background checks amid a corporate culture that made revenue the top priority.

* Outrage over alleged U.S. monitoring of German Chancellor Angela Merkel’s personal cellphone spread across Europe on Thursday, threatening to complicate an array of America’s trans-Atlantic interests.

* Twitter set its price range for its initial public offering at $17 to $20 a share, in a deal that values the company at up to $11.1 billion.

* Highly rated issuers sold more than $12 billion of bonds Thursday, taking advantage of robust investor demand and the latest tumble in market interest rates to stock up on cash.

* The U.S. Federal Communications Commission is considering softening the decades-old 25 percent foreign-ownership limit on TV and radio stations, paving way for new investment.

* The slowdown in mortgage-refinancing activity is hitting towns across the U.S. as banks such as Bank of America, Wells Fargo and Citigroup eliminate thousands of jobs to cope with declines in home lending.

* Amazon.com Inc shares soared Thursday in after-hours trading after the online retailer reported its third loss in the past year. Investors were focused on a big jump in quarterly sales, which exceeded analysts’ forecasts.

* The Chief Executive of Southwest Airlines Co hinted Thursday that the carrier could soon start charging for checked baggage if the flying public comes to accept the fees that other airlines charge.

 

FT

Micro-blogging company Twitter set a modest $17 to $20 price range per share for its initial public offering next month, anxious to avoid the runaway valuations which dogged rival Facebook’s offering.

Bank of America is planning to axe 3,000 jobs – most of which are not full-time employees – in its legacy asset servicing unit as improving credit quality reduces work on delinquent loans and foreclosures.

WPP, the world’s largest advertising company, posted better-than-expected third-quarter sales growth driven by strength from business in western Europe for the first time this year.

Royal Bank of Scotland’s “bad bank” is taking bids for its West Register internal property portfolio, which consists of a number of industrial distribution units with a guide price of 63 million pounds ($101.85 million).

G4S, the world’s biggest security services firm, said its UK chief executive had stepped down immediately after holding the position for little more than a year

 

NYT

* Twitter disclosed that it planned to price its eagerly awaited initial public offering in the $17 a share to $20 a share range, as it readies a road show for investors.

* The Food and Drug Administration on Thursday recommended tighter controls on how doctors prescribe the most commonly used narcotic painkillers. The move, which represents a major policy shift, follows a decade-long debate over whether the widely abused drugs, which contain the narcotic hydrocodone, should be controlled as tightly as more powerful painkillers like OxyContin.

* Fury over reports that American intelligence had monitored the cellphone of Chancellor Angela Merkel spread from Germany to much of Europe on Thursday, plunging trans-Atlantic relations to a low and threatening to recast the United States and President Obama from friend and ally to cyberbully.

* When the stock market opened on Thursday, NQ Mobile Inc , a Chinese mobile security company, had a valuation of $1.1 billion. Just hours later, half of its value was erased. Muddy Waters, a short-selling firm known for its scathing reports on Chinese companies, released a harsh assessment of NQ Mobile on Thursday, calling it a “massive fraud.”

* Federal officials did not fully test the online health insurance marketplace until two weeks before it opened to the public on Oct. 1, contractors told Congress on Thursday.

* The Federal Reserve’s rule asks banks to estimate how much cash might flee in a 30-day period, and requires them to enough assets that they could sell to cover that outflow.

* Microsoft Corp’s earnings of $5.24 billion beat expectations, and were helped in large part by a surge in the company’s corporate software business.

* On Thursday, DuPont said it would spin off its performance chemicals segment into a new publicly traded company. The unit – which makes a pigment that turns paints, paper and plastics white, as well as refrigerants and polymers for cables – generated about $7 billion in revenue in 2012.

* More than a year after
the activist investor William Ackman won a bitter battle for control of the Canadian Pacific Railway, he is cashing in part of his investment at a substantial profit.

* Many high-end brands have left behind Bal Harbour Shops, for years a magnet to the wealthy, for more breathing room in Miami’s Design District – once an enclave of furniture showrooms, low storefronts and empty streets in the shadow of two interstate highways.

 

Canada

THE GLOBE AND MAIL

* Canadian Prime Minister Stephen Harper insisted that “very few” people in Conservative circles knew that chief aide Nigel Wright was personally bailing out Senator Mike Duffy when the politician faced public pressure to reimburse taxpayers for questionable expense claims.

* Senators pressed the Canadian government about why a federal spy agency has been probing telecommunications in Brazil, seeking clear answers about the activities of Communications Security Establishment Canada.

Reports in the business section:

* CGI Group Inc faced the full fury of the U.S. political process on Thursday, as executives from the Canadian technology giant appeared before an angry congressional committee investigating the botched rollout of the healthcare.gov website.

* Companies operating in Canada’s oil sands are facing new pressure to assess and disclose the long-term risks to the value of their crude reserves amid a global effort to address climate change.

NATIONAL POST

* Training for front-line officers and better information sharing between police and government agencies can help protect law enforcement officials from potentially aggressive “sovereign citizens,” says a newly declassified briefing to Canadian police chiefs.

* An American who shot a Chicago police officer, and then fled to Toronto until he was caught 30 years later, was treated unfairly by Canadian immigration officials, a judge has ruled. The Federal Court of Canada said there were several problems with the way officials handled Douglas Gary Freeman’s immigration case and, as a result, he was “denied procedural fairness.”

FINANCIAL POST

* On a conference call to discuss third-quarter results, the Chief Executive of Potash Corp of Saskatchewan Inc ripped into OAO Uralkali, the Russian producer, saying its decision to collapse a cartel-like marketing company and max out production was “probably the single dumbest thing” he has ever seen in the fertilizer business.

* Pershing Square Capital Management has announced a public offering of more than 5.9 million shares of Canadian Pacific Railway Ltd that would have a value of more than $880-million at market prices.

 

China

CHINA SECURITIES JOURNAL

– Net profit of Chinese insurers jumped 134.9 percent in the first nine months of this year to 91.75 billion yuan ($15.09 billion), due to a low base last year and improved investment returns, according to the China Insurance Regulatory Commission.

SHANGHAI SECURITIES NEWS

– Shanghai will merge the city’s two major newspaper groups, the Jiefang Daily Group and Wenhui Xinmin United Press Group.

– Wal-Mart Stores is looking to close 15-30 underperforming stores in China.

SHANGHAI DAILY

– Competition and protectionism have caused Japanese dairy manufacturer Meiji to quit the China infant formula market. Meiji was forced to slash prices by regulators during an anti-monopoly campaign.

CHINA DAILY

– China’s industrial recovery remains weak, said an official with the Ministry of Industry and Information Technology.

– Agricultural Bank of China plans to offload non-performing assets valued 10 billion yuan ($1.64 billion) on the Beijing Financial Assets Exchange.

PEOPLE’S DAILY

– China’s urban employment increased by 10.66 million people during the first nine months, hitting the 9 million target for the year ahead of schedule.

 

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Advance Auto Parts (AAP) upgraded to Outperform from Sector Perform at RBC Capital
Amazon.com (AMZN) upgraded to Strong Buy from Market Perform at Raymond James
CYS Investments (CYS) upgraded to Neutral from Underperform at BofA/Merrill
Career Education (CECO) upgraded to Outperform from Market Perform at Wells Fargo
Columbia Sportswear (COLM) upgraded to Neutral from Sell at Citigroup
DuPont (DD) upgraded to Buy from Neutral at Citigroup
Forest Labs (FRX) upgraded to Market Perform from Underperform at BMO Capital
ITT Educational (ESI) upgraded to Neutral from Sell at Compass Point
ITT Educational (ESI) upgraded to Neutral from Underweight at JPMorgan
Knightsbridge Tankers (VLCCF) upgraded to Equal Weight from Underweight at Evercore
Monolithic Power (MPWR) upgraded to Outperform from Perform at Oppenheimer
Sierra Bancorp (BSRR) upgraded to Market Perform from Underperform at Raymond James

Downgrades

Caterpillar (CAT) downgraded to Neutral from Overweight at Atlantic Equities
Coca-Cola Enterprises (CCE) downgraded to Hold from Buy at Societe Generale
Credit Suisse (CS) downgraded to Neutral from Overweight at JPMorgan
Eastman Chemical (EMN) downgraded to Neutral from Conviction Buy at Goldman
Hill-Rom (HRC) downgraded to Market Perform from Outperform at Wells Fargo
ICON plc (ICLR) downgraded to Market Perform from Strong Buy at Raymond James
Landstar System (LSTR) downgraded to Neutral from Outperform at Credit Suisse
NCR Corp. (NCR) downgraded to Neutral from Buy at Compass Point
PAREXEL (PRXL) downgraded to Neutral from Outperform at RW Baird
Patterson-UTI Energy (PTEN) downgraded to Hold from Buy at Wunderlich
Plexus (PLXS) downgraded to Underperform from Neutral at BofA/Merrill
Rayonier (RYN) downgraded to Market Perform from Outperform at Raymond James
Rayonier (RYN) downgraded to Neutral from Buy at BofA/Merrill
Rayonier (RYN) downgraded to Sell from Hold at Deutsche Bank
Reliance Steel (RS) downgraded to Neutral from Outperform at Credit Suisse
STMicroelectronics (STM) downgraded to Neutral from Buy at Goldman
Sandridge Mississippian Trust (SDT) downgraded to Underperform at Raymond James
Sirius XM (SIRI) downgraded to Neutral from Buy at Goldman
Susquehanna (SUSQ) downgraded to Market Perform from Outperform at FBR Capital
Susquehanna (SUSQ) downgraded to Neutral from Outperform at Credit Suisse
Susquehanna (SUSQ) downgraded to Underperform from Market Perform at Raymond James
Taubman Centers (TCO) downgraded to Neutral from Overweight at JPMorgan
Texas Capital (TCBI) downgraded to Market Perform from Outperform at Keefe Bruyette
Timken (TKR) downgraded to Neutral from Buy at BofA/Merrill
Union First (UBSH) downgraded to Market Perform from Outperform at Keefe Bruyette
United Continental (UAL) downgraded to Underweight from Neutral at JPMorgan
Zimmer (ZMH) downgraded to Neutral from Outperform at RW Baird

Initiations

21st Century Fox (FOXA) initiated with an Outperform at FBR Capital
Actavis (ACT) initiated with a Buy at Citigroup
DISH (DISH) initiated with an Underperform at FBR Capital
DirecTV (DTV) initiated with a Market Perform at FBR Capital
Discovery (DISCA) initiated with an Outperform at FBR Capital
Disney (DIS) initiated with an Outperform at FBR Capital
Hannon Armstrong (HASI) initiated with a Sector Perform at RBC Capital
Kythera (KYTH) initiated with a Buy at BofA/Merrill
Mylan (MYL) initiated with a Neutral at Citigroup
NGL Energy Partners (NGL) initiated with an Outperform at Raymond James
Netflix (NFLX) initiated with a Market Perform at FBR Capital
Starz (STRZA) initiated with a Market Perform at FBR Capital
Teva (TEVA) initiated with a Buy at C
itigroup
TiVo (TIVO) initiated with a Market Perform at FBR Capital
Time Warner (TWX) initiated with an Outperform at FBR Capital
Vermilion Energy (VET) initiated with a Neutral at Goldman
Viacom (VIAB) initiated with an Outperform at FBR Capital

HOT STOCKS

Disney (DIS) to build its largest Disney Store in Shanghai, China
Microsoft (MSFT) CFO said corporate PC demand better than expected, Bloomberg reports
DuPont (DD) to spin-off Performance Chemicals segment
Omnicare (OCR) to pay U.S. $120M to settle False Claims Act suit

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Callaway Golf (ELY), Superior Energy (SPN), Validus (VR), Flowserve (FLS), QLogic (QLGC), KLA-Tencor (KLAC), CA Technologies (CA), NetSuite (N), Western Digital (WDC), NCR Corp. (NCR), Maxwell (MXWL), VeriSign (VRSN), Chubb (CB), Regal Entertainment (RGC), Wynn Resorts (WYNN), Zynga (ZNGA), Microsoft (MSFT), Deckers Outdoor (DECK)

Companies that missed consensus earnings expectations include:
Santander Chile (BSAC), Cliffs Natural (CLF), ResMed (RMD), KBR (KBR), Delta Apparel (DLA), DeVry (DV), BJ’s Restaurants (BJRI), Sterling Financial (STSA),

Companies that matched consensus earnings expectations include:
Cabot Oil & Gas (COG), Express Scripts (ESRX), Cerner (CERN), Amazon.com (AMZN), Netgear (NTGR)

NEWSPAPERS/WEBSITES

  • The FCC is considering softening the decades-old 25% foreign-ownership limit on TV and radio stations, a move that could open up new sources of investment capital at a time of consolidation in the TV station sector, the Wall Street Journal reports
  • Three years after BP’s (BP) Deepwater Horizon disaster, it’s still fighting to keep damage claims and regulatory fines in check. But BP is spending to leave behind one of the biggest retrenchments in its 100-plus-year history, increasing its investment in exploration, the Wall Street Journal reports
  • In a rare move, Sinopec Group (SHI) wants to sell half of its two biggest shale gas acreages in Canada to spread costs and accelerate their development, as the Chinese energy company focuses increasingly on return of investment, Reuters reports
  • Boeing (BA) secured commitments for about 200 of its 737 Max aircraft, worth $20.7B, for the upgraded variant of its best-selling short-haul planes, from multiple Chinese customers, sources say, Reuters reports
  • Ford’s (F) market value is reaching levels last seen in 1999, putting the company closer to its historical peak than Toyota (TM), the world’s biggest car maker, Bloomberg reports
  • Wynn Resorts (WYNN) founder Steve Wynn said he was “flabbergasted” when he heard  Caesars Entertainment (CZR) pulled out of a casino project in Boston after a critical review by regulators. Wynn who is pursuing a casino in nearby Everett, MA, Bloomberg reports

SYNDICATE

Aerie Pharmaceuticals (AERI) 6.72M share IPO priced at $10.00
Alcobra (ADHD) 2M share Secondary priced at $16.50
Canadian Pacific (CP) announces sale of 5.97M shares by Pershing
CommScope (COMM) 38.462M share IPO priced at $15.00
Dynavax (DVAX) to offer common stock
Endurance (EIGI) 21.051M share IPO priced at $12.00
Fidelity National (FNF) 17.25M share Secondary priced at $26.75
Horsehead Holding (ZINC) 5.5M share Secondary priced at $12.00
Institutional Financial (IFMI) files to sell 6.84M shares of common stock
Sorrento Therapeutics (SRNE) 4.15M share Secondary priced at $7.75
Sprague Resources (SRLP) 8.5M share IPO priced at $18.00
Twitter (TWTR) sees IPO price range $17-$20 on 70M shares


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Doxk1m-TfnM/story01.htm Tyler Durden

Busy, Lackluster Overnight Session Means More Delayed Taper Talk, More “Getting To Work” For Mr Yellen

It has been a busy overnight session starting off with stronger than expected food and energy inflation in Japan even though the trend is now one of decline while non-food, non-energy and certainly wage inflation is nowhere to be found (leading to a nearly 3% drop in the Nikkei225), another SHIBOR spike in China (leading to a 1.5% drop in the SHCOMP) coupled with the announcement of a new prime lending rate (a form a Chinese LIBOR equivalent which one knows will have a happy ending), even more weaker than expected corporate earnings out of Europe (leading to red markets across Europe), together with a German IFO Business Confidence miss and drop for the first time in 6 months, as well as the latest M3 and loan creation data out of the ECB which showed that Europe remains stuck in a lending vacuum in which banks refuse to give out loans, a UK GDP print which came in line with expectations of 0.8%, where however news that Goldman tentacle Mark Carney is finally starting to flex and is preparing to unleash a loan roll out collateralized by “assets” worse than Gree Feta and oilve oil. Of course, none of the above matters: only thing that drives markets is if AMZN burned enough cash in the quarter to send its stock up by another 10%, and, naturally, if today’s Durable Goods data will be horrible enough to guarantee not only a delay of the taper through mid-2014, but potentially lend credence to the SocGen idea that the Yellen-Fed may even announce an increase in QE as recently as next week.

Market Re-Cap by RanSquawk

Markets got off to a cautious start this morning, as market participants reacted to less than impressive EU based earnings and also continued to fret over yet another up tick in money market rates in China. Financials and telecommunications sectors underperformed, with credit spreads widening and the Euribor curve steepening after the 3m Euribor rate fixed above Thursday’s level. The FTSE-100 index in the UK outperformed its peers, supported by the release of an encouraging advanced GDP report and also the fact that BoE’s Carney announced late Thursday that the central bank will offer banks money for longer periods and accept a wider range of collateral. Looking elsewhere, even though the release of the latest German IFO number failed to meet consensus estimate, market reaction was relatively muted. Going forward, market participants will get to digest the release of the latest durables goods report, as well as earnings from Procter & Gamble and UPS.

Overnight news bulletin from BBG and Ran

  • China’s money-market rate completed the biggest weekly jump since a cash
    squeeze in June after the central bank refrained from injecting funds
    through open-market operations
  • The PBOC wants to avoid the problems seen in June where money market rates soared, increasing concerns of defaults and may resume reverse repos if money market rates are too high, according to PBOC sources.
  • UK GDP (Q3 A) Q/Q 0.8% vs. Exp. 0.8% (Prev. 0.7%) – strongest growth since Q2 2010.
  • German business confidence fell for the first time in six months in
    October, with the Ifo institute’s business climate index declining to
    107.4 from 107.7 in Sept and a median estimate of 108 in a Bloomberg
    News survey
  • Treasuries head for weekly gain, spurred by weaker-than-forecast September payrolls which pushed expectations for Fed taper until at least March FOMC meeting.
  • U.K. GDP rose 0.8% in 3Q, in line with forecasts and the biggest increase since 2010; BOE presents new quarterly forecasts on Nov. 13 amid growing expectations officials will concede interest rates may have to increase earlier than forecast in August
  • RBNZ Gov. Wheeler said NZD is “very strong,” would be prepared to intervene if opportunity arises to “make a difference and create uncertainty”
  • Credit Suisse and Citigroup are among banks grappling with a round of probes into MBS sales, as the U.S. uses a 1989 law to extend scrutiny of Wall Street’s role in the credit crisis and seek additional penalties from the industry
  • European leaders condemned the reported U.S. hacking of Merkel’s mobile phone and said they will seek trans-Atlantic accords on espionage practices
  • Sovereign yields mixed, EU peripheral spreads tighten. Shanghai Composite fell for a fourth day, leading Asian equities lower; European stocks and U.S. equity-index futures decline. WTI crude higher; gold and copper fall

Asian Headlines

The PBOC wants to avoid the problems seen in June where money market rates soared, increasing concerns of defaults and may resume reverse repos if money market rates are too high, according to PBOC sources.

The PBOC launched a new loan prime rate benchmark lending rate system for commercial bank lending, with the aim of liberalizing interest rate reform. The PBOC also added it is to further promote interest rate liberalization.

Japanese National CPI (Sep) Y/Y 1.1% vs. Exp. 0.9% (Prev. 0.9%), Tokyo CPI (Oct) Y/Y 0.6% vs. Exp. 0.5% (Prev. 0.5%)

– National CPI Ex Food and Energy (Sep) Y/Y 0.0% vs. Exp. 0.0% (Prev. -0.1%) – first non-deflationary reading since Dec’08.

EU & UK Headlines

German IFO Business Climate (Oct) M/M 107.4 vs. Exp. 108.0 (Prev. 107.7)
German IFO Current Assessment (Oct) M/M 111.3 vs. Exp. 111.4 (Prev. 111.4)
German IFO Expectations (Oct) M/M 103.6 vs. Exp. 104.5 (Prev. 104.2)

Eurozone M3 Money Supply (Sep) Y/Y 2.1% vs. Exp. 2.4% (Prev. 2.3%)

UK GDP (Q3 A) Q/Q 0.8% vs. Exp. 0.8% (Prev. 0.7%) – strongest growth since Q2 2010.
UK GDP (Q3 A) Y/Y 1.5% vs. Exp. 1.5% (Prev. 1.3%) – highest since Q1 2011 .

Barclays month-end extension: Euro Agg +0.08y
Barclays month-end extension: Sterling Agg +0.02y

US Headlines

According to sources, top banking regulators in the US are recommending lenders strengthen underwriting standards for leveraged corp. loans as borrowing of the high-risk debt approaches levels not seen since before the fin. crisis.

Barclays month-end extension: Treasury +0.06y

Equities

Markets got off to a cautious start this morning, as market participants reacted to less than impressive EU based earnings and also continued to fret over yet another up tick in money market rates in China.

Financials and telecommunications sectors underperformed, with credit spreads widening and the Euribor curve steepening after the 3m Euribor rate fixed above Thursday’s level.

UK banks outperformed its peers this morning, as market participants welcomed decision by the BoE to offer money for longer periods, accept a wider range of collateral, including “any asset of which we are capable of assessing the risks” and lower the cost of using the bank’s facilities.

FX

Despite the cautious sentiment as evidenced in lower trading stocks, EUR/CHF edged higher and topped the psychologically important 200DMA line to the upside. Separately, USD/JPY also managed to recover off overnight lows but remains below the 200DMA line.

Commodities

East Libya has declared itself as an autonomous authority to the central government, in what is seen as a direct challenge to the federal Libyan government.

A senior White Official has said that the US are not looking to ease sanctions ‘at the front end’ following reports that Iran are set to reduce their nuclear programme.

Indian finance minister Chidambaram asked regulators to take all possible measures to prepare for the tapering of quantitative easing policies of the US Fed.

In related news, there were also reports that India is to approach sovereign wealth funds for debt investments to offset any likely impact of US Fed tapering, according to a government official.

UBS says physical gold premiums in India may continue to rise.

* * *

We round of the round up with the commentary by Deutsche Bank’s Jim Reid

Markets are off to a cautious start to Friday’s trading though. Every major Asia regional index is trading lower with the exception of the ASX200 (+0.25%) while S&P 500 futures are down 0.2%. Japanese equities are faring poorly (- 2.2%) despite a better (ie higher) than expected inflation reading (1.1% YoY vs 0.9% expected). Core CPI measures were flat YoY and -0.2% MoM suggesting weakening upward momentum of prices. The yen’s strength against the dollar is also weighing on sentiment there. Chinese equities (-1.1%) are again lagging the broader region and are on track for their fourth consecutive loss which is the longest losing streak in nearly three months. Negative earnings reports from a number of Chinese corporate are weighing on A-shares while banking shares are rebounding (+0.6%) following sharp losses yesterday. The seven-day repo rate continues to climb (+40bp to 4.80%), though it should be noted that rates have tended to climb into the month-end over the past few months. Our Chinese bank equities team believes that rising inflation pressure and net capital inflows in September 2013 have prompted banks to preserve more liquidity, in anticipation of a potentially tighter monetary stance by the PBOC.

As a result, money market rates have spiked up, but they believe rates should normalize unless October’s CPI data surprises on the upside. Staying in China, there is some market chatter that the government is considering wide-ranging financial market and economic reforms ahead of the Country’s third plenum meeting in November – which will be attended by the President, Premier, ministers and heads of the largest state-owned enterprises.

While the market continues to push back on Fed tapering, a Bloomberg report overnight suggested that the Fed has sent letters to some of the largest US banks asking them to avoid originating loans that can be considered as “criticised”. The description relates to any loans that can be classified as having some deficiency that may result in a loss. According the article, 42% of leveraged loans were placed in that category this year. This comes after $839bn of leveraged loans were originated this year in  the US, which is within 7% of the record $899bn set in 2007 (Bloomberg). This follows comments from Fed Governor Jeremy Stein who commented earlier this year that  some segments of the credit markets are showing signs of excessive risk taking. So it’s fair to say that there is growing interest in this issue within the Fed.

Staying on the topic of central banks, the BoE Governor Mark Carney struck a decidedly softer tone towards the banking sector yesterday in his first major policy speech on financial sector regulation. The tone could be described as conciliatory, at least compared with that of his predecessor Mervyn King who was criticised as taking a harder line stance during the financial crisis. Indeed, it’s clear to us that a Mark Carney BoE would be more aggressive in supporting the banking system in the future if the need arose than his predecessor. Amongst the ideas floated by Carney yesterday, one involved amending the Index Long Term Repo to allow banks to tap central bank liquidity with lower grade collateral, and to do so at a lower charge. Carney commented that “The range of assets we will accept in exchange will be wider, extending to raw loans and, in fact, any asset of which we are capable of assessing the risks”. The Bank will also make the terms of its discount window more generous. Mervyn King’s worry of moral hazard seems to have been kicked out the door of the BoE.

Yesterday’s US data flow was mixed and did little to directly add to the tapering debate. Initial jobless claims for the week of October 19 declined -12k to 350k after the prior week was revised up +4k to 362k. The Department of Labor indicated that the backlog of initial claims in California continued to distort the data. The preliminary Markit PMI disappointed at 51.1 (vs 52.5 expected and 52.8 previous) which followed a similarly disappointing round of Euroarea PMIs (51.5 vs 52.4 expected and 52.2 previous). The JOLTS job openings survey showed 1.7% of workers quit their jobs in August, which though low by historical standards, is at multi-year highs. The US trade balance for August was broadly unchanged MoM at -$39bn. 10yr UST yields traded as low as 2.47% at one point yesterday following the data, but promptly backed up to finish just above 2.50%.

Looking at the day ahead, much of the focus in the European timezone will be on the German October IFO report and Eurozone credit aggregates. The UK’s preliminary Q3 GDP print is due today where consensus is looking for +0.8% qoq. In the US, data releases include capital goods orders, the final UofMichigan confidence survey and wholesale inventories.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/WEKX_bpfe0k/story01.htm Tyler Durden

Busy, Lackluster Overnight Session Means More Delayed Taper Talk, More "Getting To Work" For Mr Yellen

It has been a busy overnight session starting off with stronger than expected food and energy inflation in Japan even though the trend is now one of decline while non-food, non-energy and certainly wage inflation is nowhere to be found (leading to a nearly 3% drop in the Nikkei225), another SHIBOR spike in China (leading to a 1.5% drop in the SHCOMP) coupled with the announcement of a new prime lending rate (a form a Chinese LIBOR equivalent which one knows will have a happy ending), even more weaker than expected corporate earnings out of Europe (leading to red markets across Europe), together with a German IFO Business Confidence miss and drop for the first time in 6 months, as well as the latest M3 and loan creation data out of the ECB which showed that Europe remains stuck in a lending vacuum in which banks refuse to give out loans, a UK GDP print which came in line with expectations of 0.8%, where however news that Goldman tentacle Mark Carney is finally starting to flex and is preparing to unleash a loan roll out collateralized by “assets” worse than Gree Feta and oilve oil. Of course, none of the above matters: only thing that drives markets is if AMZN burned enough cash in the quarter to send its stock up by another 10%, and, naturally, if today’s Durable Goods data will be horrible enough to guarantee not only a delay of the taper through mid-2014, but potentially lend credence to the SocGen idea that the Yellen-Fed may even announce an increase in QE as recently as next week.

Market Re-Cap by RanSquawk

Markets got off to a cautious start this morning, as market participants reacted to less than impressive EU based earnings and also continued to fret over yet another up tick in money market rates in China. Financials and telecommunications sectors underperformed, with credit spreads widening and the Euribor curve steepening after the 3m Euribor rate fixed above Thursday’s level. The FTSE-100 index in the UK outperformed its peers, supported by the release of an encouraging advanced GDP report and also the fact that BoE’s Carney announced late Thursday that the central bank will offer banks money for longer periods and accept a wider range of collateral. Looking elsewhere, even though the release of the latest German IFO number failed to meet consensus estimate, market reaction was relatively muted. Going forward, market participants will get to digest the release of the latest durables goods report, as well as earnings from Procter & Gamble and UPS.

Overnight news bulletin from BBG and Ran

  • China’s money-market rate completed the biggest weekly jump since a cash
    squeeze in June after the central bank refrained from injecting funds
    through open-market operations
  • The PBOC wants to avoid the problems seen in June where money market rates soared, increasing concerns of defaults and may resume reverse repos if money market rates are too high, according to PBOC sources.
  • UK GDP (Q3 A) Q/Q 0.8% vs. Exp. 0.8% (Prev. 0.7%) – strongest growth since Q2 2010.
  • German business confidence fell for the first time in six months in
    October, with the Ifo institute’s business climate index declining to
    107.4 from 107.7 in Sept and a median estimate of 108 in a Bloomberg
    News survey
  • Treasuries head for weekly gain, spurred by weaker-than-forecast September payrolls which pushed expectations for Fed taper until at least March FOMC meeting.
  • U.K. GDP rose 0.8% in 3Q, in line with forecasts and the biggest increase since 2010; BOE presents new quarterly forecasts on Nov. 13 amid growing expectations officials will concede interest rates may have to increase earlier than forecast in August
  • RBNZ Gov. Wheeler said NZD is “very strong,” would be prepared to intervene if opportunity arises to “make a difference and create uncertainty”
  • Credit Suisse and Citigroup are among banks grappling with a round of probes into MBS sales, as the U.S. uses a 1989 law to extend scrutiny of Wall Street’s role in the credit crisis and seek additional penalties from the industry
  • European leaders condemned the reported U.S. hacking of Merkel’s mobile phone and said they will seek trans-Atlantic accords on espionage practices
  • Sovereign yields mixed, EU peripheral spreads tighten. Shanghai Composite fell for a fourth day, leading Asian equities lower; European stocks and U.S. equity-index futures decline. WTI crude higher; gold and copper fall

Asian Headlines

The PBOC wants to avoid the problems seen in June where money market rates soared, increasing concerns of defaults and may resume reverse repos if money market rates are too high, according to PBOC sources.

The PBOC launched a new loan prime rate benchmark lending rate system for commercial bank lending, with the aim of liberalizing interest rate reform. The PBOC also added it is to further promote interest rate liberalization.

Japanese National CPI (Sep) Y/Y 1.1% vs. Exp. 0.9% (Prev. 0.9%), Tokyo CPI (Oct) Y/Y 0.6% vs. Exp. 0.5% (Prev. 0.5%)

– National CPI Ex Food and Energy (Sep) Y/Y 0.0% vs. Exp. 0.0% (Prev. -0.1%) – first non-deflationary reading since Dec’08.

EU & UK Headlines

German IFO Business Climate (Oct) M/M 107.4 vs. Exp. 108.0 (Prev. 107.7)
German IFO Current Assessment (Oct) M/M 111.3 vs. Exp. 111.4 (Prev. 111.4)
German IFO Expectations (Oct) M/M 103.6 vs. Exp. 104.5 (Prev. 104.2)

Eurozone M3 Money Supply (Sep) Y/Y 2.1% vs. Exp. 2.4% (Prev. 2.3%)

UK GDP (Q3 A) Q/Q 0.8% vs. Exp. 0.8% (Prev. 0.7%) – strongest growth since Q2 2010.
UK GDP (Q3 A) Y/Y 1.5% vs. Exp. 1.5% (Prev. 1.3%) – highest since Q1 2011 .

Barclays month-end extension: Euro Agg +0.08y
Barclays month-end extension: Sterling Agg +0.02y

US Headlines

According to sources, top banking regulators in the US are recommending lenders strengthen underwriting standards for leveraged corp. loans as borrowing of the high-risk debt approaches levels not seen since before the fin. crisis.

Barclays month-end extension: Treasury +0.06y

Equities

Markets got off to a cautious start this morning, as market participants reacted to less than impressive EU based earnings and also continued to fret over yet another up tick in money market rates in China.

Financials and telecommunications sectors underperformed, with credit spreads widening and the Euribor curve steepening after the 3m Euribor rate fixed above Thursday’s level.

UK banks outperformed its peers this morning, as market participants welcomed decision by the BoE to offer money for longer periods, accept a wider range of collateral, including “any asset of which we are capable of assessing the risks” and lower the cost of using the bank’s facilities.

FX

Despite the cautious sentiment as evidenced in lower trading stocks, EUR/CHF edged higher and topped the psychologically important 200DMA line to the upside. Separately, USD/JPY also managed to recover off overnight lows but remains below the 200DMA line.

Commodities

East Libya has declared itself as an autonomous authority to the central government, in what is seen as a direct challenge to the federal Libyan government.

A senior White Official has said that the US are not looking to ease sanctions ‘at the front end’ following reports that Iran are set to reduce their nuclear programme.

Indian finance minister Chidambaram asked regulators to take all possible measures to prepare for the tapering of quantitative easing policies of the US Fed.

In related news, there were also reports that India is to approach sovereign wealth funds for debt investments to offset any likely impact of US Fed tapering, according to a go
vernment official.

UBS says physical gold premiums in India may continue to rise.

* * *

We round of the round up with the commentary by Deutsche Bank’s Jim Reid

Markets are off to a cautious start to Friday’s trading though. Every major Asia regional index is trading lower with the exception of the ASX200 (+0.25%) while S&P 500 futures are down 0.2%. Japanese equities are faring poorly (- 2.2%) despite a better (ie higher) than expected inflation reading (1.1% YoY vs 0.9% expected). Core CPI measures were flat YoY and -0.2% MoM suggesting weakening upward momentum of prices. The yen’s strength against the dollar is also weighing on sentiment there. Chinese equities (-1.1%) are again lagging the broader region and are on track for their fourth consecutive loss which is the longest losing streak in nearly three months. Negative earnings reports from a number of Chinese corporate are weighing on A-shares while banking shares are rebounding (+0.6%) following sharp losses yesterday. The seven-day repo rate continues to climb (+40bp to 4.80%), though it should be noted that rates have tended to climb into the month-end over the past few months. Our Chinese bank equities team believes that rising inflation pressure and net capital inflows in September 2013 have prompted banks to preserve more liquidity, in anticipation of a potentially tighter monetary stance by the PBOC.

As a result, money market rates have spiked up, but they believe rates should normalize unless October’s CPI data surprises on the upside. Staying in China, there is some market chatter that the government is considering wide-ranging financial market and economic reforms ahead of the Country’s third plenum meeting in November – which will be attended by the President, Premier, ministers and heads of the largest state-owned enterprises.

While the market continues to push back on Fed tapering, a Bloomberg report overnight suggested that the Fed has sent letters to some of the largest US banks asking them to avoid originating loans that can be considered as “criticised”. The description relates to any loans that can be classified as having some deficiency that may result in a loss. According the article, 42% of leveraged loans were placed in that category this year. This comes after $839bn of leveraged loans were originated this year in  the US, which is within 7% of the record $899bn set in 2007 (Bloomberg). This follows comments from Fed Governor Jeremy Stein who commented earlier this year that  some segments of the credit markets are showing signs of excessive risk taking. So it’s fair to say that there is growing interest in this issue within the Fed.

Staying on the topic of central banks, the BoE Governor Mark Carney struck a decidedly softer tone towards the banking sector yesterday in his first major policy speech on financial sector regulation. The tone could be described as conciliatory, at least compared with that of his predecessor Mervyn King who was criticised as taking a harder line stance during the financial crisis. Indeed, it’s clear to us that a Mark Carney BoE would be more aggressive in supporting the banking system in the future if the need arose than his predecessor. Amongst the ideas floated by Carney yesterday, one involved amending the Index Long Term Repo to allow banks to tap central bank liquidity with lower grade collateral, and to do so at a lower charge. Carney commented that “The range of assets we will accept in exchange will be wider, extending to raw loans and, in fact, any asset of which we are capable of assessing the risks”. The Bank will also make the terms of its discount window more generous. Mervyn King’s worry of moral hazard seems to have been kicked out the door of the BoE.

Yesterday’s US data flow was mixed and did little to directly add to the tapering debate. Initial jobless claims for the week of October 19 declined -12k to 350k after the prior week was revised up +4k to 362k. The Department of Labor indicated that the backlog of initial claims in California continued to distort the data. The preliminary Markit PMI disappointed at 51.1 (vs 52.5 expected and 52.8 previous) which followed a similarly disappointing round of Euroarea PMIs (51.5 vs 52.4 expected and 52.2 previous). The JOLTS job openings survey showed 1.7% of workers quit their jobs in August, which though low by historical standards, is at multi-year highs. The US trade balance for August was broadly unchanged MoM at -$39bn. 10yr UST yields traded as low as 2.47% at one point yesterday following the data, but promptly backed up to finish just above 2.50%.

Looking at the day ahead, much of the focus in the European timezone will be on the German October IFO report and Eurozone credit aggregates. The UK’s preliminary Q3 GDP print is due today where consensus is looking for +0.8% qoq. In the US, data releases include capital goods orders, the final UofMichigan confidence survey and wholesale inventories.


    



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