Tag: finance

It appears President Trump is once again backing off his warning that the historic summit with North Korea – which is set to take place June 12 in Singapore – might not happen.

In comments that were likely intended to sooth North Korea’s concerns about the so-called “Libya model” (i.e., the idea that the west would topple the North Korean regime shortly after it gives up its nuclear weapons, just like what happened with Libyan leader Muammar Gaddafi), Trump said during an interview with Fox & Friends that the US might endorse a more “gradual” process of denuclearization.

Trump also commented on the NFL’s decision to ban kneeling during the national anthem, saying the “NFL owners did the right thing” and that players who don’t stand for the anthem “shouldn’t be playing and maybe…shouldn’t be in the country.”

Trump on @foxandfriends to NFL players who don’t stand for the anthem: “You shouldn’t be playing … Maybe you shouldn’t be in the country.” pic.twitter.com/EDhdi9323O

— Axios (@axios) May 24, 2018

He added that he’d still be disappointed with any player who chose to wait in the locker room during the anthem.

Circling back to North Korea, Trump’s remarks are a departure from last week when reports surfaced claiming the US had asked the North to consider starting to ship its weapons abroad within six to twelve months, a position that we imagine the North Koreans weren’t too thrilled with.

Trump on denuclearization of North Korea: I would like to have it done immediately. Physically, a phase-in may be necessary. pic.twitter.com/kbx2YOP9yk

— Washington Examiner (@dcexaminer) May 24, 2018

When asked whether he would attend the Singapore summit, Trump reiterated his usual line (“we’ll see what happens”) though he added that there’s a “good chance” the meeting will happen.

While Trump says he’d like to see the North give up its nukes all at once, he added that, due to the logistics of moving the nukes, a “phase-in” might be necessary.

“We are going to see. I would like to have it done immediately. Physically, a phase-in may be a little bit necessary. It would have to be a rapid phase-in.”

And while North Korea says it’s moving ahead with the closure of its (already ruined) nuclear test site, signs of tension remain. For example, a senior North Korean official called Vice President Mike Pence a “political dummy” yesterday following an escalating series of harsh verbal outbursts.

Some other comments from the interview, courtesy of Axios:

• On an immigration deal: “I think it’s time to get the whole package, it’s not such a big deal, Brian. It’s time to get the whole package.”
• On James Comey: “I think a thing that I’ve done for the country — the firing of James Comey — is going to go down as a very good thing.”

via RSS https://ift.tt/2s3FnaX Tyler Durden

One day after the WSJ reported that the biggest German bank is set to “decimate” its workforce, firing 10,000 workers or one in ten, this morning Deutsche Bank confirmed plans to cut thousands of jobs as part of new CEO Christian Sewing’s restructuring and cost-cutting effort. The German bank said its headcount would fall “well below” 90,000, from just over 97,000. But the biggest gut punch to employee morale is that the bank would reduce headcount in its equities sales and trading business by about 25%.

The announcement came as Deutsche Bank was set for tough questions from investors at its annual general meeting in Frankfurt, including a vote of no confidence for Chairman Paul Achleitner who defended the supervisory board’s decision last month to replace former Chief Executive John Cryan as “unavoidable.” As the WSJ reports, the new CEO, Christian Sewing, laid out strategic priorities for the lender, telling investors that the lender remains committed to investment banking.

“This time is different,” Sewing said, referring to the bank’s years-long habit of missing cost-control targets although markets naturally seem skeptical. The bank had already cut 600 employees at the investment bank in the past seven weeks.

And in what Wall Street took as a tacit profit warning, the CEO warned that second-quarter results would reflect a “revenue environment [that] remains challenging,” particularly in the investment bank. He didn’t provide figures. The news sent DBK stock plunging 3.5%, just above €10, and rapidly approaching the all time lows hit during the bank’s existential crisis days of September 2016.

Restructuring and severance charges will also hurt full-year results Sewing said, warning that 2018 results would be hit by restructuring charges of up to €800 million ($935.9 million). Sewing, like Mr. Cryan before him, also said Deutsche Bank aims to find itself in fewer media headlines, another goal it has missed. “It won’t do us any harm to be a bit more boring,” Sewing told investors.

Thursday’s announcement of job cuts follow months of thorny debate over how fast and deep job losses should be at the beleaguered bank, the WSJ reported Wednesday. The process has divided senior executives and left investors unconvinced. The bank’s shares have fallen by nearly a third this year to their lowest level since a crisis of confidence hit the lender in late 2016.

At the investor meeting, the bank’s supervisory board and senior executives are facing probing questions about last month’s chief executive handoff and the tough choices the lender has to make. They’re also confronting a proposal to break up the company, although with nearly €50 trillion gross notional in derivatives on the bank’s books that may be next to impossible absent an ECB backstop.

The meeting follows a messy year for Deutsche Bank. The April 8 ouster of former CEO Mr. Cryan in the middle of his management contract appeared botched to some clients and investors, and shook employees launching an exodus of some the bank’s most prominent bankers.

via RSS https://ift.tt/2kjTSTY Tyler Durden

Hardly stating anything new to those who have seen the recent collapse in the Citigroup Euro Econ Surprise Index, which has recently plunged tumbled to the lowest level observed since the 2011 sovereign debt crisis…

… this morning the ECB the released minutes from its 25-26 Governing Council meeting, in which “it was widely cautioned that the uncertainty around the outlook had increased since the March monetary policy meeting” and that “a more pronounced weakening of demand, notably related to external factors, could therefore not be ruled out.“

Confirming the cautious tone from the ECB’s April meeting, the key highlights from the minutes confirm that the ECB is becoming increasingly sour on the outlook, with the threat of protectionism once again receiving the highest billing: “in particular, risks related to global factors, including the threat of increased protectionism, had become more prominent and warranted monitoring with regard to their implications for the medium-term outlook for growth and prices.”

The ECB also warned of violent FX moves: “It was also remarked that turbulent trade relations had the potential to give rise to disorderly movements in exchange rates and to heightened volatility in financial markets”

For now the outlook remains the same but that cah change: while “it was underlined that the signs of a moderation in economic growth at the start of the year did not change the picture regarding the underlying pace of expansion,” officials agreed that “data releases ahead of the June monetary policy meeting would need to be carefully scrutinized to better understand the sources of the recent moderation in growth”

The good news – stronger wages: “Some comfort was drawn from encouraging signs of a strengthening in nominal wage growth and the continued anchoring of long-term inflation expectations”

But not strong enough, as overall inflation remains weak: “While a view was expressed that the Governing Council’s criteria for a sustained adjustment in the path of inflation could be considered as close to being satisfied over a medium-term horizon, there was broad agreement that the evidence remained insufficient at the current stage.”

* * *

Whether because most traders are already out for the holiday weekend, or “just because”, there was hardly any market reaction to the minutes: as RanSquawk notes, at the post-meeting press conference, President Draghi said that the ECB discussed little directly on monetary policy “per se”, and that seems to be reflected in the minutes, and accordingly, the market reaction. 

Source: ECB

via RSS https://ift.tt/2klwcOU Tyler Durden

After months of the SEC and the CFTC pursuing civil cases against individual initial coin offerings that had scammed investors out of millions, it looks like the Department of Justice is now ready to take the government’s crackdown against bitcoin to the next level by chasing down allegations of market manipulation in bitcoin and other popular cryptocurrencies.

According to Bloomberg, the DOJ has opened a criminal investigation into whether large bitcoin traders – so-called “whales” – are manipulating the price of bitcoin. Market manipulation has been an increasingly popular topic in crypto world – particularly since prices started their historic surge.

Last summer, the SEC established the legal precedent that all digital tokens should be treated like legitimate securities and required them to be registered with the agency. Meanwhile, the CFTC, which is also working with the DOJ, declared bitcoin a commodity back in 2015, and is responsible for regulating bitcoin futures.

Investigators will likely look to bring charges against traders who engaged in spoofing – flooding the market with fake orders to push a price up or down depending on one’s position. Another illicit tactic that the DOJ is looking into is called wash trading, which is also prevalent in equity and futures markets. Wash traders trade with themselves to create the illusion of volume in an otherwise illiquid market.

The probe is reportedly focusing on bitcoin and ether, according to Bloomberg’s sources.

The investigation, which the people said is in its early stages, is the US’s latest effort to crack down on an industry that was initially embraced by those who were distrustful of banks and government control over monetary policy.

But Bitcoin’s meteoric rise – it surged to almost $20,000 in 2017 after starting the year below $1,000 – has been a lure for mom-and-pop investors. That’s prompted regulators to grow concerned that people are jumping into cryptocurrencies without knowing the risks. For instance, the Securities and Exchange Commission has opened dozens of investigations into initial coin offerings, in which companies sell digital tokens that can be redeemed for goods and services, due to suspicions that many are scams.

Cryptocurrency trading is fragmented on dozens of platforms across the globe, and many aren’t registered with the CFTC or SEC. As a derivatives watchdog, the CFTC doesn’t regulate what’s known as the spot market for digital tokens — which is the trading of actual coins rather than futures linked to them. But if the agency finds fraud in spot markets, it does have authority to impose sanctions.

Given the pressure that the IRS has put on companies like Coinbase to turn over customer information, the DOJ investigation could also ensnare a few exchanges – particularly after the collapse of Mt Gox, the former Tokyo-based exchange has been liquidated after losing hundreds of millions of dollars worth of its customers’ bitcoin.

According to Bloomberg, the limited oversight of the crypto market (the same reason given by the SEC for rejecting a proposed rule change that would’ve cleared the way for an ETF) makes it vulnerable to fraud. And exchanges are increasingly realizing that if manipulation isn’t eliminated, or at least suppressed, that customers could start walking away from what they now believe to be a rigged market… then again, investors have stuck with stocks and bonds through every financial crisis in the history of modern, post-central bank “capitalism.”

The limited oversight of crypto trading makes it a target for crooks, said John Griffin, a University of Texas finance professor who has studied manipulation, including in digital-coin markets. “There’s very little monitoring of manipulative trading, spoofing and wash trading,” Griffin said. “It would be easy to spoof this market.”

Signs are emerging that some crypto exchanges realize the industry’s growth could be constrained if large swaths of investors conclude that trading platforms have a “buyer beware” approach to oversight.

That said, good luck: determining who is manipulating prices and who has inside information would be next to impossible in the anonymous world of bitcoin, which is subject to different regulations in different markets. Japan and the Philippines have already developed their own legal framework for crypto markets.

Studies have shown that 1,000 people own 40% of the bitcoin market. Given this naturally top-heavy concentration, it could be difficult for prosecutors to prove that there’s anything illegal going on when the largest players step up to trade.

Ironically, most of the recent “manipulation” has been to the detriment of bulls: for example, when the Mt. Gox bankruptcy trustee who has earned the nickname “the Tokyo Whale” for his ability to crash prices while unloading massive quantities of bitcoin decides to sell tens of thousands of bitcoins in a single block – crashing the price – is he manipulating the market?

But that doesn’t mean spoofing isn’t happening. For years, the twitter user @bitfinexed (who has since switched his account to private) has documented the work of “spoofy” (who was also profiled here) – a nickname he used for a group of traders who would place, and then cancel, large orders on different exchanges. He has also highlighted other shady behavior, like the Bitfinexed tether token, which is supposed to allow crypto traders to go from cash to coin more quickly. But we imagine – particularly as more institutions become exposed to the bitcoin market – that the Feds will investigate every scrap of potentially nefarious activity in due time.

Meanwhile, we imagine crypto enthusiasts will be less than delighted at this news, with accusations that the US is turning into China set to emerge as crypto doomsayers claim the US government is finally making its move against bitcoin.

via RSS https://ift.tt/2J1Tl7c Tyler Durden

US equity futures are flat, following a drop in Asian shares and modest rise in European equities as markets digested the late Wednesday news that Trump’s administration started a Section 232 trade probe that may lead to new U.S. tariffs of as much as 25% on new imported vehicles, restarting global trade wars and weighing on Japanese and European automakers.

Trump’s push for tariffs drew pointed responses from Japan and South Korea and ended the temporary calm that came less than a week ago when the U.S. and China declared a truce in their trade dispute. S&P futures were unchanged while the tech sector rallied as Nasdaq futures break through yesterday’s session highs.

Offsetting concerns about Trump’s auto tariffs was a Bloomberg report that China is said to plan to cut tariffs on consumer goods, effective July 1st, on everything from cosmetics to food.

As Bloomberg notes, it has “already been a torrid week across markets so far, with investors forced to navigate escalating geopolitical and trade risks, from Trump’s decision to back away from an agreement with China to North Korea warning of a “nuclear-to-nuclear showdown.” Questions are swirling around the Italian populist government’s economic policies, while Brexit negotiations loom large over British assets. Amid the noise, the impact of somewhat dovish minutes from the Federal Reserve appeared to fade.”

European stocks started flat, dragged lower by automakers in response to Trump’s proposed tariffs, but then advanced after the ECB’s Peter Praet said in Brussels that economic conditions are good despite clouds. Stoxx Europe 600 Index climbed 0.3% to session high, extending earlier gains, with 15 of 19 industry groups up. Shares of technology, chemicals and retail companies gained the most, while European carmakers fell, with the Stoxx 600 Automobiles & Parts Index down 1.9% and underperforming the broader gauge.

Earlier, Trump’s tariff report also dragged the MSCI Asia Pacific Index lower, although modestly so, and led by Japan where the stronger yen was the primary reason for equity weakness. The Nikkei 225 (-1.1%) was the underperformer as currency strength sapped exporter sentiment and with automakers reeling from the prospects of the hefty import duties, while ASX 200 (unch) was pressured by financials amid the ongoing banking royal commission grilling on the sector, although losses in the index were stemmed by strength in consumer stocks. Elsewhere, Shanghai Comp. (-0.5%) and Hang Seng (+0.3%) traded mixed following a net neutral liquidity operation by the PBoC and mixed signals on trade talks from President Trump who stated discussions are moving along nicely, but then suggested a change in the structure may be needed.

The recent return of apparent calm to the market surface belies what is a return of many of the recent risks back to the forefront: “All the risk factors which had been pushed to the back are returning to the fore: uncertainty over U.S.-North Korea talk, U.S.-China trade tension, the Italian political situation as well as concerns about euro-zone growth,” Kumiko Ishikawa, an FX analyst at Sony Financial in Tokyo told Bloomberg.

Peripheral European bonds advanced, including Italy’s, on a La Stampa report that Luigi Zingales and Geminello Alvi are other possible candidates for Italian Finance Minister apart from favored eurosceptic Savona, whose name has spooked Italian bonds in recent days. Treasuries slipped, and after closing just under 3.0% on Wednesday, the yield on 10-year TSYs rose on Thursday and stabilizes around 3% after earlier touching their lowest level in ten days.

In global macro, the dollar weakened against most G-10 peers after Wednesday’s dovish Fed minutes and concerns about trade tensions between the U.S. and Asian economies increased. The BBDXY fell 0.1% to 1168 and the yen strengthened for a third day as Japanese stocks slumped on concern Trump’s probe of U.S. car and truck imports will lead to the introduction of higher auto tariffs: USDJPY fell as much as 0.6% to 109.38, while Japan’s Nikkei 225 dropped 1.1%. Asia was also spooked as the recent diplomatic achievements between Trump and Kim appeared to unravel after North Korea reiterated a threat to cancel a planned June summit with the U.S., further boosting demand for haven assets.

The yen’s haven peer, the Swiss franc saw Thursday’s biggest advance versus the dollar among G-10 peers. In Europe, the EUR rose for the first time in three days as tensions over Italy’s new government eased, while the pound recovered from Wednesday’s five-month low on better- than-expected U.K. retail-sales data. As noted earlier, the relief brought by Turkey’s interest-rate increase at Wednesday’s emergency central bank decision didn’t last long as the lira resumes its nosedive; the USD/TRY rose as much as 3.6%

Commodities were mixed as markets focus on US President Trump’s protectionist policies. WTI crude (-0.7%) and Brent (-0.8%) continue to extend losses alongside the lacklustre risk tone and following the prior day’s surprise DoE crude inventory build. Expectations that OPEC could boost output to offset the supply disruptions caused by Iran and Venezuela remain on traders’ minds. Meanwhile, gold (+0.5%) continues to creep higher as the yellow metal tracks the softer dollar. Elsewhere, Shanghai copper prices snapped a five-day winning streak and closed lower amid Trump stating that any deal with China will “need a different structure”. On the flip side, Chinese steel and iron ore futures closed higher, snapping its 7-day losing streak.

In other overnight news, the Times reported UK PM May is to ask EU for a new Brexit transition to last until 2023 to avoid a hard border. This was then dismissed by dismissed by government sources. Mexico NAFTA negotiator said a skinny NAFTA deal is not an option and that they are not interested in a partial agreement.

As noted above, Italy’s 5 Star is considering Zingales for Finance Minister, some see him as more of a mainstream candidate. Meanwhile, Forza Italia’s Berlusconi says he cannot support a 5 Star/League government

Late on Wednesday, US President Trump said he will know by next week if the summit with North Korea on June 12th will go ahead. In related news, North Korea said it condemns comments from US Vice-President Pence that North Korea may end up like Libya, while a Foreign Ministry official stated they will suggest to North Korea’s leadership to reconsider summit and that summit is entirely up to Washington.

Elsewhere, US Ambassador to Israel said the White House Middle East peace plan could be unveiled within next few months. Also overnight, the US expelled 2 Venezuelan diplomats in which they were ordered to leave in 48 hours.

In central bank news, ECB’s Praet says economic conditions are good despite clouds; ECB’s Vasiliauskas doesn’t disagree with ECB’s rate hike forecasts in six months.  Over in Japan, BoJ board member Sakurai says it’s too early to mull withdrawal of stimulus and now is the time to watch data carefully; he adds all policy options must be looked at when considering modifying policy.

Expected data include jobless claims and home sales. Best Buy, Medtronic, Royal Bank of Canada, and Autodesk are among companies reporting earnings

Market Snapshot

• S&P 500 futures little changed at 2,732.25
• STOXX Europe 600 up 0.3% to 393.55
• MXAP down 0.2% to 173.20
• MXAPJ up 0.3% to 565.79
• Nikkei down 1.1% to 22,437.01
• Topix down 1.2% to 1,775.65
• Hang Seng Index up 0.3% to 30,760.41
• Shanghai Composite down 0.5% to 3,154.65
• Sensex up 0.4% to 34,497.12
• Australia S&P/ASX 200 up 0.08% to 6,037.08
• Kospi down 0.2% to 2,466.01
• German 10Y yield rose 1.2 bps to 0.519%
• Euro up 0.4% to $1.1740
• Italian 10Y yield rose 7.2 bps to 2.138%
• Spanish 10Y yield fell 5.0 bps to 1.394%
• Brent futures down 0.8% to $79.20/bbl
• Gold spot up 0.3% to $1,297.42
• U.S. Dollar Index down 0.3% to 93.70

Top Overnight Headlines from Bloomberg

• President Donald Trump’s administration has started an investigation into whether car and truck imports threaten national security, a move that could lead to new U.S. tariffs on foreign vehicles. Trump’s push for tariffs drew pointed responses from Japan and South Korea and ended the temporary calm that came less than a week ago when the U.S. and China declared a truce in their trade dispute
• China is planning to reduce import duties on consumer goods ranging from food to cosmetics, people familiar with the matter said
• La Stampa: Luigi Zingales and Geminello Alvi are other possible candidates for Italian Finance Minister apart from
• favored eurosceptic Savona
• North Korea renewed a threat to cancel its planned summit with Trump next month, hardening its rhetoric by saying it was ready for a “nuclear-to-nuclear showdown” if the U.S. didn’t change its approach to the disarmament talks
• The U.S. Justice Department has opened a criminal probe into whether traders are manipulating the price of Bitcoin and other digital currencies, according to four people familiar with the matter
• Italian bonds climbed as Giuseppe Conte accepted a mandate as premier-designate and began a search for ministers, bringing some stability to a market rattled by the prospect of a populist government
• The European Commission unveiled a proposal to facilitate the development of sovereign bond-backed securities, or SBBS, as it seeks to shield Europe’s bond market from future crises in the face of German opposition to any instruments that would mutualize public debt
• British Prime Minister Theresa May will ask the European Union for a second Brexit transition period to run until 2023, according to the Times, which didn’t say where it got its information from. Brexit red tape will shrink Irish-U.K. trade, Ireland’s central bank says
• Federal Reserve officials signaled they are set to raise interest rates at their meeting in June, but sent no clear message on whether they’d hike one or two more times this year following that move
• Turkey’s central bank raised its late liquidity window rate by 300 basis points to 16.5 percent, after an extraordinary meeting of its monetary policy committee on Wednesday. The lira reversed losses after earlier plunging as much as 5.5 percent to a record low

Asian equity markets traded subdued with Trump’s trade policies returning to the forefront of attention after the US President ordered the Commerce Department to consider a probe on auto imports for national security purposes under Section 232, while reports also noted that tariffs of as much as 25% are being considered and is likely an attempt to prod NAFTA counterparts for a better deal. In addition, increasing uncertainty whether the US-North Korea summit will take place added to dampened tone, which in turn has collectively overshadowed a slightly-dovish perceived FOMC minutes. Nikkei 225 (-1.1%) was the underperformer as currency strength sapped exporter sentiment and with automakers reeling from the prospects of the hefty import duties, while ASX 200 (-0.1%) was led lower by financials amid the ongoing banking royal commission grilling on the sector, although broader losses in the index were stemmed by strength in consumer stocks. Elsewhere, Shanghai Comp. (-0.5%) and Hang Seng (+0.3) traded indecisive following a net neutral liquidity operation by the PBoC and mixed signals on trade talks from President Trump who stated discussions are moving along nicely, but then suggested a change in the structure may be needed. Finally, 10yr JGBs were flat despite the underperformance seen in Japanese stocks, as prices took a breather from the prior day’s gains and with weaker demand seen in today’s enhanced-liquidity auction for 10yr-30yr JGBs. China Mofcom said it will encourage companies to import more from US and that it welcomes US sending officials to China, although it reiterated that China has not promised to reduce trade deficit by a certain amount and will unswervingly protect its interests.

Top Asian News

• HSBC Said to Hire From Deutsche Bank, Citi in Asia Equities Push
• Top Investment Executive Fired in Rare Chinese #MeToo Flare- Up
• Singapore Warns Eight Crypto Exchanges as Scrutiny Increases
• For Asia’s Newest Central Bank Chief, It’s a Trial by Fire
• Samsonite Euro Bonds Tumble 11 Points After Short Seller Report

European bourses are currently positive (Euro Stoxx 50 +0.4%) with the current outperformer, the IBEX (+0.5%). FTSE 100 (-0.1%) is currently the underperforming bourse amid GBP strength post- Retail Sales. Auto names are being hit by the US import probe, with names such as Daimler (-2.9%), BMW (-2.8%), Volkswagen (-2.8%) and Peugeot (-2.1%) affected negatively by this news. In the M&A scope, the touted Barclays/Standard Chartered merger is stated to have created a rift between Barclays’ chief executive and chairman. Elsewhere, for Smurfit Kappa, a group of shareholders at the co. have asked the company to enter into talks with International Paper. However, the Smurfit board later reaffirmed their position against the deal.

Top European News

• ECB Says Increased Risk-Taking in Markets Needs Close Attention
• Silicon Valley-Backed Payment Company Adyen Plans Dutch IPO
• U.K. Retail Sales Bounce Back in April as Weather Warms Up
• U.K. Seen Becoming Too Reliant on EU to Keep Its Lights on

FX markets thus far are trading in a more relaxed fashion compared to yesterday’s sizeable moves seen in the early stages of European trade. Most majors are sticking to their recent ranges with the USD back below 94.00 (DXY -0.2%) in the wake of yesterday’s FOMC minutes release which was perceived as a tad dovish and did little to change the current ‘gradual hikes’ backdrop, while it also indicated the Fed would tolerate inflation temporarily above 2% and that there was a range of views on how many rate hikes are required. USD/JPY remains a key focus for the market with the JPY broadly firmer against its major peers (albeit off best levels) with the major pair sitting just above 109.50 after the move to the downside ran out of steam ahead of the 30DMA seen at 109.20. Elsewhere, the EUR has also been a beneficiary from the softer USD with EUR/USD reclaiming the 1.1700 handle after yesterday’s data-inspired rout with traders mindful over today’s ECB minutes release which will look to see if the official account of proceedings corroborates with Draghi’s vague overview of proceedings which left investors unclear as to what the ECB actually discussed at the meeting. Finally, the TRY has pared around half of its gains seen against the USD yesterday after the CBRT held an extraordinary meeting to evaluate recent developments in which it raised the Late Liquidity Window (the lending rate) by 300bps to 16.50%, while it added that it will use strong monetary tightening to support price stability. Given the price action in recent trade, it appears that markets still cast serious doubts over the autonomy of the CBRT and whether attempts to defy Erdogan will be sustainable in the long-term ahead of domestic elections next month.

Commodities are mixed as markets focus on US President Trump’s protectionist policies. WTI crude (-0.7%) and Brent (-0.8%) continue to extend losses alongside the lacklustre risk tone and following the prior day’s surprise DoE crude inventory build. Expectations that OPEC could boost output to offset the supply disruptions caused by Iran and Venezuela remain on traders’ minds. Meanwhile, gold (+0.5%) continues to creep higher as the yellow metal tracks the softer dollar. Elsewhere, Shanghai copper prices snapped a five-day winning streak and closed lower amid Trump stating that any deal with China will “need a different structure”. On the flip side, Chinese steel and iron ore futures closed higher, snapping its 7-day losing streak. Russian Energy Novak says that gradual oil output recovery will be discussed in June.

Looking at the day ahead, we get weekly initial jobless claims, Q1 house price purchase index, March FHFA house price index, April existing home sales and the May Kansas City Fed PMI are all due. Over at the Fed, Dudley will speak in the morning, along with BoE Governor Carney, while in the evening Harker is due to speak again. It’s worth noting that Russia’s acting energy minister is due to discuss the US exit from the Iran accord with Saudi Arabia’s energy minister on Thursday. The ECB will also publish its Financial Stability review report while the ECB’s Praet will speak shortly after.

US Event Calendar

• 8:30am: Initial Jobless Claims, est. 220,000, prior 222,000; Continuing Claims, est. 1.75m, prior 1.71m
• 9am: House Price Purchase Index QoQ, est. 0.65%, prior 1.61%; FHFA House Price Index MoM, est. 0.6%, prior 0.6%
• 9:45am: Bloomberg Consumer Comfort, prior 54.6
• 10am: Existing Home Sales, est. 5.55m, prior 5.6m; MoM, est. -0.89%, prior 1.1%
• 11am: Kansas City Fed Manf. Activity, est. 20, prior 26

DB’s Jim Reid concludes the overnight wrap

I don’t know about you but it’s hard to get work done at the moment without the constant ping of an email about GDPR. Companies that I only hear from once every few weeks are suddenly sending me daily emails pleading to opt in before tomorrow’s deadline. The only ones I’ve accepted so far are one that promises to cut my golf handicap and one that might be able to get me Champions League Final flights to Kiev for Saturday. Of the two I’m not sure which is the more realistic.

Markets were as erratic as my golf game yesterday, especially in Europe as the Euro PMIs disappointed, North Korea and Italy continued to focus everyone’s minds and the Turkish lira was on course for its worst day since October 2008 as it fell around -5.5% intra-day and to the lowest level on record. However the day was partly rescued first by an after the European close emergency meeting by the Turkish Central Bank where they raised their “late liquidity  window” rate 300bps to 16.5% and then by the perception of a slightly dovish set of Fed minutes.

The Turkish Lira saw a huge turnaround and was up 1.99% on the day at the end of the US trading session. For background, the Turkish Lira has fallen -20.5% this year and -12.7% in May alone as Erdogan has threatened to take more control of monetary policy if successful in an upcoming election. YTD the Lira is only behind the Argentinian Peso which is down -31.5% in 2018.

Our FX strategists made a good point last night in a blog where they argued that every Fed tightening cycle creates a meaningful crisis somewhere and it backs up a point we made in last year’s “The next financial crisis” The blog last night noted that going back in history, the 2004-6 Fed tightening created the US housing collapse and the catalyst for the global financial crisis. The late 1990s Fed stop start tightening cycle included the Asia crisis, LTCM and Russia collapse, and when tightening resumed, the pop of the equity bubble. The early 1993-4 tightening phase included the bond market turmoil and the Mexican crisis. The late 1980s tightening ushered along the S&L crisis. Greenspan’s first fumbled tightening in 1987 helped trigger Black Monday, before the Fed eased and ‘the Greenspan put’ took off in earnest. The early 80s included the LDC/Latam debt crisis and Conti Illinois collapse. The 1970s stagflation tightening was when the Fed was behind ‘the curve’ and where inflation masked a prolonged decline in real asset prices.

A reminder that our note from last September suggested that financial crises have been a very regular feature of the post-Bretton Woods system (1971-) and that based on history we’d be stunned if we didn’t have another one in some form or another by around the end of this decade/turn of the next one. The most likely catalyst was the “great unwind” of loose monetary policy/QE around the world at a time of still record debt levels. We would stand by this and I suppose the newsflow and events this year so far makes me more confident of this even if we’re still unsure on the timing or the epicentre.

Back to yesterday, the slightly dovish Fed minutes seemed to help the S&P 500 to reversed earlier losses to close in  positive territory for the day (+0.32%). Our US economists believes the minutes indicated that a further rate hike should be expected in June but that the Committee is not in a rush to clearly signal a more hawkish trajectory at this juncture. In the details, the minutes noted that “most participants judged that….it would likely soon be appropriate…to take another step in removing policy accommodation”. On balance, the minutes didn’t seemed to be too concerned about an overheating economy and inflation over shooting. It noted that a temporary period of inflation “modestly above 2% would be consistent with the committee’s symmetric inflation objective…” and that “it was premature to conclude that inflation would remain at levels around 2%….” On the labour market, the minutes noted the Employment cost index for 1Q indicated the strength in the labour market was “…showing through to a gradual pickup in wage increases, although the signal from other wage measures was less clear.” while many participants commented that overall wage pressures were still moderate or were strong only in industries and occupations…” Overall, given our economists’ expectations for the ongoing tightening of the labour market, they still expect three more hikes this year.

This morning in Asia, markets are broadly lower with the Nikkei (-1.23%), Kospi (-0.27%) and Shanghai Comp. (-0.04%) all down while the Hang Seng is rebounding modestly (+0.07%). In the US, President Trump has ordered the Commerce Department to investigate whether car and truck imports threaten national security, to which Bloomberg cited unnamed sources that suggest these investigations under Section 232 could lead to higher tariffs. Back in early May, Trump told US car markers he was planning to impose tariffs of 20-25% on some imported vehicles. Elsewhere, the Secretary of State Pompeo seemed to be easing his demands on North Korea, now calling for the regime to take “credible steps” towards denuclearisation rather than give up its weapons program immediately.

Now recapping other markets performance from yesterday. European equities were all lower, weighed down by softer PMIs, Italian politics and rising US / China trade tensions. Across the region, the DAX (-1.47%), FTSE (-1.13%) and  Stoxx 600 (-1.10%) were all down, although the latter is still up 0.9% on an YTD basis.

Elsewhere, the VStoxx jumped 16.0% to 15.06 and has been back above the VIX (12.58) for three out of the last four trading sessions after a few months of mostly being below. Despite the softer European session, US bourses turned around to close modestly higher after the FOMC minutes (S&P +0.32%; Dow +0.21%; Nasdaq +0.64%). In the retail space, Target dropped -5.7% post poor results, but Tiffany & Co. (+23.3%) and Ralph Lauren (+14.3%) rallied post a beat on earnings.

Following on, government bonds rallied following the dovish FOMC minutes and softer than expected PMIs. The yield on UST 10y fell below 3% (-6.7bp to 2.994%), while Bunds (-5.3bp) and Gilts (-8.4bp) also declined, with the latter’s outperformance partly due to a softer than expected core CPI print for April.

Meanwhile, Italian BTPs resumed their slide (10y +7.2bp) as the Italian President Mattarella named law professor Giuseppe Conte as the new PM, who will now start the process of forming a new government. Mr Conte said he “is aware of the need to confirm Italy’s position in Europe” but added that his government will based on the accord agreed by the 5SM and League Party. Elsewhere, WTI oil nudged down -0.50% to $71.84/bbl while precious metals were little changed.

Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the flash May PMIs were above market with the composite PMI at 55.7 (vs. 54.9 previous) while the services (55.7 vs. 55  expected) and manufacturing (56.6 vs. 56.5 expected) prints were also above expectations, with the latter at the highest in almost four years. Elsewhere, April new home sales fell -1.5% mom to 662k (vs. 680k expected). The number of properties for sale rose 12.4% yoy and the median sales price was little changed yoy. In Europe, the May flash PMIs were broadly below expectations and helping to cause the market weakness in the European session. The Euro area’s Composite PMI was 1pt below consensus at 54.1 (vs. 55.1) and the lowest reading in 18 months, while the services (53.9 vs. 54.7 expected) and manufacturing (55.5 vs. 56.1 expected) prints also disappointed. Across the region, all three of Germany’s PMIs were below expectations while France’s manufacturing PMI was modestly above. For composite PMIs, Germany was 53.1 (vs. 54.6 expected) while France was 54.5 (vs. 56.8 expected). DB’s Peter Sidorov noted the data point to a softening in external demand but beyond that, the mixed details do not offer much clarity and consistency in terms of the direction or drivers of the cycle after the Q1 surprise. Growth remains above trend but the murky data will make the ECB’s approaching QE decision more complex.

Elsewhere, the Euro zone’s May consumer confidence was below market but remains relatively sound at 0.2 (vs. 0.5 expected) while France’s 1Q unemployment rate was 8.9% (vs. 8.5% expected). In the UK, the April CPI was 0.1ppt lower than expectations with headline CPI at 0.4% mom (vs. 0.5% expected) and core CPI down to a 13-month low  of 2.1% yoy (vs 2.2% expected). The weakness was partly due to the timing of Easter and lower inflation for airfares. Meanwhile, RPI was in line at 3.4% yoy while core PPI was above at 2.4% yoy (vs 2.1% expected).

Looking at the day ahead, data due includes the final Q1 GDP revisions in Germany along with June consumer confidence, May confidence indicators in France and April retail sales data in the UK. In the US weekly initial jobless  claims, Q1 house price purchase index, March FHFA house price index, April existing home sales and the May Kansas City Fed PMI are all due. Over at the Fed, Dudley will speak in the morning, along with BoE Governor Carney, while in the evening Harker is due to speak again. It’s worth noting that Russia’s acting energy minister is due to discuss the US exit from the Iran accord with Saudi Arabia’s energy minister on Thursday. The ECB will also publish its Financial Stability review report while the ECB’s Praet will speak shortly after.

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As widely expected , the beneficial boost to the Turkish Lira from yesterday’s emergency 3% hike in the late liquidity window rate by the Turkish Central Bank did not even last one full day, and on Thursday the Turkish Lira collapse resumed, with the currency reversing much of yesterday’s gains, sliding as much as 3.5% – the biggest decline across Emerging Markets – amid the previously discussed concerns that the rate hike will provide only temporary support.

The central bank acted after three weeks of turbulence in the currency market, with the lira rallying 2 percent by the end of Wednesday, although as of this morning those gains are now lost, and judging by the chart below, Erdogan’s demand that Turks not exchange their rapidly devaluing currency into dollars and other foreign currency has made them do just that.

Additionally, as Bloomberg’s Stephen Kirkland notes, the market is about to test president Erdogan’s vow not to intervene in monetary policy: “beyond fueling the debate over whether Turkey’s 300bp was enough, today’s lira about-face also tests the central bank’s tightening resolve, as well as Erdogan’s vow of allegiance to global principles of monetary policy.”

It’s still early going for Turkey’s topsy-turvy market and the next catalyst comes from Erdogan himself, as he kicks off his re-election campaign today. Key to stabilizing the lira will be his tone and whether he sticks to yesterday’s script, especially since his past comments involved blaming higher rates for inflation and accusing speculators of attacking the economy.

President Recep Tayyip Erdogan, who’s seeking re-election in a June 24 vote, didn’t specifically mention the rate increase in a televised speech Wednesday, but sought to reassure investors by pledging allegiance to global principles on monetary policy.  He’s due to kick off a campaign for re-election on Thursday, as polls suggest he may face a tougher challenge than in the past.

Until then, trader nerves will be on frayed: “Is lira weakness avoidable? Perhaps not so much, considering Turkey’s high inflation and large external financing needs,” said Emre Akcakmak, a Dubai-based portfolio adviser at East Capital International.

As shown in the chart below, this trade jitteriness has manifested in the biggest surge in TRY implied vol since the financial crisis.

Potentially adding to the confusion, Bloomberg’s Anchalee Worrachate writes this morning that “whispers of capital controls have re-emerged”, as “Turkey’s currency dilemma may be deja vu all over again for investors wary of the fraught history of capital controls.”

Back in September 1998, Malaysia’s measures to counter outflows and fix the exchange rate drew criticism from the IMF. But Paul Krugman supported it, writing in a Fortune magazine article that “currency controls are a risky, stopgap measure, but some gaps desperately need to be stopped.”

I’m not suggesting capital controls are even an option for Turkey. Yet the judgment by some that yesterday’s rate hike was a temporary fix — particularly as the lira resumes weakness today — underscores the need for measures to give policy makers breathing room on the currency.

Meanwhile, as we summarized yesterday, analyst remain skeptical the one-off intervention by the CBRT will be successful: The rate increase “won’t trigger a sustainable reversal in USD/TRY after confidence has been shattered over the past few weeks,” said Piotr Matys, an EM FX strategist at Rabobank in London. “More is required to restore confidence among investors and the central bank may have to tighten monetary policy further perhaps as soon as on June 7.”

The good news is that while the currency rout has returned, so far it has spared other Turkish assets as stocks and bonds rallied. The yield on Turkish 10-year debt dropped 23bps to 14.04%, the lowest level since May 14, bringing it’s three-day decline to 54 basis points. The benchmark Borsa Istanbul 100 Index rose 1.4 percent, led Akbank and Turkiye Garanti Bankasi.

A recap of what some other analysts and traders say is below, as first noted yesterday and recapped courtesy of Bloomberg:

Tatha Ghose, an analyst at Commerzbank

• “It may suffice for the near term if global markets also turn supportive.” Otherwise, it’s only a brief pause
• Interest rates may have to rise to 20% to control the rout

Kiran Kowshik, a strategist at UniCredit in London

• The lira could rebound to about 4.4 per dollar
• Erdogan is likely to be a bit more hawkish on the FX side in his pre-election speech tomorrow, which should support the lira
• In medium term, rate hikes aren’t likely to help the lira, given the still-widening current account deficit and apparently low sensitivity of inflows to interest rates
• “Hence TRY will likely remain an under performer further out”

Alejandro Cuadrado, global head of foreign exchange at BBVA

• Rate hike should be enough to stem selloff, but more is needed to restore credibility
• Tightening topped initial BBVA’s expectation of 250 basis points
• “More signals may be needed, otherwise the adjustment higher in USDTRY remains inevitable”
• Forecasts a potential level of 4.4 in 2Q, as high volatility and possible corporate demand complicates the picture

Delphine Arrighi, a money manager at Old Mutual in London

• Hike might be “just enough” to calm the market, but more needs to be done to reestablish credibility
• Reduced short TRY position to market weight
• Without economic policy turnaround, TRY may weaken more medium-term

Shamaila Khan, director of emerging-market debt at AllianceBernstein

• Hike is a step in the right direction, but won’t be enough to change market sentiment
• “The positive impact will only last if the CB continues to pursue a hawkish policy; a one-off will not change sentiment except in the short term”
• We have not seen policy response to address the imbalances

Erik Nelson, a currency strategist at Wells Fargo in New York

• More commitment to deal with high inflation will be needed over the longer term
• “Without more concrete and sustained signs of central bank commitment to bringing down inflation, the Turkish currency will likely remain under pressure going forward”
• “We would maintain a bearish view on the currency over time unless there are more sustained actions”
• Forecasts the TRY to end 2Q at 4.3, but says there are some upside risks to that estimate

Timothy Ash, a senior emerging-market sovereign strategist at BlueBay Asset Management

• Turkey may need to raise rates again as policy makers are “far behind the curve”
• Credibility of Turkey’s central bank has been “shot to hell” over the past month, he says on Twitter

Win Thin, New York-based head of emerging-markets strategy at Brown Brothers Harriman

• 300 basis points is “a very weak response” to the depreciation in the lira
• Any currency relief “is likely to be temporary if this is all that the bank is doing”
• Central bank should have raised to at least 20%

Anders Faergemann, a London-based senior fund manager at PineBridge Investments

• “I’m not convinced 300 bps are enough at this stage to stabilize the Turkish lira. A week ago, maybe, but as of today my sense is that the market has moved on and I would have preferred the Central Bank of Turkey to have surprised the market and regained some type of control with inflation expectations”

Cristian Maggio, head of emerging market strategy at TD Securities

• “This is a relevant move for sure if they’re serious about tightening and fixing the inflation problem. However, they must be ready to do more if needed”

Paul Greer, a London-based money manager at Fidelity International

• Rate hike is enough to stabilize the lira in the short-term as some of the large short Turkey positioning will now quickly unwind, which will support the market
• However, the Turkish central bank’s credibility has been badly damaged during this episode of sharp lira depreciation
• “If the Turkish authorities had wanted to get well ahead of the curve, reduce inflation expectations on a more sustainable basis and to drive down Turkey’s long-dated debt funding costs over the longer term, they should have delivered an even larger hike than +300bp and also accompanied the hike with a simplification of its monetary policy tools”

Philip Wee, among other analysts at DBS Bank Ltd.:

• It is too early to conclude that the worst is over for the Turkish lira even after the currency rebounded from a record low
• There’s concern about “effective policy making” under Erdogan
• Erdogan’s administration still needs to address the causes, not the symptoms, of the lira’s rout

 

 

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Authored by Valentin Schmid via The Epoch Times,

Liberalize domestic trade to compete in international trade…

In early 2018, the gloves finally came off: The United States started to punish China for its unfair trade practices and threatened allies, like Europe and Canada, for their uneven trade policies. Since then, trade has been dominating the headlines, with threats and counterthreats from the opposing sides.

But the bluster is distracting the world from the fact that we’re in an outdated paradigm, and a major solution could be fairly simple.

For the current trade paradigm, when viewed from inside the complex, rigid, and bureaucratic international trade system that is the World Trade Organization (WTO) and the different domestic institutions tasked with managing trade, the Trump administration’s move to escalate the trade war is entirely understandable and justified.

According to the – severely flawed – rules of the game, China is exploiting the United States’ and Europe’s relatively free-trade policies to officially pursue its policy of complete domination of all industries. Europe and the rest of Asia are trying to gain an edge over the United States, although they are more interested in fair trade in principle than China.

For the United States, the tolerance of such trade practices resulted in persistent trade deficits with the rest of the world worth hundreds of billions of dollars, the loss of millions of manufacturing jobs, and trillions in international debt obligations. On the flip side, it also increased profit margins for multinational American corporations who produce abroad to sell in the United States, and it lowered prices of gadgets (some productive, many useless) for consumers.

So the Trump administration’s plan is to level the playing field by more or less getting even with tariffs on inbound goods, which are, on average, 10 percent in China, 4.8 percent in the European Union, and 3.5 percent in the United States. Those tariffs may be a simplified proxy of the complex trade barriers every country manages, but they do provide a good estimate of how much a country is really interested in free trade.

Whether the increase of tariffs will ultimately work remains to be seen. China has more to lose but can also suppress discontent much more easily than the United States, where some states and industries will mobilize politically to defend the status quo once they suffer from retaliatory measures.

Liberalize Domestic Trade

A cursory glance at the WTO proceedings for applying tariffs and counter-tariffs as well as the many unintended consequences of managed trade, even if they are pro-American, show that this problem needs to be solved at a higher level, outside the paradigm of government-managed trade.

The solution is to radically liberalize trade, but not only internationally—the liberalization of domestic trade is more important.

Domestic trade? Mainstream economics and the mainstream media have indoctrinated us to believe that only nations trade. However, as with all aggregate economic statistics, this is nonsense. It is private companies and private individuals who trade, and it doesn’t really matter whether this is domestic or international.

If I order a couple of bars of Cailler Frigor Swiss chocolate on Amazon, I do the trading with the company that ships them to me from Europe through Amazon. I send them money, and they send me the product.

But the same is true if I buy a couple of domestically produced bars of Hershey’s—much cheaper but certainly not as good—from Amazon here in the United States.

Goods or services are exchanged for money, whether domestically or internationally. Every tax, tariff, or regulation that stands in the way of these transactions is hindering trade.

For domestic trade in the United States, the most important barriers to trade between individuals and companies are taxation on buying and selling goods and services (sales tax) and, more importantly, taxation on selling labor services (income tax).

Capital gains taxes and taxes on dividends stand in the way of the free flow of capital. The corrupt fractional reserve fiat money system under the management of the Federal Reserve further prevents capital from finding the right places to invest, leading to overcapacity in sectors like real estate and a complete lack of infrastructure investment, to cite just one problem.

Add to this other regulations that limit or prohibit commercial transactions, especially in the labor market, and you get the picture that domestic trade is severely crippled and operating far below its potential.

It is ironic that most of the people who are ostensibly pushing for the liberalization of international trade—in reality, they merely want regulations to favor them—are most against the liberalization of trade domestically.

If the potential of domestic trade were fully unleashed, the United States would not have to worry about 10 percent average tariff rates in China or exports to China at all, because domestically produced goods could easily compete with products coming from a semi-state planned, developing economy. Without the tax and regulatory costs, even solar panels produced in the United States would be cheaper and better than the state-subsidized products from China.

State planning is less efficient and effective than the operation of free markets; therefore, China cannot win the game in the long run, just as the Soviet Union could not win it, nor Japan, whose markets were very heavily managed by the state during its boom years. Of course, this does not mean China could not score some victories here and there by dumping some products on the U.S. market virtually for free and undermining an industry. Nothing is perfect. But the costs of China doing so would be even higher than they are today and would deplete the country’s resources in the long term.

As a result of liberalized domestic trade, people and companies in the United States would either produce domestically, because the added cost of taxation and regulation would be much lower, if not removed entirely, or trade with countries who are interested in real free trade. The ideal scenario would be that almost every product that now comes from China would be produced for the same price or less domestically, so no international trade tariffs would be necessary.

Interestingly, the Trump administration is also pushing in this direction, and its tax cuts and deregulation are going in the right direction considering the starting point of illiberal domestic trade. However, if the United States wants to compete with hostile foreign players like China, taxes and regulation need to all but disappear.

Stuck in the Middle

At the moment, the United States occupies an awkward middle ground. Its international trade policies are relatively free compared to its competitors, and so are its national trade policies and regulations—and this is why the United States is still the most competitive large economy, according to the World Economic Forum (WEF) Global Competitiveness Index.

However, as job losses and the increase in debt have shown, U.S. domestic trade is not free enough to compete with hostile actors like China in the short term. This is the main risk of the free domestic trade strategy.

When unnecessary regulations, taxes, and tariffs are scrapped, there is bound to be some volatility as the economy adjusts to the freer environment. A hostile actor like China could use this adjustment period to move in and buy up companies and intellectual property.

Maybe this is why the Trump administration’s strategy of domestic liberalization and international interventionism could be just right for the time being, although both domestic and international barriers to commerce have to be removed eventually.

Many countries in the top 10 of the WEF competitive index who also rank highly in the enabling trade index, most notably Singapore (No. 1) and Hong Kong (No. 3), had their adjustment periods a few decades ago and are thriving with free domestic and international trade. They are international trading hubs and have relatively benign tax and regulatory regimes.

Both countries also have relatively balanced trade, with Singapore averaging a small surplus since the 1950s and Hong Kong a small deficit.

At the end of the economic cycle and in the long run, trade should always be balanced. By liberalizing domestic trade and unleashing the full productive capacity of the economy, the United States could achieve this goal and avoid trade wars.

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In a sign the currency’s status in international finance is on the rise, and just a few short weeks after China unveiled its Yuan-denominated oil futures contract, the CEO of the London Metal Exchange has confirmed that it is planning to introduce yuan-denominated metal products.

As we noted recently, interest in China’s yuan-denominated oil futures contract has soared since inception…the share of yuan contracts in global trading jumped to 12% compared to eight percent in March and 14% of WTI volume, up from 2% in April.

“The contract is thundering into action,” said Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA in Singapore, as quoted by Reuters.

 “It makes sense for Iran to begin selling oil under contracts denominated in yuan rather than dollars.”

Which could explain why, as The South China Morning Post reports, LME CEO Matthew Chamberlain said in an interview in Hong Kong…

 “At present, investors are trading our products in US dollars. We would definitely like to explore the possibility of launching products denominated in offshore renminbi,”

The LME, owned by Hong Kong Exchanges and Clearing (HKEX), already allows traders to use the Chinese currency as collateral. HKEX last July has also introduced yuan-denominated gold futures.

Chamberlain could not say when the new products will be launched but he is confident yuan-denominated products would be popular because the currency has become more widely use in global finance.

“Chinese investors are definitely very active customers at the LME. They are trading through mainland brokers who are members of the LME or western firms.”

“We believe with the increasing number of Chinese trading in our market, there would be more Chinese companies wishing to join the LME.”

Additionally, International Finance reports that Gary Cheung, chairman of the Hong Kong Securities Association, said:

“Allowing Chinese manufacturers and investors to trade in yuan instead of the US dollar would reduce their currency risk. If the LME wants to attract more Chinese investors to its market, it makes perfect sense for it to launch the yuan metal contracts.”

Is the tide turning on the USDollar’s reserve status? Remember, nothing lasts forever…

Even The World Bank’s former chief economist wants to replace the US dollar with a single global super-currency, saying it will create a more stable global financial system.

“The dominance of the greenback is the root cause of global financial and economic crises,” Justin Yifu Lin told Bruegel, a Brussels-based policy-research think tank. “The solution to this is to replace the national currency with a global currency.”

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In the last three months, tensions between two NATO member states have escalated dramatically – Turkey has threatened to invade Greek islands, Greece has responded, and Greeks now see Turkey as the greatest threat to their existence.

And while Turkish President Erdogan was busy talking up his currency and begging his people not to sell Lira for dollars, his air force was once again running interference with Greece.

As GreekReporter.com reports,Turkish fighter jets violated Greek airspace over the Aegean 56 times, making such incidents an almost daily phenomenon.

According to the Greek Ministry of National Defense, the air force recorded 56 violations of national airspace in the Northeast, Central and Southeastern Aegean.

Eleven Turkish aircraft – two F-16s that were flying in formation, two CN-235s and seven helicopters – also committed 14 air-traffic law violations in the Athens Flight Information Region.

According to the General Staff, in all cases, the Turkish aircraft were identified and intercepted by Greek fighter planes in line with international rules of engagement.

Two Turkish aircraft were armed.

However, despite all this provocation, the rapidly souring tensions between Greece and Turkey are “not an issue for NATO,” the General Secretary of the North Atlantic Alliance, Jens Stoltenberg in an interview with Turkish news agency Anadolu.

With friends like this – who needs enemies?

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Not unlike the stock itself, it looks like Facebook users “bought the dip” on using the social media platform after the Cambridge Analytica scandal: the backlash that we were warned about for Facebook as a result of this scandal never happened.

In fact, Facebook usage numbers were actually higher for April 2018 – the month that the scandal had the most impact and news coverage. 

As Business Insider reported, the movement for consumers to delete their Facebook accounts simply never took hold. Data provided by Goldman Sachs stated that Facebook‘s unique users on mobile devices were actually up 7% in April 2018, at the same time that the scandal was in its heyday.:

Facebook weathered the worst of the storm and usage actually increased, according to a client note from Goldman Sachs, citing ComScore figures. In other words, the #deleteFacebook backlash never really arrived.

Goldman Sachs said Facebook’s US unique users on mobile rose 7% year-on-year to 188.6 million in April, when the scandal was biting hard. Time spent on Facebook also went up. The graph below says it all.

As you can see above, the company actually wound up gaining usage according these newly released figures. This seems to prove that the cash generating social media giant made its way through “its biggest crisis” without even ruffling its feathers.

The company had announced also that it was purging more than 583 million fake accounts related to “Russian interference” recently, but Deutsche Bank noted that this purge also didn’t seem to have an effect on audience reach:

And there’s more good news for Facebook. Deutsche Bank said its advertising system checks had shown that the purge of 583 million fake accounts following Russian interference in the US election has had “little to no impact on audience reach.” It produced a graph revealing that ad targeting across all demos has actually grown.

“We note that this data represents audience reach across properties, not strictly tied to core Facebook, but we suspect they are cleaning up fake accounts across the board and view this as a broad indication that ad reach across Facebook continues to grow,” Deutsche Bank said.

As you may recall, after the Cambridge Analytical scandal broke, there was no shortage of analysts and pundits on television, including Tesla uber-bull Ross Gerber, who exclaimed on CNBC that “it’s all over”, “its going to be much worse than you’re seeing” and that Facebook “had allowed their platform to be a gutter for so many evil things”. 

“Trust me, this is just the tip of the iceberg here,” he told CNBC on the first day Facebook was down about 7%.  

Business Insider continued, echoing that “other research” showing trust in Facebook had been lost has ultimately been proven inaccurate, at least as it relates to both the stock and Facebook overall usage:

The findings, coupled with a full recovery in Facebook’s share price, completely undercut other research, which suggested that people’s trust in Facebook has nosedived since mid-March, when whistleblower Christopher Wylie first helped reveal that 87 million users had their data compromised by Cambridge Analytica.

As companies that generate $27 billion plus in operating cash per annum will tend to do, Facebook shelled out to launch a full court press PR campaign and went on the defensive, running apology videos on national television alongside of other disgraced companies, like Wells Fargo, doing the same. It worked. As a result, Facebook’s share price recovered in little time. Since then, the stock had dipped to near the $150 level but has promptly made its way back up to “pre-crisis levels” near $185 again, where it is today.

The Business Insider article notes that this should give Zuckerberg momentum during his upcoming testimony with EU lawmakers, which will take place next week:

The figures will give Facebook CEO Mark Zuckerberg confidence as he prepares for a crunch week, in which he will be grilled by top EU lawmakers. He will be questioned on privacy, fake news, and regulation by European Parliament’s political leaders.

But then Zuckerberg has already suggested that Facebook has seen little impact from Cambridge Analytica in terms of user engagement. He told Congress an immaterial number of users deleted their accounts as a result of the scandal.

We’re sure this “grilling” won’t have any tangible effect on Facebook going forward, similar to the way Zuckerberg’s testimony in the U.S. had no effect. There were some analysts who accurately prognosticated that his congressional testimony would do very little, as most congressional testimony tends to not produce any results and is simply a forum for political grandstanding.

In the meantime, Cambridge Analytica got the worst of the scandal – and recently filed for bankruptcy, as was reported 5 days ago by Bloomberg:

Cambridge Analytica, overwhelmed by a scandal over how it harvested data from Facebook to influence the last U.S. election, filed for bankruptcy in New York.

The U.K.-based political consulting firm, which had already said it would cease operations and wind down in its home country, listed liabilities of $1 million to $10 million. The Chapter 7 petition to liquidate U.S. affiliates — including SCL Elections Ltd., and SCL USA Inc. and SCL Social Ltd. — was signed by board members Rebekah Mercer and Jennifer Mercer, daughters of former New York hedge fund manager Robert Mercer whose family backed Donald Trump presidential campaign and helped reshape American conservative politics.

 

For the time being, Mark Zuckerberg looks to continue being “the golden child” – escaping what has arguably been his most prominent scandal to date with little to no repercussions. This should help keep his schedule wide open so that he can continue to prepare for his presidential bid.

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