8 European Countries In Outright Deflation As Inflation Expectations Crash To Record Low

Forward inflation expectations for Europe have collapsed to all-time record lows (based on 5Y forward implied 5Y inflation) as the market grows increasingly impatient at Draghi’s dragging his “whatever it takes” feet on pulling the sovereign QE trigger.


With 8 European nations now in outright deflation, the growing political pressure on the ECB to actually “do” something is, however, equal and opposite to Germany’s (read Buba’s) insistence that member states have some fiscal discipline (oh and the fact that OMT may just be exactly what we always said it was – illegal and a mirage).


With France shunning Brussels laws directly, and Italy flouting the “hookers-and-blow” GDP adjustment to improve its debt-to-gdp ratios, is it any wonder that Germany sticks to its anti-hyperinflationary, fiscally responsible guns… But then again, as we have seen again and again with the failed European Union, beggars can be choosers as politicians are unwilling to give up their perks in favor of helping the people that voted for them (or didn’t in some cases).

via Zero Hedge http://ift.tt/1F3ixzY Tyler Durden

Beware of Extremes

The market is a fickle mistress.  At the end of September, and at the start of this month, we pushed against the hawkish read of the Fed’s dot-plots.  We resisted talk of a Fed hike in Q1 15.  We explained that the Fed’s policy signal emanates from the Troika of leaders, Yellen, Fischer and Dudley.    We warned that the US economy had lost some momentum at the end of Q3 and into Q4.  We had wrongly anticipated a softer employment report, but our larger economic suspicions are proving correct. 


We now find ourselves pushing back against the uber-pessimistic view that had taken hold.  Looking at the Fed funds futures strip the market has pushed the first rate hike out of 2015 entirely and into the Q1 2016.  There is talk of a new round of QE.  The US economy grew above trend in Q2, as partly a payback for some of the weather-induced weakness in Q1, and it appears to have grown above trend in Q3.  It is not unreasonable to anticipate some modest slowing to a more sustainable pace.  It does not mean a recession.  The slowing from near 5% annualized pace in Q2 to around 3% in Q3, and a bit slower in Q4, does not feel good, it is not the apocalypse either. 


The global headwinds can be mitigated by the decline in energy prices and the decline in interest rates.  It is yet to be seen that American households will take advantage of savings at the pump to boost spending elsewhere.  But it is a reasonable expectation. 


As a headwind, the dollar’s appreciation was always conditional on its persistence.  In terms of magnitude, we have pointed out that on a real, broad, trade-weighted basis, which is the key metric in this context, the dollar’s rise has been minor this year.  Some bilateral nominal adjustments have been larger, and some companies will likely blame adverse currency moves for disappointing news during earnings season. 


However, few companies seem to draw attention to the tailwind that currency adjustments have sometimes given.  Two companies in the same industry with similar international exposure can and do report divergent impact from the developments in the foreign exchange market.  The proper level of analysis for this is the corporate treasurer’s office and its hedging strategies, not macro-economic policy. 


The moving parts in the international jigsaw puzzle are not to be found in the euro area or Japan.  There the investors are duly pessimistic, and the recent string of data indicates it is not unwarranted.  Rather, the change has been in perceptions of the UK and US. 


For the last few months, we have been highlighting how well sterling was tracking interest rate expectations as reflected in the March 2015 short-sterling futures contract.  As the UK economy lost momentum, and price pressures continued to ease, expectations of the first hike have been pushed from Q4 14 to Q1, then into Q2, and now into late next year, if not 2016. 


Similarly, the market, as reflected in the Fed funds futures strip, was never as hawkish as the FOMC dot-plots implied.  Many observers had warned of a rude awakening for investors.   However, rather than move toward the Fed, the market has run, not walked, in the opposite direction. 


Inflation expectations are at levels that have proceeded Fed’s QE operations in the past.  These are market-based inflation expectations.   However, they are far from clean.  One distortion stems from differences of liquidity between Treasuries and the inflation-protected securities.  At the risk of over-simplifying, inflation expectations tend to fall when US Treasuries rally strongly. 


Before the end of his term, Bernanke announced the Fed’s tapering operation.  Up until now, Yellen has been simply executing it.  This methodology was important.  The Fed announced months ahead of time what it was going to do, and even waited a few months longer than many had expected.  It then implemented what it said it would.   Some foreign countries did not like the unconventional US monetary policy in the first place, and then did not like that it was going to end.  However, they cannot complain of being surprised. 


As recently as last week, NY Fed President Dudley opined that it was reasonable to expect the first rate hike around the middle of next year.  A week or so before that Dallas Fed President Fisher, who dissented at the last FOMC meeting, suggested a hike in Q1 may be appropriate.    We suspect, given the price of oil and its impact on the Texas economy, we suspect that Fisher is more likely to change his mind than Dudley. 


Assuming that Yellen and Dudley are singing from the same songbook, Yellen’s comments to the Group of 30 in Washington suggest the center is holding.  Neither the hawk nor dove wing has wrestled the reins of monetary policy from the core centrists. 


While there can be no mistake that the recent string of data since the September jobs report has been weaker than expected.  The Federal Reserve is likely to recognize this in its statement at conclusion of its month-end meeting.  However, it is also likely to recognize that progress continues to be made toward its mandates.  This is why the three elements of the Fed’s forward guidance will likely continue in the Fed’s statement later this month.


First, there is still significant slack in the labor market, even if the unemployment rate looks low or near NAIRU.  Second, It will be a “considerable” period between the end of QE and the first rate hike.  A June of July rate move would still put in 8-9 months out.  Third, even when Fed judges to have achieved its mandates, Fed funds may stay lower than what the central bank believes is the long-term equilibrium rate. 


It may be a mistake to conclude that the Fed will not raise rates, or that a new QE operation will be launched.   The Fed’s mandates are being approached.  For policy purposes, the Fed targets the core PCE deflator.  Only the second round impact of falling energy prices would be picked up, for example if the price of airfare fell as companies passed on the lower energy costs to consumers. 


More importantly, Fed officials recognize its credibility is on the line.  It has said it will raise rates.  It has led investors to believe a rate hike will be forthcoming.   Barring a significant shock, it will raise rates.    Recall that even a sharp contraction in Q1 14, not all of which can be written off due to the weather, was not sufficient to get the Fed to change the pace of its tapering.  A move back to trend growth, which is a function of labor force growth and productivity, is unlikely to derail the Federal Reserve. 


Lastly, while officials would doubtlessly prefer less dramatic market swings, the sell-off of risk assets and the rise in volatility from what many thought to be unsustainable and unhealthy is not completely undesirable.   Many market participants see the size of the Fed’s balance sheet, and some of its composition, and wrongly conclude it is a hedge fund.  It most certainly is not, and such thinking will lead one to exaggerate the impact of the market turmoil on policy.


Medium and long-term investor may also recognize the salutary effect of the market correction.  Value investors were finding little to chose from, and this setback will create new opportunities to buy good securities and companies at better prices.  A less violent path would be desirable, but this is often the case after a period of sustained trends and the compression of volatility. 


Global investors have been best served by pushing against the dramatic swings in the pendulum of market sentiment.  First the hawks tried to dislodge the market.  This was successfully rebuffed. Now the doves/pessimists are pushing the market hard in the other direction.  There is still plenty of time before the middle of next year when the market consensus previously expected the first Fed rate hike. 



Our message to clients can be summarized in three words:  Beware of extremes.  

via Zero Hedge http://ift.tt/1F3iAMc Marc To Market

Prepare For Epic Volatility: E-mini Liquidity Is Nonexistant

If you thought the last several days were volatile in the market, you ain’t seen nothing yet: judging by the early liquidity, or rather complete lack thereof, in the market moving E-Mini contract, the asset class through which as we disclosed a month ago central banks directly manipulate markets with the CME’s blessing, then we urge all those who have stop losses close to the NBBO to quietly pull those as they will get hit adversely. The reason? As this Nanex chart of ES orderbook levels show, there is zero, zilch, nada liquidity in the ES (purple line, compare to orange yesterday).

Which means that should yesterday’s volumes carry over into today (volumes which were so high, bank dark pools had to rebuff orders as they couldn’t handle the order surge) and move a market in which there is virtually no orderbook buffer, the S&P will certainly jump around like a rabid bull on meth.

Said otherwise, if you always wanted to topple the rigged house of cards with a handful of e-eminis, today may be your chance.

via Zero Hedge http://ift.tt/1qBJ5yt Tyler Durden

Average Goldman Employee Comp Drops To $385,821 Despite Top And Bottom-Line Beat

On the surface, Goldman’s just reported earnings that were significantly better than expected, with the central-bank controlling hedge fund announcing it had earned $4.57 in the third quarter, over a dollar above the $3.21 expected and also above the highest estimate, on revenues of $8.39 billion, half a billion above the $7.83 billion expected, while also announcing an increase in its dividend from $0.55 to $0.60.

The biggest revenue contributor was the pick up in FICC trading which was $2.17 billion, just below the $2.22 billion in Q2 and well above the $1.83 Bn expected.

Somewhat disappointing is that Goldman’s prop group, Investing and Lending, generated just $1.692 billion, far below the $2.072 billion last quarter: so, do you see what happens Larry when the prop guys can no longer trade against Stolper’s recos?

Nonetheless, the long-term trend in Goldman revenues is quite clear, and is shown on the chart below

But the main reason why EPS soared is because Goldman did what it should do in a time of contracting revenues: it slashed compensation – the firm set aside “only” $2.8 billion for Compensation benefits, or a 33.4% comp margin, far below the 41% expected, and the 43% margin it had accrued last quarter.

As a result, despite the substantial beat in revenues and EPS, average employee comp actually fell modestly to $385,821 in Q3, although Goldman did boost total headcount from 32,400 to 33,500 in the third quarter, bucking the layoff trend seen at every other bank.

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

Frontrunning: October 16

  • Dallas County May Declare State of Disaster From Ebola Virus (BBG)
  • Markets on edge after worst turmoil in four years (Reuters)
  • Central bankers may have no quick fix as markets swoon, economy weakens (Reuters)
  • Risk of Deflation Feeds Global Fears  (Hilsenrath)
  • U.S. health official allowed new Ebola patient on plane with slight fever (Reuters)
  • Texas Hospital Fights Allegations About Ebola Protocols (BBG)
  • Treasuries Gain as Oil Drops Below $80 While Stocks Slide (BBG)
  • Greek Bonds Slump on Bailout Concern as Spain Misses Sale Target (BBG)
  • White House shifts into crisis mode on Ebola response (Reuters)
  • Obama Confronts Slippery Slope as Islamic State Advances (BBG)
  • Cocktail of Trouble for Liquor Makers Diageo, Rémy Cointreau and LVMH (WSJ)
  • Dark Pools Said to Rebuff Orders Amid U.S. Volume Surge (BBG)
  • EU Starts Two-Week Austerity Scrutiny as Crisis Reawakens (BBG)
  • U.S. foreclosure activity falls to eight-year low (Reuters)
  • Well that was fun: AbbVie board ditches planned $55 billion Shire acquisition (Reuters)
  • Lockheed says makes breakthrough on fusion energy project (Reuters)
  • Paris’s `Squalor Pit’ Gare du Nord Becomes French Decline Symbol (BBG)


Overnight Media Digest


* Concerns grew about containing the spread of Ebola in the United States after federal health officials disclosed Wednesday that the second Texas nurse infected with the virus flew from Dallas to Cleveland and back in the days before reporting her symptoms. (http://on.wsj.com/1rdCg5N)

* U.S. officials said they weren’t seeking to extend nuclear negotiations with Iran beyond a Nov. 24 deadline, as Secretary of State John Kerry met with his Iranian counterpart on Wednesday. (http://on.wsj.com/1zcfyVu)

* AbbVie Inc said on Wednesday its board is recommending stockholders vote against the drug maker’s proposed $54 billion takeover of Shire Plc. (http://on.wsj.com/ZvJBH7)

* Mexico’s banking regulator fined Banamex, the local unit of Citigroup Inc a little more than $2 million for failing to prevent an alleged fraud against the bank by a client, oil-services firm Oceanografia. (http://on.wsj.com/1npL4tN)

* Sierra Nevada Corp, the losing bidder in NASA’s recent multibillion-dollar “space taxi” competition, has gone to court seeking to block winners Boeing Co and SpaceX from proceeding with work until its pending contract protest is resolved. (http://on.wsj.com/1twUx5q)

* Amazon Inc plans to hire 80,000 seasonal workers for its warehouse network in the United States, representing a 14 percent increase from last year as the company brings its massive distribution facilities closer to urban centers. (http://on.wsj.com/1vfPlBn)

* Google Inc unveiled three Nexus-branded devices on Wednesday, signaling plans to compete with Apple Inc for high-end consumers. Google’s new Nexus 6 smartphone, Nexus 9 tablet and Nexus Player set-top box are priced slightly below, or in line with, competing devices from Apple. In the past, Google has priced new models significantly below Apple products. That is a departure for Google, which in the past has priced new models significantly below Apple products. (http://on.wsj.com/1xTlqyl)

* McDonald’s Corp has hired back a second former executive as it tries to stabilize its U.S. business. Karen King, retired east division president for McDonald’s USA, returned to the company this week as its chief people officer for the U.S. (http://on.wsj.com/1w9OZuk)



Russian billionaire Mikhail Fridman’s attempt to buy RWE Dea, the oil and gas arm of German utility RWE AG for about 5.1 billion euros was blocked by the UK government, a move that indicates that even private Russian companies will have to bear the impact of U.S. and EU sanctions.

Japan’s Toyota Motor Corp said it would recall 1.75 million vehicles globally to address three separate defects, relating to brake master cylinders, fuel delivery pipes and the fuel suction plate.

Statoil ASA’s long-serving chief executive Helge Lund unexpectedly quit to take on the top role at smaller rival BG Group PLC where he has been promised a big pay rise if he can turn round the flagging British gas and oil producer.

Tata Steel Ltd said it was in talks with the Klesch Group to sell its long products business in Europe that employs about 6,500 people including those at its distribution facilities.



* The Obama administration may have killed the biggest corporate takeover of the year. AbbVie Inc, the Illinois-based drugmaker that had agreed to pay $54 billion for the Irish pharmaceutical company Shire Plc, now has cold feet. AbbVie’s abrupt reconsideration of the deal sent Shire’s stock price plummeting on Wednesday and provided the clearest evidence yet that the Treasury Department had succeeded in cracking down on corporate inversions. (http://nyti.ms/1sUEqww)

* The first two drugs that can slow the progression of a fatal lung disease won approval from the Food and Drug Administration on Wednesday, a decision that could open a new era for patients but also a new chapter in the controversy over high drug prices. Roche Holding AG’s drugs Esbriet and Boehringer Ingelheim’s Ofev, are meant to treat idiopathic pulmonary fibrosis, a scarring of the lungs that affects roughly 100,000 Americans and kills many of them in three to five years. (http://nyti.ms/ZFNaL9)

* Waves of nervous selling buffeted the stock market in the United States on Wednesday, after a steep sell-off in Europe. At one point, the Dow Jones industrial average had plunged 460 points, or 2.8 percent, though it later swung higher to close down 1.1 percent, or 173.45 points. The Standard & Poor’s 500-stock index fell 0.8 percent, or 15.21 points. Since their peak a month ago, American stocks have lost over $2 trillion in value, losses that may ripple through the wider economy. (http://nyti.ms/1yG2bvz)

* During an event at its Cupertino, California, headquarters on Thursday, Apple Inc is set to unveil new iPads that are expected to include fingerprint sensors for each model. A major revision of the full-size tablet, the iPad Air, is also expected. (http://nyti.ms/1sW3Yu9)

* JPMorgan & Chase corporate race website, which is managed by an outside vendor, has been conspicuously inaccessible since early August, with visitors to the site seeing only a lonely list of coming races. The link between the breach on that website and the broader attack, which the bank said did not compromise any financial information, has not been previously reported. (http://nyti.ms/1rwp6R8)

* SolarCity Corp, installer of rooftop solar systems, began selling bonds online to ordinary investors on Wednesday, joining a handful of companies that are using crowdfunding to finance solar development. The company will issue up to $200 million in the bonds, whose maturities range from one to seven years and carry interest rates of 2 percent to 4 percent. (http://nyti.ms/1sKZEwr)




– Chinese insurance firms will need to run tests to monitor and measure liquidity risks, according to a circular from the China Insurance Regulatory Commission (CIRC) on Wednesday.


– Chinese brokerages need to ratify a three-year capital replenishment plan before the end of the year and make use of at least one funding channel within three years, according to Zhang Yujun, assistant chairman at the China Securities Regulatory Commission (CSRC).


– China’s Ministry of Environmental Protection has launched a programme to monitor air pollution discharged by companies through winter, typically a time of high pollutant levels.


– Some Chinese companies operating in Africa are taking measures to protect employees against a deadly outbreak of Ebola in the region, the official paper said. China has thousands of people working in the worst affected regions in West Africa.


– Eight people in southwest China have been killed during a clash between local villagers and construction workers over a land dispute, local officials said on Wednesday.

– Chinese artists should reflect the country’s socialist values in their work, China’s president Xi Jinping said on Wednesday. Art works should not be “slaves” to the market or bear the “stench of money”, he added.



The Times


BG Group PLC has been forced to pay top dollar to recruit one of the oil and gas sector’s most well-respected figures, Helge Lund from Statoil ASA to lead the company after seven months without a chief executive, offering Lund a package of up to 29 million pounds. (http://thetim.es/100jg55)


Investors succumbed to the biggest bout of jitters since the nadir of the eurozone crisis two years ago, prompting wild swings in equities and government bonds. Volatility took hold and the Dow Jones swung by almost 450 points over the course of a turbulent day. The S&P 500 VIX index has doubled in the space of a fortnight and hit a peak of 31, higher than in the summer of 2012. (http://thetim.es/1yFr8aq)

The Guardian


Europe’s top banking regulator has warned banks they should not hand their staff top-up payments to avoid the EU bonus cap in a move that could have implications for dozens of banks and thousands of bankers. (http://bit.ly/1w9CqRP)


UK unemployment has fallen below the 2 million mark for the first time since the global financial system was on the brink of collapse six years ago. (http://bit.ly/1w9CkJO)

The Telegraph


The 36 billion pounds takeover of Shire Plc was hanging in the balance on Wednesday night after U.S. drugmaker AbbVie Inc said it was reconsidering the deal in the wake of US tax reforms. (http://bit.ly/11pitem)


Tata Steel Ltd is planning to sell its Long Products division, which employs thousands of workers at several sites in the UK. The steel giant said it had signed a Memorandum of Understanding with the Klesch Group, an industrial company which operates across Europe. (http://bit.ly/1sUdvAT)

Sky News


The chairman of troubled payday lender Wonga is recruiting another former colleague from the insurer RSA Insurance Group Plc. Paul Miles, the chief financial officer of Capquest, a debt recovery firm, will join Wonga to take on the same role. (http://bit.ly/1sffYUM)


J Sainsbury Plc’s customers have threatened to shop elsewhere after the supermarket chain confirmed it was planning cuts to its Nectar reward points. (http://bit.ly/1w9ihcF)

The Independent


Taxi hailing app Hailo is to pull out of North America as the London-based company struggles to make a profit amid “astronomical” marketing costs. (http://ind.pn/1vxagkW)


Balfour Beatty has appointed a new chief executive just weeks after fending off a takeover by rival Carillion Plc . Leo Quinn is poised to join in January after five years as group chief executive of defence research firm QinetiQ, following four years as the boss of banknote printer De La Rue. (http://ind.pn/1zbRX7k)


Fly On The Wall Pre-market Buzz


Domestic reports scheduled for today include:
Jobless claims for week of October 11 at 8:30–consensus 290K
Industrial production for September at 9:15–consensus up 0.4%
Philadelphia Fed manufacturing survey for October at 10:00–consensus 20.0
Housing market index for October at 10:00–consensus 59



Air Products (APD) upgraded to Outperform from Neutral at Credit Suisse
American Express (AXP) upgraded to Neutral from Underweight at JPMorgan
Baidu (BIDU) upgraded to Outperform from Perform at Oppenheimer
Bank of America (BAC) upgraded to Outperform from Market Perform at FBR Capital
Bank of the Ozarks (OZRK) upgraded to Buy from Hold at Wunderlich
Bristol-Myers (BMY) upgraded to Outperform from Market Perform at BMO Capital
CSX (CSX) upgraded to Outperform from Neutral at Credit Suisse
Cloud Peak (CLD) upgraded to Buy from Hold at Brean Capital
Cullen/Frost (CFR) upgraded to Market Perform from Underperform at BMO Capital
FireEye (FEYE) upgraded to Overweight from Neutral at JPMorgan
FleetCor (FLT) upgraded to Overweight from Equal Weight at Morgan Stanley
Gulfport Energy (GPOR) upgraded to Outperform from Sector Perform at RBC Capital
Host Hotels (HST) upgraded to Outperform from Market Perform at FBR Capital
Illumina (ILMN) upgraded to Overweight from Neutral at Piper Jaffray
L Brands (LB) upgraded to Outperform from Market Perform at Wells Fargo
LifePoint Hospitals (LPNT) upgraded to Outperform from Neutral at RW Baird
Magellan Midstream (MMP) upgraded to Buy from Neutral at Ladenburg
Netflix (NFLX) upgraded to Hold from Underperform at Jefferies
Sibanye Gold (SBGL) upgraded to Neutral from Sell at UBS
Targa Resources (TRGP) upgraded to Buy from Neutral at UBS
Tiffany (TIF) upgraded to Outperform from Neutral at Macquarie
Time Warner (TWX) upgraded to Buy from Neutral at BofA/Merrill


Akamai (AKAM) downgraded to Market Perform from Outperform at Wells Fargo
Francesca’s (FRAN) downgraded to Underperform from Outperform at Macquarie
lululemon (LULU) downgraded to Underperform from Neutral at Macquarie
Netflix (NFLX) downgraded to Fair Value from Buy at CRT Capital
Nordstrom (JWN) downgraded to Neutral from Outperform at Macquarie
Norfolk Southern (NSC) downgraded to Neutral from Outperform at Credit Suisse
Rio Tinto (RIO) downgraded to Market Perform from Outperform at Cowen
Seadrill (SDRL) downgraded to Reduce from Neutral at Nomura
Ternium (TX) downgraded to Neutral from Overweight at JPMorgan
Urban Outfitters (URBN) downgraded to Neutral from Outperform at Macquarie
Viacom (VIAB) downgraded to Underperform from Neutral at BofA/Merrill


Aquinox (AQXP) initiated with a Buy at Canaccord
Starwood Waypoint (SWAY) initiated with an Outperform at JMP Securities
Teck Resources (TCK) initiated with an Equal Weight at Barclays
Western Asset Mortgage (WMC) initiated with a Market Perform at Wells Fargo


Following Shire’s (SHPG) waiver of the three-day notice period, AbbVie (ABBV) announced its board withdrew its recommendation made on July 18 regarding the proposed Shire transaction and recommended that stockholders vote against the transaction
Amazon (AMZN) announced it is creating 80,000 seasonal positions across its U.S. network of fulfillment and sortation centers this holiday season
Google (GOOG) unveiled Android 5.0 Lollipop, new Nexus phone, tablet, set-top player
Microsoft (MSFT) said working with YouTube (GOOG) to reinstate content inadvertently removed
Las Vegas Sands (LVS) said its board authorized an additional $2B to the company’s stock repurchase program
Meredith (MDP) secured rights to license Martha Stewart Living (MSO) Magazine, website
Insys Therapeutics (INSY) received a Refusal to File Letter from the FDA for its proprietary Dronabinol Oral Solution
Michigan bill blocked Tesla (TSLA) from selling directly to consumers


Companies that beat consensus earnings expectations last night and today include: eBay (EBAY), Netflix (NFLX), Orbital (ORB), WNS Holdings (WNS), Danaher (DHR), UnitedHealth (UNH), Briggs & Stratton (BGG), HNI Corporation (HNI), HCA Holdings (HCA), Intellipharmaceutics (IPCI), C1 Financial (BNK), Astoria Financial (AF), Umpqua Holdings (UMPQ), United Rentals (URI), BankMutual (BKMU), Boston Private Financial (BPFH), RLI Corp. (RLI), Badger Meter (BMI), American Express (AXP)

Companies that missed consensus earnings expectations include:
Fifth Third Bancorp (FITB), Baker Hughes (BHI), Mattel (MAT), Cohen & Steers (CNS), Universal Forest (UFPI), Central Valley Community (CVCY), Platinum Underwriters (PTP), Las Vegas Sands (LVS)

Companies that matched consensus earnings expectations include:
First Cash Financial (FCFS), BB&T (BBT), Navient (NAVI), Guaranty Bancorp (GBNK)

eBay (EBAY) sees FY14 EPS at low end of $2.95-$3.00, consensus $2.97
Danaher (DHR) sees Q4 EPS $1.00-$1.04, consensus $1.04
WNS Holdings (WNS) raises FY15 adjusted EPS to $1.56-$1.63 from 1.44-$1.56
Orbital (ORB) raises 2014 adjusted EPS view to $1.20-$1.25 from $1.10-$1.20


EU antitrust chief criticizes ‘irrational’ response by politicians to Google (GOOG) probe, WSJ reports
Boeing (BA) mulls potential helicopter deal with Brazilian Army, Reuters reports
American Apparel (APP) to make interest payment on bonds, Bloomberg reports
Mexican regulators fine Citigroup’s (C) Banamex unit 30M pesos, Bloomberg reports
Berkshire Hathaway (BRK.A) cuts Tesco (TSCDY) stake to less than 3%, Telegraph reports
AbbVie (ABBV), Shire (SHPG) both look like buys no matter what, Barron’s says


Esperion (ESPR) 4.25M share Secondary priced at $20.00
NeuroMetrix (NURO) files to sell 3.3M shares for holders
Southern Missouri Bancorp (SMBC) files to sell 345,893 shares for holders
Tetraphase (TTPH) files to sell $75M of common stock

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

Second Nurse With Ebola Called CDC Before Flight And Reported She Had a Fever. She Wasn’t Told Not to Fly.

On Monday, the
day before she contacted a hospital about her symptoms, Texas nurse
Amber Vinson, the second nurse to eventually be infected with Ebola
after treating the first patient with the virus, took a commercial
flight from Cleveland to Dallas. 

Before she boarded the plane, she called the Centers for Disease
Control (CDC) and reported that she had a fever of 99.5

Here’s what happened next,
according to NBC News

According to the government spokesperson, when Vinson called in,
the staff she talked with looked on the CDC website for guidance.
At the time, the category for “uncertain risk” had guidance saying
that a person could fly commercially if they did not meet the
threshold of a temperature of 100.4.

The final guidance? Vinson “was not told that she could not
fly,” the unnamed government spokesperson
told NBC News
other news outlets
Wednesday evening. 

CDC Director Dr. Tom Frieden said the nurse “should not have
traveled on a commercial aircraft.”

But she did. And she apparently wasn’t told by the CDC that she
shouldn’t or couldn’t. 

Now, it’s not likely that anyone else on her flight contracted
Ebola. “Chances that other passengers were infected were very low
because Vinson did not vomit on the flight and was not bleeding,”

to Reuters. Even still, it should not have happened.
It was a preventable error. 

This is the latest in a string of worrisome incidents involving
the CDC going back through the summer. 

In June, the CDC announced that
dozens of workers
in its Atlanta facility had been
inadvertently exposed to anthrax. The samples had not been properly
“inactivated” before being moved. As a result, they were handled
without necessary protection.

An internal review of
the incident later found that “use of unapproved sterilization
technicques,” “transfer of material not confirmed to be inactive,”
and “lack of a standard operating procedure or process on
inactivation and transfer” played a role. 

In July, the CDC admitted
that it had unexpectedly found six long-lost vials in a
storage room at the National Institutes of Health in Maryland.
Several of those vials contained still-active samples of smallpox,
which is deadly. 

In the aftermath of those incidents, the CDC
temporarily closed two of its labs
and stopped many sample
transfers. The head of the lab where the anthrax exposure ocurred

In that incident, “the scientists failed to follow a
scientifically derived and reviewed protocol that would have
assured the anthrax was deactivated,” CDC Director Frieden said,
to CNN at the time. The short version: It “should have happened,
and it didn’t.”

Months later, with the pressure on the agency as the first Ebola
cases hit the United States, the CDC does not seem to have improved
all of its processes. Things that should be happening clearly
aren’t happening, and things that should not be happening

from Hit & Run http://ift.tt/1wbAet1

Andrew Napolitano on the FBI’s Unconstitutional Search Warrants

FBI Director James Comey knows that if his agents
get caught violating the Constitution, any evidence obtained from
their searches will be invalid. Yet his agents can and do write
their own unconstitutioanl search warrants. The Patriot Act calls
these warrants by the euphemism “national security letters.”

The list of third parties that can be subjected to an
agent-written search warrant includes virtually all entities
required by law to keep records. And recipients of these letters
are forbidden from even telling anyone they’ve recieved one. It is
this section of the Patriot Act that is being challenged by Twitter
and Google in the Ninth Circuit Court of Appeals, explains Andrew
Napolitano. The tech companies have apparently received many of
these unconstitutional agent-written warrants, and they want their
customers to know what the government is doing. 

View this article.

from Hit & Run http://ift.tt/1vh8rr3

The Mythical Menace of Marijuana-Infused Halloween Candy

This week the Denver Police Department warned
parents to be on the lookout for marijuana-infused candy that might
show up in their kids’ Halloween haul. As I show in my latest
Forbes column, this fear, though often voiced by law
enforcement officials, never seems to materialize in any actual
child’s trick-or-treat bag. Here is how the piece starts:

Move over, razor blades and shards of glass. The latest menace
to innocent trick-or-treaters, according to the Denver Police
Department (DPD), is marijuana-infused candy passed off as unspiked
versions of the same treats.

This week the DPD posted a video in
which Patrick Johnson, proprietor of Denver’s Urban Dispensary,
warns that “there’s really no way to tell the difference between
candy that’s infused and candy that’s not infused” once the
products have been removed from their original packages. The video
illustrates Johnson’s point with images of innocuous-looking gummy
bears and gumdrops. He advises parents to inspect their kids’
Halloween haul and discard anything that looks unfamiliar or seems
to have been tampered with.

Det. Aaron Kafer of the DPD’s Marijuana Unit amplifies that
message in an “Ask the Expert” podcast,
saying “there’s a ton of edible stuff that’s out there on the
market that’s infused with marijuana that could be a big problem
for your child.” Noting that “all marijuana edibles have to be
labeled,” Kafer recommends that parents make sure their kids “avoid
and not consume anything that is out of the package.”

CNN turned these warnings into a widely carried story headlined
“Tricks, Treats and THC Fears in Colorado.” According to CNN,
“Colorado parents have a new fear to factor in this Halloween: a
very adult treat ending up in their kids’ candy bags.”

Actually, this fear is not so new. For years law enforcement
officials have been warning parents to be on the lookout for
marijuana edibles in their kids’ trick-or-treat sacks. And for
years, as far as I can tell, there has not been a single documented
case in which someone has tried to get kids high by doling out
THC-tainted treats disguised as ordinary candy. 

Read the whole thing

from Hit & Run http://ift.tt/11spZ8p

Everything Breaks Again: Futures Tumble; Peripheral Yields Soar, Greek Bonds Crater

Yesterday afternoon’s “recovery” has come and gone, because just like that, in a matter of minutes, stuff just broke once again courtsy of a USDJPY which has been a one way liquidation street since hitting 106.30 just before Europe open to 105.6 as of this writing:


This comes after futures actually were briefly green for the session earlier in the morning. The catalyst this time, however, is not some US fund liquidating or repositioning or new Ebola pandemic news, but all Europe:


Only this time Europe is once again broken with periphery yields exploding, after Spain earlier failed to sell the maximum target of €3.5 billion in bonds, instead unloading only €3.2 billion, and leading to this:


And the punchline, as usual, is Greece, whose 10 Year is now wider by over 1% on the session(!), to just about 9%.

One-handed golf clap to all those who used other people’s money to buy those Greek 5 Year bonds a few months ago.

In short, Europe is a sea of red, only unlike before when the bid for safety was peripheral bonds, this time the puking is also sending the periphery crashing, something we last saw just before Draghi’s “whatever it takes” speech, which means that the market has finally called the ECB’s bluff and demands that after 2 years of jawboning, that the ECB actually put the printer where its mouth is. Good luck with that.

Let’s not forget that oil is also still sliding and we have yet to see some major macro fund liquidate as a result of commodity margin calls. The wait will hardly be too long at this point.

Oh, and we forgot to mention that today Dallas well announce State of Disaster (aka martial law lite) and activate an emergency plan over its third Ebola case. So all those BTFD, best of luck to you too.

Bulletin Headline Summary

  • European equities only see short-lived relief at the open as Greek market rot spreads to the Eurozone core, pushing German 10yr yields to – yet again – record lows.
  • Greek markets continue to sell-off on speculation that Greece’s early bailout exit will be less than smooth. The market turmoil also results in Spain failing to sell their targeted EUR 3.5bln in a longer-dated Bono auction
  • Focus turns to the slew of Fed speakers today, primarily Yellen at 1745BST/1145CDT, and earnings from Goldman Sachs, Google and Philip Morris
  • Treasury rally continues, 10Y trading below 2% while 30Y yield lowest since Dec. 2012 amid concern over global growth and possible economic impact of Ebola.
  • Investors are worried that five years since the world limped out of recession, central banks have virtually exhausted their stimulus arsenals if inflation and activity keep fading
  • A second Texas nurse infected with Ebola alerted U.S. health officials to her elevated temperature before flying from Cleveland to Dallas on a commercial airline
  • Lawmakers and health specialists say reversals and missteps mar the Obama administration’s handling of the outbreak — and fueled calls for the resignation of CDC chief Thomas Frieden, who testifies today in Congress
  • As airpower has failed to dislodge Islamic State fighters from the Syrian border town of Kobani or halt their offensive in Iraq, Obama’s appeals for strategic patience are being challenged by some U.S. military and intelligence officers and diplomats who say more needs to be done
  • It’s futile for the U.S. and its allies to “blackmail” Russia over the Ukraine crisis, Putin said in a newspaper interview; also accused Obama of adopting a “hostile” approach in naming Russia as a threat to the world
  • The ECB agreed yesterday on two acts that officially establish its covered-bond program and lay out how it will be implemented, according to two euro-area officials, who asked not to be identified because the discussions aren’t public
  • Hong Kong Chief Executive Leung Chun-ying said his government is ready to meet student leaders next week to discuss the city’s first leadership election as he seeks to end three weeks of pro-democracy protests
  • EU peripheral yields surge, with Greek 10Y over 8.00%. Asian stocks fall, Nikkei -2.2%, Shanghai -0.7%. European stocks, U.S. equity-index futures fall. Brent crude falls to four-year low; copper falls, gold little changed

US Econ Calendar

  • 8:30am: Initial Jobless Claims, Oct. 11, est. 290k (prior 287k); Continuing Claims, Oct. 4, est. 2.380m (prior 2.381m)
  • 9:15am: Industrial Production, m/m, Sept., est. 0.4% (prior -0.1%); Capacity Utilization, Sept., est. 79% (prior 78.8%)
  • 9:45am: Bloomberg Consumer Comfort, Oct. 12 (prior 36.8); Economic Expectations, Oct. (prior 41.5)
  • 10:00am: Philadelphia Fed Business Outlook, Oct., est. 19.8 (prior 22.5)
  • 10:00am: NAHB Housing Market Index, Oct., est. 59 (prior 59)
  • 4:00pm: Net Long-term TIC Flows, Aug. (prior -$18.6b); Total Net TIC Flows, Aug. (prior $57.7b)

Central Banks

  • 8:00am: Fed’s Plosser speaks in Allentown, Pa.
  • 9:00am: Fed’s Lockhart speaks in New Brunswick, N.J.
  • 10:00am: Fed’s Kocherlakota speaks in Billings, Mont.
  • 12:45pm: Fed’s Bullard speaks in Washington
  • 12:45pm: Fed’s Yellen attends event in Chelsea, Mass.


  • 11:00am: Fed to purchase $150m-$250m in 2024-2031 sector


After yesterday’s sell-off in US equities abated ahead of the Wall Street close, European equities opened on firmer footing – albeit this was very short-lived. Greek woes swirled further, as the Greek 10yr yield jumped above 8.5% for the first time in 8 months on continued speculation that Greece’s early IMF bailout exit will be less-than smooth. The resulting market turmoil in Greece rubbed off on today’s Spanish bond auction, as the Spanish Treasury failed to sell their targeted EUR 3.5bln in 2024 and 2028 debt. The SP/GE 10yr government bond yield has widened in response, wider by 22bps today as the Spanish 10yr yield climbs above 2.3%.

The Euribor curve continues to bear-flatten after the ECB confirmed they are yet to make a decision on Greece’s collateral requirements at the ECB, despite discussing doing so as earlier reports suggested the ECB could accept poorer quality collateral in order to access liquidity.


Greek equities have fallen sharply, dragging both Italian and Spanish stocks with it, as a number of Italian banks are stopped out of trade – limit down. Furthermore, lacklustre corporate earnings updates from Nestle and Roche as well as AbbVie turning against Shire dropped blue-chip stocks across the continent.

Corporate earnings updates today include Goldman Sachs, Google, Philip Morris International and Schlumberger all due today.


A resumed decline in industrial metals (Chinese iron ore futures fell 4% overnight) has knocked commodity-based currencies, with CAD, AUD and NZD all underperforming. EUR/USD saw some mild upside after Eurozone Core CPI was revised higher to 0.8% vs. Exp. 0.7%, allowing the pair to reclaim the 1.2800 level ahead of the US crossover. Alongside the downside in European equity futures, the JPY has benefited further, gaining no solace from comments out of BoJ’s Kuroda overnight – who reiterated the Bank of Japan will continue with QQE until their price target is reached.


WTI and Brent crude futures again trade softer, with WTI crude briefly breaking below USD 80/bbl. Energy prices failed to find support in positive Chinese data, which overnight showed Foreign Direct Investment rising 1.9% vs. Exp. -14.0%. Furthermore, Yesterday’s API inventories showed a significant build of 10200K vs. Prev. 5100K. The Kuwaiti Oil Co. additionally appeared unphased by the recent slide in oil, as the CEO reaffirmed that the Co. are to raise production further.

* * *

Jim Reid’s dramatic summary concludes the overnight recap

Where do we start this morning? Its tempting to get back under the duvet after a 24 hours like the last one, especially as after a year of renovations, my central heating is still not working properly. Anyway I grew up in a house without central heating so I’m made of sterner stuff. As a starter I think its fair to say that after the US opened yesterday it was not wise to be long Greek government bonds and short US Treasuries. In 10 years the former rose 82bps on the day and the latter fell an incredible 34bps at the lows. It was the worst day for Greek Government bonds since July 23rd 2012 (more on this later) and had the US intra-day move stuck, it would have been the biggest yield move on a % basis relative to the starting yield in history.

However it didn’t stick and the story of the day for US treasuries was one of a sharp post retail sales rally, then a flash rally, then a flash crash and then a slow but steady sell-off. At 7am NY time 10 years were sitting calmly at around 2.20% before rallying hard to 2.05% by 9am (post weak retail sales) and then 2% at 9.34am. At 9:38am though they hit 1.86%!!! They then reversed back to around 2.04% 15 minutes later before selling off to 2.14% at the close (currently lower this morning at 2.08%). A wild trip that suggests a large liquidation, capitulation or huge technical trading level breached. In markets that have a lower structural liquidity than pre-crisis these things can happen but something big in positioning must have happened yesterday.

With all this going on one wonders what probabilities you’d get that the Fed actually does QE again before it raises rates. I’m sure if you’d have suggested this a month ago many would have thought that there was more chance of Elvis being found living a relaxing retirement on the moon. As a minimum markets have now priced out a 2015 rate hike from the Fed which seems a sensible response. Our US rate strategist Dominic Konstam hosted a call last night and in it he suggested that a minimum pre-condition for stability was for the Fed to validate the re-pricing of the interest rate curve. Or in other words if they stick close to the message of the dots then to paraphrase Dominic it would be a disaster for risk assets. So we perhaps need to hear more dovish comments from the Fed along the lines of Fischer’s remarks at the IMF over the weekend and others like Williams back on Tuesday.

The other (and bigger) problem is clearly in Europe. Before we get to Greece the further collapse in 5yr5yr breakevens suggest a market running out of confidence in the ECB’s ability to be able to do enough to arrest deflation. In the pdf today we show the history of this. Before mid-August we had only fleetingly traded below 2% in the 10 year history we have. It did manage to go back above 2% again in early September but since September 9th we’ve been back below 2% with the move accelerating over the last week. We closed at around 1.75% yesterday having hit 1.70% intra-day. This is a key gauge that Draghi looks at although he did downplay it a little in the last ECB meeting. However whichever variable he looks at this morning its fair to say that he will see a market that is not confident the ECB can deliver anywhere near enough to turn things around.

More days like yesterday will surely produce a policy response soon though. If it were to prompt a fiscal break through in Europe then the market would really like that.

Onto Greece and markets struggled yesterday on the back of ongoing political issues in the country. The Athex closed down -6.3%, its worst day since 29th October 2012, although at one point it was down more than 10%, making it the biggest intra-day drop in six years. At the same time Greek 10Y debt closed the day 82bps wider, its biggest one day widening since 23rd July 2012. Greek assets have been struggling recently as its current embattled government has looked ever more likely to collapse before their official mandate expires in 2016, even as the Prime Minister Antonio Samaras has decided Greece will end its IMF bailout programme in December, 15 months early. The anti-bailout Syriza party has seen its polling lead grow ever larger over the current dominant governing party, New Democracy. The latest poll, conducted between October 9-13 by GPO, put Syriza in a 6.5% lead over New Democracy. A general election will take place if the governing parties New Democracy and Pasok fail to secure 180 votes in parliament – the minimum needed to elect a new head of state in February as the incumbent is set to retire. The Greek PM told the Cabinet yesterday that he still expects elections in 2016 as scheduled and remains committed to his current reform programme. Almost irrespective of the final outcome of current political worries it seems they could well remain unresolved well into Q1 next year with the February vote on Greece’s new head of state the most obvious catalyst for change on the horizon.

Moving on to other parts of the European market it was also a historic day to some degree. The 10yr German Bund and French OAT yields fell around 7-8bps to fresh lows of 0.75% and 1.13%, respectively. European equities endured a difficult day with the Stoxx600, DAX, CAC, IBEX, and FTSEMIB down -3.2%, -2.9%, -3.6%, -3.6% and -4.4%, respectively. It was the 7th consecutive down day for the Stoxx600 and it was also the biggest loss for Italian markets since February 2013. On the other side of the Atlantic, the official close of S&P 500 (-0.81%) also failed to tell the whole picture. The index saw a 2.9% peak-totrough intraday move yesterday which at one point actually erased all of its YTD gains. The VIX index closed at a near 29-month high of 26.25 (crossed 31 during intraday). Interestingly Energy (+0.43%) stocks posted modest gains despite the further drift lower in oil prices. Brent fell 1.5% to test the lows of US$83/bbl into the close and there seems to be little good news going on for the commodity right now. US Financials (-2.0%) were the biggest drag to the market in what was the worst day for US bank stocks in nearly 2 years as low rates raised fears of margin concerns.

Indeed there wasn’t much good news anywhere for markets yesterday. Ebola concerns are also gaining more media focus in the US after second nurse Amber Joy Vinson was tested positive for Ebola in Dallas after nursing a Liberian patient. This raised renewed concerns about the protocols for containing the outbreak and has prompted US officials to call for more aggressive monitoring of incidents where the virus could potentially spread. Data flow failed to offer much relief either. The Fed’s Beige Book reported modest-to-moderate growth conditions but the NY Fed survey fell by 21.3pts in October (second biggest monthly fall in recorded history) whilst Retail sales print were also disappointing (-0.3% mom v -0.1% expected). PPI was also softer than expected which is broadly in line with the trend of prices we are seeing globally.

Asian markets are not surprisingly following the weaker lead from US yesterday. Chinese equities are the only major equity markets trading firmer on the day probably helped by data showing that aggregate credit growth rose to a 3 month high in September. Power consumption in China rose 2.7% yoy in September, which although is an improvement from the negative 1.5% print in August, it is still the second worst reading in the last 18 months. Away from China, bourses in Tokyo, Sydney, Seoul and Hong Kong are down -2.2%, -0.4%, -0.3% and -0.5%, respectively as we go to print. The Nikkei is now at around a 6-month low. The Dollar is weaker against key currencies. Asian credit spreads drifted wider given the broader risk off tone. Bank of China’s US$6.5bn AT1 printed overnight and is now quoted higher at 100.40/100.65 after having dipped below par at the open.

Looking at the data docket ahead we have initial jobless claims, industrial production, NAHB housing market index, and the Philly Fed in the US. Data will still be important but with the current disconnect between what’s priced in and the Fed’s dot plot, we will be increasingly sensitive to any Fed communication in the weeks and months to come. The next key event will be the 2 day FOMC meeting concluding on the 29 October (no press conference scheduled) but well ahead of that we have four Fed speakers today. Fed’s Plosser (1pm UKT) will speak on the economic outlook and will take questions from reporters. Fed’s Lockhart (2pm UKT) will speak on workforce development at a university conference co-sponsored by the Atlanta and Kansas Fed. Kocherlakota’s speech today is “Clarifying the Objectives of Monetary Policy” (3pm UKT) and finally Fed’s Bullard (5.45pm UKT) will speak on US demographics (Q&A available). After all this the focus will be on Yellen as she speaks to a Boston Fed conference on “Inequality of Economic Opportunity” tomorrow so stay tuned for that.

Let’s see what the next 24 hours brings!!

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