Month: October 2013

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

What we can expect to happen generally happens, as the causal chain cannot be disrupted by wishful thinking.

If I go to Las Vegas and gamble with abandon, what do I expect to happen? If I wander alone through a tough part of town waving my iPhone around, what do I expect to happen? If I insist on hiking up a muddy rain forest trail in street clothes in the pouring rain, what do I expect to happen?

We all know what is likely to happen: In Las Vegas, we will lose our stake; in the tough part of town, our iPhone will be stolen, and on the tropical trail, we will get soaking wet.

These consequences are easily predictable. What we can expect to happen generally happens, as the causal chain cannot be disrupted by wishful thinking.

Yet when we re-elect the same politicos who have failed miserably for years, we somehow expect they will magically succeed in providing leadership the next time around. When we eat visibly unhealthy packaged junk food that is engineered to trigger our reward centers with massive doses of fat, salt and sugar, we somehow expect there will be no consequences of eating this "food."

We sit in front of digital devices all day and eliminate physical fitness from our schools, yet we expect there will be no consequences from this inactivity.

We create trillions of dollars from thin air and borrow trillions of additional dollars into existence, yet we expect there will be no consequences from this unprecedented monetary and credit expansion.

We borrow a third of all government expenditures, yet we expect there will be no consequences from this monumental dependence on public debt to maintain the Status Quo.

We buy the cheapest quality goods, yet complain about the poor quality.

We pursue a plan of borrowing our way to prosperity, yet we are flummoxed that prosperity is elusive.

We push everyone with any assets into risky asset bubbles with zero-interest rates, yet we are surprised when asset bubbles pop.

What do you expect to happen? The causal chain cannot be disrupted by wishful thinking. Bubbles will pop, and increasingly leveraged, fragile systems will crash. Hoping causal consequences will magically vanish is a strategy doomed to catastrophe.
 

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

That the US is set to have its third consecutive quarter with revenue declines (followed by the fourth in a few months, when all the misses will be blamed on – what else – the Tea Party), is by now well-known and greeted by stocks which have given up on any fundamentals (that this happens even as “one-time” restructuring charges which actually recur every quarter, such as JPM’s most recent $9 billion in fees, are added back to non-GAAP EPS, and make EPS increase is just as well-known). But it is not so much the US we focus on in this blurb, but Europe, where for some mindboggling reason the consensus has rapidly shifted in recent months, toward a prevailing sentiment of recovery. So here is a quick datapoint from Deutsche putting the European “recovery” in context.

You read that right: of 17 companies on the DJStoxx600 reporting so far in Q3, 13 have missed.

Welcome to the [European] recovery, indeed.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4XhyU0vUINM/story01.htm Tyler Durden

That the US is set to have its third consecutive quarter with revenue declines (followed by the fourth in a few months, when all the misses will be blamed on – what else – the Tea Party), is by now well-known and greeted by stocks which have given up on any fundamentals (that this happens even as “one-time” restructuring charges which actually recur every quarter, such as JPM’s most recent $9 billion in fees, are added back to non-GAAP EPS, and make EPS increase is just as well-known). But it is not so much the US we focus on in this blurb, but Europe, where for some mindboggling reason the consensus has rapidly shifted in recent months, toward a prevailing sentiment of recovery. So here is a quick datapoint from Deutsche putting the European “recovery” in context.

You read that right: of 17 companies on the DJStoxx600 reporting so far in Q3, 13 have missed.

Welcome to the [European] recovery, indeed.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4XhyU0vUINM/story01.htm Tyler Durden

Last week, the main area of focus was the political situation in the US where Democrats and Republicans finally agreed upon a short term fix to reopen the government and extend the debt ceiling. The conclusion of this saw equity markets rally to all time highs in Europe and the US, with the USD continuing to slide as markets turn their attention to the Fed’s QE programme and push back expectations of when the central bank will begin to pull back on asset purchases.

With the government now reopen, attention will turn to the numerous data releases that were delayed but will now take place over the next two weeks, including the jobs report which is due on Tuesday. The release of this report will once again be used to help predict when the Fed will begin to taper QE however, recent comments from Fed members have suggested that October is likely to be too soon trim bond buying due to the lack of key macroeconomic data and the unknown economic impact as a result of the government closing for 16 days. Most recently, Fed’s Evans suggested it is not yet time to remove monetary accommodation and said he sees tapering postponed after the shutdown. Expectations on Tuesday are for an increase of 180K jobs for the month of September and the number will be used to evaluate the momentum of the economy prior to the shutdown of the government.

However next month’s report could be perceived as more important as it appears tapering is off the table this month, and the report will be an assessment of the damage done from the closure of numerous government departments.

Elsewhere next week, approximately 25% of companies in the S&P 500 are due to report their earnings, including McDonald’s, Microsoft, Caterpillar, Amazon and the best performing company in the index this year, Netflix. Subscriber additions will be one of the key figures for Netflix, with growth expected from Q2 due to seasonality, however there is not expected to be large growth from the same quarter in 2012. As a guide, of the approximately 100 companies in the S&P 500 to have reported this quarter, 69% have topped earnings expectations while only 53% have beaten revenue expectations, compared to four-year averages of 73% and 59% respectively.

In fixed income markets, supply dries up in the Eurozone this week following last week’s EUR 14.4bln of mostly shortdated supply, with only a EUR 2bln German Buxl auction on Wednesday. Not only is supply notably lower in the Eurozone but there are also numerous payments as France pays EUR 37bln in coupons and principals at the end of the week and Austria is due to pay out over EUR 13bln on Monday, which could support core fixed-income throughout the week. Furthermore, there is also a lack of conventional supply out of the US although the US Treasury is to issue USD 7bln in 30y TIPS on Thursday, as well as detailing next week’s supply in 2-, 5- and 7-year notes.

Monday, Oct 21

• US Existing Home Sales (Sep): consensus -3.3%mom, previous +1.7%mom
• Japan Trade Balance (Sep): consensus JPY-918.6bn, previous JPY-962.8bn
• Mexico Retail Sales (Aug): previous +1.3%yoy
• Also interesting: Taiwan Export Orders (Sep), Hong Kong CPI (Sep)

Tuesday, Oct 22

• US Non-Farm Payrolls (Sep): Consensus 180K, previous 169K
• US Unemployment Rate (Sep): Consensus 7.3%, previous 7.3%
• US Richmond Survey (Oct): previous flat
• Switzerland Trade Balance (Sep): previous CHF+1.86bn
• Argentina Trade Balance (Sep): Consensus $+800mn, previous $+568mn

Wednesday, Oct 23

• Canada MPC: consensus has policy rate unchanged at 1%.The BoC’s policy stance should remain very much on hold.
• UK MPC minutes (Oct)
• Euro Area Consumer Confidence (Oct, Flash): consensus -14.5, previous -14.9
• US FHFA House Price Index (Aug): consensus +0.8%mom, previous +1.0%mom
• South Africa CPI (Sep): Consensus +5.90%yoy, previous +6.40%yoy
• Australia CPI (Q3): Consensus +1.8%yoy, previous +2.4%yoy
• Taiwan IP (Sep): consensus +0.1%yoy, previous -0.7%yoy
• Also interesting: Singapore CPI (Sep), New Zealand Trade Balance (Sep)

Thursday, Oct 24

• Sweden MPC: Consensus have policy rate unchanged at 1%
• Norway MPC: Consensus have deposit rate unchanged at 1.50%
• Philippines MPC: Consensus have policy rate unchanged at 3.50%yoy
• UK CB Carney speaks in London
• Euro Area PMIs (Oct, Flash)
• US Initial Jobless Claims (Oct 18): consensus 340K, previous 358K
• US New Home Sales (Sep): Consensus 1.0%mom, previous +7.9%mom
• US Kansas Fed Survey (Oct)
• Mexico Real GDP (Aug): Previous +1.69%yoy
• Also interesting: Spain Unemployment Rate (Q3), Honk Kong Trade Balance (Sep), Mexico Inflation (15 Oct)

Friday, Oct 25

• Mexico MPC: Consensus expects a cut of 25bps in policy rate to 3.50%yoy. In addition, there is a probability of a more assertive 50bps cut-and-hold particularly if Thursday’s 1H October inflation prints significantly below expectations
• Euro Area ECB Asmussen speaks in Milan
• US Core Capital Goods Orders (Sep): consensus +0.7%, previous +1.5%
• US Durable Goods Orders (Sep): consensus +2.0%, previous +0.1%
• US Michigan Consumer Sentiment (Oct, final): consensus 75.0, previous 75.2
• Japan core CPI (Sep): consensus +0.7%yoy, previous +0.8%yoy. Together with a series of food price hikes from October, we expect inflation to creep up further in the coming months.
• Germany IFO Business Survey (Oct): consensus 108.0, previous 107.7
• UK GDP (Q3): previous +0.7%qoq
• Brazil CA Balance (Sep): Consensus $-2.9bn, previous $-5.5bn
• Mexico Trade Balance (Sep): previous $-0.23bn
• Also interesting: Philippines Trade Balance (Aug), Thailand Trade Balance (18 Oct), South Korea GDP (Q3), Singapore IP (Sep), Sweden Business and Consumer Surveys (Oct), Brazil FDI Inflows (Sep)

Key Issues in the Week Ahead:

TOP ISSUES FOR THE WEEK AHEAD US DATA OUT OF SHUTDOWN

On Tuesday, we finally get the long-awaited update on the US employment situation in September. We expect a strong reading of
240,000 net new jobs, well above the 148,000 average posted over the June-August period and consensus (180,000). We also expect the unemployment rate to fall to 7.1%. Such strong readings would again ignite a debate on an imminent start of US tapering, but given that the full impact of the recent shutdown may take some further time to emerge, we continue to see tapering in Q1 next year.

FLASH PMIS TO SUGGEST WEAK RECOVERY

PMIs have recently shown mixed results, with some weakness apparent in manufacturing. This week’s flash PMIs in Germany, France and the euro area (out Wednesday) are likely to show similarly mixed results. For manufacturing, we expect onlya marginal improvement in line with consensus, while for services we expect a slight drop, in contrast to consensus which sees unchanged conditions. Overall, this should be in line with the expectations for a weak, uneven and fragile recovery in the euro area.

Source: Goldman, RanSquawk, SocGen

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/VWiG10Nug8o/story01.htm Tyler Durden

All those who claim there is no inflation, and a tsunami of hot central-bank money flooding the world, are advised to check out the housing numbers reported overnight by UK’s property website Rightmove, according to which asking prices in London saw an “unsustainable” 10% month-on-month increase in October. This sent the typical asking prices in the capital to £544,232, a new record high surpassing the previous high set in July by more than £28,000.

Who is to blame, in addition to central banks injecting nearly $150 billion in fresh liquidity in the market every month? Why Europe’s Cyprus template of course:  according to Rightmove, the “frenzy” of activity in parts of prime inner London is due to overseas investors who are looking for a safe haven to place their cash, which is “leaving the shelves bare.” It also means anyone who is not a robber baron, oligarch, money launderer, or otherwise has criminal access to billions, is fresh out of luck and priced out until the next housing crash.

The berserk chasing of ultra-luxury properties can be seen on the chart below, which compares the transactions in the top price band between 2013 and 2012. One term can describe the shift: whoosh, as transactions on the most expensive property class have nearly become the single most active bucket in all of London!.

The Evening Standard has more:

A major property website has seen London house sellers’ asking prices soar to a new high this month, beating their previous record by nearly £30,000 and fuelling fears that the capital is overheating.

 

Across England and Wales, asking prices rose more gently by 2.8% month-on-month, following two months of falls, to reach £252,418 on average.

 

Prices across the country are 3.8% higher than they were a year ago, although in London they have shot up by 13.8% over this period, Rightmove said.

 

Despite the overall upward march in prices, Rightmove said that “a bubble seems a long way off in the majority of regions”. The patchy state of the housing market was still shown, as four areas recorded year-on-year falls in house values – Wales, the North, the North West and the West Midlands.

 

The North recorded the biggest year-on-year drop, with asking prices falling by 2.2% to reach £145,094 on average. Sellers in Wales have dropped their asking prices by the second biggest amount over the last year, with prices falling by 1.4% annually to typically reach £165,708. After London, the East Midlands saw the second biggest annual increase in house prices, with a 6.0% annual uplift taking them to £171,913 on average.

 

The findings come after the Council of Mortgage Lenders (CML) reported last week that lending activity is at its strongest in five years and the Office for National Statistics (ONS) said that UK house prices reached an all-time high of £247,000 in August, surpassing a previous 2008 peak.

 

Housing market activity among people with low deposits who have previously struggled to get on the property ladder is expected to increase further in the coming months, as a new phase of the Government’s flagship Help to Buy scheme is fully fired into action.

Of course, since only those armed with copius loans can afford anything anymore, there are naturally banks – and in this case even the UK government – willing to provide it for them, in exchange for just 5% money down: a recipe for absolute taxpayer-funded devastation and bailouts down the line.

Royal Bank of Scotland (RBS), NatWest, Halifax and Bank of Scotland started offering state-backed loans to people with deposits as low as 5% under the scheme this month and the lenders have reported strong interest so far.

 

Lenders including HSBC, Santander and Barclays have also confirmed they plan to come on board and start offering loans under the scheme.

 

The City of Westminster was named by Rightmove as London’s strongest-performing house price area in October. Prices there have soared by 11.9% month-on-month to reach £1.6 million typically. Kensington and Chelsea and Hammersmith and Fulham also recorded increases of 11.8% in sellers’ asking prices over the month.

 

Sellers are now typically asking £2.4 million for a home in Kensington and Chelsea and £1.1 million for a home in Hammersmith and Fulham.

Buyers, however, oblivious of the prices, keep pouring in:

Rightmove said that wealthy overseas buyers are continuing to snap up properties in prime central London as they are seen as “safe” investments amid the troubles of the eurozone.

 

Rightmove director Miles Shipside said that while this is happening and developers can achieve sales at premium prices, this “eats up a much-needed source of fresh supply and drags up existing property prices at an even faster rate”.

 

He said: “Although not sustainable in the longer term, some agents currently report there is a buying frenzy in parts of prime inner London, with available stock so low that their shelves are now bare.”

Lol: the longer run. Who cares about that. Certainly not China. Because if you thought a 10% increase in one month was bad, what is the proper adjective to describe a 12% increase in home prices in… one week!?

As Bloomberg reports, the average Shanghai new home price rose 12% on the week. Shanghai’s average new home price rose to 26,527 yuan/square meter in the week ended Oct. 20 from the previous week, property consultant Shanghai Uwin Real Estate Information Services Co. said in an e-mailed note today.

In short – what is going on in the global housing market is no longer a bubble: we don’t know however how to describe it. What comes after a bubble?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4WaRyfHCnA0/story01.htm Tyler Durden

All those who claim there is no inflation, and a tsunami of hot central-bank money flooding the world, are advised to check out the housing numbers reported overnight by UK’s property website Rightmove, according to which asking prices in London saw an “unsustainable” 10% month-on-month increase in October. This sent the typical asking prices in the capital to £544,232, a new record high surpassing the previous high set in July by more than £28,000.

Who is to blame, in addition to central banks injecting nearly $150 billion in fresh liquidity in the market every month? Why Europe’s Cyprus template of course:  according to Rightmove, the “frenzy” of activity in parts of prime inner London is due to overseas investors who are looking for a safe haven to place their cash, which is “leaving the shelves bare.” It also means anyone who is not a robber baron, oligarch, money launderer, or otherwise has criminal access to billions, is fresh out of luck and priced out until the next housing crash.

The berserk chasing of ultra-luxury properties can be seen on the chart below, which compares the transactions in the top price band between 2013 and 2012. One term can describe the shift: whoosh, as transactions on the most expensive property class have nearly become the single most active bucket in all of London!.

The Evening Standard has more:

A major property website has seen London house sellers’ asking prices soar to a new high this month, beating their previous record by nearly £30,000 and fuelling fears that the capital is overheating.

 

Across England and Wales, asking prices rose more gently by 2.8% month-on-month, following two months of falls, to reach £252,418 on average.

 

Prices across the country are 3.8% higher than they were a year ago, although in London they have shot up by 13.8% over this period, Rightmove said.

 

Despite the overall upward march in prices, Rightmove said that “a bubble seems a long way off in the majority of regions”. The patchy state of the housing market was still shown, as four areas recorded year-on-year falls in house values – Wales, the North, the North West and the West Midlands.

 

The North recorded the biggest year-on-year drop, with asking prices falling by 2.2% to reach £145,094 on average. Sellers in Wales have dropped their asking prices by the second biggest amount over the last year, with prices falling by 1.4% annually to typically reach £165,708. After London, the East Midlands saw the second biggest annual increase in house prices, with a 6.0% annual uplift taking them to £171,913 on average.

 

The findings come after the Council of Mortgage Lenders (CML) reported last week that lending activity is at its strongest in five years and the Office for National Statistics (ONS) said that UK house prices reached an all-time high of £247,000 in August, surpassing a previous 2008 peak.

 

Housing market activity among people with low deposits who have previously struggled to get on the property ladder is expected to increase further in the coming months, as a new phase of the Government’s flagship Help to Buy scheme is fully fired into action.

Of course, since only those armed with copius loans can afford anything anymore, there are naturally banks – and in this case even the UK government – willing to provide it for them, in exchange for just 5% money down: a recipe for absolute taxpayer-funded devastation and bailouts down the line.

Royal Bank of Scotland (RBS), NatWest, Halifax and Bank of Scotland started offering state-backed loans to people with deposits as low as 5% under the scheme this month and the lenders have reported strong interest so far.

 

Lenders including HSBC, Santander and Barclays have also confirmed they plan to come on board and start offering loans under the scheme.

 

The City of Westminster was named by Rightmove as London’s strongest-performing house price area in October. Prices there have soared by 11.9% month-on-month to reach £1.6 million typically. Kensington and Chelsea and Hammersmith and Fulham also recorded increases of 11.8% in sellers’ asking prices over the month.

 

Sellers are now typically asking £2.4 million for a home in Kensington and Chelsea and £1.1 million for a home in Hammersmith and Fulham.

Buyers, however, oblivious of the prices, keep pouring in:

Rightmove said that wealthy overseas buyers are continuing to snap up properties in prime central London as they are seen as “safe” investments amid the troubles of the eurozone.

 

Rightmove director Miles Shipside said that while this is happening and developers can achieve sales at premium prices, this “eats up a much-needed source of fresh supply and drags up existing property prices at an even faster rate”.

 

He said: “Although not sustainable in the longer term, some agents currently report there is a buying frenzy in parts of prime inner London, with available stock so low that their shelves are now bare.”

Lol: the longer run. Who cares about that. Certainly not China. Because if you thought a 10% increase in one month was bad, what is the proper adjective to describe a 12% increase in home prices in… one week!?

As Bloomberg reports, the average Shanghai new home price rose 12% on the week. Shanghai’s average new home price rose to 26,527 yuan/square meter in the week ended Oct. 20 from the previous week, property consultant Shanghai Uwin Real Estate Information Services Co. said in an e-mailed note today.

In short – what is going on in the global housing market is no longer a bubble: we don’t know however how to describe it. What comes after a bubble?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4WaRyfHCnA0/story01.htm Tyler Durden

By now, and certainly in the aftermath of the embarrassing US government shutdown, it has become clear to everyone that fiscal policy is terminally broken as a process through which to reform and fine-tune the economy. But far from affecting only the US, fiscal policy has failed miserably to encourage structural reform in virtually all broken European states, the bulk of which reside in the periphery but increasingly more France and also Germany. Why? A very simple reason: the Fed’s shotgun monetary policy, which is rising the stock market to such unprecedented heights, it allows politicians the loophole they need to justify their irrelevance, and impotence. After all, if stocks are up who cares if the US doesn’t have a budget for over 4 years. or if the Italian debt/GDP ratio is rising at a record pace, or if Spanish bad debt is accumulating at breakneck speeds, or if Greek youth unemployment is 60%+. Hey, look over there stocks, are up.

In short: if you want to blame someone for the complete breakdown in fiscal policy and the political negotiation process, blame the Fed. That much we made clear back in 2011 when instead of forcing Europe to deal with its issues on a fiscal basis, the ECB stepped in with the LTRO bazooka (and subsequently with Draghi’s “whatever it takes” uberbluff) and made any structural reform unnecessary. The same has since happened in the US with QE3 and in Japan with QE Bazooko Circus.

But for now, while this decision-making hijacking process by the central banks, was largely implied, it was never explicit. Never, that, until this Friday when Italy’s Prime Minister Enrico Letta came under fire from all sides Friday over his 2014 budget proposal, which critics say has failed to attack deep-seated problems such as Italy’s suffocating tax rates and lack of growth. In other words, yet another example of fiscal reform failing to promote long-term economic policies. The WSJ has more on the latest Italian budgetary failure:

Fresh from winning a confidence vote that many believed would strengthen his government, Mr. Letta was attacked by both Italy’s business lobby and its unions, while former Prime Minister Mario Monti resigned as head of a small, centrist party that supports his government.

 

Mr. Monti criticized the budget’s “timidity” in cutting taxes, a complaint echoed by business leaders.

 

Labor unions complained that the budget failed to extend unemployment benefits for the hundreds of thousands of workers who have been laid off during the downturn or may be next year. “Trying not to displease everybody doesn’t mean pursuing the national interest,” Susanna Camusso, head of CGIL, Italy’s largest labor union, said.

 

Italian businesses pay an effective tax rate of about 68%, according to accountancy PricewaterhouseCoopers, when payroll taxes are included. Such taxes, which are almost as high for wages, produce a lose-lose situation in which companies are loath to hire and the net pay that employees earn is quite low.

 

The budget would cut overall business taxes by €2.7 billion ($3.7 billion). About €1.5 billion of that would go to workers in the form of lower payroll costs. But the monthly impact on the average wage earner would be worth little more than the cost of a pizza.

But however bad the proposed Itlaian budget may be, and no matter how bad, it is still orders of magnitude better than the US, which is simply unable to pass a budget, let alone one which balances, that is not the punchline. This is:

Economy Minister Fabrizio Saccomanni, a former deputy governor of the Bank of Italy, acknowledged that “more could have been done.” He said political squabbling had complicated the government’s work, but pointed out that that the budget keeps Italy’s deficit below 3% of gross domestic product, as European Union rules require.

 

“Everybody hates this budget, but the stock market is up and the spread is down,” Mr. Saccomanni noted.

And there you have it: no matter how bad, or non-existent a budget, a political compromise, a political proposal, a government shutdown, or a debt default threat… the market is up.

Why is the market up? Because between the Fed and the BOJ alone, some $160 billion in liquidity is created de novo each month, pushing assets to record prices around the fungible globe. Which simply means that since there is no feedback loop anymore to inform politicians that their decision-making process is just a broken, there is no impetus for any change.

And the biggest paradox is that it is the Fed whose various presidents, complain almost daily how they would promptly taper if only Washington would get its act in order, in the process proving the Fed has zero understanding of how a reflexive market process works. Because it is not Washington that is to blame that it is broken, it is the Fed… and the ECB… and the BOJ, whose monetary flood has made fiscal policy irrelevant, meaningless and moot.

The problem, obviously, is that once the Fed has no choice but to start easing off the Koolaid, whether that means S&P at 2000, 5000, 10,000 or much more, only then will the market finally awake to years of pent up fiscal policy mistakes but courtesy of the inflationary inferno that the very same central bankers will have created, there will be nobody to run to.

But that’s in the future. For now, all that matters as Mr. Sack-O-Money put it, is “that the stock market is up.” Nothing else matters.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/h9Z8e4W8dP0/story01.htm Tyler Durden

• FHFA Is Said to Seek at Least $6 Billion From BofA for MBS Sales (BBG)
• Record Pact Is on the Table, But J.P. Morgan Faces Fight (WSJ)
• Magnetar Goes Long Ohio Town While Shorting Its Tax Base (BBG)
• Mini-Wall Street’ Rises in Hamptons (WSJ)
• Obama to call healthcare website glitches ‘unacceptable’ as fix sought (Reuters)
• Starbucks Charges Higher Prices in China, State Media Says (WSJ)
• Cruz Is Unapologetic as Republicans Criticize Shutdown (BBG)
• Berlusconi struggles to keep party united after revolt (Reuters)
• SAC Defections Accelerate as Cohen Approaches Settlement (BBG)
• Some Liberal Groups, Lawmakers Worry About Cuts to Social Security, Other Entitlements (WSJ)
• McConnell: Shutdown Bad Idea, Won’t Happen Again (WSJ)
• US asks top court not to take case on NSA cyber-snooping (AP)

 

Overnight Media Digest

WSJ

* JPMorgan Chase & Co reached a tentative deal this weekend to pay $13 billion to end a number of civil investigations into its sale of mortgage securities before the 2008 financial crisis, but a separate and potentially more serious criminal probe into the bank and its executives will continue.

* Cracks are showing in the Democratic coalition as the next round of budget talks gets under way, hurting the chances for progress toward a broad deal that changes the tax code and significantly narrows future deficits.

* U.S. candy makers are expanding production in other countries as federal price supports and a global glut of the sweet stuff give an ever-greater advantage to foreign rivals.

* Sotheby’s and Christie’s are invading the turf of high-end art galleries, as a boom in the contemporary art market and pressures in the auction business disrupt what had long been a symbiotic relationship.

* Despite the market disruptions Washington’s mess caused over the past few weeks, analysts who have studied past market behavior say that the current backdrop – moderate economic growth with low inflation and strong central bank backing – is excellent for stocks.

* As rivals scale back their research-and-development spending to appease investors, Chief Executive John Lechleiter says Eli Lilly & Co is staying the course, despite the drug maker’s relatively large R&D budget.

* Raoul Weill, the former No. 3 official at UBS, has been arrested in Italy based on an Interpol notice requested by U.S. authorities, according to a U.S. official. The United States plans to seek his extradition from Italy to face charges of helping conceal billions of dollars from U.S. tax authorities.

* Manufacturing of new business jets isn’t likely to recover to pre-recession levels for at least another decade, according to a closely watched forecast that trimmed the number of aircraft deliveries over the next 10 years by about 8 percent from the year-earlier projection.

* In the next few weeks, the Chinese government is expected to release the results of an ambitious effort to calculate a seemingly simple figure: just how much the country’s local governments have borrowed from banks and investors in the past few years.

* The planned merger of Office Depot Inc and OfficeMax Inc is on track to receive antitrust clearance from the Federal Trade Commission after a lengthy government review, according to people familiar with the matter.

* AT&T Inc plans to lease a portfolio of cell towers, and sell some others, to Crown Castle International Corp for about $4.85 billion as the telecom giant cashes in on consolidation among tower operators and seeks to spend its money elsewhere.

* Level 3 Communications Inc said it fixed an Internet service outage that left users from Brooklyn to Philadelphia with slow to nonexistent service for nearly 24 hours Saturday after equipment at a New York-area network hub broke down.

 

FT

Overview

U.S. housing regulators are looking to fine Bank of America more than $6 billion for its role in misleading mortgage agencies during the housing boom, compared with the $4 billion to be paid by JPMorgan Chase & Co.

Opinions are divided in the U.S. regarding the $13 billion settlement JPMorgan Chase has agreed to pay to state and federal authorities.

Aluminum producer Alcoa has attacked the London Metal Exchange as “short-sighted and misguided” and called on the UK Financial Conduct Authority and the U.S. Commodity Futures Trading Commission to intervene in a row about metals warehousing.

AT&T said it would lease the rights to about 9,100 of its wireless network towers to Crown Castle International and sell another 600 towers to the tower operator for about $4.9 billion.

Terra Firma, the buyout group run by dealmaker Guy Hands, is set to launch a 1 billion pound ($1.62 billion) float of Infinis, a British wind power company, on Monday in a comeback signal to prospective new investors.

 

NYT

* A tentative $13 billion settlement between JPMorgan and the Justice Department was a result of extensive personal negotiations involving Attorney General Eric Holder and Jamie Dimon, the bank’s chief executive.

* Mounting legal problems have so far left Jamie Dimon unscathed at the helm of JPMorgan Chase. On Sunday, several JPMorgan executives said, as they have for months, that the bank’s board remains firmly behind Dimon, who is both chairman and chief executive.

* Norway’s sovereign wealth fund is preparing to raise its voice on a sensitive topic: the increasing computerization of the stock markets and the costs it has imposed on big long-term investors. “The U.S. market has gone through a lot of changes and has become quite complicated – and this complexity of the market creates a lot of challenges for a large investor like us,” said Oyvind Schanke, the global head of stock trading for the fund, Norges Bank Investment Management.

* Crown Castle International Co will buy the rights to run 9,100 towers for an average lease of 28 years, with the right to acquire the towers outright from AT&T Inc in the future for about $4.2 billion. Crown Castle will also buy about 600 towers outright.

* The producer Jason Blum’s winning movie formula relies on profit-sharing, and he’s thinking about applying it to television. Over the last five years, for production costs totaling a mere $27 million, his company, Blumhouse Productions, has ch
urned out eight hit horror films – including “Paranormal Activity”, “Sinister” and “The Purge” – that have taken in $1.1 billion at the worldwide box office.

* Genetic engineering to produce products that now come from rare plants holds great promise, but critics warn of harm to small farmers, among others.

* Experts involved in fixing the online health insurance marketplace say the technological problems are extensive.

* The intense competition in the market for tablets will be highlighted on Tuesday, as Apple Inc, Nokia and Microsoft Corp each introduce new devices.

* Ignazio Angeloni, a top European Central Bank official, has a leading role in reviewing euro zone banks to determine which are sound and which are not.

* Music industry’s total digital sales are down almost 1 percent so far this year, and some in the industry cite the rise of streaming music services like Spotify and Pandora Media Inc .

 

Canada

THE GLOBE AND MAIL

* Native leaders are warning that the violent clash between Royal Canadian Mounted Police and the Elsipogtog First Nation – which last week saw police vehicles torched, rubber bullets fired and rocks thrown – is just the tip of the iceberg.

The protest against shale-gas exploration near the village of Rexton, New Brunswick, took place as some aboriginal groups across the country are expressing frustration over being excluded from consultations, especially when it comes to resource development.

* The Conservative government is seeking to give victims of crime a more active role in the legal process. A bill will be put forward this fall that extends victim involvement “from the time of the offence to the final disposition of the sentence,” Justice Minister Peter MacKay told The Globe and Mail.

* The Canadian Food Inspection Agency has issued an alert over another beef product because of possible E. coli contamination. The federal food safety watchdog is warning the public not to consume uncooked lean ground beef from Belmont Meats of Toronto, distributed at Loblaw stores.

Reports in the business section:

* Corporate Canada is expected to raise spending in 2014 to take advantage of a global economic recovery. CIBC World Markets Inc Deputy Chief Economist Benjamin Tal said Canadian companies are well-positioned to increase capital expenditures, particularly if the U.S. economy gets rolling.

* Canadian National Railway Co and Canadian Pacific Railway Ltd both experienced weak grain shipments in the third quarter, although shipments are expected to rise in the fourth quarter due to a bumper crop in Canada.

NATIONAL POST

* A free trade deal linking Canada and Europe, even in the absence of a final text, is a historic win for the federal Conservative party and for Prime Minister Stephen Harper personally. It could not have come at a better time, from a Tory political perspective.

* A probe by the auditor general into spending in the Senate has prompted senators and the chamber’s administration to start creating paper trails for decisions that previously weren’t documented.

FINANCIAL POST

* Even amid a slowdown in hiring across Canada, small businesses continue to face difficulties recruiting and keeping the best employees.

* Northwest Territories village Inuvik’s untapped resources, and non-existent infrastructure to develop or deliver them is becoming a metaphor for Canada itself. The latest, most egregious example of this problem revolves around the lack of strategy, politics and recurring media flashpoints concerning pipelines and, to a lesser extent, power generation infrastructure.

 

China

CHINA SECURITIES JOURNAL

– The People’s Bank of China is likely to keep monetary policy neutral or even make it slightly tighter in the fourth quarter, Song Guoqing, an adviser to the Chinese central bank forecast.

– The China Securities Regulatory Commission recently said that it will support the Shanghai Pilot Free Trade Zone in launching an international crude oil futures trading platform, heralding a new stage for the rapid expansion of China’s commodity futures market.

SHANGHAI SECURITIES NEWS

– E-Fund 120 ETF, the first exchange-traded fund (ETF) to invest in stocks dual listed on mainland Chinese and Hong Kong bourses, will be listed on the Hong Kong stock exchange on Monday.

– The slowdown of China’s growth due to the country’s efforts to adjust and improve its economic structure will help end a decade-long bull run in global commodity prices, economists participating in a seminar in the eastern Chinese city of Wuxi on Sunday forecast.

CHINA DAILY

– A report citing a senior security official said China sees an extradition treaty with the United States as “essential to capture and repatriate economic fugitives,” including corrupt officials. The official blamed U.S. lack of understanding of Chinese human rights protections as a barrier to progress.

PEOPLE’S DAILY

– China will continue to use Marxist theory as the key guideline to boost efforts to build a socialist society with Chinese characteristics, the newspaper, the mouthpiece of the Chinese Communist Party, said in a commentary.

 

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Apple (AAPL) upgraded to Buy from Hold at Societe Generale
ArcelorMittal (MT) upgraded to Buy from Hold at Deutsche Bank
Archer Daniels (ADM) upgraded to Buy from Underperform at BofA/Merrill
Bunge (BG) upgraded to Buy from Neutral at BofA/Merrill
Dean Foods (DF) upgraded to Outperform from Market Perform at BMO Capital
Delek US (DK) upgraded to Buy from Neutral at Goldman
Horizon Pharma (HZNP) upgraded to Overweight from Neutral at Piper Jaffray
Mead Johnson (MJN) upgraded to Buy from Neutral at Citigroup
ProAssurance (PRA) upgraded to Buy from Neutral at Janney Capital
Salesforce.com (CRM) upgraded to Strong Buy from Outperform at Raymond James

Downgrades

ARIAD (ARIA) downgraded to Perform from Outperform at Oppenheimer
Capital Bank (CBF) downgraded to Neutral from Buy at Compass Point
Celestica (CLS) downgraded to Hold from Buy at Canaccord
Empresas ICA (ICA) downgraded to Neutral from Buy at BofA/Merrill
First Horizon (FHN) downgraded to Neutral from Overweight at JPMorgan
First Horizon (FHN) downgraded to Sector Perform from Outperform at RBC Capital
General Mills (GIS) downgraded to Neutral from Buy at BofA/Merrill
Goodyear Tire (GT) downgraded to Hold from Buy at Deutsche Bank
Kaiser Aluminum (KALU) downgraded to Hold from Buy at KeyBanc
Kellogg (K) downgraded to Underperform from Buy at BofA/Merrill
Luxottica (LUX) downgraded to Sell from Neutral at Goldman
Magna (MGA) downgraded to Hold from Buy at Canaccord
Myriad Genetics (MYGN) downgraded to Underperform from Neutral at Credit Suisse
Reinsurance Group (RGA) downgraded to Market Perform at Keefe Bruyette
Senomyx (SNMX) downgraded to Neutral from Buy at Roth Capital
U.S. Silica (SLCA) downgraded to Market Perform from Outperform at Wells Fargo
VimpelCom (VIP) downgraded to Hold from Buy at Deutsche Bank

Initiations

Activision Blizzard (ATVI) initiated with an Overweight at Barclays
Applied Optoelectronics (AAOI) initiated with an Outperform at Cowen
Applied Optoelectronics (AAOI) initiated with an Overweight at Piper Jaffray
ArrowHead Research (ARWR) initiated with an Overweight at Piper Jaffray
Capitala Finance (CPTA) initiated with a Buy at Deutsche Bank
Capitala Finance (CPTA) initiated with an Overweight at Barclays
Covisint (COVS) initiated with an Outperform at Credit Suisse
Foundation Medicine (FMI) initiated with a Neutral at Goldman
Foundation Medicine (FMI) init
iated with a Neutral at JPMorgan
Foundation Medicine (FMI) initiated with an Outperform at Leerink
Montage Technology (MONT) initiated with a Buy at Deutsche Bank
Montage Technology (MONT) initiated with an Outperform at Wells Fargo
Montage Technology (MONT) initiated with an Overweight at Barclays
Norwegian Cruise Line (NCLH) initiated with an Outperform at Credit Suisse
Ophthotech (OPHT) initiated with an Outperform at Leerink
Premier (PINC) initiated with a Buy at BofA/Merrill
Premier (PINC) initiated with a Neutral at Piper Jaffray
Premier (PINC) initiated with an Outperform at Raymond James
Premier (PINC) initiated with an Overweight at JPMorgan
Xoom (XOOM) initiated with a Buy at SunTrust

HOT STOCKS

Goldman Sachs Asset Management (GS) to acquire RBS’ (RBS) money market funds
NTS, Inc. (NTS) to be acquired by Tower Three Partners for $2.00 per share
Crown Castle (CCI) announced $4.85B AT&T (T) tower transaction
Prudential (PRU) won’t seek to rescind designation as non-bank systemically important financial institution by Financial Stability Oversight Council
U.S. Steel (X) to take $1.8B goodwill impairment charge in Q3
Teradata (TDC) signed multi-year agreement with Procter & Gamble (PG)
Hasbro (HAS) targets $100M in annual savings by 2015

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Hasbro (HAS), Check Point (CHKP), Celanese (CE), MetroCorp (MCBI)

Companies that missed consensus earnings expectations include:
Crown Castle (CCI), Republic First Bancorp (FRBK)

NEWSPAPERS/WEBSITES

• The five largest U.S. defense contractors (LMT, GD, RTN, COL, UTX) release Q3 earnings this week, in what’s likely to be an even more pivotal period for sector sentiment than a year ago, the Wall Street Journal reports
• As his competitors scale back their R&D spending to appease investors, Eli Lilly (LLY) CEO John Lechleiter says the company is staying the course, despite the drug maker’s relatively hefty R&D budget, the Wall Street Journal reports
• Global shares hovered at five-year highs this morning while the dollar edged up against the yen as investors looked to U.S. data for clues on when the Fed will begin scaling back its stimulus. Many in the markets think the Fed will be wary of trimming its  bond-buying program until the economic impact of a 16-day partial U.S. government shutdown becomes clearer, Reuters reports
• Starbucks (SBUX) has been charging customers in China higher prices than other markets, helping the company realize thick profit margins, a report by the official China Central Television said, Reuters reports
• JPMorgan Chase’s (JPM) tentative agreement to pay a record $13B to end civil claims over its sales of mortgage bonds, a deal that won’t absolve the bank of potential criminal liaability, hasn’t shaken some investors’ faith in Chairman and CEO Jamie Dimon, Bloomberg reports
• Netflix (NFLX) is poised to pass HBO (TWX) in paid U.S. subscribers, showing CEO Reed Hastings is making progress toward a goal of transforming the streaming service to a Web-based television network, Bloomberg reports

BARRON’S

AT&T (T) could rise to around $40
Accenture (ACN), Aetna (AET), Western Union (WU), Raytheon (RTN) have regular buybacks
Jana Partners could bring more capital returns to Outerwall’s (OUTR) holders
Questcor (QCOR) could be trouble for investors
Uncertainty about Amazon’s (AMZN) Kindle sales a risk to investors
Amazon’s (AMZN) new Kindle Paperwhite is nearly perfect for reader

SYNDICATE

Luna Innovations (LUNA) files to sell 2.64M shares for holders
Mazor Robotics (MZOR) offers to sell 2M American depositary shares

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/_7xQOnqyZAs/story01.htm Tyler Durden

Following last week’s last two day panic buying driven not by data (since in the US it has been delayed until late October and November, and elsewhere in the world it is just getting worse) but by the catalyst that the US isn’t going to default (yes, that’s all that is needed to push the S&P to all time highs) and just hopes that the tapering – that horrifying prospect of the Fed reducing its monthly monetization by $15 billion from $85 to $70 billion in line with the decline in the US deficit – will be delayed until March or June 2014 because, you see, the Fed isn’t sure how the economy is doing, it makes no sense to even comment on the market. Squeezes, momentum ignitions, rumors about what Messers Bernanke and Yellen had for breakfast, Goldman’s 2015 S&P forecast of 2100: that’s the lunacy that passes for market moving factors. News, and reality, have long since been put in the dust. Just keep an eye on flashing read headlines, and try to buy (remember: anyone caught selling by the NSA is guaranteed a lifetime of annual IRS audits) ahead of the algos. That’s what Bernanke’s centrally-planned “market” has devolved to.

Overnight news bulletin from BBG and Ran:

• With the government now reopen, attention will turn to the numerous data releases that were delayed but will now take place over the next two weeks, including the jobs report which is due on Tuesday.
• Fed’s Evans (voter, dove) said there has not been enough positive information to taper this month.
• As a guide, of the 80 S&P 500 companies that have reported Q3 results so far, 70% of those have topped analysts’ EPS expectations whilst only 53% of those have beaten sales forecasts.
• Treasuries steady, 10Y yield holding near July lows; Sept. nonfarm payrolls due tomorrow (est. 180k, unemployment rate 7.3%) as U.S. eco reports resume with government reopening.
• Japan’s exports rose 11.5% in Sept., less than forecast, imports rose 16.5% to leave trade deficit at JPY932.1b, a 15th straight shortfall in data back to 1979
• Draghi challenged rules that would bar banks from accessing public aid unless they forced losses on junior bondholders, a central building block of EU protocols for handling struggling banks
• London house prices rose at an unsustainable rate in October as demand from overseas investors added pressure to a market with an already small supply of properties, according to Rightmove Plc
• BOE’s Ben Broadbent said officials will only consider an interest-rate increase once the recovery is secure, with inflation unlikely to prompt monetary tightening earlier than they have signaled
• FHFA is seeking at least $6b from Bank of America Corp. to settle civil claims the firm sold faulty mortgage bonds to Fannie Mae and Freddie Mac, according to a person with direct knowledge of the discussions
• JPMorgan reached a tentative agreement to pay a record $13b to end civil claims over its sales of mortgage bonds, a deal that won’t absolve the bank of potential criminal liability
• Germany’s Social Democrats ratified their leaders’ decision to enter negotiations on joining Merkel as junior partners in a “grand coalition” between the country’s two largest parties
• The Obama administration, admitting the health insurance exchange has failed to meet expectations, is asking a group of the “best and brightest,” including U.S. technology chief Todd Y. Park, to bring the site up to speed

  Sovereign yields mostly higher, EU peripheral spreads narrow. Nikkei gains 0.9%, leading Asian markets higher, European stocks mixed; S&P 500 futures gain. WTI crude falls; copper and gold gain

Market Re-Cap from RanSquawk

Stocks got off to a cautious start this week as market participants positioned for the release of the delayed jobs report from the BLS for the month of September on Tuesday. As a result, stocks traded broadly lower in Europe, with credit spreads widening and financials under performing. Despite the lacklustre performance by stocks, which came in spite of consensus beating earnings releases by Philips and SAP, Bunds traded steady, with money
market rates also little changed compared to Friday’s levels. At the same time, both EUR/CHF and USD/JPY remained bid, underpinning the view that uncertainty over the looming macroeconomic risk events was the main driver behind the cautious sentiment. Apart from digesting a slew of macroeconomic releases, market participants will keenly awaiting further earnings updates from the likes of McDonald’s, Microsoft, Caterpillar, Amazon this week.

Asian Headlines

Japanese Trade Balance (JPY) (Sep) M/M -932.1bln vs. Exp. -918.6bln (Prev. -960.3bln, Rev. -962.8bln)
Japan has posted a trade deficit for the 15th month in a row in September as a weak JPY pushed up import costs. Of note,
Japan’s imports have grown at a faster rate than its exports in all but one of the past 11 months.

China’s State Council says that China Q3 growth is stable and the annual growth target can be met.

EU & UK Headlines

The German finance ministry said the German economy is likely to grow above potential in H2 and that German companies are likely to expand production capacity.

German Chancellor Angela Merkel is considering a change to European Union treaties that could give the Brussels-based European Commission more rights over economic and fiscal policies BoE’s Broadbent said the BoE has room to raise interest rates as they would not hit borrowers and the primary objective is still inflation.

The outgoing deputy governor of the Bank of England, Paul Tucker, has said the UK’s economic recovery is evidence that quantitative easing is finally working. Although Tucker said it was still too early to say whether the economy had reached “escape velocity”

US Headlines

Fed’s Evans (voter, dove) said there has not been enough positive information to taper this month. Evans said raising rates when weak economy needs low rates could itself foster financial instability and low rates are needed until economy on a more stable path.

Equities

Stocks fell in Europe as market participants positioned for the looming risk events, with the highlight being the delayed jobs report from the BLS for the month of September. Financials underperformed in Europe, with credit spreads widening, as market participants remained cautious ahead of the looming jobs report from the US and also reacted to comments made by ECB President Draghi who warned the European Commission that imposing losses on banks’ bondholders in order to plug capital shortfalls could be destabilizing for many Eurozone economies. As a guide, of the 80 S&P 500 companies that have reported Q3 results so far, 70% of those have topped analysts’ EPS expectations whilst only 53% of those have beaten sales forecasts Of note, JP Morgan has reached a USD 13bln deal with US regulators to settle claims that it mis-sold bundles of toxic mortgage debt to investors in the build up to the financial crisis.

FX

Despite the cautious sentiment as evidenced across the equity space in Europe, both USD/JPY and EUR/CHF traded higher, with 1m implied vol for USD/JPY also bid after falling to its lowest level since early Jan on Friday. Looking elsewhere, EUR/USD and GBP/USD traded steady, with EUR/GBP trading just below the 50DMA line.

Commodities

Heading into the North American open, both WTI and Brent crude futures are seen lower, with WTI crude futures below the psychologically important USD 100 mark for the first time since July on the back of a firmer Greenback.

OPEC’s Badri says OECD oil inventories levels are healthy and that there is little impact from North Africa oilsupply halts. He also added that oi
l at USD 100-110 is acceptable for producers and users. Market watchdog Sebi has allowed Mutual Funds to hold gold certificates issued by banks in the physical forms as well, in addition to the ones in demat form, for investments made in Gold Deposit Schemes.

 

Deutsche Bank rounds up the overnight event summary

After all the political noise of the past month, this week looks set to see macro and fundamental drivers come back with a bang as we (finally) have September’s non-farm payrolls on Tuesday. We also see more than a quarter of S&P500 companies report earnings whilst European earnings season gathers pace. On that note we provide our earnings season review at the end of today’s note. After last week’s impressive rallies it will be interesting to see how markets manage this change of focus and the persistent data flow. On top of this each data point will be analysed with an eye not only to what they mean for underlying economic strength but also for what each implies for the time schedule of Fed tapering. Before we look at the week ahead, we begin with the weekend news flow.

A court in Milan has banned Silvio Berlusconi from holding a public office for two years following his conviction for tax fraud. This isn’t quite the end of the matter however as the ban must be approved by parliament for it to take effect. This vote is expected within the next few weeks. If it is upheld Berlusconi would also lose his parliamentary immunity from prosecution in a host of other criminal cases as well as having to spend a year under house arrest or serving community service. Over in the US there are reports (FT) that JPMorgan has reached a tentative deal to pay $13bn to resolve investigations into its misselling of MBS according to people familiar with the matter. Whilst the deal is still being finalized it looks set to be a record amount for a single company however it is also hoped the deal (which resolves not only all federal but also civil mortgage litigation against the bank) will draw a line under the issue. Now onto the week ahead! On the macro data front the stand out release is Payroll Tuesday, with September’s delayed Non-Farm Payrolls. In terms of data accuracy the figure is expected to have been relatively unaffected by the government shutdown. Bloomberg consensus on the payroll change currently sits at +180K whilst DB is forecasting +170K. The unemployment rate is expected to remain unchanged at 7.3%. The October Payrolls data release has also been delayed to November 8th. The BLS has a fully updated data release schedule available at http://www.bls.gov/bls/updated_release_schedule.htm.

Other key data in the US this week includes existing home sales today, Richmond Fed manufacturing survey on Tuesday (in addition to the aforementioned payrolls data), Markit’s flash US manufacturing PMI on Thursday and Friday will see the final release of UoM consumer confidence (October). At the time of writing the BEA and Census haven’t yet posted an updated release schedule to account for a back log of data ranging from construction spending and factory orders to wholesale and business inventories (for August) and retail sales and housing starts/permits (for September). Also it is not yet known whether new home sales or September durable goods orders will be released. They are currently scheduled for Thursday and Friday respectively. After last week’s strong rally on the back of easing US political tensions it will be interesting to see how the market copesas the focus turns back to the underlying macro picture.

The big data release in Europe this week will be the flash PMI’s on Thursday with consensus forecasts showing a slight improvement on the previous month’s data. Bloomberg survey expectations for manufacturing PMI’s are 50.1, 51.5 and 51.4 For France, Germany and the Eurozone respectively. The Eurozone PMI composite is expected to rise marginally to 52.4. Thursday will also see the release of China’s flash manufacturing PMI (expectations at 50.4). Beyond the flash PMI’s we have Q3 GDP for the UK (with expectations of a 1.5% YoY growth rate) and the German Ifo survey on Friday. Outside of data releases Thursday will see the beginning of a two day EU leaders summit in Brussels.

Overnight in Asia, markets continued where the US left off on Friday, opening strongly and generally adding to the open as trading went on. The Nikkei gaining almost +1% before dropping back a bit to sit around +0.5% as we type, with the Hang Seng up +0.59% and Shanghai composite up +1.1% with markets supported by growing expectations that Fed tapering will be delayed until next year.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/pkg9eRp9nDY/story01.htm Tyler Durden

It was only two months ago that France’s socialist president, Francois Hollande, in his quest to show just how great his allegiance was to the eat tax the rich “fairness doctrine” and socialist causes espoused by the glorious leader on the other side of the Atlantic, and to said glorious leader himself, that France was prepared to almost singlehandedly invade Syria (and surrender shortly thereafter) on the basis of several fabricated YouTube clips. So strong was the socialist bond.

Less than 60 days later, how quickly the alliances within the second coming of the Comintern have changed: over the weekend, Spiegel and Le Monde revealed that the US NSA secretly monitored tens of millions of phone calls in France and hacked into former Mexican President Felipe Calderon’s email account. The spy agency monitored 70.3 million phone calls in France over a 30-day period between December 10 and January 8 this year, Le Monde reported in its online version, citing documents from Snowden. And so, recently demoted to B-grade economic status in Europe, France – America’s European lap dog in virtually everything – is suddenly apopleptic and shocked, shocked, that spying went on here.

AP has more on hilarious French response:

French Foreign Minister Laurent Fabius, on a trip to Luxembourg for a meeting with his EU counterparts, said the US ambassador had “immediately” been summoned to his ministry for a meeting Monday morning.

 

“These kinds of practices between partners that harm privacy are totally unacceptable. We have to rapidly make sure that they are no longer implemented in any circumstance,” he told reporters.

Why hilarious? Because apparently France thought that while the US can spy daily on hundreds of millions of Americans, the spy agency would somehow exempt France. Of course, the question of why the NSA actually bothered is somewhat relevant: it’s not as if the NSA would learn anything actionable. Still, the sudden fracas between these two comrades in false flag arms nations, is quite enjoyable.

French Interior Minister Manuel Valls, meanwhile, described the revelations as “shocking”, in an interview with Europe 1 radio.

 

According to the paper, the NSA automatically picked up communications from certain phone numbers in France and recorded certain text messages under a programme code-named “US-985D.”

 

Le Monde said the documents gave grounds to believe that the NSA targeted not only people suspected of being involved in terrorism but also high-profile individuals from the world of business or politics.

Not just France: bossom NAFTA buddy Mexico too:

The Le Monde article followed revelations by Der Spiegel — also based on documents provided by Snowden — that US agents had hacked into the Mexican presidency’s network, gaining access to Calderon’s account.

 

According to the report, the NSA said this contained “diplomatic, economic and leadership communications which continue to provide insight into Mexico’s political system and internal stability.”

 

The agency reportedly said the president’s office was now “a lucrative source.”

 

Mexican authorities said they would be seeking answers from US officials “as soon as possible” following the allegations.

Get in line pal. As for the French, if you will pardon our French, denouement:

Valls said France would demand “precise explanations by US authorities in the coming hours.”

Or what: surrender?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/976Mn2Oh3rI/story01.htm Tyler Durden