Month: October 2013

This morning, like many other mornings in the last few months, precious metals prices are being pummeled lower in a vertical dumpfest (for no apparent sudden reason other than its opening time). What is ironic about this apparent lack of demand is that around the world, demand is extreme – and is most clearly evident in India, where thanks to government intervention, physical premiums push to new record highs yet do nothing to detract from Indians buying demand (as Reuters reports supplies of the precious metal disappear). Of course, the real reason why gold and silver prices have dropped since 10/28 is that none other than "the world renowned Gartman" went long again…

 

 

Via Michael Krieger of Liberty Blitzkrieg blog,

I first reported on record high gold premiums in India a couple of weeks ago. Since then, the story has become even more interesting as Reuters reports that gold supplies have completely dried up just ahead of major gold buying festivals and despite continued record premiums. While it is clear that Indians are finding a way to buy gold anyway via black markets, this is still a very interesting story to keep an eye on.

More from Reuters:

India has imposed several restrictions on imports of gold, the biggest non-essential import item, to curb a record trade deficit. Gold imports in September fell to 7 tonnes from 162 tonnes in May.

 

Of course, if additional demand wasn’t being met via black markets the price of gold would be far lower than it is.

 

“Still gold is not available, and they are charging $120-130 (an ounce) of premiums,” said Bachhraj Bamalwa, director with the All India Gems and Jewellery Trade Federation.

 

Most of the demand is being met by recycled gold or through unofficial or illegal supply channels, traders said.

 

“Sales have dropped by 50 percent… and everything is happening according to the wishes of the government,” said Harshad Ajmera, proprietor of Kolkata-based wholesaler JJ Gold House.

I’m sure this will all work out just as the government anticipates…

Full article here.

 

but here is the real reason for this…

 

In what has become a neck-to-neck race between the two best contrarian indicators in the world, Goldman's FX antiguru Tom Stolper and, well, nobody's Dennis Gartman, recall that it was October 15 when Gartman infamously told CNBC that " "Gold Is Acting Crappy… Looks Weak… Looks Awful". The logical result was a $100 gold price ramp in the days that followed. So fast forward ten days, to October 28 when Gartman, again on CNBC, intoned his suddenly bullish stance on gold, telling CNBC " that he was now looking at another trade. " That prompted us to quickly note that logical trade to be made:

 

Gartman now long gold apparently. Time to sell it all

— zerohedge (@zerohedge) October 28, 2013

 

And sure enough, after hitting $1360 on the day of Gartman's interview, gold has since tumbled.

It goes without saying that we would urge readers to wait for the author of the "world famous Gartman letter" to start bashing gold again before going all in the yellow metal

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ZVkYtFdEDA4/story01.htm Tyler Durden

This morning, like many other mornings in the last few months, precious metals prices are being pummeled lower in a vertical dumpfest (for no apparent sudden reason other than its opening time). What is ironic about this apparent lack of demand is that around the world, demand is extreme – and is most clearly evident in India, where thanks to government intervention, physical premiums push to new record highs yet do nothing to detract from Indians buying demand (as Reuters reports supplies of the precious metal disappear). Of course, the real reason why gold and silver prices have dropped since 10/28 is that none other than "the world renowned Gartman" went long again…

 

 

Via Michael Krieger of Liberty Blitzkrieg blog,

I first reported on record high gold premiums in India a couple of weeks ago. Since then, the story has become even more interesting as Reuters reports that gold supplies have completely dried up just ahead of major gold buying festivals and despite continued record premiums. While it is clear that Indians are finding a way to buy gold anyway via black markets, this is still a very interesting story to keep an eye on.

More from Reuters:

India has imposed several restrictions on imports of gold, the biggest non-essential import item, to curb a record trade deficit. Gold imports in September fell to 7 tonnes from 162 tonnes in May.

 

Of course, if additional demand wasn’t being met via black markets the price of gold would be far lower than it is.

 

“Still gold is not available, and they are charging $120-130 (an ounce) of premiums,” said Bachhraj Bamalwa, director with the All India Gems and Jewellery Trade Federation.

 

Most of the demand is being met by recycled gold or through unofficial or illegal supply channels, traders said.

 

“Sales have dropped by 50 percent… and everything is happening according to the wishes of the government,” said Harshad Ajmera, proprietor of Kolkata-based wholesaler JJ Gold House.

I’m sure this will all work out just as the government anticipates…

Full article here.

 

but here is the real reason for this…

 

In what has become a neck-to-neck race between the two best contrarian indicators in the world, Goldman's FX antiguru Tom Stolper and, well, nobody's Dennis Gartman, recall that it was October 15 when Gartman infamously told CNBC that " "Gold Is Acting Crappy… Looks Weak… Looks Awful". The logical result was a $100 gold price ramp in the days that followed. So fast forward ten days, to October 28 when Gartman, again on CNBC, intoned his suddenly bullish stance on gold, telling CNBC " that he was now looking at another trade. " That prompted us to quickly note that logical trade to be made:

 

Gartman now long gold apparently. Time to sell it all

— zerohedge (@zerohedge) October 28, 2013

 

And sure enough, after hitting $1360 on the day of Gartman's interview, gold has since tumbled.

It goes without saying that we would urge readers to wait for the author of the "world famous Gartman letter" to start bashing gold again before going all in the yellow metal

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ZVkYtFdEDA4/story01.htm Tyler Durden

For the 4th week in a row, initial jobless claims came in worse than expected. According to the BLS there are no special adjustments for “glitches” or shutdowns or any other caveats and in fact California (at the center of the software glitch that impacted everything) saw the biggest ‘drop’ in claims: 13,033 as fewer layoffs in service, wholesales trade, and retail trade industries supported the data. If this is indeed a clean number, it is still the highest level of jobless claims in over 3 months. It seems, post-FOMC, that the market needs moar bad prints to spark some more momentum and a mere 10k miss is just not enough to warrant another BFTATH ramp (for now).

 

 

Charts: Bloomberg

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/zvvFw1Dc7Qg/story01.htm Tyler Durden

If the “success” of Abenomics is measured by the soaring prices of food and energy, if little other inflation, by the exploding monetary base and by a wealth effect, pardon, stock market which has flatlined in the past 3 months, then it has so far done passable job of being considered good policy. If, however, one actually looks at the general improvement in living conditions measured most directly by that key metric –wages – then Abenomics has been the worst thing to hit Japan since the Fukushima tsunami, and an unmitigated disaster.

As the Japan labor ministry reported overnight, the nation’s salaries extended the longest slide since 2010, as regular wages excluding overtime and bonuses fell 0.3 percent in
September from a year earlier, marking a 16th straight month of decline. That this is happening even as Prime Minister Shinzo Abe “urges companies to raise workers’ wages as part of his bid to reflate the world’s third-largest economy” is merely the latest slap in the face of central-planners everywhere who believe that flipping an economy and deeply engrained behaviors can happen on a dime.

More from Bloomberg:

The data underline the difficulties Abe faces in getting companies on board in his drive to end more than a decade of deflation among nascent signs of price gains after the Bank of Japan’s unprecedented easing. Trade unions are demanding higher base pay, and the question now is whether firms will agree in wage negotiations early next year.

“The key for the success of Abenomics is whether companies will raise wages,” Norio Miyagawa, a senior economist at Mizuho Securities Research and Consulting Co. in Tokyo, said before the report. “Companies still aren’t confident enough that growth will be sustained and will probably hesitate to raise wages, especially base salaries, for the time being.”

Wages are falling behind price gains. National consumer prices excluding fresh food rose 0.7 percent last month from a year earlier, a fourth straight increase.
Expansion Forecast

The nation’s economy is forecast to grow until April, when a sales-tax increase is likely to cause a one-quarter contraction. Domestic demand is boosting production, and a survey of purchasing managers released today showed manufacturers this month at their most confident in more than three years.

Great: so Abe has another six months before the secular shift in fiscal policy makes wage growth virtually impossible

Kaoru Yosano, a former finance minister, said in an interview this month that wage gains hinge on a pick-up in demand, not just pleas by Abe for companies to do their part for a recovery.

 

Trade union negotiations with management on salaries in talks known as “shunto,” or the spring wage offensive — around March next year — will be key for pay increases.

 

The negotiations “will be one clear point at which there is a chance to either show that something new is happening or raise further doubts,” Jerry Schiff, the International Monetary Fund’s mission chief for Japan, said in an interview this week in Tokyo. “It’ll be important to get wages to begin to rise soon.”

 

The Japanese Trade Union Confederation, or Rengo, plans to demand pay increases of more than 1 percent in next spring’s labor talks — a move welcomed by Economy Minister Akira Amari.

Good luck with all that… especially following news that Japan’s tobacco conglomerate, Japan Tobacco, is firing some 20% of jobs at the parent company and is closing 4 plants.

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

The last time major explosions were reported near Damascus, it was in May when Israel and its air force did everything in their power to provoke the Assad regime to escalate military operations both domestically and abroad. It almost succeeded when three months later Obama nearly led a falseflag-driven “liberation” force facilitating Saudi and Qatari energy interests in the region and their pipeline ambitions below Syria. Since then Israel had been largely dormant, seething in its (and Saudi) disappointment that it was unable to play Obama like a fiddle.

The unstable detente changed again overnight, when as Haaretz reports “a large explosion was heard at a Syrian army missile base in Latakia.  Eye witnesses told the Britain-based Syrian Observatory for Human rights that the explosion took place near Snobar Jableh, south of the city. It was not yet clear whether anyone was wounded in the strike.” And not surprisingly, it is once again Israel’ that was implicated in the latest regional provocation because as Haaretz adds, the “strike follows Lebanese media reports that Israeli aircraft circled above southern Lebanon.”

“The official Lebanese news agency reported that Israeli aircrafts were sighted on multiple occasions Wednesday in the south of the country. According to the report, which was based on a press statement by the Lebanese army, the airplanes entered Lebanese airspace at around 1:40 P.M. and circled over various places before leaving over the Mediterranean Sea near Tripoli and Naqoura at 5 P.M.”

From Haaretz:

A Facebook page run by Syrian rebels claimed that the strike occurred at around 7 P.M. According to the page, a missile was fired from the sea and struck the Syrian base but did not result in any casualties. Israeli sources declined to comment on the reports.

 

Last week, Kuwaiti newspaper Al Jarida reported that Israeli fighter planes had bombed a shipment of missiles in the border area between Lebanon and Syria. The report, which according to the paper was based on sources in Jerusalem, has no confirmation from any other source.

 

The source told the newspaper that the missiles that were destroyed were of an advanced model and were designated for Hezbollah, as part of the strengthening of the organization’s missile system. It is not clear whether the attack was carried out on Lebanese territory or on Syrian territory.

 

Israel refused to comment officially on the publication in the Kuwaiti newspaper, whose reliability is questionable.

While hardly surprising if Israel is confirmed as the offending party, a far bigger question is what are next steps: because unlike before, Putin has now very officially made Syria his protectorate, even as the US protective influence over both Syria and the region in general was waned substantially in the past few months. But perhaps more surprising is the desperation with which Israel is once again trying to destabilize the region. One thing that is clear: while such provocative actions may have yielded results as recently as half a year ago, Israel will need to put far more energy into comparable actions in the future, whether they target Syria or Iran, as the public opinion’s threshold for unwarranted Israel offensive action has dropped substantially since the bundled US foreign policy escapade in Syria which was an unmitigated disaster for the US-Saudi-Qatar-Israel axis.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Il9u_-icd2U/story01.htm Tyler Durden

• US Blasts Germany’s Economic Policies (WSJ)
• Citigroup, JPMorgan Said to Put Currency Dealers on Leave (BBG)
• Watchdog: Syria Destroys Chemical-Arms Equipment (WSJ)
• Kynikos Alumni Start Hedge Fund Betting on Declining Stocks (BBG)
• China state media calls for stern action after Tiananmen attack (RTRS)
• IMF warns of financial shock risk to Africa (FT)
• Insurers Oppose Obamacare Extension as Danger to Profits (BBG)
• BoJ content to ignore Fed tapering and go its own way (FT)
• U.S. attorney wants DOJ to take civil action against BofA (RTRS)
• NSA Fallout Hits AT&T’s Ambitions In Europe (WSJ)
• Sony slashes profit outlook with TV business back in red (RTRS)
• Google Denies NSA Cooperation While Expanding Encryption (WSJ)
• End western deference to Saudi petrodollars (FT)
• Facebook Status: Big Gains, but Worries Ahead (WSJ)
• Polish journalist abducted in Syria escaped and is home (RTRS)

 

Overnight Media Digest

WSJ

* Fed officials emerged from a policy meeting with their easy-money program intact and no clear signal about whether they would begin pulling it back at their December meeting or continue it into 2014.

* The collapse of oil company OGX, Latin America’s biggest-ever bankruptcy, punctuates Eike Batista’s breathtaking rise and fall.

* The Treasury’s semiannual report says Germany’s export-led growth is creating problems for the euro zone and the global economy.

* Facebook’s revival continued Wednesday as its surging mobile-advertising business helped the social network post a third-quarter profit, making its bumpy initial public offering last year seem like a distant memory.

* Retailers and grocers are bracing for another drain on consumer spending when a temporary boost in food-stamp benefits expires Friday.

* London’s top traders and bankers could soon see a big boost to their monthly pay as part of an effort by banks to soften the blow of a new European Union law limiting annual bonuses.

* When 58.com Inc, China’s equivalent of Craigslist, starts selling shares in New York, it will offer the best indicator yet of whether U.S. investors have found a taste for Chinese stocks again after a two-year case of indigestion.

* As it prepared its workers to take on jobs at major U.S. companies, Indian outsourcing giant Infosys Ltd provided them with written instructions on how to deceive U.S. authorities about the type of work they would do, and furnished them with inappropriate visas to lower its cost of doing business, federal prosecutors allege.

* Comcast Corp lost more video customers in the latest quarter than in the year-earlier period amid intensified competition from AT&T Inc’s U-Verse and Verizon Communications’ FiOS, a sign that phone companies’ years long expansion into TV is continuing to exert pressure on the cable-TV industry.

 

FT

Google said it was “outraged” by allegations that the U.S. government attempted to siphon information about millions of its users from its network.

Intel has held talks with Verizon Communications about offloading the chipmaker’s web-based television streaming service just months before it was due to launch.

Big Four audit firm PriceWaterhouseCoopers said it would buy independent management consultant Booz & Co, in a deal understood to be worth at least the $1 billion that Booz makes in annual revenues.

Brazilian tycoon Eike Batista on Wednesday filed for bankruptcy protection for his oil exploration and production company OGX in Latin America’s largest-ever corporate default.

Nokia on Wednesday won a patent infringement case against Taiwan-based HTC Corp, which may no longer be able to sell various handsets – including its flagship HTC One – in Britain.

 

NYT

* While the secretary of health and human services apologized profusely for the troubled rollout of the Affordable Care Act, President Obama traveled to Massachusetts to offer a forceful defense of the law.

* Advocates of the digital currency bitcoin say it is ready to emerge from its fringe status and become a common method of retail payment.

* The Federal Reserve said it would keep its campaign of asset purchases and low interest rates intact. The central bank’s statement contained no surprises, and the stock market barely budged.

* Facebook profits doubled in the third quarter, and the social network reported that mobile ads now accounted for about half its advertising revenue.

* Unbeknown to Google and Yahoo, the National Security Agency and its British counterpart have tapped into the search engines abroad, where data collection faces less oversight.

* PricewaterhouseCoopers said on Wednesday that it had agreed to buy consulting firm Booz & Company, bolstering its advisory business, a chief source of growth for the firm.

* Investors now have an opportunity to bet directly on diamond mining, as the Russian government moves to spin off a 16 percent stake in Alrosa. When shares start trading Thursday afternoon on the Micex stock exchange in Russia, it will provide an opening to a long-cloistered and once highly secretive business.

* The staff of a U.S. attorney’s office plans to recommend that the Justice Department sue Bank of America over the packaging and selling of mortgage-related investments before the financial crisis of 2008, the firm disclosed in a regulatory filing on Wednesday.

* The bankruptcy filing by petroleum company OGX was a stunning fall for entrepreneur Eike Batista, who was once a symbol of Brazil’s rapid rise as a global economic power but more recently has come to represent a Brazilian elite that views itself as above the rules that govern the most of the country.

* The Brixmor Property Group Inc sold more shares than it had expected in its initial public offering, reflecting strong demand from investors for commercial real estate.

 

Canada

THE GLOBE AND MAIL

* Suncor Energy Inc,
Canada’s largest energy outfit, has approved plans to build a new $13.5 billion oil sands mine – a decision that comes after years of delays.

* Alberta Premier Alison Redford defended Wednesday a new regional planning bill she says will help municipalities, but opposition leaders say the legislation will gut local authority and could be used to jail dissenting municipal elected leaders.

Reports in the business section:

* Amazon.com Inc is launching online grocery and auto shops on Thursday, adding to an array of category additions this year that has included toys, beauty and home goods. The company is aggressively pushing into Canada, more than doubling its offerings this year, with 14 new kinds of products.

* Executives at Target Corp say they will spend the next year trying to reshape the habits of Canadian shoppers who have soured to the company’s roll-out north of the border.

NATIONAL POST

* Rising above a patch of flattened brown earth, the tallest structure in western Canada still has a neat gleam and that crisp new building smell. But that hasn’t stopped Calgary from announcing an even bigger and better one. Within four years, Brookfield Place, which had its official groundbreaking ceremony on Wednesday, is expected to eke ahead of the much-heralded Bow Tower.

* Canadian Conservative Party lawyer Arthur Hamilton came under fire in the House of Commons on Tuesday for his role in paying the legal bill for Conservative Senator Mike Duffy.

FINANCIAL POST

* After 18 months of telling consumers and markets that its key interest rate would eventually be lifted from 1 percent, close to rock bottom, the Bank of Canada shifted gears into neutral.

* Target Corp is still trying valiantly to turn around the perception that the new-to-Canada mass merchant is pricier than its rivals in this country – most specifically, Walmart.

 

China

CHINA SECURITIES JOURNAL

– A total of 2,467 A-share listed Chinese companies have posted a 15.2 percent rise in their combined net profit for the July-September period from a year earlier, exchange data showed.

– China should take cautious steps to open up its capital account in the Shanghai free-trade zone, said Long Guoqiang, a senior official with the State Council’s Development Research Center, the government’s think tank, at a presser on Wednesday.

SHANGHAI SECURITIES NEWS

– China’s parliament said it would speed up amendments on laws regarding land regulation, environment protection and air pollution prevention.

SECURITIES TIMES

– China’s average cement price rose 1 percent to 338.84 yuan ($55.60) a tonne in the last week of October from the previous week, and analysts expect cement firm’s profits to improve in the fourth quarter.

SHANGHAI DAILY

– China issued rules to regulate incumbent and retired officials from working in companies or holding concurrent posts in government and commercial enterprises in order to avoid conflicts of interest.

CHINA DAILY

– Participants in medical drug trials are appealing for better treatment, while trial companies complain of “dirty tricks” by participants to earn more.

 

Fly On The Wall 7:00 AM Market Snapsot

ANALYST RESEARCH

Upgrades

Chuy’s (CHUY) upgraded to Market Perform from Underperform at Raymond James
Expedia (EXPE) upgraded to Buy from Neutral at BofA/Merrill
Hatteras Financial (HTS) upgraded to Buy from Neutral at Compass Point
Hess Corp. (HES) upgraded to Outperform from Neutral at Credit Suisse
ICON plc (ICLR) upgraded to Strong Buy from Buy at ISI Group
Itron (ITRI) upgraded to Hold from Sell at Brean Capital
Microchip (MCHP) upgraded to Buy from Neutral at Mizuho
Thoratec (THOR) upgraded to Buy from Hold at Canaccord

Downgrades

Boardwalk Pipeline (BWP) downgraded to Underweight from Equal Weight at Barclays
Covance (CVD) downgraded to Outperform from Strong Buy at Raymond James
Facebook (FB) downgraded to Market Perform from Outperform at BMO Capital
Garmin (GRMN) downgraded to Market Perform from Outperform at Raymond James
Itron (ITRI) downgraded to Neutral from Buy at Janney Capital
Ligand (LGND) downgraded to Hold from Buy at Brean Capital
MSC Industrial (MSM) downgraded to Neutral from Outperform at RW Baird
MedAssets (MDAS) downgraded to Neutral from Buy at ISI Group
Mobile TeleSystems (MBT) downgraded to Neutral from Buy at Citigroup
Saia, Inc. (SAIA) downgraded to Outperform from Strong Buy at Raymond James
Sealed Air (SEE) downgraded to Hold from Buy at Jefferies
Sealed Air (SEE) downgraded to Neutral from Buy at Citigroup
Southern Company (SO) downgraded to Market Perform from Outperform at Wells Fargo
United Microelectronics (UMC) downgraded to Underperform from Neutral at BofA/Merrill

Initiations

Allscripts (MDRX) initiated with a Market Perform at FBR Capital
athenahealth (ATHN) initiated with a Market Perform at FBR Capital
Casella Waste (CWST) initiated with an Outperform at Imperial Capital
Cerner (CERN) initiated with an Outperform at FBR Capital
Computer Programs (CPSI) initiated with a Market Perform at FBR Capital
eHealth (EHTH) initiated with a Market Perform at FBR Capital
Essent Group (ESNT) initiated with a Buy at BTIG
FireEye (FEYE) initiated with a Perform at Oppenheimer
Omnicell (OMCL) initiated with an Outperform at FBR Capital
Prothena (PRTA) initiated with an Outperform at RBC Capital
Quality Systems (QSII) initiated with an Underperform at FBR Capital
Vocera (VCRA) initiated with a Market Perform at FBR Capital
Wabash (WNC) initiated with an Overweight at Piper Jaffray

HOT STOCKS

Visa (V) announced new $5B share repurchase
Weight Watchers (WTW) suspended quarterly cash dividend
Facebook (FB) said fewer daily users among younger teens
Starwood Hotels (HOT) sold San Francisco properties for $125M
FleetCor (FLT) acquired Epyx from HgCapital, acquired NexTraq from Francisco Partners

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Time Warner Cable (TWC), Iron Mountain (IRM), Cigna (CI), Pilgrim’s Pride (PPC), Churchill Downs (CHDN), Marriott (MAR), Williams (WMB), Williams Partners (WPZ), Weight Watchers (WTW), Jarden (JAH), FleetCor (FLT), Elizabeth Arden (RDEN), SunPower (SPWR), PerkinElmer (PKI), Owens-Illinois (OI), Hanesbrands (HBI), Bally Technologies (BYI), Allstate (ALL), Facebook (FB), Starbucks (SBUX), PriceSmart (PSMT), Silicon Graphics (SGI), Expedia (EXPE), Affymetrix (AFFX), Kraft Foods (KRFT)

Companies that missed consensus earnings expectations include:
Total (TOT), Buenaventura (BVN), SJW Corp. (SJW), International Shipholding (ISH), Murphy Oil (MUR), Curtiss-Wright (CW), Avis Budget (CAR), Oil States (OIS), Intrepid Potash (IPI), Enbridge Energy (EEP), Con-way (CNW), Vanguard Natural (VNR), MetLife (MET), Tile Shop (TTS), A.T. Cross (ATX), Molina Healthcare (MOH)

Companies that matched consensus earnings expectations include:
FreightCar America (RAIL), MaxLinear (MXL), Meru Networks (MERU), Premiere Global (PGI), Atmel (ATML), AXIS Capital (AXS), XL Group (XL), Visa (V), Crocs (CROX)

NEWSPAPERS/WEBSITES

• Facebook (FB) spooked investors with warnings that it may be nearing the limits of one of its most important areas of revenue growth. After reporting strong Q3 financial results, the company told analysts that they may not be able to cram any more ads into users’ news feeds, and that U.S. teens are spending less time on the site, the Wall Street Journal reports
• AT&T’s (T) ambitions to expand in Europe have run into unexpected hurdles amid the growing outcry across the region over surveillance by the NSA. German and other European o
  fficials said any attempt by AT&T to acquire a major wireless operator would face intense scrutiny, the Wall Street Journal reports
• Fiat (FIATY) CEO Sergio Marchionne said the company’s long-term goal is to own 100% of Chrysler, Reuters reports
• Warren Buffett, who aims to have $20B in cash at Berkshire Hathaway (BRK.A), isn’t investing fast enough to keep money from piling up. Even in a year in which the company has struck some of its largest deals and accelerated capital spending, Buffett still needs to find acquisitions, Bloomberg reports
• Baidu (BIDU), owner of China’s most-popular Internet search engine, is buying companies to accelerate its transition to mobile devices, where traffic is at least doubling annually, said CEO Robin Li, Bloomberg reports
• Morgan Stanley (MS) will take a 30% stake in Mitsubishi Financial Group’s (MTU) Japanese wealth-management business, sources say, Bloomberg reports

SYNDICATE

58.com (WUBA) 11M share IPO priced at $17.00
Discovery Labs (DSCO) files to sell common stock
Essent Group (ESNT) 19.7M share IPO priced at $17.00
Gas Natural (EGAS) files to sell 1.13M shares of common stock
Intercloud Systems (ICLD) 1.25M share Secondary priced at $4.00
Marcus & Millichap (MMI) 6M share IPO priced at $12.00
Western Digital (WDC) files to sell 10.9M shares for holder Hitachi Ltd
Yelp (YELP) 3.75M share Secondary priced at $67.00

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/paYoyA3qRIM/story01.htm Tyler Durden

In addition to the bevy of ugly European unemployment and inflation news just reported, the overnight session had a dollop of more ugly macro data for the algos to kneejerkingly react to and ramp stocks to fresh time highs on. First it was China, where the PBOC did another reverse repo, however this time at a fixed 4.3% rate, 0.2% higher than the Monday iteration and well above the 3%-handle from early October, indicating that China is truly intent on tightening its monetary conditions. Then Japan confirmed that despite the soaring imported food and energy inflation, wages just refuse to rise, and have declined now for nearly 1.5 years. Then, adding core insult to peripheral injury, Germany reported retail sales that missed expectations of a +0.4% print wildly, declining -0.4% from a prior downward revised 0.5% to -0.2%. And so on: more below. However, as usual what does matter is how the market digests the FOMC news, and for now the sense is that the risk of a December taper has risen based on the FOMC statement language, whether warranted or not, which as a result is pushing futures modestly lower following an epic move higher in the month of October on nothing but pure balance sheet and multiple expansion.

The big data week in the US rolls on with the highlights being the Chicago PMI and initial jobless claims, which are expected to print their first accurate, non-impaired reading since August.

On today’s US docket:

US: Initial jobless claims, cons 339K (13:30)
US: Chicago PMI, cons 55.0 (14:45)

Overnight news bulletin from Bloomberg and RanSquawk:

• Treasuries higher, erasing losses seen after the FOMC yesterday kept asset purchases at a pace of $85b/month and said it needs to see more evidence that the economy will continue to improve.
  Euro-area inflation cooled to 0.7% in Oct., the slowest in almost four years, moving further away from the ECB’s goal
• Very likely that ECB members will discuss a rate cut at Nov. 7 meeting following data: Market Securities
• The Bank of Japan maintained its commitment to unprecedented monetary easing and reiterated its forecast that inflation will almost match its 2% target in the year starting April 2015
• Japan should lower its effective corporate tax rate to Germany’s level, around 29%, to help bolster growth, according to one of Abe’s top economic aides
• G-7 central banks said emergency currency-swap lines established during the global financial crisis will be made permanent, providing backstops to safeguard against future turbulence
• China’s top four banks posted their biggest increase in soured loans since at least 2010 as a five-year credit spree left companies with excess manufacturing capacity and slower profit growth amid a cooling economy
• The U.S. reiterated its complaints that China’s yuan hasn’t strengthened as fast as needed and criticized Germany for its current-account surplus in a report yesterday
• Obama defended his health-care law, saying the flawed online insurance exchange will get fixed, people being thrown off the plans that don’t meet the law’s standards will be getting better insurance and “a fraction” of higher income Americans will pay more for plans that are better than they had
• Sovereign yields mostly higher, EU peripheral spreads little changed. Nikkei -1.2%, leading Asian equities lower; European stocks mixed, U.S. equity-index futures fall. WTI crude little changed, gold and copper lower

Market Recap from RanSquawk

Even though stocks traded lower this morning in reaction to the removal of language around tightening financial conditions by the Fed yesterday, which in turn prompted market participants to speculate over potential Fed taper in December, financials led the move higher in Europe following comments from ECB’s Nowotny who said that there will be further liquidity provisions. The sector also benefited from an encouraging set of earnings from BNP Paribas, which led the way in France. Combination of comments from Nowotny, together with the move by the ECB to announce that emergency swap lines with other central banks will be made  permanent, ensured that despite the risk averse sentiment, money market rates actually declined. Nevertheless, Bunds grinded higher, supported by coupon & redemption flows from Italy and Spain, as well as general month-end extensions.

Prices received another boost following the release of softer Eurozone CPI estimate and higher than expected Eurozone Unemployment Rate. Going forward, market participants will get to digest another round of earnings (Exxon, Conoco), as well as the weekly jobs data, Chicago PMI and also GDP report from Canada.

Asian Headlines

The Bank of Japan kept monetary policy on hold, alongside expectations, in a unanimous vote. BoJ 2014 Monetary Base Target (JPY)(Oct 31) 270trl vs. Exp. 270trl (Prev. 270trl).

Japanese Manufacturing PMI (Oct) M/M 54.2 (Prev. 52.5) – highest in over 3 years.

The PBoC injected CNY 16bln via 14 day reverse repos today, which was part of a net CNY 29.1bln injection this week vs. a CNY 58bln drain the previous week.

EU & UK Headlines

ECB’s Nowotny said that there will be further liquidity provision, adding that he wants to avoid sudden effects and must avoid falling off cliff as LTRO comes to an end. Nowotny suggested that the LTRO will be more tailored to countries perceived to have funding requirements.

The ECB has said it’s standing swap lines agreements with the BoE, Federal Reserve, BoJ, SNB and BoC are to become permanent facilities and may adjust the frequency and maturity on changing market conditions.

Eurozone Unemployment Rate (Sep) M/M 12.2% vs. Exp. 12.0% (Prev. 12.0%, Rev. 12.2%)
Eurozone CPI Estimate (Oct) Y/Y 0.7% vs. Exp. 1.1% (Prev. 1.1%)

CPI Core (Oct A) Y/Y 0.8% vs. Exp. 1.0% (Prev. 1.0%) – growth rate is a low for the series, matching early 2010 low.

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

US Headlines

As a reminder, following the FOMC statement yesterday Hilserath said that the Fed is still looking at tapering and there is no sign of taking action, adding that the Fed still has taper on table at the December FOMC meeting.

Republican Senators McCain and Graham seek to delay confirmation of Fed chair nominee Yellen over Benghazi attacks, with Senator Graham vowing to block appointments without more info on Benghazi.

According to reports, Senator McCain is attempting to leverage Senate approval of an Obama nominee to the Fed, in order to collect more information on the 2012 attack on US facilities in Benghazi, Libya, that killed four Americans.

Barclays month-end extension: Treasury +0.07y

Equities

Equities traded mixed in Europe, as market participants reacted to somewhat less dovish than expected FOMC statement late yesterday, though financials outperformed following comments by Nowotny who stated that there will be further liquidity provision. Consensus beating earnings from BNP Paribas, which led the way in France, also supported investor demand for financials in Europe.

As a reminder, after the closing bell on Wall Street yesterday, Facebook reported Q4 Adj. EPS USD 0.25 vs. Exp. USD 0.19 and Q3 revenue USD 2.02bln vs. Exp. USD 1.91bln. Separately, Visa reported Q4 EPS USD 1.85 vs. Exp. USD 1.85 and reaffirmed forecast for year rev. and EPS growth.

FX

The risk averse sentiment also translated into lower trending EUR/CHF and USD/JPY, with USD/JPY also driven lower by option related flow. Good sized strikes are said to
be placed between 98.00-50 level. With that in mind, 1m implied fell to its lowest level since Dec 2012, while the spread above realised vol is around 1.0 level.

RBNZ Official Cash Rate (Oct 31) 2.50% vs. Exp. 2.50% (Prev. 2.50%) – Governor Wheeler said that currency gains provide flexibility that rate increases and that a rate increase will likely be needed in 2014.

The US Treasury’s FX report said that Germany’s weak demand and export dependence create deflationary bias for Euro area and world economy. The US Treasury also commented that China’s currency is not rising as fast as needed and that China cannot be labelled a currency manipulator at this time.

Commodities

Libya’s oil exports are currently around 150,000-200,000bpd according to a government official. Furthermore for Libya, a government official has said that the Sharara oil field may restart in 10 days.

US Secretary of Energy Moniz has said the US would like to coordinate with China on any use of strategic petroleum reserves, with discussions to take place over the next 12 months.

According to the OPCW Syria have destroyed their chemical weapons production and mixing facilities. Analysts at ANZ expect the slowing of physical gold demand and the decline in Shanghai premiums will mean gold prices will have to fall further before sparking any strong end-user demand.

 

SocGen’s summary of the key macro events:

No surprises this time around – the Fed keeps its US$85bn monthly bond buying programme intact. Slight disappointment however was from the optimistic sounding Fed vs. dovish expectations, which led to almost 8bps jump in the US 10y swaps immediately after FOMC announcement. G10 FX barring Aussie and yen are trading weaker against the greenback in Asia as shorts get squeezed. No change to unemployment and inflation target, but Fed dropped the notion that financial conditions have tightened, also there was no guidance of when they would start tapering. So what lies next? If the recent economic data is any indication, the momentum that the US economy has gathered since the beginning of the year has ebbed since the Fed last met. Our money is now on tapering to start in March 2014, meaning that it would be the next Fed chairman (likely Yellen) and not Bernanke who would be at the helm when we get to hear of the Fed actually starting to taper. The reasons for this are obvious, in that it would give the FOMC members sufficient data points to assess the housing and employment situation, which is expected to be back on track by then. Uncertainty from the budget impasse should also have subsided by then. However, with Fed’s optimistic tone, a taper start earlier than March is not completely out of reckoning.

In the context of emerging markets, a delayed start to Fed tapering should now be music to EM investors’ ears. We see the Fed’s decision as a green signal for carry trade investors as it gives a free hand to investors as well as giving the emerging markets sufficient time to show improvements in economic growth, which has been scaring investors away amid fears of an end to easy money.

US initial claims (SG forecast 330K) and the Chicago PMI (57.0) will be in focus today. We believe any positive surprises on the US economic front will gradually but eventually add to paying interest, helping yields to back up further by the year end. Additionally, on the European economic agenda, we have the unemployment and CPI data to look for, where there is a risk of the euro HICP inflation rate coming in lower than our earlier forecast of 1.0% y/y (which has now been revised to 0.9%), following the German state and Spanish national inflation data.

As usual, we conclude with Jim Reid’s overnight event recap

Risk assets including equities (S&P 500 -0.49%) and credit (CDX IG +2bp) traded weaker going into the FOMC and the tone after the event left things pretty much unchanged. This has come after the S&P 500 recorded a 7% gain since the October 8th, so the market can be forgiven for pausing for breath yesterday. In terms of the data, the ADP employment survey was worse than most estimates. The gain in private nonfarm payrolls came in at just +130k for October, 20k lower than the median 150k estimate. The vendor responsible for compiling the report (Moody’s) commented that the government shutdown hurt an already softening job market in October but did not quantify the effect.

Elsewhere September CPI suggested that inflationary pressures remain benign as the latest print showed only modest gains for both the headline (+0.2%) and core (+0.1%). Outside of the data flow, Republican Senator John McCain made some headlines threatening to delay Yellen’s confirmation, in an effort to obtain information from the White House about attacks on US assets in Benghazi, Libya. In Europe, DB’s economists interpreted the latest ECB lending survey as suggesting a moderate improvement in credit standards in Q3 2013 and an outright easing of credit standards in Q4 – indicating a stronger credit impulse going forward.

On the micro side, there were a few interesting snippets to highlight. Facebook’s after-market earnings beat was well liked and the market responded by bidding its shares up more than 10% for a brief period in afterhours trading before fading back to unchanged. Facebook disclosed that more than 40% of Q3 sales came from mobile-derived sources, up from 14% the same quarter last year – but on its conference call it suggested that mobile ad growth may slow. General Motors reported adjusted earnings that beat analyst estimates and its shares traded up 3%. The management commentary sounded broadly similar to that of Ford who reported last week. Encouragingly, GM reported solid demand coming out of North America and revenues in Europe rose on a YoY basis for the first time in two years. On a less positive note, a bankruptcy filing from Brazilian oil company OGX, a former market darling controlled by ex-billionaire Eike Batista raised a few eyebrows. The company had a one-time market cap of US$45bn but had only barely passed the start-up phase and had produced almost no crude oil, according to Reuters. The company failed to reach a restructuring agreement with bondholders. Bond markets are seeing this as a test of Brazil’s 8 year old bankruptcy laws, which are reportedly similar to US Chapter 11 proceedings (Reuters).

Turning to overnight markets, Asian equities are tracking lower following the lead of Wall St. The major Chinese banks reported earnings yesterday which have mostly disappointed the markets. Indeed, three of the four major Chinese bank’s stocks are down more than 1% today, underperforming the Hang Seng (-0.5%) and Hang Seng China Enterprises Index (-0.5%). Reported earnings growth among the banks continued to be solid (+10.8% for the quarter) but this was the slowest pace in seven quarters. There is also concern over the growing balance of non-performing loans among the majors which increased 3.5% in the third quarter to a combined total of RMB330bn (US$54bn). The average bad-loan ratio widened to 1.02% (Bloomberg). The four major banks have set aside an average 279% of the value of their bad debt as provisions, up from 272% at the end of June according to Bloomberg data. Outside of China, the BoJ kept its policy unchanged in its meeting today. AUDUSD spiked higher after a strong building approvals number (+14.4% MoM vs 2.8% expected) – recent price increases in the Australian property market appear to have spurred building activity.

Turning to the day ahead, consumer spending and retail sales in France and Germany, together with Eurozone unemployment and CPI are the major data releases today in Europe. The big data week in the US rolls on with the highlights being initial jobless claims and the Chicago PMI.

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Those following the Euro FX pairs saw a plunge at 6 am Eastern, when Eurostat released the latest Eurozone unemployment and inflation statistics. They were, in a word, abysmal. After the August unemployment data finally saw a modest drop forcing many to announce the end of the European depression, not only did the the September number revise the August print from 12.0% to 12.2%, a new record high as 73,000 thousand people became unemployed, but more importantly made the September unemployment rate 12.2% as well following another 60,000 Eurozoneans losing their jobs, effectively meaning that for all the talk of a European recovery, its unemployment rate keeps hitting new all time record highs every single month.

Broken down by country:

And yes, that sudden housing mecca for all rental condo flippers, Spain, was just found to also have a record high unemployment rate of 26.6%. So much for that.

But the worst print for Europe is not in any of the above charts or tables, but is and has always been its youth unemployment, as an entire generation is unable to find a productive life. In this case, the EA17 Under 25 unemployment just rose to a new record high 24.1%, from 24.0% in August, driven by Spain at 56.5%, Cyprus 43.9% (was 28.0% a year ago – thanks template), Portugal at 36.9%, and Greece somewhere in the 58% ballpark.

 

Finally, rounding out the abysmal picture was the Euro area’s just reported October CPI, which tumbled to 0.7%Y/Y, down from 1.1% in September and below the 1.1% expected. This was the weakest annual inflation print in the continent since 2009, and is a bright red flag for Draghi that everything he has done so far has failed to stimulate inflation, but at least his precious EUR is at 2 year highs against the dollar. Alas, not for much longer as the time to reprice the European currency has arrived.

 

End result of all of the above:

And going much lower.

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

Those following the Euro FX pairs saw a plunge at 6 am Eastern, when Eurostat released the latest Eurozone unemployment and inflation statistics. They were, in a word, abysmal. After the August unemployment data finally saw a modest drop forcing many to announce the end of the European depression, not only did the the September number revise the August print from 12.0% to 12.2%, a new record high as 73,000 thousand people became unemployed, but more importantly made the September unemployment rate 12.2% as well following another 60,000 Eurozoneans losing their jobs, effectively meaning that for all the talk of a European recovery, its unemployment rate keeps hitting new all time record highs every single month.

Broken down by country:

And yes, that sudden housing mecca for all rental condo flippers, Spain, was just found to also have a record high unemployment rate of 26.6%. So much for that.

But the worst print for Europe is not in any of the above charts or tables, but is and has always been its youth unemployment, as an entire generation is unable to find a productive life. In this case, the EA17 Under 25 unemployment just rose to a new record high 24.1%, from 24.0% in August, driven by Spain at 56.5%, Cyprus 43.9% (was 28.0% a year ago – thanks template), Portugal at 36.9%, and Greece somewhere in the 58% ballpark.

 

Finally, rounding out the abysmal picture was the Euro area’s just reported October CPI, which tumbled to 0.7%Y/Y, down from 1.1% in September and below the 1.1% expected. This was the weakest annual inflation print in the continent since 2009, and is a bright red flag for Draghi that everything he has done so far has failed to stimulate inflation, but at least his precious EUR is at 2 year highs against the dollar. Alas, not for much longer as the time to reprice the European currency has arrived.

 

End result of all of the above:

And going much lower.

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

It seems like it was an eternity ago that Obama was doing his post-government shutdown gloating media tour, when day after day the world was bombarded with news of the GOP’s record low popularity rating, paradoxically following their attempt to do what even the president is now desperate to achieve: delay Obamacare. Well, the tables have turned and now that the government shutdown is history, at least until January, and the public focus has shifted to where it should have been in the first place – namely the embarrassing ponzi scheme experiment that is Obamacare, and the epic failure surrounding its rushed rollout – it is Obama’s turn to suffer a record low rating, which is precisely what happened according to a just concluded WSJ/NBC News poll.

The WSJ reports that “the popular discontent that engulfed Republicans amid the partial government shutdown has now washed over President Barack Obama, whose job approval rating has sunk to an all-time low. Americans just weeks ago heaped scorn largely on congressional Republicans over the dysfunction in Washington. But the new poll found a sharp turn against Mr. Obama, during a month in which lawmakers tiptoed up to a potential debt default and the White House fumbled the rollout of its signature health-care law.

Specifically:

Mr. Obama’s job approval fell to 42%, with 51% of respondents disapproving of his performance as president. That marked a drop in his approval rating from 47% in early October and 53% at the end of 2012.

 

At the same time, more Americans now view Mr. Obama negatively than positively, for the first time since he emerged as a national political candidate.

 

In all, the poll of 800 Americans captured an extraordinarily deep and widespread public distaste for the two political parties, those parties’ leaders and the state of politics in the nation’s capital.

Elsewhere, it appears that Americans just have given up on the government system, whose increasing corruption and cooption by moneyed interests is now obvious to everyone:

Optimism about the U.S. system of government, at 30%, was at the lowest ebb in 40 years. Just 29% said their congressional representative deserved re-election—a new low—while nearly three-quarters said Congress was contributing to the problems in Washington instead of working to solve them.

 

House Speaker John Boehner and Senate Minority Leader Mitch McConnell, both Republicans, hit their highest negative ratings, as did Senate Majority Leader Harry Reid, a Democrat.

 

“Americans are voicing their frustration at a Congress that cannot keep the government open for business and an administration that cannot get health care open for enrollment,” Mr. Hart said.

 

Republican pollster Bill McInturff, who conducts the survey along with Democrat Fred Yang, described the findings as a “shock wave” that showed the depth of “anger and frustration with everybody in Washington.”

Frustration… and yet nobody will dare to change anything for fear of losing their precious entitlements, which are unsustainable as is and like in Detroit will end up with pennies on the dollar, or for fear of infringing on their Dancing with the Stars TV time.

Visually:

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