Month: January 2014

Major Nations Have Debts At 200 Year Highs

Today’s AM fix was USD 1,238.00, EUR 909.56 and GBP 756.54 per ounce.
Friday’s AM fix was USD 1,232.25, EUR 903.01 and GBP 748.45 per ounce.

Gold rose $12.10 or 0.99% Friday, closing at $1,236.40/oz. Silver edged up $0.19 or 0.95% closing at $20.16/oz. Platinum climbed $6.24, or 0.4%, to $1,406.74/oz and palladium fell $0.53 or 0.1%, to $725.72/oz. Gold and silver were both up on the week at 1.83% and 0.63%.

Gold rallied for its fifth day and last week showed its highest margin growth since October on signs of stronger demand from China. Gold ETF products have dropped to levels not seen since the 2008 financial crisis. With speculative hands exiting the market, physical demand may again drive prices.

The IMF published research by Harvard professors, Carmen Reinhart and Kenneth Rogoff, that highlighted that most countries in the Western world will require defaults, higher inflation and a savings tax to save their economies as debt levels reach an astounding 200 year high.

The debt crisis crippling sovereign economies may even require 1930’s style write offs or IMF tools for austerity as seen in the past.  The authors are familiar to the IMF, Rogoff was a former chief economist. They were lauded for their work, This Time is Different: Eight Centuries of Financial Folly,  but stirred controversy latter by suggesting that that growth slows sharply once public debt exceeds 90pc of GDP.

The crux of the paper highlights the following:
 
1. Wealthy nation’s policy makers are in denial that they are different than poorer nations and feel that their debt can be reduced by austerity cuts, growth, and tinkering.

2. Advanced economies wrote of debt in the 1930s. First World War loans from the U.S. were forgiven when the Hoover Moratorium ended in 1934, giving debt relief worth 24% of GDP to France, 22% to Britain and 19% to Italy.

3. During a further restructuring of the war reparations regime on Germany under the Versailles Treaty, the U.S. itself imposed haircuts on its own creditors worth 16% of GDP in April 1933 when it abandoned the Gold Standard.

4. The policy is essentially a confiscation of savings, mostly achieved by increasing inflation while rigging the system to stop markets taking evasive action. The UK and the U.S. ran negative real interest rates of -2% to -4% for several years after the Second World War. Real rates in Italy and Australia were -5%.

The Telegraph article by Ambrose Evans-Pritchard, illuminates that opponents of the present system find that extreme austerity without offsetting monetary stimulus is the main reason why debts have been spiralling upwards even faster in parts of Southern Europe.

Unstable eurozone states are particularly vulnerable to default because they no longer have their own sovereign currencies, putting them in a similar position as emerging countries that borrowed in U.S. dollars in the 1980s and 1990s. The eurozone is further troubled with an unstable banking system that may still require significant recapitalization.

As seen with the 2008 financial crisis, a catastrophe across the pond will ripple and affect all trading partners in our interdependent world. These type of macro economic risks continue to support the need for safe haven investments like gold and precious metals.

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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/FBzWDbuC2pM/story01.htm GoldCore

$500 Billion In 2013 Corporate Buybacks: Half Of QE

Everyone knows that the Fed, through the bank excess reserves/cash deposit pathway, participated in indirectly purchasing some $1 trillion in risk assets in 2013 through POMO – a process that many have confused with economic recovery. It is also known that corporate stock buybacks have managed to keep S&P500 EPS rising by removing the total number of shares outstanding (and thus lowering the S in EPS in a world where absolute E stubbornly refuses to grow): after all, someone has to keep those activist shareholders happy or else they release unpleasant letters about corporate CEOs.

However, what may not be known is just how large the total amount of corporate buybacks in the past year was. The answer: the second highest in history, just shy record of 2007 (when there was no additional $1 trillion in stock purchases coming from the Fed/Primary Dealer complex), amounting to $500 billion (even if non-US buybacks have been a tiny fraction of US).

Presented otherwise, corporations injected roughly half of the total POMO cash used by the Fed to push the S&P straight-line higher.

For the sake of stocks, and with QE tapering, let’s hope that this critical buyer remains in the market or else the tapped out retail investor may have a tough time to keep the S&P at its now more expensive than 2007 level for long.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/KAd1Pa-E5xc/story01.htm Tyler Durden

In Terms of Real Stuff, The Dow's "New High" Is Pure Illusion

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The rise in equities does not mean stocks "buy" more commodities in the real world–they buy less.

 
If the new highs in the Dow Jones Industrial Average (DJIA) are so wonderful, why does one share of the Dow-30 buy less than it did 14 years ago? What does a nominal new high in the stock market mean in the real world? The only way to know is to ask if the purchasing power of a share of the Dow buys more than it did when the Dow was at lower levels.
 
If one share of the Dow (defined as one share of each of the constituent 30 companies) buys less than it did when the Dow was as lower levels, the nominal new high is a mirage in terms of increased purchasing power of equities.
 
Another way of assessing the real-world impact of a nominal new high in equities is to perform a relative strength analysis: did equities outperform essential commodities, or did equities underperform these essentials? If the Dow underperformed, then a new high is an illusion: if equities buy less stuff in the real world, the nominal new high is misleading.
 
Longtime correspondent Harun I. recently shared a series of charts which reveals what's real and what's false about nominal new highs in the Dow:
 
Wonderful post, What's Real? What's Fake? (December 16, 2013). Below you will find some charts that may answer: What is real?
 
RS charts are not new to us, but they need constant study. Nobody eats, clothes, shelters, heats their shelter or fills their gas tank with equity shares. Therefore, when we convert those shares to currency in order to purchase things that are generally useful, their real value is revealed. Purchasing power cannot be faked.
 
There are several questions that can be explored, however, today I wish to point out the most obvious.
 
The trend in commodities relative equities over the period ranging from 1970-2000 was down. This indicated that the Dow outperformed commodities, or put another way, was able to purchase more per unit during this time. It is useful to remember that, as you and many others have pointed out, that during this time debt expanded as well. Two wage earners were required per household to produce a standard of living that once required only one wage earner. This effectively was a 50% loss of purchasing power.
 
However, the fact that household debt expanded to the extent that it has in order to maintain a particular standard of living with even two wage earners suggests an even greater decline in net purchasing power. But I digress.
 
The downtrend lines drawn on the charts below indicate secular trends that were in place for approximately a thirty year period, much like the decline in interest rates. With equities at new nominal highs, there are many who argue that the worst is behind us.
 
However, as I point out on the first chart (Gold/Dow Ratio), the amount of debt that created the secular bull market previously is dwarfed by the amount of debt that it has taken to create what may be a normal correction in what appears to be a secular bear phase. Despite new historic nominal highs, despite parabolic increases in public debt, not one chart displayed indicates the Dow as having recovered its purchasing power which peaked roughly in 1999.
If we are to believe that the worst is over, we must at the very least answer a few basic questions:
 
–How much debt is required to get back to the peak in equity purchasing power in 1999?
 
–Assuming the next leg down is the same as the previous leg down, how much debt would be required to produce such a move?
 
Conversely, if they are wrong, if the commodity cycle has reversed and the bear phase in equities resumes, how much debt will be incurred while fighting the commodity cycle all the way back to its historic highs?
 
In either scenario, who is going to take on what will be stupefying levels of debt (after all, it is a geometric progression), and how will it be paid back?
 
What is real? These charts that lay bare the falsity that "everything is just peachy" are real. Central bank activity is real. Their activity allows nations to bid for commodities for which they produce too little to pay for outright. They have created multigenerational obligations that will likely never be repaid. Keeping commodities well bid based on improbable (impossible?) promises is causing real global instability.
 
The Fed is leverage 72 to 1. Either way these cha
rts break will represent reality, a reality that will become increasingly unstable.
 
As for the status quo’s defense of the farce being perpetrated, they will do what we all have observed in children caught doing something naughty. They will lie. It may be understandable in children but in adults selected for national leadership it is gravely disturbing. From Nixon’s, “I’m not a crook”, to Clinton’s, “I didn’t have sex with that woman”, and Nancy Pelosi's defense of the ACA, "the more we see of it the more we will like it" (paraphrased).
 
It is all very disturbing. Whether there exists a pathological disconnect with reality, intentional deception, or a tendency to revert to childhood psychological defense mechanisms, such behavior from those entrusted with so much is a blaring warning signal.

Thank you, Harun, for an insightful assessment of value and the unsustainable absurdity of a political and financial system dependent on debt, propaganda and falsehoods for its survival. Here are the charts, with comments by Harun and myself as noted.


Federal debt:

The rise in equities does not mean stocks "buy" more goods in the real world–they buy less. So much for "new highs"–the nominal new highs in equities is pure illusion in terms of purchasing power.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/t4rXzKG9Q8U/story01.htm Tyler Durden

In Terms of Real Stuff, The Dow’s “New High” Is Pure Illusion

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The rise in equities does not mean stocks "buy" more commodities in the real world–they buy less.

 
If the new highs in the Dow Jones Industrial Average (DJIA) are so wonderful, why does one share of the Dow-30 buy less than it did 14 years ago? What does a nominal new high in the stock market mean in the real world? The only way to know is to ask if the purchasing power of a share of the Dow buys more than it did when the Dow was at lower levels.
 
If one share of the Dow (defined as one share of each of the constituent 30 companies) buys less than it did when the Dow was as lower levels, the nominal new high is a mirage in terms of increased purchasing power of equities.
 
Another way of assessing the real-world impact of a nominal new high in equities is to perform a relative strength analysis: did equities outperform essential commodities, or did equities underperform these essentials? If the Dow underperformed, then a new high is an illusion: if equities buy less stuff in the real world, the nominal new high is misleading.
 
Longtime correspondent Harun I. recently shared a series of charts which reveals what's real and what's false about nominal new highs in the Dow:
 
Wonderful post, What's Real? What's Fake? (December 16, 2013). Below you will find some charts that may answer: What is real?
 
RS charts are not new to us, but they need constant study. Nobody eats, clothes, shelters, heats their shelter or fills their gas tank with equity shares. Therefore, when we convert those shares to currency in order to purchase things that are generally useful, their real value is revealed. Purchasing power cannot be faked.
 
There are several questions that can be explored, however, today I wish to point out the most obvious.
 
The trend in commodities relative equities over the period ranging from 1970-2000 was down. This indicated that the Dow outperformed commodities, or put another way, was able to purchase more per unit during this time. It is useful to remember that, as you and many others have pointed out, that during this time debt expanded as well. Two wage earners were required per household to produce a standard of living that once required only one wage earner. This effectively was a 50% loss of purchasing power.
 
However, the fact that household debt expanded to the extent that it has in order to maintain a particular standard of living with even two wage earners suggests an even greater decline in net purchasing power. But I digress.
 
The downtrend lines drawn on the charts below indicate secular trends that were in place for approximately a thirty year period, much like the decline in interest rates. With equities at new nominal highs, there are many who argue that the worst is behind us.
 
However, as I point out on the first chart (Gold/Dow Ratio), the amount of debt that created the secular bull market previously is dwarfed by the amount of debt that it has taken to create what may be a normal correction in what appears to be a secular bear phase. Despite new historic nominal highs, despite parabolic increases in public debt, not one chart displayed indicates the Dow as having recovered its purchasing power which peaked roughly in 1999.
If we are to believe that the worst is over, we must at the very least answer a few basic questions:
 
–How much debt is required to get back to the peak in equity purchasing power in 1999?
 
–Assuming the next leg down is the same as the previous leg down, how much debt would be required to produce such a move?
 
Conversely, if they are wrong, if the commodity cycle has reversed and the bear phase in equities resumes, how much debt will be incurred while fighting the commodity cycle all the way back to its historic highs?
 
In either scenario, who is going to take on what will be stupefying levels of debt (after all, it is a geometric progression), and how will it be paid back?
 
What is real? These charts that lay bare the falsity that "everything is just peachy" are real. Central bank activity is real. Their activity allows nations to bid for commodities for which they produce too little to pay for outright. They have created multigenerational obligations that will likely never be repaid. Keeping commodities well bid based on improbable (impossible?) promises is causing real global instability.
 
The Fed is leverage 72 to 1. Either way these charts break will represent reality, a reality that will become increasingly unstable.
 
As for the status quo’s defense of the farce being perpetrated, they will do what we all have observed in children caught doing something naughty. They will lie. It may be understandable in children but in adults selected for national leadership it is gravely disturbing. From Nixon’s, “I’m not a crook”, to Clinton’s, “I didn’t have sex with that woman”, and Nancy Pelosi's defense of the ACA, "the more we see of it the more we will like it" (paraphrased).
 
It is all very disturbing. Whether there exists a pathological disconnect with reality, intentional deception, or a tendency to revert to childhood psychological defense mechanisms, such behavior from those entrusted with so much is a blaring warning signal.

Thank you, Harun, for an insightful assessment of value and the unsustainable absurdity of a political and financial system dependent on debt, propaganda and falsehoods for its survival. Here are the charts, with comments by Harun and myself as noted.


Federal debt:

The rise in equities does not mean stocks "buy" more goods in the real world–they buy less. So much for "new highs"–the nominal new highs in equities is pure illusion in terms of purchasing power.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/t4rXzKG9Q8U/story01.htm Tyler Durden

Standpoint Research Discovers Capitalism, Downgrades Apple For "Moral Reasons"

Looks like Standpoint Research, whoever they are, threw in the towel on waiting for the “soft dollar” tsunami to wash over its hard-hitting operations, and decided to make headlines the old-fashioned way – with what is an early contender in the category for “dumbest research note of the year”, this one bashing Apple because, get this, it is profitable.

“For Apple Computers to pay their workers $2 an hour while they have $150 billion in the bank is nothing short of obscene. They have workers who are doing back-breaking and eye-burning work in depressed states of mind and in many instances have already committed suicide. Instead of treating their employees like human beings, they are treated like animals. If it were not for their employees, Apple would not be where it is today. But instead of giving these people a better life, they give these people the bare minimum and defend this action with the argument that the wage is higher than the average there and in-line with what their competitors are paying.”

Uhm, because it’s “unfair?” In other words, after looking under every nook and cranny, Standpoint “Research” finally discovered capitalism. Congratulations. 

H/t streetinsider


    



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

Standpoint Research Discovers Capitalism, Downgrades Apple For “Moral Reasons”

Looks like Standpoint Research, whoever they are, threw in the towel on waiting for the “soft dollar” tsunami to wash over its hard-hitting operations, and decided to make headlines the old-fashioned way – with what is an early contender in the category for “dumbest research note of the year”, this one bashing Apple because, get this, it is profitable.

“For Apple Computers to pay their workers $2 an hour while they have $150 billion in the bank is nothing short of obscene. They have workers who are doing back-breaking and eye-burning work in depressed states of mind and in many instances have already committed suicide. Instead of treating their employees like human beings, they are treated like animals. If it were not for their employees, Apple would not be where it is today. But instead of giving these people a better life, they give these people the bare minimum and defend this action with the argument that the wage is higher than the average there and in-line with what their competitors are paying.”

Uhm, because it’s “unfair?” In other words, after looking under every nook and cranny, Standpoint “Research” finally discovered capitalism. Congratulations. 

H/t streetinsider


    



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

Frontrunning: January 6

  •  ‘Life-threatening’ cold bites Midwest, heads east (Reuters)
  • Gold Analysts Get Most Bullish in a Year After Rout (BBG)
  • Asian Stocks Fall Most in Three Weeks on China Services (BBG)
  • Angela Merkel in skiing accident, cancels visits (Reuters)
  • High-Speed Traders Form Trade Group to Press Case (WSJ)
  • Toyota and Honda post record China sales (FT)
  • China Shadow Banking Risks Exposed by Local Debt Audit (BBG)
  • J.P. Morgan to Pay Over $2 Billion to U.S. in Penalties in Madoff Case (WSJ)
  • Corruption trial of Trenton, N.J., mayor starts Monday (Reuters)
  • Activist Investors Gain in M&A Push (WSJ)
  • Car Makers at Consumer Electronics Show Tout Ways to Plug Autos Into the Web (WSJ)
  • Bond Tab for Biggest Economies Seen at $7.43 Trillion in ’14 (BBG)
  • Central Banks Split on Stimulus in 2014 as Fed Tapers (BBG)
  • India considers easing gold import curbs (Reuters)
  • Economists Spar on Path to Faster Recovery (WSJ)
  • Goose meat tests positive for H7N9 in Chinese city (Xinhua)

 

Overnight Media Digest

WSJ

* Auto makers aim to make 2014 the year that cars connect to the Web in a big way, and they are stepping up their land rush with Silicon Valley to compete for customers who go online on the road.

* In taking Facebook public and reshaping it around mobile phones, Mark Zuckerberg, the often-stubborn, idealistic 29-year-old chief executive, has shown growing attention to the bottom line.

* Financial shares last year had their strongest showing since 1997 and many portfolio managers are betting firms with large lending operations are poised to profit from gains in U.S. employment and output.

* To counter what they say is the industry’s unfair reputation as a disruptive force in the markets, a group of high-frequency firms have hired a pair of heavy-hitting political strategists and formed a trade group to press their case with regulators and lawmakers.

* A dispute playing out in federal court over a blockbuster cancer treatment underscores the tensions that can surface in research collaborations and licensing agreements with academia.

* Investors are heading to Pakistan and braving one of the world’s most dangerous countries to benefit from a newly elected government that is rolling out an economic program to aid the struggling economy.

* Boeing Co’s contract deal with its largest union cements a key portion of its effort to aggressively control costs and avoid disruptions for one of its most important new jetliners in years.

* XPO Logistics said it agreed to acquire Pacer International in a deal valued at $335 million.

 

FT

British finance minister George Osborne will on Monday warn that years of spending cuts lie ahead even as Prime Minister David Cameron promised on Sunday to protect pensioners’ income if his Conservative party wins the 2015 election.

The European Commission is poised to relax financial reforms so that banks do not have to separate risky activities from lending operations, according to a draft proposal.

There is likely to be further consolidation among U.S. electricity companies, which are facing a future of slow demand growth, chief executive of the largest U.S. power company Duke Energy Corp said.

Autonomy, the British software company accused of accounting irregularities by its U.S. owners Hewlett-Packard, booked revenues from uncompleted transactions at the end of a number of quarters to meet sales targets, according to a document from the U.S. Air Force.

Private companies and charities that provide services to the NHS will for the first time face scrutiny of their funding arrangements and liquidity in an effort to avoid harming patients in case they run into financial difficulty or collapse.

An appetite for risk has returned to the finance chiefs of Britain’s biggest companies, which are looking to expand into new markets or introduce new products as the economic recovery takes hold.

 

NYT

* JPMorgan Chase & Co is nearing a $2 billion settlement with federal authorities to resolve suspicions that the bank ignored signs of Bernard Madoff’s Ponzi scheme, the New York Times reported, citing people briefed on the case.

* Ireland is using grants and tax breaks to help small start-ups compete with Silicon Valley giants that employ thousands in Dublin.

* A number of changes in the capital markets, the venture capital industry and the public equity markets have conspired to make it easier than ever for unproven start-ups to be valued at $1 billion or more. However, some consider this a sign of too much money is chasing too few good ideas and fear a new dot-com bubble.

* TV makers at the Consumer Electronics Show in Las Vegas will be showing off a range of sets that can connect to the Internet and run apps.

* Alumni of ThinkFilm, a small, short-lived movie distributor, have become a force in an industry that has been learning to think smaller, make do with less and live more by wit than a fat bankroll.

* Two Harvard economists conclude in a new study that, relative to previous American financial crises, the current economy is doing substantially better.

 

Canada

THE GLOBE AND MAIL

* Finance Minister Jim Flaherty said Canada would face global pressure to raise interest rates in 2014 as the United States begins to step back from its policy of economic stimulus through intervention in bond markets.

* New Democratic Leader Thomas Mulcair celebrated a record monthly fundraising haul by his party, driven by “bite-sized chunk” donations from NDP faithful. The Official Opposition took in $800,000 for the final month of 2013, ahead of its $750,000 goal, and set a party record in online fundraising.

Reports in the business section:

* Canadian pharmacy chain Jean Coutu Group Inc’s chief is likely to address future growth and pressure for acquisition on Thursday’s post-earnings conference call. Francois Coutu will likely face questions about where growth is going to come for the chain’s relatively limited Quebec market and in the face of increasing competition and consolidation.

NATIONAL POST

* Newfoundland and Labrador Premier Kathy Dunderdale said her government would ask large consumers of energy to conserve power as the province grapples with power outages and rolling blackouts following a heavy storm. Thousands of households in Newfoundland remained without power after a fire at a terminal station just hours after a powerful blizzard ripped through the region.

* The Lobster Council of Canada launched a campaign to promote the Canadian essence of lobster, and to create a logo that sets its apart from shellfish from other regions.

 

China

SHANGHAI SECURITIES NEWS

– Guangdong province officials have delegated more decision-making and application approval authority to the Qianhai Free Trade Zone, which was designed to serve as a test bed for currency and capital account reform.

CHINA DAILY

– Nearly 37,000 official were probed for graft in the first 11 months of last year as China steps up a sweeping campaign against official corruption, procurators said.

– Samples of goose meat taken from a market in southern Chinese province of Guangdong have tested positive for H7N9 avian influenza, the local health authorities said.

PEOPLE’S DAILY

– A commentary by the official mouthpiece of the Communist Party of China criticised Southeast Asian countries for failing to adequately criticise Japanese prime ministry Shinzio Abe for a recent visit to the Yakusuni Shrine, which houses the graves of multiple convicted war criminals.

SHANGHAI DAILY

– Twenty-one police officers and government officials were engaged in drug dealing in the Boshe village in Guangdong province, where three tonnes of crystal methamphetamine was seized in recent raids.

CHINA BUSINESS NEWS

– Sources said an official document aimed at tightening supervision of China’s rapid growing shadow banks has been issued to banks.

 

Britain

The Telegraph

GEORGE OSBORNE TO CUT TAXES BY EXTENDING AUSTERITY AND CREATING SMALLER STATE

George Osborne will set out plans to cut taxes by extending the austerity programme and creating a permanently smaller State. The Chancellor will say in a speech in Birmingham that Britain must face up to “hard truths” about the need to make more cuts and reforms to get a stable economy.

ECONOMIC SHIFT AWAY FROM CHINA TO THE WEST WILL DICTATE COMMODITY PRICES IN 2014

Commodities investors are shifting their strategic focus away from China for 2014 as they search out clues as to the direction of prices. The global economic narrative is changing rapidly, with the emphasis moving from Asia and the fast-growing markets in the East, back to the developed West.

The Guardian

UK MANUFACTURING TIPPED FOR STRONGEST GROWTH IN EUROPE

Britain’s manufacturers will enjoy faster growth than those in Germany or any other western European economy this year from rising demand at home and abroad, according to a report.

GEORGE SOROS WARNS THAT CHINESE SLOWDOWN IS BIGGEST WORRY IN 2014

George Soros is worried about China, and we should take note. The hedge fund boss, who built his fortune betting on the world’s money markets, is concerned that 20 years of rapid growth is about to run out of steam.

The Times

DEVELOPER’S GRAND DESIGN FOR LUXURY RETAIL AT O2

Land Securities has signed a six-month exclusivity agreement with AEG Europe, one of the world’s largest concert promoters and owner of O2 Arena in Greenwich, to negotiate options for jointly developing a luxury retail centre in an unused part of the former Millennium Dome.

THE DAYS OF BELT-TIGHTENING ARE OVER AND HOMEBUYERS ARE HEADING FOR THE COUNTRY

Forget luxury homes in Notting Hill or Wimbledon Village – the property hot spots this year will be in London’s commuter belt. According to the nationwide estate agent Jackson-Stops & Staff, househunters will be heading for the likes of Weybridge, Esher, Cobham and Oxted in Surrey and Sevenoaks, in Kent.

The Independent

ASIAN TYCOON LI KA-SHING’S EMPIRE TAKES UP TO 630 MLN STG FROM BLACKOUT ENERGY FIRM

The Hong Kong billionaire Li Ka-Shing’s offshore-controlled family companies could have channelled as much as 630 million pounds in the past three years out of the UK electricity distribution network blamed for the Christmas blackouts.

CARNEY WINS APPROVAL OF FINANCE DIRECTORS

Britain’s finance directors “like what they’ve seen” of Mark Carney in his first six months as Bank of England Governor, according to Deloitte’s top number-cruncher.

 

 

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Abbott (ABT) upgraded to Overweight from Equal Weight at Morgan Stanley
Ameren (AEE) upgraded to Outperform from Market Perform at Wells Fargo
Bonanza Creek (BCEI) upgraded to Buy from Neutral at Mizuho
Boston Scientific (BSX) upgraded to Overweight from Equal Weight at Morgan Stanley
ConocoPhillips (COP) upgraded to Market Perform from Underperform at Raymond James
DaVita (DVA) upgraded to Outperform from Market Perform at Raymond James
Exelixis (EXEL) upgraded to Overweight from Neutral at Piper Jaffray
Genworth (GNW) upgraded to Buy from Neutral at UBS
Grifols (GRFS) upgraded to Overweight from Neutral at JPMorgan
HSBC (HBC) upgraded to Buy from Neutral at BofA/Merrill
Halliburton (HAL) upgraded to Outperform from Market Perform at Wells Fargo
Huntington Bancshares (HBAN) upgraded to Equal Weight from Underweight at Barclays
Idenix (IDIX) upgraded to Buy from Neutral at UBS
Ingram Micro (IM) upgraded to Overweight from Equal Weight at Barclays
M&T Bank (MTB) upgraded to Overweight from Equal Weight at Barclays
MGM Resorts (MGM) upgraded to Buy from Neutral at Citigroup
McKesson (MCK) upgraded to Strong Buy from Outperform at Raymond James
PPL Corp. (PPL) upgraded to Overweight from Equal Weight at Barclays
Regions Financial (RF) upgraded to Buy from Hold at Deutsche Bank
RetailMeNot (SALE) upgraded to Outperform from Sector Perform at RBC Capital
SolarCity (SCTY) upgraded to Conviction Buy from Neutral at Goldman
SolarWinds (SWI) upgraded to Overweight from Equal Weight at Evercore
St. Jude Medical (STJ) upgraded to Overweight from Equal Weight at Morgan Stanley
SunTrust (STI) upgraded to Equal Weight from Underweight at Barclays
Trulia (TRLA) upgraded to Outperform from Sector Perform at RBC Capital
Ventas (VTR) upgraded to Top Pick from Outperform at RBC Capital
Vertex (VRTX) upgraded to Buy from Neutral at UBS
Wabash (WNC) upgraded to Outperform from Market Perform at FBR Capital
Wynn Macau (WYNMF) upgraded to Buy from Neutral at Citigroup
Wynn Resorts (WYNN) upgraded to Buy from Neutral at Citigroup
YPF SA (YPF) upgraded to Outperform from Market Perform at Raymond James
Zillow (Z) upgraded to Outperform from Sector Perform at RBC Capital

Downgrades

ARIAD (ARIA) downgraded to Sell from Neutral at Citigroup
ARRIS (ARRS) downgraded to Equal Weight from Overweight at Barclays
Acorda Therapeutics (ACOR) downgraded to Neutral from Buy at Citigroup
Alliant Energy (LNT) downgraded to Equal Weight from Overweight at Barclays
Apple (AAPL) downgraded to Sell from Hold at Standpoint Research
BancorpSouth (BXS) downgraded to Underweight from Equal Weight at Morgan Stanley
CA Technologies (CA) downgraded to Underweight from Equal Weight at Evercore
CMS Energy (CMS) downgraded to Equal Weight from Overweight at Barclays
City National (CYN) downgraded to Equal Weight from Overweight at Barclays
Con-way (CNW) downgraded to Underperform from Buy at BofA/Merrill
eBay (EBAY) downgraded to Equal Weight from Overweight at Morgan Stanley
Entergy (ETR) downgraded to Market Perform from Outperform at Wells Fargo
First Solar (FSLR) downgraded to Sell from Buy at Goldman
HealthSouth (HLS) downgraded to Market Perform from Outperform at Raymond James
Hess Corp. (HES) downgraded to Neutral from Buy at Mizuho
HollyFrontier (HFC) downgraded to Sell from Neutral at Citigroup
Hologic (HOLX) downgraded to Equal Weight from Overweight at Morgan Stanley
Host Hotels (HST) downgraded to Outperform from Top Pick at RBC Capital
Liberty Media (LMCA) downgraded to Neutral from Buy at Citigroup
MetLife (MET) downgraded to Neutral from Buy at UBS
Pernix Therapeutics (PTX) downgraded to Sell from Hold at Cantor
PetSmart (PETM) downgraded to Sell from Hold at Deutsche Bank
Prosensa (RNA) downgraded to Underweight from Neutral at JPMorgan
Riverbed (RVBD) downgraded to Hold from Strong Buy at Needham
Sanofi (SNY) downgraded to Neutral from Overweight at JPMorgan
Sarepta (SRPT) downgraded to Sell from Neutral at Citigroup
Twitter (TWTR) downgraded to Underweight from Equal Weight at Morgan Stanley
Wendy’s (WEN) downgraded to Neutral from Buy at Janney Capital
Wisconsin Energy (WEC) downgraded to Equal Weight from Overweight at Barclays

Initiations

AIG (AIG) reinstated with an Outperform at Credit Suisse
Autohome (ATHM) initiated with a Neutral at Piper Jaffray
Autohome (ATHM) initiated with a Sell at Goldman
Clean Energy (CLNE) initiated with a Neutral at Citigroup
Houghton Mifflin (HMHC) initiated with an Outperform at Wells Fargo
IAC (IACI) initiated with an Equal Weight at Morgan Stanley
JinkoSolar (JKS) initiated with a Buy at Jefferies
Physicians Realty Trust (DOC) initiated with an Outperform at JMP Securities
RE/MAX Holdings (RMAX) initiated with a Market Perform at JMP Securities
Scorpio Bulkers (SALT) initiated with a Buy at Deutsche Bank
Trina Solar (TSL) initiated with a Buy at Jefferies
Valero Energy Partners (VLP) initiated with an Outperform at Credit Suisse
Valero Energy Partners (VLP) initiated with an Outperform at Wells Fargo

HOT STOCKS

Men’s Wearhouse (MW) began cash tender offer for JoS. A. Bank (JOSB) at $57.50 per share
Boeing’s (BA) machinists union accepted contract extension tied to 777X aircraft
Liberty Media (LMCA) offered to acquire Sirius (SIRI) in a deal valued at $3.68 per share
T-Mobile (TMUS) CEO Legere called AT&T’s (T) plan to offer customers a credit to switch from T-Mobile a “desperate move”
Google (GOOG) acquired Bitspin, terms not disclosed
BE Aerospace (BEAV) agreed to acquire LT Energy and Wildcat Wireline for $265M
Samsung (SSNLF), Rambus (RMBS) signed 10-year licensing agreement
Verint Systems (VRNT) to acquire KANA Software for $514M

NEWSPAPERS/WEBSITES

  • Aggressive investors were a driving force behind a number of deals at big companies in 2013. According to FactSet SharkWatch, there were 10 instances in 2013 in which a U.S. company agreed to break itself up or sell or exit businesses after an investor pushed it to make such changes, even if the moves didn’t always satisfy the activist, the Wall Street Journal reports
  • U.S. prosecutors and regulators are expected to announce this week that JPMorgan Chase (JPM) will pay over $2B in penalties for alleged failures to warn about Bernard L. Madoff’s massive fraud, sources say, the Wall Street Journal reports
  • U.S. cable and satellite television operators, already locking horns with programmers over subscriber fees, are now squaring off over the mobile apps that viewers are increasingly using to watch TV (NFLX, DISH, DIS, TWC, DTV, CMCSA, VZ), Reuters reports
  • Toyota Motor (TM) and its two local joint-venture partners sold more than 900,000 vehicles in China last year, according to two executives, beating its annual sales target after tensions eased in a territorial row between Japan and China, Reuters reports
  • Samsung (SSNLF), which sells almost one of every three smartphones, wants to parlay that technology into automotive navigation and entertainment systems for an industry that makes more than 80M vehicles a year (GM, VLKAY, TM, INTC, QCOM, NVDA), Bloomberg reports
  • Apple (AAPL), facing behind-the-scenes pressure from some shareholders to add more female directors and executives, has taken a step to address the criticism and diversify its board, Bloomberg reports

BARRON’S 

National Oilwell (NOV) could rise 30% with a split-up
Plum Creek Timber (PCL) could drop 20%
Invesco (IVZ) could reach mid-$40s in 2014
Future for Sanofi’s (SNY) contingent-value rights ‘doesn’t look bright’
Fiat (FIATY) could double in a couple of years
Unni-Pixel (UNXL) may not recover

SYNDICATE

Cvent (CVT) files to sell 4.8M shares of common stock


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/F-yS7wqjOZ4/story01.htm Tyler Durden

"Polar Vortex" Day Market Summary

The “polar vortex” (no, really) which is about to unleash even record-er cold temperatures upon the US may be the greatest thing to happen to the economy: after all once Q1 GDP estimates miss once again, what better scapegoat to blame it on than cold winter weather during… the winter. However, for the overnight markets, the weather seems to have had an less than desired effect following both much weaker Services PMI data out of China, and after the entire USDJPY ramp achieved during Bernanke’s late Friday speech evaporated in the span of two hours in Japanese Monday morning trading, sending the Nikkei reeling lower by 2.35%. One reason for this may be that like in the early summer when both the Yen and the Nikkei froze in a rangebound formation, South Korea has vocally started t0 complain about the weak Yen, which as readers may recall was one of the catalysts to put an end to the surge in the USDJPY and EURJPY. This time may not be different, furthermore as Goldman forecast overnight, it now expects a BOK rate cut of 25 bps as soon as this Thursday. Should that happen expect the JPY coiled-short spring to pounce.

Joking aside, the release of weaker than expected macroeconomic data from China, together with somewhat mixed Services PMIs from Europe meant that heading into the North American open, European stocks are seen mixed. Nevertheless, financials outperformed from the get-go, supported by reports that Brussels is set to ease financial
reforms so that big European banks are not forced automatically to split lending operations from risky trading. Also, Monte Paschi shares in Italy gained over 2% following reports that that some US funds may consider investing as much as EUR 350mln to buy a 20% stake in the bank. At the same time, London listed RSA traded up over 5% after being added to UBS’s most preferred list.

Looking elsewhere, a combination of coupon/redemption flows, together with the somewhat lacklustre performance by stocks supported the bid tone by Bunds. On that note, January has the second highest amount of coupons and redemptions in 2014 (EUR 34bln of coupon payments and EUR 98bln of redemptions). Also, touted buying by domestic names ensured that despite the broad based widening of EU sov. bond yield spreads with respect to German 10y, PO/GE 10y spread actually narrowed by over 5bps. However overall, trade volumes remained light as some market participants observed Epiphany holiday.

US Docket:

  • ISM non mfg comp, cons 54.5 (10:00 am)
  • Factory orders (Nov – mom), cons 1.7% (10:00 am)
  • Senate confirmation vote for Yellen as Fed Chair (5:30 pm)
  • POMO: $1.00 – $1.50 billion focusing on 02/15/2036 – 11/15/2043 maturities (11:00 am)
  • US Sells $28bn 3m and $26bn 6m bills (11:30 am)

Global markets recap:

  • Chinese HSBC Services PMI (Dec) M/M 50.9 (Prev. 52.5) – weakest level of expansion in 28 months.
  • European stocks are relatively mixed following this morning’s Service PMIs.
  • Going forward, the second half of the session sees the release of the latest ISM non-manufacturing survey, as well as factory orders report from the US.
  • S&P 500 futures up 0.1% to 1827.5
  • Stoxx 600 down 0.1% to 327.4
  • US 10Yr yield down 1bps to 2.98%
  • German 10Yr yield down 3bps to 1.92%
  • MSCI Asia Pacific down 0.8% to 139.1
  • Gold spot up 0.1% to $1237.8/oz

EUROPE

  • Sweden, Finland, Austria mkts closed today for the Epiphany holiday
  • 7 out of 19 Stoxx 600 sectors rise; bank, real estate outperform, basic resources, travel & leisure underperform
  • 46% of Stoxx 600 members gain, 51.2% decline
  • Euro-zone Dec. services PMI 52.1 in line with est.
  • U.K. Dec. services PMI 58.8 vs 60.3 est.
  • Top Stoxx 600 gainers: RSA Insurance Group PLC  +6.7%, Vestas Wind Systems A/S  +5.2%, Mediobanca SpA  +3.2%, Banca Monte dei Paschi di Sien  +2.9%, UniCredit SpA  +2.9%, Banco Popolare SC  +2.6%, Commerzbank AG  +2.6%, FLSmidth & Co A/S +2.5%, Pandora A/S  +2.4%, Stada Arzneimittel AG  +2.3%
  • Top Stoxx 600 decliners: Edenred -4.2%, Aker Solutions ASA -3.1%, Barry Callebaut AG -3%, Remy Cointreau SA -2.8%, John Wood Group PLC -2.7%, Randgold Resources Ltd -2.3%, Umicore SA -2.3%, Fresnillo PLC -2.3%, Polymetal International PLC -2.2%, Portugal Telecom SGPS SA -2.1%

ASIA

  • Asian stocks fall  with the Kospi outperforming and the Nikkei underperforming.
  • MSCI Asia Pacific down 0.8% to 139.1
  • Nikkei 225 down 2.3%, Hang Seng down 0.6%, Kospi up 0.4%, Shanghai Composite down 1.8%, ASX down 0.5%, Sensex down 0.3%
  • 0 out of 10 sectors rise with tech, utilities outperforming and telcos, energy underperforming
  • China HSBC/Markit Services PMI for Dec. 50.9 vs 52.5 prior
  • Gainers: Bangkok Dusit Medical Services  +9.7%, Kangwon Land Inc  +8.3%, Minor International PCL  +7.5%, BEC World PCL +7.3%, MMC Corp Bhd  +6.7%, Eclat Textile Co Ltd  +6.1%, Siam Commercial Bank PCL/The  +5.7%, ANA Holdings Inc +4.8%, Lotte Confectionery Co Ltd  +4.2%
  • Decliners: Daelim Industrial Co Ltd -8.9%, Adaro Energy Tbk PT -7.9%, Samsung Engineering Co Ltd -7.4%, Tambang Batubara  Bukit Asam Pe -7%, Astra Agro Lestari Tbk PT -6.1%, BBMG Corp -5.8%, Fast Retailing Co Ltd -5.8%, Anhui Conch Cem ent Co Ltd -5.6%, TPK Holding Co Ltd -5.2%, Highwealth Construction Corp -5.1%

Asian Headlines

Chinese HSBC Services PMI (Dec) M/M 50.9 (Prev. 52.5) – weakest level of expansion in 28 months.

BOJ Governor Kuroda said the central bank won’t necessarily end or scale back its stimulus program in 2 years and will continue it until inflation stabilizes at 2%.

EU & UK Headlines

GBP has underperformed EUR following the release of weaker than expected UK Services PMI data and also as market participants digest press reports over the weekend which suggested that the BoE may amend unemployment benchmark to 6.5% from 7.0%. This also resulted in bull flattening of the curve, with Gilts receiving a further boost shortly after the release of weaker than expected UK Services PMI data.

– Sunday Times reported over the weekend that Mark Carney is set to amend the Bank of England’s forward guidance in the coming months by changing the unemployment benchmark to 6.5% from 7.0% at which an interest rates rise will be considered.

UK PMI Services (Dec) M/M 58.8 vs Exp. 60.3 (Prev. 60.0) – lowest since June.
– Composite PMI (Dec) M/M 59.5 (Prev. 60.4) – lowest since July.
– PMI points to UK Q4 GDP growth of above 0.8% Q/Q, 2013 growth of 1.9% Y/Y.

Eurozone Services PMI (Dec) M/M 51.0 vs. Exp. 51.0 (Prev. 51.2). Employment component at 50.0 (Prev. 49.1) – highest since December 2011.
– German Services PMI (Dec F) M/M 53.5 vs. Exp. 54.0 (Prev. 55.7)
– French Services PMI (Dec) M/M 47.8 vs. Exp. 47.4 (Prev. 48.0)
– Italian Services PMI (Dec) M/M 47.9 vs. Exp. 48.7 (Prev. 47.2)
– Spanish Services PMI (Dec) M/M 54.2 (Prev. 51.5) – fastest pace of growth since July 2007

German Saxony CPI (Dec) Y/Y 1.4% (Prev. 1.4%)
– German Hesse CPI (Dec) Y/Y 1.2% (Prev. 1.1%)
– German Brandenburg CPI (Dec) Y/Y 1.3% (Prev. 1.3%)
– German CPI North Rhine Westphalia (Dec) Y/Y 1.8% (Prev. 1.6%)

US Headlines

Fed Comments from the Philadelphia conference over the weekend/late Friday:

– Fed Chairman Bernanke said cut in bond buying does not diminish Fed’s commitment to accommodation as long as needed.
– F
ed’s Dudley (voter, dove) said could decide “at a future date”to fully implement a proposed new policy tool known as a fixed rate full allotment reverse repo facility.
– Fed’s Plosser (non-voter, hawk) said Fed could cut QE by larger than USD 10bln increments if economic data improves and sooner bond buying ends the better.
– Fed’s Lacker (non-voter, hawk) said uncertain about Fed rate hike timing, but main expectation is for early 2015 and if growth picks up significantly, could see rates increase this year.

Equities

Despite the cautious sentiment, credit spreads tightened and financials outperformed from the get-go, supported by reports that Brussels is set to ease financial reforms so that big European banks are not forced automatically to split lending operations from risky trading. Also, Monte Paschi shares in Italy gained over 2% following reports that that some US funds may consider investing as much as EUR 350mln to buy a 20% stake in the bank.

FX

Heading into the North American open, USD index is seen down 0.14%, as market participants position for a slew of risk events and also take note of the latest IMF data which showed that holdings of USD by central banks fell for 1st time in almost a year. The USD accounted for 61.44% of the money held by central banks in the third quarter of 2013, down from 61.76%. At the same time, data showed that the EUR accounted for 24.16% of reserve holdings in the third quarter of 2013, up from 23.93% in the previous three months.

Commodities

Libya have resumed oil output at El Sharara after protests, with production of as much as 600,000bpd possibly being established, according to news reports without citing anyone. However, there are reports that new protests have erupted in the West.

US Secretary of State Kerry has suggested that Iran could play an observer role in talks on Syria, when they reconvene on Jan 22nd.

The Chinese aluminium market is bracing itself for what could potentially be its worst year in a decade as continuous capacity expansions and lower production costs put pressure on an already oversupplied market.

Japan’s demand for copper and copper-alloy fabricated products to rise to 800,000t in 2014 or 3.9%.

* * *

We conclude, as usual, with the overnight recap from DB’s Jim Reid

Risk is off to a weak start this morning as we launch into the first full week of 2014: a blockbuster week which features FOMC minutes, the ECB meeting, US payrolls, services PMIs and the start of US earnings season to name just a few highlights. There’s more on the week below but first taking a look at overnight markets, one of the driver’s for today’s weakness is the HSBC China services PMI which came in at 50.9, which is 1.6 points below November’s headline, and is the lowest reading in at least eight months. This will likely provide further fuel to those calling for a Chinese slowdown and it follows an uninspiring set of Chinese PMIs released in recent days including  the official manufacturing PMI (51.0 vs 51.2 consensus), HSBC manufacturing PMI (50.5 vs 50.8 previous) and official non-manufacturing PMI (54.6 vs 56.0 previous).

Leading the decliners today are Japanese equities (Nikkei -2.1%) where markets are returning for the first time in 2014 and possibly playing catch up to the weak start to DM equities last week. Chinese equities are down for the third straight session (Shanghai Composite -2.3%, Hang Seng -0.6%) and eyes remain on Chinese interbank funding market where rates continue to bounce around (7-day repo +80bp today). Our China rates strategist has published an outlook suggesting significant near-term headwinds for rates in 2014 including the PBoC maintaining its neutral to tightening bias on liquidity management, demand for liquidity ahead of Chinese New Year and ongoing interest rate reforms. Asian EM currencies are weaker overnight and there are reports that India’s RBI intervened to stem the recent slide in the rupee which is trading at 1-month lows versus the USD.

Briefly reviewing some of the weekend press headlines, the FT is reporting that Brussels may ease financial reforms so that large European banks are not forced to split their lending and trading operations. In a draft European Commission proposal, due to be released in January or February, the separation is no longer mandatory, would be less costly and restrictive than first envisaged and national supervisors are given wide discretion in applying the reforms (Financial Times). The Sunday Times wrote that the Bank of England is set to change its forward guidance by lowering the unemployment threshold to 6.5% over the next few months. In the Euroarea, the weekend press noted that the Italian and Spanish bond yields has fallen to within 200bp of bunds for the first time in around two and a half years following an impressive new year rally (Reuters).

Previewing the week ahead, the Fed remains in full focus starting with today when the US senate will vote on whether to approve the nomination of Janet Yellen as the next Fed Chair to succeed Ben Bernanke at the end of this month. The Senate is expected to vote at around 5:30pm Eastern time according to indications from Democrat Senate leaders. Yellen needs a majority of votes in the 100-person Senate, but she is widely expected to receive broad support. Only a small number of Republicans have voiced opposition to her nomination. Other items on Congress’ new year to-do-list include a potential debate on whether to revive expanded benefits for the long-term unemployed which lapsed in December. A number of forecasters have predicted that the expriation of these benefits could have a bearing on the unemployment rate.

Following on from that, the FOMC minutes (released on Wednesday) will be closely watched given the Fed’s recent decision to taper QE. According to Bernanke, further tapering is dependent on their assessment of economic conditions in general and the labor market in particular. DB’s US economists write that the key focus of the minutes will be to discern whether meeting participants viewed the first tapering move as the beginning of a steady sequence of purchase reductions which should continue over the next several meetings, or whether they are leaning toward a more tentative approach. Bernanke envisaged that asset purchases will likely be cut at a measured pace throughout 2014 if job gains continue as expected and this is something that we will likely get further detail on in the minutes. Outside of the minutes, the Fed speakers this week include Williams and Bullard who are scheduled to speak on US economy on Tuesday and Friday respectively.

In terms of data releases, Friday’s US employment report is the clear highlight. The market is expecting a gain of 195k in the headline (vs a 203k gain last month), +195k in private payrolls (vs 196k last month) and for unemployment to remain at 7.0%. In advance of this, the ADP employment will be released on Wednesday and the expectation here is for a +200k outcome for December (vs 215k previous). Other US data releases include today’s ISM non-manufacturing & factory orders, Tuesday’s trade data, Thursday’s jobless claims and Friday’s wholesale inventories.

Staying Stateside, the Q4 earnings season unofficially kicks-off with Alcoa’s quarterly report on Thursday, but the earnings docket will stay relatively light with only seven S&P500 companies reporting this week. Earnings will get more interesting next week when the major US banks and broker dealers’ earnings reports start to trickle in. As we head into reporting season, the Wall Street Journal reports that a total of 94 companies have issued earnings guidance that came in below the median analyst estimate for Q4, citing FactSet data. That’s the highest number since the company began tracking the data in 2006. Only 13 companies gave guidance above the median estimate, tying the record for the fewest
number, reached during the first quarter of 2006.

Across the Atlantic, the ECB meets on Thursday where DB’s Gilles Moec expects no major news as the governing council continues to debate whether more steps are necessary. Indeed, Gilles thinks that the ECB seems to be comfortable with its current stance: they have managed to convince the market that they could do more, with their “array of instruments”. At the same time, they would need a “smoking gun” to get them into action but the trickle of data released since the December meeting does not provide them with one. Again, Draghi’s post rate-announcement press conference will be key.

Speaking of data the flow of economic releases in the Euroarea begins with today’s services PMIs. Gilles highlights that after November’s sharp fall to 47.2 (from 50.5), it’s important that Italy’s services PMI does not disappoint given also weak November lending numbers. The PMIs will be followed up by the Euroarea inflation and unemployment reports on Tuesday and Wednesday respectively. Germany reports November factory orders and trade data on Wednesday and industrial production the following day. Friday’s release of UK, French and Spanish industrial production rounds out the week’s major European data releases.

In Asia, following a lacklustre set of Chinese PMIs to start the year we have a fairly big week of Chinese data. The December trade report will be released on Wednesday where the Bloomberg consensus is centred on export growth of 5.2% (vs 12.7% last month) and import growth of 5.0% (vs 5.3% in November). The monthly inflation data on Thursday will also make for interesting reading. New bank lending and money supply data will be released on Friday. On the topic of China, our Chief China economist Jun Ma published a themes and strategy update for 2014 focusing on the country’s growth-enhancing reforms.

Jun thinks that 2014 will mark the beginning of a series of growth-enhancing structural reforms and should witness a cyclical economic recovery. He expects GDP growth to continue its recovery on the back of five major drivers: 1) reduced overcapacity; 2) deregulation in sectors with under-capacity; 3) the effectiveness of the government’s efforts to “reactivate money stock”; 4) rising external demand; and 5) a pro-cyclical fiscal policy. It will be a relatively quiet in Japan but elsewhere the Bank of Korea and Bank of Indonesia policy meetings are the major central bank meetings in Asia this week.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/jW6ES8AdMdk/story01.htm Tyler Durden

“Polar Vortex” Day Market Summary

The “polar vortex” (no, really) which is about to unleash even record-er cold temperatures upon the US may be the greatest thing to happen to the economy: after all once Q1 GDP estimates miss once again, what better scapegoat to blame it on than cold winter weather during… the winter. However, for the overnight markets, the weather seems to have had an less than desired effect following both much weaker Services PMI data out of China, and after the entire USDJPY ramp achieved during Bernanke’s late Friday speech evaporated in the span of two hours in Japanese Monday morning trading, sending the Nikkei reeling lower by 2.35%. One reason for this may be that like in the early summer when both the Yen and the Nikkei froze in a rangebound formation, South Korea has vocally started t0 complain about the weak Yen, which as readers may recall was one of the catalysts to put an end to the surge in the USDJPY and EURJPY. This time may not be different, furthermore as Goldman forecast overnight, it now expects a BOK rate cut of 25 bps as soon as this Thursday. Should that happen expect the JPY coiled-short spring to pounce.

Joking aside, the release of weaker than expected macroeconomic data from China, together with somewhat mixed Services PMIs from Europe meant that heading into the North American open, European stocks are seen mixed. Nevertheless, financials outperformed from the get-go, supported by reports that Brussels is set to ease financial
reforms so that big European banks are not forced automatically to split lending operations from risky trading. Also, Monte Paschi shares in Italy gained over 2% following reports that that some US funds may consider investing as much as EUR 350mln to buy a 20% stake in the bank. At the same time, London listed RSA traded up over 5% after being added to UBS’s most preferred list.

Looking elsewhere, a combination of coupon/redemption flows, together with the somewhat lacklustre performance by stocks supported the bid tone by Bunds. On that note, January has the second highest amount of coupons and redemptions in 2014 (EUR 34bln of coupon payments and EUR 98bln of redemptions). Also, touted buying by domestic names ensured that despite the broad based widening of EU sov. bond yield spreads with respect to German 10y, PO/GE 10y spread actually narrowed by over 5bps. However overall, trade volumes remained light as some market participants observed Epiphany holiday.

US Docket:

  • ISM non mfg comp, cons 54.5 (10:00 am)
  • Factory orders (Nov – mom), cons 1.7% (10:00 am)
  • Senate confirmation vote for Yellen as Fed Chair (5:30 pm)
  • POMO: $1.00 – $1.50 billion focusing on 02/15/2036 – 11/15/2043 maturities (11:00 am)
  • US Sells $28bn 3m and $26bn 6m bills (11:30 am)

Global markets recap:

  • Chinese HSBC Services PMI (Dec) M/M 50.9 (Prev. 52.5) – weakest level of expansion in 28 months.
  • European stocks are relatively mixed following this morning’s Service PMIs.
  • Going forward, the second half of the session sees the release of the latest ISM non-manufacturing survey, as well as factory orders report from the US.
  • S&P 500 futures up 0.1% to 1827.5
  • Stoxx 600 down 0.1% to 327.4
  • US 10Yr yield down 1bps to 2.98%
  • German 10Yr yield down 3bps to 1.92%
  • MSCI Asia Pacific down 0.8% to 139.1
  • Gold spot up 0.1% to $1237.8/oz

EUROPE

  • Sweden, Finland, Austria mkts closed today for the Epiphany holiday
  • 7 out of 19 Stoxx 600 sectors rise; bank, real estate outperform, basic resources, travel & leisure underperform
  • 46% of Stoxx 600 members gain, 51.2% decline
  • Euro-zone Dec. services PMI 52.1 in line with est.
  • U.K. Dec. services PMI 58.8 vs 60.3 est.
  • Top Stoxx 600 gainers: RSA Insurance Group PLC  +6.7%, Vestas Wind Systems A/S  +5.2%, Mediobanca SpA  +3.2%, Banca Monte dei Paschi di Sien  +2.9%, UniCredit SpA  +2.9%, Banco Popolare SC  +2.6%, Commerzbank AG  +2.6%, FLSmidth & Co A/S +2.5%, Pandora A/S  +2.4%, Stada Arzneimittel AG  +2.3%
  • Top Stoxx 600 decliners: Edenred -4.2%, Aker Solutions ASA -3.1%, Barry Callebaut AG -3%, Remy Cointreau SA -2.8%, John Wood Group PLC -2.7%, Randgold Resources Ltd -2.3%, Umicore SA -2.3%, Fresnillo PLC -2.3%, Polymetal International PLC -2.2%, Portugal Telecom SGPS SA -2.1%

ASIA

  • Asian stocks fall  with the Kospi outperforming and the Nikkei underperforming.
  • MSCI Asia Pacific down 0.8% to 139.1
  • Nikkei 225 down 2.3%, Hang Seng down 0.6%, Kospi up 0.4%, Shanghai Composite down 1.8%, ASX down 0.5%, Sensex down 0.3%
  • 0 out of 10 sectors rise with tech, utilities outperforming and telcos, energy underperforming
  • China HSBC/Markit Services PMI for Dec. 50.9 vs 52.5 prior
  • Gainers: Bangkok Dusit Medical Services  +9.7%, Kangwon Land Inc  +8.3%, Minor International PCL  +7.5%, BEC World PCL +7.3%, MMC Corp Bhd  +6.7%, Eclat Textile Co Ltd  +6.1%, Siam Commercial Bank PCL/The  +5.7%, ANA Holdings Inc +4.8%, Lotte Confectionery Co Ltd  +4.2%
  • Decliners: Daelim Industrial Co Ltd -8.9%, Adaro Energy Tbk PT -7.9%, Samsung Engineering Co Ltd -7.4%, Tambang Batubara  Bukit Asam Pe -7%, Astra Agro Lestari Tbk PT -6.1%, BBMG Corp -5.8%, Fast Retailing Co Ltd -5.8%, Anhui Conch Cem ent Co Ltd -5.6%, TPK Holding Co Ltd -5.2%, Highwealth Construction Corp -5.1%

Asian Headlines

Chinese HSBC Services PMI (Dec) M/M 50.9 (Prev. 52.5) – weakest level of expansion in 28 months.

BOJ Governor Kuroda said the central bank won’t necessarily end or scale back its stimulus program in 2 years and will continue it until inflation stabilizes at 2%.

EU & UK Headlines

GBP has underperformed EUR following the release of weaker than expected UK Services PMI data and also as market participants digest press reports over the weekend which suggested that the BoE may amend unemployment benchmark to 6.5% from 7.0%. This also resulted in bull flattening of the curve, with Gilts receiving a further boost shortly after the release of weaker than expected UK Services PMI data.

– Sunday Times reported over the weekend that Mark Carney is set to amend the Bank of England’s forward guidance in the coming months by changing the unemployment benchmark to 6.5% from 7.0% at which an interest rates rise will be considered.

UK PMI Services (Dec) M/M 58.8 vs Exp. 60.3 (Prev. 60.0) – lowest since June.
– Composite PMI (Dec) M/M 59.5 (Prev. 60.4) – lowest since July.
– PMI points to UK Q4 GDP growth of above 0.8% Q/Q, 2013 growth of 1.9% Y/Y.

Eurozone Services PMI (Dec) M/M 51.0 vs. Exp. 51.0 (Prev. 51.2). Employment component at 50.0 (Prev. 49.1) – highest since December 2011.
– German Services PMI (Dec F) M/M 53.5 vs. Exp. 54.0 (Prev. 55.7)
– French Services PMI (Dec) M/M 47.8 vs. Exp. 47.4 (Prev. 48.0)
– Italian Services PMI (Dec) M/M 47.9 vs. Exp. 48.7 (Prev. 47.2)
– Spanish Services PMI (Dec) M/M 54.2 (Prev. 51.5) – fastest pace of growth since July 2007

German Saxony CPI (Dec) Y/Y 1.4% (Prev. 1.4%)
– German Hesse CPI (Dec) Y/Y 1.2% (Prev. 1.1%)
– German Brandenburg CPI (Dec) Y/Y 1.3% (Prev. 1.3%)
– German CPI North Rhine Westphalia (Dec) Y/Y 1.8% (Prev. 1.6%)

US Headlines

Fed Comments from the Philadelphia conference over the weekend/late Friday:

– Fed Chairman Bernanke said cut in bond buying does not diminish Fed’s commitment to accommodation as long as needed.
– Fed’s Dudley (voter, dove) said could decide “at a future date”to fully implement a proposed new policy tool known as a fixed rate full allotment reverse repo facility.
– Fed’s Plosser (non-voter, hawk) said Fed could cut QE by larger than USD 10bln increments if economic data improves and sooner bond buying ends the better.
– Fed’s Lacker (non-voter, hawk) said uncertain about Fed rate hike timing, but main expectation is for early 2015 and if growth picks up significantly, could see rates increase this year.

Equities

Despite the cautious sentiment, credit spreads tightened and financials outperformed from the get-go, supported by reports that Brussels is set to ease financial reforms so that big European banks are not forced automatically to split lending operations from risky trading. Also, Monte Paschi shares in Italy gained over 2% following reports that that some US funds may consider investing as much as EUR 350mln to buy a 20% stake in the bank.

FX

Heading into the North American open, USD index is seen down 0.14%, as market participants position for a slew of risk events and also take note of the latest IMF data which showed that holdings of USD by central banks fell for 1st time in almost a year. The USD accounted for 61.44% of the money held by central banks in the third quarter of 2013, down from 61.76%. At the same time, data showed that the EUR accounted for 24.16% of reserve holdings in the third quarter of 2013, up from 23.93% in the previous three months.

Commodities

Libya have resumed oil output at El Sharara after protests, with production of as much as 600,000bpd possibly being established, according to news reports without citing anyone. However, there are reports that new protests have erupted in the West.

US Secretary of State Kerry has suggested that Iran could play an observer role in talks on Syria, when they reconvene on Jan 22nd.

The Chinese aluminium market is bracing itself for what could potentially be its worst year in a decade as continuous capacity expansions and lower production costs put pressure on an already oversupplied market.

Japan’s demand for copper and copper-alloy fabricated products to rise to 800,000t in 2014 or 3.9%.

* * *

We conclude, as usual, with the overnight recap from DB’s Jim Reid

Risk is off to a weak start this morning as we launch into the first full week of 2014: a blockbuster week which features FOMC minutes, the ECB meeting, US payrolls, services PMIs and the start of US earnings season to name just a few highlights. There’s more on the week below but first taking a look at overnight markets, one of the driver’s for today’s weakness is the HSBC China services PMI which came in at 50.9, which is 1.6 points below November’s headline, and is the lowest reading in at least eight months. This will likely provide further fuel to those calling for a Chinese slowdown and it follows an uninspiring set of Chinese PMIs released in recent days including  the official manufacturing PMI (51.0 vs 51.2 consensus), HSBC manufacturing PMI (50.5 vs 50.8 previous) and official non-manufacturing PMI (54.6 vs 56.0 previous).

Leading the decliners today are Japanese equities (Nikkei -2.1%) where markets are returning for the first time in 2014 and possibly playing catch up to the weak start to DM equities last week. Chinese equities are down for the third straight session (Shanghai Composite -2.3%, Hang Seng -0.6%) and eyes remain on Chinese interbank funding market where rates continue to bounce around (7-day repo +80bp today). Our China rates strategist has published an outlook suggesting significant near-term headwinds for rates in 2014 including the PBoC maintaining its neutral to tightening bias on liquidity management, demand for liquidity ahead of Chinese New Year and ongoing interest rate reforms. Asian EM currencies are weaker overnight and there are reports that India’s RBI intervened to stem the recent slide in the rupee which is trading at 1-month lows versus the USD.

Briefly reviewing some of the weekend press headlines, the FT is reporting that Brussels may ease financial reforms so that large European banks are not forced to split their lending and trading operations. In a draft European Commission proposal, due to be released in January or February, the separation is no longer mandatory, would be less costly and restrictive than first envisaged and national supervisors are given wide discretion in applying the reforms (Financial Times). The Sunday Times wrote that the Bank of England is set to change its forward guidance by lowering the unemployment threshold to 6.5% over the next few months. In the Euroarea, the weekend press noted that the Italian and Spanish bond yields has fallen to within 200bp of bunds for the first time in around two and a half years following an impressive new year rally (Reuters).

Previewing the week ahead, the Fed remains in full focus starting with today when the US senate will vote on whether to approve the nomination of Janet Yellen as the next Fed Chair to succeed Ben Bernanke at the end of this month. The Senate is expected to vote at around 5:30pm Eastern time according to indications from Democrat Senate leaders. Yellen needs a majority of votes in the 100-person Senate, but she is widely expected to receive broad support. Only a small number of Republicans have voiced opposition to her nomination. Other items on Congress’ new year to-do-list include a potential debate on whether to revive expanded benefits for the long-term unemployed which lapsed in December. A number of forecasters have predicted that the expriation of these benefits could have a bearing on the unemployment rate.

Following on from that, the FOMC minutes (released on Wednesday) will be closely watched given the Fed’s recent decision to taper QE. According to Bernanke, further tapering is dependent on their assessment of economic conditions in general and the labor market in particular. DB’s US economists write that the key focus of the minutes will be to discern whether meeting participants viewed the first tapering move as the beginning of a steady sequence of purchase reductions which should continue over the next several meetings, or whether they are leaning toward a more tentative approach. Bernanke envisaged that asset purchases will likely be cut at a measured pace throughout 2014 if job gains continue as expected and this is something that we will likely get further detail on in the minutes. Outside of the minutes, the Fed speakers this week include Williams and Bullard who are scheduled to speak on US economy on Tuesday and Friday respectively.

In terms of data releases, Friday’s US employment report is the clear highlight. The market is expecting a gain of 195k in the headline (vs a 203k gain last month), +195k in private payrolls (vs 196k last month) and for unemployment to remain at 7.0%. In advance of this, the ADP employment will be released on Wednesday and the expectation here is for a +200k outcome for December (vs 215k previous). Other US data releases include today’s ISM non-manufacturing & factory orders, Tuesday’s trade data, Thursday’s jobless claims and Friday’s wholesale inventories.

Staying Stateside, the Q4 earnings season unofficially kicks-off with Alcoa’s quarterly report on Thursday, but the earnings docket will stay relatively light with only seven S&P500 companies reporting this week. Earnings will get more interesting next week when the major US banks and broker dealers’ earnings reports start to trickle in. As we head into reporting season, the Wall Street Journal reports that a total of 94 companies have issued earnings guidance that came in below the median analyst estimate for Q4, citing FactSet data. That’s the highest number since the company began tracking the data in 2006. Only 13 companies gave guidance above the median estimate, tying the record for the fewest number, reached during the first quarter of 2006.

Across the Atlantic, the ECB meets on Thursday where DB’s Gilles Moec expects no major news as the governing council continues to debate whether more steps are necessary. Indeed, Gilles thinks that the ECB seems to be comfortable with its current stance: they have managed to convince the market that they could do more, with their “array of instruments”. At the same time, they would need a “smoking gun” to get them into action but the trickle of data released since the December meeting does not provide them with one. Again, Draghi’s post rate-announcement press conference will be key.

Speaking of data the flow of economic releases in the Euroarea begins with today’s services PMIs. Gilles highlights that after November’s sharp fall to 47.2 (from 50.5), it’s important that Italy’s services PMI does not disappoint given also weak November lending numbers. The PMIs will be followed up by the Euroarea inflation and unemployment reports on Tuesday and Wednesday respectively. Germany reports November factory orders and trade data on Wednesday and industrial production the following day. Friday’s release of UK, French and Spanish industrial production rounds out the week’s major European data releases.

In Asia, following a lacklustre set of Chinese PMIs to start the year we have a fairly big week of Chinese data. The December trade report will be released on Wednesday where the Bloomberg consensus is centred on export growth of 5.2% (vs 12.7% last month) and import growth of 5.0% (vs 5.3% in November). The monthly inflation data on Thursday will also make for interesting reading. New bank lending and money supply data will be released on Friday. On the topic of China, our Chief China economist Jun Ma published a themes and strategy update for 2014 focusing on the country’s growth-enhancing reforms.

Jun thinks that 2014 will mark the beginning of a series of growth-enhancing structural reforms and should witness a cyclical economic recovery. He expects GDP growth to continue its recovery on the back of five major drivers: 1) reduced overcapacity; 2) deregulation in sectors with under-capacity; 3) the effectiveness of the government’s efforts to “reactivate money stock”; 4) rising external demand; and 5) a pro-cyclical fiscal policy. It will be a relatively quiet in Japan but elsewhere the Bank of Korea and Bank of Indonesia policy meetings are the major central bank meetings in Asia this week.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/jW6ES8AdMdk/story01.htm Tyler Durden

Steve Chapman on a Ruling For Polygamy – and Freedom

In modern America, sex is increasingly where it
should be: outside the reach of government. Anti-sodomy statutes
have been tossed by the Supreme Court. Contraception is widely
accessible. Anyone with a computer can gorge on pornography without
fear of prosecution. Same-sex marriage has been legalized in 18
states and the District of Columbia. Now, as Steve Chapman
highlights, another step has been taken to expel police and
legislators from the bedrooms of consenting adults: a federal court
decision striking down a key element of Utah’s ban on polygamy.

View this article.

from Hit & Run http://reason.com/blog/2014/01/06/steve-chapman-on-a-ruling-for-polygamy-a
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