Month: May 2014

With gold holding gains over 6% year-to-date (and the best performing asset-class), this morning’s silver slamdown has taken the precious metal notably into the red for 2014 (-2%) and makes it the worst performing asset-class. Silver is back under $19 and near its lowest price since July 2013. Of course, it all started with the futures market where the sudden fiduciary need to dump over 2000 contracts 0505ET sent the complex collapsing.

Silve rnear 9 month lows…

 

Someone was in a hurry to dump their silver this morning as we gapped lower in spot

 

as it started in the futures…but no limits triggered

 

Charts: Bloomberg

via Zero Hedge http://ift.tt/R6zlkz Tyler Durden

As we noted on the last day of March, April was supposed to be the best month for stocks, with an average return since 1950 of over 2%. It wasn’t.

In fact it barely managed to eek out a positive return, treading negative MTD performance until the last few days.

Still, nothing compares to the rout of the laughable Greek stock market, which after generating scorching returns in the first quarter, tumbled in April by nearly 8%, and cut its YTD gains by more than half. In fact, Greece, with its stock market where a few oddlots can move the market by more than 1%, performed worse than even Russia’s stock market – the same Russia which none other than the White House speaker Jay Carney told everyone to short. Curiously, while there were no sanctions announced against Japan, the Nikkei was in danger of losing almost as much as Russian stocks in the past month.

But it wasn’t all doom: among the better performers were the FTSE, the Bovespa, and a bevy of commodities such as Corn, Wheat and the broader CRB Index. Here is some additional color from Deutsche Bank:

April was a generally positive month across the board for global financial assets, although with a handful of major losers. No single asset class stood out although equities and commodities had a relatively strong month with the top performers including UK (FTSE 100, +3.1% – helped by M&A), Brazilian (Bovespa, +2.4%) and Spanish (IBEX 35, +1.6%) Equity and Corn (+2.4%), Wheat (+2.3%) and the broader Commodity index (CRB, +1.6%). YTD commodities have performed strongly with Corn (+22% YTD) and Wheat (+18% YTD) the two best performing assets and the broad CRB commodity index returning +10.5%. The rest of the 2014-so-far top 5 is made up by Peripheral European Equities with the FTSE-MIB and Portugal General returning +15% and +14% respectively.

 

Fixed income performance sat in the middle of the pack in April with EU Fin Sub bonds continuing to lead the way returning +1.4% on the month and +5% YTD. Other strong performers in fixed income this month were Italian and Spanish government bonds and US IG Non Fin and US Fin Sub all returning around +1% on the month. This stronger performance marks a continuation of trends seen through 2014 so far with returns on Spanish govvies at +7.1% YTD, BTP’s at +6.5% YTD and US IG Non-Fin and Fin Sub of around +4.5% YTD.

 

Sterling continued to perform in April with GBPUSD returning +1.3% this past month. GBPUSD returns now stand at +1.6% on the year, only being beaten in  the G7 FX space by JPYUSD at +2.6%. GBPUSD’s been on a bull run since early June last year and is now around its post-2008 highs.

 

April has seen a few notable losers with the Greek Athex down -7.8%, the Russian Micex down -4.6% and the Nikkei down -3.5%. The weak Micex and Nikkei are continuing themes this year, now returning -13.1% and -11.5% respectively. Geopolitical risks and sanctions are continuing to weigh on Russia with fatigue impacting the Japan reflation trade. April’s weak Athex performance on the other hand marks a sharp divergence from 2014 performance pre-April as the index has given back much of it’s strong performance YTD. When we last wrote this performance review at the end of March YTD Athex performance was +15%, after April it now stands at +6%. However it is up +28%% over the past 12 months.

The full April performance by asset class:

 

A different pictures emerges in the YTD chart,where corn, wheat and Italy are the best performers, while Russia, Japan, Copper, Hong Kong and China round out the tail end.

 

Jim Reid’s conclusion: “So now April’s over, will it be sell in May and go away? Or buy in May and make hay.. We just made that one up. We don’t expect it to catch on!”

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

• Two-Thirds of Insurance Exchange Enrollees Paid Premiums (WSJ)
• Panic: Criminal Charges Against Banks Risk Sparking Crisis (BBG)
• Did the junk bubble pop: Junk Loans Pulled as Investors Say No After Fed Raises Concerns (BBG)
• CME mulls price fluctuation limits for gold, silver futures (Reuters)
• AT&T Has Approached DirecTV About Possible Acquisition (WSJ)
• NBA sets wheels turning for Clippers sale; Oprah in wings (Reuters)
• One way to fix prison overcrowding: Florida Jail Hit by Deadly Blast (WSJ)
• New Boeing jets hold key to more than half of future sales (Reuters)
• Sony slashes profit estimate by 70% (Guardian)
• Buffett Pressures Coca-Cola Over Executive Pay (WSJ)
• Two attackers among three killed in China bombing (Reuters)
• Ukraine’s restive east slipping from government’s grasp (Reuters)
• Hess, Mercuria Units Added to Brent Crude Price-Fixing Lawsuit (BBG)

 

Overnight Media Digest

WSJ

* AT&T has approached DirecTV about a possible acquisition of the satellite-TV firm, the latest sign of a possible shake-up in the television industry. A deal would likely be worth at least $40 billion, DirecTV’s current market capitalization, a fraction of AT&T’s $185 billion market capitalization. (http://ift.tt/1hZdIJ9)

* The Federal Reserve said Wednesday it would reduce its bond purchases to $45 billion a month and it was starting to see a growth pickup in recent weeks after a harsh winter that hit the U.S. economy. (http://ift.tt/1fBanVY)

* The Coca-Cola Co likely will revise its executive-compensation plan before it goes into effect next year, bowing to pressure from billionaire investor Warren Buffet. The potential changes come as a surprise after voting shareholders approved Coke’s plan last week-and Buffett declined to vote against it. (http://ift.tt/1fBamkS)

* U.S. prosecutors are threatening to use what bank executives consider a nuclear option by filing criminal charges against two large foreign banks. Officials led by the Justice Department, though, are still trying to find a way to defuse the most catastrophic possible outcome of filing criminal charges: driving the banks out of business entirely. (http://ift.tt/1o6bUmJ)

* Alstom Chairman and Chief Executive Patrick Kron defied France’s government by plunging ahead with plans to sell the country’s industrial jewels to U.S.-based General Electric . France’s economy minister portrayed the move as an act of national betrayal. (http://ift.tt/1o6bSLD)

* The Federal Aviation Administration granted Boeing Co’s request that the new 777 jetliner to be approved without a lengthy full recertification. (http://ift.tt/1fBaoch)

* Anheuser-Busch InBev NV’s union workers Wednesday ratified a five-year contract that calls for wage increases and no plant closings, officials with the International Brotherhood of Teamsters said in a statement posted on the union’s website. The contract, which union officials said would add some $2 billion in wages and benefits, is retroactive to March 1. It was the first contract Anheuser-Busch negotiated since its 2008 hostile-bid acquisition by InBev NV. (http://ift.tt/1o6bUmL)

* Online-storage startup Box is delaying its plans for an initial public offering after a sudden weakening in demand for technology stocks. Box’s March 24 IPO filing made it eligible to list shares as early as April, but people close to the company said the offering may not happen until June, and no timing has been set. (http://ift.tt/1fBamBa)

 

FT

GlaxoSmithKline’s Chief Executive Andrew Witty all but ruled out a white knight bid for rival drugmaker AstraZeneca on Wednesday by reiterating scepticism on big takeover deals in the sector.

Britain’s Reckitt Benckiser, which makes Durex condoms and Nurofen, has ended talks to buy Merck’s consumer healthcare unit, paving the way for a rival to land the business behind Coppertone sun tan lotion.

Media baron Richard Desmond is planning to sell British broadcaster Channel 5 for 450 million pounds ($759.85 million) to U.S.-based Viacom, in a move that will see him receive more than four times his initial investment.

Rio Tinto is taking Vale and BSG Resources to court, alleging the rival mining groups were part of a conspiracy to steal its rights to an African iron ore deposit worth billions of dollars.

Microsoft’s Xbox One is going to be the first foreign games console to be sold in China, after a 14-year ban on the devices was lifted in January.

 

NYT

* With the Republican-led filibuster of a Senate proposal to raise the federal minimum wage to $10.10 on Wednesday, Democrats moved swiftly to frame the vote as an example of the gulf that exists between the two parties on matters of economic fairness and upward mobility. (http://ift.tt/1fBamBc)

* Facebook Inc announced on Wednesday that when its 1.3 billion users log in to other websites or mobile apps through their Facebook identities, they will be able to limit what they reveal to the site or app to just their email addresses and public profile information, like name and gender. (http://ift.tt/1fBamBe)

* A federal regulator confirmed on Wednesday that the country’s biggest banks committed widespread errors in dealing with homeowners who faced foreclosures at the height of the mortgage crisis, but the findings are unlikely to put to rest questions from lawmakers and others about the extent of the problems. (http://ift.tt/1o6bUD9)

* The Federal Reserve continued to retreat from its stimulus campaign on Wednesday, saying it was looking past the economic slowdown during an unusually cold winter because growth already was rebounding. (http://ift.tt/1fBaocj)

* The utility operator Exelon Corp agreed on Wednesday to buy Pepco Holdings Inc for $6.8 billion in a bid to strengthen its operations on the East Coast. Under the terms of the deal, Exelon will pay $27.25 a share in cash, nearly 20 percent above Pepco’s closing share price on Tuesday. (http://ift.tt/1fBamBj)

* The Federal Communications Commission’s chairman delivered a tough message to cable and broadband executives Wednesday, saying a lack of competition in their industry has hurt consumers. The chairman, Tom Wheeler, said that the FCC intended to address the problem by writing tough new rules to enforce so-called net neutrality, preventing big broadband and cable companies from blocking access to innovative new technologies and start-ups that might emerge as competitors. (http://ift.tt/1o6bUDf)

 

Canada

THE GLOBE AND MAIL

** Two workers were killed and two others injured as gunfire broke out at the Western Forest Products mill in Nanaimo in British Columbia. Royal Canadian Mounted Police said a lone gunman, a 47-year-old former employee who was later arrested at the scene, entered the mill yard carrying a shotgun and started shooting in the parking lot. (http://ift.tt/1fBaocn)

** A second video of Toronto Mayor Rob Ford smoking what has been described as crack cocaine by a self-professed drug dealer was secretly filmed in his sister’s basement early Saturday morning. Ford declined to respond to questions about the video, his lawyer said the mayor was going to take a break from election campaigning. (http://ift.tt/1o6bT24)

Reports in the business section:

** Peter Munk stepped down as the chairman of Barrick Gold Corp on Wednesday. He founded the company three decades ago and turned it into the world’s biggest gold producer. “You can take, maybe, Munk out of Barrick. You can’t take Barrick out of Munk,” he said at the company’s annual meeting of shareholders. (http://ift.tt/1fBaocp)

NATIONAL POST

** Rumors about Beverley McLachlin, Chief Justice of the Supreme Court of Canada, are being shared with journalists, alleging she lobbied against the appointment of Marc Nadon to the court. It is also being suggested she has told people the Harper government has caused more damage to the court as an institution than any government in Canadian history. (http://ift.tt/1fBaocr)

** Canada is stepping into the increasingly tense showdown between Kyiv and Moscow over the future of eastern Ukraine by taking over leadership of an Organization for Security and Cooperation in Europe’s military observer mission in the central European country. (http://ift.tt/1o6bUDh)

FINANCIAL POST

** The Canadian federal government is expected to release details soon about the shape and size of a co-operative securities regulator that so far has the support of only Ontario and British Columbia. (http://ift.tt/1fBaocv)

** The federal government asks Canadian telecom companies for private customer information about 1.2 million times each year, documents released Tuesday by the federal privacy commissioner’s office show. (http://ift.tt/1o6bT2a)

 

Britain

The Telegraph

RECKITT BENCKISER BOWS OUT OF RACE FOR MERCK’S CONSUMER HEALTH ARM

Reckitt Benckiser has said it is no longer in discussions about buying U.S. pharma group Merck’s consumer health business, leaving Germany’s Bayer as the leading contender for the $14 billion business. (http://ift.tt/1krcicW)

ABU DHABI AND SOROS GOT ‘GOLDEN TICKET’ IN ROYAL MAIL SALE

Abu Dhabi Investment Authority, billionaire investor George Soros and activist hedge fund Third Point were among the 16 investors given preferential treatment in the controversial Royal Mail privatisation. (http://ift.tt/1krcg52)

ARGOS TO OPEN STORES IN HOMEBASE

Argos is to open concessions in Homebase stores and will also roll out a collection of small convenience stores in London as the retailer ramps up its fight with Amazon. (http://ift.tt/1krcicY)

The Guardian

MORRISONS CUTS PRICE OF 1,200 PRODUCTS IN BID TO WIN CUSTOMERS BACK

A supermarket price war will move a step closer on Thursday as struggling Morrisons slashes the price of more than 1,200 products in an attempt to regain customers lost to cheaper discount chains. (http://ift.tt/1krcj0u)

GLAXOSMITHKLINE KEEPS DISTANCE FROM BID FOR RIVAL ASTRAZENECA

GlaxoSmithKline has distanced itself from a white-knight bid for rival British drugs maker AstraZeneca , which has received an unwanted 60 billion pound ($101.31 billion) takeover approach from Pfizer of the United States. (http://ift.tt/1iLyFfI)

The Times

SERCO ON BRINK AS ANDREW JENNER, FINANCE DIRECTOR, QUITS

The finance director of Serco has left his job in the wake of a disastrous profit warning as the struggling outsourcing group plots an emergency fundraising to shore up its ailing balance sheet. (http://ift.tt/1iLyDUW)

PARIS MAY TAKE STAKE IN ALSTOM TO STOP GE

France’s Socialist government hinted it could take a stake in Alstom to thwart General Electric’s 12.35 billion euro ($17.12 billion) bid for the French group’s power division. (http://ift.tt/1iLyFvY)

CHANNEL 5 SOLD FOR 450 MLN BY DESMOND

Media baron Richard Desmond is set to complete the sale of Channel 5 to U.S. broadcaster Viacom, the owner of MTV, for up to 450 million pounds. (http://ift.tt/1iLyDUZ)

PENSION TAX FEAR AFTER EU RULING

Britain’s ability to limit damaging decisions made by eurozone countries was called into question as the European Union’s highest court threw out a challenge to a financial transactions some fear could wipe billions from UK pension funds. (http://ift.tt/1iLyDV1)

STANDARD LIFE SHRUGS OFF THE IMPACT OF PENSION CHANGES

The British government’s shock changes to pensions announced in this year’s budget, which mean that those retiring do not automatically have to take out an annuity, has resulted in the halving in sales of such investment products at Standard Life , one of the biggest providers. (http://ift.tt/1krcid7)

The Independent

SAGA CUSTOMERS SIGN UP AHEAD OF 2.2 BLN STG FLOAT

Saga has revealed that 700,000 customers have registered to take part in its stock market listing as it aims to raise around 550 million pounds. (http://ift.tt/1krcj0E)

LADBROKES POISED TO CUT JOBS AFTER TAX HIKE

Ladbrokes has warned it will make job cuts and store closures after the British government’s surprise tax hike for bookmakers. (http://ift.tt/1krcid9)

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
Jobless claims for week of April 26 at 8:30–consensus 320K
Personal income for March at 8:30–consensus up 0.4% for the month
ISM manufacturing index for April at 10:00–consensus 54.3
Construction spending for March at 10:00–consensus up 0.6% for the month

ANALYST RESEARCH

Upgrades

Abercrombie & Fitch (ANF) upgraded to Buy from Hold at Jefferies
Barclays (BCS) upgraded to Buy from Neutral at UBS
Cavium (CAVM) upgraded to Neutral from Reduce at Nomura
Cengage Learning (CNGO) upgraded to Outperform from In-Line at Imperial Capital
Citrix (CTXS) upgraded to Buy from Sell at Berenberg
Exelon (EXC) upgraded to Buy from Hold at Deutsche Bank
Exelon (EXC) upgraded to Market Perform from Underperform at Wells Fargo
FARO Technologies (FARO) upgraded to Outperform from Neutral at RW Baird
Flushing Financial (FFIC) upgraded to Buy from Neutral at Guggenheim
ING Groep (ING) upgraded to Neutral from Underweight at HSBC
JetBlue (JBLU) upgraded to Overweight from Neutral at JPMorgan
KeyCorp (KEY) upgraded to Market Perform from Underperform at Bernstein
National CineMedia (NCMI) upgraded to Buy from Neutral at B. Riley
Pacific Biosciences (PACB) upgraded to Neutral from Underweight at JPMorgan
Quaker Chemical (KWR) upgraded to Overweight from Equal Weight at First Analysis
Regions Financial (RF) upgraded to Market Perform from Underperform at Bernstein
Rocket Fuel (FUEL) upgraded to Equal Weight from Underweight at Evercore
Synageva (GEVA) upgraded to Buy from Neutral at Janney Capital
Synchronoss (SNCR) upgraded to Strong Buy from Outperform at Raymond James
Synovus (SNV) upgraded to Equal Weight from Underweight at Morgan Stanley
U.S. Silica (SLCA) upgraded to Buy from Hold at Jefferies
Wright Medical (WMGI) upgraded to Strong Buy from Buy at Needham
Yelp (YELP) upgraded to Outperform from Neutral at Macquarie
Yelp (YELP) upgraded to Outperform from Sector Perform at RBC Capital
Yelp (YELP) upgraded to Overweight from Neutral at Piper Jaffray

Downgrades

CEVA (CEVA) downgraded to Hold from Buy at Wunderlich
CNO Financial (CNO) downgraded to Neutral from Buy at Goldman
Clean Harbors (CLH) downgraded to Neutral from Outperform at RW Baird
Coach (COH) downgraded to Underweight from Equal Weight at Morgan Stanley
EXCO Resources (XCO) downgraded to Underperform from Sector Perform at RBC Capital
Emulex (ELX) downgraded to Neutral from Overweight at Piper Jaffray
Essilor (ESLOY) downgraded to Neutral from Buy at Citigroup
GFI Group (GFIG) downgraded to Market Perform from Outperform at Keefe Bruyette
Pepco Holdings (POM) downgraded to Market Perform from Outperform at Wells Fargo
USA Compression (USAC) downgraded to Market Perform from Outperform at Wells Fargo

Initiations

Flowers Foods (FLO) initiated with an Outperform at Imperial Capital
Navient (NAVI) initiated with an Equal Weight at Evercore

COMPANY NEWS

EQT (EQT) said it will sell Jupiter gathering system to EQT Midstream Partners (EQM) for $1.18B. EQT also signed an asset exchange agreement with Range Resources (RRC) and announced a 1M share repurchase authorization
Weight Watchers (WTW) raised its FY14 earnings outlook to $1.45-$1.70 per share from $1.30-$1.60
Yelp (YELP), which gave a FY14 revenue outlook that topped current expectations, said Q1 cumulative reviews increased 46% to 57M
Chevron (CVX) raised its quarterly dividend to $1.07 per share from $1.00
Abercrombie & Fitch (ANF) nominated four independent directors to board, announced settlement agreement with Engaged Capital, under which Engaged agreed to withdraw its notice of nomination of directors for election
Aeropostale (ARO) said it will close 125 P.S. stores, cut 100 positions
Starwood Hotels (HOT) CFO Vasant Prabhu resigned to become CFO of NBCUniversal (CMCSA)

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Vical (VICL), Pacira Pharmaceuticals (PCRX), Swift Energy (SFY), Ball Corp. (BLL), Quanta Services (PWR), ExlService (EXLS), Calpine (CPN), CytRx (CYTR), Care.com (CRCM), Proto Labs (PRLB), Endo International (ENDP), Enterprise Products (EPD), Becton Dickinson (BDX), Cigna (CI), Orbotech (ORBK), Orion Marine (ORN), Republic Airways (RJET), Fleetmatics (FLTX), United Insurance (UIHC), Atwood Oceanics (ATW), La Jolla (LJPC), C&J Energy (CJES), Charles River Labs (CRL), Tesoro Logistics (TLLP), Tetra Tech (TTEK), Chesapeake Lodging (CHSP), Blackbaud (BLKB), Curtiss-Wright (CW), Lincoln National (LNC), Con-way (CNW), Digital River (DRIV), Glu Mobile (GLUU), Synageva (GEVA), Flextronics (FLEX), Amdocs (DOX), Williams (WMB), Weight Watchers (WTW), Atmel (ATML), Fidelity National (FNF), Shutterfly (SFLY), Intersil (ISIL), Cohu (COHU), Intrepid Potash (IPI), Accuray (ARAY), Western Digital (WDC), Manning & Napier (MN), First Bancorp (fbnc), Rovi (ROVI), Equinix (EQIX), Coherent (COHR), Cavium (CAVM), NCI, Inc. (NCIT), Hologic (HOLX), International Rectifier (IRF), Yelp (YELP), Green Dot (GDOT), Kratos Defense (KTOS), Whiting Petroleum (WLL), WebMD (WBMD), Roadrunner (RRTS), QuickLogic (QUIK)

Companies that missed consensus earnings expectations include:

Textron (TXT), Beazer Homes (BZH), Integra LifeSciences (IART), ACI Worldwide (ACIW), Genesee & Wyoming (GWR), Generac (GNRC), Heritage-Crystal Clean (HCCI), Buenaventura (BVN), Crocs (CROX), Xenith Bankshares (XBKS), SJW Corp. (SJW), American Railcar (ARII), Ashland (ASH), Terex (TEX), Orient-Express (OEH), Remy International (REMY), Hyster-Yale Materials (HY), North Valley Banc (NOVB), Stanley Furniture (STLY), Chemtura  (CHMT), California Water Service (CWT), Stamps.com (STMP), Amerisafe (AMSF), Energy XXI (EXXI), Alphatec (ATEC), Hornbeck Offshore (HOS), Comfort Systems USA (FIX), Cabot (CBT), Oiltanking Partners (OILT), TTM Technologies (TTMI), Oplink Communications (OPLK), ManTech (MANT), inTEST (INTT), Williams Partners (WPZ), MedAssets (MDAS), TESARO (TSRO), McGrath RentCorp (MGRC), MetLife (MET), Martin Midstream Partners (MMLP), JDSU (JDSU), OncoGenex (OGXI), Forrester (FORR), American Equity (AEL), Boyd Gaming (BYD), Silicon Graphics (SGI)

Companies that matched consensus earnings expectations include:

Iron Mountain (IRM), MEDNAX (MD), Key Energy (KEG), Kirby (KEX), MDU Resources (MDU), Pilgrim’s Pride (PPC), Allegion (ALLE), Jack Henry (JKHY), Macquarie Infrastructure (MIC), United Online (UNTD), Kona Grill (KONA), Endologix (ELGX), Portfolio Recovery (PRAA), ANADIGICS (ANAD), Dyax (DYAX), Pacific Biosciences (PACB), Sensar (SCII)

NEWSPAPERS/WEBSITES

AT&T (T) approached DirecTV (DTV) about possible takeover, WSJ reports
Coca-Cola (KO) to amend executive pay after pressure from Buffett (BRK.A), WSJ says
Winters says Coca-Cola (KO) compensation plan ‘excessive,’ Bloomberg reports
Softbank (SFTBF) and Sprint (S) deal for T-Mobile (TMUS) not imminent, Re/code reports
Rio Tinto (RIO) sues Vale (VALE), Steinmetz over iron-ore concession, WSJ reports
Alibaba in talks with Alipay about regaining stake, NY Times reports
Merck (MRK), Sanofi (SNY) exploring sale of off-patent drug assets, Reuters says
Box’s (BOX) IPO may be delayed until June or later, WSJ reports
Twitter (TWTR) still looks expensive, Barron’s says

SYNDICATE

Alphatec (ATEC) files to sell 10.25M shares of common stock for holders
Apollo Commercial (ARI) files to sell 9M shares of common stock
AxoGen (AXGN) files to sell $35M shares of common stock
Burlington Stores (BURL) 12M share Secondary priced at $25.75
EQT Midstream Partners (EQM) files to sell 8.75M common units for limited partners
Forum Energy (FET) 10M share Secondary priced at $29.00
Sterling Construction (STRL) announces bought deal offering of 2.1M shares
Uranium Resources (URRE) files to sell 4.5M shares of common stock for holders

via Zero Hedge http://ift.tt/1i0E2T0 Tyler Durden

It is May Day, which means half the world – the half where welfare contributions to one’s standard of living are off the charts – celebrates labor, or rather the lack thereof, by taking the day off. Which means virtually all of Europe is closed, as are Eurex and Euronext futures, and most European markets expect the UK. In light of the non-existent volume, futures are relatively unchanged despite the latest Chinese Mfg PMI disappointment (50.4, below the 50.5, expected but just above the prior print of 50.3), and of course yesterday’s US GDP debacle which helped push the DJIA to a record high. The good news is that with volume even more miserable than usual, the few momentum ignition algos that are operating will have a field day with the now standard low-volume levitation that happens like clockwork if the news is bad, and also happens just in case if the news is bad.

In Chana, as we reported last night and as SocGen followed up this morning, a 3.4% fall year-to-date in CNY against the USD and the fourth consecutive monthly drop has propelled USD/CNY to 6.2595, 1.6% above the PBoC fixing of 6.1580. This divergence is the largest in recent history (see chart) and is very close to the limit of the 2% trading band and so begs the question whether the PBoC will intervene by buying USD or adjusting the fixing higher to take pressure off the daily trading limit.

In the US oil majors COP and XOM report pre-market and, of note, AT&T has approached DirecTV about a possible acquisition which has pushed London listed Vodafone (-2.3%) lower as any take over by AT&T of Vodafone will have to be postponed. In other Telecom sector news Sprint are to push forward with a bid for T-Mobile after meeting with banks last month to make debt arrangements.

Elsewhere, stability in the RUB remains elusive as retaliatory measures to the sanctions are under consideration by Moscow. The IMF yesterday declared that Russia’s economy is already in recession and said capital outflows could reach $100bn.

Turning to the day today, the US ISM manufacturing index will be released as will the latest US consumer spending report with the PCE deflators. Initial jobless claims round out the data docket. Elsewhere Janet Yellen speaks at a Community Bankers of America meeting in Washington. Chancellor Merkel begins a two-day trip to Washington. Oil giants, Exxon Mobil and ConocoPhillips report earnings the same day.

Bulletin headlines from Bloomberg and RanSquawk

• FOMC USD 10bln taper failed to weigh on sentiment as the Fed say that the US economy has picked up pushed the DJIA to a new record close.
• Light volumes are seen in Europe with Continental European markets closed with the FTSE 100 (+0.2%) slightly higher on earnings.
• Chinese Manufacturing PMI came in slightly below expectations (50.4 vs Exp. 50.5) but failed to draw a market reaction given the majority of Asia-Pacific markets were closed today. Nikkei 225 traded with gains of 1.3% cushioned by a batch of positive earnings reports.
• UK Manufacturing PMI was significantly higher than expectations (57.3 vs Exp. 55.4) an eight-month high, pushing GBP/USD above 1.6900, hitting the highest levels since June 2009.
• Later will see Yellen, US jobs report, PCE and ISM Manufacturing.
• Treasuries lower, led by 5Y and 7Y, as market prepares for payrolls report tomorrow, est. 215k vs 192k with unemployment rate falling to 6.6% from 6.7%.
• Unsure of Putin’s intentions, the Obama administration is attempting to warn the Kremlin not to test the U.S. commitment to defend its allies in eastern and central Europe
• Ukraine’s east is slipping out of the government’s grasp as separatists expand their takeovers of official buildings and the U.S. and its allies warn of additional sanctions
• The confidence Bank of Japan officials are demonstrating in achieving their inflation target is lowering the chances of additional monetary easing this year even as the economy weakens
• Bonds from the Americas to Asia and Europe are generating their best returns through the first four months of a year on record, as slower-than-forecast growth and declining inflation vindicate the bulls
• Sovereign yields mixed. Nikkei +1.3% while Shanghai little changed. European equity markets mixed, U.S. stock futures decline. WTI crude and gold lower, copper steady

US Event Calendar

• 7:30am: Challenger Job Cuts y/y, April (prior -30.2%)
• 8:30am: Initial Jobless Claims, April 26, est. 320k (prior 329k); Continuing Claims, April 19, est. 2.7m (prior 2.680m)
• 8:30am: Personal Income, March, est. 0.4% (prior 0.3%)
• Personal Spending, March, est. 0.6% (prior 0.3%)
• 8:30am: PCE Deflator m/m, March, est. 0.2% (prior 0.1%); PCE Deflator y/y, March, est. 1.1% (prior 0.9%)
• 9:45am: Bloomberg Consumer Comfort, April 27 (prior -25.4)
• 9:45am: Markit US Manufacturing PMI, April final est. 55.4 (prior 55.4)
• 10:00am: ISM Manufacturing, April, est. 54.3 (prior 53.7); ISM Prices Paid, April, est. 59.5 (prior 59)
• 10:00am: Construction Spending m/m, March, est. 0.5% (prior 0.1%)
• Domestic Vehicle Sales, April, est. 12.8m (prior 12.78m)
• Total Vehicle Sales, April, est. 16.2m (prior 16.33m) Central Banks
• 8:30am: Fed’s Yellen speaks in Washington Supply
• 11:00: POMO – Fed buys $0.95-$1.10 billion in bonds with a 02/15/2036 – 02/15/2044 maturity range

Equities

With European markets closed the focus was on positive UK earnings, notably Lloyds (+4.7%) and BG Group (+4%). In the US oil majors COP and XOM report pre-market and, of note, AT&T has approached DirecTV about a possible acquisition which has pushed London listed Vodafone (-2.3%) lower as any take over by AT&T of Vodafone will have to be postponed. In other Telecom sector news Sprint are to push forward with a bid for T-Mobile after meeting with banks last month to make debt arrangements.

FX

USD/CNY traded at its highest level in over 18 months overnight, with analysts at Morgan Stanley noting that as the CNY approaches the lower end of PBOC’s permissible daily trading range, anticipated intervention to defend band could put other currencies under selling pressure.

Commodities

WTI (USD -0.51) extends the decline below USD 100/bbl as disappointing Chinese PMI overnight compounds the weakness seen after US GDP yesterday and now trades at the lowest levels since April 2014. Notably US capacity has ramped up recently, coupled with Libyan ports re-opening, has been weighing on the energy complex.

Palladium (USD 4.10) is seen out-performing its peers as concerns on further sanctions against Russia, the world largest producer of the metal, supports prices. Gold (USD -5.80) is under pressure after the continuing of Fed tapering announced last night and the weak Chinese PMI.

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In conclusion DB’s Jim Reid completes the overnight recap

The start of the new month is likely to be quiet with the May Day holiday observed  in many places around the world today. Even with the holiday China has kicked off  what will be a stuttered 2-day series of international manufacturing PMI releases.  Their official reading came in at 50.4 overnight which is one-tenth of a point below analyst estimates, but slightly improved from March’s reading of 50.3. This is the second straight month where the PMI has increased (though the rate of increase has been minimal), providing some hope to China bulls that activity may have bottomed out in Q1. The Chinese premier was quoted by state-media as saying that “arduous effort” is needed. just to meet the 2014 target for trade growth. There has been a very muted reaction to the data with most major Asian markets shut today. Copper is down about 0.1% this morning, following a 1.5% fall yesterday and S&P500 futures are flat. The Nikkei is up 1.1% off the back of a number of positive earnings announcements
 
Yesterday was a disappointing day for backward looking data but encouraging for those looking forward. Although the surprise 0.1% Q1 US GDP can be excused for now due to the weather it does show that in a low era for growth, shocks can push you close to negative GDP. Fortunately this was a relatively brief weather
shock but it shows how vulnerable things would be to a more serious outside shock. There’s not much of a cushion anywhere in the world at the moment. The other worry was that a lot of the miss was due to weak exports. This clearly could get revised and is counter to some recent survey evidence but at face value it’s slightly concerning that global activity hasn’t helped the US in Q1. Having said all this, other US data was decent yesterday. Even within the GDP report, personal consumption rose 3%, which added 2% to the headline number. Consumption was driven by services, which rose 4.4% in the quarter—the largest drivers were health care which added +1.1%, the fastest rate since 1947, though this may have been affected by Obamacare. Housing/utilities (which added +0.7%) was also a bright spot. Elsewhere, ADP employment rose +220k in April, slightly ahead of the +210k expected, after the prior month was revised up +18k to +209k. Hiring was led by small businesses (+82k vs. +81k) and medium-sized businesses (+82k vs. +56k), while the pace of large business hiring fell modestly (+57k vs. +71k). Most forecasters have left their April non-farm payrolls estimates unchanged including DB’s Joe Lavorgna who is keeping his call for a +240k headline and two-tenths drop in the unemployment rate to 6.5% tomorrow. The Chicago PMI rose a better than expected 7.1 points to 63.0 driven by sizable gains in production (70.5 vs. 61.7), new orders (68.7 vs. 58.8), and employment (57.8 vs. 50.0).
 
The FOMC proved to be fairly uneventful with very little reaction from rates, equity or credit. Indeed, yesterday’s Euroarea CPI (0.7% vs 0.8% expected) appeared to generate much more of a reaction in EURUSD which gained 0.4% on the day, perhaps in relief that the European inflation had bounced back from multi-year lows. There was some talk that perhaps the US GDP number, which was released before the FOMC statement, would cause the FOMC to be a little more dovish in its statement this month. However this was not the case and the official Fed policy statement was essentially little changed on the prior month. The Fed acknowledged the economic weakness in Q1 but also said that other indicators such as household spending were picking up “more quickly”. So a rather straightforward FOMC this month, while we wait for next week’s JEC testimony from Yellen and the June 17th/18th FOMC (which will have updated dot plot forecasts) to get our next cues on the Fed’s policy path.

Though markets tried to look through the backward looking GDP data, UST yields rallied 6bp following the data release as it headed back down towards the bottom of the 2.60% to 2.80% trading range that has held for most of 2014. Rallying rates helped equity and credit markets grind back towards their respective post-crisis highs and tights. Indeed, the USD iBoxx credit index is now less than a basis point away from the cyclical tights in spread terms and the S&P500 (+0.3%) is just 7pts away from all time highs (the Dow hit a record high yesterday). High momentum stocks continue to languish for the time being, with the US biotech index still more than 10% from the Feb peaks.

M&A fever has certainly helped the sentiment in equities and this was further heightened after the US market close when Bloomberg reported that US telco Sprint Corp is pushing forward with plans to bid for T-Mobile US Inc which would results in the combination of the third and fourth largest wireless carriers. According to the report, Sprint management is currently in readying funding with a number of banks. Shares in Sprint and T-Mobile were up 5% and 11% respectively in afterhours trading. The shares of Sprint’s parent, Softbank in Japan, are up 1.5% overnight. As we go to print, the WSJ is reporting that another telco AT&T  has approached DirectTV about an acquisition.

The combination of lower US rates and a weaker dollar set the stage for a constructive session for EM assets. In currencies, the ZAR (+0.33%), PLN (+0.16%) and MXN (+0.17%) gained against the dollar, and a number of EM equity markets recorded gains above 1%. LATAM rates traded about 3-7bp tighter in sympathy with the rally in US treasuries, and we should note here that Italian and Spanish yields also performed strongly (down 5-6bp apiece) as the bid for duration and spread continues. Sentiment in Russia, though still fragile, improved with Russian CDS gapping in more than 10bp, but the newsflow suggested that the Ukraine crisis remains far from over after pro-Moscow separatists seized government offices in several more eastern towns yesterday (Interfax-Ukraine). On a slightly more positive note, the IMF yesterday signed on a US$17bn loan to Ukraine with an immediate payment of $3.2bn to settle back payments to
Gazprom for natural gas and to prepay for future imports.

Turning to the day ahead, much of continental Europe will be shut for Labour Day holidays and those markets that are open, including London, may see lower volumes with a looming long weekend ahead. The US ISM manufacturing index will be released but our economists warn that there are two technical factors that are impacting the ISM headline which are simply delayed reactions to recent weather events. These are occurring in the employment and supplier delivery subcomponents. The latest US consumer spending report will be published together with the PCE deflators. Initial jobless claims round out the data docket. Elsewhere Janet Yellen speaks at a Community Bankers of America meeting in Washington. Chancellor Merkel begins a two-day trip to Washington. Oil giants, Exxon Mobil and ConocoPhillips report earnings the same day.

via Zero Hedge http://ift.tt/1fB7qob Tyler Durden

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via Zero Hedge http://ift.tt/1rRUWKZ williambanzai7