Month: June 2014

 

via Zero Hedge http://ift.tt/1r5jwKA Reggie Middleton

A few days ago, when we wrote our “explainer” on the need for Russia to have an alternative pathway for its gas, one which bypasses Ukraine entirely and as the current “South Stream” framework is set up, crosses the Black Sea and enters Bulgaria before passing Serbia and Hungary on the way to the Central European energy hub located in Baumgarten, Austria, we said that “one short month after Putin concluded the Holy Grail deal with Beijing, he not only managed to formalize his conquest of Europe’s energy needs with yet another pipeline, one which completely bypasses Ukraine (for numerous reasons but mostly one: call it a Plan B), but scored a massive political victory by creating a fissure in the heart of the Eurozone, after Austria openly defied its European peers and sided with Putin.”

Today we find just what said Plan B is.

As Itar-Tass reports, citing Gazprom CEO Alexei Miller, “Russia’s gas giant Gazprom does not rule out gas transit via Ukraine may be stopped completely.”

“What happened once is a tendency, nothing happens incidentally. In 2009, gas supplies were stopped completely — so, we know precedents,” Miller told a briefing on Friday.

Clearly, this is bad news for Ukraine: Gazprom not interested in participation in Ukraine’s gas transportation system (GTS), “train has departed”, CEO said.

“The train has already departed. It seems it departed yesterday,” Miller said. “It belongs to no one. The GTS has no owner,” he said. “The GTS of Ukraine does not belong to Naftogaz but to the Ukrainian government. Before discussing things with someone regarding modernization and cooperation, it should appear on the balance sheet of this or that economic entity.”

 

“Property and legal issues should be resolved first,” Miller said.

In fact, the civil war torn country may soon lose all leverage it had with both Europe and Russia as a transit hub for natural gas, which also means that it is quite likely that Ukraine is about to be abandoned by its western allies who will no longer have any practical use for it. 

The Gazprom chief added that “a dozen Ukrainian laws need to be changed to be able to do something with the GTS.” 

Confirming that Ukraine’s leverage at least with Russia is now effectively zero, Gazprom’s CEO also said that “As for the continuation of negotiations with Ukraine, today there is no subject for talks. First, they must repay their debts.”

“The gas price for Ukraine is fair – this price is fixed in the contract,” he stressed.

There have been no requests on the part of Ukraine’s national oil and gas company Naftogaz Ukrainy on a change of the transit deal with Russia, Alexei Miller said. Miller told journalists that it would be bad news if such requests had been received.

At least we now know what the Ukraine endgame will look like: as Russian transit through the country is completely cut off, the nation will lose all strategic importance first to Russia and then to Europe, which is still over-reliant on Russian gas (see map below), but which will increasingly turn its attention to the countries which the South Stream passes through.

And speaking of South Stream countries, there is increasing speculation that the main reason why none other than the poorest EU member country, Bulgaria, just suffered its worst bank run in 17 years, and one which has paved the way to early elections, is precisely that: to provide Europe with a government which will be more focused on Brussels’ interests, instead of the current socialist regime, whose allegiance to the Kremlin is said to take precedence.

After all, now that Ukraine is yesterday’s news, pay close attention to how Europe treats all the South Stream countries, starting with Bulgaria, and going through Serbia (read “Serbia could go bankrupt within a year and end up “in the position of Greece”, the country’s new prime minister has warned“), Hungary and of course, Austria.

Finally, and perhaps most notably, is last week’s announcement by Gazprom CEO Miller that Gazprom has good chance, and is interested in discussing buying a stake in the Baumgarten gas hub (see more on why Austria is suddenly so important to both Russia and Europe here).

As Bloomberg reported previously, citing Miller, “The talks we had about South Stream also were a catalyst for the continuation of our talks about participating in the gas hub. We are interested and I think we can discuss a specific percentage of participation.” The Russian gas producer and exporter discussed with OMV participating in gas trading in Baumgarten. Miller also added that work on South Stream link to Europe going on schedule, first deliveries to Bulgaria, Serbia, Turkey; capacity to reach 63bcm by end 2017.

In other words, as Europe and the US remains still focused on Ukraine, the one place which now matters most for Europe’s energy future is Austria: a country where Gazprom, and Putin of course, are quietly sowing the seeds of Russia’s energy dominance tomorrow. As for the feeder countries, especially Bulgaria, pay close attention as the US “foreign service” does all it can to destabilize the local government and financial system as a last ditch attempt to wrest Russia’s trump card out of its hand. Something tells us Putin will hardly let it go easily.

via Zero Hedge http://ift.tt/1r5jySI Tyler Durden

• Facebook Researchers Manipulated News Feeds in 2012 Study (BBG)
• Argentina at Brink of Default as $539 Million Payment Due (BBG)
• Hedge fund correlation risk alarms investors (FT)
• As China Flexes Muscle, Obama Frets Over Rival’s Weakness (BBG)
• As caliphate declared, Iraqi troops battle for Tikrit (Reuters)
• Dubai Caps Worst Month Since 2008 as Real Estate Stocks Tumble (BBG)
• Russian Advisers Ready Iraq to Use New Combat Aircraft (BBG)
• Blackstone Readies Big-Bet Hedge Fund (WSJ) – so what was GSO?
• Pope says communists are closet Christians (Reuters)
• Thomson Reuters revising FX trading standards (Reuters)
• Scotland Holds Billions of Barrels of Shale Oil, Report Says (BBG)
• U.S. Investment Firms Challenge Puerto Rico Restructuring Law (WSJ)
• BNP Paribas Dollar-Clearing Ban Said to Start in 2015 (BBG)
• BlackRock ETFs near $1 trillion as it loses market share to Vanguard (Reuters)
• U.S. government to unveil near $9 billion fine for France’s BNP (Reuters)
• Soros Caught in ClickSoftware Rout That Puzzles Analysts (BBG)

 

Overnight Media Digest

WSJ

* The extremist group known as the Islamic State of Iraq and al-Sham (ISIS) is expanding its foothold in Syria after recent gains in neighboring Iraq, intensifying its clashes here against other Islamist rebel factions. (http://on.wsj.com/1sQ8xXl)

* Funds managed by Franklin Templeton Investments and OppenheimerFunds Inc asked the U.S. District Court for the District of Puerto Rico to block a new law that allows some public agencies to restructure their debt, arguing that only Congress is allowed to create bankruptcy rules. (http://on.wsj.com/1jB9WYr)

* After a series of high-profile data breaches and warnings, corporate boards are waking to cyberthreats, grappling with security issues they once relegated to technology experts. So far this year, 1,517 companies traded on the New York Stock Exchange or Nasdaq Stock Market listed some version of the words cybersecurity, hacking, hackers, cyberattacks or data breach as a business risk in securities filings, according to a Wall Street Journal analysis. (http://on.wsj.com/1m1kfJe)

* Blackstone is quietly laying plans to start a hedge fund that will make big, bold bets, an effort it hopes will eventually rival some of the largest firms in the business. (http://on.wsj.com/V0fExi)

* The landmark settlement expected Monday between U.S. authorities and BNP Paribas SA began to take shape last summer, after bank executives flew to New York to share an embarrassing admission: The French bank had been processing potentially illicit dollar transactions with countries blacklisted by Washington years after the U.S. began investigating the lender. (http://on.wsj.com/TIB9BB)

* As soon as the U.S. Supreme Court rendered its long-awaited decision on securities class-action litigation last week, a fight brewed over who won the case. (http://on.wsj.com/1nWPeVo)

* A social-network furor has erupted over news that Facebook Inc in 2012, conducted a massive psychological experiment on nearly 700,000 unwitting users. To determine whether it could alter the emotional state of its users and prompt them to post either more positive or negative content, the site’s data scientists enabled an algorithm, for one week, to automatically omit content that contained words associated with either positive or negative emotions from the central news feeds of 689,003 users. (http://on.wsj.com/1nVk7IC)

 

FT

Jean-Claude Juncker, the president-designate of the European Commision, told David Cameron that he was “fully committed” to finding solutions to UK’s political concerns, despite the British prime minister’s bid to block his nomination for EU’s top job.

BNP Paribas SA has negotiated a partial concession with U.S. authorities on its $8.9 billion settlement, relating to alleged sanction violations by the French bank.

The partners in Israel’s giant natural gas field have signed a preliminary agreement on a deal worth $30 billion to supply British oil and gas company BG Group with gas via a new undersea pipeline.

Senior executives at GlaxoSmithKline, which is facing allegations of bribery in China, on Sunday received a secretly-filmed sex tape of the drugmaker’s top manager in the country.

The value of mergers and acquisitions touched its highest level since 2007, rising 75 percent to hit $1.75 trillion in the first six months of the year.

The Bank for International Settlements warned that ‘euphoric’ financial markets were out of step with reality, and urged governments to scrap policies that could lead to asset bubbles.

Brokers have warned that rising competition between global reinsurers is forcing these companies to provide cover for terrorism, forcing them to revisit terms they have sought to avoid since the 9/11 attacks.

 

NYT

* Facebook revealed that for one week in January 2012, it had manipulated the news feeds of over half a million randomly selected users to change the number of positive and negative posts they saw. It was part of a psychological study to examine how emotions can be spread on social media. (http://nyti.ms/1q7fO1p)

* Kenneth Feinberg, a prominent compensation expert hired by General Motors, is scheduled to announce a plan on Monday to distribute money to victims of accidents caused by the automaker’s defective ignition switch. (http://nyti.ms/1m1j7VZ)

* An organization representing the world’s main central banks warned on Sunday that dangerous new asset bubbles were forming even before the global economy has finished recovering from the last round of financial excess.(http://nyti.ms/1qpCSde)

* Verizon Communications is preparing to move its corporate offices from downtown back into far smaller quarters inside the former New York Telephone building at 1095 Avenue of the Americas, at 42nd Street. Its diminished presence parallels the steady erosion of demand for its original business: providing plain old telephone service over landlines. The number of landlines Verizon has left in New York State is down to about 3 million from 12 million. (http://nyti.ms/1r3wtEO)

* The day after the Supreme Court ruled against Aereo in a copyright case brought by the nation’s major broadcasters, Mark Ely, chief executive of streaming television service Simple.TV, was trying to scoop up Aereo customers by promoting his start-up on social media. (http://nyti.ms/1mxLmaJ)

 

Canada

THE GLOBE AND MAIL

* Brian Storseth, Conservative party MP from Alberta, is speaking out against Employment Minister Jason Kenney’s changes to the temporary foreign worker program, calling for an exception to be made for the province. (http://bit.ly/1iMhA7x)

* A group of prominent General Motors of Canada Ltd dealers is suing the company and its parent General Motors Co, saying the auto maker has ignored their repeated pleas for financial help to address a dramatic drop in sales and market share. (http://bit.ly/1qqnyNH)

Reports in the business section:

* BCE Inc, Rogers Communications Inc, Shaw Communications Inc and the Canadian Broadcasting Corp, Canada’s biggest broadcast companies are at odds with each other over consumer choice and support for local programming, setting the stage for a debate at September hearings that could reshape the way Canadians watch and pay for television. (http://bit.ly/1lIwf2I)

NATIONAL POST

* Four federal by-elections in Toronto and Alberta on Monday will provide a test of just how far back from the wilderness the Liberals have come under the leadership of Justin Trudeau. The most crucial test will likely be in Trinity-Spadina, where the Liberals are going all-out to steal a seat held by the New Democratic Party since 2006 by Olivia Chow, the widow of beloved former party leader Jack Layton. (http://bit.ly/1z1F1hU)

* Canadian doctors are looking at offering a fascinating new procedure for saving the fertility of pre-pubescent cancer patients, where pieces of ovary or testicle are frozen before toxic treatments, then transplanted back years or decades later. Scientific and ethical questions still hang over the concept, and a little-known Canadian law could actually prevent lab research on it. (http://bit.ly/1mMtXQl)

FINANCIAL POST

* Spanish billionaire behind the Zara retail banner, Amancio Ortega Gaona, is buying into Toronto’s upscale Yorkville commercial district, paying $255 million for 150 Bloor St. W., a 270,000-square-foot mixed retailing and office building, sources tell the Financial Post. (http://bit.ly/1qqoKRc)

China

– China urgently needs to launch a deposit insurance system to help its interest rate reforms, says a report.

– The current corrective period in China’s housing market is not likely to end soon, says a commentary.

CHINA BUSINESS NEWS

– Reports that the United States has reached agreements with 86 countries to investigate tax payments of U.S. citizens outside the country will help China’s anti-corruption campaign.

– The Chinese government has started deploying eight inspection teams across the country to investigate how regional governments are implementing central policies and will hold accountable those found wanting.

SHANGHAI SECURITIES NEWS

– Many Chinese mutual funds believe that China’s stock market is likely to walk out of years of weakness in the second half of this year, partly driven by official efforts to reform the country’s capital markets.

CHINA DAILY

– China, the largest contributor of personnel to U.N. peacekeeping, will provide more expertise and training to fight against crime on top of its traditional role of maintaining order and security.

PEOPLE’S DAILY

– Hong Kong must abide by Chinese laws related to the Hong Kong Special Administrative Region, the newspaper said in a commentary after Hong Kong lawyers protested against what they see as Chinese interference on Friday.

 

Britain

The Telegraph

ABBVIE ON SHIRE COURTSHIP TRIP TO LONDON

The boss of US drug-maker AbbVie Inc is flying into London this week to court Shire’s shareholders and try to convince them of the merits of a potential takeover.

INDEPENDENT SCOTLAND RISKS BEING DESTABILISED BY BANKS

An independent Scotland would be even more exposed to its banking sector than Iceland was at the height of the financial crisis if the country’s biggest institutions remained there.

ADDISON LEE OWNER FLAGS SALE

The American backer of Addison Lee, the London minicab firm, is to explore a possible sale of the firm just over a year after taking control.

The Guardian

LABOUR OFFERS OLIVE BRANCH TO BUSINESS BY TARGETING TAX AND INVESTMENT

Ed Balls is to launch a bid to bolster Labour’s credibility with business by promising to keep a low rate of corporation tax and attract long-term investors to Britain, as he brushed off criticism from the policy chief Jon Cruddas that a “profound dead hand” within the party is blocking bold reforms.

HOPES RAISED THAT TAKEOVER WILL SAVE MILFORD HAVEN OIL REFINERY JOBS

Hundreds of workers at the Milford Haven oil refinery in south-west Wales are awaiting confirmation that their jobs have been saved after weekend reports that a deal to sell the plant was close.

The Times

OSBORNE’S GRAND PLAN TO JOIN UP INCOME TAX AND NATIONAL INSURANCE

Income tax and national insurance will be merged under plans being lined up as a key element of the next Conservative manifesto.

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Chicago PMI business barometer for June at 9:45–consensus 64.0
Pending home sales for May at 10:00–consensus up 1.0% for the month

ANALYST RESEARCH

Upgrades

Amedisys (AMED) upgraded to Hold from Sell at Deutsche Bank
Canadian National (CNI) upgraded to Overweight from Equal Weight at Barclays
Charter (CHTR) upgraded to Overweight from Equal Weight at Evercore
CoStar Group (CSGP) upgraded to Outperform from Market Perform at JMP Securities
DreamWorks Animation (DWA) upgraded to Neutral from Underweight at Piper Jaffray
KLA-Tencor (KLAC) upgraded to Buy from Neutral at B. Riley
Norfolk Southern (NSC) upgraded to Overweight from Equal Weight at Barclays
Ryanair (RYAAY) upgraded to Neutral from Underperform at BofA/Merrill
TransCanada (TRP) upgraded to Buy from Neutral at Citigroup
Yahoo (YHOO) upgraded to Overweight from Neutral at Piper Jaffray

Downgrades

Fresenius Medical (FMS) downgraded to Underperform from Hold at Jefferies
Rayonier (RYN) downgraded to Sector Perform from Outperform at RBC Capital
Syngenta (SYT) downgraded to Underweight from Neutral at JPMorgan
Unitil (UTL) downgraded to Hold from Buy at Brean Capital

Initiations

Altisource Residential (RESI) initiated with a Neutral at Citigroup
DaVita (DVA) initiated with a Buy at Jefferies
Kona Grill (KONA) initiated with a Buy at KeyBanc
Marrone Bio (MBII) initiated with an Outperform at RW Baird
Williams Partners (WPZ) initiated with a Buy at UBS

COMPANY NEWS

American Apparel (APP) adopts stockholder rights plan
BlackRock (BLK) Advisors receives Wells Notice
Carlyle Group (CG) to conduct tender offer for SBI Mortgage Co
Gabelli files to nominate three to board of Superior Industries (SUP)
Illumina (ILMN) announces agreements with Genoma, two others
InterOil (IOC) sells downstream businesses for $525.6M
Kindred Healthcare (KND) sends letter to Gentiva Health (GTIV) board
MannKind (MNKD) confirms FDA approval of Afrezza
PetroQuest (PQ) enters JV with Midstates Petroleum in Louisiana
Philips (PHG) to combine LED components, Automotive lighting businesses
Raytheon (RTN) awarded $275.4M government contract modification
Ryanair (RYAAY) Deputy CEO and CFO Howard Millar to step down

NEWSPAPERS/WEBSITES

Adobe (ADBE) shares could climb 20%, Barron’s says
Anglo American (AAUKY) looks to sell up to $4B in mining assets, Sunday Times says
Blackstone (BX) prepares to start ‘big-bet’ hedge fund, WSJ says
Boeing (BA), Airbus submit offers for $1.38B South Korean order, Reuters says
Chevron (CVX) has 30% upside potential, Barron’s reports
Chico’s FAS (CHS) looks tempting for LBO, Barron’s says
Concerns about Valero (VLO) look overblown, Barron’s says
Facebook (FB) experiment on users creates backlash, WSJ says
General Motors (GM) could still face criminal charges, NY Times says
Microsoft (MSFT) may be planning to halt Surface Min production, DigiTimes reports
Murphy Oil (MUR) in talks to sell UK refinery Milford Haven, Reuters says
NXP Semiconductors (NXPI) technology rumored to be in iPhone 6, WSJ says
NetApp (NTAP) could gain 25%, Barron’s says
ResMed (RMD) shares could fall at least 15%, Barron’s says

SYNDICATE

Malibu Boats (MBUU) files to sell 4M shares of Class A common stock
Speed Commerce (SPDC) files to sell 4.4M shares of common stock for holders

via Zero Hedge http://ift.tt/1iMy0g2 Tyler Durden

It is the last day of not only the month but also the quarter, not to mention the halfway point of 2014, which means that window dressing by hedge funds will be rampant, as they scramble to catch up some of the ground lost to the S&P 500 so far in 2014. Most likely this means that once again the most shorted names will ramp in everyone’s face and the short side of the hedgie book will soar, further pushing hedged P&L into the red, because remember: in a market in which all the risk is borne by the Fed there is no need to hedge.

It is a busy, July 4 holiday-shortened week: the data docket starts off with the US Chicago PMI and pending home sales data later today. Ahead of the ECB meeting on Thursday, today’s advance Euroarea CPI print for June will be followed with interest and Bloomberg consensus is expecting no change from May’s 0.5% YoY run rates. In emerging markets Argentina’s dispute with holdout creditors comes to a head with a key payment on restructured bonds due today. Argentina indicated on Friday that it wanted to make payment but the transfer was effectively blocked by a US judge. So will Argentina default today or at least enter a grace period? Find out later today. Certainly a fresh Argentina default should be all this joke of a market needs for new all time highs (for those who still don’t get it, please read the BIS’ thoughts on the “market”).  A full preview of the busy week will be posted shortly.

Weekend newsflow was rather thin, with the geopolitical developments in Iraq generating the bulk of the headlines. Weekend editorials (FT) suggested that Turkey was moving closer to welcoming an independent Kurdish state in northern Iraq, while ISIS itself declared large areas of captured Iraqi territory as part of an independent Islamic state encompassing Iraq and Syria. According to Reuters a spokesman for ISIS called for those living in the area under the group’s control in both countries to swear allegiance to Baghdadi, who was declared head of state. Brent futures are down 0.3% to start the week and have now retraced about one-third of the June price spike.

The overnight price action in Asian equities has been largely positive though Japan (Nikkei +0.2%) is lagging amidst a rising yen (USDJPY down four straight days). A weaker than expected May industrial production report (+0.5% vs 0.9% expected) isn’t helping matters either. Also in Japan, prime minister Abe penned a commentary in the FT on Sunday in which he says that his “Third Arrow” of reforms will be enough to fell Japan’s economic demons. The measures he outlines in the commentary have been previously announced and there has been little reaction to the commentary this morning. Mr Abe outlines planned cuts to corporate taxes, changes to corporate governance codes and “forward-looking reforms” to the GPIF. Abe also writes that the recent post-sales tax dip in consumer spending will be temporary. On the subject of Japan’s economic demons, Japanese 10yr breakevens have fallen back down to 1.25%, the lowest rate since early April of this year. Elsewhere in Asia, it’s been a quiet session ahead of Chinese PMIs and a Hong Kong public holiday on Tuesday. Asia ex-Japan equity and credit markets are trading unchanged to better, following on from the tone in NY on Friday. Most Asian bourses are up 0.5% to 1%. S&P500 futures are unchanged as we type.

European shares remain little changed with the chemicals and food & beverage sectors outperforming and travel & leisure, banks underperforming. The Dutch and German markets are the best-performing larger bourses, Spanish the worst. The euro is little changed against the dollar. Portuguese 10yr bond yields rise; Spanish yields increase. Commodities decline, with corn, wheat underperforming and zinc outperforming. U.S. Chicago purchasing manager, Dallas Fed index, ISM Milwaukee, pending home sales due later.

Market Wrap

• S&P 500 futures down 0.1%
• Stoxx 600 up 0% to 342
• US 10Yr yield down 1bps to 2.53%
• German 10Yr yield down 1bps to 1.25%
• MSCI Asia Pacific up 0.3% to 145.6
• Gold spot down 0.2% to $1313.3/oz

EUROPE

• 10 out of 19 Stoxx 600 sectors rise
• 51.5% of Stoxx 600 members gain, 45.5% decline
• Eurostoxx 50 +0.1%, FTSE 100 +0.1%, CAC 40 -0.1%, DAX +0.4%, IBEX -0.4%, FTSEMIB -0.3%, SMI +0.1%

ASIA

• Asian stocks rise  with the Sensex outperforming and the ASX underperforming.
• MSCI Asia Pacific up 0.3% to 145.6
• Nikkei 225 up 0.4%, Hang Seng down 0.1%, Kospi up 0.7%, Shanghai Composite up 0.6%, ASX down 0.9%, Sensex up 1.3%
• 7 out of 10 sectors rise with tech, consumer outperforming and telcos, materials underperforming

Bulletin Headline Summary from Bloomberg and RanSquawk

• European equities (EuroStoxx +0.25%) and fixed income (Bunds +12 ticks) tread water with a lack of fundamental newsflow and in line Eurozone CPI (0.5%) failing to provide direction
• Oil markets trade softer as Basra supply lines in Iraq are unaffected by ISIS declaring an independent Islamic state in the North of the country
• Busy data week for the US starts with Chicago PMI and pending home sales this morning
• Treasuries advance, paring monthly decline, as markets prepare for Yellen speech Wednesday, nonfarm payrolls and ECB rate decision/Draghi press conference on Thursday’s pre-holiday shortened session.
• Central banks shouldn’t delay an exit from emergency policymeasures even as the path may be rough, the BIS said in itsannual report released yesterday
• BIS also said that loose monetary policy makes it easyfor euro-area banks to keep bad debt on their books,potentially delaying the flushing out of sour loans andthat emerging market companies, which have borrowed morethan $2t since 2008, is leaving them vulnerable to asudden drop in funding
• BNP Paribas SA won a reprieve during final talks to settle acriminal probe into U.S. sanctions violations, giving the bank six months to prepare for a ban on handling certaindollar transactions, according to a person with direct knowledge
• The al-Qaeda breakaway group fighting in Syria and Iraq declared an Islamic caliphate in areas under its controls, from Aleppo in northern Syria to the eastern Iraqi  provinceof Diyala
• Russian military advisers helped to prepare Iraq’s air force to use five newly delivered combat planes in its campaign to recapture areas of the country’s north that fell to an al-Qaeda breakaway
• Obama will ask Congress for more funding and authority to stem a growing flood of undocumented immigrants from Central America, including children unaccompanied by adults at the southern border
• The VA’s medical system is hobbled by management with little accountability and a “corrosive culture,” according to an interim White House report; Obama will name former PG CEO Bob McDonald to head to troubled agency
• Merkel and French President Hollande, in a telephone call lasting more than two hours, stepped up pressure on Russia and Ukraine to resolve their territorial dispute
• Four hundred Russian sailors arrived in France today to train on two warships the French government is selling to the Russian navy, a contract Hollande refused to cancel  
• Abe’s growth strategy plan “may still be insufficient” to bridge gap between the Japanese economy’s track record and government’s “ambitious” growth prospects,   Fitch says in a report 
• Sovereign yields mostly lower; EU peripheral spreads wider. Asian stocks gain, European stocks mixed. U.S. stock futures little changed. WTI crude unchanged, gold falls, copper rises

US Event Calendar

• 9:00am: ISM Milwaukee, June (prior 63.49)
• 9:45am: Chicago Purchasing Manager Index, June., est. 63 (prior 65.5)
• 10:00am: Pending Home Sales m/m, May, est. 1.3% (prior 0.4%) Pending Home Sales y/y, May (prior -9.4%)
• 10:30am: Dallas Fed Manufacturing Activity, June 8.0 (prior 8.0)
• 11:00am POMO: Fed to purchase $850m-$1.1b in 2036-2044 sector

Central Banks

• 1:10pm: Fed’s Williams speaks in Sun Valley, Idaho Supply
• 11:00am: U.S. to announce plans for auction of 4W bills
• 11:30am: U.S. to sell $25b 3M bills, $23b 6M bills
• 3:00pm: New York Fed to issue QE schedule for July

 

ASIA

Asia-Pacific equity markets traded mostly in the green, with the Shanghai Composite benefitting from the market’s smooth launch of IPOs ahead of more scheduled later this year, and the Nikkei 225 rises on little newsflow ahead of the BoJ’s Tankan survey due tomorrow.

EUROPE

With a lack of notable newsflow from over the weekend or morning. Attention turned to today’s Eurozone CPI estimate which came in line with expectations (0.5% vs. Exp. 0.5%), with the slightly higher than expected Core number (0.8% vs. Exp. 0.7%) failing to provide European assets with much in the way of direction.

Elsewhere in Europe, Portuguese bonds sharply underperform, with 10yr yields up over 10bps as markets eschew Portuguese debt and banking stocks after last Friday’s reports of an investigation into Banco Espirito Santo’s holding companies.

Prelim Barclays month end extensions show Pan-Euro Agg at +0.09y (Prev. +0.04y)

US

Fed’s Bullard (non-FOMC, soft hawk) reiterated that he prefers to end bond buying in October and that his own forecast of Q1 2015 rate hike is data dependent. (BBG)

Prelim Barclays month end extensions show US Treasury at +0.08y (Prev. +0.12y)

EQUITIES

European equities tread water, with volumes particularly light today. Positive broker moves have provided the main source of direction for European equities so far amid a lack of notable fundamental news flow. It’s also worth noting that today sees month, quarter and half-year end, therefore window-dressing is to be expected.

FX

USD/JPY has remained stubbornly below the heavily-watched 200DMA at 101.72, with a slew of option expiries at 101.45-50 (1.5bln) and 101.65-70 (400mln) keeping spot price in check. Elsewhere, NZD retreats from multi-year highs printed last week as the New Zealand Treasury warned that last week’s multi-decade high trade surplus cannot be maintained. The EUR has started the week strongly, with national central bank demand in EUR/GBP supporting the currency into the month’s end.

COMMODITIES

WTI and Brent crude futures are seen under continued selling pressure today, after the ISIS threats to southern Iraq continue to abate, and oil supply through Basra remains secured. Although, ISIS have declared a new caliphate (seized areas of Iraq and Syria) as a new Islamic state, autonomous to both Baghdad and Damascus, claiming victory over government forces.

* * *

DB’s Jim Reid concludes the overnight summary

Unbelievably today marks the end of the first half of the year. Its been a generally positive first half for financial markets but one where volatility has been low. Indeed after what seems like months of very low volatility, perhaps a week featuring Euroarea CPI, global PMIs/ISMs, Yellen, an ECB meeting and non-farm payrolls – jammed into what effectively will be four days – will encourage some more interesting price action? We’ll preview the rest of the week ahead in more detail below, but first we’ll take a look at overnight markets and some of the weekend newsflow.

The overnight price action in Asian equities has been largely positive though Japan (Nikkei +0.2%) is lagging amidst a rising yen (USDJPY down four straight days). A weaker than expected May industrial production report (+0.5% vs 0.9% expected) isn’t helping matters either. Also in Japan, prime minister Abe penned a commentary in the FT on Sunday in which he says that his “Third Arrow” of reforms will be enough to fell Japan’s economic demons. The measures he outlines in the commentary have been previously announced and there has been little reaction to the commentary this morning. Mr Abe outlines planned cuts to corporate taxes, changes to corporate governance codes and “forward-looking reforms” to the GPIF. Abe also writes that the recent post-sales tax dip in consumer spending will be temporary. On the subject of Japan’s economic demons, Japanese 10yr breakevens have fallen back down to 1.25%, the lowest rate since early April of this year. Elsewhere in Asia, it’s been a quiet session ahead of Chinese PMIs and a Hong Kong public holiday on Tuesday. Asia ex-Japan equity and credit markets are trading unchanged to better, following on from the tone in NY on Friday. Most Asian bourses are up 0.5% to 1%. S&P500 futures are unchanged as we type.

Weekend newsflow was rather thin, with the geopolitical developments in Iraq generating the bulk of the headlines. Weekend editorials (FT) suggested that Turkey was moving closer to welcoming an independent Kurdish state in northern Iraq, while ISIS itself declared large areas of captured Iraqi territory as part of an independent Islamic state encompassing Iraq and Syria. According to Reuters a spokesman for ISIS called for those living in the area under the group’s control in both countries to swear allegiance to Baghdadi, who was declared head of state. Brent futures are down 0.3% to start the week and have now retraced about one-third of the June price spike.

European banks were one of the key underperformers from a credit and equity point of view on Friday and much of this was due to the headlines surrounding BNP Paribas. Over the weekend the WSJ reported that a settlement between US authorities and the bank is expected to be agreed and settled on today. The article said that BNP is likely to pay a US$8.9bn fine and lose its capacity to perform certain dollar-clearing transactions. The restrictions on USD clearing only come into force from January next year, to allow the bank time to put in place alternative arrangements with clients who require USD clearing services. The WSJ says that the bank will also cut its dividend and issue bonds to preserve its balance sheet and meet the cash penalty.

Taking a closer look at this week’s calendar, the data docket starts off with the US Chicago PMI and pending home sales data later today. Ahead of the ECB meeting on Thursday, today’s advance Euroarea CPI print for June will be followed with interest and Bloomberg consensus is expecting no change from May’s 0.5% YoY run rates. In emerging markets, South Africa and Turkey report their latest trade data and Argentina’s dispute with holdout creditors comes to a head with a key payment on restructured bonds due today. Argentina indicated on Friday that it wanted to make payment but the transfer was effectively blocked by a US judge.

Tuesday will be all about the global manufacturing PMIs and US ISM with perhaps the greatest focus on the official Chinese PMI and the US ISM manufacturing for signs of a pickup in manufacturing activity. Japan reports Tankan business confidence and the Bank of England publishes its minutes from its last Financial Policy meeting in which it decided on new measures to take some of the heat out of mortgage lending. The RBA meets on Tuesday, but no change to policy is expected.

Yellen takes the stage with a lecture on financial stability at the IMF in Washington on Wednesday. Yellen had some fairly dovish words to say on financial stability at the last FOMC press conference, and one would expect a similar tone on Wednesday. The data docket features ADP employment, US factory orders and Brazil industrial production.

Thursday will be the key day this week with non-farm payrolls and the ECB meeting. The ECB is widely expected to stay put this month after the announcements at its June meeting, but as always Draghi’s press conference will be important. In terms of June’s payrolls, consensus is for a +215k gain in the headline and for unemployment to remain at 6.3%. The hawks will be watching for signs of wage growth but hourly earnings are expected to drop to a rate of 1.9% YoY from 2.1% in the previous month. Other data on Thursday’s calendar are US trade, jobless claims and the global non-manufacturing PMIs.

Turkey’s June CPI will be the key event to watch in EM. US markets shut early on Thursday for Independence Day.

Friday will be pretty quiet with the week’s major events out of the way and with US markets shut for holidays. German factory orders round off the week’s data docket. Finally Moody’s will publish the result of their review of Belgium and Netherland’s sovereign debt rating on Friday.

A busy week as we wave goodbye to June.

via Zero Hedge http://ift.tt/1z1NSzS Tyler Durden

Since 2007, the world’s Central Banks have collectively put more than $10 trillion into the financial system since 2008. To put that number into perspective, it’s equal to roughly 15% of global GDP.

 

This kind of money printing is literally unheard of in modern history. And it has set the stage for a roaring wave of inflation to hit the financial system. Indeed, the first signs are already showing up… not in the “official” Government data (which is bogus) but in how those who run businesses around the globe are acting.

 

Most people believe that when inflation hits, prices have to go higher. This is true, but higher prices can be manifested in multiple ways. Firms usually do not simply raise prices in nominal terms because it would hurt sales.

 

Instead, companies resort to a number of strategies to maintain profit margins without hurting their sales. One of them is to simply leave part of a package EMPTY, thereby selling LESS product for the SAME price (a hidden price hike).

 

Food manufacturers, like the politicians currently debating health reform, may have a solution to the obesity crisis: Feed Americans a lot of hot air. But this heated air is not just a figure of speech for packaged goods companies including Ralcorp Holdings' (RAH) Post Foods and PepsiCo (PEP) subsidiaries Frito-Lay and Quaker.

 

In many packaged products, as much as 50% of the contents is just empty space, an investigation by Consumer Reports reveals. And we consumers are buying that nothingness every day.

 

http://ift.tt/1cNOxut

 

Another tactic corporation use is to simply sell smaller packages for the SAME price (another means of selling less for MORE= a price hike).

 

U.S. Companies Shrink Packages as Food Prices Rise

           

Large food companies have recently announced that they will raise the prices they charge grocery retailers for commodities-based products. For example, a chocolate bar will cost more soon: Hershey last week announced a 10% increase for most of its confectionery goods.

 

Of course, straightforward price hikes could cause consumers to buy less of those products or to choose less costly store brands. So in many cases, food companies are trying a different tactic: Keeping the price of an item the same while decreasing the amount of food in the package. The company recoups the costs of the rise in commodities and hopes consumers don't notice that they're getting less of the product for the same price.

 

http://ift.tt/1cNOvCK

 

However, perhaps the most scandalous policy employed by companies looking to engage in stealth price hikes is to swap out higher quality ingredients for lower quality/ lower cost alternatives. One bigname coffee maker was caught doing this just a few years ago.

 

Reuters is reporting that many of America's major brands have been quietly tweaking their coffee blends. While most coffee companies consider their blends trade secrets, and are loath to disclose exactly what goes into them, both circumstantial and direct evidence suggests they're now substituting lower-grade Robusta beans for some of their pricier Arabica, and degrading the quality of our coffee…

 

At least one coffee roaster has admitted it. In November, Massimo Zanetti USA, which roasts for both Chock full o'Nuts and Hills Bros., publicly confirmed upping its Robusta usage by 25% this year.

 

Why the switcheroo? Prepare to not be shocked. The answer is: price.

 

Last year, a shortage of Arabica caused prices of the premium bean to spike as high as $3 a pound — $2 more than what a pound of Robusta would cost. This compares to a five-year historical trend of Arabica costing closer to 70 cents more than Robusta. In recent weeks, the trend has reversed, with Arabica prices falling to just a 62-cent premium over Robusta.

 

http://ift.tt/RAgFIl

 

 

In simple terms, inflation is already around us, though it’s not yet showing up in LITERAL price hikes. Instead, we’re all paying MORE for LESS. And it’s only a matter of time before the situation really gets out of control.

 

As you likely know, nothing protects from inflation like Gold. Many analysts believe that the precious metal is DEAD due to its having fallen from a record high of $1900 per ounce to roughly $1300 per ounce today (a 36% drop).

 

However, this price movement, while dramatic, is quite inline with how commodities trade. Gold has already posted one drop of 28% (in 2008) during its bull market, before more than doubling in price. This latest drop is not much larger.

 

Moreover, a 36% drop in prices is nothing in comparison to what happened during that last great bull market in Gold back in the 1970s. At that time, Gold staged a collapse of nearly 50%. But after this collapse, it began its next leg up, exploding 750% higher from August ’76 to January 1980.

 

With that in mind, I believe the next leg up in Gold could very well be the BIG one. Indeed, based on the US Federal Reserve’s money printing alone Gold should be at $1800 per ounce today.

 

Since the Crash hit in 2008, the price of Gold has been very closely correlated to the Fed’s balance sheet expansion. Put another way, the more money the Fed printed, the higher the price of Gold went.

 

Gold did become overextended relative to the Fed’s balance sheet in 2011 when it entered a bubble with Silver.  However, with the Fed now printing some $35 billion per month, the precious metal is now significantly undervalued relative to the Fed’s balance sheet.

 

Indeed, for Gold to even realign based on the Fed’s actions, it would need to be north of $1,900. That’s a full 35% higher than where it trades today (see below).

 

 

 

 

This concludes this article. If you’re looking for the means of protecting your portfolio from the coming collapse, you can pick up a FREE investment report titled Protect Your Portfolio at http://ift.tt/170oFLH.

 

This report outlines a number of strategies you can implement to prepare yourself and your loved ones from the coming market carnage.

 

Best Regards

 

Phoenix Capital Research

 

 

 

 

via Zero Hedge http://ift.tt/1z0VoLx Phoenix Capital Research

Hot on the heels of last week's dismal Japanese data, tonight's Industrial Production data missed rather dramatically as once again the hockey-stick'ers of hope rebound from last month's post-tax-hike plunge did not appear. USDJPY is still fading (4th day in a row), as Goldman concludes rather ominously (having folded like a lawn-chair on their J-Curve exuberance), the post-tax-hike correction is larger than the government and the market anticipated, and in view of our outlook for a slump in real wages and a resultant delayed recovery in domestic demand, we look to external demand to drive economic growth in FY2014. However, we highlight risk factors in the form of protracted weakness in China and other Asian economies and a decline in corporate Japan’s structural export capacity. Sadly for the hopers, hard data continues to miss both the production survey forecast and consensus.

 

As Goldman notes,

May production turns up, but short of consensus: Industrial production increased 0.5% mom in May (April: -2.8%), in line with our forecast but short of consensus (+0.9%) and well below the production outlook (+1.7%) announced together with last month’s data release. The upturn in production was widely anticipated given the sharp decline in April on the dropout of rush demand ahead of the consumption tax hike. However, the output trend is weak mainly because of sluggish export production, and the headline figure continues to miss both the production survey forecast and consensus. The government maintained its assessment of industrial production as “appears to be flat.”

Among the demand components, production of consumer durables picked up to some extent with 1.7% mom growth in May, having fallen 4.0% in April. Production of capital goods fell again in May, by 2.3%, while production of construction goods shrank 4.6% in May, versus 1.5% growth in April. By industry, output rose in the transport equipment sector (May: +1.9% mom) and the machinery sector (+1.9%), but decreased in chemicals (-4.5%) and information/communications equipment (-9.3%).

Output growth projected for Jun-Jul, but we still see high downside risk: The production outlook for Jun-Jul, announced together with the May data, calls for a small increase in output over the two months, with a 0.7% mom decline in June and 1.5% growth in July. However, we continue to see high downside risk due to (1) continued sluggishness in export volumes, (2) a slower-than-expected pace of recovery in consumption-related indicators after the April tax hike, and (3) many recent cases where production has undershot the survey forecast.

Post-tax-hike correction may be slightly exceeding expectations: On the whole we believe the post-tax-hike correction is larger than the government and the market anticipated, but more or less in line with our expectations. In view of our outlook for a slump in real wages and a resultant delayed recovery in domestic demand, we look to external demand to drive economic growth in FY2014. However, we highlight risk factors in the form of protracted weakness in China and other Asian economies and a decline in corporate Japan’s structural export capacity.

 

*  *  *

USDJPY is not happy… and carry traders begin to lose faith…

 

As we noted previously, Abe's actions are nothing but a mirage:

Abe’s arrows have been praised in the media by the economically ignorant, the politically motivated, and those who believe prosperity is parceled out by some all powerful shaman. However, the arrows, seen in the harsh light of reality, turn out to be counterfeiting schemes, “investing” in money losing ventures, taking money from the productive, and squabbling with the neighbors. These counterproductive political actions won’t ever result in a stronger economy and have instead left the Japanese people with a crushing debt and tax burden. Don’t get taken in by the hogwash you read in mainstream media propaganda pieces. Abe’s policies are complete and utter failures.

It appears Goldman is joining the choir (along with BofAML).

And remember – inflation is at a 20-30 year high (depending on how one measures it) so don't be expecting moar QQE

via Zero Hedge http://ift.tt/1k3VF6j Tyler Durden

For all the debate about a college education, its opportunity cost, the trade off of only having a high-school diploma, the impact of a record amount of debt on an entire generation’s spending habits, and, of course, the alleged lack of inflation everywhere expect in those critical things that 99% of Americans must spend on daily, perhaps the simplest chart is the following, courtesy of the WSJ: it shows the average annual tuition – call it the “upfront investment”, whether funded by debt or equity or both – for both a Bachelor’s and an Associate’s degrees from 1970 until 2013, as well as the average wages of those with each type of degree, once again expressed in real dollars.

In a nutshell:

• The change in tuition costs expressed in real dollars from 1970 to 2013, amounts to a roughly 275% increase
• The change in real wages for a graduate with a bachelor’s degree over the same period amounts to a roughly 10% increase (and an outright decline for Associate’s degree wages despite a doubling for Associate’s degree tuition costs).

Is there any wonder then why the US middle class, and certainly both Generations X and Y, are hopelessly drowning in debt and why the economy can barely survive from one QE episode to the next?

Read more at the NY Fed which clearly tries to put a pleasant spin on the above chart.

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