Month: July 2014

With all other operating holdcos having already declared bankruptcy, the anxiety over Banco Espirito Santo is growing (despite DE Shaw and Goldman Sachs recommending investors buy the shares). Despite Bank of Portugal reassurance last night that “BES is able to raise capital), the stock is plunging on news of “unexpected facts” this morning…

• *BANCO ESPIRITO SANTO SAYS SHAREHOLDER MEETING WAS CANCELLED DUE TO “UNEXPECTED FACTS”
• *BANCO ESPIRITO SANTO FALLS MORE THAN 13% IN LISBON TRADING

Remember, this is systemic (as the Portugues President has warned), and the contagion is potentially global… not “contained.”

3 down, 1 to go?

 

But The Bank of Portugal reassured everyone last night…

• *BANCO ESPIRITO SANTO IS ABLE TO RAISE CAPITAL: BANK OF PORTUGAL
• *BANK OF PORTUGAL SAYS BES SOLVENCY IS ASSURED

But now this…

• *BANCO ESPIRITO SANTO SAYS SHAREHOLDER MEETING WAS CANCELLED
• *BES SAYS MEETING CANCELLED DUE TO “UNEXPECTED FACTS”
• *BES SAYS `UNEXPECTED FACTS’ INCLUDE ESFG FILING FOR PROTECTION
• *BES SAYS ESFG AND CREDIT AGRICOLE WITHDRAW PROPOSALS

And the result…

• *BANCO ESPIRITO SANTO FALLS MORE THAN 13% IN LISBON TRADING

 

 

and this could go global…

 

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

A month ago, when we reported on the signal America’s “most important housing market” is sending we said the following:

When it comes to critical housing markets in the US, none is more important than San Francisco.

 

Courtesy of its location, not only does it reflect the general Fed-driven liquidity bubble which is the tide rising all housing boats across the US, but due to its proximity to both Silicon Valley and China, it also benefits from two other liquidity bubbles: that of tech, and of course, the Chinese $25 trillion financial debt monster, where since the local housing bubble has burst, local oligarchs have no choice but to dump their cash abroad.

 

It is no surprise that during ever single previous bubble peak, San Francisco home prices managed to post a 20% annual increase, starting with the dot com bubble in the year 2000, the first (not to be confused with the current) housing bubble peaking around 2005, and then the European sovereign debt bubble.

 

Which is why, while today’s Case Shiller data was widely disappointing across the board, indicating a significant slowdown in price gains (and on a sequential seasonally adjusted basis, practically a decline), the one market we paid particular attention to was San Francisco. What we found is a red flag for everyone waiting to time the bursting of the latest housing bubble. Because after an unlucky 13 months of posting consecutive 20% Y/Y price gains, the San Francisco bubble appears to have finally burst, posting “just” an 18.2% price increase, the lowest since January of 2013.

 

So, has the global coordinated credit bubble burst?

The answer is still unclear. But what the chart below shows is quite clear: the relentless appreciation in the San Francisco housing market is over, and after rising by 18.2% in April, in May the San Fran market posted a mere 15.4% Y/Y price increase: the lowest since 2012. And while the Fed’s liquidity injections continue, if only for a few more months, and the second dot com bubble is clearing raging as the recent ridiculous Zillow-Trulia deal confirmed, it appears that the “?” bubble (as defined) is now well in its deflationary phase. Any attempts to restore the upmove will certainly require trillions more in fresh liquidity.

via Zero Hedge http://ift.tt/1mYLSz5 Tyler Durden

But it was supposed to be the weather? S&P/Case-Shiller home prices dropped in May and missed expectations for the 2nd month in a row. Against a forecast rise on 0.3%, prices dropped in May by 0.3% – the biggest drop since December 2011. It appears we are going to need more Chinese hot money flow buyers.

 

 

 

The May inflection point in the seasonally adjusted data is quite obvious:

Of note, while in April Case-Shiller reported only 5 cities out of the tracked 20 posting sequential price declines, in May this number has soared to 14. And so the fourth dead cat bounce in housing appears to be over.

Finally, from the report itself:

“Home prices rose at their slowest pace since February of last year,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “The 10- and 20-City Composites posted just over 9%, well below expectations. Month-to-month, all cities are posting gains before seasonal adjustment; after seasonal adjustment 14 of 20 were lower.

 

“Year-over-year, nine cities – Las Vegas (16.9%), San Francisco (15.4%), Miami (13.2%), San Diego (12.4%), Los Angeles (12.3%), Detroit (11.9%), Atlanta (11.2%), Tampa (10.2%) and Portland (10.0%) – posted double-digit increases in May 2014. The Sun Belt continues to lead with seven of the top eight performing cities. Eighteen of 20 cities had lower year-over-year numbers than last month; San Francisco and San Diego saw their year-over-year figures decelerate by about three percentage points.

 

“Housing has been turning in mixed economic numbers in the last few months. Prices and sales of existing homes have shown improvement while construction and sales of new homes continue to lag. At the same time, the broader economy and especially employment are showing larger improvements and substantial gains.”

Source: Case Shiller

via Zero Hedge http://ift.tt/1rB66TQ Tyler Durden

This morning makes as much sense as most mornings. US equity markets, after some weakness in the European session have been lifted wholesale towards Friday’s highs on the heels of a USDJPY 102 stop-running algo. At the same time bonds are being bnought aggressively with 10Y and 30Y yields now lower on the week. The USD index is surging higher on EUR and GBP weakness and commodities are sliding.

Normal?

 

USDJPY in charge of stocks… but that 102 stops have been run now

 

And bonds are rallying…

 

The USD Index is jumping…

 

and Commodities are sliding…

 

 

Charts: Bloomberg

via Zero Hedge http://ift.tt/1po5UHu Tyler Durden

In the aftermath of the news from the past week that at least two US citizens have been infected with the Ebola virus, a very unpleasant if nagging question has appeared: can the virus spread to the US? According to NBC, “the Ebola virus, which has infected two U.S. humanitarian workers in Liberia, is only a short plane ride from any city on Earth. But federal health officials say it’s not a big worry for most Americans.”

Maybe it should be.

Recall that last week’s Ebola stunner came when not only did an Ebola patient die from the disease in the world’s 4th most populous city, Nigeria’s Lagos, but when he was intercepted while at the airport: how many people he may have come in contact with is anyone’s guess even if the government swears they have all been quarantined.

It’s the first time this virus has moved by jet, even though public health experts love to warn that any disease is just a flight away from anywhere with an airport.

Perhaps the fact that the CDC had to go out as far as making an official statement for the record shows just how increasingly worried Americans are. According to the Centers for Disease Control, “Ebola poses little risk to the U.S. general population,” Stephan Monroe of CDC’s National Center for Emerging & Zoonotic Infectious Diseases told reporters in a conference call. It’s because you have to be in direct contact with someone who is ill to become infected.

“Transmission is through direct contact with the bodily fluids of an infected person,” Monroe said. That includes vomit, blood or diarrhea. “Individuals who are not symptomatic are not contagious,” he said.

The incubation period can last for as long as 21 days, meaning it can take 21 days for someone to develop symptoms after being in contact with an infected person. So in theory, someone could be infected and get on a plane to travel to the U.S. before he or she got sick. But the odds of this are low.

 

There’s no need to control travel in and out of the U.S. CDC says. It has quarantine stations in major airports and agents can forcibly isolate or quarantine people with symptoms of Ebola and other diseases such as cholera, tuberculosis, plague or bird flu.

How does the CDC hope to contain the potential threat? Apparently so far the first and only line of defense is… interrogation? Careful questioning can usually rule out a disease such as Ebola. In this case, it would be asking people if they’ve been to West Africa in recent weeks or in close contact with someone who had been and who was ill. One wonders how honest potential carriers would be if they knew the rest of their short lives could be spent under CDC quarantine.

“U.S. health experts pulled this off with MERS — the Middle East Respiratory Syndrome virus, which was carried into the country twice by travelers, both of whom recovered fully without infecting anybody else.”

And another denial:

“The likelihood of this spreading out of West Africa is very low,” Monroe said. While it’s possible someone ill could get on a plane, they couldn’t spread the virus to someone who just happened to be sitting nearby. “It is very unlikely they would be able to spread disease to their fellow passengers,” Monroe said. CDC worries more about airborne viruses such as measles, which can spread silently.

And even more attempts to contain any possible panic:

“People are not infectious prior to becoming symptomatic,” he stressed. And once in the U.S., doctors should isolate a patient quickly. “We are fairly confident that the standard of care in the U.S. would prevent much of the transmission of the virus were to show up here,” Monroe said.

 

“We do not anticipate this will spread in the US if an infected person is hospitalized here but we are taking action now by alerting healthcare workers in the US and reminding them how to isolate and test suspected patients while following strict infection control procedures.” CDC Director Dr. Tom Frieden added in a statement.

The CDC is correct about the infectious phase. The problem is that while Ebola symptoms are quite glaring, such as fever, throwing up, and general pain, only about half of all Ebola cases show the bleeding that so frightened people, and that’s only in very advanced cases. The rest of the symptoms can be confused for your garden variety flu.

Still, despite all assurances,  the CDC has issued a “level 2” alert, which cautions people in the affected region to avoid contact with anyone who seems infected. CDC also issued a health alert, a reminder to doctors in the U.S. “Ebola virus disease poses little risk to the U.S. general population at this time. However, U.S. healthcare workers are advised to be alert for signs and symptoms of Ebola virus disease in patients with compatible illness who have a recent (within 21 days) travel history to countries where the outbreak is occurring, and should consider isolation of those patients meeting these criteria, pending diagnostic testing,” it reads.

Bloomberg has some more details on the potential spread of the disease which has so far managed to spread beyond Africa only once, but as Bloomberg notes, “that doesn’t mean it can’t happen now, infectious disease experts warn.”

The symptoms appear from two days to three weeks after infection, meaning it’s possible for an infected person who doesn’t feel ill to board a plane, said Ben Neuman, a virologist at the University of Reading in the U.K. Since Ebola in its earliest stages can resemble nothing more than flu, no one else would know either, he said.

 

The symptoms appear from two days to three weeks after infection, meaning it’s possible for an infected person who doesn’t feel ill to board a plane, said Ben Neuman, a virologist at the University of Reading in the U.K. Since Ebola in its earliest stages can resemble nothing more than flu, no one else would know either, he said.

 

“One person per plane load would have something that you would possibly call flu-like symptoms,” Neuman said in a telephone interview. “Do you want to detain all those people coming into your airport? Do you have the manpower to do that, and send them all for testing? It’s expensive, and difficult.”

 

The question of trans-continent infection became more key this week after Patrick Sawyer, a Liberian government worker who took a July 20 flight to Lagos, Nigeria, died from Ebola five days later. His death gave Africa’s most populous nation its first case, a frightening hint at how global air travel may enable the spread of disease.

 

“We’ve known it’s a risk ever since the beginning of the Ebola outbreak, and now it’s finally happened,” Neuman said. “He could have gone anywhere on this flight.”

The 1994 case:

Fruit bats are thought to be the natural host of Ebola virus, accord
ing to the WHO. Monkeys, chimpanzees, gorillas, porcupines and forest antelope can also be infected, and human outbreaks can begin when people eat the meat of infected animals, according to the WHO.

 

The only case in which an Ebola victim was known to be taken out of Africa by aircraft came in 1994, when a 34-year-old Swiss zoologist became infected with the virus while performing an autopsy on a chimpanzee in Ivory Coast.

 

Eight days later, she developed chills, then diarrhea, an all-body rash, temporary memory loss and was flown to Switzerland by air ambulance for treatment, accompanied by health workers wearing masks, gloves and gowns. She recovered without infecting anyone else.

 

The Ebola outbreak is expected to go on for some time and will be difficult to stop as it can easily “re-ignite” from even one case, the CDC’s Monroe said. Even if there are no new cases, it would be 42 days before health workers would be sure the outbreak was over.

But the biggest smoking gun, and perhaps the reason why 2014 may be the new 1994, is this:

wife & children of a Texas doc working in Liberia w/ Ebola patients, returned to America last week, days b4 Brantly -came down w/ Ebola WTF?

— Robert Passarella (@robpas) July 28, 2014

via Zero Hedge http://ift.tt/1po5Urd Tyler Durden

In the aftermath of the news from the past week that at least two US citizens have been infected with the Ebola virus, a very unpleasant if nagging question has appeared: can the virus spread to the US? According to NBC, “the Ebola virus, which has infected two U.S. humanitarian workers in Liberia, is only a short plane ride from any city on Earth. But federal health officials say it’s not a big worry for most Americans.”

Maybe it should be.

Recall that last week’s Ebola stunner came when not only did an Ebola patient die from the disease in the world’s 4th most populous city, Nigeria’s Lagos, but when he was intercepted while at the airport: how many people he may have come in contact with is anyone’s guess even if the government swears they have all been quarantined.

It’s the first time this virus has moved by jet, even though public health experts love to warn that any disease is just a flight away from anywhere with an airport.

Perhaps the fact that the CDC had to go out as far as making an official statement for the record shows just how increasingly worried Americans are. According to the Centers for Disease Control, “Ebola poses little risk to the U.S. general population,” Stephan Monroe of CDC’s National Center for Emerging & Zoonotic Infectious Diseases told reporters in a conference call. It’s because you have to be in direct contact with someone who is ill to become infected.

“Transmission is through direct contact with the bodily fluids of an infected person,” Monroe said. That includes vomit, blood or diarrhea. “Individuals who are not symptomatic are not contagious,” he said.

The incubation period can last for as long as 21 days, meaning it can take 21 days for someone to develop symptoms after being in contact with an infected person. So in theory, someone could be infected and get on a plane to travel to the U.S. before he or she got sick. But the odds of this are low.

 

There’s no need to control travel in and out of the U.S. CDC says. It has quarantine stations in major airports and agents can forcibly isolate or quarantine people with symptoms of Ebola and other diseases such as cholera, tuberculosis, plague or bird flu.

How does the CDC hope to contain the potential threat? Apparently so far the first and only line of defense is… interrogation? Careful questioning can usually rule out a disease such as Ebola. In this case, it would be asking people if they’ve been to West Africa in recent weeks or in close contact with someone who had been and who was ill. One wonders how honest potential carriers would be if they knew the rest of their short lives could be spent under CDC quarantine.

“U.S. health experts pulled this off with MERS — the Middle East Respiratory Syndrome virus, which was carried into the country twice by travelers, both of whom recovered fully without infecting anybody else.”

And another denial:

“The likelihood of this spreading out of West Africa is very low,” Monroe said. While it’s possible someone ill could get on a plane, they couldn’t spread the virus to someone who just happened to be sitting nearby. “It is very unlikely they would be able to spread disease to their fellow passengers,” Monroe said. CDC worries more about airborne viruses such as measles, which can spread silently.

And even more attempts to contain any possible panic:

“People are not infectious prior to becoming symptomatic,” he stressed. And once in the U.S., doctors should isolate a patient quickly. “We are fairly confident that the standard of care in the U.S. would prevent much of the transmission of the virus were to show up here,” Monroe said.

 

“We do not anticipate this will spread in the US if an infected person is hospitalized here but we are taking action now by alerting healthcare workers in the US and reminding them how to isolate and test suspected patients while following strict infection control procedures.” CDC Director Dr. Tom Frieden added in a statement.

The CDC is correct about the infectious phase. The problem is that while Ebola symptoms are quite glaring, such as fever, throwing up, and general pain, only about half of all Ebola cases show the bleeding that so frightened people, and that’s only in very advanced cases. The rest of the symptoms can be confused for your garden variety flu.

Still, despite all assurances,  the CDC has issued a “level 2” alert, which cautions people in the affected region to avoid contact with anyone who seems infected. CDC also issued a health alert, a reminder to doctors in the U.S. “Ebola virus disease poses little risk to the U.S. general population at this time. However, U.S. healthcare workers are advised to be alert for signs and symptoms of Ebola virus disease in patients with compatible illness who have a recent (within 21 days) travel history to countries where the outbreak is occurring, and should consider isolation of those patients meeting these criteria, pending diagnostic testing,” it reads.

Bloomberg has some more details on the potential spread of the disease which has so far managed to spread beyond Africa only once, but as Bloomberg notes, “that doesn’t mean it can’t happen now, infectious disease experts warn.”

The symptoms appear from two days to three weeks after infection, meaning it’s possible for an infected person who doesn’t feel ill to board a plane, said Ben Neuman, a virologist at the University of Reading in the U.K. Since Ebola in its earliest stages can resemble nothing more than flu, no one else would know either, he said.

 

The symptoms appear from two days to three weeks after infection, meaning it’s possible for an infected person who doesn’t feel ill to board a plane, said Ben Neuman, a virologist at the University of Reading in the U.K. Since Ebola in its earliest stages can resemble nothing more than flu, no one else would know either, he said.

 

“One person per plane load would have something that you would possibly call flu-like symptoms,” Neuman said in a telephone interview. “Do you want to detain all those people coming into your airport? Do you have the manpower to do that, and send them all for testing? It’s expensive, and difficult.”

 

The question of trans-continent infection became more key this week after Patrick Sawyer, a Liberian government worker who took a July 20 flight to Lagos, Nigeria, died from Ebola five days later. His death gave Africa’s most populous nation its first case, a frightening hint at how global air travel may enable the spread of disease.

 

“We’ve known it’s a risk ever since the beginning of the Ebola outbreak, and now it’s finally happened,” Neuman said. “He could have gone anywhere on this flight.”

The 1994 case:

Fruit bats are thought to be the natural host of Ebola virus, according to the WHO. Monkeys, chimpanzees, gorillas, porcupines and forest antelope can also be infected, and human outbreaks can begin when people eat the meat of infected animals, according to the WHO.

 

The only case in which an Ebola victim was known to be taken out of Africa by aircraft came in 1994, when a 34-year-old Swiss zoologist became infected with the virus while performing an autopsy on a chimpanzee in Ivory Coast.

 

Eight days later, she developed chills, then diarrhea, an all-body rash, temporary memory loss and was flown to Switzerland by air ambulance for treatment, accompanied by health workers wearing masks, gloves and gowns. She recovered without infecting anyone else.

 

The Ebola outbreak is expected to go on for some time and will be difficult to stop as it can easily “re-ignite” from even one case, the CDC’s Monroe said. Even if there are no new cases, it would be 42 days before health workers would be sure the outbreak was over.

But the biggest smoking gun, and perhaps the reason why 2014 may be the new 1994, is this:

wife & children of a Texas doc working in Liberia w/ Ebola patients, returned to America last week, days b4 Brantly -came down w/ Ebola WTF?

— Robert Passarella (@robpas) July 28, 2014

via Zero Hedge http://ift.tt/1po5Urd Tyler Durden

• EU finalises Russian sanctions as BP warns of impact on business (FT)
• Geopolitical Risk Rises for Global Investors (BBG)
• Jaded Argentines brace for looming debt default (Reuters)
• In Argentina, Mix of Money and Politics Stirs Intrigue Around Kirchner (WSJ)
• Mom ‘Trusting God’ for Ebola-Infected U.S. Doctor’s Life (BBG)
• Thanks NSA: Tech Companies Reel as NSA’s Spying Tarnishes Reputations (BBG)
• Goldman unit eyes foray into China amid metals financing scandal (Reuters)
• Cash out time: London’s Gherkin Tower Offered for Sale by Its Lenders (BBG)
• Apenomics strikes again: McDonald’s Japan axes profit guidance amid food safety scandal (FT)
• Do you see what happens Larry when you are the only USDJPY bid? Nomura Profit Falls More Than Estimated on Broking Slump (BBG)
• UBS, Deutsche drawn into ‘dark pool’ probes (FT)
• Morgan Stanley Said to Boost Junior Banker Salaries 25% (BBG)
• Ban gold, diamonds? Gold, diamonds feed Central African religious violence (Reuters)
• Italian police seize €104m from Nomura after fraud probe (FT)
• Deutsche Bank Reports Rise in Pretax Profit (WSJ)

 

Overnight Media Digest

WSJ

* Israel’s leaders said they were escalating the military campaign in Gaza and told the country to prepare for a prolonged operation, defying international demands for an immediate cease-fire. (http://on.wsj.com/1rLLcop)

* Pro-Russia rebels in eastern Ukraine saw some of their worst battlefield setbacks in weeks Monday as the West agreed on tougher sanctions aimed at forcing Moscow to cut support for the militias-posing fresh challenges on two fronts for Russian President Vladimir Putin. (http://on.wsj.com/UHNOF3)

* The battle for America’s poorest consumers intensified on Monday with Dollar Tree Inc’s agreement to buy rival Family Dollar Stores Inc for about $8.5 billion. (http://on.wsj.com/X3tX58)

* Negotiations between Bank of America Corp and the Justice Department have hit a snag over whether the firm should pay a cash penalty for the dealings of Countrywide Financial Corp and Merrill Lynch & Co Inc. (http://on.wsj.com/1rzefYR)

* Money-laundering allegations against Argentine businessman Lázaro Báez are focusing attention on the wealth of Argentine President Cristina Kirchner and her late husband Néstor Kirchner. (http://on.wsj.com/1tV7Cl8)

* A Chinese government anticorruption investigation that already has swept aside dozens of officials is now stretching into Canada. A shake-up has hit state-run China National Petroleum Corp.’s Canadian operations and a billion-dollar oil-sands project is now in limbo. (http://on.wsj.com/WL2fu2)

* Zillow Inc and Trulia Inc, the two online real-estate giants that announced plans to merge, have a message for real-estate agents that have grown increasingly concerned about their market clout: We’re partners, not competitors. (http://on.wsj.com/1o6txQV)

* Hundreds of small and regional banks are clinging to a practice that can cause consumers to incur multiple overdraft fees in the same day, even as the biggest lenders are backing away. (http://on.wsj.com/1l8XwHW)

* Oracle Corp cut its yearly stock-option grants to Chief Executive Larry Ellison and other top executives nearly a year after a wave of shareholder opposition to compensation paid to the chief. (http://on.wsj.com/1l8VvM1)

 

FT

Officials from China’s State Administration for Industry and Commerce conducted unannounced visits on Monday to some of Microsoft Corp’s local offices, making it the latest U.S. company to be targeted by an antitrust investigation in China.

Bank of Cyprus has raised 1 billion euros ($1.34 billion) from selling shares to investors including U.S. private equity specialist Wilbur Ross and the European Bank for Reconstruction and Development.

Aberdeen Asset Management Chief Executive Officer Martin Gilbert shrugged off the investment group’s fifth successive quarter of outflows as its exposure to emerging markets proved costly.

Dollar Tree has said it will buy Family Dollar for $8.5 billion, marrying two of the United States’ largest discount stores at a time when changing consumer habits are piling pressure on retailers across the country.

China’s Baidu, a search engine that has mimicked U.S. technology group Google Inc’s biggest innovations, is now experimenting with its own version of a “highly autonomous” self-driving car.

 

NYT

* An international court has awarded the shareholders of the defunct Yukos oil company more than $50 billion, ruling that the Russian government wrongly seized the company from one of the country’s most powerful oligarchs. (http://nyti.ms/1tUR50D)

* China has named Microsoft among the foreign technology companies likely to come under tighter government checks for security risks after the revelations by Edward Snowden about the U.S. government surveillance. Officials from the State Administration for Industry and Commerce visited Microsoft offices in Beijing, Shanghai, Guangzhou and Chengdu, Joanna Li. (http://nyti.ms/1nBlXCs)

* The United States and Europe agreed to sharply escalate economic sanctions against Russia amid worries that Moscow is stepping up its intervention in Ukraine and may be setting the stage for an outright invasion. The two sides settled on measures that would target Russia’s financial, energy and military sectors. (http://nyti.ms/1qcc2l1)

* Dollar Tree Inc proposed an $8.5 billion takeover of Family Dollar Stores Inc that will form a new giant of the dollar-discount industry. By buying Family Dollar, Dollar Tree will expand markedly, to 13,000 stores in 48 states and in Canada, as well as to $18 billion in annual revenue. (http://nyti.ms/1rZLeGN)

* Wall Street investment banks, led by JPMorgan Chase & Co and Goldman Sachs Group Inc, are estimated to have collected, or will soon collect, nearly $1 billion in fees over the last three years advising and persuading American companies to move the address of their headquarters abroad. (http://nyti.ms/1Asfmzz)

* Clarence Otis, chairman and CEO of Darden Restaurants Inc, will step down when the board chooses his successor, or by the year end. The move came on the day that Darden completed the sale of the Red Lobster, the seafood chain that gave rise to the restaurant’s empire, in a transaction that was hotly opposed by the activist investors. (http://nyti.ms/1tl8Yba)

* Morgan Stanley plans to increase base salaries for junior and mid level bankers by as much as 25 percent. The change will apply to associates and vice presidents in investment banking and capital markets. The bump in base salary is intended to provide the bankers with more cash in the near term, since bonuses are often deferred into the future. (http://nyti.ms/1nPCkwl)

* The Lloyds Banking Group agreed to pay more than $380 million to British and United States authorities to resolve investigations into the manipulation of rates, including one used to determine fees paid by Lloyds for taxpayer-backed funding during the financial crisis. (http://nyti.ms/1rz3GoL)

* The Federal Aviation Administration said on Monday it planned to fine Southwest Airlines $12 million for repair violations on some of its Boeing 737 jets, citing some faulty repairs the airlines made since 2006. Southwest has 30 days to respond to the complaint and can negotiate to reduce the fine. (http://nyti.ms/1tlcO4c)

* Governor Andrew Cuomo delivered a feisty and unrepentant defense of his handling of an anti-corruption panel he created and then abruptly shut down, after five days in seclusion during which he encountered some of the harshest criticism he has faced as governor. (http://nyti.ms/X7yDqG)

* Virgin America, the sleek low-cost American airline partly owned by Richard Branson, filed for an initial public offering on Monday after posting its first annual profit. The airline gave a placeholder fund-raising target of $115 million, a figure used only to determine filing fees. (http://nyti.ms/1oE8Ctq)

* A judge issued a sweeping victory Monday for Rochelle Sterling, ruling that she had the authority to sell the Los Angeles Clippers to the businessman Steve Ballmer, who has agreed to pay a record $2 billion for the franchise. (http://nyti.ms/1AstfO0)

 

Canada

THE GLOBE AND MAIL

* Things became chaotic even before a Toronto mayoral election debate began on Monday as Mayor Rob Ford and his team drew police intervention during a dispute with organizers.(http://bit.ly/1lQP7J6)

* A dispute between Toronto’s city council and Ontario’s alcohol licensing board has left many new restaurants in the city facing months-long delays in obtaining a liquor licence, which they say may prevent them from opening at all. (http://bit.ly/1nCc7Ar)

Reports in the business section:

* Ottawa will auction a prime chunk of the public airwaves in March next year, raising at least C$162-million for federal coffers and it hopes to prompt more competition in Canada’s mobile phone market. (http://bit.ly/1l9c8XJ)

NATIONAL POST

* Toronto Deputy Mayor Norm Kelly says it is “not unreasonable” to call on integrity commissioner Janet Leiper to complete an investigation into allegations of misconduct by Toronto Mayor Rob Ford and Councillor Doug Ford in time for the October provincial election. (http://bit.ly/1nCtuAW)

* The Canadian Department of Foreign Affairs, Trade and Developments wants to operate a shuttle service for employees between its three main buildings, two of which are only a three-minute walk apart. The department outlined the plan for the dedicated shuttle service in a tender posted earlier this month on a government website. (http://bit.ly/1k5eT1f)

FINANCIAL POST

* Merger and acquisition activity is on the rise globally, and some 40 percent of Canadian firms expect to grow through deals over the next three years, a survey by Grant Thornton LLP said.(http://bit.ly/1AsCtdh)

* The Canada-based energy firm Athabasca Oil Corp’s shares fell more than 7 percent on Monday as the company sought to reassure investors over receipt of a cash payment from Chinese energy giant, PetroChina Co Ltd. (http://bit.ly/1rMuIwk)

 

Hong Kong

SOUTH CHINA MORNING POST

— The head of Hong Kong’s de facto central bank has rejected calls from some lawmakers to use part of the city’s HK$3 trillion Exchange Fund to pay for infrastructure projects or for social welfare. Norman Chan Tak-lam, the chief executive of the Monetary Authority, said the fund needs every penny to cope with unexpected financial crises. (http://bit.ly/1uBAoev)

— One in five diabetics in Hong Kong is under the age of 40 and the number is expected to double by 2030. A Chinese University of Hong Kong study has found that diabetes is being diagnosed in Hongkongers at a younger age, with the median age now 50, down from 57 in 1990. The youngest person with diabetes in the study was just 3 years old. (http://bit.ly/1k4Pgxr)

— The five leading business chambers in Hong Kong formed a united front to oppose Occupy Central, warning that the pro-democracy civil disobedience movement might damage the city’s economy like that caused by the political protests in Thailand. (http://bit.ly/1l8uo3D)

THE STANDARD

— Singapore is expected to return to Hong Kong an 11-year-old boy who was found wandering along Marina Promenade in the city state last week after he was allegedly dumped by his father. The father has been questioned by Hong Kong police and is out on bail. (http://bit.ly/1zomo6Z)

— Chun Wo Development will explore overseas business through joint ventures and may introduce strategic shareholders, Chairman Dominic Pang Yat-ting said. (http://bit.ly/1zon24o)

HONG KONG ECONOMIC JOURNAL

— Investment fund Pacific Alliance Asia Opportunity Fund plans to sell 250 million shares, or 3.3 percent of the issued share capital, of China South City Holdings Ltd raising up to HK$1.025 billion ($132.3 million), according to a share-sale document.

HONG KONG ECONOMIC TIMES

— The retail portion of the initial public offering of China’s pork company WH Group Ltd is seen eight times oversubscribed in Hong Kong, according to market sources.

APPLE DAILY

— Some 77 percent of 1,249 Hong Kong people interviewed in the past two days said they will not visit McDonald’s restaurants in the city in the short term after the latest food scandal, according to a survey conducted by Apple Daily.

Britain

The Times

MYSTERY ABERDEEN CLIENT PULLS OUT 4.2 BLN STG

Fears of a renewed emerging markets sell-off by investors have been fuelled after it was revealed that an anonymous client withdrew 4.2 billion pounds ($7.13 billion) from Aberdeen Asset Management, Europe’s largest fund manager. (http://thetim.es/1qHXzCd)

ASTRA ENLISTS RIVALS IN PLAN TO DEVELOP CANCER TESTS

AstraZeneca has signed up Swiss and Dutch rivals to create blood tests to help identify patients that will benefit from its lung cancer drugs. (http://thetim.es/1rZi4HS)

SKY’S THE LIMIT AS GHERKIN SALE LOOMS

Agents have been appointed to sell the “Gherkin” skyscraper in what will be one of the most closely watched property sales in the Square Mile for years. (http://thetim.es/1mWvv60)

The Guardian

LLOYDS SUSPENDS SEVEN PEOPLE AFTER 226 MLN STG BILL FOR RIGGING INTEREST RATES

Lloyds Banking Group have suspended seven employees after it was hit with a 226 million pound bill from regulators on both sides of the Atlantic for rigging crucial interest rates. (http://bit.ly/1uAusSY)

RECKITT BENCKISER SET TO FLOAT U.S. ARM RB PHARMACEUTICALS

Reckitt Benckiser, the consumer goods giant that makes Nurofen and Dettol, plans to spin off its U.S.-based pharmaceutical business. (http://bit.ly/1o7UnIi)

The Telegraph

SHOULD BANKERS HAVE TO SWEAR AN OATH? SIR RICHARD LAMBERT SEEMS TO THINK SO

The head of the review into standards in the British banking industry is this week expected to reignite the question of whether an oath for bankers is needed despite rejecting the idea when producing his original report. (http://bit.ly/X6BnVc)

VIRGIN AMERICA FILES FOR U.S. IPO

Billionaire entrepreneur Richard Branson could be in line for a $220 million windfall, after a bold gamble to launch Virgin America, his low-cost U.S. airline, in the teeth of the biggest crisis the industry had ever seen. (http://bit.ly/1ArCXAp)

Sky News

EX-TESCO CHIEF TO CHAIR STRUGGLING MORRISONS

Andrew Higginson, a former finance director of Tesco , is to become the next chairman of Wm Morrison, the UK’s fourth-biggest grocer, as it combats falling sales amid competition from lower-priced rivals. (http://bit.ly/X559tx)

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Case-Shiller 20-city home price index for May at 9:00–consensus up 9.9% from last year
Consumer confidence for July at 10:00–consensus 85.5

ANALYST RESEARCH

Upgrades

Albemarle (ALB) upgraded to Buy from Hold at Topeka
Costco (COST) upgraded to Conviction Buy from Neutral at Goldman
Family Dollar (FDO) upgraded to Neutral from Underweight at Piper Jaffray
Ferrellgas Partners LP (FGP) upgraded to Neutral from Sell at Citigroup
Higher One (ONE) upgraded to Overweight from Underweight at Piper Jaffray
MarkWest Energy (MWE) upgraded to Buy from Hold at Wunderlich
Matador (MTDR) upgraded to Outperform from Market Perform at BMO Capital
MicroStrategy (MSTR) upgraded to Outperform from Market Perform at JMP Securities
Sally Beauty (SBH) upgraded to Buy from Neutral at Citigroup
Zions Bancorp (ZION) upgraded to Market Perform from Underperform at Bernstein

Downgrades

AcelRx (ACRX) downgraded to Neutral from Overweight at Piper Jaffray
Alliance Fiber Optic (AFOP) downgraded to Neutral from Buy at B. Riley
Allstate (ALL) downgraded to Market Perform from Outperform at William Blair
Avery Dennison (AVY) downgraded to Hold from Buy at Topeka
Barnes Group (B) downgraded to Hold from Buy at Deutsche Bank
Black Diamond (BDE) downgraded to Neutral from Overweight at Piper Jaffray
BreitBurn Energy (BBEP) downgraded to Neutral from Buy at Citigroup
CoreLogic (CLGX) downgraded to Market Perform from Outperform at Keefe Bruyette
Dollar Tree (DLTR) downgraded to Market Perform from Outperform at BMO Capital
First Potomac (FPO) downgraded to Market Perform from Outperform at Raymond James
Golar LNG Partners (GMLP) downgraded to Neutral from Buy at Citigroup
Horizon Pharma (HZNP) downgraded to Neutral from Overweight at Piper Jaffray
Legacy Reserves (LGCY) downgraded to Neutral from Buy at Citigroup
RBC Bearings (ROLL) downgraded to Neutral from Buy at Goldman
Regal Entertainment (RGC) downgraded to Hold from Buy at Ascendiant
Thoratec (THOR) downgraded to Market Perform from Outperform at Wells Fargo
Trulia (TRLA) downgraded to Hold from Buy at Needham
Vanguard Natural (VNR) downgraded to Neutral from Buy at Citigroup
Wal-Mart (WMT) downgraded to Neutral from Buy at Goldman

Initiations

Abengoa Yield (ABY) initiated with a Neutral at HSBC
Boston Scientific (BSX) initiated with a Neutral at Sterne Agee
St. Jude Medical (STJ) initiated with a Neutral at Sterne Agee
 
COMPANY NEWS

Darden (DRI) Chairman and CEO Clarence Otis to step down, board to separate roles. The company appointed lead independent director Charles Ledsinger, Jr., as independent non-executive chairman
Darden (DRI) completed sale of Red Lobster to Golden Gate Capital
UBS (UBS) said ‘responding to inquiries’ on dark pools
Airbus (EADSY) terminated purchase order with Skymark Airlines for A380s
Carlyle Group (CG) to purchase full ownership stake of Acosta from Thomas H. Lee firm
Arrowhead Research (ARWR) CEo Christopher Anzalone told CNBC he is optimistic on Hep B trial data out in Q3 and that the company has enough cash through Phase 3

EARNINGS

Companies that beat consensus earnings expectations last night and today include:

Aetna (AET), BP (BP), United Therapeutics (UTHR), M.D.C. Holdings (MDC), Spirit Airlines (SAVE), ExlService (EXLS), Headwaters (HW), Portland General Electric (POR), PGT, Inc. (PGTI), Great Southern Bancorp (GSBC), Silicon Motion (SIMO), Anthera Pharmaceuticals (ANTH), Eastman Chemical (EMN), German American Bancorp (GABC), American Financial Group (AFG), Masco (MAS), Seacoast Banking (SBCF), HealthSouth (HLS), Park National (PRK), Advent Software (ADVS), Denny’s (DENN), Mavenir Systems (MVNR), Luminex (LMNX), Cognex (CGNX), Innophos Holdings (IPHS), Alliance Fiber Optic (AFOP), Intevac (IVAC), GigOptix (GIG), Ducommun (DCO), Bank of Hawaii (BOH), Integrated Device (IDTI), W. R. Berkley (WRB), XL Group (XL), Plum Creek Timber (PCL), Greenhill & Co. (GHL), Norwegian Cruise Line (NCLH), Heartland Financial (HTLF), J & J Snack Foods (JJSF)

Companies that missed consensus earnings expectations include:

Herbalife (HLF), Medidata Solutions (MDSO), Universal American (UAM), Talisman Energy (TLM), AudioCodes (AUDC), Jacobs Engineering (JEC), HomeStreet (HMST), Crane (CR), Seaspan (SSW), PRGX Global (PRGX), Owens & Minor (OMI), Range Resources (RRC), TriCo Bancshares (TCBK), National Interstate (NATL), PartnerRe (PRE), MicroStrategy (MSTR), CNO Financial (CNO), Peregrine (PSMI), Montpelier Re (MRH), Danaos (DAC), Meru Networks (MERU), Tile Shop (TTS), PDF Solutions (PDFS)

Companies that matched consensus earnings expectations include:

Harris (HRS), Sensata (ST), Stock Building Supply (STCK), Heritage Oaks (HEOP), Harmonic (HLIT), Exactech (EXAC), MiMedx (MDXG)

NEWSPAPERS/WEBSITES

Bank of America (BAC), DOJ talks hit snag, WSJ reports
Toyota (TM) should recall older Camry hybrids, Consumer Reports says
AECOM Technology (ACM) said to acquire Hunt Construction, WSJ reports
Dollar General (DG) rejected chance to bid on Family Dollar (FDO), Bloomberg reports (DLTR)
McDonald’s (MCD) China will have to obtain meat from local suppliers, McDonald’s Japan to shift to Thailand suppliers, China Daily reports
eBay (eBAY) executives Carges, Doerger sold over $2M in stock, Barron’s says

SYNDICATE

Brandywine Realty (BDN) files to sell 18M shares of common stock
Meridian Interstate Bancorp (EBSB) 32.5M share Secondary priced at $10.00
Spark Energy (SPKE) 3M share IPO priced at $18.00
TCP Capital (TCPC) files to sell 5.4M shares of common stock
Zoe’s Kitchen (ZOES) files to sell 4.6M shares for holders

via Zero Hedge http://ift.tt/1oFA35W Tyler Durden

Overnight markets have been a continuation of the relative peace observed yesterday before the onslaught of key data later in the week, with the biggest mover standing out as the USDJPY, which briefly touched 102 before sliding lower then recouping losses. This sent the Nikkei 225 up 0.57% despite absolutely atrocious Japanese household spending data, coupled with a major deterioration in employment: at this rate if Abenomics doesn’t fix the economy it just may destroy it. Aside from that the last 24 hours could be summed as having a lot of noise but not a lot of excitement. This was best illustrated by the S&P500’s (+0.03%) performance which was the second smallest gain YTD. And while the SHCOMP is starting to fade its recent euphoria and China was up only 0.24%, Europe continues to cower in the shade of Russian sanctions as both German Bund yields rose to record highs, and Portugal’s BES tumbled by 10% once again to 1 week lows. Today Europe is expected to formally reveal its latest Russian sanctions, which should in turn push Europe’s already teetering economy back over the edge.

Expect the DE Shaws to recalibrate the Spoos correlation algo from AUDJPY to USDJPY today following renewed calls from the street that the RBA will be forced to cut rates before the end of the year: the US stock market clearly can’t have that overhang.

Stateside, the FOMC begins its two-day meeting today, but won’t release its policy statement until tomorrow. Consensus believes that the Fed will take a pass on saying anything that it thinks would move markets this week. Neither the overall economic activity picture nor the inflation data have been firm enough recently to move the Committee to signal that they are moving closer to lift-off. Employment growth has been stronger than expected in recent months. But wage inflation remains low, business and housing investment numbers have softened most recently, and core inflation has moved sideways. On balance, this is not a picture that will get a data-driven Fed excited. Even an upward surprise in the Q2 GDP release on Wednesday is unlikely to elicit any significant change in the wording of the FOMC statement. Of greater interest to the market (and the Fed) will be how the PCE and ECI inflation numbers, as well as the July employment report, come out later this week. These data, along with ensuing data reports ahead of the September FOMC meeting, will be important in shaping the potentially important message the Fed delivers at that time as it likely updates its exit guidance.

Turning to Asia, Chinese equities are consolidating their 2%+ gains from yesterday with HSCEI up 0.15% as we type. As we mentioned yesterday, Chinese A-shares are up around 20% from the YTD lows and this morning a number of commentators have suggested that we are in the midst of a Chinese equity bull market. The KOSPI and Nikkei are the outperformers today though, off the back of stronger corporate earnings from the likes of Kia, Hyundai and Nissan. In rates, most Asia-Pac bonds are trading slightly lower today, which is a spillover of the mild EM selloff seen in EMEA and LATAM yesterday (Brazil 10yr yield +8bp). The USD is down slightly against most major Asian currencies overnight. Asian stocks rise with the Hang Seng outperforming. MSCI Asia Pacific up 0.3% to 149.6; Nikkei 225 up 0.6%, Hang Seng up 0.9%, Kospi up 0.6%, Shanghai Composite up 0.2%, ASX up 0.2%; 8 out of 10 sectors rise with consumer, tech outperforming and energy, utilities underperforming

Heading into the North American open, stocks in Europe are seen broadly lower, with the Portuguese PSI-20 index underperforming amid fresh concerns over the troubled lender Banco Espirito Santo (-6.5%). On the sector breakdown, energy related stocks underperformed, with BP (-1.0%) shares reversing initial gains after the oil-giant posted a rise in second quarter profits, with the company also noting that further sanctions against Russia could affect its business as it posted a rise in second quarter profits. 11 out of 19 Stoxx 600 sectors rise; real estate, bank outperform, autos, oil & gas underperform. 58.7% of Stoxx 600 members gain, 38.5% decline. Eurostoxx 50 +0.2%, FTSE 100 +0.2%, CAC 40 +0.1%, DAX +0.1%, IBEX +0.3%, FTSEMIB +0.6%, SMI -0.2%

Looking at the day ahead, there is Spanish retail sales and UK mortgage approvals data this morning. US CaseShiller house prices (May) and the Conference Board’s consumer confidence numbers (July) follow thereafter. Its another big day for corporate earnings today, with European financials in focus, together with around 45 S&P500 companies including Wynn Resorts, Boston Properties and American Express. As mentioned above, it’s worth keeping an eye on potential EU sanctions headlines.

Market Wrap

• S&P 500 futures up 0.01% to 1973
• Stoxx 600 up 0.1% to 341.5
• US 10Yr yield down 2bps to 2.47%
• German 10Yr yield down 3bps to 1.12%
• MSCI Asia Pacific up 0.3% to 149.6
• Gold spot up 0.3% to $1307.8/oz

Bulletin Headline Summary from Bloomberg and RanSquawk

• Both Germany and Spain print record low 10yr yields, as positive cash flow and fading optimism from European earnings lifts Bunds to contract highs
• Treasury curves flatten, 5/30 at tightest since January 2009 as week’s auctions continue with $35b 5Y notes; yield 1.719% in WI, implying highest auction stop since May 2011.
• Fed begins its two-day meeting in Washington; most expect Fed to taper by another $10b, see possibility of 1st rate increase sooner than many expect, based on published research
• Israel intensified its attacks against Gaza after Netanyahu told his country to brace for an extended military campaign and said any truce must be based on disarming Hamas
• Germany’s business and political leaders are lining up to upport a tougher stance on Russia, giving Chancellor Angela  Merkel critical backing as she pushes her EU counterparts to expand sanctions
• Japan’s retail sales fell 0.6% in June, more than forecast, capping a weak quarter that challenges Abe’s bid to reflate the economy while heaping a heavier tax burden on consumers
• Ebola, the killer of more than 670 people in four West African countries since February, has spread beyond Africa only once. That doesn’t mean it can’t happen now, infectious disease experts warn
• China regulators opened an anti-monopoly investigation into Microsoft, seizing computers and documents from offices in four cities amid escalating tensions with U.S. technology companies
• Obama will host more than 40 African leaders at a summit in Washington next week as the U.S. tries to challenge China’s status as Africa’s number one investor and trading partner
• Sovereign yields mostly lower. Euro Stoxx Banks +0.3%. Asian stocks, European equities mostly higher, U.S. stock futures fall. WTI crude little changed, copper falls, gold higher
• USD-index holds near a six-month high as AUD and NZD lag on policy cues and lower than expected milk prices for the current season

US Event Calendar

• 9:00am: S&P/CS 20 City m/m, May, est. 0.3% (prior 0.19%)
• S&P/CS Composite-20 y/y, May, est. 9.9% (prior 10.82%)
• S&P/CaseShiller Home Price Index, May, est. 171.25 (prior 168.71)
• 10:00am: Consumer Confidence Index, July, est. 85.4 (prior 85.2)
• 11:00am POMO: Fed to buy $300m-$450m notes in 2024-2031 sector
• 1:00pm: U.S. to sell $35b 5Y notes

 

FIXED INCOME

Month-end, as well as coupon/redemption related flow saw Bunds touch on a fresh contract high, also supported by the looming risk events such as FOMC, US GDP and the monthly jobs report. The gains in bonds are relatively broad-based, with Spanish 10yr yields also falling to historic lows. Bonds continue to benefit from the glut of liquidity provided by just shy of EUR 60bln in coupons and redemptions due from Spain, Italy and Portugal this week. At the same time, the upside was driven by the renewed uncertainty surrounding Banco Espirito Santo amid reports that the bank may need to raise capital, resulting in shares and also sub-2 bonds sliding since the get-go. As a result, PO/GE 10y spreads widened.

In terms of month-end revisions, Barclays Final Pan Euro Agg Month-end Extension +0.12y vs. Prelim. +0.11y (Prev. month 0.09y, 12m Avg. 0.08y) and Barclays Prelim Sterling Agg Month-end Extension +0.04y (Prev. month 0.03y).

EQUITIES

Heading into the North American open, stocks in Europe are seen broadly lower, with the Portuguese PSI-20 index underperforming amid fresh concerns over the troubled lender Banco Espirito Santo (-6.5%). On the sector breakdown, energy related stocks underperformed, with BP (-1.0%) shares reversing initial gains after the oil-giant posted a rise in second quarter profits, with the company also noting that further sanctions against Russia could affect its business as it posted a rise in second quarter profits.

FX

USD-index holds near its 6-month high ahead of this week’s key risk events incl. US GDP, NFP and tomorrow’s FOMC rate decision, which is consequently weighing on major USD pairs and crosses. AUD/USD broke below the 0.9400 handle despite S&P affirming Australia at ‘AAA’; outlook stable as Goldman Sachs said RBA may be forced to cut the official cash rate before the end of the year. NZD/USD fell to fresh 1-month low after Fonterra revised lower their milk pay-out forecast by close to 15% (one of New Zealand’s largest GDP components). Analysts at Westpac see the drop in prices shaving 1.9ppts of GDP to collective income of dairy farmers.

COMMODITIES

After thin volumes overnight, gold moved above the USD 1310 level in early European trade benefiting from inflows into fixed income as global geo-political tensions remain on the boil. The yellow metal has since come off its best levels, yet remains supported above the USD 1300/oz mark. Brent crude futures are marginally outperforming WTI, which trades near a 2-week low ahead of the US API inventories, expected later today at 2135BST1535CDT.

* * *

The conclusion comes as usual from DB’s Jim Reid

Markets enjoyed the relative peace yesterday before the onslaught of key data later in the week. Indeed the last 24 hours could be summed as having a lot of noise but not a lot of excitement. This was best illustrated by the S&P500’s (+0.03%) performance which was the second smallest gain YTD. Disappointing US pending home sales drew equities to an intra-day low early in the NY session, but in the end it was fresh M&A activity which helped equities recover from the opening lows. The M&A transactions announced yesterday takes year-to-date activity to $2.5 trillion, or an increase of 70% YoY, led by North America ($1.2 trillion, +83%) and Europe ($773bn, +85%).

Aside from the downpour of macro data to come this week, there is also the looming prospect of wider EU sanctions on Russian business interests hanging over markets. Reports continue to filter through suggesting that the EU is putting the finishing touches on sectorwide sanctions targeting Russia’s state-owned banks and restricting exports of sensitive technology used in oil production. According to the WSJ and Reuters, the EU’s plans for economic sanctions could be announced as early as today, when EU ambassadors meet in Brussels, or tomorrow. Russia’s ITAR-TASS news agency writes that two decisions are to be taken today. Firstly, the EU ambassadors will either speak out in support of the whole package of sanctions or hand it over to the European Commission for finalization. Secondly, the ambassadors will decide on whether the sanctions can be introduced by a formal written procedure or whether this will require a new EU summit. If they choose the written option, the relevant measures can then be brought in as early as next week (ITAR-TASS). Speaking ahead of today’s meeting, UK PM David Cameron said he and fellow European leaders have agreed that “strong” economic sanctions should be imposed on Russia as soon as possible. Mr Cameron said he and his French, German and Italian counterparts had agreed on the need for further action against Moscow in a conference call with US president Barack Obama (BBC) that was held on Monday. Outside of the sanctions, the Kremlin came under further pressure yesterday when an international tribunal in The Hague ordered Russia to pay $50bn in damages to former shareholders of the Yukos oil company. The Ruble finished on a soft note yesterday, losing 1% against the USD, while the shares in Russian government affiliated banks such as Sberbank (-3.1%) declined. The Ruble is again approaching the March lows.

Turning to Asia, Chinese equities are consolidating their 2%+ gains from yesterday with HSCEI up 0.15% as we type. As we mentioned yesterday, Chinese A-shares are up around 20% from the YTD lows and this morning a number of commentators have suggested that we are in the midst of a Chinese equity bull market. The KOSPI (+0.6%) and Nikkei (+0.5%) are the outperformers today though, off the back of stronger corporate earnings from the likes of Kia, Hyundai and Nissan. In rates, most Asia-Pac bonds are trading slightly lower today, which is a spillover of the mild EM selloff seen in EMEA and LATAM yesterday (Brazil 10yr yield +8bp). The AUD is down a touch (-0.2%) following renewed calls from the street that the RBA will be forced to cut rates before the end of the year. The USD is down slightly against most major Asian currencies overnight.

Looking more closely at the data docket over the last 24 hours, pending home sales (-1.1% MoM vs +0.5% expected) hardly inspired confidence in the housing sector and follows the disappointing new home sales data from last Thursday. This put pressure on the S&P500 homebuilders index (-1.23%) as well as construction materials stocks (-1.32%). The fall in pending home sales was largely concentrated in the US northeast (-2.9%) and in the south (-2.4%) with all other regions either flat or slightly positive. In Europe, Spanish bonds at multi-century all time yield lows and Italian bonds not far behind helped keep a lid on any credit spread widening. Indeed, European Crossover (-1bp) and Main (unch) were both broadly unchanged on a day when the Stoxx600 (-0.18%) traded with a defensive tone. Elsewhere in the periphery, the Bank of Portugal commented late yesterday that Banco Espirito Santo is able to raise capital should it prove necessary. The central bank said that if solvency becomes an issue, there is sufficient interest shown by various entities in buying BES shares, and State aid will also be available as a last resort. BES reports its 1H14 earnings tomorrow, which will likely be one of the more interesting earnings reports of this reporting season.

The FOMC begins its two-day meeting today, but won’t release its policy statement until tomorrow. DB’s Peter Hooper thinks that the Fed will, with high probability, take a pass on saying anything that it thinks would move markets this week. Neither the overall economic activity picture nor the inflation data have been firm enough recently to move the Committee to signal that they are moving closer to lift-off. Employment growth has been stronger than expected in recent months. But wage inflation remains low, business and housing investment numbers have softened most recently, and core inflation has moved sideways. On balance, this is not a picture that will get a data-driven Fed excited. Even an upward surprise in the Q2 GDP release on Wednesday is unlikely to elicit any significant change in the wording of the FOMC statement. Of greater interest to the market (and the Fed) will be how the PCE and ECI inflation numbers, as well as the July employment report, come out later this week. These data, along with ensuing data reports ahead of the September FOMC meeting, will be important in shaping the potentially important message the Fed delivers at that time as it likely updates its exit guidance. While the hawks on the committee have become increasingly restless, Peter does not expect either Fisher or Plosser to dissent at this point. Rather, he expects they will save those dissents for when they might carry more force, alongside the release of a new exit manifesto and backed up by some firmer macro data.

Looking at the day ahead, there is Spanish retail sales and UK mortgage approvals data this morning. US CaseShiller house prices (May) and the Conference Board’s consumer confidence numbers (July) follow thereafter. Its another big day for corporate earnings today, with European financials in focus, together with around 45 S&P500 companies including Wynn Resorts, Boston Properties and American Express. As mentioned above, it’s worth keeping an eye on potential EU sanctions headlines.

via Zero Hedge http://ift.tt/1Atrro8 Tyler Durden