Month: September 2014

And so Carl Icahn wins again, this time with his demand that eBay spin off PayPal. As a reminder, eBay swore up and down it would never spin off its best performing asset, then swore again, and swore some more. And then 3 minutes ago, revealed it was only kidding, because eBay just reported PayPal will be spun off in a move that will cost CEO John Donahoe his job: “Neither Donahoe nor Swan will have an executive management role in the new eBay and PayPal companies. But to provide continuity, they each expect to serve on one or both of the boards of the two companies. Oh, and another winner: “Goldman, Sachs & Co. and Allen & Company LLC are serving as financial advisors to eBay Inc.”

From the just released press release:

eBay Inc. to Separate eBay and PayPal Into Independent Publicly Traded Companies in 2015

• Maximizes strategic focus and flexibility for eBay and PayPal to capitalize on respective growth opportunities in highly competitive, rapidly changing global commerce and payments markets
• Preserves eBay and PayPal relationships through arm’s length operating agreements
• Provides shareholders with more targeted investment opportunities; best path to sustainable shareholder value

Devin Wenig, president of eBay Marketplaces, to become CEO of new eBay company following separation; American Express executive Dan Schulman joins PayPal immediately as President and CEO designee for PayPal post-separation; eBay Inc. President and CEO John Donahoe and CFO Bob Swan to oversee separation and serve on boards of new independent companies

eBay Inc. (EBAY) today said its Board of Directors, following a strategic review of the company’s growth strategies and structure, has approved a plan to separate the company’s eBay and PayPal businesses into independent publicly traded companies in 2015, subject to customary conditions. Creating two standalone businesses best positions eBay and PayPal to capitalize on their respective growth opportunities in the rapidly changing global commerce and payments landscape, and is the best path for creating sustainable shareholder value, the company said.

“eBay and PayPal are two great businesses with leading global positions in commerce and payments,” said eBay Inc. President and CEO John Donahoe. “For more than a decade eBay and PayPal have mutually benefited from being part of one company, creating substantial shareholder value. However, a thorough strategic review with our board shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively. The industry landscape is changing, and each business faces different competitive opportunities and challenges.

“eBay and PayPal will be sharper and stronger, and more focused and competitive as leading, standalone companies in their respective markets,” Donahoe continued. “As independent companies, eBay and PayPal will enjoy added flexibility to pursue new market and partnership opportunities. And we are confident following a thorough assessment of the relationships between eBay and PayPal that operating agreements can maintain synergies going forward. Our board and management team believe that putting eBay and PayPal on independent paths in 2015 is best for each business and will create additional value for our shareholders.”

As the company has previously stated, eBay’s board of directors has a practice of regularly reviewing the company’s growth strategies and structure, and assessing all alternatives. As part of such assessments, the board regularly explores the following questions: Will separation make eBay and PayPal more competitive? Will separation be possible without distracting innovation and execution? And, will separation create sustainable value for shareholders over time?

In its recently completed review, the board concluded:

• A changing competitive landscape creates enormous opportunities for eBay and PayPal; separation will create sharper strategic focus and better position each business to capitalize on those growth opportunities as independent companies. The pace of industry change and innovation in commerce and payments requires maximum flexibility to stay competitive and drive global leadership.
• The benefits of the existing relationships between eBay and PayPal will naturally decline over time and can be optimized in arm’s length operating agreements between the two entities. Arm’s length operating agreements can formalize the existing relationships between the two companies and capture ongoing synergies.
• This is the best path for delivering sustainable shareholder value. eBay is a leading global commerce platform that has benefited from PayPal, and PayPal is a strong, rapidly growing global payments leader because it has been part of eBay. But beyond 2015, eBay and PayPal will each benefit more and create greater value from the strategic focus, speed, flexibility and agility that come with being independent publicly traded companies.

The future

The company expects to complete the transaction as a tax-free spin-off in the second half of 2015, subject to market, regulatory and certain other conditions.

eBay Inc. President and CEO John Donahoe and company CFO Bob Swan will be responsible for leading the separation of each business, with board oversight. This includes determining appropriate management and capital structures for eBay and PayPal, and putting in place appropriate operating agreements. Neither Donahoe nor Swan will have an executive management role in the new eBay and PayPal companies. But to provide continuity, they each expect to serve on one or both of the boards of the two companies.

The “new” eBay

Devin Wenig, currently president of eBay Marketplaces, will become CEO of the new eBay company. As CEO of eBay, Wenig will lead the eBay Marketplaces and eBay Enterprise businesses. Revenue over the last twelve months1 for these two businesses grew approximately 10% year-over-year to $9.9 billion, with eBay Marketplaces accounting for about $8.7 billion. eBay Marketplaces and eBay Enterprise collectively handled approximately $85 billion of gross merchandise volume and gross merchandise sales, which grew 13 percent year over year. Scott Schenkel, currently the CFO of eBay Marketplaces will become the CFO of the new eBay company.

A global commerce leader with 149 million active buyers, eBay is one of the world’s top 30 global brands and a top 10 retail global brand.2 Offering consumers worldwide extraordinary value and selection, eBay has more than 700 million live listings at any given time, and approximately 75% of sold items are new. eBay also is a leader in emerging competitive battlegrounds such as mobile and cross-border commerce. eBay has an installed mobile base of 200 million apps, generating $20 billion in mobile volume. Cross-border commerce represents 20% of eBay’s gross merchandise volume and 61% of Marketplaces revenue is international.

“eBay has been a leading innovator in the world of commerce for almost 20 years; it’s an incredibly special business,” Donahoe said. “Since joining eBay three years ago, Devin has proven to be an exceptional global leader and operating executive. He is steadily enhancing eBay’s unique assets and capabilities and creating new commerce experiences to ensure long-term growth and commerce leadership. He will make a fantastic CEO of eBay.”

The “new” PayPal

Concurrent with the announcement of the business separation plan, the company also today announced the appointment of Dan Schulman to be President of PayPal, effective immediately, and CEO-designee of the standalone PayPal company following separation.

Schulman joins PayPal from American Express, where he was presid
ent of the company’s Enterprise Growth Group. A seasoned leader in multiple industries, Schulman has held senior executive and CEO roles at AT&T, Priceline and Virgin Mobile, prior to joining American Express.

“As both a leading global technology platform and a financial services business, PayPal requires a diverse blend of leadership skills and operating experience in its president and future CEO,” Donahoe said. “Dan has a proven track record of leading complex technology businesses at scale, driving sustainable growth and understanding how to innovate to drive competitive advantage and deliver compelling experiences for customers. I am thrilled to have him lead PayPal forward as a publicly traded, independent global payments leader, and we welcome him to the team.”

PayPal is a rapidly growing global leader in digital payments and the most trusted digital wallet, with more than 152 million active registered accounts. Accounts grew 15% year-over-year last quarter. Revenue over the last 12 months grew by 19% over the prior year period to approximately $7.2 billion.

PayPal facilitates one in every six dollars spent online today. Total payments volume over the last 12 months increased by 26% to $203 billion, providing merchants and consumers worldwide a faster, safer way to pay and be paid. PayPal is fully localized in 26 currencies, is available in 203 markets worldwide and has relationships with 15,000 financial institutions. Representative of its global reach, PayPal is the No. 1 payments processor for business to consumer exports for Chinese merchants.

With acquisitions such as Braintree and its new One Touch mobile payments experience, PayPal continues to lead and innovate in mobile payments. One Touch is the industry’s first and only single touch payments experience. PayPal processed $27 billion in mobile payments volume in 2013. PayPal expects to process 1 billion mobile transactions in 2014.

A strong record of delivering shareholder value

Since 2008, eBay Inc.’s board and management team have led a successful turnaround of the company’s core eBay Marketplace business; have dramatically grown PayPal and drove digital payments innovation; and through 37 acquisitions have built a strong portfolio of global commerce and payments technologies, assets and capabilities.

The company’s board and management team have a clear track record of making the right decisions for eBay and its shareholders.

“Together, eBay and PayPal have delivered substantial value creation for our shareholders,” Donahoe said. “We believe eBay and PayPal will continue to do so as separate, independent companies. Tremendous opportunities exist for each business.”

Goldman, Sachs & Co. and Allen & Company LLC are serving as financial advisors and Wachtell, Lipton, Rosen and Katz is serving as legal counsel to eBay Inc.

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

It has been a night of relentless and pervasive disappointing economic data from just about every point on the globe: first the Chinese HSBC manufacturing data was well short of expectations (50.2 vs. Exp. 50.5), which was promptly spun as bullish and a reason for more stimulus by the PBOC even though the central bank has been constantly repeating it will not engage in western-style shotgun easing. Then Japanese wages, household spending and industrial production came in far below expectations – in fact at levels which suggest Japan is once again in a recession – which once again was spun as bullish, because the BOJ has no choice but to do more of the same failed policies that have made Abenomics the laughing stock of the world. Finally, moments ago Europe reported the lowest inflation data in 5 years, as well as core CPI sliding to just 0.7%, and which was, wait for it, immediately spun as bullish for risk as once again the local central bank would have “no choice but to ease.” In other words, thank god for horrible news: because how else will the rich get even richer?

As DB summarizes, in terms of the latest from Hong Kong, the government has withdrawn riot police from the streets as protestors began to calm down. Still that has not deterred tens of thousands of people from pouring into the Central/Admiralty district on Monday night although in comparison with the heated street clash on Sunday evening the mood has been rather peaceful over the last 24 hours. Protests are still ongoing on Tuesday morning as we type although the crowds are smaller. But again this has become somewhat of a routine over the last few days, where protestors tend to diminish during the day but return in the evening and stay throughout the night. The event has attracted international headlines and attention from the West although China is seemingly taking a firm stance on this.

Indeed a spokeswoman from the Foreign ministry has said that Beijing “vehemently objected to illegal actions that undermine the rule of law and social security,” adding that any international intervention in China’s matters was also unacceptable?. These came just before comments from Britain’s call for “constructive talks” and hopes that it would eventually lead to ?a meaningful advance for democracy?. A White House spokesman has also urged Hong Kong authorities to “exercise restraint” and protesters to “express their views peacefully”. Chinese authorities have also tightened its grip on social media with the number of restricted Weibo (a Twitter like service) posts increasing fivefold between last Friday and Sunday (SCMP). Instagram has also been banned in China.

Looking ahead, a bigger crowd is expected to flood the streets leading up to China’s 1 October National Day Holiday on Wednesday. Pro-democracy organisers have also set a Wednesday deadline for a response from the government to meet their demands for reforms and for him to step down as a leader of HK (AP). S&P has said that the protests have minimal implications on HK’s AAA/Stable rating in the near term unless the situation deteriorates severely. The rating agency says HK’s economic performance could be modestly affected but the impact on Hong Kong’s banking system is manageable. Clearly this is still a ‘live’ situation so developments in HK and how it will ultimately be managed by the authorities will be closely watched.

Turning to markets, the Hang Seng (-1.2%) is extending its losses for the fourth consecutive day now and has broken past what is thought to be a support level of 23,000 for the index. Interestingly Chinese equities are faring relatively better (Shanghai Composite -0.1%) despite further data weakness. The final September HSBC Chinese manufacturing PMI index came in at 50.2, versus an initial reading of 50.5 a week ago. Elsewhere in Asia, bourses in Korea, Taiwan and Japan are down -0.5%, -0.2% and -1.2%, respectively. A stronger JPY is perhaps adding pressure to the local markets. Asian IG credit spreads continued to lead 2-4bp wider across the board. That said Indonesia USD bonds is seeing some intraday support with the benchmark 2024 bonds largely unchanged as we go to print.

In Europe, equities trade firmer across the board, with the Spanish IBEX-35 leading the way after Madrid postponed Catalonia’s independence bid. The FTSE-100 slightly underperforms as UK retailer Next warned that the warm weather at the end of September dented its sales growth at the end of Q3, and the Co. may have to revise guidance lower. As such, Next shares fell sharply, and dragged down Marks & Spencer with it, countering the upside in RBS shares today, which rose as the Co. are seen significantly outperforming their guidance due to lower impairment costs.

We have Chicago PMI today which is usually seen as a good preview of ISM manufacturing tomorrow. The market is looking for the headline to slide a touch lower to 62.0 from 64.3 in August. We also have the Consumer Confidence Index and Case-Shiller Home Prices in the US.

Market Wrap

• S&P 500 futures up 0.3% to 1975
• Stoxx 600 up 0.2% to 341.6
• US 10Yr yield up 2bps to 2.5%
• German 10Yr yield at 0.97%
• MSCI Asia Pacific down 0.5% to 140.5
• Gold spot down-0.9% to 1208

Bulletin Headline Summary from RanSquawk and Bloomberg

• Eurozone Core CPI equals the lowest on record, suggesting the Eurozone’s disinflationary spiral cannot be wholly attributed to falling energy prices
• EUR and bond yields fall as equity futures rise on hopes that lower-than-expected inflation will drive the ECB to do more
• Chicago PMI the highlight of a busy data calendar, with Fed’s Powell and BoE’s Miles also due to be speaking
• Treasuries sold off in overnight trading, with 2Y yield reaching level not seen since May 3, 2011 as Euro-area CPI slowed in September, raising speculation that ECB will use further monetary policy moves to prevent prices from adjusting lower.
• The dollar’s strongest year since 2008 is a source of growing concern among some Federal Reserve policy makers, who say further gains have the potential to curb economic growth and keep inflation too low
• Money-market investors who have endured almost-zero interest rates for about six years are bracing for even worse returns after the Federal Reserve limited how much cash it is willing to sop up
• On his first full business day at Janus Capital Bill Gross got a blue-chip endorsement of his economic outlook from a group of former central bankers
• Morningstar Inc. cut the rating of Pimco’s Total Return Fund, the world’s largest bond fund, to bronze from gold after co-founder Bill Gross’s exit
• U.K. economy grew faster than estimated in 2Q, extending a recovery that’s been more robust than previously thought. GDP rose 0.9%, fastest pace in nine months and above the 0.8% previously published
• Protesters continued to block roads in central Hong Kong in the fifth day of pro-democracy demonstrations as leaders warned the standoff would escalate in the coming days if their demands aren’t met
• Turkey sent troops to its border with Syria and pondered military options as an Islamic State onslaught against Syrian Kurds drew Turkey deeper into its neighbor’s fighting
• Sovereign 10Y yields mostly higher, led by Greece. USD strengthens, at highest level since June 11, 2010. Asian stocks mostly lower, European stocks rise. U.S. equity-index futures rise. WTI crude higher, gold, copper falls

US Economic Data Calendar

• 9:00am: ISM Milwaukee, Sept., est. 61 (prior 59.63)
• 9:00am: S&P/Case Shiller Home Priced m/m, July, est. 0.0% (prior -0.2%)
  • S&P/CS Composite 20 y/y, July, est. 7.4% (prior 8.10%, revised 8.07%)
  • S&P/CS Composite In
    dex NSA, July, est. 174.45 (prior 172.33)
• 9:45am: Chicago Purchasing Manager, Sept., est. 62 (prior  64.3)
• 10:00am: Consumer Confidence Index, Sept., est. 92.5 (prior 92.4)
• 3:00pm: Fed issues QE schedule for Oct.

ASIA

The Hang Seng (-1.3%) closed lower amid political unrest in Hong Kong, with the bourse set for its biggest monthly drop (-7.4%) since May. The Nikkei 225 (-0.8%) is also markedly lower in the wake of disappointing Japanese Industrial Production and Household Consumption data, further weighed by Softbank (-7%) after their takeover bid for DreamWorks fell through. Elsewhere, the Shanghai Comp closed up 0.3% despite Chinese HSBC mfg. reading falling short of expectations (50.2 vs. Exp. 50.5), as it showed a 4th consecutive month of expansion and the exports component was the strongest in four years. As a reminder, mainland Chinese markets will be closed after today’s trade until next Wednesday for Golden Week, while Hong Kong markets will closed tomorrow and Thursday.

FIXED INCOME

After a tepid start, core and peripheral European government bonds rallied after Eurozone core CPI fell to 0.7% vs. Exp. 0.9%, suggesting the Eurozone’s price level woes cannot be attributed solely to the slide in commodities prices. As such, markets have accelerated their expectations of further action from the ECB, with all eyes now turning to the press conference from the ECB President Draghi on Thursday. Spain outperforms all others, with the Spanish curve trading markedly flatter after the Constitutional court suspended Catalonia’s ability to vote on independence, stemming the speculative outflow that Spain has suffered since the beginning of the week.

Pan Euro Agg month-end extensions +0.08yrs (Prev. +0.03yrs), 12-month average +0.07yrs (IFR)

RANsquawk sources report large Sterling month-end extensions, ranging between +0.28yrs to +0.31yrs – Unconfirmed.

EQUITIES

Equities trade firmer across the board, with the Spanish IBEX-35 leading the way after Madrid postponed Catalonia’s independence bid. The FTSE-100 slightly underperforms as UK retailer Next warned that the warm weather at the end of September dented its sales growth at the end of Q3, and the Co. may have to revise guidance lower. As such, Next shares fell sharply, and dragged down Marks & Spencer with it, countering the upside in RBS shares today, which rose as the Co. are seen significantly outperforming their guidance due to lower impairment costs.

FX

EUR/USD tumbled to September 2012 lows after Core CPI in the Eurozone fell sharply, suggest the ECB may have to provide further monetary stimulus (perhaps even QE) should the disinflation spiral not bottom. As such, EUR/USD tripped stops on the way through YTD lows, targeting a touted large option barrier at 1.2615, below which, S3 lies at 1.2608. The USD-index has soared to a fresh four year high on the back of EUR weakness, lifting USD/JPY close to YTD highs of 109. In Scandinavian currencies, NOK trades at monthly highs against the EUR after Norway announced they are to buy NOK for first time from the oil fund in order to cover domestic budget requirements. Norway will purchase NOK 250mln per day in October for this purpose.

COMMODITIES

WTI and Brent crude futures both trade higher as China’s lower than expected final HSBC manufacturing PMI is shrugged off, as traders read into the  greenshots within the report, as the exports component rose to four year highs. Nonetheless, precious and industrial metals have fallen throughout the session, with gold down over USD 5.50/oz as the stronger USD weighs on prices. Looking ahead, Heating Oil and RBOB October’14 futures expire at 1930BST/1330CDT.

* * *

DB’s Jim Reid concludes the overnight recap

So it wasn’t exactly the start that the bulls were hoping for with risk assets kicking off the week generally lower across the board. There weren’t any specific drivers for markets per se but the combination of the political uncertainty in Hong Kong, the selloff in selected parts of EM, and the fresh violence in Ukraine was probably just enough to keep markets on the back foot for now.

We’ll start off with Asia today with Hong Kong and China still the key focus for markets. In terms of the latest from Hong Kong, the government has withdrawn riot police from the streets as protestors began to calm down. Still that has not deterred tens of thousands of people from pouring into the Central/Admiralty district on Monday night although in comparison with the heated street clash on Sunday evening the mood has been rather peaceful over the last 24 hours. Protests are still ongoing on Tuesday morning as we type although the crowds are smaller. But again this has become somewhat of a routine over the last few days, where protestors tend to diminish during the day but return in the evening and stay throughout the night. The event has attracted international headlines and attention from the West although China is seemingly taking a firm stance on this.

Indeed a spokeswoman from the Foreign ministry has said that Beijing “vehemently objected to illegal actions that undermine the rule of law and social security,” adding that any international intervention in China’s matters was also unacceptable?. These came just before comments from Britain’s call for ‚constructive talks? and hopes that it would eventually lead to ?a meaningful advance for democracy?. A White House spokesman has also urged Hong Kong authorities to “exercise restraint” and protesters to “express their views peacefully”. Chinese authorities have also tightened its grip on social media with the number of restricted Weibo (a Twitter like service) posts increasing fivefold between last Friday and Sunday (SCMP). Instagram has also been banned in China.

Looking ahead, a bigger crowd is expected to flood the streets leading up to China’s 1 October National Day Holiday on Wednesday. Pro-democracy organisers have also set a Wednesday deadline for a response from the government to meet their demands for reforms and for him to step down as a leader of HK (AP). S&P has said that the protests have minimal implications on HK’s AAA/Stable rating in the near term unless the situation deteriorates severely. The rating agency says HK’s economic performance could be modestly affected but the impact on Hong Kong’s banking system is manageable. Clearly this is still a ‘live’ situation so developments in HK and how it will ultimately be managed by the authorities will be closely watched.

Turning to markets, the Hang Seng (-1.2%) is extending its losses for the fourth consecutive day now and has broken past what is thought to be a support level of 23,000 for the index. Interestingly Chinese equities are faring relatively better (Shanghai Composite -0.1%) despite further data weakness. The final September HSBC Chinese manufacturing PMI index came in at 50.2, versus an initial reading of 50.5 a week ago. Elsewhere in Asia, bourses in Korea, Taiwan and Japan are down -0.5%, -0.2% and -1.2%, respectively. A stronger JPY is perhaps adding pressure to the local markets. Asian IG credit spreads continued to lead 2-4bp wider across the board. That said Indonesia USD bonds is seeing some intraday support with the benchmark 2024 bonds largely unchanged as we go to print.

Much of the overnight action was largely an extension of the US and European session yesterday with equities, credit and the Dollar all weaker. The S&P 500 (-0.25%) finished off the lows after having declined nearly 1% at the open. Credit markets are still weighed by concerns around PIMCO unwinds which saw widening pressure across IG and HY. In synthetic markets, the CDX IG index was around 4bp wider whilst the HY index was down by nearly a point. US HY ETFs continue to drop lower with both the SPDR Barclays HY Bond ETF (-0.27%) and the iShares iBoxx $ HY Corporate Bo
nd ETF (-0.21%) down for their 6th consecutive day. In reality balance sheet constraints around month/quarter end likely contributed to the volatility/weakness as well. Treasuries enjoyed their flight-to-quality moment with the 10yr yield closing 5bps lower at 2.477%. Some dovish comments from Fed’s Evans also helped as he sad that the strong USD will make it harder for the Fed to achieve its inflation target.

In the world of EM, Brazil’s benchmark equities dropped over 4% and 5yr CDS widened by 16bps yesterday after latest polls suggests that the Brazil’s President Rousseff has opened up a nine point lead over Ms Silva in a likely second round runoff (WSJ). In Ukraine, pro-Russian insurgents launched an attack which saw 13 soldiers and civilians killed in 24 hours in a move that is seen as the worst violence since a truce was struck few weeks ago. The Russian Micex index closed 1.8% lower whilst 5yr CDS widened by nearly 10bps.

Quickly updating the data flow yesterday, US personal income (+0.3%) was as expected whilst personal spending (+0.5% v 0.4% expected) was slightly ahead. Pending home sales was disappointing though with a 1.0% mom decline in August. In reality though yesterday’s data flow was hardly inspirational but today’s releases should be more interesting.

Indeed we have Chicago PMI today which is usually seen as a good preview of ISM manufacturing tomorrow. The market is looking for the headline to slide a touch lower to 62.0 from 64.3 in August. We also have the Consumer Confidence Index and Case-Shiller Home Prices in the US. In Europe the highlights will be consumer spending updates from Germany and France but the main focus will be on the first September inflation reading for Europe as it will likely weigh on the QE debate ahead of the ECB meeting on Thursday. Markets are looking for a 0.3% yoy increase in the headline and 0.9% yoy increase at the core level.

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

Anyone confused why futures are doing their best to surge in the overnight session, the answer is simple: first it was Japan reporting the latest batch of atrocious economic data, which an hour ago was followed by Europe own abysmal econofreakshow, where Eurostat just reported that in September Eurozone inflation rose a meager 0.3% from a year ago, the lowest annual increase since October 2009.This marks the 12th straight month that Euro inflation has been below 1%, and far below the ECB’s goal of 2% inflation.

More importantly, it also shows that some 3 months of a sliding Euro have not only had zero impact on European export competitiveness, as the entire continent is careening into a triple dip recession, but that the ECB is completely powerless to create an inflationary spark, as not only is the bulk of the Eurozone flirting with disinflation but more and more European countries are in outright deflation.

Also of note, while headline inflation was in line with expectations, it was core CPI that missed expectations of a 0.9% increase, and rose by only 0.7%, confirming that the most recent bout of deflation in Europe is about far more than just sliding energy prices. In fact for the culprit, perhaps look at Japan which is now exporting deflation hand over fist.

Then again, there is always hope. From the WSJ:

There are reasons to expect the rate of inflation will begin to pick up from next month. With food and energy prices very low in Europe last fall, annual comparisons for these sectors should start rising in October. Analysts refer to these statistical forces as base effects.

 

However, inflationary pressures are likely to remain very weak. Surveys of businesses have pointed to a weakening of activity as the third quarter has progressed, making it unlikely that the eurozone economy has picked up significantly after stagnating in the second quarter.

To be sure, the already weak and sliding EUR welcomed the news with open arms, weakening and sliding even more.

 

As for the great news, here is Bloomberg:

European stocks rebounded from a five-week low, as investors speculated on the possibility of further European Central Bank stimulus, after data showed euro-area inflation slowed this month. U.S. stock futures gained, while Asian shares fell.

 

The Stoxx 600 Europe Index climbed 0.6 percent to 342.87 at 10:17 a.m. in London, extending earlier gains. The equity benchmark fell 0.4 percent yesterday, as banks slid and data showed economic confidence in the region dropped to the lowest since November.

 

“The ECB has done a lot already to stimulate economic activity in Europe,” Teis Knuthsen, chief investment officer at Saxo Bank A/S’s private-banking unit, said by phone from Hellerup, Denmark. “This week we’ll look for more details regarding the asset-backed securities program and covered bond program. We’re still waiting for the big bazooka, which would be the ECB really expanding their balance sheet.”

In other words, the European economic collapse is bullish because it means more failed monetarist experiments to make rich richer. QE and D.

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

For about three years, or just before the terminal Keynesian/monetarist experiment of Abenomics was launched, Japanese wages were flatlining, happily hugging the 0% Y/Y line. But that was ok, because the country had deflation or at best 0% inflation, meaning quite often real wages, adjusted for actual purchasing power, were higher than nominal wages. Then, following Abe’s triumphal return after a 4 year battle with diarrhea, when he unleashed a different kind of liquidity, one impacting the BOJ’s CTRL-P function, after much cajoling, threats and outright incantations, Japan’s nominal wages started to slowly rise higher, and as reported earlier following the latest battery of worse than expected news out of a recessionary Japan, nominal wages in August rose by 1.4%, down from 2.4% in July, driven by overtime wages which rose 1.8% (with base wages barely eeking out a 0.6% annual rise), however also at half the Y/Y rate seen in July.

What about real wages, or wages when factoring in the soaring prices of, well, everything such as TV sets rising in price by double digits (yes, in the country that gave the world Sony), or gas and heating prices through the roof for nearly 2 years now. Sadly, here the picture is far worse. Because while the nominal wage increase is welcome, if declining, the real wage crash is quite horrifying to some 100+ million Japanese. And accelerating, because while real wages dropped -1.7% in July, in August they flat out crashed by -2.6%.

In fact, even as the great Keynesian priests of Japan distract the world by pointing out repeatedly the modest and now declining rise in nominal wages, as testament of the “success”of Abenomics, what they want everyone to ignore is what is going on with real wages.

So, without further ado, here is the difference between Nominal and Real wages, as demonstrates best by that sinking Keynesian titanic, which has already returned to recession as confirmed by the upcoming negative GDP print, Japan.

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De-dollarization has been an ongoing theme hidden just below the surface of the mainstream media for more than a year as Russia and China slowly but surely attempt to "isolate" the US Dollar. Until very recently, direct trade agreements with China (in other words, bypassing the US Dollar exchange in bilateral trade) had been with smaller trade partners. On the heels of Western pressure, Russia and China were forced closer together and de-dollarization accelerated from Turkey to Argentina as an increasing number of countries around the world realize the importance of this chart. However, things are about to get even more dramatic. As Bloomberg reports, China will start direct trading between the yuan and the euro tomorrow as the world’s second-largest economy seeks to spur global use of its currency in a "fresh step forward in China’s yuan internationalization." With civil unrest growing on every continent and wars (proxy or other) at tipping points, perhaps, just perhaps, the US really does want rid of the weight of the USD as a reserve currency after all (as championed here by Obama's former right hand economist)… now that would be an intriguing 'strategy'.

 

As Bloomberg reports, China will start direct trading between the yuan and the euro tomorrow as the world’s second-largest economy seeks to spur global use of its currency…

The euro will become the sixth major currency to be exchangeable directly for yuan in Shanghai, joining the U.S., Australian and New Zealand dollars, the British pound and the Japanese yen. The yuan ranked seventh for global payments in August and more than one-third of the world’s financial institutions have used it for transfers to China and Hong Kong, the Society for Worldwide International Financial Telecommunications said last week.

 

“It’s a fresh step forward in China’s yuan internationalization,” said Liu Dongliang, an analyst with China Merchants Bank Co. in Shenzhen.

 

The move will lower transaction costs and so make yuan and euros more attractive to conduct bilateral trade and investment, the People’s Bank of China said today in a statement on its website. HSBC Holdings Plc said separately it has received regulatory approval to be one of the first market makers when trading begins in China’s domestic market.

 

…

 

China’s trade with European Union nations grew 12 percent from a year earlier to $404 billion in the first eight months of 2014, according to data from the Asian nation’s customs department. That compares with just $354 billion with the U.S. during the period.

 

French and German companies lead among countries outside of greater China in the use of the yuan, according to a July report by HSBC that was based on a survey of 1,304 businesses in 11 major economies that have ties with mainland China. Some 26 percent of French corporates and 23 percent of German companies were using the currency to settle trade, the highest proportions apart from mainland China, Hong Kong and Taiwan.

 

…

 

“Given the appointments of renminbi clearing banks in Frankfurt and Paris, today’s announcement is largely expected,” Australia & New Zealand Banking Group Ltd.’s economists led by Liu Li-gang wrote in a research note today. The agreement marks a “significant milestone” in yuan internationalization as the euro is the only G3 currency that has not had direct conversion with the yuan, Liu said.

The chart below suggests the increasing push for de-dollarization across the 'rest of the isolated world' may be a smart bet…

 

The internationalization of the Yuan (or implicit de-dollarization by the rest of the world) appears to go unnoticed by the administration (and mainstream media)… which makes one wonder – is this the strategy after all? As Obama's former chief economist noted:

what was once a privilege is now a burden, undermining job growth, pumping up budget and trade deficits and inflating financial bubbles.

 

To get the American economy on track, the government needs to drop its commitment to maintaining the dollar’s reserve-currency status.

As Deutsche Bank previously concluded:

Given this analysis it strikes us that today we are in the midst of an extremely rare historical event – the relative decline of a world superpower. US global geopolitical dominance is on the wane – driven on the one hand by the historic rise of China from its disproportionate lows and on the other to a host of internal US issues, from a crisis of American confidence in the core of the US economic model to general war weariness.

 

This is not to say that America’s position in the global system is on the brink of collapse. Far from it. The US will remain the greater of just two great powers for the foreseeable future as its “geopolitical multiplier”, boosted by its deeply embedded soft power and continuing commitment to the “free world” order, allows it to outperform its relative economic power. As America’s current Defence Secretary, Chuck Hagel, said earlier this year, “We (the USA) do not engage in the world because we are a great nation. Rather, we are a great nation because we engage in the world.”

 

Nevertheless the US is losing its place as the sole dominant geopolitical superpower and history suggests that during such shifts geopolitical tensions structurally increase. If this analysis is correct then the rise in the past five years, and most notably in the past year, of global geopolitical tensions may well prove not temporary but structural to the current world system and the world may continue to experience more frequent, longer lasting and more far reaching geopolitical stresses than it has in at least two decades. If this is indeed the case then markets might have to price in a higher degree of geopolitical risk in the years ahead.

via Zero Hedge http://ift.tt/1ryhqB6 Tyler Durden

De-dollarization has been an ongoing theme hidden just below the surface of the mainstream media for more than a year as Russia and China slowly but surely attempt to "isolate" the US Dollar. Until very recently, direct trade agreements with China (in other words, bypassing the US Dollar exchange in bilateral trade) had been with smaller trade partners. On the heels of Western pressure, Russia and China were forced closer together and de-dollarization accelerated from Turkey to Argentina as an increasing number of countries around the world realize the importance of this chart. However, things are about to get even more dramatic. As Bloomberg reports, China will start direct trading between the yuan and the euro tomorrow as the world’s second-largest economy seeks to spur global use of its currency in a "fresh step forward in China’s yuan internationalization." With civil unrest growing on every continent and wars (proxy or other) at tipping points, perhaps, just perhaps, the US really does want rid of the weight of the USD as a reserve currency after all (as championed here by Obama's former right hand economist)… now that would be an intriguing 'strategy'.

 

As Bloomberg reports, China will start direct trading between the yuan and the euro tomorrow as the world’s second-largest economy seeks to spur global use of its currency…

The euro will become the sixth major currency to be exchangeable directly for yuan in Shanghai, joining the U.S., Australian and New Zealand dollars, the British pound and the Japanese yen. The yuan ranked seventh for global payments in August and more than one-third of the world’s financial institutions have used it for transfers to China and Hong Kong, the Society for Worldwide International Financial Telecommunications said last week.

 

“It’s a fresh step forward in China’s yuan internationalization,” said Liu Dongliang, an analyst with China Merchants Bank Co. in Shenzhen.

 

The move will lower transaction costs and so make yuan and euros more attractive to conduct bilateral trade and investment, the People’s Bank of China said today in a statement on its website. HSBC Holdings Plc said separately it has received regulatory approval to be one of the first market makers when trading begins in China’s domestic market.

 

…

 

China’s trade with European Union nations grew 12 percent from a year earlier to $404 billion in the first eight months of 2014, according to data from the Asian nation’s customs department. That compares with just $354 billion with the U.S. during the period.

 

French and German companies lead among countries outside of greater China in the use of the yuan, according to a July report by HSBC that was based on a survey of 1,304 businesses in 11 major economies that have ties with mainland China. Some 26 percent of French corporates and 23 percent of German companies were using the currency to settle trade, the highest proportions apart from mainland China, Hong Kong and Taiwan.

 

…

 

“Given the appointments of renminbi clearing banks in Frankfurt and Paris, today’s announcement is largely expected,” Australia & New Zealand Banking Group Ltd.’s economists led by Liu Li-gang wrote in a research note today. The agreement marks a “significant milestone” in yuan internationalization as the euro is the only G3 currency that has not had direct conversion with the yuan, Liu said.

The chart below suggests the increasing push for de-dollarization across the 'rest of the isolated world' may be a smart bet…

 

The internationalization of the Yuan (or implicit de-dollarization by the rest of the world) appears to go unnoticed by the administration (and mainstream media)… which makes one wonder – is this the strategy after all? As Obama's former chief economist noted:

what was once a privilege is now a burden, undermining job growth, pumping up budget and trade deficits and inflating financial bubbles.

 

To get the American economy on track, the government needs to drop its commitment to maintaining the dollar’s reserve-currency status.

As Deutsche Bank previously concluded:

Given this analysis it strikes us that today we are in the midst of an extremely rare historical event – the relative decline of a world superpower. US global geopolitical dominance is on the wane – driven on the one hand by the historic rise of China from its disproportionate lows and on the other to a host of internal US issues, from a crisis of American confidence in the core of the US economic model to general war weariness.

 

This is not to say that America’s position in the global system is on the brink of collapse. Far from it. The US will remain the greater of just two great powers for the foreseeable future as its “geopolitical multiplier”, boosted by its deeply embedded soft power and continuing commitment to the “free world” order, allows it to outperform its relative economic power. As America’s current Defence Secretary, Chuck Hagel, said earlier this year, “We (the USA) do not engage in the world because we are a great nation. Rather, we are a great nation because we engage in the world.”

 

Nevertheless the US is losing its place as the sole dominant geopolitical superpower and history suggests that during such shifts geopolitical tensions structurally increase. If this analysis is correct then the rise in the past five years, and most notably in the past year, of global geopolitical tensions may well prove not temporary but structural to the current world system and the world may continue to experience more frequent, longer lasting and more far reaching geopolitical stresses than it has in at least two decades. If this is indeed the case then markets might have to price in a higher degree of geopolitical risk in the years ahead.

via Zero Hedge http://ift.tt/1ryhqB6 Tyler Durden

We have explained the complications of China’s monetary policy efforts, trade-financing shenanigans, ‘peculiarly stable’ headline macro data in the face of collapsing real data, and the ‘hangover’ effect of China’s seemingly-terrified-for-reality-to-peek-through credit injections… but sometimes, a brief 30 second clip is all that is needed to explain just how it all works in China…

 

 

… And yes, someone was aboard this launch from a Chinese vessel…

 

h/t @noalpha_allbeta

via Zero Hedge http://ift.tt/1ry4Ulg Tyler Durden