Month: July 2016

• Bond yields sink as central banks head for easier policy (Reuters)
• PM hopeful Gove says UK leader must believe in Brexit (AP)
• U.K. Can’t Bank on EU’s Rationality in Talks (WSJ)
• Gove Makes Case for U.K. Premiership After Johnson Betrayal (BBG)
• ECB not debating abandoning capital key in QE buys (Reuters)
• World Biggest Pension Fund Seen Losing $43 Billion Last Quarter (BBG)
• European Cities Battle for London’s Finance Crown After Brexit Vote (WSJ)
• PBOC injects liquidity via short-term tools in June, but less than May (Reuters)
• Clinton Spending Roughly $500,000 a Day on TV Ads, Trump Zero (BBG)
• Puerto Rico Defaults on Debt as Obama Approves Restructuring (BBG)
• After an Attack, Germans Question Efforts to Dissuade Young Islamists (WSJ)
• Hedge Funds Set for Worst First Half Since ’11 on Turmoil (BBG)
• Gold heads for fifth weekly gain, silver jumps to 22-month high (Reuters)
• America’s Offshore Tax Cheats Are Feeling the Heat Once Again (BBG)
• Taiwan Navy fires missile in error as China’s Communists mark birthday (Reuters)
• Spain Runs Out of Workers With Almost 5 Million Unemployed (BBG)
• Kiss Your ‘Domestic’ Bias Goodbye, Central Bankers of the World (BBG)
• Europe needs Brexit roadmap urgently, says ECB chief economist (Reuters)
• Six Williams Directors Said to Resign After Failed Takeover (BBG)

 

Overnight Media Digest

WSJ

– Apple Inc is in talks to acquire Tidal, a streaming-music service run by rap mogul Jay Z, according to people familiar with the matter. http://on.wsj.com/29aBeYu

– Mondelez International Inc made a roughly $23 billion bid for Hershey Co in an effort to create the world’s largest candy maker at a time when both companies’ sales are under pressure. http://on.wsj.com/29aBHtO

– Nearly half of Williams Cos board members quit Thursday after they failed to oust the company’s chief executive following its collapsed merger deal with rival pipeline operator Energy Transfer Equity LP. http://on.wsj.com/29aBLK5

– U.S. auto-safety regulators are investigating what is believed to be the first fatal crash involving a Tesla Motors Inc car that was driving itself, an incident that is likely to ratchet up scrutiny of a technology that has been evolving with little oversight. http://on.wsj.com/29aBAyj

– A jury in Silicon Valley on Thursday delivered a resounding victory to Hewlett Packard Enterprise Co finding that Oracle Corp should pay the computer maker $3 billion in damages – the full amount it sought for actions that contributed to the decline of a once-lucrative line of high-end computers. http://on.wsj.com/29aBQxx

 

FT

Spanish tax inspectors raid Google’s Madrid office (http://on.ft.com/296jT66)

Overview Snacks and candy group Mondelez International Inc made a $23 billion offer for rival Hershey Co.

Rupert Murdoch’s News Corp agreed to buy the owner of Britain’s talkSPORT.

HSBC Holdings Plc said it would keep its headquarters in London in a vote of confidence for the UK.

Spanish tax inspectors raided the offices of Google in Spain on Thursday, the latest in a serious of regulatory worries for the company in Europe.

 

NYT

– The federal highway safety agency said the driver of a Tesla Model S electric sedan was killed in an accident when the car was in self-driving mode. http://nyti.ms/298S2mL

– About half of the directors at the Williams Companies resigned on Thursday over disagreements about the future of the pipeline operator, three people with direct knowledge of the matter said. The moves followed the dismantling of its $38 billion merger with Energy Transfer Equity earlier in the week over a tax issue. http://nyti.ms/296NQCW

– Hershey Co rebuffed a $23 billion offer from Mondelez International, whose own products run from Oreo cookies to Cadbury chocolate. The company is betting that it can stay on its own, or at least fetch a substantially higher price. http://nyti.ms/297BczW

– A throng of lawyers for Sumner Redstone and the two long-time confidants, who have brought suits against him, resumed arguments at a Massachusetts courthouse on Thursday, continuing a heated legal battle that could decide the fate of Redstone’s media empire. http://nyti.ms/299Nj2Q

– Zenefits investors are getting a larger piece of the troubled human resources start-up because they overpaid for their stakes, unaware that the company’s sales teams flouted regulations to enhance growth, Zenefits announced on Thursday. The move will cut the company’s valuation in half, to about $2 billion. http://nyti.ms/296C1bF

 

Canada

THE GLOBE AND MAIL

** A disparity in the wages of two groups of workers at Canada Post is a pressing issue in negotiations between the Crown corporation and the Canadian Union of Postal Workers. If an agreement can’t be struck by Saturday, the issue could be one factor behind a possible strike or lockout. (http://bit.ly/29ee72H)

** Enbridge Inc and its oil industry partners have seen their faint hope for the Northern Gateway pipeline project dealt a major blow on Thursday as the Federal Court of Appeal quashed the permit issued by the federal cabinet two years ago. (http://bit.ly/29bub1F)

** Canada’s federal government is moving toward a restrictive market for recreational marijuana, vowing to impose potency limits, controls on advertising and strict rules over the production and sale of the drug. Ottawa has unveiled a nine-member panel to draw up Canada’s new marijuana framework, sending out the clearest signal to date that it is not bowing to the demands of members of the illegal pot industry that has boomed in recent months. (http://bit.ly/29ayzQZ)

NATIONAL POST

** Superior Plus Corp’s $982-million deal for Canexus Corp has fallen apart after last-minute negotiations failed to provide enough time to fight off a legal challenge in the United States. (http://bit.ly/297s2XY)

** In a week where BuzzFeed Canada and Global News announced they were cutting positions, Canada’s media industry got a little bit of a jolt on Thursday afternoon when the world’s largest broadcaster, the BBC, announced it would be adding an editorial bureau in Toronto and launching a version of BBC.com tailored for Canadians. (http://bit.ly/297rPUJ)

** Rising oil prices have pushed up the loonie against the U.S. dollar in recent months, but CIBC Capital Markets says that will likely change later this year. CIBC analysts said in a new report that a U.S. Federal Reserve hike in December will push the loonie down to 74 U.S. cents, from its current level of about 77 U.S. cents. (http://bit.ly/297euaf)

 

Britain

The Times

The Governor of the Bank of England Mark Carney signalled more quantitative easing and indicated interest rates would be cut to cushion the economy from the impact of Brexit. (http://bit.ly/29jzvRu)

United Overseas Bank, a Singapore bank, has stopped giving mortgages for property purchases in Britain because of market turmoil and political uncertainties caused by the vote to leave the European Union. (http://bit.ly/295T4Kz)

The Guardian

Al Mana Group, based in Doha, has bought BHS’s 70 overseas stores as administrator Duff & Phelps continues to negotiate the future of 164 UK outlets. (http://bit.ly/2966zum)

Britain needs to retain its ties with Europe after Brexit while building a new international model for financial services, the chairman of Barclays, John McFarlane, said on Thursday. (http://bit.ly/298aeKm)

The Telegraph

Rupert Murdoch’s UK newspaper group has mounted a major challenge to BBC radio with a 220 million pound ($293.28 million)takeover of Wireless Group, the owner of the Premier League football broadcaster talkSport. (http://bit.ly/295pmd6)

The government has come under fierce attack from leading business figures after it delayed a decision on airport expansion amid the Brexit turmoil, dealing a blow to Heathrow’s chances of building its long sought-after 17.6 billion pound ($23.46 billion) third runway. (http://bit.ly/29hFmXO)

Sky News

The European Union’s rating was cut from AA+ to AA by credit rating agency Standard and Poor. The agency said that the post-referendum vote uncertainty would affect revenue forecasting, long-term capital planning and adjustments to key financial buffers. (http://bit.ly/29juqsn)

Fund manager Fidelity International is to move 100 jobs from its UK offices to the Irish capital Dublin amid forecasts that swathes of City jobs will be relocated in the wake of the vote for Brexit. (http://bit.ly/29iyt8i)

The Independent

HSBC has confirmed that it will keep its headquarters in London despite the shock decision for the UK to leave the EU. (http://ind.pn/297s1nT)

Goldman Sachs has not ruled out moving some of its staff out of the UK, following Britain’s vote to leave the EU. (http://ind.pn/295AmDH)

 

via http://ift.tt/299BHM2 Tyler Durden

In yet another slap in the face for an already reeling Europe, moments ago Austria’s Constitutional Court ruled on Friday that the presidential runoff election must be held again, handing the Freedom Party’s narrowly defeated candidate another chance to become the first far-right head of state in the European Union. Norbert Hofer of the anti-immigration FPO lost the May 22 vote to former Greens leader Alexander Van der Bellen by less than one percentage point, or around 31,000 votes, all due to mailed-in ballots.

This prompted a loud outcry of allegations that the vote had been rigged. As it turns out the allegations were spot on.

Austrian Freedom Party presidential candidate Norbert Hofer

As a reminder, one month ago – in the aftermath of the Freedom Party candidate’s loss by a negligible margin in the Austrian presidential runoff election – five voting districts were being investigated over postal vote irregularities in the close-run presidential election. Allegations of fraud arose from the far-right Freedom party of defeated candidate Norbert Hofer, after the Green candidate Alexander Van der Bellen just scrapped ahead with 31,000 votes when the postal ballot was counted. As a result, the anti-immigrant Freedom Party had challenged the election result earlier this month, alleging “catastrophic” violations of election law, especially in how mail-in ballots were processed.

Many were sceptical that anything of substance would be found, and yet that is precisely what happened: as the WSJ reports, the court found law violations in “many districts” in how the May 22 second-round vote was carried out, Mr. Neuwirth said. “It is for the [Constitutional Court] completely clear that the laws that regulate an election must be applied rigorously.”

“The challenge is granted,” chief justice Gerhart Holzinger said in announcing the verdict in Vienna

The decision comes a week after Britain delighted anti-EU groups such as the Freedom Party (FPO) by voting to leave the bloc. Concerns about immigration and jobs featured prominently in the Brexit referendum, as they did in Austria’s knife-edge election.

As Reuters adds, the court said that widespread irregularities in the counting of the more than 700,000 postal ballots cast meant there was enough doubt over the election’s outcome for a re-run to be ordered.

Whether a re-run of the vote for the largely ceremonial post of president will have a different outcome this time is unclear. The Brexit vote could buoy populist sentiment or have a chilling effect on it.

The court said it was using its strict standard on the application of election rules. Those rules were broken in a way that might have influenced the result, but there was no proof that the count had been manipulated, it said in its ruling.

However, if the Freedom Party does end up winning after a recount, it will confirm that in addition to using fearmongering tactics, the Euro-faithful resort to such blatant measures as outright vote fraud (in addition to rigging bookie odds) in order to preserve a dying status quo. Which would mean that any and all future polls and referenda in which the future of the EU is at stake will be even more closely scrutizined, while concerns about a “rigged system” will rise to unseen levels.

via http://ift.tt/29ak0i3 Tyler Durden

The world’s major precious metals mints are currently riding high on the back of huge global bullion coin demand and relatively buoyant gold and silver prices. The sheer scale of revenues that the US Mint, Royal Canadian Mint (RCM), Perth Mint and Austrian Mint have been generating over the last number of years is eye-opening. These mints are predominantly run as commercial enterprises. Not surprisingly, due to their high value nature, revenues from bullion coin sales account for the lion’s share of total revenues for each institution and have been a core driver of their overall profitability.

Official Bullion Coin Programs

Each of these four mints has an official bullion coin program. The US Mint’s program consists of American Eagle Silver bullion coins, American Eagle gold bullion coins, American Buffalo gold bullion coins, America the Beautiful silver coins, and American Eagle Platinum coins. RCM's bullion coin program comprises gold, silver, platinum and palladium Maple Leaf bullion coins, as well as the recently added MapleGrams. The Perth Mint bullion program is slightly more extensive and briefly consists of the following: Australian Kangaroo gold and silver coin series, Australian Kookaburra silver coin series, Australian Koala silver coin series, Australian Platypus platinum coin series, Australian Lunar gold and Australian Lunar silver coin series. The flagship of the Austrian Mint's bullion program is the Vienna Philharmonic gold bullion coin series, but the mint also produces the Vienna Philharmonic as a silver and platinum bullion coin, as well as historical restrikes of original Austrian circulation gold ducats, gold guilders and gold crowns. 

Bullion Coin Sales Drive Revenues 

In fiscal 2015 (to September 30), the US Mint generated revenues of US$2.12 billion on its bullion coin sales. This represented 57.6% of the Mint’s total 2015 revenues of US$ 3.69 billion. Revenues from gold Eagles totalled $979.6 million, silver Eagle sales added $785.4 million, and gold American Buffalos contributed another $252.2 million in revenues.

In 2015, the RCM’s Gold Maple Leaf coin sales generated revenues of CA$1.41 billion while the Silver Maple Leaf coins added a further CA$687 million, giving a combined revenue of CA$2.1 billion. This represented over 80% of RCM’s total bullion revenues in 2015, and nearly 71% of RCM’s total 2015 group revenues.

The Austrian Mint’s annual report for 2015 is not out yet but will be published in early July. For calendar 2014, the Austrian Mint generated revenues of €1.14 billion. The biggest revenue contributors were gold bullion coin sales of €464.2 million and gold bar sales of €391.7 million. Together the Austrian’s Mint’s gold coin and bar sales represented a combined 75% of total mint revenues.

However, profit margins on the mints’ bullion coin sales are relatively small. For example, in fiscal year 2015, the US Mint only generated bullion income of $61.1 million on bullion revenue of $2.126 billion, so this was a margin of 2.87%. Nevertheless, it’s important to remember that the bullion sales of these mints, both in coins and bars, supply a global distribution network of precious metals wholesalers, bullion dealers and banks on the downstream side, as well as a chain of precious metals suppliers, refineries and gold miners upstream. Not to forget the ultimate beneficiaries of bullion sales, the investors and collectors. There is therefore an entire virtuous ecosystem built around the bullion coin output of these giant precious metals mints.

Furthermore, an often overlooked point is that with all foure of these mints, profits from operations can and often do go to the mints’ owners in the form of either transfers or dividends. For three of the mints, their owners are governments. For the Austrian Mint it is owned by a government owned central bank, which is essentially the same thing.

Government Ownership and Dividends

The US Mint is part of the US Department of the Treasury, and reports to the Office of the Treasurer. The Mint is structured as a Public Enterprise Fund (PEF) under 31 U.S.C. § 5136 and generates its own revenues without the need for Federal appropriations. Any revenue that the US Mint deems to be excess to it’s needs is transferred to the Treasury General Fund.

For fiscal year 2015 (to September 30), the US Mint transferred $561 million to the Treasury General Fund, however $11 million of this was income from numismatic / bullion products, as the rest was a seigniorage transfer from the sale of circulating coins to the Federal Reserve Banks. But interesting, this $11 million can actually be used to reduce the US Treasury’s budget deficit.

The Royal Canadian Mint (RCM), a federal Crown corporation of the Government of Canada, is 100% owned by the Canadian Government and reports to the Canadian Department of Finance. Like the US Mint, the RCM is not funded by the Government and is predominantly run as a commercial organization except for the Canadian circulation coin program which since 2014 has been operated on a non-profit basis. Although the RCM made a small loss in fiscal 2015 (its year end is December 31) due to a one off impairment, it still paid dividends of CA$53 million to the Government of Canada which was a lot higher than previous years due to strong Maple Leaf coin sales.

The Perth Mint, through a holding company called Gold Corporation, is 100% owned by the Government of Western Australia. Western Australia is a state within the Commonwealth of Australia. The Perth Mint group operates on a fully commercial basis and is self-funding. In its fiscal 2015 results to June 30, the Mint made a profit after tax of AU$14 million and also paid a dividend of AU$10.54 million to the Government of Western Australia.

The Austrian Mint (Münze Österreich) is fully owned by Austria’s central bank, the Oesterreichische Nationalbank (OeNB). The OeNB’s capital is itself fully owned by the Austrian government. Although the Austrian Mint 2015 annual report is not yet published, the Austrian central bank has already reported that for 2015, it received a regular dividend of a cool €89 million from the Austrian Mint. In 2014, the Austrian Mint paid the central bank an even bigger dividend of €184.8 million out of its net profit.

Silver – Gold Production Ratio

The relative importance of gold and silver bullion coin sales varies across each mint and between years since each Mint’s bullion program differs, and demand patterns ebb and flow.

In 2015, the US Mint sold 801,500 ounces (24.93 tonnes) of gold American Eagles and 220,500 ounces (6.86 tonnes) of gold American Buffalos, for total gold bullion coin sales of 1,022,000 ounces (31.79 tonnes). Silver American Eagle sales reached 47 million ounces (1,461.85 tonnes) in 2015, with another 1,060,000 ounces (32.97 tonnes) of America the Beautiful 5 oz coins sold, bringing total US Mint silver bullion coin sales to 48.06 million ounces (1,494.82 tonnes).

Using a metric of silver ounces sold compared to gold ounces sold, this gives a silver to gold coin sales ratio of 47:1 for the US Mint. In 2015, the RCM sold 953,000 ounces of gold Maple Leaf bullion coins (29.6 tonnes), and 34.3 million ounces (1067 tonnes) of silver Maple Leaf bullion coins, giving a silver to gold coin sales ratio of 36 for the RCM. Therefore applied to 2015, it is justifiable for the US Mint to say that it was the world’s largest seller of gold bullion coins and silver bullion coins.

Although the Austrian Mint hasn’t published its full 2015 bullion sales statistics yet, it did reveal to Bloomberg earlier this year that its combined gold coin and gold bars sales for 2015 totalled 1.32 million ounces (41 tonnes), and its combined silver sales in 2015 totalled 7.3 million ounces (227 tonnes). This would give a general silver to gold ratio for the Austrian Mint of only 5.53, which highlights the Austrian Mint’s relative concentration on gold bullion over silver bullion. 

In 2014, the Austrian Mint sold 483,700 ounces (15 tonnes) of gold coins, mainly Vienna Philharmonics, and 410,364 ounces of gold bars (12.75 tonnes), Total gold sold was therefore 894,000 ounces (27.75 tonnes). The Mint’s silver coin sales approximated 144.4 tonnes of silver in 2014. This would give a silver to gold coin ratio of 9.63 and a silver coin to total gold (coins and bars) ratio of 5.2.

Overall, the world’s largest mints are a useful source of income for their government owners. More importantly though, these Mints actually make the valuable and high quality investment gold and silver coins and bars that are in such high demand right now, and that also provide tangible economic benefits such as employing large numbers of people around the world in highly skilled jobs. 

 

To learn more about the world's top Mints, please see full profiles of these Mints which have now been published on BullionStar's Gold University pages:

United States Mint: http://ift.tt/29dCpIC

Royal Canadian Mint: https://www.bullionstar.com/gold-university/royal-canadian-mint

Perth Mint: http://ift.tt/295dxio

Austrian Mint http://ift.tt/295e0B1

 

via http://ift.tt/295dy5O BullionStar

Whether it is due to the conclusion of quarter-end window dressing, or due to a more poor manufacturing data out of China overnight, but the new quarter is starting off poorly for risk with Europe flat and US equities lower, while the scramble for safety means that bond yields across the developed world just hit new all time lows as precious metals are surging once again on ongoing speculation central banks will do anything to keep markets propped up and buy up even more assets.

As noted earlier, treasury yields fell to a record lows along with sovereign rates from Spain to Japan as policy makers worldwide signaled their readiness to take steps to shore up the economy. Gold extended its fifth weekly advance rising 0.9% to $1,333 and silver jumped as much as 3.6% to the highest since September 2014. US equity futures were down 6 points. The yuan declined to the lowest since 2010 after the Chinese Official Manufacturing PMI printed at 50.0 for June, down modestly from the month prior, while the Chinese Caixin Manufacturing PMI in June tumbled to 48.6 below the 49.2 expected, the lowest reading in 4-months and the 16th consecutive month in contraction territory. Confirming China’s concerns was the PBOC’s reduction in the 7-Day repo rate by 30 bps to 2.4% as China is now signalling it may have to take more drastic steps to boost the economy.

Yet even with Chinese devaluation concerns looming once more it is all about central banks: yesterday Mark Carney signaled the Bank of England would likely cut interest rates within months, while the ECB said it is considering loosening the rules for its bond purchases, a report which however was denied later by a Reuters report, which in turn pushed Bund yields back down as it meant the scarcity of German paper would persist and forced traders to look for yield across the Atlantic. As a result, the yield on 30-year Treasuries slid as much as nine basis points to an unprecedented 2.1914 percent and was at 2.204 percent as of 6:01 a.m. in New York. The rate on 10-year notes dropped five basis points to 1.3784 percent.

“Policy makers have been very level-headed,” Francois Savary, chief investment officer at Prime Partners in Geneva told Bloomberg. “It’s all about the relief that central banks have intervened. But this rebound is not part of a new trend. There are still political uncertainties and let’s not forget that we’re in a low-growth environment where corporate profits are struggling. Let’s not get euphoric here.”

The question is what happens when this latest round of central bank intervention and jawboning is exhausted: “Markets are reacting positively to the supportive interest rate environment,” said Chris Green, the director of economics and strategy at First NZ Capital Group Ltd. “With interest rates remaining low for longer, the concern is what policy options are left for central banks if we see an even softer patch for the global economy.“

It wasn’t just the US where yields hit new all time lows – Spanish government securities surged, pushing two- and 10-year yields to all-time lows. Bonds in Italy, which like Spain has a relatively large debt market compared with the size of its economy, also jumped. decision. Japan’s 10-year yield tumbled to an unprecedented minus 0.255%.

The gain in the risk-off complex has so far meant poor performance for risk-on assets: S&P 500 futures fell 0.3%, indicating U.S. equities will snap a three-day rally that erased a June decline and helped the index to a third consecutive quarterly gain.  The Stoxx Europe 600 Index added 0.1%, after gaining as much as 0.6 percent and losing of 0.4 percent. 

The U.K.’s FTSE 100 Index rose 0.3%, after recovering from its post-Brexit slump to reach its highest level since August on Thursday. It is 6.3 percent higher on the week, on course for its best performance since 2011. So much for the Brexit apocalypse so widely predicted by the “experts.”

Market snapshot

• S&P 500 futures down 0.3% to 2083
• Stoxx 600 up less than 0.1% to 330
• FTSE 100 up 0.5% to 6534
• DAX up 0.2% to 9702
• German 10Yr yield down less than 1bp to -0.13%
• Italian 10Yr yield down 1bp to 1.25%
• Spanish 10Yr yield down less than 1bp to 1.15%
• S&P GSCI Index down 0.4% to 372.6
• MSCI Asia Pacific up 0.6% to 130
• US 10-yr yield down 6bps to 1.41%
• Dollar Index down 0.36% to 95.8
• WTI Crude futures down 0.6% to $48.06
• Brent Futures down 0.5% to $49.44
• Gold spot up 0.9% to $1,334
• Silver spot up 2.7% to $19.23

Global Headline News

• Bonds Climb With Gold on Stimulus Optimism as Stocks Pare Gains: Yen advances as data show ongoing decline in Japan prices
• U.S. Yields Set Historic Lows in El-Erian’s Era of Slower Growth: 10-year, 30-year Treasury yields decline to lowest ever
• Disney Said to Acquire Stake in $3.5 Billion MLB Digital Arm Disney has four-year option to acquire additional 33% stake
• Six Williams Directors Said to Resign After Failed Takeover: Almost half of board said to resign following failed merger
• Puerto Rico Defaults on Debt as Obama Approves Restructuring: Governor invokes debt-moratorium law after federal bill passes
• Hedge Funds Set for Worst First Half Since ’11 on Turmoil Managers lost 1.8% on average through June 28, HFR index shows
• BHP Says Court Order Reinstates $6.2 Billion Samarco Claim: Producer says it intends to appeal against court’s decision
• Apple in Exploratory Talks to Buy Jay Z’s Tidal, WSJ Reports: Jay Z bought music streaming service for $56 million in 2015
• Fatal Crash of Tesla on Autopilot Under Investigation by US: U.S. safety regulators say accident happened May 7 in Florida
• Thor Said to Sell Champs-Elysees Building for $544 Million: Buyer said to be a Middle Eastern investor
• Netflix Rises Post-Market, Traders Cite 7Park Channel Checks: NFLX wasn’t immediately available to comment

Looking at regional markets, Asian stocks picked up on the early momentum from the Wall Street close where stocks posted a 3-day win streak, although gains have been capped following mixed data releases. Nikkei 225 (+0.7%) traded higher after the BoJ’s Tankan survey showed better than expected Large Mfg Industry Index & Outlook figures, while Capex also beat estimates. However, soft Chinese PMI releases have slightly dampened sentiment and pressured indices off their best levels as the Caixin Mfg. PMI fell to a 4-month low. Although, the Shanghai Comp (+0.1%) traded in positive territory for the majority of the session following a net weekly injection and as the discouraging data added to hopes of supportive measures. Of note, Hong Kong markets were closed due to a public holiday. 10yr JGBs tracked T-Notes higher with futures climbing to record highs as the BoJ were in the market for over JPY 1tr1 while yields remained pressured with 2yr,5yr and 10yr yields declining to fresh record lows.

Top Asian News

• China’s Manufacturing Treads Water in June as Services Perk Up: Non-manufacturing PMI at 53.7, compared with 53.1 in May
• Onshore Yuan Slides to 6.6591 vs Dollar, Lowest Level Since 2010: CNY weakens as much as 0.17%
• Japan’s Prices Keep Falling in Challenge to Abe, Kuroda: May core consumer prices fall 0.4% y/y
• Macau Gambling Falls Less Than Estimates Helped by Tourists: Operators are opening more casino resorts aimed at tourists
• Singapore Home Prices Post Longest Losing Streak on Record: Prices fall for 11th quarter as curbs stay
• Bad-Loan Ultimatum in India Sees Default Risk Climb Most in Asia: Bank of India’s CDS jumps as spreads widen on dollar bonds
• Abu Dhabi Fund Denies Guaranteeing 1MDB’s Cayman Investments: 1MDB in months-long dispute with Abu Dhabi’s IPIC over debt
• Trafigura Said in Talks for Stake in $6.5b Indian Refiner: Billionaire Ruia brothers selling stake to pay down debt

In Europe, central banks have stolen the limelight today as ECB and BoE remain at the fore of participants’ thoughts and continue to dictate price action. The latest ECB sources saw suggestions that the central bank are not currently considering abandoning their capital key for QE purchases and as such refute suggestions from yesterday that the ECB are concerned about the diminishing pool of eligible debt for their QE programme and subsequently could move away from their current capital key. As such, Bunds and T-notes have seen significant upside, with the German benchmark back above 167, while UST yields reach fresh record lows. In terms of equities, major European indices have traded in a relatively tight range this morning, with Euro Stoxx (-0.25%) trading higher at mid-morning by around 0.2%. Financials are among the worst performers, after hopes of further action by the ECB have been dashed, while defensive sectors in the form of consumer discretionary and consumer staples outperform.

Top European News

• EU’s Bank Resolution Plan Questioned as Denmark Joins Doubters: Italy’s banks saddled with ~EU360b in soured loans
• Deutsche Boerse Director Says ‘Creative’ Answer Needed for LSE: Bloomberg survey shows odds of deal happening at just 26%
• Gove to Make Case for U.K. Premiership After Boris Betrayal: Theresa May is main rival in five-way Tory leadership race
• Euro-Area Manufacturing Grows at Fastest Pace in Six Months: Purchasing Manufacturers’ Index rose to 52.8 in June from 51.5
• U.K. Manufacturing Growth Picked Up Before Brexit Referendum: Purchasing Managers’ Index rose to 52.1 from revised 50.4 in May
• Italy’s Jobless Rate Falls Slightly Before Expected Slowdown: Youth unemployment in May remained unchanged at 36.9%

In FX, the pound slid more, dropping to $1.3250, after sliding 0.9 percent Thursday on Carney’s comments alluding to potential policy action. Sterling reached a 31-year low of $1.3121 on June 27 in the aftermath of the Brexit vote.  The yen snapped a three-day retreat, climbing 0.5 percent to 102.68 per dollar after Japanese data showed core consumer prices dropped for a third straight month, and household spending also declined. The MSCI Emerging Markets Currency Index was little changed on Friday, leaving it 1.2 percent higher this week, the best performance in three months. Brazil’s real and Mexico’s peso have led gains, rising more than 3 percent. The yuan slipped 0.20 percent to 6.6612 per dollar on speculation that the authorities are allowing it to drop. China’s currency weakened more than 3 percent last quarter, the most since the nation unified the official and market rates at the start of 1994.

In commodities, silver jumped as much as 3.6 percent to the highest since September 2014, and gold climbed 0.9 percent to $1,333.63 an ounce with its fifth weekly advance the longest rally since July 2014.  Gold will probably extend its rally this half as Britain’s vote to quit the EU adds to the case for the Fed pausing on interest rates, according to Ivan Szpakowski, who left Citigroup Inc. earlier this year to set up a hedge fund that started trading in May. Nickel and lead both rose more than 1 percent. The London Metal Exchange LMEX Metals Index rallied the most in two years last quarter.  West Texas Intermediate crude decreased 0.6 percent to $48.06 a barrel. The commodity jumped 26 percent in the three months through June as declines in U.S. supply fueled speculation the global oil surplus is easing.

On today’s US calendar, the highlight will be the June ISM manufacturing print which is expected to have held steady at 51.3. Construction spending for May is also due out along with the manufacturing PMI and later on this evening we’ll get the latest vehicle sales data. There’s a bit more central bank speak with the ECB’s Coeure due this morning in Paris (8.15am BST) and Nowotny (9.30am BST) shortly after, while this afternoon we’ll hear from Bundesbank President Weidmann (4.00pm BST) and the Fed’s Mester (4.00pm BST).

Bulletin Headline Summary from RanSquawk and Bloomberg

• European equities enter the North American crossover modestly lower as the latest ECB sources suggest the central bank are not currently considering abandoning their capital key
• As such, Bunds and T-notes have seen significant upside, with the German benchmark back above 167, while UST yields reach fresh record lows
• Today’s highlights include US Mfg PMI, ISM Mfg PMI and potential comments from ECB’s Weidmann and Fed’s Mester
• Treasuries higher in overnight trading, global equities mixed and gold rallies as central banks around the world promise more stimulus. Fixed income markets early close (2pm ET), rates/FX futures trading floors (1pm ET); U.S. markets closed Monday for holiday.
• Yields on 10- and 30-year U.S. Treasuries fell to records as bonds surged around the world on speculation the U.K.’s decision to leave the EU will slow global growth, prompting the Federal Reserve to abandon plans to raise interest rates
• The European Central Bank is considering loosening the rules for its bond purchases to ensure enough debt is available to buy in the aftermath of the Brexit vote, according to euro- area officials familiar with the discussions
• Justice Secretary Michael Gove made his case to be Britain’s next prime minister after breaking with the incumbent and then betraying the onetime front-runner
• Britain’s vote to leave the European Union, which has whipsawed markets and sparked political turmoil in the U.K., may end up having no impact on the U.S. economy, according to St. Louis Federal Reserve President James Bullard
• Goldman Sachs dismissed about 60 traders and salesmen in New York and London this wee. The cuts, which come on top of at least 353 others in New York this year, affect employees in fixed-income and equities
• For the Bank of Japan tepid economic indicators underscore a looming choice for Governor Kuroda to either step up monetary stimulus, adjust his 2%, two-year inflation target, or suffer a hit to credibility

* * *

US Event Calendar

• 9:45am: Markit US Manufacturing PMI, June F
• 10am: ISM Manufacturing, June, est. 51.3 (prior 51.3)
• 10am: Construction Spending, May, est. 0.6% (prior -1.8%)
• 1pm: Baker Hughes rig count
• Wards Domestic Vehicle Sales, June, est. 13.4m (prior 13.33m)

* * *

DB’s Jim Reid concludes the overnight event summary

In a day of fascination in UK politics, it was BoE chief Mark Carney who stole the show markets wise when he discussed the likelihood of looser monetary policy over the summer in an afternoon speech. This was combined with a Bloomberg story late in the day suggesting that the ECB are considering moving away from capital keys to allow them to increase the pool of securities they can buy and possibly give them more flexibility to help direct funds to the more indebted in the future. Both stories helped sharply turn around a day that started with weakness in the morning European session.

Expanding on those two in order, in his second televised address since last Thursday Carney said specifically that ‘it now seems plausible that uncertainty could remain elevated for some time’ and that ‘the economic outlook has deteriorated and some monetary policy easing will likely be needed over the summer’. Carney also highlighted that the Bank will ‘discuss further the range of instruments at our disposal’. It’s worth noting that the upcoming two BoE policy meetings are relatively close together. The first is in just two weeks (July 14th) and the second on August 4th. DB’s George Buckley highlighted in his “As the dust settles” note on Friday that a cut at the August meeting could well be justified and this meeting also happens to line up with the next BoE inflation report. In any case markets yesterday moved to swiftly re-price the odds of a cut this summer. Indeed based on futures markets the implied probability of a cut in July is 62% – the highest it’s been and up from 11% pre-referendum while the probability of a cut by August is 76% and up from 15% in the same time frame. Sterling was little changed in the build up to Carney’s speech but plummeted as he spoke, hitting an intraday low of $1.3206 (about -1.65% lower on the day) before settling down to finish -0.88% by the close at $1.3311. The FTSE 100 and 250 climbed +2.27% and +1.68% respectively with a late rally into the close while it was amazing to also see the March 2019 Gilt hit negative territory yesterday at -0.006% after dropping over 10bps. Putting it in perspective, this time last year that bond was trading with a yield of 1.177%!

Meanwhile the ECB story which emerged after Carney’s speech suggested that policy makers have started to become concerned that the eligible pool of securities for QE has shrunk so much post Brexit that some Governing Council members are starting to favour switching the allocation of purchases towards one in line with a country’s outstanding debt pile. All eyes will be on what the potential Bundesbank response is but there’s no doubting that, if true, the news would be very supportive for risk assets. Indeed Italy would be one to reap the rewards with the potential for a lot more buying of BTP’s. Peripheral rates markets were the big winners yesterday as a result with 10y yields in Italy, Spain and Portugal falling 11bps, 9bps and 8bps respectively while the core was flat to a few basis points tighter. The FTSE MIB also bounced into the close to finish +1.57% yesterday which outperformed the Stoxx 600 (+1.04%), DAX (+0.71%) and CAC (+1.00%). Credit markets were also stronger with financials in particular (senior and sub 5bps and 13bps tighter respectively) leading the charge. It’s worth also mentioning that yesterday the European Commission was said to have authorized for Italy to use government guarantees as a precautionary liquidity support for its ailing banking sector, so it’s likely that this also helped support sentiment. A reminder that the next ECB meeting is on the 21st of July which suddenly looks like it has the potential to be very interesting.

Switching our focus over to markets this morning in Asia where there’s been a fair bit of data out for us to highlight. The June PMI’s have been released in China with the non-manufacturing PMI rising 0.6pts to 53.7 (highest since March) while the manufacturing PMI declined one-tenth to 50.0 as expected. The private Caixin manufacturing survey however did reveal a 0.6pt decline to 48.6 which is the lowest since February. Meanwhile in Japan headline inflation has moved further into deflationary territory in May at -0.4% yoy from -0.3%. If there’s good news it’s that the decline was a little less than expected (-0.5% yoy). Core CPI printed at -0.4% yoy too (from -0.3%) while the core-core declined one-tenth also to +0.6% yoy. Also out is the Q2 Tankan survey where the large manufacturers index held at +6 (vs. +4 expected) while the large non-manufacturing index declined 3pts to +19 (vs. +22 expected). Readings for small firms weakened. Elsewhere Japan’s jobless rate has held steady at 3.2% in May, while household spending has fallen to -1.1% yoy in the same month (from -0.4%). Taken together it’s hard to imagine that the data will do anything other than further the pressure on the BoJ to react later this month.

The Nikkei and Topix are both +0.67% higher following the data while the Yen is also around +0.3% stronger. Bourses in China are modestly higher while the Kospi and ASX are +1.00% and +0.61% respectively. Sterling is about +0.2% stronger while FTSE 100 futures are up about a percent.

Moving on to look into a bit more detail on that latest swing in UK politics where, following that announcement from Boris Johnson yesterday, the majority of the betting odds appear to be in favour of Theresa May as the being the next UK PM, indeed a view also shared by the BBC. While May backed the ‘remain’ campaign it did feel like her speech yesterday offered a relatively clear path ahead. May highlighted that there ‘must be no attempt to remain inside the EU, no attempts to re-join through the back door and no second referendum’. She also went on to say that there should be no general election until 2020 and no decision to invoke article 50 until the British negotiating strategy is agreed and clear.

Changing tack, as we discussed at the top, yesterday Michal Jezek in my team published a note reviewing the performance of CSPP-eligible, ineligible non-bank and (ineligible) bank senior EUR bonds, assessing their relative performance since we formulated our CSPP strategy before the programme started. We affirm our strategy, sticking to overweight CSPP-eligible bonds for now given the uncertain outlook after the Brexit vote. In addition to senior unsecured bonds, we look at performance across the bank capital structure. We highlight the outperformance of AT1s relative to bank equity, in contrast to the bank sell-off early in the year. Finally, we produce a list of the top and bottom 300 EUR IG senior benchmark bonds ranked by relative spread performance since a) the Brexit vote and b) the CSPP announcement, indicating which are eligible and which are ineligible non-bank or bank bonds. See the note for more details. Email Michal.Jezek@db.com if you didn’t get it.

In a last mention of the ECB for today, this morning our European equity strategists published a report on market expectations for ECB easing. They highlight that while the story which emerged yesterday potentially removes some near term financial stress in markets, other referendum related risk factors, while less immediate, are still in place. The weakness in European banks raises the risk that the Euro area credit impulse will turn negative which points to downside risks for domestic demand growth, macro uncertainty in both the UK and Euro area is also likely to remain elevated and finally the prospect of further USD strength raises the risk of further CNY depreciation and oil price weakness. They maintain their overall cautious stance on European equities and also banks as a result and see upside as relatively capped even with the ECB story.

In terms of the rest of the price action yesterday, the stimulus prospect boost to markets also helped Wall Street close the quarter on a strong note yesterday. The S&P 500 finished +1.36% and actually erased a monthly decline in the last minutes of trading to close just in positive territory for June. Yesterday’s gains actually came despite a rougher session for Oil with WTI closing -3.11% and back below $49/bbl although precious metals and especially Silver (as you’ll see in our performance review below) continued the amazing run after rallying +2.28% and to the highest level since September 2014.

There was a bit of data yesterday too. In the US initial jobless claims were up 10k last week to 268k which is pretty much where the four-week average is sitting. Meanwhile the Chicago PMI printed at 56.8 for June (vs. 51.0 expected) which is a 7.5pt rise from that low May print and actually the highest reading since January last year. That perhaps provides some upside risk to the ISM manufacturing print today. Meanwhile in Europe the CPI headline estimate for the Euro area in June was slightly higher than expected (+0.1% yoy vs. 0.0% expected) after being at -0.1% in May. Core inflation rose one-tenth to +0.9% yoy after expectations were for no change. Meanwhile the Q1 GDP print for the UK was left unchanged in the final revision at +0.4% qoq, German unemployment also held steady at 6.1% while the flash June CPI print for France came in at +0.2% mom as expected.

Taking a look at the day ahead, datawise in Europe this morning we’ll get those final revisions to the manufacturing PMI’s as well as a first look at the data in the periphery and for the UK. The Euro area unemployment rate for May is also due to be released (expected to nudge down one-tenth to 10.1%). The highlight this afternoon in the US will be the June ISM manufacturing print which is expected to have held steady at 51.3. Construction spending for May is also due out along with the manufacturing PMI and later on this evening we’ll get the latest vehicle sales data. There’s a bit more central bank speak with the ECB’s Coeure due this morning in Paris (8.15am BST) and Nowotny (9.30am BST) shortly after, while this afternoon we’ll hear from Bundesbank President Weidmann (4.00pm BST) and the Fed’s Mester (4.00pm BST).

via http://ift.tt/29fSL4V Tyler Durden

Silver has surged another 2.7% higher this morning to $19.23/oz. This after yesterday’s 3% surge when silver flew through resistance at the $18 level to close at $18.26/oz. Silver is 20% higher in dollar terms in June. Silver has surged by similar amounts in euros and by 28% in beleaguered sterling in the month.

– BREXIT Creates EU Contagion Risk – Ramifications for Investors, Savers and Companies In Ireland
– BREXIT Day – Markets Becalmed – Gold Panic Prelude – Trading Hours
– Gold Lower Despite “Panic” Due To “Supply Issues” In Inter Bank Gold Market
– Gold Slips Despite UK Gold Demand Surging – Investors “Seek Stability”
– Gold Prices Surge to Highest in Nearly Two Years On FED and Brexit Haven Demand
– Gold Bullion Has Little Downside, Brexit Or Not, Says HSBC
– Central Bank of Ireland Warns Risks are Debt, Brexit, Geopolitical Tensions and Migration
– Gold In Euros Surges 6.5% In June and 17% YTD On BREXIT Concerns
– Soros Buying Gold On BREXIT, EU “Collapse” Risk
– UK Gold Demand Rises On BREXIT “Nerves”
– Pensions Timebomb in “Slow Motion Detonation” In UK, EU, U.S.
– Silver – Perfect Storm Brewing in the Market
– Martin Wolf: There Will Be Another “Huge” Financial Crisis

www.GoldCore.com

via http://ift.tt/297nBME GoldCore

Finally.

With bond yields across the rest of the developed world already making new record lows every day, only the US had so far refused to take out all time lows set back in 2012. That finally changed overnight when the 10Y Treasury dropped -9 bps to 1.3784%, while the 30Y declined by the same amount, sliding as low as to 2.1914%.

The underlying dynamic for the bond demand is the same as that which has pushed all other bond yields to record lows: yields are plunging to record-low levels from the U.S. and Japan to the U.K., as a result of expectations of more QE by central banks, something which was confirmed by the US yesterday.  “In the Tokyo market, there’s no interest rate, and there’s turmoil in the euro area,” said Yoshiyuki Suzuki, the head of fixed income in Tokyo at Fukoku Mutual Life Insurance Co., which has $63.4 billion in assets. “Money is escaping to the Treasury market.”

However, the specific catalyst which helped push both Bund and US TSY yields higher, was a Reuters report that contrary to what Bloomberg reported yesterday, the ECB is not currently considering buying government debt out of proportion to euro zone countries’ shareholding in the bank and the hurdle for abandoning this capital key is high.

Previously, bond markets rallied on Friday after Bloomberg reported that the ECB was considering giving up the capital key due to a shortage of German paper, which investors see as safe and have piled into in the aftermath of Britain’s vote to leave the European Union.  But sources familiar with the ECB’s thinking said that several other changes would be first considered before any such move, which would be have heavy political ramifications, especially in Germany, where many are already uneasy about the ECB’s quantitative easing.

In case of shortage of papers to buy, it would first consider raising the limit on how much it can purchase of each bond issue that is not protected by collective action clauses, the sources said. Or it would amend rules about which assets it can buy to expand the eligible pool.

“As in the past, we’ll amend the rules if necessary but it’s not on the agenda now,” a Governing Council member, asking not to be named, told Reuters. “I would expect such changes to be quite technical. The capital key would be political, however.”

So, while traders await for more clarity on what the ECB will do, they have decided to simply pile into the one bond that provides more yield than virtually any other DM TSY in the world: that of the US, and as Bloomberg explained, the long-end of the UST curve outperformed in London hours, where recent sessions have seen the sector supported by large buying by Asian real money.  Volumes today show more bonds trading in 30Y cash than in 2Y, says one London-based trader. 

The trader reasoning, as summarizied by Bloomberg: “10Y USTs break to new all time yield lows as bunds rally after ECB said to not debate abandoning capital key.”

Also of note: 10Y Treasury futures volumes spike as all time yield lows are hit with ~10k trading 1-minute between 133-23/28+.

It appears that as we hit new record low yields, the scramble is just getting started.

via http://ift.tt/29izMXR Tyler Durden

Via Dana Lyons' Tumblr,

Like many equity markets globally, the German DAX is testing critical trend support stemming from the 2009 lows.

Another day, another mega-trendline being tested in the global equity markets. Considering the bevy of trendline encounters around the world, it has become Trendline Week here on the blog and on Twitter (@JLyonsFundMgmt). And we’re not talking about obscure markets either. For example, we’ve already highlighted critical support tests for the STOXX Europe 600 and Japanese Nikkei 225 indices this week. Today’s featured trendline pertains to – the German DAX.

Considered the engine that runs the Eurozone, it is not surprising that the German DAX would strongly resemble the STOXX 600. As goes the German market, so goes the Eurozone, it is thought. And while there is probably a lot of truth to the notion, the 2 markets are not 100% in lock-step. As a matter of fact, Germany only has the 4th highest weighting in the STOXX 600, behind Great Britain, France and Switzerland. Also, consider the fact that while the STOXX 600 was in the process of making essentially a multi-decade Triple Top in the past few years, the DAX was consistently hitting all-time highs from 2013 to 2015.

That said, the similarities are unmistakable and Germany’s influence undeniable. Considering the charts, the DAX trendline is basically the same as the one we highlighted on the STOXX 600. Specifically it’s the Up trendline stemming from the 2009 lows that tracks the bull market of the past 7 years (the only difference is that the DAX chart is drawn on a log scale, which makes its meteoric rise even more impressive).

 

The idea is obviously the same as with the STOXX 600. It is a trendline so let’s keep it simple and not over-analyze things. Above the trendline is bullish for prices. Below it is bearish. And presumably – assuming it holds – when prices drop to test the trendline, it is a “buy” signal.

Now, for you day-traders, we apologize but the actual trendline touch occurred 2 days ago, on Monday (we had to pick 1 market each of the past 2 days and we settled on the STOXX 600 and Nikkei). Therefore, if you were looking to trade the DAX for a bounce, you’ve already missed it as the index has popped close to 5% in the 2 days since. This is not to say the DAX cannot rally more. Indeed, while it is not our forecast, the trendline is significant enough to produce another strong intermediate-term rally, as it did following touches in 2011 and this past February.

FYI, on Monday, the trendline (an inexact art, btw) was in the vicinity of 9205, according to our work. The DAX hit a low that day of 9214…thus, another “random” victory for technical analysis voodoo.

So, is the trendline going to hold? Our guess is that, while it may hold temporarily, there is a strong chance the trendline is broken sooner than later. One thing we have discussed before is that the increased frequency of trendline touches is suggestive of a forthcoming break. The idea is that buyers are unable to bounce the index as high or for as long as they did before, so it is an indication of waning demand.

On the plus side, like the STOXX 600, the 38.2% Fibonacci Retracement of the 2009-2015 rally is nearby (around 9000). This level held in February and provides another layer of potential support. Unlike the STOXX 600, that February low was above the October 2014 low. Thus, the series of higher lows is still in effect, which is a positive.

That said, the dominant force on the chart is undoubtedly the post-2009 Up trendline. In the event that it is broken, those other factors may merely serve as speed bumps on the way lower. Furthermore, should that break occur, one can be assured that a falling German stock market will serve as a significant weight upon the rest of Europe, and possible the globe.

*  *  *

More from Dana Lyons, JLFMI and My401kPro.

via http://ift.tt/29bddkl Tyler Durden