Month: February 2017

• Gold hits 12-week high
• USD Gold price up 4.85% in last month
• Sabre-rattling from Trump administration set-to benefit gold
• Iran upset and Middle East tensions could drive oil and gold prices up.
• Financial Times foresees “not only currency wars but a fully fledged trade confrontation that could be disastrous for the world economy.”
• Royal Mint producing 50 % more gold bullion coins and bars compared to 2016
• Utah moves to hold public funds in gold
• WGC report demand for gold hit four-year high in 2016
• Investment demand climbed by 70% last year fuelled by geopolitical uncertainties 

The Trump administration continues to sabre-rattle at global powers and threatens to disrupt the status-quo of international relations. Comments in just 24-hours by Donald Trump and his team have included attacking an Ivy League university, a nuclear power and two of the United States’ key trading partners.

We continue to look on as the unconventional tweets and announcement appear, but in the meantime watch the gold price hit 12-week highs and inflows of roughly 1.2 million ounces surge into gold ETFs, as uncertainty continues to drive investors towards safe havens.

FOMC stand-by to watch the Donald

Many market observers may have found a funny sort of comfort in seeing the statement of the FOMC meeting, this week. A funny thing to say, but given each day appears to bring a new surprise there is something reassuring that meetings and announcements from the likes of the Federal Reserve, continue as scheduled.

Unsurprisingly, and despite Janet Yellen’s warnings of a ‘nasty surprise on inflation if it was too slow with rate hikes’, the Federal Reserve held back from a further rate rise this week. The committee painted a fairly positive outlook of the economy, it was perceived to be dovish. The statement helped to ultimately push gold prices higher as the dollar fell in disappointment to no rate hike. For some this was an example of ‘The Fed that cried Wolf.’

The Fed is still expected to hike rates up at points throughout the year, but uncertainty about when and how much remains. The FOMC are waiting for further disclosure President Trump’s economic policy.

Gold was the only commodity that climbed higher (+0.9%) following the Fed announcement.

Iran on notice: be on notice to buy gold

Earlier this week Iran tested a ballistic missile and attacked a Saudi navy vessel. The Trump did not disappoint in letting the world that they were unhappy, through both Twitter and Mike Flynn.

Mike Flynn, Trump’s national security advisor stated, ““Recent Iranian actions involving a provocative ballistic missile launch and an attack against a Saudi naval vessel conducted by Iran-supported Houthi militants underscore what should have been clear to the international community all along about Iran’s destabilizing behaviour across the entire Middle East”

Flynn concluded, “As of today, we are officially putting Iran on notice.” This was followed by a Tweet confirming this position, by Trump.

Fordham University maritime law professor and former US Navy Commander Lawrence Brennan spoke to Business Insider on Monday.

“This attack is likely to impact US naval operations and rules of engagement (ROE) in nearby waters,” said Brennan, who pointed out that Iranian ships frequently harass and sail very closely to US Navy ships.

Brennan suggested that in light of the recent suicide boat attacks, the US Navy should now consider shooting Iranian or hostile vessels that get too close.

Given that Trump has so far proven his intention to follow through on campaign promises, we expect him to do the same with Iran. Whilst campaigning in Florida, in September, he told a rally of thousands that when it comes to Iran, “when they circle our beautiful destroyers with their little boats, and they make gestures at our people that they shouldn’t be allowed to make, they will be shot out of the water.”

The remarks from Trump and Flynn took immediate effect on the US dollar (already weakened by the FOMC’s statement) and sent gold higher (as shown in this Business Insider chart).

Iran weighed in on the matter with defence minster Hossein Dehghan telling Iranian state media that contrary to the claims of the US,  “The test was not a violation of a nuclear deal with world powers or any UN resolution,”

Later Ali Akbar Velayati, senior adviser to Iran’s supreme leader Ali Khamenei, told the Fars news agency, “”This is not the first time that an inexperienced person has threatened Iran … the American government will understand that threatening Iran is useless.”

Iran to dump the dollar but stocking up on gold

Of course, this wasn’t the first time President Trump has rattled the Iranians since he took office. When he declared a travel ban on seven countries, including Iran, the country’s central bank decided to respond.

Iranian Central Bank Governor, Valiollah Seif, told sate Press TV that the bank “is seeking to replace the dollar with a new common foreign currency or use a basket of currencies in all official financial and foreign exchange reports.” This will come into force on 21st March 2017. Seif has apparently recommended currencies “ with a high degree of stability.”

The country reportedly receives around USD$41billion in oil revenues, a risk on both sides of the equation.

It is also worth noting that Iran bucked the trend for gold demand in the last quarter of 2016. The WGC reports that a growth of 15% in Q4 helped push annual demand up to 41.0t. This push for gold was supported by the improving domestic economy and is set to continue to climb as the central bank releases new coins later this year.

Good for oil, good for gold

 

Low oil prices across the Middle East affected gold demand, according to the World Gold Council’s 2016 Q4 report, however with Trump’s ongoing fighting-talk (and executive orders to the Middle East) we expect the correlation between oil and gold prices to work in our favour.

Whilst the jury is still out on the correlation between gold and oil returns, there is some clearer correlation between their prices. It is estimated that over 60% of the time, there is a strong correlation between the two. The above chart compares the month-end LBMA fix gold price with the monthly closing price for West Texas Intermediate (WTI) crude oil since 1946.

With all the fighting talk with Iran, oil has had a bit of a pop up (also helped by Exxon’s (XOM) Rex Tillerson being sworn in as Secretary of State). As tensions increase in the Middle East and Trump carries on protecting America’s trade, we expect to see higher oil and therefore gold prices.

As oil prices rise, this pushes up inflation. Gold is an inflation hedge and therefore an increase in demand for the yellow metal, as a safe haven, will increase. It is also worth remembering the damage high oil prices can do on economic growth – by slowing it. Slow economic growth is likely to impact equity markets and boost demand for alternative investments such as gold and silver.

Currency wars set to come out into the open

It is not just the price of oil which signals a positive picture for gold in both the long and short-term. Currency wars, as most recently discussed by us a week ago are now an open threat to the stability of the global financial and trade system.

Trump suggesting that the US dollar was too strong and enticing China into a currency war now seems like a distant memory. It was in fact the start of a trend of the new administration to take on currencies.

Peter Navarro, head of the National Trade Council, had accused Germany of exploiting a ‘grossly undervalued Euro’. This came just days after Shinzo Abe had accused Trump of attacking both China and Japan and for “play[ing] the devaluation market” and was forced deny reports of yen manipulation.

Following Navarro’s Euro comments Ulrich Leuchtmann, an analyst with Germany’s Commerzbank, warned clients to “buckle up for a currency war that might become nasty…With his statement [Mr Navarro] has in fact fired the next salvo in the currency war the US administration is currently conducting against the rest of the world,”

These latest moves by both the President and Navarro signal further steps away from the usual protocol of government leaders who do not openly comment on the currencies of other countries. A job which is usually handled by the Treasury Secretary.

It will be interesting to see what Trump and Navarro think they can do about the strong dollar and other currencies. It is not so easy to devalue, as it once might have been. Moves to weaken the dollar are likely to occur through protectionist measures which will ultimately see price inflation exported around the world as the dollar is used in the majority of trade. This will not be taken well across the globe. The Financial Times echoes such concerns:

“But the chaotic start to the administration and what many see as its protectionist agenda have amplified fears of not only currency wars but a fully fledged trade confrontation that could be disastrous for the world economy.”

Hype overshadows the real news

Despite the announcement from the Yellen and her team, the ongoing sabre-rattling from the Trump administration distracts from economic reports that once influenced markets. For example, today the January employment report will be released, economists are expecting gains of 170,000 which could raise expectations of a rate-hike in March. However, markets appear distracted by activities in the Trump administration and a certain twitter account.

Should the jobs report be positive news then we may see a small-pullback in the gold price, however it is unlikely that investors wish to be short-gold given the world-wide geopolitical environment of uncertainty.

But it is not just Trump that is prompting upset and discomfort, as highlighted by the recent WGC report, gold demand was high in 2016 (and continues to be in 2017) because of ongoing uncertainty with Brexit, elections in France, Germany and Holland.

This has been reflected in an insightful report into government owned Royal Mint shows the explosion in demand for gold across both the UK and Europe. Reuters reports that demand has climbed by 50% since the same point last year and sales rose by one-third in January.

Demand in the UK is reportedly up 25%, whilst sales to German more than doubled in volume terms, in the last year. Workers at the Mint point to uncertainties surrounding Brexit, the EU and the United States as reasons for the dramatic pick-up in demand.

Far away from the White House and the communications machine that is Twitter, in Utah Rep. Ken Ivory introduced a bill that will add several provisions to state law that will allow (and arguably encourage) the use of gold and silver as legal tender.

House Bill 224 will give the state the option to hold public funds in gold and silver, as opposed to Federal Reserve notes. Utah has long been at the forefront in the move to sound money, in 2011 it was the first state in 80 years that allowed the precious metals to be used as legal tender. This latest bill is seen as the next step in allowing gold and silver to be used in everyday transactions.

 

2017 set to shine like 2016

Whilst Q4 saw outflows, 2016 was the second best year for ETFs on record according to the WGC’s latest report. Global demand for gold-backed ETFs was 531.9t – the highest since 2009.

The World Gold Council points to three main factors driving the surge in gold demand in 2016: negative interest rates, the FOMC’s decisions and uncertainty stemming from the geopolitical situation.’

Demand for ETFs continues to be strong, just one month into the year. A report released on January 20th, Inauguration Day, by Bank of America Merrill Lynch said that precious metals saw the first ETF inflows of $1.3 billion, the largest weekly gain in five months.

According to Bloomberg, almost $1.6 billion poured into the 10 precious-metals ETFs that have attracted the most money in January. In Europe, in the week of Trump’s inaugurations, Germany’s Xetra-Gold ETF added $544 million in gold-backed ETF inflows. That amount is ten times that in the world’s biggest gold-backed ETF, SPDR Gold Shares (GLD).

Uncertainty remains, as does the need to buy gold

As we discussed yesterday, there is much uncertainty in the markets at present. The inauguration of Donald Trump just two weeks ago has, if anything, increased this feeling rather than reassure markets. However this sabre-rattling is distracting and markets do not know where to turn.

Supply and demand ultimately affect prices, but it is expectations and sentiment that make markets move. Despite Trump doing exactly what he promised, he continues to shock in the way he is delivering on those promises and this is confusing the sentiment in the market. Putting aside the events in the first week of his Presidency, this week in just 24 hours President Trump managed to threaten an Ivy League institution with a stop their federal funding, put a nuclear power ‘on notice’ and insult Australia over immigrants.

What is not confusing, as we see in the levels of gold demand, is market expectations. The market is expecting a period of uncertainty, it is expecting a period of raised tensions between the United States and the growing list of countries it has publicly taken issue with and it is expecting people to turn to safe havens such as gold and silver.

Yesterday we wrote about how big declarations and fear-mongering can distract us from what is really going on and, therefore, distract us from making the right decisions. It is clear that there is growing number of investors, around the world, who are not being distracted by the noise and the hype and are choosing to invest in safe havens such as gold and silver.

It would be wise to expect heightened uncertainty in the forthcoming months, if not longer. There is little point in looking to market sentiment at a time when a 140-character tweet can flip it upside down. Instead, investors should look to hold some of their wealth in gold and silver, assets that have long-held their value at times of unpredictability and turmoil whether through war, economic crises or political upheaval – all of which appear to be on the cards.

Gold and Silver Bullion – News and Commentary

Dollar, Stocks Fluctuate Before Jobs: Markets Wrap (Bloomberg)

JPM Silver Rigging Case Back in Court (Zerohedge)

Gold marks highest finish since mid-November (MarketWatch)

Investors Are Pouring Into Gold (Bloomberg)

Gold slips on profit-taking, firm dollar (Reuters)

The weak dollar policy is back with a vengeance (MoneyWeek.com)

China Suffers Largest Capital Outflow On Record In 2016 (Zerohedge.com)

The best precious metal to buy right now (MoneyWeek.com)

Trump devaluation claims raise fears of global currency war (FT.com)

Who Will Trump Blast Next Over Their Currencies? (Bloomberg)

Gold Prices (LBMA AM)

03 Feb: USD 1,214.05, GBP 970.93 & EUR 1,128.99 per ounce
02 Feb: USD 1,224.05, GBP 966.14 & EUR 1,131.88 per ounce
01 Feb: USD 1,210.00, GBP 960.01 & EUR 1,122.03 per ounce
31 Jan: USD 1,198.80, GBP 964.91 & EUR 1,119.20 per ounce
30 Jan: USD 1,189.85, GBP 949.38 & EUR 1,112.63 per ounce
27 Jan: USD 1,184.20, GBP 943.81 & EUR 1,108.77 per ounce
26 Jan: USD 1,191.55, GBP 945.14 & EUR 1,111.95 per ounce
25 Jan: USD 1,203.50, GBP 956.90 & EUR 1,119.62 per ounce

Silver Prices (LBMA)

03 Feb: USD 17.28, GBP 13.84 & EUR 16.10 per ounce
02 Feb: USD 17.71, GBP 13.95 & EUR 16.38 per ounce
01 Feb: USD 17.60, GBP 13.91 & EUR 16.29 per ounce
31 Jan: USD 17.29, GBP 13.86 & EUR 16.07 per ounce
30 Jan: USD 17.10, GBP 13.65 & EUR 16.03 per ounce
27 Jan: USD 16.70, GBP 13.32 & EUR 15.61 per ounce
26 Jan: USD 16.86, GBP 13.39 & EUR 15.71 per ounce
25 Jan: USD 16.93, GBP 13.46 & EUR 15.74 per ounce

Recent Market Updates

– Buy Gold Because of Uncertainty not Doomsday
– The Alternative Fact of the Cashless Society
– Silver, Platinum and Palladium As Safe Havens – Reassessing Their Role
– Why 2017 Could See the Collapse of the Euro
– Dow 20K … US Debt $20 Trillion … Trump and $15,000 Gold
– Switzerland’s Gold Exports To China Surge To 158 Tons In December
– Blockchain – Central Banks Banking On It
– Sharia Standard May See Gold Surge
– Gold Price To 2 Month High As Fiery Trump Declares New American Order
– Gold’s Gains 15% In Inauguration Years Since 1974
– Turkey, ‘Axis of Gold’ and the End of US Dollar Hegemony
– Gold Up 5.5% YTD – Hard Brexit Cometh and Weaker Dollar Under Trump
– Bitcoin and Gold – Outlook and Safe Haven?
– Physical Gold Will ‘Trump’ Paper Gold

www.GoldCore.com

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Having seemingly survived their existential crisis last year, it appears the world’s most systemically dangerous bank remains under pressure. Just a day after missing analysts’ earnings expectations, Deutsche Bank is set to announce major job cuts across its trading businesses.

 

As Bloomberg reports, the bank will cut as much as 17 percent of staff in its equities unit and reduce fixed-income headcount by as much as 6 percent, with notices to be served to employees soon, the person said.

Chief Executive Officer John Cryan is cutting 9,000 jobs across the company to raise profitability and capital levels eroded by misconduct costs. Deutsche Bank’s market share in fourth-quarter trading fell to the lowest since the financial crisis as Cryan cut assets and clients concerned about the company’s finances pulled back.

 

Debt-trading revenue rose 11 percent to 1.38 billion euros ($1.48 billion), falling short of the 1.68 billion-euro average estimate of 10 analysts in a Bloomberg News survey. Equity trading revenue, which analysts had expected to be flat, fell 23 percent to 428 million euros.

 

The equities business is still “flattish to slightly down” in January compared with a year earlier, though the firm’s debt-trading business saw a 40 percent increase in the month, Deutsche Bank Chief Financial OfficerMarcus Schenck said Thursday on a call with analysts.

Following chatter of more client redemptions during the call, the share price has begun to flag once again – but for now CDS remains well off its 2016 wides.

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Having received his doctorate from UC Berkeley in 1978, Dr. Michael Savage offered a unique perspective today on the trajectory the famed college has taken over the subsequent decades since.

Wistfully, he compared the present day cadre of left wing anarchists, known to us as AntiFA, to communist anarchists in Germany, circa 1920s. The response to the agitators then paved the way for Hitler’s brown shirts. The rest, as you know, is history.

But, have we learned from history, posited an inquisitive Savage? For every action is a counter-reaction and so forth. Hence, law and order is the only tonic to quell the present day disorder, fomented and encouraged by democratic politicians, carefully cultivated and organized by left wing groups for the explicit purposes of strong arming those who do not fit into the zeitgeist of their political ideals.

“This was the start of the free speech movement back in the 1960s. Now we complete the arc, from free speech to dead speech.’

Dr. M. Savage, Feb. 2nd, 2017

‘Tis a slippery slope. Behold a momentous monolog by the good Dr.

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Submitted by Martin Armstrong via ArmstrongEconomics.com,

A shocking statement was made by a United Nations official Christiana Figueres at a news conference in Brussels.

Figueres admitted that the Global Warming conspiracy set by the U.N.’s Framework Convention on Climate Change, of which she is the executive secretary, has a goal not of environmental activists is not to save the world from ecological calamity, but to destroy capitalism. She said very casually:

“This is the first time in the history of mankind that we are setting ourselves the task of intentionally, within a defined period of time, to change the economic development model that has been reigning for at least 150 years, since the Industrial Revolution.”

She even restated that goal ensuring it was not a mistake:

“This is probably the most difficult task we have ever given ourselves, which is to intentionally transform the economic development model for the first time in human history.”

I was invited to a major political dinner in Washington with the former Chairman of Temple University since I advised the University with respect to its portfolio. We were seated at one of those round tables with ten people. Because we were invited from a university, they placed us with the heads of the various environmental groups. They assumed they were in friendly company and began speaking freely. Dick Fox, my friend, began to lead them on to get the truth behind their movement. Lo and behold, they too admitted it was not about the environment, but to reduce population growth. Dick then asked them, “Whose grandchild are we trying to prevent from being born? Your’s or mine?

All of these movements seem to have a hidden agenda that the press helps to misrepresent all the time. One must wonder, at what point will the press realize they are destroying their own future?

Investors.com reminds Figueres that the only economic model in the last 150 years that has ever worked at all is capitalism. The evidence is prima facie: From a feudal order that lasted a thousand years, produced zero growth and kept workdays long and lifespans short, the countries that have embraced free-market capitalism have enjoyed a system in which output has increased 70-fold, work days have been halved and lifespans doubled.

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According to Trepp, one of the world’s leading providers of global research and analysis for the securities and investment management industry, the delinquency rate for Commercial Mortgage-Backed Securities (CMBS) hit a 14-month high-water mark in December 2016. At 5.23%, the rate of CMBS delinquencies was 20 basis points higher than a month earlier (November 2016).

So what does this mean in terms of what industry watchers might expect in the next year
and beyond? Is this a prelude to the CMBS ghosts of 2007 making a revival?

Since the 2007 crisis, some borrowers have seen respite to their dire situations. With their property values on the rise, and their own financial situations set to improve gradually, they are in a much better position today to re-finance upcoming loans.

According to Trepp, over $54.5B of CMBS conduit loans matured in 2015. By 2018, the researcher forecasts nearly $205.2 of such loans to become due. $87.1 billion of that came due in 2016, while over $105.8 billion is set to mature this year – 2017. When we compare these amounts to what matured in 2014 ($37B) and 2015 ($70B), we can see there is a definite uptrend in delinquencies.That uptrend is forecast to dip in 2018, with $12.8 billion up for re-negotiation that year.

While the fortunate few have managed to make a comeback, for many others things don’t look too good! Barely able to keep up with their payments; and with scant equity created in the property they own, these unfortunates aren’t seeing their property values appreciate either.

For them, as for the general CMBS market, there’s more doom to come!

THE SQUEEZE IS ON

For CMBS loan borrowers who are up for re-financing, things could get even tougher. With the massive volume of debt that’s coming due, and the spectre of 2007 still looming large, many lenders are taking a fresh look at their own lending practices. The ensuing soul-searching is causing lenders to more closely review their regulatory compliance, with many of them now requiring borrowers to meet a higher underwriting standard – that of current income as opposed to projected income.

As a result, some lenders have been forced to close shop and exit the CMBS marketplace, with others preparing to brace a fresh onslaught of defaulters and delinquencies.

BIG NAMES…BIG PAINS

Big names like CA Technologies (formerly Computer Associates) are not immune to the CMBS turmoil’s either. In August 2016, Fitch Rating had tagged CA’s commercial loan for purchase of its former HQ as “high probability” of defaulting. While CA finally did agree to a sale-leaseback arrangement, the loan (which was part of a $4.2 collateral for Goldman Sachs Mortgage Securities), highlights the murky waters of the CMBS business.

Wealth manager UBS was yet another ‘big name’ that has been swept by the tidal wave of bad CMBS loans. Early last year, its $156 million mortgage against its downtown Stamford premises, which it had securitized in association with Lehman Brothers, was put into the hands of a “special servicer” who deals with problem loans.

While these are just a few examples of ‘name brand’ borrowers defaulting on their mortgage commitments, it sets the tone of what we are to expect in 2017 and beyond. According to a report from Kroll Bond Rating Agency, “lending volumes for both insured depositories and non-bank lenders are likely to fall in 2017 and beyond…” The report expects a sharp decline in refinancing volume – from $263B in Q4 2016 to
just under $145B in Q1 of 2017.

And if businesses, homeowners and corporations can’t refinance – then what?

BRACING FOR THE FALL

Industry watchers are concerned about the massive tide of maturities that loom from now till 2018. While the 2018 wave is expected to be less “messy” – largely due to improving real estate values in certain areas, the CMBS market as a whole faces other headwinds.

Though employment rates are improving gradually, large segments of mortgage holders aren’t benefiting from the green shoots in the economy. Add to that the increasing demand by many lenders for lower loan-to-value (LTV ratio) requirements, and toss in potential (impending) interest rate hikes – and we are looking at a recipe for disaster.

Borrowers, whose loans are set to mature shortly, shouldn’t automatically expect that they will get renewed. Lenders, who have such loans on their books, should worry about what course of action to follow if/when their clients default.

In either case, it does seem as though the ghost of the sub-prime past is once again rearing its ugly head. Let’s hope this time everyone involved – lenders, accountants, real estate lawyers, borrowers, regulators – are well prepared and already bracing for the fall!

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Courtesy of Bloomberg, here’s a look at scheduled events of interest today in Washington (all times Eastern).

White House

• Noon: President Trump signs executive orders
• Trump to Halt Obama Fiduciary Rule, Order Review of Dodd-Frank
• Trump also attends meetings at White House before departing for West Palm Beach, Fla. in afternoon
• 12:30pm: Briefing with Press Sec. Sean Spicer

Congress

• Senate convened 6:30am and cleared bill to repeal an SEC rule forcing oil, gas, mining companies to disclose payments made to foreign governments
• Senate to vote on motion to invoke cloture on Betsy DeVos’ nomination to lead Education Dept.
• House convenes at 9am; considers joint resolution to disapprove Bureau of Land Management rule on conservation, waste prevention and production subject to royalties
• 10am: Sen. Ben Cardin, D-Md., participates in news conference on President Trump’s Supreme Court nominee, Neil Gorsuch; 26 North Fulton Ave. in Baltimore

Budget/Economy

• 8am: U.S. Chamber of Commerce holds conference on retirement; 1615 H St. NW

Defense/Foreign Affairs

• 8:30am: Council on Foreign Relations discusses countering religious extremism; 1777 F St. NW

Energy/Environment

• 3pm: Woodrow Wilson Center discusses year ahead in environment and energy; 1300 Pennsylvania Ave. NW

Trade

• 9am: The Elliott School of International Affairs at George Washington University discusses what President Trump can and cannot do to change trade policy; 1957 E St. NW

Transportation

• 11am: North American Concrete Alliance holds briefing on infrastructure priorities; 2168 Rayburn

Source: BBG

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Trump’s Travel Ban

Last Friday President Trump issued Executive Order 13769 which prohibited the entry of certain foreign residents from several different countries. The countries restricted by Trump’s travel ban were Iraq, Iran, Libya, Somalia, Sudan, Syria and Yemen. The order also suspended the U.S. Refugee Admissions Program for 120 days and entirely suspended refugees entering from Syria. The order was issued to prevent future attacks by foreign nationals in the U.S.

The execution of Trump’s travel ban was very poor. There was a significant amount of confusion and at first the Department of Homeland Security was detaining green card holders. Green card holders are legal residents who have already undergone a significant amount of vetting. The confusion and hasty implementation added to complaints from the left which said that the travel ban was motivated by Islamophobia. This is despite the fact that the Obama administration had already labeled these nations as countries of concern.

The markets reacted negatively to the news of the Trump’s travel ban. After two and a half months of positive reactions to Trump’s election the travel ban seems to be a tipping point. The travel ban will not have an impact on the performance of the economy or any of its constituents. Despite this fact the market reacted negatively.

Some of the negative performance is due fears that Trump’s next move will be to restrict worker visa’s. This caused technology companies to decline during the week. This type of restriction would mean added cost for U.S. based companies who rely on cheaper, temporary H-1B labor. Unfortunately, the mainstream media would like to you believe that Trump is preventing the next Sergey Brin from coming to the U.S. to start the next Silicon Valley Unicorn. This is not what is really happening.

Negative Short Term Volatility

The most important impact of President Trump’s actions is the precedent that he has created. The actions of last Friday show how quickly and hastily the Trump administration makes decisions. We highlighted this risk in our special Inauguration Article. While this may be a positive long term it is likely to increase uncertainty in the short term. Healthcare investors will have a hard time evaluating businesses knowing that the Trump can issue a ground-shaking executive order at any moment. Utility companies will not be able to effectively plan capital investments because the future is unclear. Uncertainty for the economy and markets is not good and usually translates into poor investing returns.

Today the press is reporting that Trump will be issuing an executive order to dismantle Dodd-Frank. The order will reduce the regulatory costs and burden that have been building for several years. This will have a positive impact on the financial industry today. This action again proves that President Trumps term will be volatile over the short term but likely positive long term. We shall wait and what other executive orders the Trump administration has in store for us this weekend.

Article originally posted at Boom Bust Market.

 

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With just over half an hour left until today’s jobs report, here are the key Jan. payroll report metrics and expectations that traders and algos will be focusing on (for a long preview please see here):

• Change in Nonfarm Payrolls (Jan) M/M Exp. 175K (Prey. 156K, Nov. 178K)
• Unemployment Rate (Jan) M/M Exp. 4.70% (Prey. 4.70%, Nov. 4.60%)
• Average Hourly Earnings (Jan) M/M Exp. 0.30% (Prey. 0.40%, Nov. -0.10%)

The current market consensus for today is 175k although the range between economists is a fairly lofty 140k to 238k. Pointing to a potential upside surprise, recall that Wednesday’s ADP came in at a much better than expected 246k while the employment component of the ISM manufacturing also bounced 3.3pts to 56.1, so the whisper number is notably higher than the where the consensus, with some expecting a number above 200.

As always keep an eye on the other components of the report too. The market expects the unemployment rate to hold steady at 4.7% and average weekly earnings to rise +0.3% mom.

To us, the most importants item will be average average weekly – not hourly – earnings for production and non-supervisory workers, as well as hours worked for the group: in recent reports there has been a substantial decline in this series not captured in the main headlines.

Some of the more notable NFP forecasts of note, by bank:

• High Frequency Economics 210K
• Moody’s 205k
• Nomura 205k
• Goldman Sachs 200k
• Comerica 190K
• SEB 175k
• Barclays 175k
• Consensus 175k
• Credit Agricole 175k
• CIBC 175k
• BofAML 160k
• Deutsche Bank 150k

As RanSquawk reminds us, last month the NFP reported an increase of 156k jobs, lower than the expected historically substantial figure in December, following an increase in part time jobs through the holiday period. Wednesday saw the FOMC’s first rate decision of the year where, as expected, rates were kept on hold at 0.50%-0.75%. Noticeably recent rhetoric from the Fed, on job growth has taken a back seat with market focus now on less bullish expectations of inflation.

The Fed’s lowered concern to US jobs is set to result in a possibly cleaner move, with investors looking at the report its self as an indicator to US growth. Last month’s report was largely in line, with no shock figures and December’s average hourly earnings back as a positive figure, this has seemingly proved that November’s -0.10% figure was indeed an anomaly, yet still seen slowing from December.

Recent data has been under the microscope; noticeably this week’s ADP private payrolls saw a staggering 246K increase in jobs. Furthermore, growth was seen from the month’s US ISM manufacturing PMI, revealing increased employment in the manufacturing sector and with the four-week moving average of initial jobless claims showing a four-decade low (248K) with all the job figures seen this month implying a strong report.

Market Reaction

As ever with the NFP release, the headline is likely to garner much of the initial focus with algorithms and fast money moves jumping on any large discrepancies. An overwhelming strong report will strengthen the USD, which has seen some slowdown to the bullish pressure, with the DXY back below the 100.00 handle. With many forecasts between two and three hikes for the year and all talk in regards to inflation, equity markets could once again see 2016’s choppy trade as a weak report could highlight the inflation slack, resulting in even more of a reason for the Fed to resist three hikes.

Gold and treasury markets are likely to act in tandem with classic price action in regards to the NFP to be evident in flight to safety asset classes, with a strong report set to cause some risk on sentiment resulting in weakness in both gold and treasury markets. Participants are likely to keep an eye on fixed income markets, with tight trading ranges evident across the curve throughout December and January – with any discrepancy in either direction could result in some traction.

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• Trump Plans to Undo Dodd-Frank, Fiduciary Rule (WSJ)
•  CEOs to meet with Trump amid tensions (Reuters)
• Trump’s CEO Brain Trust Meets Amid Widening Rifts (BBG)
• Business coalition supports border tax (Reuters)
• Nordstrom winds down relationship with Ivanka Trump brand (Reuters)
• Tillerson Calms Foreign Allies’ Nerves on First Day as Diplomat (BBG)
• Trump’s Bluntness Unsettles World Leaders (WSJ)
• The One Russian Linking Putin, Erdogan and Trump (BBG)
• Bank of Japan Whipsaws Markets in Tussle Over Yield Control (BBG)
• China Tightens Monetary Policy by Raising Money Market Rates (BBG)
• U.K. Services Growth Cools as Costs Dominate Firms’ Concerns (BBG)
• Spain’s Banco Popular posts 3.5 bln euros loss on property charges (Reuters)
• Amazon Projects Spending That Concerns Investors (BBG)
• Italy’s Renzi signals willingness to ditch push for early vote (Reuters)
• Toronto Home Prices Jump 22% as Buyers Contend With Tight Supply (BBG)
• May Seeks to Ride Brexit Wave Targeting Historic By-Election Win (BBG)
• ‘Superstar’ Companies Are Eating Into Workers’ Wealth, Study Finds (BBG)
• Vanity Fair, New Yorker back out of White House Correspondents’ Association events (The Hill)
• Billionaire Magnier Said to Purchase $56 Million U.K. Estate (BBG)
• Mexico Has Its Own Fiery Populist. Trump May Put Him in Power (BBG)
• Trump White House Set to Impose Fresh Sanctions on Iran (WSJ)
• Senate advances DeVos’s nomination, setting her up for final vote (The Hill)
• State Lawmakers Are Cracking Down on Protesters (BBG)
• Snap IPO Will Mint Fortunes for Founders, Two Big Investors (WSJ)

 

Overnight Media Digest

WSJ

– The Trump administration is set to impose fresh sanctions on dozens of Iranian entities for their alleged role in missile development and terrorism, in a move likely to escalate U.S. tensions with Tehran, according to people close to the deliberations. http://on.wsj.com/2knPJxg

– President Donald Trump’s administration said on Thursday night that the growth of Israeli settlements “may not be helpful” in achieving a goal of peace in the Middle East, an abrupt shift that signals a potentially tougher stance with Israeli Prime Minister Benjamin Netanyahu. http://on.wsj.com/2knPNxc

– Snap Inc lifted the veil on its highly anticipated initial public offering, revealing a business that is growing at a torrid clip but that also faces challenges keeping users engaged, attracting new ones – and justifying a valuation that could reach $25 billion. http://on.wsj.com/2knQRBi

– President Donald Trump vowed on Thursday to repeal a ban on churches engaging in political campaigning, while his administration also was exploring other steps to expand religious rights, including increased protection for individuals, organizations and employers acting on their faith. http://on.wsj.com/2knTfrx

– Uber Technologies Inc chief executive Travis Kalanick said he is stepping down from President Donald Trump’s economic advisory council, saying that his participation has been misunderstood as an endorsement of the new administration’s policies. http://on.wsj.com/2knJwkU

– Amazon.com Inc on Thursday said fourth-quarter profit jumped 55 percent to $749 million, topping the company’s own guidance. http://on.wsj.com/2knK0b5

– A dispute over creative control led Ralph Lauren Corp Chief Executive Stefan Larsson to leave the struggling luxury fashion brand after less than two years at the helm. http://on.wsj.com/2knKo9b

 

FT

* Snap Inc, owner of popular messaging service Snapchat, made many of its financial details public for the first time on Thursday, as it prepared to raise up to $3 billion in an initial public offering in New York that is expected to come in March.

* Uber Technologies Inc Chief Executive Officer Travis Kalanick, facing criticism from immigration advocates for serving on President Donald Trump’s business advisory group, quit the group on Thursday, the company said.

* The Institute for Fiscal Studies, a think tank, said that the United Kingdom needs more reforms to tackle “costly, inefficient and unfair” differences in the way the self-employed, owner-managers and employees are taxed.

 

NYT

– Uber CEO Travis Kalanick plans to step down from the president’s council, after internal pressure from employees and a social media backlash. http://nyti.ms/2jJwrRe

– Stephen A. Feinberg, founder of Cerberus Capital Management, is in discussions to join the Trump administration, the firm disclosed on Thursday. http://nyti.ms/2jJAfBT

– Republicans on Thursday took one of their first steps to officially dismantle Obama-era environmental regulations by easing restrictions on coal mining, bolstering an industry that President Trump has made a symbol of America’s neglected heartland. http://nyti.ms/2jJyHYy

– Department store operator Nordstrom Inc said it would put the brakes on its relationship with Ivanka Trump and it removed her brand from a list on its site. http://nyti.ms/2jJxErO

– John Cryan, chief executive of Deutsche Bank, apologized in especially contrite terms on Thursday for the long list of misdeeds that tarnished the German lender’s reputation and cost it billions of euros in fines and settlements, adding that bonuses of top managers would be cut. http://nyti.ms/2jJyKUm

 

Canada

THE GLOBE AND MAIL

** Kew Media Group Inc is set to acquire a broad portfolio of 10 companies that own, produce and distribute film, television and other programming for $104.1 million. https://tgam.ca/2k8ETNt

** Toronto and its surrounding municipalities are doubling down on efforts to entice foreign investment, with a new agency called Toronto Global designed to pull new business and money into the region. https://tgam.ca/2jEZNVM

NATIONAL POST

** A former editor with Vice Media used the Canadian headquarters of the youth-focused publishing empire as a recruiting ground to draw young journalists and artists into a transnational cocaine-smuggling ring, according to allegations by current and former Vice employees who spoke to the National Post. http://bit.ly/2l1PYNV

** Six-month-old NewLeaf Travel Co Inc will drop flights to two more cities this summer, bringing its total number of destinations down to five while increasing frequency on its remaining routes. http://bit.ly/2k8ONhV

 

 

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