Month: February 2017

Despite beating top- and bottom-lines, Ralph Lauren shares are plunging over 10% in the pre-market following news that President and CEO Stefan Larsson will depart the company on May 1st.

As Bloomberg reports, Ralph Lauren Chief Executive Officer Stefan Larsson will leave the company after less than two years in the role, following a clash with the fashion brand’s founder.

Larsson will be leaving Ralph Lauren on May 1, and the company will begin searching for a new CEO, according to a statement Thursday. Chief Financial Officer Jane Nielsen will oversee the strategy in the interim.

 

Ralph Lauren, 77, said he and Larsson couldn’t agree on the creative direction of the brand.

 

“We both recognize the need to evolve. However, we have found that we have different views on how to evolve the creative and consumer-facing parts of the business,” Lauren said in the statement. “After many conversations with one another, and our board of directors, we have agreed to part ways.”

The result is clear…

via http://ift.tt/2kZFmiy Tyler Durden

Echoing comments made yesterday by his national security advisor Michael Flynn, Trump started his Thursday morning on Twitter by first threatening to pull UC Berkeley’s funding and congratulating Rex Tillerson, and then stating that Iran is now formally “on notice” for firing a ballistic missile. 

“Iran has been formally PUT ON NOTICE for firing a ballistic missile.Should have been thankful for the terrible deal the U.S. made with them!” he tweeted, without providing any other details.

Iran has been formally PUT ON NOTICE for firing a ballistic missile.Should have been thankful for the terrible deal the U.S. made with them!

— Donald J. Trump (@realDonaldTrump) February 2, 2017

Trump then added that “Iran was on its last legs and ready to collapse until the U.S. came along and gave it a life-line in the form of the Iran Deal: $150 billion.”

Iran was on its last legs and ready to collapse until the U.S. came along and gave it a life-line in the form of the Iran Deal: $150 billion

— Donald J. Trump (@realDonaldTrump) February 2, 2017

During a surprise appearance in the White House briefing room on Wednesday, Michael Flynn vowed a forceful U.S. response to Iran’s “destabilizing behavior across the Middle East.” Flynn said Iran “continues to threaten U.S. friends and allies in the region,” with a ballistic missile test launch over the weekend and other actions. Flynn also accused Barack Obama for allowing Iran to become “emboldened.”

“As of today, we are officially putting Iran on notice,” he said, without elaborating what that meant. 

Subsequently, the White House provided little clarity about the practical impact of Flynn’s comments. “There are a large number of options available to the administration. We are going to take appropriate action and I will not provide any further information today relative to that question,” a senior administration official told reporters.

“The important thing here is we are communicating that Iranian behavior needs to be rethought by Tehran.”

Trump has in the past criticized the international agreement to curb Iran’s nuclear program, and vowed to abandon the agreement if elected. The agreement to offer relief from international financial sanctions in exchange for new limits on Iran’s nuclear program isn’t a treaty and therefore isn’t binding from one administration to the next. 

In November, nuclear policy experts and lobbyists said President Obama’s signature nuclear deal with Iran could be put in peril when Trump assumes office. On Wednesday night, the president tweeted that Iran is dominating “more and more of Iraq,” despite U.S. efforts to secure the country.

Iran is rapidly taking over more and more of Iraq even after the U.S. has squandered three trillion dollars there. Obvious long ago!

— Donald J. Trump (@realDonaldTrump) February 2, 2017

Yesterday, in a move meant to gauge the US willingness to escalate, Iran confirmed it had test fired a new ICBM rocket.

via http://ift.tt/2kl1g0x Tyler Durden

• Doomsday Clock moves closer to midnight
• World not been as close to self-destruction since 1953
• Threat of nuclear powers, climate change and technology all considered heightened risks
• First time the Bulletin of Atomic Scientists have singled out an individual – President Trump
• Doom-mongering is arguably distracting and uncertainties should be more considered
• Gold and silver perform well during times of uncertainty and provide a safe-haven
• Wall Street’s largest fund managers have bet on gold in face of growing uncertainty

Buy gold because of uncertainty not Doomsday

It is two and a half minutes to midnight, the Clock is ticking, global danger looms. Wise public officials should act immediately, guiding humanity away from the brink. If they do not, wise citizens must step forward and lead the way. Bulletin of the Atomic Scientists, January 2017.

We hope you remembered to reset your clocks last week, not the timekeeping kind but the doomsday kind. And hopefully you’ve made a start on those bucket lists as apparently nuclear power, climate change, nationalist politics and technology have brought us one step closer to The End.

The Doomsday Clock, as kept and set by the Bulletin of Atomic Scientists, was moved forward last week by 30 seconds to two-and-a-half minutes to midnight. This is the closest the clock has cometo 12am since 1953 when the Soviet Union tested its first hydrogen bomb, nine months after the US first tested their own version.

“The Clock has become a universally recognized indicator of the world’s vulnerability to catastrophe from nuclear weapons, climate change, and new technologies emerging in other domains.” Bulletin of Atomic Scientists

The movement of the clock by half a minute comes as the group of scientists believe that in 2016, “the global security landscape darkened as the international community failed to come effectively to grips with humanity’s most pressing existential threats, nuclear weapons and climate change.”

The statement acknowledges that the outlook for climate change has not changed in the last year, but is concerned with the lack of action. It is also concerned about technology and ‘the knotty problems’ in some fields of technological innovation that may or may not present a threat to humanity. Back in 1947, they say “there was one technology with the potential to destroy the planet, and that was nuclear power” but now there are multiple threats.

However it is the US Presidential election and comments from President Trump that appear to have really forced the issue of moving the clock forward. The Bulletin points to the rise in ‘strident nationalism’ that brought about the US election result and Trump’s comments on nuclear weapons and climate change.

Whilst nuclear codes access and climate change haven’t concerned the President too much, this is not the first time apocalyptic language has been used since he came to power. Trump himself has enjoyed painting a picture of the ‘American carnage’ he sees across the United States today – he did so in his own inauguration speech.

Scientists v. Trump

The Bulletin makes clear that it would normally focus on long-term trends (ie not the behaviour of a democratic leader who could be in power for just four years) but:

“…the statements of a single person—particularly one not yet in office—have not historically influenced the board’s decision on the setting of the Doomsday Clock.

But wavering public confidence in the democratic institutions required to deal with major world threats do affect the board’s decisions. And this year, events surrounding the US presidential campaign—including cyber offensives and deception campaigns apparently directed by the Russian government and aimed at disrupting the US election—have brought American democracy and Russian intentions into question and thereby made the world more dangerous than was the case a year ago.

This move by the Bulletin of the Atomic Scientists is very much a statement, Lawrence Krauss, chairman of the group’s board of sponsors, told Bloomberg, “It’s only six days into the new administration and actions do speak louder than words, and we wanted to send a message that things are not going in the right direction.”

Absence of facts and Moral narcissism

Yesterday we talked about the alternative facts of government. The Bulletin of Scientists are also worried about such hyperbole affecting the decisions regarding existential threats:

Wise men and women have said that public policy is never made in the absence of politics. But in this unusual political year, we offer a corollary: Good policy takes account of politics but is never made in the absence of expertise. Facts are indeed stubborn things, and they must be taken into account if the future of humanity is to be preserved, long term. Nuclear weapons and climate change are precisely the sort of complex existential threats that cannot be properly managed without access to and reliance on expert knowledge.

There is arguably an element of moral narcissism here, on both sides of the coin – Trump and the scientists. Both believe that they know better than the other and that they should influence policy and the thinking of others.

Nassim Taleb writes about this phenomenon in a blog, Intellectuals but Idiots “that class of paternalistic semi-intellectual experts with some Ivy league, Oxford-Cambridge, or similar label-driven education who are telling the rest of us 1) what to do, 2) what to eat, 3) how to speak, 4) how to think… and 5) who to vote for.”

As ever, Taleb’s words might be bit too harsh, but it speaks to how this kind of authoritarian groupthink from the likes of the scientists that has lead to the rise in nationalist politics, and put Trump in power.

But we are also seeing this on Trump’s side as well. He is reinforced by those he has positioned around him. People are unlikely to feel that those influencing policy are looking out for them and what really matters day-to-day.

Roger Simon writes in I Know Best “It is a narcissism of groupthink that makes you assume you are better than you are because you have the same received and conventional ideas as your peers, a mutual reward system.”

This is about uncertainty, not scientific or political doom-mongers

It can be argued believe that the scientists’ warnings and groupthink, along with the same brand moral narcissism of Trump’s calls to work ‘for the people’ are counterproductive. Will Boisvert writes;

“Apocalypticism can systematically distort our understanding of risk, mesmerizing us with sensational scenarios that distract us from mundane risks that are objectively larger. Worse, it can block rather than galvanize efforts to solve global problems. By treating risks as infinite, doom-saying makes it harder to take their measure — to prioritize them, balance them against benefits, or countenance smaller ones to mitigate larger ones. The result can be paralysis.”

In many ways we couldn’t agree more. The latest tick-tock on the Doomsday clock has gathered a lot of media attention, but to what end? What does this information really tell people other than the group of scientists doesn’t like Trump? It provides no useful information for the man or woman on the street.

Anders Sandberg a Research Fellow at Future of Humanity Institute & Oxford Martin School, University of Oxford writes about the distortions in trying to place a probability on man-made dangers and how this can skew our perception of risk. “The chance of at least one of them being wrong is high. It may be better to explicitly acknowledge the uncertainty”.

Sandberg is right, we are far better to acknowledge both the existent of uncertainty at any given moment as well as the known risks. We only really know things are risks, after the fact and even then we are not always able to find the true cause or catalyst to whatever disastrous event the supposed risk lead to.

What we do know, is that nothing is certain and at the moment it feels we have more uncertainties than ever before. What we also know is that gold and silver both perform well during times of heightened uncertainty and we expect it to push higher as both Trump’s presidency and the shifting of economic plates is felt around the globe.

Feeling uncertain? Buy gold.

Earlier this week we brought you a brief synopsis of “Reassessing the Role of Precious Metals As Safe Havens – What Colour Is Your Haven and Why?” by Dr Brian Lucey and Sile Li, of Trinity College Dublin and Trinity Business School. The paper examines the “safe haven properties versus equities and bonds of four precious metals (gold, silver, platinum and palladium) across eleven countries.”

We outlined that the authors, Dr Brian Lucey and Sile Li had attempted to “identify robust economic and political determinants of precious metals’ safe haven properties.”  Lucey and Sile’s work finds that ‘Economic Policy Uncertainty’ is found to be a “positive and robust determinant of a precious metal being a safe haven” and that this “holds across countries”.

The Bulletin of Atomic Scientists have failed to address the financial system in their latest statement, but in the same way they point to the rise in nationalist politics forming the backdrop to nuclear way, climate change and cyber issues, we would argue that economic risks should also be seriously considered.

We’re not the only ones who think so, Reuters recently reported that gold has become a favourite safe-haven of some of Wall Street’s biggest fund managers:

Some of Wall Street’s largest fund managers have taken a contrarian bet on gold, wagering that U.S. President Donald Trump’s governing style and upcoming elections in Europe will combine to create more stock-market volatility and boost the prices of a metal long seen as a safe haven.

Fund managers from IVA, Ridgeworth and Fidelity are among those who are bullish on gold at a time when the VIX, Wall Street’s main measure of volatility, is near two-year lows amid a stock market rally that has pushed the S&P 500 up 6.5 per cent since election day in November.

Conclusion – heightened uncertainty is certainly good for gold

In the concluding paragraphs of the Bulletin of Atomic Scientists, the group say that “This year’s Clock deliberations felt more urgent than usual. On the big topics that concern the board, world leaders made too little progress in the face of continuing turbulence.”

We would argue the same in the case for the financial system and the systemic, global disaster it has become in the last decade. As we wrote about in the days following Trump’s inauguration, we expect some serious uncertainty and volatility in the months and years to come. Despite us getting a feel for how Trump will run his government, there is a lot that remains unknown both in the US and around the world.

Investors should ignore the moral narcissism of the elites, the politicians and the scientists, and instead prepare for uncertain times by diversifying and owning gold and silver. In recent years and throughout the ages, both precious metals have protected investors and savers from uncertainty, both economic and political.

Gold and Silver Bullion – News and Commentary

Gold prices edge up after Fed holds steady on rates (MarketWatch.com)

Gold extends post-FOMC gains, eyes $ 1220 (FXStreet.com)

Trump to Mexico: I might deploy troops into your country to take care of ‘bad hombres’ (CNBC.com)

Gold Gains as Trump Shocks Markets by Doing What He Said He’d Do (Bloomberg.com)

Derivatives ‘Big Bang’ catches market off guard (FT.com)

Why Gold and Energy Can Make Gains This Year (Barrons.com)

Gold extends post-FOMC gains, eyes $ 1220 (FXStreet.com)

Gold Seeker Closing Report: Gold and Silver End Slightly Lower (GoldSeek.com)

Trumpenstein ! Our Creation – Foretold 157 Years Ago (GoldCore.com)

Silver Prices: This One Factor Alone Could Send Silver Soaring (LombardiLetter.com)

Gold Prices (LBMA AM)

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
24 Jan: USD 1,213.30, GBP 972.22 & EUR 1,130.07 per ounce

Silver Prices (LBMA)

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
24 Jan: USD 17.10, GBP 13.73 & EUR 15.92 per ounce

Recent Market Updates

– 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

via http://ift.tt/2kl15lW GoldCore

• Futures fall as Fed gives no clarity on next rate hike (Reuters)
• Yellen Eyes Commercial Real-Estate Froth as Fed Weighs ’17 Risks (BBG)
• Trump Slams ‘Dumb Deal’ With Ally Australia After Testy Call (BBG)
• For Many Firms, Trump Dominates Earnings Calls (WSJ)
• Trump’s Blue-Collar Populism Is Dividing Unions (BBG)
• Trump’s defense chief, in Seoul, takes stock of North Korea threat (Reuters)
• Tillerson’s Vow to Keep Away From Exxon Runs Into a World of Oil (BBG)
• Deutsche Bank Posts Loss as Litigation Costs Bite (WSJ)
• Syrian army says it will press on against Islamic State near Aleppo (Reuters)
• Seven Cases Where the Supreme Court Sided With Neil Gorsuch (And One Time It Didn’t) (BBG)
• Factory Skills Gap Could Spell Trouble for Trump’s Jobs Plan (BBG)
• Here’s a Glimpse of the Global Trade Carnage From a U.S. Border Tax (BBG)
• Fed’s Bonds Are Growing Up, and That Means Less Economic Support (WSJ)
• U.S. military probing more possible civilian deaths in Yemen raid (Reuters)
• Europe must remain committed to openness: Draghi (Reuters)
• Who Will Pay for San Francisco’s Tilting, Sinking Millennium Tower? (BBG)
• Japan considers buying more U.S. energy as Abe prepares to meet Trump (Reuters)
• Sony Says It Won’t Sell Movie Unit (WSJ)
• Snap’s secrecy frustrates banks’ pursuit of IPO glory (Reuters)

 

Overnight Media Digest

FT

* Prime Minister Theresa May’s plan to take Britain out of the European Union easily cleared its first legislative hurdle on Wednesday, paving the way for the government to launch divorce talks by the end of March.

* Facebook Inc shares rose more than 2 percent in after-hours trading on Wednesday as the world’s largest online social network reported higher-than-expected quarterly profit and revenue, helped by continued growth in mobile advertising.

* U.S. President Donald Trump’s administration on Wednesday signalled a tougher stance on Tehran declaring that it has put Iran “on notice”, following a weekend missile test by the Islamic republic.

 

NYT

– Anthony Scaramucci, an investment firm founder and a Republican donor, will not be taking a senior job at the White House as previously announced, a senior administration official said Wednesday. http://nyti.ms/2ksRZWx

– Sales for social media giant Facebook grew 51 percent in the most recent quarter, and even a jury verdict that went against the company earlier in the day did little to diminish enthusiasm about its finances. http://nyti.ms/2ksSikt

– A partnership with H&R Block shows IBM’s strategy for artificial intelligence: Watson will be a smart assistant tailored for specific industries. http://nyti.ms/2ksGOgO

– Rex W. Tillerson, the former chairman and chief executive of Exxon Mobil, was confirmed by the Senate on Wednesday in a 56-to-43 vote to become the nation’s 69th secretary of state just as serious strains have emerged with important international allies. http://nyti.ms/2ksFVES

– Bosch will pay $327.5 million to vehicle owners in the United States over claims that it helped devise software used to cheat on emissions tests. http://nyti.ms/2ksQZSn

– SoFi, or Social Finance as it is officially known, announced Tuesday that it was acquiring a company, Zenbanx, allowing SoFi to offer checking accounts, credit cards and international money transfers to its customers. http://nyti.ms/2ksFhXL

 

Canada

THE GLOBE AND MAIL

** Quebec’s securities regulator is proposing to ban the sale of short-term binary options to the general public, saying the securities are being used in scams. https://tgam.ca/2kUWLg3

** PointClickCare Technologies Inc has delayed its plans to go public and instead has raised $85 million in a private financing led by San Francisco fund Dragoneer Investment Group. https://tgam.ca/2jGs9dl

NATIONAL POST

** One of the founders of WestJet Airlines Ltd is making another foray into Canada, this time with a 72-year-old Portuguese airline that will begin flying to Toronto in June. http://bit.ly/2kZvKo1

** The Liberal government is breaking its promise to change Canada’s voting system, though just Tuesday it was stringing along opposition parties with hopes for collaboration. http://bit.ly/2jGpnF6

 

Britain

The Times

– Tesco could be forced to dispose of more than 600 stores unless it can convince regulators that its 3.9 billion pound ($4.94 billion) merger with Booker will not harm competition. Analysis by the data team at The Times has found there are 635 Tesco stores situated less than 500 metres from a shop in Booker’s network of Premier, Londis and Budgens stores, raising fears about the impact on consumers, suppliers and rivals. http://bit.ly/2k0pmiG

– Emerald Investment Partners withdrew from the bidding for Punch Taverns, leaving the field clear for Heineken and Patron Capital Advisers to complete their recommended 1.8 billion pound deal. http://bit.ly/2k0wCLf

The Guardian

– The European commission’s Brexit negotiators must strike a “workable” deal with Theresa May’s government to protect the City of London or the economies of the remaining member states will be damaged, a leaked EU report warns. http://bit.ly/2k0DZ5v

– Deutsche Bank said it will stop financing coal projects as part of its commitments under the Paris agreement to tackle global warming. The lender said the decision was in line with the pledges it made at last year’s Paris climate conference, along with 400 other public and private companies, to help fight global warming. http://bit.ly/2k0ybJl

The Telegraph

– Reckitt Benckiser, the consumer goods giant behind Dettol, Durex and Nurofen, has revealed $16.7 billion takeover talks with U.S. baby formula maker Mead Johnson. The FTSE 100 company announced that it was in advanced negotiations about a deal that would value the U.S. group at $90-a-share. http://bit.ly/2k0ukvK

– The Guardian has warned staff of further heavy losses, as the newspaper said it expects to burn through another 90 million pounds in cash this year. It has recorded negative cash flow of 60 million pounds so far in the current financial year and is on track for another 30 million pounds by April, executives told a meeting at its King’s Cross headquarters. http://bit.ly/2k0Jf91

Sky News

– Peter Jackson, a former chief executive of Travelex, the foreign currency provider, will be named on Thursday as the new managing director of Worldpay UK. Mr Jackson, who also serves as a non-executive director of Santander UK, Britain’s fifth-biggest bank, will replace Dave Hobday. http://bit.ly/2k0ybsy

– The European Union says it is on course to deliver on its promise of an end to mobile phone roaming charges from 15 June for EU residents travelling in the bloc. It announced on Wednesday that it had cleared the final hurdle by agreeing caps on wholesale charges – the amount phone operators charge each other when their customers use their phones abroad – following exhaustive negotiations. http://bit.ly/2k0z2cN

The Independent

– Ken Morrison, the founder of supermarket chain Morrisons , who was instrumental in growing the company into one of Britain’s leading retailers, has died at the age of 85. http://ind.pn/2k0B9xp

 

via http://ift.tt/2kkZoVt Tyler Durden

First, the AP reported that according to a transcript of a phone call between the presidents of the US and Mexico, Trump threatening to send US troops to Mexico if it was unable to stop the “bad hombres down there.” Then, in a separate report from the Washington Post, Trump labeled a refugee swap deal with Australia “dumb” on Thursday after a Washington Post report of an acrimonious telephone call with Australia’s prime minister, replete with alleged “yelling” and which Trump hung up after just 25 minutes, that has threatened a rift in ties between the two ally nations.

Trump on the phone with Australia’s prime minister as aides Michael Flynn and
Steve Bannon listen.

The Post reported that Trump described the resettlement plan as “the worst deal ever” and accused Australia of trying to export the “next Boston bombers”. At one point, Trump reportedly informed Turnbull that he had spoken with four other world leaders that day — including Russian President Vladi­mir Putin — and that “this was the worst call by far.” The Post also said Trump had boasted to Turnbull about the size of his election victory.

#BREAKING Sky News sources say Donald Trump was ‘yelling’ during his phone conversation with PM Turnbull and hung up after 25 minutes http://pic.twitter.com/xqrebcOv84

— Sky News Australia (@SkyNewsAust) February 2, 2017

It said the call had been scheduled to last an hour but Trump cut it short after 25 minutes when Australian Prime Minister Malcolm Turnbull tried to turn to subjects such as Syria. Turnbull told reporters the call with Trump at the weekend had been frank and candid but refused to give further details.

“I do stand up for Australia. My job is to defend Australian interests,” the former Goldman employee said in Melbourne. Turnbull refused to confirm the Post report that Trump, who had earlier spoken to world leaders including Russian President Vladimir Putin and Mexican President Enrique Pena Nieto, had angrily told him that the call was “the worst so far”.

Political analysts were dumbfounded and said such acrimony was unprecedented, surpassing even the difficult relations between former U.S. President Richard Nixon and then Australian Prime Minister Gough Whitlam, who pulled Australian troops out of the Vietnam War. “Even that was always done in the language of foreign policy niceties,” said Harry Phillips, a political analyst of 40 years experience at Edith Cowan and Curtin universities in Perth.

As reports of the conversation hit headlines on both sides of the world, Trump tweeted shortly before midnight in Washington: “Do you believe it? The Obama Administration agreed to take thousands of illegal immigrants from Australia. Why? I will study this dumb deal.”

Do you believe it? The Obama Administration agreed to take thousands of illegal immigrants from Australia. Why? I will study this dumb deal!

— Donald J. Trump (@realDonaldTrump) February 2, 2017

The deal in question is a controversial agreement that Australia agreed with former President Barack Obama late last year for the United States to resettle up to 1,250 asylum seekers held in offshore processing camps on Pacific islands in Papua New Guinea and Nauru. In return, Australia would resettle refugees from El Salvador, Guatemala and Honduras. The swap deal is at odds with Trump’s executive order last week that suspended the U.S. refugee program and restricted entry to the United States for travelers from seven Muslim-majority countries, including Iran, Iraq, and Syria.

Many of those being held in the Australian detention centers, which have drawn harsh criticism from the United Nations and rights groups, have fled violence in countries such as Afghanistan, Iraq and Iran.

White House spokesman Sean Spicer and the U.S. Embassy in Australia have both said Trump would honor the deal. In several media appearances after Trump’s tweet, Turnbull reiterated that he believed the deal stood.

“He is saying that this is not a deal he would have made, but the question is will he honor that commitment? He has already given it,” Turnbull said. “I make Australia’s case frankly, powerfully, forthrightly and hopefully persuasively when I deal with other leaders.”

According to Reuters, the apparent breakdown between Washington and Canberra that has developed over the resettlement deal could have serious repercussions. Australia and the United States are among the five nations that make up the Five Eyes group, the world’s leading intelligence-sharing network.

The United States also plans to send extra military aircraft to Australia’s tropical north this year as part of a U.S. Marines deployment that will bolster its military presence close to the disputed South China Sea. Australia is also one of 10 U.S. allies purchasing Lockheed Martin’s F-35 fighter jet program.

The Post quoted unidentified senior U.S. officials briefed on the conversation between Trump and Turnbull. It also quoted the official read-out from the call, which emphasized “the enduring strength and closeness of the U.S.-Australia relationship that is critical for peace, stability, and prosperity in the Asia-Pacific region and globally”.

via http://ift.tt/2jZ7LoO Tyler Durden

The Bank of England kept its key interest rate at 0.25%, gilt purchase program at GBP435BN, and corporate-bond plan at GBP10b, voting 9-0 on all 3 decisions. The BOE also raises growth forecasts, while keeping its inflation forecasts broadly unchanged, and said the current policy stance “depended on the trade-off between above-target inflation and slack in the economy.” The central banks also reiterated that “monetary policy could respond, in either direction, to changes in the economic outlook as they unfolded”

From the BOE statement:

The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment.  At its meeting ending on 1 February 2017, the Committee voted unanimously to maintain Bank Rate at 0.25%.  The Committee voted unanimously to continue with the programme of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, totalling up to £10 billion.  The Committee also voted unanimously to maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at £435 billion.

 

As the MPC had observed at the time of the UK’s referendum on membership of the EU, the appropriate path for monetary policy depends on the evolution of demand, potential supply, the exchange rate, and therefore inflation.  The Committee’s latest economic projections are contained in the February Inflation Report.  The MPC has increased its central expectation for growth in 2017 to 2.0% and expects growth of 1.6% in 2018 and 1.7% in 2019.  The upgraded outlook over the forecast period reflects the fiscal stimulus announced in the Chancellor’s Autumn Statement, firmer momentum in global activity, higher global equity prices and more supportive credit conditions, particularly for households.  Domestic demand has been stronger than expected over the past few months, and there have been relatively few signs of the slowdown in consumer spending that the Committee had anticipated following the referendum.  Nevertheless, continued moderation in pay growth and higher import prices following sterling’s depreciation are likely to mean materially weaker household real income growth over the coming few years.  As a consequence, real consumer spending is likely to slow.

However, while cable initially spiked on the modestly hawkish announcement, it subsequently tumbled after the BOE warned that it has limited tolerance to above-target CPI, and some Monetary Policy Committee members had moved closer to those limits, explicitly noting that there are “limits to the extent above-target inflation can be tolerated.”

As the Committee has previously noted, however, there are limits to the extent that above-target inflation can be tolerated.  The continuing suitability of the current policy stance depends on the trade-off between above-target inflation and slack in the economy. The projections described in the Inflation Report depend in good part on three main judgements:  that the lower level of sterling continues to boost consumer prices broadly as expected, and without adverse consequences for expectations of inflation further ahead;  that regular pay growth does indeed remain modest, consistent with the Committee’s updated assessment of the remaining degree of slack in the labour market;  and that the hitherto resilient rates of household spending growth slow as real income gains weaken. In judging the appropriate policy stance, the Committee will be monitoring closely the incoming evidence regarding these and other factors.  For instance, if spending growth slows more abruptly than expected, there is scope for monetary policy to be loosened. If, on the other hand, pay growth picks up by more than anticipated, monetary policy may need to be tightened to a greater degree than the gently rising path implied by market yields.  Monetary policy can respond, in either direction, to changes to the economic outlook as they unfold to ensure a sustainable return of inflation to the 2% target.

Additionally, in its inflation report published concurrently, the BOE noted that household saving in the UK is set to fall to its lowest level since at least the early 1960s, according to new forecasts, boosting economic growth and taking some members of the Monetary Policy Committee closer to the limits of their tolerance for above target inflation. But, for now, the committee has voted unanimously to keep policy on hold.

As the FT adds, the bank’s new forecast, published on Thursday, is for growth of 2 per cent this year, well above the 1.4 per cent forecast they made in November. Consumers are expected to save less to support higher spending than the bank had expected. Over the next few years, the additional government spending that was announced at the end of November, stronger growth in the US and the Euro area and a further easing of credit conditions are expected to provide a further boost.

The bank’s forecast now implies the economy will be 1.5 per cent smaller in three years’ time than they expected before the UK voted for Brexit in June. This is significantly smaller than 2.5 per cent reduction they projected in November.

For now, the pound is taking the announcement as less hawkish, and after USDGBP spiked at high as 1.27, it has since tumbled to session lows just above 1.26.

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In the latest crackdown by less than tolerant liberals against free speech, on Wednesday night hundreds of protesters at University of California in Berkeley smashed windows, set fires and clashed with police as they forced a controversial “alt-right” speaker to cancel his appearance at the liberal-leaning institution.

Two hours before Breitbart News editor Milo Yiannopoulos was to give a speech at the student union, protesters tossed metal barricades and rocks through the building’s windows and set a light generator on fire near the entrance, footage from news outlets showed.

Just toppled a light pole. Craziest protest I’ve seen in Berkeley by far. Crowd fast turning violent. http://pic.twitter.com/5ujFLOtA4u

— Michael Bodley (@michael_bodley) February 2, 2017

Police ordered protesters to disperse as the school put the campus on lockdown. Protesters also tossed bricks and fireworks at police in riot gear who fired rubber pellets back at the crowd, according to SFGate.com, a news outlet in San Francisco.

“We shut down the event. It was great. Mission accomplished,” a protester told CNN.

Some 150 “masked agitators” were responsible for the violence during the otherwise largely peaceful protest of about 1,500 people, the university said in a statement, noting that the school “is proud of its history and legacy as home of the Free Speech Movement” in the 1960s. Many have expressed curiosity if the masked agitators are the same ones who tried to provoke violence during Trump’s inauguration and if they are funded by certain financially endowed “liberal” organizations linked to George Soros.

Donald Trump’s chief strategist, Steve Bannon, previously headed Breitbart News and CNN reported that many of the protesters voiced opposition to the Republican president.

One protester at Berkeley held a sign that said “No Safe Space for Racists” while other protesters danced to hip hop music, footage from a Facebook Live feed showed. Protesters later marched along streets near the campus where some smashed storefront windows and car windshields while clashing with police, the feed showed.

Yiannopoulos, whose account on Twitter was suspended last year after he was accused of participating in the online harassment of an African-American actress, criticized “the Left”, saying in a statement it was “absolutely terrified of free speech and will do literally anything to shut it down.”

He also said on Fox News that he was evacuated by police after protesters began throwing rocks and other objects at the building. “Obviously it’s a liberal campus so they hate any libertarians or conservatives who dare to express an opinion on their campuses,” he said. “They particularly don’t like me.”

On Thursday morning, in a barrage of tweets that touched on topics as far ranging as Rex Tillerson, to the death of Navy SEAL Ryan Owens to the Iran ballistic missile test, Trump also lashed out at UC Berkley, and hinted that the university which “does not allow free speech and practices violence on innocent people with a different point of view” may see its federal funding yanked.

If U.C. Berkeley does not allow free speech and practices violence on innocent people with a different point of view – NO FEDERAL FUNDS?

— Donald J. Trump (@realDonaldTrump) February 2, 2017

It was not immediately clear if any algos were confused by the Trump tweet and interpreted it as referring to interest rates or the Fed’s hiking plans.

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European shares and S&P futures fell amid mixed earnings from corporate heavyweights, while Asian stocks were fractionally higher. The dollar slump continued against all its major peers after the Federal Reserve gave dollar bulls little to be optimistic about.  The U.S. currency dropped toward the lowest close since November after the Fed reiterated its intention on Wednesday to lift rates only gradually.

Dollar bulls had hoped that Yellen would provide a stronger signal about the pace of interest-rate increases this year after comments by the new Trump administration overshadowed data showing economic growth is picking up steam, prompting some skeptics to ask “what does the Fed know that we don’t.” With all the political uncertainties about, the big central banks appear to be lying low – or at least trying not to add to the volatility. It sent the dollar to its lowest level since mid-November against a six-strong group of other top world currencies, to add to January’s worst start to a year in three decades.

As DB’s Jim Reid put it, “the message from the Fed overnight was a fairly steady one which acknowledged improvements in the outlook but didn’t really further the debate on when the next rate rise will occur. There was a mention of improving “measures of consumer and business sentiment” although interestingly there was a notable omission of the recent improvement in business fixed investment which they continue to say “remained soft”. We also got the usual “some further strengthening” in the labour market while on the inflation front the Fed noted that “inflation increased in recent quarters but is still below the committee’s 2% longer-run objective”. There was nothing new to take from the language concerning the rates path or balance sheet policy – the latter having been a fairly topical discussion amongst Fed officials recently. One thing that is worth noting though is the change in the composition of the voting members this year. Both George and Mester have dropped off and both were previously seen as having a strong hawkish leaning and so implying a more dovish Fed overall.”

Others were more cheerful: “this is a confirmation of the strength of the U.S. economy and an affirmation rate increases will be gradual,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. in Manila. “It’s a silver lining for Asia and the rest of the world against the dark clouds brought by the lack of clarification in the policies and direction of” U.S. President Donald Trump.

Investors will now be keeping one eye on Friday’s jobs report and
another on the narrative from the White House for signs of pro-growth
policies.

“The dollar and other currencies are in a push-pull situation,” said Andrew Milligan, head of global strategy at Standard Life Investments Ltd. in Edinburgh. “On the one hand economic fundamentals imply the dollar should rise, but on the other hand there is political risk. If the political risk premium rises too much, then it’s contrary to what the fundamentals are actually saying.”

Back in the currency market, sterling also pounced on the weakened dollar to hit a 12-week high as construction sector data showed builders, like manufacturers the day before, are seeing a sharp rise in their costs. It set the stage nicely for the Bank of England’s first meeting and economic forecasts of the year. With Brexit looming it may take a leaf out of the Fed’s book and choose to play a straight bat, although it may implicitly send a less dovish signal than normal as it’s likely to be forced to upgrade growth and inflation forecasts.

In markets, European stocks dropped with S&P 500 futures. The Stoxx Europe 600 Index dropped 0.2 percent at 10:39 a.m. in London as investors assessed disappointing corporate outlooks with health-care shares falling the most. Deutsche Bank tumbled 5.4 percent after its quarterly trading revenue missed analysts’ estimates. Reckitt Benckiser Group Plc added 2.9 percent after saying it’s in advanced talks to acquire baby-food maker Mead Johnson Nutrition Co. Futures on the S&P 500 lost 0.3 percent, after the underlying gauge rose less than one point to close at 2,279.42 on Wednesday.

That was also despite Asian shares ex-Japan hitting their highest since mid-October as Korea’s markets climbed to their best level since July 2015.

In commodities, oil began to edge higher again after news of a sharp rise in U.S. crude and gasoline stockpiles triggered a pause overnight. Brent crude futures nudged up 8 cents to $57.02 a barrel threatening its highest level of the year, while key industrial metals like copper and nickel, but also safe-haven gold, moved higher too.

Earnings are coming thick and fast, with mixed results clouding the picture on the state of the global economy. While Facebook Inc.’s sales topped forecasts, Sony Corp. and Mazda Motor Corp. cut their profit outlooks. In Europe, Deutsche Bank AG and Royal Dutch Shell Plc missed estimates. “There was a clear impact from the negative news flow around Deutsche Bank in the fall, especially on the global markets unit,” said Daniel Regli, an analyst with MainFirst whose recommendation on the stock is under review. “It remains to be seen whether this effect will be reversed in 2017.”

The Stoxx Europe 600 Index dropped 0.2 percent at 10:39 a.m. in London as investors assessed disappointing corporate outlooks with health-care shares falling the most. Deutsche Bank tumbled 5.4 percent after its quarterly trading revenue missed analysts’ estimates. Reckitt Benckiser Group Plc added 2.9 percent after saying it’s in advanced talks to acquire baby-food maker Mead Johnson Nutrition Co. Futures on the S&P 500 lost 0.3 percent, after the underlying gauge rose less than one point to close at 2,279.42 on Wednesday.

Rattled euro zone bond market drew some comfort from the Fed’s apparent lack of urgency to push up rates. Yields, which move inverse to price, drifted down across the board with those on benchmark Bunds down to 0.48 percent. France’s bonds went with the flow but the gap over German peers was near its widest level in three years on nerves about far-right Marine Le Pen polling strongly ahead of elections in April and May. The yield on Spanish 10-year bond added two basis points to 1.7 percent, the highest level in almost a year. German bunds gained, with the yield on the benchmark note due in a decade dropping two basis points to 0.45 percent. The yield on the 10-year U.S. Treasury note was little changed at 2.46 percent, after adding two basis points on Wednesday.

* * *

Overnight bulletin summary

• Earnings dictate play in Europe this morning, with Deutsche Bank the notable underperformer after their report, with Daimler and Shell also among the large caps to have announced their results
• FX markets have continued to see USD softness, with participants looking ahead to BoE rate decision and QIR
• Looking ahead, as well as the BoE QIR, today also sees weekly US jobless data and possible comments from ECB’s Draghi as well as earnings from Amazon and Visa

Market Snapshot

• S&P 500 futures down 0.3% to 2267
• Stoxx 600 down 0.2% to 363
• FTSE 100 down less than 0.1% to 7104
• DAX down 0.3% to 11623
• German 10Yr yield down 1bp to 0.46%
• Italian 10Yr yield up 1bp to 2.33%
• Spanish 10Yr yield up 4bps to 1.72%
• S&P GSCI Index up 0.2% to 402.7
• MSCI Asia Pacific up 0.1% to 142
• Nikkei 225 down 1.2% to 18915
• Hang Seng down 0.6% to 23185
• S&P/ASX 200 down 0.1% to 5645
• US 10-yr yield down 1bp to 2.46%
• Dollar Index down 0.37% to 99.27
• WTI Crude futures up 0.2% to $53.98
• Brent Futures up 0.4% to $57.03
• Gold spot up 0.6% to $1,218
• Silver spot up 0.8% to $17.68

Top Global News

• Fed Waiting to See Economic Results From Flurry of Trump Actions: Economic impact of executive orders still hard to gauge
• Reckitt Targets Mead Johnson With Surprise $16.7 Billion Bid: $90-a-share offer represents 29% premium for shares
• Facebook Invests for Future After Posting Another Revenue Beat: Mobile ad revenue made up 84% of company’s total ad sales
• MetLife Pins Hopes on Trump as Kandarian Reshapes Insurer: Operating profit of $1.28 a share misses analysts’ estimates
• NXP’s Revenue Rises Ahead of Qualcomm’s $47 Billion Purchase: Fourth-quarter revenue rose 52 percent to $2.44 billion
• Deutsche Bank Misses Estimates as Client Jitters Hit Trading: CEO Cryan is cutting assets, jobs, bonuses to shore up capital
• AstraZeneca Sees 2017 Profit Drop, With Elusive Sales Growth: Revenue in 2016 fell as sales of Crestor blockbuster plunged
• Rio Said to Get Approaches on Last $1.5b of Coal Assets: Company weighs options including sale for Hail Creek, Kestrel
• Hexagon to Buy California’s MSC Software for $834 Million: Private equity including CVC, Veritas said to have been outbid
• BC Partners, Bain Said to Weigh Offers for Nature’s Bounty: Entire company could fetch a value of as much as $6 billion

Asian markets were subdued amid a lack of drivers, despite the upbeat close on Wall St where the S&P 500 snapped a 4-day losing streak and tech outperformed following strong Apple results, while the FOMC meeting was also perceived as somewhat dovish. ASX 200 (-0.1%) traded indecisively, although gold and resource names stemmed losses in the index, while Nikkei 225 (-1.1%) suffered from a firmer JPY. The Taiwanese Taiex (-0.2%) was lower on return from its week-long closure but still the Apple supply chain mildly supported in reaction to the tech giant’s encouraging Q1 results, while the Hang Seng (-0.6%) was dampened amid underperformance in property stocks and a lack of drivers with mainland Chinese participants still away before reopening tomorrow. 10yr JGBs were initially higher alongside weakness in riskier Japanese assets, although gains were later wiped out following a weak 10yr auction in which average and lowest accepted prices slumped from last month and the tail in price also widened.

Top Asian News

• Singapore Sees Little Growth in Investment This Year: Investment in 2016 was lowest since at least 2007
• China Oil Trader’s Mideast Spree Shakes Up World Crude Flows: Chinaoil buys Mideast crude as part of Platts pricing process
• Sony Cuts Outlook on Film Unit Writedown, Profit Decline: Struggling movie division weighs on full-year profit outlook

European Indices trade mixed this morning (DAX -0.4%) as earnings dictate play, Deutsche Bank (-5%) after poor earnings although revenues did slightly improve. Shell also underperformed against analyst expectations, however shares are trading higher this morning by 1.7% as the market was buoyed by comments from the CEO who stated with higher oil prices the companies fate may turn. In terms of sectors, IT outperform after Facebook posted a stellar set of results. Core fixed income markets gapped lower at the open but have subsequently pared those losses now up over 40 ticks and above the 162 level. Heading in to the auction, Spanish paper was weighed on with the GE/SP 10Y spread widening around 3.2bps.

Top European News

• Shell’s Falling Debt Burden Shows Worst of Oil Slump May Be Over: Investors look beyond earnings miss, shares rise
• Novo Nordisk Trims Outlook, Expects Lower Prices in U.S.: Environment is ‘increasingly volatile,’ new CEO says
• Delta Lloyd Boards Recommend NN’s $2.7 Billion Takeover Offer: Extraordinary general meeting to be held on March 29
• Vodafone Falls as Indian Competition Crimps Profit Forecast: Full-year Ebitda will be at lower end of 3%-6% growth range
• Daimler Gives Cautious 2017 Profit Outlook Amid Spending Push: 4Q profit rose 3% as trucks slump hurt results
• UniCredit Sets Discount for $14 Billion Rights Offer at 38%: Bank selling shares at 8.09 euros each and offers 13 for 5
• Swatch Profitability Falls to Lowest in 20 Years on Glut: CEO Hayek sees growth in 2017 after recent improvement
• Nokia Quarterly Earnings Beat Estimates as Decline Slows: CEO Rajeev Suri sees stabilization after sharp decline in 2016

In currencies, the Bloomberg Dollar Spot Index lost 0.5 percent as of 11:02 a.m. in London, extending its decline this year to 2.9 percent. The euro added 0.4 percent to $1.0810 and the pound reversed earlier gains. The follow through from last night’s FOMC reaction continued in early London, with USD losses seen across the board after the statement highlighted low inflation and gave a slightly ‘less hawkish’ (rather than dovish), view of the rate profile ahead. The pendulum edges back to 2 rather than 3 hikes through 2017 as a result, and this has pushed EUR/USD back above 1.0800, while USD/JPY is back testing yesterday’s lows ahead of 112.00. USD/CHF remains below 0.9900. The risk ahead if for the GBP as we wait for the BoE announcement and QIR. Many anticipate revisions (higher) to both growth and inflation, and a significant chunk of this may be priced in as Cable has tipped 1.2700 but faces heavy resistance through here. The Brexit White Paper brings another layer of risk into the equation, so caution at the highs looks to be in play as EUR/GBP also pulls away from 0.8500 — partially in the wake of the higher than expect EU PPI numbers — topical due to the (re)focusing on inflation levels. UK construction PMIs came in south of consensus, but discounted due to seasonal factors, while input prices also rose.
 
In commodities, nickel led industrial metals higher, advancing 2.2 percent to $10,480 a metric ton after the Philippines announced mine closures and suspensions. Coppers prices are also buoyant, in anticipation of China’s return, pushing better levels but struggling ahead of USD6000p/t.  Gold rose 1 percent to $1,222.42 an ounce, the fourth gain in five sessions. Silver also added 1 percent. Oil rose as the biggest expansion of U.S. stockpiles in three months countered output cuts by Russia, the largest non-OPEC member that’s joined the group in trimming supply. West Texas Intermediate climbed 0.7 percent to $54.26 a barrel. The weaker dollar has also played a role.

Looking at the day ahead, we’ll get the BoE meeting outcome at 12pm GMT where we’ll also get the release of the inflation report and also the post meeting press conference with BoE Governor Carney. In a quick preview, the BoE is at or close to the limits of its tolerance of above-target inflation. Recent strength in activity indicators could tip the MPC in favour of a tightening bias. A case can be made for waiting though. The Brexit forecast error may be about to resolve itself as evidence of the real income shock and business relocations begin to appear; the cost of a policy mistake is asymmetric; the role of easy financial conditions in buffering the economy from uncertainty should not be underestimated; and with the latest QE tranche wrapping up this month, the BOE has all the more reason to proceed slowly as the post-referendum monetary stimulus unwinds. Elsewhere in the US the only data of note is the Q4 nonfarm productivity and unit labour cost readings, as well as the latest initial jobless claims print. Earnings wise we’ve also got 36 S&P 500 companies set to report including Amazon (after the close) and Merck (prior to the open).

US Event Calendar

• 7:30am: Challenger Job Cuts YoY, Jan. (prior 42.4%)
• 8:30am: Nonfarm Productivity, 4Q P, est. 1.0% (prior 3.1%)
• 8:30am: Initial Jobless Claims, Jan. 28, est. 250k (prior 259k)
• 9:45am: Bloomberg Consumer Comfort, Jan. 21, est. 2.063m (prior 2.100m)
• 10am: Freddie Mac mortgage rates
• 10:30am: EIA natural-gas storage change

US Government docket:

• President Trump meets with Harley-Davidson executives at White House
• 10am: House Budget Cmte hears from CBO Director Keith Hall on the economic outlook
• 10am: House Homeland Security panel holds hearing on future of TSA
• 11am: Senate Budget Cmte votes on confirmation of Rep. Mick Mulvaney, R-S.C., to be OMB director

DB’s Jim Reid concludes the overnight wrap

The message from the Fed overnight was a fairly steady one which acknowledged improvements in the outlook but didn’t really further the debate on when the next rate rise will occur. There was a mention of improving “measures of consumer and business sentiment” although interestingly there was a notable omission of the recent improvement in business fixed investment which they continue to say “remained soft”. We also got the usual “some further strengthening” in the labour market while on the inflation front the Fed noted that “inflation increased in recent quarters but is still below the committee’s 2% longer-run objective”. There was nothing new to take from the language concerning the rates path or balance sheet policy – the latter having been a fairly topical discussion amongst Fed officials recently. One thing that is worth noting though is the change in the composition of the voting members this year. Both George and Mester have dropped off and both were previously seen as having a strong hawkish leaning and so implying a more dovish Fed overall.

The lack of anything materially new coming out of the Fed last night meant that the Greenback, which had been staging a decent rebound, pared most of the pre- FOMC gains. The Dollar index had been trading as high as +0.53% in the minutes prior but actually wiped out all of that move in the 30 minutes or so following the meeting, before rebounding modestly into the close to finish +0.13%. There was a similar move for Treasuries with the 10y yield peaking at 2.516% intraday before then closing at 2.476%. Equity markets were a bit more subdued with the S&P 500 (+0.03%) generally passing between gains and losses, although it did end up snapping a four-day losing streak. That was largely as a result of a decent rally for tech names with Apple (+6.19%) leading the charge following those better than expected revenue and earnings numbers the evening before. The Nasdaq finished the day up +0.50%. Prior to that in Europe the Stoxx 600 had finished +0.86%.

Meanwhile, in comparison to the last few days, yesterday was actually a fairly Trump newsflow free day aside from some headlines suggesting that Trump had “humiliated” Mexico President Nieto last week with more chatter about Trump supposedly forcing Mexico to pay for the wall with a tax on Mexican exports. That aside, the market was instead able to turn some of the focus over to what was a broadly decent day for data. In the US the most notable was the ADP employment change reading which came in at 246k in January (vs. 168k expected). That’s actually the biggest gain since June last year and should point to some upside risk in tomorrow’s payrolls. Meanwhile the manufacturing data was also positive. The final manufacturing PMI revision for January was set at a solid 55.0 (from 55.1 in the initial flash) while the ISM manufacturing reading rose 1.5pts to 56.0 (vs. 55.0) with both new orders (+0.1pts to 60.4) and employment (+3.3pts to 56.1) components higher. Elsewhere total vehicle sales in January were pretty much bang on the money at 17.5m annualised but construction spending weakened unexpectedly (-0.2% mom vs. +0.2% expected). The Atlanta Fed shifted their Q1 GDP forecast up fairly significantly post the ISM data to 3.4% from 2.3%.

Over in Europe we also got the final January manufacturing numbers and a first look at the data for the periphery. The Euro area reading was nudged up marginally to 55.2 while a slightly softer reading for Italy (-0.2pts to 53.0) was offset by a similar gain for Spain (+0.3pts to 55.6). The UK printed at 55.9, a fall of -0.2pts.

So with it being ISM and PMI manufacturing day we thought we’d update our numbers looking at the manufacturing print through history versus the YoY change in equity markets for the US, Germany, France, the UK and Italy. The numbers do a good job of showing why equity markets remain resilient in the face of rising political risk. On this crude measure equities are just 1% over priced in the US relative to activity, 3% cheap in both France and Germany, 5% too expensive in the U.K. (obviously this can’t adjust for the big fx moves over the last 12 months), and 5% cheap for Italy (likely due to elevated political  risk). We try to not to be overly country specific when looking at this analysis and prefer to use it as a broader starting point as to whether equities are cheap or expensive. Very simplistically it appears like they are broadly in line with where they should be given the data but perhaps being a touch cheap in Europe at the moment.

Elsewhere, the other notable news to report yesterday was the announcement that UK PM Theresa May’s Brexit law had been approved in the House of Commons by 498 votes to 114. That allows May to commence divorce talks with the EU although as the FT pointed out, dozens of pro-EU MP’s were said to refuse to back the bill suggesting a tense road ahead still. May is set to release a “substantial” white paper today detailing her negotiating objectives, so we will be keeping a close eye on that.

This morning in Asia it has for the most part been a fairly weak session with bourses largely edging lower. The Nikkei (-0.72%), Hang Seng (-0.62%), Kospi (-0.47%) and ASX (-0.25%) are all in the red. The Dollar has continued its move lower post the FOMC with the Dollar index down -0.14% while commodities are mixed (Gold +0.46% and WTI Oil -0.58%).

Moving on. As discussed at the top, overnight we have published our latest HY monthly where we highlight that despite rising government bond yields in Europe the measures of financial market volatility that we follow have generally fallen in the past month or so. We don’t think such a low vol environment will last. A potential risk to our view is that it remains stubbornly low even in the face of some fairly aggressive moves in rates. We show how HY credit spreads have outpaced these moves lower in volatility with BB and B spreads now 35bps and 55bps tighter than the volatility implied levels. IG credit spreads have actually underperformed the same volatility implied measures and the spread ratio between HY and IG is at its lowest level in more than a decade with our analysis suggesting that relative returns in the coming months are likely to favour IG credit over HY. Although absolute returns for both asset classes might be negative in 2017. We also show that there are limited attractive yield opportunities within the higher rated part of the HY spectrum although yields do rise with duration. For lower rated HY (B, CCC) there is no evidence that extending duration provides more attractive yield opportunities. In fact short-dated single-Bs still provide upside vs. longer-dated BBs. So we would argue that investors are still presented with the dilemma of whether they prefer increased credit risk or increased duration risk. For now with a still benign default outlook and the potential for higher government bond yields it might continue to benefit shorterdated / lower rated credit.

Before we look at today’s calendar, the saga in France’s presidential race continued yesterday with the spotlight still firmly placed on Francois Fillon. Reuters suggested that his party may consider substitute candidates in the wake of the revelations about his wife’s employment. In the mean time another poll was released yesterday (Elabe poll for Les Echos and Radio Classique). It showed that that Le Pen would lead the first round of voting at 27% versus 20% for Fillon and 23% for Macron. The second round voting shows that Macron would defeat Le Pen by 65% to 35% while Fillon versus Le Pen comes out at 59% to 41% in favour of Fillon (Pollster). French bonds underperformed again yesterday with the 10y yield edging up 4.9bps to 1.080% (versus 3.2bps for Bunds). France’s 10y bond yields are now 40bps above where they started the year and at the highest since September 2015. The spread between France and German 10y bonds (at 62bps) has also now reached a 3-year high.

Looking at the day ahead, this morning in Europe it’s fairly quiet data wise with just the Euro area PPI reading in December due. That clears the path for the BoE meeting outcome at 12pm GMT however where we’ll also get the release of the inflation report and also the post meeting press conference with BoE Governor Carney. In a quick preview, DB’s Mark Wall believes that the BoE is at or close to the limits of its tolerance of above-target inflation. Recent strength in activity indicators could tip the MPC in favour of a tightening bias. Mark also thinks that a case can be made for waiting though. The Brexit forecast error may be about to resolve itself as evidence of the real income shock and business relocations begin to appear; the cost of a policy mistake is asymmetric; the role of easy financial conditions in buffering the economy from uncertainty should not be underestimated; and with the latest QE tranche wrapping up this month, the BOE has all the more reason to proceed slowly as the post-referendum monetary stimulus unwinds. Elsewhere this afternoon in the US the only data of note is the Q4 nonfarm productivity and unit labour cost readings, as well as the latest initial jobless claims print. Earnings wise we’ve also got 36 S&P 500 companies set to report including Amazon (after the close) and Merck (prior to the open). Royal Dutch Shell headlines the reporters in Europe.

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After staging a remarkable recovery in its stock price since last summer’s record lows, nearly doubling from its September price, Deutsche Bank shares tumbled this morning after the bank reported a net loss of €1.89 billion for the fourth quarter, which while better than the €2.12 billion loss one year ago, was a big miss to the consensus expected shortfall of €1.32 billion.

For the full year, the bank reported a net loss of €1.4 billion, which while also better than last year, disappointed shareholders who sent the stock lower by more than 5% as of this moment, although as the FT chart below shows, shares are still up about 75% from a record low on Sept. 26, when news of the Justice Department’s initial request broke.

The miss also hit the top line with revenue from debt trading rising 11% from a year earlier to 1.38 billion euros but falling short of the 1.68 billion-euro average estimate. Equity trading revenue fell 23% to 428 million euros, Deutsche Bank said Thursday, while analysts had expected revenue to be flat.

Goldman was quick to slam the company’s results, saying its Q4 operations were “very weak” even as there were “strong liquidity metrics,” and there is evidence of franchise damage. It added that the 4Q loss of €1.9b is more than expected; underlying divisional pretax missed “across the board.” Underlying divisional pretax came in at loss of €320m vs consensus for profit of €210m, while Goldman had expected a profit of €450MM. It also noted that IB revenue was weak, rose just 6% vs U.S. peers up 18%, and notes the bank’s market share loss in FICC and Equities; FICC revenue increased 10% vs U.S. peers up 43%; Equities down 23% vs U.S. peers’ up 3%.

Embattled CEO John Cryan has been shrinking the bank’s trading operations, built by his predecessor, and raising capital levels eroded by misconduct costs BBG added. While the bank has settled some of its biggest legal cases in the past two months, an initial request that it pay $14 billion to settle a U.S. Justice Department investigation of mortgage-backed bonds spooked some investors in the quarter.

Deutsche Bank took €1.59 billion of litigation charges in the fourth quarter, more than the €1.28 billion analysts surveyed by Bloomberg News had expected on average. While 2015 and 2016 were “peak years for litigation,” this year will continue to be “burdened by resolving legacy matters,” Deutsche Bank said in slides on its website.

The silver lining in the poor report is that Deutsche Bank’s common equity Tier 1 ratio rose modestly to 11.9% at the end of December from 11.1% three months earlier as it shrunk risk-weighted assets. That’s higher than the 11.3 percent analysts in the Bloomberg News survey had expected. Cryan has said he’s willing to sacrifice some revenue as he improves the firm’s internal controls and scales back debt-trading operations that require increasing amounts of capital.

The bank reiterated a plan to raise the ratio to at least 12.5 percent by the end of 2018. Assets weighted by risk will probably rise in the first quarter “to support business growth,” the bank said.

“We welcome the improvement in the capital position, but wonder if this has come at a cost to the profitability of the core franchise,” Citigroup Inc. analysts including Andrew Coombs said in a report. They have a sell recommendation on the stock.

Also, in a statement, Cryan said Deutsche Bank has experienced a “promising start to this year.” Revenue will rise this year and the company had a “strong” January across almost all its businesses, according to a presentation the bank published on its website.

“There was a clear impact from the negative news flow around Deutsche Bank in the fall, especially on the global markets unit,” said Daniel Regli, an analyst with MainFirst whose recommendation on the stock is under review. “It remains to be seen whether this effect will be reversed in 2017.”

A criminal investigation of the trades by the Justice Department is ongoing, Bloomberg notes. The bank also hasn’t resolved investigations into whether it manipulated foreign-currency rates and precious metals prices. To help shoulder those costs, the company said last month that it will scrap the bonuses of its top executives for a second straight year and slashed variable compensation for other senior employees to shore up capital. Deutsche Bank is also considering raising capital through the sale of a stake in its asset management unit in an initial public offering, according to people familiar with the matter. That division generated a 753-million pretax loss after writing down the value of the Abbey Life unit it agreed to sell to Phoenix Group Holdings in September. Asset management generated a 173 million-euro pretax profit in the year earlier quarter. The business saw 13 billion euros of net outflows in the quarter, the highest since redemptions started in the third quarter of 2015.

Cryan said in a speech in Berlin that he’s seeing signs of better times ahead and will continue to focus on resolving the bank’s “legacy issues.” Shareholders have yet to be convinced.

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