Month: March 2017

Brexit Gold Buying – UK Demand for Gold Bars Surges 39% 

– UK investors buy gold bars as demand surges 39% in 2016
– Brexit Day sees Article 50 triggered and pound weakens
– “Brexit nerves” see “Brits hoard gold” reports WSJ
– End of 44 year relationship with closest economic partner
– May sets Brexit clock ticking in letter to Tusk
– UK PM says “A great turning point in our story”
– Threat as security raised as negotiating tool
– Brexit uncertainty to impact business and economy
– Robust demand for gold coins, bars due to political and economic uncertainty
– French elections in 3 weeks & U.S. ‘Civil War’ politics
– UK National Debt now £1.84 trillion 

As the UK triggered its formal departure from the European Union yesterday, gold demand from UK investors remained ongoing and robust with increased numbers of British investors diversifying into physical gold in order to hedge the considerable uncertainty and volatility that the coming months and years will bring.

Gold in GBP – 10 Years

The U.K. government yesterday triggered Article 50–the legal mechanism which will start negotiations on how the UK will exit the EU – after the British voted to leave the EU last June.

This is creating considerable uncertainty and concerns about the political and economic outlook – both for the UK and for the EU itself.

Demand for gold bars by UK investors has surged 39% in 2016 according to GFMS as reported by the WSJ:

The resulting political and economic uncertainty helped drive a 39% rise in U.K. gold bar hoarding in 2016, according to Ross Strachan from GFMS, part of media group Thomson Reuters.

“Macroeconomic fears are conducive to increased investment demand in gold,” Mr. Strachan said. During and after the global financial crisis, he pointed out, global gold bar investment increased from 237.7 metric tons in 2007 to 1246.9 metric tons in 2011.

Given the scale of the uncertainty created by the UK decision to leave the EU, robust gold demand in the UK should continue.

Indeed, given the fact that cohesion of the European Union itself will be tested and there is the risk of contagion, gold demand in the EU should also remain robust. Ireland and the Irish economy is particularly vulnerable.

Gold has edged up in recent days and appears to be consolidating at the $1,250 level. In sterling terms, the pound has fallen against gold and gold in sterling terms is back above the important psychological level of £1,000 per ounce.

The pound fluctuated wildly yesterday against other currencies after the Prime Minister triggered Article 50. A period of intense uncertainty for financial markets, both UK and EU markets and for sterling and indeed the euro awaits.

The negotiations are likely to be fractious and divisive and this uncertainty for UK companies, business in general and for the already indebted UK economy does not bode well for sterling.

It is not not just uncertainty about Brexit talks that will likely support gold. The French elections are now just three weeks away (April 23 and May 7) and the mess that is politics in the U.S. should lead to further safe-haven diversification in the coming weeks.

The ‘Trumpflation’ meme has run its course in markets and stocks and the dollar looks vulnerable to weakness which should support gold.

The failure last week to overturn ‘Obamacare’ and the ‘Civil War’ style politics in the U.S. should also support and those seeking to allocate to gold should continue to do so on price weakness.

Gold and Silver Bullion – News and Commentary

Gold investment seen rising for 4th year in 2017 (Reuters)

Gold slips on firmer dollar; political uncertainty supports (Yahoo Finance)

Gold steady amid Brexit, doubts over Trump policy and French election (Nasdaq)

May’s Opening Brexit Bid to Tie Security to Trade Hits Wall (Bloomberg)

Gold Set to Soar to $1,500 as Inflation Makes a Comeback (Bloomberg)

Gold to accelerate amid economic, political concerns – CPM Group (BN Americas)

UK investors exposed – Gold “will smooth investment returns” (Telegraph)

Trump’s $4 Trillion Fiscal Hole (The Daily Reckoning)

Welcome To The Third World, Part 22: Whites Are Dying “Deaths Of Despair” (Dollar Collapse)

Stocks are expensive – but they won’t stay expensive (MoneyWeek)

Gold Prices (LBMA AM)

30 Mar: USD 1,250.90, GBP 1,005.72 & EUR 1,165.34 per ounce
29 Mar: USD 1,252.90, GBP 1,007.71 & EUR 1,161.19 per ounce
28 Mar: USD 1,253.65, GBP 996.15 & EUR 1,154.49 per ounce
27 Mar: USD 1,256.90, GBP 1,000.49 & EUR 1,157.86 per ounce
24 Mar: USD 1,244.00, GBP 996.20 & EUR 1,150.82 per ounce
23 Mar: USD 1,247.90, GBP 997.95 & EUR 1,157.93 per ounce
22 Mar: USD 1,246.10, GBP 999.50 & EUR 1,154.76 per ounce

Silver Prices (LBMA)

30 Mar: USD 18.10, GBP 14.53 & EUR 16.85 per ounce
29 Mar: USD 18.13, GBP 14.58 & EUR 16.81 per ounce
28 Mar: USD 17.94, GBP 14.29 & EUR 16.53 per ounce
27 Mar: USD 17.94, GBP 14.25 & EUR 16.51 per ounce
24 Mar: USD 17.63, GBP 14.11 & EUR 16.31 per ounce
23 Mar: USD 17.55, GBP 14.04 & EUR 16.27 per ounce
22 Mar: USD 17.58, GBP 14.12 & EUR 16.30 per ounce

Recent Market Updates

– ‘Most Secure Coin In the World’ ?
– Gold Bullion Coin Worth $4 Million, Stolen in Berlin Museum Heist
– Gold, Silver Rise 2.5% and 3.2% As ‘Trump Trade’ Fades
– Gold ETFs or Physical Gold? Hidden Dangers In GLD
– Gold Prices See Seventh Day Of Gains After Terrorist Attack In London
– Peak Gold – Biggest Gold Story Not Being Reported
– Silver 1/ 70th The Price of Gold – Silver Eagles Sales Jump
– The Best Ways to Invest in Gold Today
– Gold Cup – Horse Racing’s Greatest Show, Gambling and ‘Going for Gold’
– Gold Up 1.8%, Silver Up 2.6% After Dovish Fed Signals Slow Rate Rises
– Most Overvalued Stock Market On Record — Worse Than 1929?
– EU Crisis Is Existential – Importance of Tomorrow’s Vote
– Digital Gold On Blockchain – For Now Caveat Emptor

Access Daily and Weekly Updates Here

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Authorerd by Mike Krieger via Liberty Blitzkrieg

When I first started becoming aware of how sleazy, parasitic and corrupt the U.S. economy was, I only had expertise in one industry, financial services. Coming to grips with the blatant criminality of the TBTF Wall Street banks and their enablers at the Federal Reserve and throughout the federal government, I thought this was the main issue that needed to be confronted. What I’ve learned in the years since is pretty much every industry in America is corrupt to the core, more focused on sucking money away from helpless citizens via rent-seeking schemes versus actually producing a product and adding value. Unfortunately, the healthcare industry is no exception.

Today’s post zeros in on a particular slice of that industry. A group of companies known as Pharmacy Benefit Managers, or PBMs. Companies that seem to extract far more from the public than they give back. It’s a convoluted sector that is difficult to get your head around, which is why we should be thankful that David Dayen wrote an excellent piece on the topic recently. What follows are merely excerpts from his lengthy and highly informative piece, The Hidden Monopolies That Raise Drug Prices. I strongly suggest you read the entire thing.

Below are a few highlights from the piece published in The American Prospect:

Like any retail outlet, Frankil purchases inventory from a wholesale distributor and sells it to customers at a small markup. But unlike butchers or hardware store owners, pharmacists have no idea how much money they’ll make on a sale until the moment they sell it. That’s because the customer’s co-pay doesn’t cover the cost of the drug. Instead, a byzantine reimbursement process determines Frankil’s fee.

 

“I get a prescription, type in the data, click send, and I’m told I’m getting a dollar or two,” Frankil says. The system resembles the pull of a slot machine: Sometimes you win and sometimes you lose. “Pharmacies sell prescriptions at significant losses,” he adds. “So what do I do? Fill the prescription and lose money, or don’t fill it and lose customers? These decisions happen every single day.”

 

Frankil’s troubles cannot be traced back to insurers or drug companies, the usual suspects that most people deem responsible for raising costs in the health-care system. He blames a collection of powerful corporations known as pharmacy benefit managers, or PBMs. If you have drug coverage as part of your health plan, you are likely to carry a card with the name of a PBM on it. These middlemen manage prescription drug benefits for health plans, contracting with drug manufacturers and pharmacies in a multi-sided market. Over the past 30 years, PBMs have evolved from paper-pushers to significant controllers of the drug pricing system, a black box understood by almost no one. Lack of transparency, unjustifiable fees, and massive market consolidations have made PBMs among the most profitable corporations you’ve never heard about.

 

Americans pay the highest health-care prices in the world, including the highest for drugs, medical devices, and other health-care services and products. Our fragmented system produces many opportunities for excessive charges. But one lesser-known reason for those high prices is the stranglehold that a few giant intermediaries have secured over distribution. The antitrust laws are supposed to provide protection against just this kind of concentrated economic power. But in one area after another in today’s economy, federal antitrust authorities and the courts have failed to intervene. In this case, PBMs are sucking money out of the health-care system—and our wallets—with hardly any public awareness of what they are doing.

 

Even some Republicans criticize PBMs for pursuing profit at the public’s expense. “They show no interest in playing fair, no interest in the end user,” says Representative Doug Collins of Georgia, one of the industry’s loudest critics. “They act as monopolistic terrorists on this market.” Collins and a bipartisan group in Congress want to rein in the PBM industry, setting up a titanic battle between competing corporate interests. The question is whether President Donald Trump will join that effort to fulfill his frequent promises to bring down drug prices.

Here’s how it works…

In the case of PBMs, their desire for larger patient networks created incentives for their own consolidation, promoting their market dominance as a means to attract customers. Today’s “big three” PBMs—Express Scripts, CVS Caremark, and OptumRx, a division of large insurer UnitedHealth Group—control between 75 percent and 80 percent of the market, which translates into 180 million prescription drug customers. All three companies are listed in the top 22 of the Fortune 500, and as of 2013, a JPMorgan analyst estimated total PBM revenues at more than $250 billion.

 

The Pharmaceutical Care Management Association, the industry’s lobbying group, claims that PBMs will save health plans $654 billion over the next decade. But we do know that PBMs haven’t exactly arrested skyrocketing drug prices. According to data from the Centers for Medicare and Medicaid Services, between 1987 and 2014, expenditures on prescription drugs have jumped 1,100 percent. Numerous factors can explain that—increased volume of medications, more usage of brand-name drugs, price-gouging by drug companies. But PBM profit margins have been growing as well. For example, according to one report, Express Scripts’ adjusted profit per prescription has increased 500 percent since 2003, and earnings per adjusted claim for the nation’s largest PBM went from $3.87 in 2012 to $5.16 in 2016. That translates into billions of dollars skimmed into Express Scripts’ coffers, coming not out of the pockets of big drug companies or insurers, but of the remaining independent retail druggists—and consumers.

 

Why haven’t PBMs fulfilled their promise as a cost inhibitor? The biggest reason experts cite is an information advantage in the complex pharmaceutical supply chain. At a hearing last year about the EpiPen, a simple shot to relieve symptoms of food allergies, Heather Bresch, CEO of EpiPen manufacturer Mylan, released a chart claiming that more than half of the list price for the product ($334 out of the $608 for a two-pack) goes to other participants—insurers, wholesalers, retailers, or the PBM. But when asked by Republican Representative Buddy Carter of Georgia, the only pharmacist in Congress, how much the PBM receives, Bresch replied, “I don’t specifically know the breakdown.” Carter nodded his head and said, “Nor do I and I’m the pharmacist. … That’s the problem, nobody knows.”

 

The PBM industry is rife with conflicts of interest and kickbacks. For example, PBMs secure rebates from drug companies as a condition of putting their products on the formulary, the list of reimbursable drugs for their network. However, they are under no obligation to disclose those rebates to health plans, or pass them along. Sometimes PBMs call them something other than rebates, using semantics to hold onto the cash. Health plans have no way to obtain drug-by-drug cost information to know if they’re getting the full discount.

 

Controlling the formulary gives PBMs a crucial point of leverage over the system. Express Scripts and CVS Caremark have used it to exclude hundreds of drugs, while preferring other therapeutic treatments. (This can result in patients getting locked out of their medications without an emergency exemption.) And there are indications that PBMs place drugs on their formularies based on how high a rebate they obtain, rather than the lowest cost or what is most effective for the patient.

 

Additionally, The Columbus Dispatch explained last October how, in some cases, a consumer’s co-pay costs more than the price of the drug outside the health plan. But the pharmacy is barred from informing the patients because of clauses in their PBM contracts; they can only provide the information when asked. The excess co-pay goes back to the PBM.

Absolutely disgusting and should be criminal.

Game-playing with brand-name drugs pales in comparison to more profitable schemes for generics, which represent the vast majority of filled prescriptions (though they account for only about half of the revenues, since brand-name drugs are so much more expensive). PBMs reimburse pharmacies for generics based on a schedule called the maximum allowable cost (MAC). But the actual number is hidden until the point of sale. “The contracts are written in the form of algorithms,” says Lynn Quincy, director of the Healthcare Value Hub for Consumers Union. “It’s not a list of drugs with a price next to it. Nobody knows what they’re up to.”

 

The MAC list that goes to the pharmacy does not necessarily match the one for the health plan. By charging the plan sponsor more than they pay the pharmacy in a reimbursement, PBMs can make anywhere from $5 to $200 per prescription, without either player in the chain knowing. While some spread pricing can be expected, the opacity of the profit stream masks the allegedly low costs PBMs tout to health plans to get them to sign up.

PBMs can also charge pharmacies additional fees months after a sale. Direct and indirect remuneration (DIR) fees were originally conceived as a way for Medicare to discover the true net cost of the drugs Medicare beneficiaries purchased through Part D, by forcing disclosure of all rebates from drug manufacturers. But PBMs secured a key loophole keeping their disclosures to the federal government confidential, while arguing that DIRs also legally apply to pharmacies.

 

The PBMs’ use of these fees also harms patients and taxpayers. Consumers pay co-pays or deductibles for drugs based on the list price, without DIR fees or rebates that would lower them. And retroactive DIR fees are routinely not reported to Medicare, as PBMs call them “network variable rates” or “pharmacy performance payments” and keep them for themselves. Obscuring DIR fees makes the net costs of drugs look higher to Medicare than they actually are. As a result, patients hit the “donut hole” coverage gap in Medicare Part D faster, forcing them to pay the full cost of their drugs. And it accelerates high-usage patients into catastrophic coverage faster as well, where Medicare pays 80 percent of all costs. All of this leaves subscribers and Medicare, i.e. the taxpayers, to pay more out of pocket, as the Center for Medicare and Medicaid Services noted in a January report.

 

The question begging to be asked is why all the players in the market—plan sponsors, drug companies, and pharmacies—put up with a middleman that extracts profits from all of them? And the answer is the failure of federal antitrust policy.

Consolidation…

Three years later, Optum gobbled up Catamaran, creating the current situation where three firms control 80 percent of the market. Brill adds that the Big Three carve up the market geographically, effectively not competing in certain regions of the country. Amid such concentration, plan sponsors have little ability to select the best PBM on price or quality. “I just sat down with [one of the Big Three PBMs], I had half a billion dollars on the table,” says Susan Hayes. “They said, ‘Where are you going to compromise?’ Really? Where else do I bring half a billion and they say where will you compromise?”

 

With such monopolized control, PBMs offer pharmacies take-it-or-leave-it contracts, with no opportunity to negotiate. These contracts employ punitive terms, including allowing the PBM to audit pharmacies, allegedly to ferret out waste, fraud, and abuse. “Minor technicalities are used to extract money,” says Susan Pilch, vice president of policy and regulatory affairs for the NCPA. “There are examples where you were supposed to initial on the bottom right of prescription, not the bottom left. The PBM recouped all claims on that.”

Gotta love that “free market.”

Other pharmacies have little recourse to fight back. PBM contracts frequently contain gag orders, preventing them from talking to local elected officials or disclosing the terms of the contract. Pharmacists complain of being threatened for mailing or delivering drugs to local patients, which would compete with PBM mail-order operations. The combined toll makes it difficult for independent pharmacies to stay in business. “This takes away a medical provider patients have used for years,” said Representative Buddy Carter. “I’ve had grandparents come to my store in tears and say ‘I can’t come here anymore.’”

 

Worst of all, PBMs don’t stop at legal money-making schemes. At his site PBM Watch, attorney David Balto compiled 56 pages’ worth of state and federal litigation against PBMs. Just a handful of these cases yielded $370 million in damages for undisclosed rebates, artificial price inflations, kickbacks, steering, and other deceptive practices.

 

Last year, Anthem sued Express Scripts for $15 billion, claiming the PBM violated their agreement by charging excessive rates for drugs. Federal agents from two states issued subpoenas for Express Scripts last fall, seeking information on the company’s business practices. In January, diabetes patients sued three drug manufacturers for conspiring with PBMs to triple the price of insulin.

 

PBMs may even have contributed to the worst public health crisis in America—the opioid epidemic. An investigation by Stat News found that Purdue Pharma, makers of OxyContin, paid off PBMs to keep prescriptions flowing for their product, over the howls of a state employee health plan in West Virginia. In exchange for rebates, PBMs kept OxyContin on their formulary with low co-pays, and without requiring prior authorization from the health plan to dispense the drug. Overprescribing of OxyContin laid the groundwork for a crisis that killed more than 20,000 Americans in 2015.

Naturally, this won’t prevent Jeff Sessions from blaming recreational marijuana.

“They were making a profit on people’s addiction, which is fricking criminal,” says consultant Susan Hayes. “Rubbing their hands with glee that people are becoming addicted to opioids. I can’t believe it.”

Solutions?

Another model would empower pharmacies. A 2016 report from the Institute for Local Self-Reliance highlights a quirk of law in North Dakota, which only allows drugstores to operate if owned by pharmacists (similar laws exist in Europe). The law prohibits chain pharmacies from entering the state. Not surprisingly, North Dakota’s independents deliver among the lowest prescription drug prices in the country, along with better health outcomes and more drugstores per capita than any other state. This flies in the face of industry claims that big chains and giant conglomerates save consumers money or improve services.

 

Why can’t this successful model be replicated elsewhere? “The answer is PBMs,” says Stacy Mitchell, the report’s author. “Because in North Dakota, independents are the only game in town, PBMs have to negotiate with them. In other states, they have no leverage.” Unsurprisingly, PBMs and chains want the North Dakota law overturned rather than adopted in other states.

 

For a more immediate impact, we must turn to Washington. And there, solutions often emerge when one large industry starts pointing the finger at another. Under fire for their many drug-pricing scandals, from Martin Shkreli to Valeant, the pharmaceutical industry has tried to deflect blame by citing PBMs. GlaxoSmithKline CEO Andrew Witty said in a February conference call that so much of the list price on the company’s drugs went to “non-innovators in a system which thinks it’s paying high prices for innovation,” a veiled reference to PBMs. An industry-funded report in January asserted that manufacturers took only 63 percent of gross drug revenues, attributing the decline to discounts and rebates paid to PBMs. (Of course, this hasn’t stopped pharmaceutical companies from earning higher profit margins than any other industry.)

 

Doug Collins, a third-term House member, experienced the PBM issue personally, when his mother couldn’t get her regular medications and her plan had no substitute on the formulary. “I am a free-market person, as conservative as they come,” Collins says. “When dealing with this, it’s not a free market.” Buddy Carter, his colleague, has worked in independent pharmacies since 1980, and sees himself as their voice in Congress. I asked him if he had difficulty explaining the PBM market and its problems to his colleagues. “Heck, it’s difficult for me to understand and I’ve worked in the industry over 35 years!” Carter says.

 

If the FTC determined that the PBM market was anti-competitive, they could sever the relationship between PBMs and pharmacies through sanctions or divestiture demands. They could even break up the entire industry to generate competition. And the FTC has the power to demand the very transparency members of Congress and state legislatures believe is the key to ending profiteering. But this would require a radical shift at the FTC, which has often opposed state legislation to regulate PBMs or increase transparency. “The FTC had argued now for over ten years that lack of transparency is necessary because it can drive prices down,” says Brill, citing recent FTC statements. “Prices have not been driven down, and we need to take a different route.”

 

The wild card in all this is Donald Trump. At his one and only pre-inauguration press conference, Trump singled out drug companies for “getting away with murder,” vowing to create “new bidding procedures” for Medicare and earning praise from the likes of Bernie Sanders. But when Trump met with pharmaceutical executives two weeks into his presidency, he focused more on speeding up new drug approvals from the FDA and cutting regulations than on reducing industry profits. This lines up with the perspective of a key aide, Silicon Valley billionaire Peter Thiel, who wants to overhaul the FDA process. (In fact, the Republican Congress just overhauled the FDA process in one of the last bills signed by Barack Obama.) Trump doesn’t appear to understand the cost excesses in the supply chain.

 

Trump did say in his address to a joint session of Congress that he would “bring down the artificially high price of drugs.” And in his confirmation hearing, Health and Human Services Secretary Tom Price, discussing Trump’s idea for competitive bidding in Medicare, said that “right now the PBMs are doing that negotiation. … I think it is important to have a conversation and look at whether there is a better way to do that.”

 

But where Trump’s team will ultimately land is unknown. “We need to get to a point of clarity about whether the administration is serious,” says the NCPA’s John Norton. Furthermore, any attempt to move forward legislatively on any part of health-care policy will run headlong into the deeply polarized debate over the Affordable Care Act. While a bipartisan alliance appears possible on the PBM issue in isolation, it will be difficult to separate anything health-related from the Obamacare vortex.

 

The PBM industry’s leading trade group isn’t sleeping on the possibility of an attack. Days after Trump met with pharma execs, the Pharmaceutical Care Management Association issued an internal memo leaked by Buzzfeed, stressing the need for “building a political firewall” in Congress to stop any legislative action.Frightened about drug manufacturers highlighting a “bloated supply chain,” PCMA CEO Merritt laid out a six-point strategy that included meetings

 

with White House staff and key members of Congress, a digital ad campaign targeting congressional leaders, partnerships with right-wing think tanks like the American Action Forum, and working groups to shape regulatory changes that make PBMs the savior instead of a villain. “We will continue to show how competition—not government intervention—is the way to manage high drug costs,” Merritt wrote, apparently without irony. Merritt even scheduled a meeting with the main health insurance lobby, AHIP, “to make sure the payer community is aligned and coordinated.”

Only in America can three companies controlling 80% of the market be seen as competition. No wonder our economy is a total neofeudal nightmare.

via http://ift.tt/2oeu1kr Tyler Durden

Richard Breslow, a former FX trader and fund manager who writes for Bloomberg, summarizes what has been a particularly confusing week for traders in his latest overnight note.

Jeez Louise, it’s only Thursday and it’s been quite the week. We’ve actually learned a lot amid the deafening noise. Primarily because not all noise is equally deafening. The conclusions of Monday were called into question Tuesday and mostly repudiated Wednesday. Now we sit wondering if we’re about to resume old trends or this is as tasty an opportunity to sell what most people were afraid to buy a mere three days ago.

• So we need to ask, is there actually “new” news, after only a very few days, we should we consider before flipping our coins anew? It really matters when updating your priors to sift through signal versus commotion. And accept that error terms haven’t been shrinking.
• Well, we’ve actually had an interesting insight into the potential direction of yield spreads between different sovereign curves. That’s actually a biggie. Probably needs greater trader focus.
• There’ve been a bunch of Fed speakers this week and they’ve stayed on message for rate hikes. Two more exceeds the one and one-half priced in. They didn’t seem derailed by last Friday’s events.
• On the other hand, a rising euro and higher yields got someone’s attention. Reuters reported that ECB sources say the hawkish rate interpretation from their March meeting was “way overinterpreted”. Euribor futures have now taken out the extra 10 basis points of tightening added on March 10
• And anyone thinking the BOJ is on the cusp of a snug should consult BOJ’s Iwata comments in parliament earlier today.
• The death of health care reform in the U.S., or more importantly, the entire fiscal agenda if you believe the armchair experts, has apparently been somewhat exaggerated. The Republican caucus is busy twisting arms and is reportedly preparing to have another go. Politicians don’t suffer embarrassment and slink away. It’s a who’s left standing last enterprise.
• Article 50 got invoked. I heard a lot more chatter about the crowded pound short trade than the acrimony that’s going to proceed any meaningful progress. All I’ll say is, it won’t be easy, no matter that the world didn’t come to an end yesterday. The key to where the whole thing ends up will be what the Chinas and Indias of the world have to say about bilateral trade and investment, not the posturing of the EU and UK over the next months.
• And if you wonder whether dip buyers are still there in equities, you need to consider the impressive 55-day moving average in the S&P 500. And not forget how stock people behave when it’s quarter-end.
• All in all, there has been actual news worth considering. Now see if USD/JPY can get above that safe-haven pivot at 111.70.

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

Confirming recurring rumors from the past month, overnight both China’s Foreign Ministry and the White House confirmed that China’s president Xi Jinping will meet with President Trump at Mar-a-Lago in Florida on April 6-7. It will be Xi’s first meeting with Trump, a little over a month after Trump used the same venue to meet with Japan’s PM Abe, and comes at a time when the two sides face pressing issues, ranging from North Korea and the South China Sea to trade disputes.

Foreign Ministry spokesman Lu Kang, who made the announcement at a daily news briefing on Thursday, did not give any more details of the meeting agenda, but spoke of the need to see the big picture while fostering mutual interests in trade relations.

“The market dictates that interests between our two countries are structured so that you will always have me and I will always have you,” Lu said.

“Both sides should work together to make the cake of mutual interest bigger and not simply seek fairer distribution,” he said in response to a question about trade frictions.

Beijing had previously said that preparatory work for the meeting was underway. But it had not yet confirmed the trip, despite western media reports on a scheduled meeting and an announcement by the Finnish government that Xi would make a brief stop in Finland on April 5.

The summit follows a series of other recent U.S.-China meetings and conversations aimed at mending ties after strong criticism of China by Trump during his election campaign. Rex Tillerson ended a trip to Asia this month in Beijing, agreeing to work together with China on North Korea and stressing Trump’s desire to enhance understanding.

Among the most pressing recent issues, China has been irritated at being repeatedly told by Washington to rein in North Korea’s nuclear and missile programs and by the U.S. decision to base an advanced missile defense system in South Korea. Beijing also remains suspicious of U.S. intentions towards self-ruled Taiwan, which China claims as its own.

Of course, trade will be a dominant topic: Trump has repeatedly accused China of unfair trade policies, criticized its island-building in the strategic South China Sea, and accused it of doing too little to constrain North Korea, although with the “Goldman” block silencing Peter Navarro in recent months, Trump has significantly moderated his tone.

* * *
Meanwhile, setting the stage for a just as critical summit, Russian President Vladimir Putin said on Thursday that he was ready to meet U.S. president Donald Trump at an Arctic summit in Finland. According to Reuters, the Russian president made this remark responding to his Finnish counterpart, who said he would be happy to receive Russian and U.S. presidents in Finland.

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

• Trump’s Border Wall: A Tall Order (WSJ)
• Trump’s Hope for Rapid Reset With Russia Fades (WSJ)
• China’s Xi to meet Trump in Florida next week (Reuters)
• U.S. Softens Call for Shift on Nafta (WSJ)
• ESPN Has Seen the Future of TV and They’re Not Really Into It (BBG)
• Inside the Leadership Shakeup at Merrill Lynch (BBG)
• States’ Next Target on Sales Taxes: Sellers on Amazon (WSJ)
• South Africa’s Zuma considers stepping down early in deal to oust Gordhan (Reuters)
• Zuma to Face Mass Cabinet Walkout If He Fires Gordhan (BBG)
• U.S., Turkey Set on a Collision Course (WSJ)
• Ackman Is ‘Profoundly’ Sorry for $4 Billion Valeant ‘Mistake’ (BBG)
• ‘You Are All Liars’: Toshiba Shareholders Vent After Westinghouse Bankruptcy (WSJ)
• Malaysia mistook slain Kim Jong Nam for South Korean (Reuters)
• JPMorgan in Talks for Dublin Office That Holds 1,000 People (BBG)
• North Carolina lawmakers reach deal to repeal transgender bathroom law (Reuters)
• Chinese women golfers may shun LPGA event amid South Korea tensions (Reuters)
• This Chinese Stock Soared 4,500% on the Nasdaq and No One Knows Why (BBG)
• Amazon Wants Cheerios, Oreos and Other Brands to Bypass Wal-Mart (BBG)
• Spain’s Mom and Pops Are Hurting (BBG)

 

Overnight Media Digest

WSJ

– The Trump administration is signaling to Congress it would seek mostly modest changes to the North American Free Trade Agreement in upcoming negotiations with Mexico and Canada, a deal President Donald Trump called a “disaster” during the campaign. http://on.wsj.com/2nBRZ7E

– Westinghouse Electric Co filed for Chapter 11 bankruptcy protection Wednesday, setting off a showdown between the nuclear power company’s Japanese parent and a major U.S. utility, and threatening to drive a wedge between governments of two countries over the fate of industries each considers vital. http://on.wsj.com/2ni79fx

– British Prime Minister Theresa May on Wednesday began the UK’s path out of the European Union, highlighting her country’s security expertise as she started the clock on negotiations that will challenge ties between Britain and some of its closest allies. http://on.wsj.com/2ofj1j9

– Negotiations between New York real-estate developer Kushner Cos and a large Chinese company over a planned $7.5 billion tower in Manhattan collapsed amid an outcry over possible conflicts of interest involving the Trump administration. http://on.wsj.com/2nAiVED

– Federal regulators plan to reverse an Obama-era rule that prevented major television-station owners from buying stations or readily selling themselves, a move that could touch off a wave of deals among media companies. http://on.wsj.com/2nikcgj

– Two black women have filed a lawsuit against Fox News Channel, its parent company 21st Century Fox and a former senior executive at the cable network alleging racial discrimination. http://on.wsj.com/2oi0fIa

 

Canada

THE GLOBE AND MAIL

** Cenovus Energy Inc is bulking up in a C$17.7 billion ($13.3 billion) deal to more than double its production as the repatriation of Canada’s oil sands winnows control of the resource to a handful of domestic players. https://tgam.ca/2obmrX7

** Bombardier Inc said its new Global 7000 luxury jet brushed the speed of sound as it confirmed testing for the new airplane remains on track for a planned entry into service in the second half of 2018. https://tgam.ca/2obr57w

** Former Torys LLP lawyers Beth DeMerchant and Darren Sukonick are suing the Law Society of Upper Canada for damages totalling C$22 million, alleging the regulatory body was malicious in its prosecution of them over alleged errors in their work for Hollinger Inc more than 15 years ago. https://tgam.ca/2obras5

NATIONAL POST

** Britain has officially filed for divorce from the European Union, but Canadian companies with a footprint in the UK still face a lengthy period of uncertainty as the details of the split are sorted out. http://bit.ly/2obu8gd

** TransCanada Corp lost its go-to guy on tough pipeline projects with the surprise retirement of its 51-year-old chief operating officer, Alex Pourbaix. http://bit.ly/2oboBpH

** Canadians will be able to invest in a basket of marijuana companies when the first marijuana exchange-traded fund launches next week, helping investors diversify their exposure to the volatile and frothy sector. http://bit.ly/2oblNsQ

** The Ontario Teachers’ Pension Plan is continuing to hunt for deals in the United Kingdom, even as concrete steps were taken Wednesday to extricate Britain from the European Union. http://bit.ly/2obpr5P

 

Britain

The Times

* Members of parliament are demanding that banks and regulators do more to crack down on security failings that mean contactless cardholders can be defrauded months after their cards are stolen or lost. http://bit.ly/2nNnFr0

* Some of the world’s biggest sovereign wealth funds will pledge 650 million pounds (about $808.66 million) in new investments for Heathrow on Thursday in what will be regarded as a significant boost after Article 50 was triggered. http://bit.ly/2oAeKWS

The Guardian

* Lloyd’s of London will announce on Thursday that it has picked Brussels as the base for its new European Union subsidiary to secure a European foothold after UK’s departure from the EU. http://bit.ly/2nN1lOo

* German Chancellor Angela Merkel has rejected one of Theresa May’s key Brexit demands, insisting negotiations on Britain’s exit from the European Union cannot run in parallel with talks on the future UK-EU relationship. http://bit.ly/2nMEEtH

The Telegraph

* Britain’s car makers have warned that Brexit poses the “biggest threat in a generation” to the car manufacturing industry. http://bit.ly/2obnWVA

* Howard Shore, the man who set up City stockbroker Shore Capital Group Ltd at the age of 24, has stepped down as the group’s chief executive after over three decades in charge. http://bit.ly/2nNvvku

Sky News

* Prime Minister Theresa May has triggered Article 50 after her letter to European Council President Donald Tusk was delivered by Ambassador Tim Barrow in Brussels. http://bit.ly/2oxRN6S

* Sky News has learnt that James Gorman, Morgan Stanley’s chairman and chief executive, told Theresa May that other cities had made compelling approaches to lure parts of its business from London during the nine months since the EU referendum. http://bit.ly/2nicdQq

The Independent

* The London attack last week was a “wake up call” for technology companies, the head of the Metropolitan Police said on Wednesday. Tech companies including Google and Facebook have come under scrutiny recently for not doing enough to stop extremist content being hosted on their networks. http://ind.pn/2njaLhl

 

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For years, bankers and buysiders assumed that moving away from conventional messanging services like AOL or the ubiquitous Bloomberg Chat to discuss confidential information, would spare them the attention of regulators and enforcers. That, however, changed today when the UK regulator, the Financial Conduct Authority imposed a fine of £37,198 on a former Jefferies banker for sharing confidential client information over WhatsApp. “The FCA found that Mr Niehaus failed to act with due skill, care and diligence.”

According to the FCA announcement, Niehaus, who was a managing director at Jefferies, received client confidential information and, on a number of occasions between 24 January and 16 May 2016, shared that information with both a personal acquaintance and a friend, who was also a client of the firm. 

In one of the instances where Mr Niehaus shared client confidential information with his friend, who was also a client of the firm, that information was about a competitor.  Mr Niehaus used the instant messaging application WhatsApp to share this information. The information was shared by Mr Niehaus because he wanted to impress the people that he shared the information with.

 

The details of the information he shared included the identity of the client, the details relating to the client mandate and the fee Jefferies would charge for their involvement in the transaction.  Mr Niehaus also boasted about how he may be able to pay off his mortgage if one of the deals was successful.

Niehaus provided full admissions to the FCA and was given a 15% reduction to the financial penalty, the FCA announced. Niehaus also agreed to settle during the stage 1 settlement period; but for this, the FCA would have imposed a penalty of £53,140.

Now if regulators shift their attention to the Mecca of confidential banker data “sharing”, Snapchat, they would promptly refill any outstanding budget gaps.

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With House Republicans said to make another push to pass Obamacare, perhaps as soon as next week according to a Bloomberg report, some have speculated whether Trump will engage democrats this time to assure at least a few votes from across the aisle. Overnight, however, House Speaker Paul Ryan poured cold water on the idea, saying he does not want President Donald Trump to work with Democrats on overhauling Obamacare.

In an interview with “CBS This Morning” that will air on Thursday and which was previewed by Reuters, Ryan said he fears the Republican Party, which failed last week to come together and agree on a healthcare overhaul, is pushing the president to the other side of the aisle so he can make good on campaign promises to redo Obamacare.

“I don’t want that to happen,” Ryan said, referring to Trump’s offer to work with Democrats.

Carrying out those reforms with Democrats is “hardly a conservative thing,” Ryan said, according to released interview excerpts. “I don’t want government running health care. The government shouldn’t tell you what you must do with your life, with your healthcare,” he said.

On Tuesday, Trump told senators attending a White House reception that he expected lawmakers to reach a deal “very quickly” on healthcare, but he did not offer specifics. “I think it’s going to happen because we’ve all been promising – Democrat, Republican – we’ve all been promising that to the American people,” he said. Trump said after the failure of the Republican plan last week that Democrats, none of whom supported the bill, would be willing to negotiate new healthcare legislation because Obamacare is destined to “explode.“

Meanwhile, speaking to Bloomberg, two Republicans said that leaders are discussing holding a new Obamacare repeal vote next week. The ray of hope for Trump and Ryan is that members of the Freedom Caucus, which was instrumental in derailing the bill, have been talking with some Republican moderate holdouts in an effort to identify changes that could bring them on board with the measure. 

A renewed attempt to pass Obamacare repeal would come after President Trump and Republican leaders in Congress said they would move on to issues like a tax overhaul in the wake of last week’s drama, when the long-awaited bill was pulled 30 minutes ahead of a scheduled floor vote. Asked if the GOP health bill will come up again, House Majority Leader Kevin McCarthy said, “Yes. As soon as we figure it out and get the votes.”

Quoted by Bloomberg, Kevin McCarthy said nothing is currently scheduled and didn’t indicate how leadership would resolve divisions between the Freedom Caucus and moderates in the so-called Tuesday Group. “Lot of people are talking,” he said. “Lot of people are working.”

For now, it is nothing but noise.

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Asian shares and oil are lower, European shares are little changed, and S&P futures are fractionally in the red after gaining for most of the overnight session, perhaps troubled by warnings from two Fed presidents who warned that markets and valuations appear frothy, and the Federal Reserve may have to raise rates more times than currently forecast. The latest round of Fed hawkishness helped the dollar gain further after recent losses which earlier this week pushed it to 4 month lows. That said, overnight the USDJPY appeared to fade much of yesterday’s gains, dipping back under 111 around the European open, only to see another unexplained jerk higher shortly before 6am eastern.

Summarizing some of yesterday’s key macro events, SocGen’s Kit Juckes writes that “the unnamed ECB source is back, telling Reuters that markets had over-interpreted Mario Draghi’s comments at the last meeting and that a further rise in bond yields would be problematic. Cue lower bond yields, and a slightly weaker Euro. If this morning’s preliminary March German CPI data deliver the expected base—effect-induced slip from 2.2% to 1.6%, we can look forward to this trend going a little further. I’m not sure how far we can go in the absence of a return of political concerns however. The FX market doesn’t have a significant Euro long position that can be flushed out (it probably has a small euro short, instead). And I’m not convinced that interest rate expectations can go that far.”

Juckes was right, and the EURUSD indeed slid further after a series of weak German regional CPIs, which has seen continued pressure following yesterday’s ECB rumors and hawkish Fed commentary. European traders will now look at German prices which are expected to rise 1.8% from the year before after CPI accelerated 2.2% in February.

The ECB’s dovish tone has once again established the diverging outlook between U.S. and European monetary policy, manifesting itself in some recent spread widening between German and US 10-Year yields.

Juckes had some observations on this too, and said that “in recent months, the US/German nominal yield differential has overtaken the real yield differential in terms of its correlation with EUR/USD. Both are better-correlated with the exchange rate than shorter-dated rates. The 10-year yield spread had narrowed from a wide position of 235bp in late December to as little as 196bp last week and is back above 200bp this morning. If the ECB is trying to anchor bond yields (and if they succeed in limiting how much they follow US moves), then the real driver of EUR/USD for a while will be what happens to US yields. The 2.3-2.65% range looks pretty strong and dooms EUR/USD to its current 1.04-1.09 range. That’ll change if the ECB’s view of the world changes after the French elections (which i suspect it will) and there’s a greater tolerance of higher Bund yields in particular. But for now, we’re stuck.”

Back to equities, where we find Asian shares turning mildly lower on Thursday after touching near two-year highs.  MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.2 percent, stepping back from morning trade when it nudged close its loftiest levels since June 2015. Australian shares firmed 0.4 percent, helped by an overnight gain in oil prices. 

China stocks were headed for a fourth day of losses amid worries over property market prospects, sharp declines in newly-listed stocks, and liquidity stress as the month-end approached. The CSI300 index was down 1.0 percent, while the Shanghai Composite Index lost 1 percent.

The tightening trend in China continued, with the one-day loan rate on the Shanghai Stock Exchange, which reflects demand from non-bank financial institutions, jumping before a long weekend (China markets closed Monday and Tuesday) and as the PBOC holds off on using a liquidity tool for the fifth day in a row. The overnight repurchase rate traded on the Shanghai exchange surges as much as 21.67% points to 32%, before closing at 14.96%; in Hong Kong’s offshore market, yuan tomorrow next forward points surge as much as 44 points, the most since Jan. 25. The PBOC again skipped reverse-repurchase operations for the fifth day in a row, taking net withdrawals during the period to 290 billion yuan due to maturities. On the first two days, the PBOC cited “high liquidity,” then over the next two days it referred to “appropriate liquidity.” On Thursday the monetary authority said that there was “high liquidity” in the banking system, and that fiscal spending toward the end of the month offsets reverse repo maturities.

In Europe, the Stoxx Europe 600 Index rose 0.1% at 10:29 a.m. in London after closing Wednesday at the highest since December 2015; the Germany’s DAX continues to close in on record highs seen in 2015.

The dollar index, which tracks the U.S. currency against a basket of six major rivals, was slightly up on the day at 100.030 . It was lifted to a one-week high overnight as the euro slipped on concerns about the impact of Brexit as well as news that ECB policymakers are keen to reassure investors that their easy-money policy is far from ending.  Sterling steadied at after skidding to a one-week low of $1.2377 previously.

“Brexit, to some extent, has been covered in the market already. People went short, covered, and went short again,” said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo. “As for the dollar, demand is still steady from pure commercial orders, but the Japanese fiscal year ends this week and Tokyo investors don’t want to take new positions,” Ogino said.

Despite the dollar’s gains on the day, it was far lower than levels above 115 yen hit a few weeks ago, and Japan’s Nikkei stock index shed 0.8 percent. “Investors have bought Japanese stocks mainly because of the strong dollar-yen trend. Trump’s healthcare defeat threw a wet blanket on the Japan market’s rally since last November,” said Takuya Takahashi, a strategist at Daiwa Securities.

As we observed yesterday, comments from Boston Fed President Eric Rosengren and San Francisco Fed President John Williams also backed multiple rate hikes, though those officials are non-FOMC voters.

“There’s a huge political fog around the world, in Asia, in the U.S., but underneath it, there’s actually quite a decent economic recovery. And that’s what’s driving markets more than the worries about politics,” said Sean Taylor, Asia Pacific chief investment officer at Deutsche Asset Management.  “The U.S. is continuing to do well. Europe isn’t doing as badly as it was and because of the commodity pickup last year, emerging markets are doing okay,” he said.

The commodity space saw some profit taking, with West Texas Intermediate dropping 0.3% to $49.38 a barrel, after surging 2.4% on Wednesday after a bigger-than-forecast decline in U.S. gasoline stockpiles. Gold slipped 0.2 percent to $1,250.48 an ounce.

Today, traders will look for the latest data on jobless claims and personal spending.

* * *

Bulletin Headline Summary from RanSquawk

• German regional CPIs add pressure on the EUR which continues to remain out of favour from yesterday’s source comments
• Away from the German data, European equities have had a slow start to the morning with little in terms of firm direction
• Looking ahead, highlights include US GDP, Fed’s Mester, Kaplan, Dudley and Williams

Market Snapshot

• S&P 500 futures unchanged at 2,357.00
• STOXX Europe 600 up 0.09% to 378.87
• MXAP down 0.5% to 148.19
• MXAPJ down 0.2% to 482.36
• Nikkei down 0.8% to 19,063.22
• Topix down 0.9% to 1,527.59
• Hang Seng Index down 0.4% to 24,301.09
• Shanghai Composite down 1% to 3,210.24
• Sensex up 0.1% to 29,564.01
• Australia S&P/ASX 200 up 0.4% to 5,896.23
• Kospi down 0.1% to 2,164.64
• German 10Y yield fell 0.9 bps to 0.335%
• Euro down 0.2% to 1.0740 per US$
• Brent Futures down 0.2% to $52.30/bbl
• Italian 10Y yield fell 2.4 bps to 2.137%
• Spanish 10Y yield fell 0.5 bps to 1.638%
• Brent Futures down 0.2% to $52.30/bbl
• Gold spot down 0.3% to $1,250.22
• U.S. Dollar Index up 0.1% to 100.13

Top Overnight News

• Trump Travel Ban Blocked for as Long as Court Battle Goes On
• Oil Stays Above $49 as U.S. Fuel Demand Blunts Crude Supply Gain
• Zuma Said to Face Mass Cabinet Walkout If He Fires Gordhan
• Turkey’s TAI Renews 787 Dreamliner Parts Contract With Boeing
• Autodesk Says It Expects Revenue Growth in Next Two Quarters
• Hikma, Vectura Fall as Mylan Advair Generic Fails to Get Nod
• Great Elm Capital to Start Tender Offer for Up to $10m in Shrs
• Lazard’s Peter Kuo to Join Canyon Bridge as Founding Partner
• GE CEO Says ‘Climate Change Is Real,’ Science ‘Well Accepted’
• GE Renewable Energy Gets $56m Hydro Contract in China
• Lululemon 1Q EPS View Misses Est.
• Partners in Leviathan, Aphrodite Mull Joint Gas Pipeline: Delek
• Ford South Africa Recall to Include Fiesta Model: Star

Asian equities traded mostly in the red after the region shrugged off the mostly positive lead from Wall Street where the energy sector outperformed following a smaller than expected build in DoEs. Nikkei 225 (-0.8%) failed to benefit from a weaker JPY amid fiscal year-end rebalancing, while ASX 200 (+0.4%) bucked the trend and was led by the strength in the commodities complex. Hang Seng (-0.3%) and Shanghai Comp. (-1.0%) were dampened despite a positive earnings report from Big 4 bank China Construction Bank, as the PBoC refrained again from conducting open market operations for the 5th consecutive day while there were also reports the Trump administration are to make preparations to keep large tariffs on Chinese goods. 10yr JGBs were lower despite the cautious risk tone with demand
dampened after the latest weekly securities transactions data showed foreign investors increased their selling of Japanese bonds by more than 3-fold, while today’s 2 year auction also failed to provide any meaningful support with the b/c and lowest accepted price below prior. PBoC refrained from open markets operations again, which resulted to a net daily drain of CNY 40bIn.

Top Asian News

• PBOC Seen Raising Money Rates Twice This Year in Leverage Battle
• Thailand Says National Oil Co. to Be Set Up Only When Time Right
• Hong Kong Feb. Retail Sales Value Fall 5.7% Y/y; Est. -0.6%
• Ajinomoto Seeks Overseas Deals With $1.8 Billion War Chest
• Kotak Mahindra Bank Approves Issue of Up to 62m Shares
• China’s Xi to Meet Trump Next Week at Mar-a-Lago, Xinhua Reports
• Posco Almost Doubles Profit as Global Steel Rally Sustained

In European markets, the notable highlight of the morning has come in the form of the regional CPIs from Germany, which have generally printed lower than previous, while also coming in under the expected figure for the national reading. The softer CPI numbers have seen upside in Bunds. While periphery yields are lower in tandem this morning, with much of the attention here falling on the supply from Italy, which was relatively well digested. Away from the German data, European equities have had a slow start to the morning with little in terms of firm direction. On a sector specific basis, energy names are the significant outperformers, with this coming in tandem with WTI futures briefly retaking USD 49.50/bbl to the upside. Elsewhere H&M are firmly at the bottom of the Stoxx 600 after a downbeat sales update.

Top European News

• Italy Finance Chief Says Le Pen Victory Would Add Permanent Risk
• May’s Opening Brexit Bid to Tie Security to Trade Hits Wall
• OPEC Oil-Cuts Extension Unlikely, Russian VEB Economist Says
• SNB Will Scrap Negative Rate as Soon as Possible, Maechler Says
• H&M 1Q Pretax Beats; New Brand to Be Launched in 2H

In currencies, the euro fell 0.3 percent to $1.0736, after declining 0.9 percent over the previous two days. The British pound was little changed. The Bloomberg Dollar Spot Index rose 0.2 percent.  Not too much to note in the FX markets other than some calm in GBP trade. Some modest weakness seen early on, but this looks to have dissipated in the wake of the Article 50 activation yesterday. All eyes on EUR/GBP to see whether the usual month end flow will impact, but the pair looks well contained in the mid 0.8600’s for now. From the EUR perspective, regional German inflation has softened in March, while the EU wide sentiment indices for business and consumers have missed on expectations, softening a tad on the month also. EUR/USD has drifted (very) steadily lower through the session, but we expect to find support around 1.0700 – if we get there – with close to 2 yards rolling off at the NY cut later today. USD/JPY has traded a very tight range around 111.00, with limited movement in UST yields to trade off. The key 10yr rate is hemmed inside 2.35-2.40%, with the recent Fed speak doing little to spark fresh movement on the curve. More to come from Mester, Kaplan, Williams and Dudley, but we see little that can change sentiment other than from Yellen herself. Hard data now counts for more – as the FOMC consistently communicate data dependency – with core PCE prices due out alongside the final reading of Q4 GDP today and the usual weekly claims data.

In commodities, the broader recovery in the global risk mood looks to have aided the rise in base metals if nothing else, with little to differentiate in terms of the latest gains seen across the board. Copper gains have pushed tentatively through USD2.65, and is struggling a little, with similar price action elsewhere. Given the recent pull-back in the USD, some would have expected a little more upside, which has also helped Oil prices to a modest degree, but the lower rise in inventory as reflected in both the DoE and APIs has largely been the driver here, further ‘supported’ by the disruptions in Libya. WTI still struggling ahead of USD50.00 however. Gold still trading on a USD1250.00 handle, as Silver is above USD18.00, with the tentative recovery in the greenback prompting cautious trade from here.

On today’s calendar, in the US this afternoon we’ll get the third and final revision to Q4 GDP (expected to be nudged up to +2.0% qoq annualized) along with core PCE. The latest weekly initial jobless claims print will also be released. It’s another busy day for Fedspeak with Mester, Kaplan, Williams and Dudley all scheduled to speak. Over at the ECB board members Praet and Nowotny are also due to speak this morning. Also worth watching today is a meeting between President Trump and head of the National Economic Council Gary Cohn where it is expected that the President will be briefed on outlines over options for tax reform.

US Event Calendar

• 8:30am: GDP Annualized QoQ, est. 2.0%, prior 1.9%; Personal Consumption, est. 3.0%, prior 3.0%; GDP Price Index, est. 2.0%, prior 2.0%; Core PCE QoQ, est. 1.2%, prior 1.2%
• 8:30am: Initial Jobless Claims, est. 247,000, prior 261,000; Continuing Claims, est. 2.03m, prior 1.99m
• 9:45am: Bloomberg Consumer Comfort, prior 51.3

Central Banks

• 9:45am: Fed’s Mester Speaks in Chicago on Payment System Improvement
• 11am: Dallas Fed’s Kaplan Speaks in Washington
• 11:15am: Fed’s Williams Speaks at Learning Community Event in New York
• 4:30pm: Fed’s Dudley Speaks in Sarasota

DB’s Jim Reid concludes the overnight wrap

So the grind higher in markets following the AHCA vote debacle last week continues to trudge along in a fairly orderly fashion. With the S&P 500 nudging up another +0.11% yesterday the index is now up +1.68% from Monday’s low point and has barely looked back. We’ve highlighted a few times this week that we think that Trump trades had already been priced out to a large degree and so therefore the disappointment over last Friday’s news may be limited with global growth being the most important factor for now. Indeed it perhaps tells you something that yesterday was the third lowest volume day for the S&P 500 this year and the VIX declined for the fourth session in a row and is not far off the lows of the recent year to date range again. While politics will continue to be an important theme – indeed there are reports this morning suggesting that Republicans are considering a resurrection of the healthcare bill vote again next week – global data surprises are approaching six-year highs and for now it feels like this might be the more important near term driver.

The more significant moves in markets yesterday however came in bonds where yields fell across the board seemingly sparked by a Reuters story which suggested that ECB policymakers are becoming wary of making any new change to their policy message next month. This follows concerns at the ECB that the market over interpreted the message sent out at its March 9th meeting and were swift to start pricing in hikes. The article stated that the intention of the ECB was to communicate reduced tail risk but that instead the market took it as a step to the exit. The article also quoted its sources for the report saying that a previously mentioned deposit rate hike prior to the unwind of QE purchases “would be a communication nightmare” and that “if you raise rates, you can’t communicate that it’s a one-off” and that instead “the market would immediately price in a new rate path”.

As is always the case with these stories there’s always a validity question with regards to the origin of the content and in this case the report quotes ‘six sources’ without any more specifics. That said there’s no smoke without fire and bond yields were quick to move lower in the wake of the story hitting the wires. By the end of play 10y Bund yields had finished 4.5bps lower at 0.342% and are now at the lowest yield in 3 weeks. Yields in Spain, Italy and Portugal fell 4.6bps, 2.3bps and 6.0bps respectively also. Market implied pricing for a 15bp hike in the deposit rate was also pushed back from April 2018  to August 2018 midway through the day. The story also appeared to be attributed to the decent bid for Treasuries which saw the 10y yield tumble 4.1bps and hit the lowest closing yield, at 2.377%, since February 27th. That was despite a chorus of relatively hawkish Fedspeak which we’ll touch on shortly. The Euro (-0.45%) was also the second worst performing G10 currency yesterday while European Banks fell nearly -1% intraday but pared losses to a more modest -0.21% decline. Still, that was in the context of a +0.33% gain for the broader Stoxx 600 after the energy complex rose on the back of a +2.36% rise for WTI Oil and the most in two weeks.

Away from that there was also a close eye kept on UK PM Theresa May’s statement to the House of Commons yesterday as well as the official withdrawal letter following the confirmation of Article 50 being triggered. In a nutshell there wasn’t a huge amount new on the UK side of things compared to what was revealed in the government’s White Paper last month. As our economists noted the UK continues to want to reach agreement on a comprehensive new deal with the EU27 in parallel with the terms of the divorce by March 2019, an unrealistic timetable and one the EU27 opposes. From the EU27 side, EU Council President Donald Tusk responded with a statement of his own and the EU Council released an official statement. The body language from Tusk was negative. Tusk mentioned damage limitation as the primary goal. Combined with last week’s comments from Commission negotiator Barnier on the priority of divorce negotiations and recent press reports, an early assessment of the EU’s stance is that they plan to offer the UK a take-it-or-leave-it option (settlement of the divorce including the UK’s budgetary commitments, then a limited transitional deal), but are preparing for a hard outcome. So with mutually contradictory goals and significant political obstacles for compromise it looks set to be a long drawn out negotiation process with the two year clock now quietly ticking away.

It’s also worth highlighting that today the UK government will release a White Paper concerning the repeal of the EU acquis, and its translation into domestic law. Our economists highlight that this is important for negotiations as the EU27 argue the UK will have to remain under the authority of the ECJ under a transitional deal. On April 27th a special EU Council will be convened to discuss the broad framework for the negotiations. Detailed negotiations are only likely to start in June. In the next few days, it will also be worth closely monitoring rhetoric from both the UK and EU27. So a few things to watch out for.

To the latest in Asia now where bourses have slowly drifted lower over the course of the session despite there being little in the way of newsflow. The Nikkei (-0.25%), Hang Seng (-0.40%), Shanghai Comp (-0.86%) and Kospi (-0.23%) are all in the red while the ASX (+0.30%) is just about holding on to gains. It’s possible that the moves reflect some quarter end profit taking following a strong run for Asia equities so far this year. Futures in the US are little changed and in commodities Oil is holding onto yesterday’s gains while Gold is slightly lower. Back to that Fedspeak yesterday which as we briefly mentioned earlier was fairly hawkish despite limited market reaction. Boston Fed President Rosengren said that “my own view is that an increase at every other FOMC meeting over the course of this year could and should be the committee’s default”, in other words suggesting that he favours 4 hikes this year. This was a view somewhat echoed by the San Francisco Fed President Williams who said that he “would not rule out more than three increases total for this year” and also that the Fed could look to begin shrinking its balance sheet before knowing the size it ultimately should be.

Away from that the economic data was especially thin on the ground yesterday. In the US pending home sales rebounded +5.5% mom in February and more than expected. In the UK mortgage approvals nudged down to 68.3k while net consumer credit printed at £1.4bn in February which was a slowdown compared to the £1.6bn average over the prior six months.

Before we look at today’s calendar, it’s worth highlighting that yesterday our Global Economics Perspectives team published a new report in which they provide ‘quick’ answers to a list of questions they have received from clients globally in recent days. The bulk of the questions this week have been on policy (both fiscal and monetary) and the team also detail their views on US growth and inflation prospects. You can find the link to the report here https://goo.gl/AtY36U.

To the day ahead now where this morning in Europe we’ll be kicking off with the latest confidence indicators for the Euro area before we then get the March CPI report out of Germany. Over in the US this afternoon we’ll get the third and final revision to Q4 GDP (expected to be nudged up to +2.0% qoq annualized) along with core PCE. The latest weekly initial jobless claims print will also be released.

It’s another busy day for Fedspeak with Mester (1.45pm GMT), Kaplan (3.00pm GMT), Williams (3.15pm GMT) and Dudley (8.30pm GMT) all scheduled to speak. Over at the ECB board members Praet and Nowotny are also due to speak this morning. Also worth watching today is a meeting between President Trump and head of the National Economic Council Gary Cohn where it is expected that the President will be briefed on outlines over options for tax reform.

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

Over the past dew days, Bloomberg market commentator Mark Cudmore has been decidedly skeptical of any rebound observed in US stocks, and overnight he did not change his sentiment despite what some have said is an attempt for the reflation rally to reassert itself. In a note titled “Why I Don’t Believe in This U.S. Equities Bounce” he explains why, giving seven reasons why despite stocks seemingly poised for a third day of gains, he refuses to BTD and chase the latest rally.

From Bloomberg

Macro View: Why I Don’t Believe In This U.S. Equities Bounce

 

U.S. equity futures are headed for a third day of gains, with consensus growing that the March correction is already over and record highs will soon be hit again. I’m not so positive and here’s why:

• The prospect of imminent Trump stimulus has been severely undermined, both in terms of size and timing, as it’s now quite clear that the U.S. president will face a struggle in everything he wants to do.
• The hard economic numbers in the U.S. continue to disappoint even though survey data is strong.
• While commodities are trading positively this week, most remain well below their February peaks, reflecting a lack of exceptional real demand.
• Wednesday saw the second-lowest transaction volume of 2017 for S&P 500 stocks, which indicates a lack of conviction in the bounce.
• With both month-end and quarter-end rebalancing flows, this week was always expected to be choppy, meaning it’s important not to read too much into every little move; what’s more relevant to note is that equities are still below their opening level from last week.
• Also, consensus 2017 trades — long dollar, short Treasuries, short pound -– have done poorly in March, which is a blow to risk appetite.
• The summary is that the fundamentals have shifted negatively. I’m absolutely not a structural bear on U.S. equities, but I do believe that the change in fundamental outlook warrants lower prices in the coming weeks.

That said, he echoes what RBC’s Charlie McElligott said earlier this week, when he described the market as binary, and admits that as technically the bounce is starting to look solid, “bears need the rally to fail very soon or admit defeat.” He look forward to what Dennis Gartman will say today for validation if we may be nearing a new, downward inflection point.

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