Month: February 2018

Key Events In The Coming Week: New Fed Chair, BOE, RBA And Brexit

In the traditional post-payrolls data lull, traders will pay attention to central bank meetings out of the UK, Australia and New Zealand, the US non-mfg ISM and the swearing in of new Fed chair Jay Powell both on Monday, as well as ongoing Brexit negotiations.

Key Weekly Events courtesy of RanSquawk

  • Monday: Brexit Negotiations Round Begins
  • Tuesday: RBA Monetary Policy Decision, UK Services PMI (Jan)
  • Wednesday: New Zealand Labour Market Report (Q4)
  • Thursday: BoE Monetary Policy Decision & QIR, RBNZ Monetary Policy Decision, Chinese Trade Balance (Jan)
  • Friday: Canadian Labour Market Report (Jan), RBA Statement on Monetary Policy

As BofA notes, there are three central bank meetings on the calendar this week. The BoE meets on Thursday, with no change expected in terms of communication. The BOE’s Quarterly Inflation Report is expected to sign up to the market curve with three more hikes in three years, upgraded from November’s guidance of two in three.

Look out for the RBA rates meeting on Tuesday and quarterly statement on monetary policy on Friday. BofA economists expect the RBA to remain on hold with no major changes to forecasts. Given 4Q CPI data, the RBA can be patient before moving policy to more normal settings. The communications will be examined for any signal around the timing of rate hikes. Recent data suggests the RBA could be moving towards a more hawkish stance.

Lastly, the RBNZ holds a rates meeting and forecast update this week. Policy is expected to remain unchanged, with recent misses on inflation risks pulling down near-term forecasts. This is the last forecast update before Orr takes over the Governorship.

* * *

A breaking of key events by region:

North America

There are no tier one releases due from the US during the week. Across the border in Canada focus will fall on January’s labour market report due on Friday. Consensus looks for headline jobs growth to slow to 1K from December’s 78.6K, while the unemployment rate is expected to tick up to 6.0% from the 5.7% seen in January. Alongside its latest monetary policy decision (where it hiked as expected) the Bank of Canada noted that “labour force participation and hours worked are showing promising signs. Recent data shows that labour market slack is being absorbed more quickly than anticipated. Wages have picked up but are rising by less than would be typical in the absence of labour market slack.” On the wage front RBC notes that “wage growth has picked up but remains a bit low relative to the unemployment rate at 2.9% Y/Y for permanent workers. In any case, the BoC’s recently introduced wage-common measure discounted the LFS wage growth figure in favour of less timely values from productivity, national accounts, and establishment employment data.”

Other releases of note: Monday: US Services & Composite PMIs (Jan, F), ISM Non-Manufacturing PMI (Jan) Tuesday: US Trade Balance (Dec), Canadian Trade Balance (Dec), US JOLTs Job Openings (Dec), Canadian Ivey PMI (Jan)

Europe

There are no tier one releases due from the region during the week.

Other releases of note: Monday: Eurozone Services & Composite PMIs (Jan, F), Eurozone Retail Sales (Dec) Wednesday: German Industrial Production (Dec)

UK

Early focus will fall on Brexit negotiations, with EU chief negotiator Barnier due to visit UK Brexit Minister Davis in London as the next round of talks get underway on Monday.

The first Bank of England (BoE) monetary policy decision of 2018 will conclude on Thursday, with consensus looking for the BoE to stand pat, with a 9-0 vote. The noted risk to consensus is that either/both hawks within the MPC (Saunders and McCafferty) cast a dissenting vote in favour of another hike. The decision will be accompanied by the latest Quarterly Inflation Report (QIR). Since the BoE last convened, official statistics revealed that the UK economy expanded by 0.5% Q/Q in Q4 (against the BoE’s forecast of 0.4% in November). On the inflation front, CPI has peaked (for now), oil prices have risen by circa 13% and the GBP has moved higher on a trade weighted basis.

Citi suggests that “new BoE forecasts may reflect somewhat stronger growth and higher inflation rates, although the Bank will likely remain cautious due to Brexit uncertainty” (November’s QIR can be found here). Citi also posits that “the MPC’s supply assessment could lead to higher slack estimates, which would be dovish. But also lower potential growth. That would set a lower speed limit and thus be hawkish.”  BoE rhetoric since the last meeting has towed the line, in that it is consistent with the view portrayed in November’s QIR. Governor Carney has noted that wages are picking up, but conceded that they are not growing spectacularly, he also reiterated that he expects investment in the UK to pick up in 2019. The Governor has also suggested that inflation pass through due to the exchange rate shock has further to go, and that he expects inflation to remain above 2% in the near future. Carney also stressed that any unwind of QE will be well telegraphed when the time comes.

Elsewhere BoE hawk Saunders noted that it is likely that interest rates will need to rise further over time, but any further tightening will be limited and gradual. Saunders also noted that Brexit could push BoE policy in either direction and reiterated that he expects the labour market to continue to tighten. Finally, BoE newcomer Tenreyro stated that, at the December meeting, she saw ‘ample time’ before the BoE would need to raise rates again.

Asia-Pacific

Early focus in China will fall on Monday’s Caixin Services PMI. As ever, there are no expectations; the prior release stood at 53.9, while the latest official survey came in at 55.0. In December, survey collators Caixin noted that “the expansion in new business picked up for the second consecutive month. Prices charged increased at a slightly slower rate in December, while input prices rose at the joint-fastest pace since February 2013.”

The other release of note in China will come on Thursday in the form of the trade balance, with consensus looking for USD 54.00bln from USD 54.69bln last time out.

In Australia focus will fall on Tuesday’s Reserve Bank of Australia (RBA) monetary policy decision. Consensus looks for the RBA to stand pat, with only one of the 48 surveyed by Reuters looking for a 25bps hike. The recent Q4 inflation headline was slightly softer than expected, however, the RBA’s preferred trimmed mean metric held steady at 1.8% Y/Y, as it remained below the bottom end of the RBA’s 2-3% band.

The Reserve Bank of New Zealand (RBNZ) will convene and issue its first monetary decision of 2018 on Thursday, with all of those surveyed expecting the central bank to stand pat. Most believe that interim Governor Grant Spencer will act as a placeholder, before Adrian Orr assumes the role in March. As a result, consensus looks for the Reserve Bank to maintain its balanced assessment and to emphasise that interest rates are likely to remain low for a considerable period of time.

* * *

Courtesy of Deutsche, here is a summary of key daily events in the coming week:

  • Monday: The start of the week will see the remaining January services and composite PMIs released in Europe and the US. Also due in the US is the January ISM non-manufacturing while in Europe the February Sentix investor confidence reading and December retail sales data for the Euro area will be due. Of most interest however will likely be ECB President Draghi’s comments in front of the European Parliament.
  • Tuesday: A fairly quiet day all round with December factory orders data in Germany the only release of note in Europe, while in the US the December trade balance and JOLTS job openings data is scheduled to be released. Away from that it’ll be worth keeping an eye on Fed Bullard’s comments when he speaks in the afternoon on the US Economy and Monetary Policy, while the ECB’s Weidmann speaks in the morning. General Motors and Walt Disney are due to report earnings.
  • Wednesday: The data calendar continues to remain fairly sparse with December industrial production in Germany, December trade data in France and December consumer credit data in the US the only releases of note. China should  also release January foreign reserves data at some stage. However there is plenty of central bank speak due with the ECB’s Nouy and Lautenschlaeger speaking in Frankfurt in the morning, while the Fed’s Kaplan, Dudley, Evans and Williams are all due to speak throughout the day.
  • Thursday: The BoE should be the highlight on Thursday with the MPC meeting due around midday. The latest inflation report will be released alongside and Governor Carney will then follow with his press conference. Away from that the most signficant data due out is most likely to be the January trade numbers in China, while December trade data in Germany and the latest weekly initial jobless claims data in the US are also due. The Fed’s Kashkari and Harker are also slated to speak in the afternoon at separate events, while the ECB’s Mersch, Praet and Villeory will speak. AIGand CVS Health are due to report earnings.
  • Friday: We finish the week with more important data out of China with the January CPI and PPI prints due out in the early morning. In Europe we’ll get December industrial production data out of the UK and France, with trade numbers also due in the former, while across the pond in the US the only data of note is December wholesale trade sales. The Fed’s George is also due to speak in the early morning.

Finally, focusing just on the US, here is a chart summary of the key events this week from BofA:

And a detailed breakdown with consensus estimates from Goldman:

The key economic release next week is the ISM non-manufacturing survey on Monday. Federal Reserve Chairman Powell will be sworn into office Monday morning, and there are a few scheduled speaking engagements by other Fed officials this week.

Monday, February 5

  • 09:00 AM Federal Reserve Chairman Powell sworn in: Federal Reserve Board Governor Jerome Powell will be sworn in as Chairman of the Board of Governors at approximately 9 a.m. Monday in a private ceremony.
  • 09:45 AM Markit US Services PMI (consensus 53.3, last 53.3)
  • 10:00 AM ISM non-manufacturing index, January (GS 57.0, consensus 56.5, last 55.9): We expect the ISM non-manufacturing index rose 1.1pt in January. Regional non-manufacturing surveys were mixed in January, with moderate gains in the Dallas and New York Fed surveys while the Philadelphia and Richmond surveys deteriorated but remained in positive territory. Overall, our non-manufacturing tracker edged up 0.2pt in January to 57.2.
  • 02:00 PM Senior Loan Officer Opinion Survey, 2018Q1: The Fed will release results and a memo from its quarterly Senior Loan Officer Opinion Survey on bank lending practices. The 2017Q4 release showed little change in bank lending practices over the previous quarter, with a modest share of banks easing lending standards for commercial and industrial loans and commercial real estate loans. Since the last survey, US bank loan growth slowed with commercial and industrial loans growing at their slowest year-over-year pace since 2011.

Tuesday, February 6

  • 08:30 AM Trade balance, December (GS -$52.2bn, consensus -$52.0bn, last -$50.5bn): we expect the trade balance to widen by $1.7bn to -$52.2bn in December. The Advance Economic Indicators report last week showed a widening trade deficit in goods, and we expect a rebound in services imports in December.
  • 08:50 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Fed President James Bullard will give a presentation on monetary policy and the US economic outlook at a conference in Lexington, Kentucky. Audience Q&A is expected.
  • 10:00 AM JOLTS job openings, December (last 5,879k)

 
Wednesday, February 7

  • 08:30 AM New York Fed President Dudley (FOMC voter) speaks: New York Fed President William Dudley will speak on a panel at an event titled “Banking Culture: Still Room for Improvement” in New York.
  • 03:00 PM Consumer credit, December (consensus +$19.7bn, last +$28.0bn)
  • 05:20 PM San Francisco Fed President Williams (FOMC voter) speaks: San Francisco Fed President John Williams will give remarks at a luncheon in Honolulu. Audience Q&A is expected.

 
Thursday, February 8

  • 04:50 AM Dallas Fed President Kaplan (FOMC non-voter) speaks: Dallas Fed President Robert Kaplan will participate in a Q&A session in Frankfurt. Audience and media Q&A is expected.
  • 08:30 AM Initial jobless claims, week ended February 3 (GS 230, consensus 232k, last 230k): Continuing jobless claims, week ended January 27 (consensus 1,933k, last 1,953k): We estimate initial jobless claims remained flat in the week ended February 3, as the trend appears to have declined as weekly readings remained low, even after the seasonally volatile start-of-year period. Continuing claims – the number of persons receiving benefits through standard programs – rose in the previous week, and claims in Missouri appear slightly elevated.
  • 09:00 AM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Fed President Neel Kashkari will participate in a Q&A discussion in Pierre, South Dakota. Audience Q&A is expected.
  • 09:00 PM Kansas City Fed President George (FOMC non-voter) speaks: Kansas City Fed President Esther George will speak on the economic outlook at an event in Wichita, Kansas. Audience Q&A is expected.

Friday, February 9

  • 10:00 AM Wholesale inventories, December final (consensus +0.2%, last +0.2%)

Source: Deutsche, BofA, Goldma, Ransquawk

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VIX Tops 19 As Hindenberg Strikes – “How Worried Should You Be?”

With US equity futures down hard in the pre-open…

 

VIX has spiked above 19 for the first time since the election in Nov 2016…

Following a Hindenburg Omen signal late last week.

 

 

As Bloomberg reports, accounts of how concerned investors should be ran the gamut, from confidence traders will rush in and buy the dip, to warnings this time is different — that selloffs that begin in the bond market have a habit of snowballing.

 

“It is now signaling, potentially, the end of this eight-year bull rally,” said Rich Weiss, chief investment officer and senior portfolio manager of multi-asset strategies at American Century Investments. The firm manages $179 billion. “The Fed is going to have to move the interest rates, the bond market is recognizing that this incremental economic growth will spur on inflation from various sources.”

Of all the threats, surging Treasury rates and their implications for inflation are vexing investors the most, with this year’s half-percentage-point climb calling into question a valuation case on equities tied to how much more you get from corporate earnings than in bond interest.

 

For last week, anyway, nobody seemed to care about the ostensibly positive signals coming from the bond market, the idea that higher yields bespeak rising demand for money among borrowers.

“It’s kind of a strange time and we seem to be driven by a fear of what everyone wants, and that’s higher rates,” said Joe “JJ” Kinahan, the chief market strategist at TD Ameritrade. “Higher rates confirm a stronger economy, and the market was very afraid of that all week long. And that’s been a big reason for selling.”

Central to the current anxiety is how far stocks have come in so short a time. Last month’s 5.6 percent gain in the S&P 500 was the biggest for any January since 1997, and using the index’s total return it has now risen for 15 straight months.

 

Friday’s selloff finally ended a streak of 404 days in which the S&P 500 sailed along without a 3 percent decline from any previous point, a record in data going all the way back to 1928.

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Trump Says “Little” Adam Schiff “Must Be Stopped”

Having spent the weekend accusing Russians of pushing the 2nd Amendment so that Americans kill each other, expressing his disgusts at the release of the GOP’s memo (and its potential to do real harm and expose ‘methods’) while also pushing for the release of the Democrats’ memo, and potentially leaking “confidential” information, California Congressman Adam Schiff has finally made it to the top of President Trump’s shit-list.

“Adam (Schiff) leaves closed committee hearings to illegally leak confidential information. Must be stopped!” Trump wrote in a post on Twitter.

But that was not all, Trump accused the Congressman of being “one of the biggest liars and leakers in Washington,” which is a major achievement amid that swamp.

We suspect Maxine Waters will turn up the madness to 11 now.

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Frontrunning: February 5

  • U.S. Stocks Set for Sharp Drop at Open (WSJ)
  • Bitcoin Drops 10% as Cryptocurrencies Sink (BBG)
  • A decade after recession, a jump in U.S. states with wage gains (Reuters)
  • Democrats See Campaign Issue in House GOP Memo Alleging Bias (BBG)
  • Trump accuses House intel panel’s top Democrat of leaking information (Reuters)
  • Tech Giants Are in No Rush to Spend Overseas Cash (WSJ)
  • Here’s the Trump Tax Loophole Your Accountant Can Blow Wide Open (BBG)
  • Senators Aim to End Budget Impasse With ‘Dreamers’ Bill (WSJ)
  • Warring Conservatives Force May Into New Red Line on Brexit (BBG)
  • Merkel, SPD Push Ahead in Government Talks After Missed Deadline (BBG)
  • House to Consider Releasing Democrats’ Surveillance Memo (WSJ)
  • Broadcom sweetens Qualcomm bid, calling it the final offer (Reuters)
  • The Latest Victim of China’s Great Firewall: Cryptocurrency Websites (WSJ)
  • Dear Jay: High-Powered Advice for the Incoming Fed Chairman (BBG)
  • Japan’s Famed Manufacturing Model Is Facing a Crisis (WSJ)
  • Samsung Heir Lee Freed After Court Suspends Jail Term (BBG)
  • Euro-Area Companies Boost Jobs as Output Nears 12-Year High (BBG)
  • Banks Double Down on Branch Cutbacks (WSJ)
  • Microsoft Says It’s True: Cat Videos Distract Workers (BBG)
  • U.S. consumer protection official puts Equifax probe on ice (Reuters)
  • Erdogan and pope discuss Jerusalem as scuffles break out near Vatican (Reuters)
  • Jury to hear opening statements in Waymo-Uber trial over autonomous car secrets (Reuters)

Overnight Media Digest

WSJ

– Broadcom Ltd plans to raise its offer for Qualcomm Inc to around $120 billion, a person familiar with the matter said, a move aimed at increasing pressure on the takeover target in what would be the largest-ever technology deal. on.wsj.com/2nErz4s

– Apple Inc’s streaming-music service, introduced in June 2015, has been adding subscribers in the U.S. more rapidly than its older Swedish rival Spotify—a monthly growth rate of 5 percent versus 2 percent—according to people in the record business familiar with figures reported by the two services. on.wsj.com/2nDM3ub

– British wireless giant Vodafone Group Plc said it is in talks to acquire European assets from Liberty Global Plc , John Malone’s international cable company. on.wsj.com/2nz6U20

– Center-right candidate Nicos Anastasiades was comfortably re-elected president of Cyprus in a runoff election on Sunday, beating rival Stavros Malas, an independent backed by Communist party AKEL. on.wsj.com/2nEbegc

– The Federal Reserve’s unprecedented move to handcuff growth at Wells Fargo & Co sent a message that boards of directors, not just management, will be held accountable when big banks fail to manage risks. on.wsj.com/2nCkEc1

 

FT

The UK’s top banking supervisor has warned against a “bonfire of the regulations” after Brexit, despite Eurosceptics calling for a more competitive regime when Britain leaves the EU.

China’s ecommerce giant JD.com Inc plans to challenge Amazon.com Inc in Europe as early as 2019, aiming to be ubiquitous across the continent within “a few years”, says the company’s chief.

The chief executive of International Airlines Group , which owns British Airways, Heathrow’s biggest single customer, has stepped up its stinging attack on high cost of expansion at the airport, calling for the break-up of Heathrow’s monopoly as a way to cut costs.

 

NYT

– DC Entertainment, the home of Batman, Superman, Wonder Woman and a legion of other heroes, is planning two new graphic novel imprints aimed at younger readers. DC Zoom will feature stories for middle school readers, and DC Ink will focus on young adults. (nyti.ms/2nIiZRz)

– A group of Silicon Valley technologists who were early employees at Facebook Inc and Alphabet Inc’s Google are creating a union of concerned experts called the Center for Humane Technology to educate students, parents and teachers about the dangers of technology, including the depression that can come from heavy use of social media. (nyti.ms/2E24D9R)

– Amtrak suffered its third high-profile crash in less than seven weeks early Sunday when a passenger train traveling on the wrong track slammed into a stationary freight train in South Carolina, killing two people and intensifying worries about the safety and reliability of passenger rail service in the United States. (nyti.ms/2nIWXyh)

Britain

The Times

Facebook Inc is close to signing a deal for a new British headquarters at the King’s Cross redevelopment in London. The company is finalising outline terms with King’s Cross Central, which is majority-owned by the Australian Super pension fund. bit.ly/2E0cHYu

One of Capita Plc’s shareholders, Royal London Asset Management, said it had been privately raising concerns about Capita’s weak governance for a number of years and had repeatedly voted against pay deals. bit.ly/2E0e1uq

The Guardian

The collapse of Carillion Plc is expected to trigger a rise in the number of construction companies going bust as subcontractors in its supply chain miss out on payment, a leading accountancy firm has warned. bit.ly/2E1aps8

Pinewood, the film studio behind the James Bond and Star Wars franchises, has expressed interest in building a new site in east London, as the British film industry struggles to accommodate demand for TV and blockbuster shoots. bit.ly/2E2lbOW

The Telegraph

One of Britain’s top think tanks has upgraded its growth forecasts for the UK economy, in a move that threatens to deal another blow to widespread predictions that Brexit would deliver a serious shock to Britain. bit.ly/2E2lTf4

Lloyds Banking Group Plc has become the first to announce a ban on customers using credit cards to buy Bitcoin amid fears they could run up huge losses. bit.ly/2E2VvBT

Sky News

Trinity Mirror Plc and Northern & Shell will clinch a 127 million pound deal to sell the Daily Express to the publisher of the Daily Mirror. bit.ly/2DY32l8

The Independent

The Civil Aviation Authority has announced a consultation into airlines’ seating policies, following a survey in which 18 per cent of passengers said they had been separated from their travelling companions when they chose not to pay to sit together. ind.pn/2E2mgX0

 

 

 

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The Pernicious Myth of ‘Chain Migration’: New at Reason

President Donald Trump’s war on immigration is in full-blown mission creep. No longer does he only want to throw “bad hombres” out. He’s even targeting immigrants who pose no security threat to the country. And recently, he has become preoccupied with so-called chain migration.

“CHAIN MIGRATION cannot be allowed to be part of any legislation on Immigration!” he bleated in one tweet. The practice is “horrible” and “bad for the country,” he barked in others.

The president is using nativist language to trash a noble goal of America’s immigration system: keeping families intact, which, as it happens, has also worked wonders for America’s economy.

The term is meant to conjure images of a process in which one immigrant comes into the country and then pulls in hordes of relatives, who in turn pull in hordes more, until entire tribes and villages are emptied into the United States. The White House even released an infographic to that effect.

But that’s not how things work. Beyond spouses and minor children, American law allows immigrants to sponsor only parents, adult children, or siblings—not aunts, uncles, and cousins. Moreover, they can do so only after they themselves receive green cards or become naturalized citizens, writes Shikha Dalmia.

View this article.

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Pilot Of Downed Russian Su-25 Detonated Grenade As Terrorists Advanced

A terrorist group operating near the Idlib de-escalation zone in northwest Syria on Saturday shot down a Russian Su-25 fighter – the first Russian plane downed in Syria since 2015. The pilot safely ejected and survived the crash – but was later killed by jihadists on the ground.

Video published by the Ebaa News Agency depicted the downing of the jet from the terrorists’ perspective, showing what appears to be a MANPADS lock on and strike the jet, and – later – the terrorists swarming the wreckage, according to RT.

Su

Of course, the government of Russian President Vladimir Putin wasn’t going to let this latest affront go unanswered: on Friday, it published footage of a series of precision missile strikes that were said to have killed 30 militants.

Meanwhile, new footage apparently depicting the pilot’s last moments has surfaced on an Arab-language YouTube channel called IDLIB+. In the footage, a pack of terrorists can be seen advancing on what appears to be the pilot, later identified as Major Roman Philipov (pictured below).

Roman

As the militants surround the pilot, a man’s voice can be heard shouting in Russian “This is for the boys!” followed by a bang and a column of smoke is seen rising from behind the rock. It’s not clear whether any militants were killed or wounded in the blast.

via GIPHY

The Russian Department of Defense later confirmed that the officer fought with the militants until the last minute, according to the statement. “After the militants surrounded the heavily-wounded Philipov, he waited till they approached and detonated a grenade”, according to RT.

via GIPHY

Philipov was reportedly an experienced pilot who had successfully fulfilled dozens of military tasks in Syria, including eliminating terrorist groups and escorting humanitarian convoys to liberated areas.

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Bitcoin Tumbles Below $8,000 As China Launches New Crypto-Crackdown

After surging to $20,000 less than three weeks ago, Bitcoin tumbled below $8,000 again overnight following a report from Chinese media that China will block all websites related to cryptocurrency trading and initial coin offerings (ICOs) – including foreign platforms – in a bid to finally quash the market completely, according to Sina.

On February 4, 2018, according to the Financial Times newspaper run by the People’s Bank of China, a series of regulatory measures will be taken against ICO and virtual currency transactions at home and abroad, including banning the existence of relevant businesses and banning and disposing of domestic and foreign virtual currency exchange websites. –Sina (translated)

As SCMP adds, quoting an article published on Sunday night by Financial News, a publication affiliated to the People’s Bank of China (PBOC), “To prevent financial risks, China will step up measures to remove any onshore or offshore platforms related to virtual currency trading or ICOs.”

Meanwhile, reports are rolling in that crypto-related content are being actively blocked by Chinese search engines.

The rest of the major cryptocurrencies are taking hits as well:

The cryptoheatmap is, in a word, red.

In September of last year, Bitcoin plunged around 20% after seven Chinese ministries banned ICOs and shuttered local Bitcoin exchanges in their “Notice on Preventing the Financing Risk of Token Issuance.” 

Fast forward to today, when China appears to have unleashed its latest crackdown on cryptos. In the Financial News article, it acknowledged that recent attempts to stamp out digital currencies by shutting down domestic exchanges had failed to completely eradicate trading.

“ICOs and virtual currency trading did not completely withdraw from China following the official ban … after the closure of the domestic virtual currency exchanges, many people turned to overseas platforms to continue participating in virtual currency transactions.

Chinese authorities pointed to Bitcoin’s ability to facilitate “illegal fund-raising and other types of illegal financial activities,” pointing to “pyramid schemes, fraud and other issues.”  

In response, some of those business have simply sidestepped the September regulations by relocating their business off of mainland China to Hong Kong. Sunday’s announcement is designed to mitigate that by banning domestic and foreign “virtual currency exchange websites” from web searches. 

“Overseas transactions and regulatory evasion have resumed … risks are still there, fuelled by illegal issuance, and even fraud and pyramid selling,” the article said.

China’s official Xinhua news agency quoted the PBOC on Monday afternoon as saying it would tighten regulations on domestic investors’ participation in overseas transactions of ICOs and virtual currencies, as risks are still high in the sector.

To that end, Chinese search engines Baidu and microblog Weibo have begun blocking crypto-conent.

the South China Morning Post news site reported that when the terms, in Chinese, bitcoin, cryptocurrency, and ICO were searched on Chinese search-engine Baidu and microblog Weibo, no obvious paid sponsored content came up alongside the expected organic results.

While Baidu had stopped advertising cryptocurrency-related searches back in August 2016, it is unclear when they started allowing them again, and they have not confirmed any new crypto-based advertising block. Weibo has confirmed that they have banned cryptocurrency-related advertising. –Cointelegraph.com

“It is common for people to use VPNs [virtual private networks] to trade cryptocurrencies, as many exchange platforms relocated to Japan or Singapore,” said Donald Zhao, an individual bitcoin trader who relocated to Tokyo from Beijing late last year, following the ban.

“I think the new move literally means it would be even harder to circumvent the ban in China … people promoting related business programmes may be arrested,” Zhao said.

The tighter regulation from the PBOC will “definitely weigh on the cryptocurrency universe,” said Wayne Cao, who runs a company that recently offered 10 billion tokens in an ICO. “Most of the Chinese ICO projects are invested in by Chinese investors. So if they are blocked, the whole cryptocurrency market will be dragged down.”

* * *

As we reported on Friday, NYU economist Nouriel “Dr. Doom” Roubini, after taking a very, very long sabbatical from the media scene – told Bloomberg TV that Bitcoin is “the biggest bubble in human history” and that this “mother of all bubbles” is finally crashing.

Given that the skyrocketing price of Bitcoin and other cryptocurrencies has driven the price of video cards (used to mine cryptocurrency) through the roof – robbing eager PC gamers of their cutting edge rigs, it will be interesting to see if a protracted drop in the price of Bitcoin and other cryptocurrencies will result in a flood of cheap GPUs hitting the market. Shares of AMD and Nvidia – the primary manufacturers of cards used for crypto mining, should also be interesting to watch. 

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Largest Ever Tech Deal Just Got Bigger: Broadcom Raises Qualcomm Bid To $82

In what it claims to be its “final offer”, Broadcom on Monday confirmed that it had raised its price for fellow chip maker Qualcomm by about 17% to $82 a share, up from $70 previously – swelling the size of what would be the largest tech deal in history to about $121 billion.

According to the Wall Street Journal, which reported early today that Broadcom planned to raise its bid, investors and Wall Street analysts had expected Broadcom to submit a higher bid. Qualcomm shares closed at $66.07 on Friday, up 5.7% from their close on Nov. 6, when Broadcom made its first offer.

Speaking to WSJ, the price is reasonable, said Stacy Rasgon, an analyst with Bernstein Research.

“Even when the deal was first announced, many Broadcom shareholders – and I’d guess a lot of Qualcomm shareholders – had in mind a number with an ‘8’ in front of it,” he said of the per-share bid. Qualcomm didn’t immediately respond to a request for comment. Combined, the two companies would form the No. 3 chip maker by revenue, behind Intel Corp. and Samsung Electronics Co.

Qualcomm CEO Steve Mollenkopf had dismissed Broadcom’s earlier proposal of $70 per share, and the company has argued that, even if it accepted Broadcom’s bid, the deal would almost certainly be quashed by international regulators.

Here’s WSJ:

The new bid ratchets up the stakes in a hostile standoff that could affect wide swaths of the markets for chips used in data centers and smartphones. Broadcom is a market leader in a variety of chips for wired and wireless devices, including Wi-Fi and Bluetooth chips for smartphones. Qualcomm is a leader in chips that manage cellular communications in smartphones.

Qualcomm, in an effort to persuade shareholders to resist Broadcom’s initial bid, released a presentation mid-January outlining a path to grow adjusted per-share earnings from $4.28 in fiscal 2017 to between $6.75 and $7.50 in fiscal 2019.

It promised that in the event it doesn’t complete its proposed acquisition of NXP Semiconductors NV, which has been held up in regulatory reviews, it would create an equivalent boost to earnings by buying back shares. Qualcomm also promised to shed $1 billion in costs.

Qualcomm in a later letter to shareholders emphasized the difficulty of getting the proposed merger past international regulators regardless of Broadcom’s ultimate offer, saying it was “highly doubtful” the transaction would be approved.

Broadcom and Qualcomm discussed a potential deal as early as 2016, according to regulatory filings. Qualcomm is set to vote on Braodcom’s nominations to its board next month.

With government and regulatory hurdles aplenty, and even QCOM pouring cold water on the deal’s prospects, it is no surprise that QCOM stock is actually red on the news.

Meanwhile, in case the deal does pass, courtesy of CNBC here is a list of the world’s biggest tech deals.

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Global Market Rout Resumes: Asian Bloodbath Spills Over Into Europe, US Sharply Lower

For the second day in a row, global markets were routed on Monday, with Asian and European indexes opening lower and bond yields rising as resurgent U.S. inflation raised the possibility central banks would tighten policy more aggressively than had been expected.

Asian stocks suffered broad losses, with the MSCI Asia-Pacific index ex-Japan plunging as much as 2%, its largest daily drop since late 2016, while S&P futures extended Friday’s decline; the Nikkei dropped 2.6% while Hang Seng plunged as much as 2.7% before rebounding. The selling fed through into Europe, however without heavy continuing momentum.

Meanwhile, U.S. equity futures are above initial lows printed straight from Globex electronic re-open, helped in part by reports that China’s regulator would act to “mitigate” the equity selloff, which helped Chinese indices to rally into close, and close green.

Friday’s payrolls report showed wages growing at their fastest pace in more than eight years, fuelling expectations for both inflation and interest rates would rise more than previously forecast. That sparked a global sell-off that continued on Monday. Futures markets priced in the risk of three, or even more, rate rises by the Federal Reserve this year.

“This added fuel to a bond market sell-off, pushing US 10 year Treasury bond yields closer to the magic 3 percent level, which will only increase borrowing costs for corporates following years of cheap financing, thus ushering equities further from recent highs,” said Mike van Dulken, head of research at Accendo Markets.

As a result, all eyes remain on the 10Y US Treasury for indication if last week’s rout would continue, and while treasuries remain under pressure, with the yield briefly touching 2.885%, the selloff appears to have since moderated. Elsewhere, Aussie bonds were sharply lower aided by soft 15-year auction, while the 10Y JGB was trading comfortably below the BOJ’s 0.11% redline, at 0.084%. German 10-year yields rose to 0.774%, their highest since September 2015. German 30-year yields rose to two-year highs at 1.429%.

The Bloomberg Dollar Index was little changed, modestly lower from the Friday close; yen marginally firmer. The Norwegian crown, a key commodity currency, was one of the biggest losers in Europe on Monday, down 0.3 percent against the U.S. dollar. In emerging markets, the South African rand fell 0.7 percent and the Chinese yuan and Polish zloty 0.2 percent.

The PBOC weakened the daily CNY fixing and drained a net 40b yuan of liquidity after the 8th consecutive day of no open market reverse-repo operations; Shanghai Composite pares early losses after Caixin services PMI beats estimates and following reports of possible regulatory intervention to prop up stocks. Dalian iron 1.2% stronger.

Europe’s benchmark Stoxx 600 index fell 0.9%, its sixth consecutive day of losses totaling 4.1%, the biggest decline since Brexit and the longest rout since November.

All major indexes in Europe fell: the UK’s FTSE 100 dropped 1 percent, France’s CAC 40 0.8 percent and Germany’s DAX 0.6 percent. In terms of sector specifics, losses have been relatively broad-based thus far with all ten sectors in the red. Airline names have been suffering this morning with RyanAir (-3%) softer in the wake of a disappointing earnings update, subsequently dragging easyJet (-2.3%) lower. Deutsche Lufthansa (-1.6%) were seen lower at the open amid reports that German coalition negotiators could drop proposal to abolish air transport tax. Elsewhere, markets will be looking out for any follow up to Friday’s reports that US regulators are seeking major fines for Fiat Chrysler as part of its motor settlement.

As we reported on Friday night, the Federal Reserve sanctioned Wells Frago after the fake accounts scandal. Wells Fargo said it could reduce profits by as much as USD 400mln this year, and the stock was down over 9% in the premarket.

Meanwhile, according to Bloomberg, investors are watching closely for clues on the direction of the rout that started in U.S. Treasuries and spread across global markets last week, with some pointing to synchronized economic growth as a reason to remain optimistic. European Central Bank President Mario Draghi could help stem further losses when he delivers an annual report to the European Parliament on Monday.

In the commodities complex, WTI and Brent crude futures pared earlier losses after hitting a one-month low in early European trade. Friday’s rig count saw oil drillers add rigs for the second consecutive week, a sign that US oil production could soon exceed 10mln bpd. The Iranian Oil Minister Zanganeh stated that OPEC’s step to push up oil prices is short-lived and that any country that builds oil output capacity will ultimately win, while he also suggested to wait until the June meeting for a decision regarding an extension of cuts. In metals markets, spot gold trades higher, benefiting from its safe-haven status, albeit gains are relatively modest thus far with reports suggesting that Indian gold imports fell to a 17-month low in Jan. Elsewhere, Chinese steel futures were seen lower in quiet trading conditions while nickel prices in London have recovered from recent losses.

In other news, UK PM May will face a coup that would install Boris Johnson, Jacob Rees-Mogg and Michael Gove if she persists with plans to keep Britain in a customs union with the European Union, Tory MPs warned according to the Sunday Times.  Downing Street has since ruled out joining a customs union with the EU, while EU and UK said to seek quick Brexit agreement on defence and security. 

The Bank of England is expected to raise interest rates twice this year after a surprisingly strong showing from the economy at the end of last year and a brightening outlook in 2018, leading economists say.

Germany’s CDU, CSU, and SPD want to present a coalition agreement by Tuesday.

Reports stated that Italian election polls could be downplaying possibility that centre-right coalition backed by Berlusconi could be closer to a majority victory at election next month.

Outgoing Fed Chair Yellen stated that asset valuations are generally elevated but added that she doesn’t want to call it a bubble.

Economic data include Markit PMIs. Bristol-Myers Squibb, Sysco, Skyworks are among companies reporting earnings.

Bulletin Headline Summary from RanSquawk

  • European equities join the global sell-off as markets reassess their Fed outlook for 2018
  • UK PM May rules out staying in the Customs Union post-Brexit amid reports that she faces a coup from pro-
  • Brexit MPs
  • Looking ahead, highlights today include: US Markit Services PMI, ISM Non-Manufacturing and ECB’s Draghi
  • speaks

Top Overnight News from BBG:

  • Chancellor Angela Merkel and party leaders of SPD, CSU want to present a final grand coalition agreement on Tuesday, Rheinische Post reports, citing an internal SPD planning paper
  • U.K. Prime Minister Theresa May has ruled out staying in the EU’s customs union after Brexit, a government official said, adding it isn’t government policy to stay in “a” customs union either
  • Tory MPs earlier said May would face a coup to install three pro-Brexit leaders if she continues with plans to keep Britain in a customs union with the EU
  • Investors have ramped up bets that the follow- up to BOE’s November’s tightening — the first in a decade — will come as soon as May
  • Maintaining QE and 2% inflation target are still important, BOJ Governor Haruhiko Kuroda says in Japan’s parliament on Monday; PM Abe says that while Japan hasn’t escaped from deflation yet, momentum toward 2% inflation is still maintained
  • China composite PMI rose to 53.7 in January, up from 53 in December and to the highest reading since January 2011
  • ellen: Wages are beginning to rise at a faster pace; asset values are high but would not say they are too high; a drop in asset values would not unduly damage core financial system
  • Fed’s Williams: no need to change path of gradual hikes; not too bothered by inflation overshooting target for a time
  • European Jan. Service PMIs: Spain 56.9 vs 55.0 est; Italy 57.7 vs 55.9 est; France 59.2 vs 59.3 est; Germany 57.3 vs 57.0 est; Eurozone 58.0 vs 57.6 est; Markit note first concurrent rise in selling prices across survey nations since July 2008
  • U.K. Jan. Services PMI: 53.0 vs 54.1 est; slowest upturn in services output for 16 months
  • German Coalition: parties want to present final grand coalition agreement on Tuesday: Rheinische Post
  • China regulator (CSRC) is urging domestic brokerages to ask investors to add to their collateral when share prices drop instead of closing out the positions according to people familiar

Market Snapshot

  • S&P 500 futures down 0.1% at 2,752.90
  • STOXX Europe 600 down 0.9% to 384.54
  • MSCI Asia Pacific down 1.4% to 179.82
  • MSCI Asia Pacific ex Japan down 1.3% to 590.34
  • Nikkei down 2.6% to 22,682.08
  • Topix down 2.2% to 1,823.74
  • Hang Seng Index down 1.1% to 32,245.22
  • Shanghai Composite up 0.7% to 3,487.50
  • Sensex down 1.1% to 34,692.40
  • Australia S&P/ASX 200 down 1.6% to 6,026.23
  • Kospi down 1.3% to 2,491.75
  • German 10Y yield fell 2.9 bps to 0.738%
  • Euro up 0.09% to $1.2474
  • Brent Futures down 0.6% to $68.16/bbl
  • Italian 10Y yield rose 8.4 bps to 1.781%
  • Spanish 10Y yield fell 3.9 bps to 1.433%
  • Brent Futures down 0.5% to $68.25/bbl
  • Gold spot up 0.2% to $1,335.43
  • U.S. Dollar Index down 0.2% to 89.06

A bloodbath was seen across equity markets in Asia trade as most major bourses suffered deep losses after Friday’s slump on Wall St, where stocks failed to benefit from the better than expected NFP jobs data and sold-off on the bond market weakness as markets reprice expectations for the Fed’s tightening cycle. ASX 200 (-1.6%) and Nikkei 225 (-2.6%) opened with firm losses amid a continued rout in US equity futures, while mining and oil-related sectors were the worst performers following weakness in the commodities complex. Hang Seng (-1.1%) conformed to the downbeat tone with notable pressure in the energy giants, while Macau gambling stocks also racked up losses on competition concerns after reports that China is drafting a proposal to permit gambling on Hainan Island. Conversely, Shanghai Comp (+0.7%) pared opening losses and outperformed the region after encouraging Chinese Caixin Services and Composite PMI data releases, in which the former posted its highest since May 2012. Finally, 10yr JGBs were relatively flat and held on to Friday’s BoJ-induced gains, with only brief support seen amid a wide-spread risk-averse tone.

Top Asian News

  • Chinese Funds Buy Record $1.6 Billion of Hong Kong Stocks Today
  • China Is Said to Ask Brokerages to Help Avert Stock Declines
  • Indonesia’s Economy Grows Faster Than Estimated in 4th Quarter
  • Samsung’s Jay Y. Lee Set Free in Unexpected Seoul Court Reversal
  • Value Stocks Are Still Unloved Everywhere Except for China
  • China Regulator Is Said to Allow Rollover of Share Pledged Loans

European equities have very much kicked the week off on the back-foot as Friday’s sell off in US equities has spread into Asia-Pac and European trade (Eurostoxx 50 -0.7%) as markets re-price expectations of the Fed’s tightening cycle. In terms of sector specifics, losses have been relatively broad-based thus far with all ten sectors in the red. Airline names have been suffering this morning with RyanAir (-3%) softer in the wake of a disappointing earnings update, subsequently dragging easyJet (-2.3%) lower. Deutsche Lufthansa (-1.6%) were seen lower at the open amid reports that German coalition negotiators could drop proposal to abolish air transport tax. Elsewhere, markets will be looking out for any follow up to Friday’s reports that US regulators are seeking major fines for Fiat Chrysler as part of its motor settlement. Wells Fargo (WFC) – The Federal Reserve has sanctioned the bank after the fake accounts scandal. Wells Fargo said it could reduce profits by as much as USD 400mln this year. Broadcom (AVGO)/Qualcomm (QCOM) – Broadcom is set to raise its bid for Qualcomm to about USD 145bln or USD 80/share, according to sources.

Top European News

  • May Under Fire as Brexit Reality Sparks Conservative Civil War
  • Prudential Financial Agrees $1.8b Reinsurence Deal With Lloyds
  • Bund Futures Are Underpinned as Small Dovish Repricing Supports
  • German CDU, CSU, SPD Want to Present Coalition Deal Tuesday: RP
  • Bayer, Monsanto Submit Concessions in EU Deal Review

In FX, the Dollar index has consolidated post-NFP recovery gains above the 89.000 level, despite losing some ground against the traditional safe-haven currencies amidst the ongoing pull-back in global equities (in part triggered by higher bond yields and Fed tightening perceptions in wake of Friday’s US jobs report). Eur/Usd is back down around 1.2450 vs last week’s 1.2500+ peaks, as specs increased long positions yet again (to fresh record highs), while Cable is pivoting around 1.4100 amidst more UK/Brexit-related claims and denials (latest concerning a plot against PM May on EU customs union issues). Usd/Cad has rebounded above 1.2400 with the Loonie undermined by reports that Canada could walk away from NAFTA, while Aud/Usd and Nzd/Usd are both sitting just above recent lows and round numbers (0.7900 and 0.7300) awaiting this week’s RBA and RBNZ policy meetings). Conversely, Usd/Jpy has retreated from Friday’s US labour data inspired highs and back below 110.00, with resistance seen ahead of the 110.37 Fib (38.2%) and 110.50 offers, but 109.79 and 109.83 MAs (ascending 55 hourly and descending 100 weekly respectively) providing support. Usd/Chf is hovering just under 0.9300 within a tight range up to around 0.9325.

In commodities, WTI and Brent crude futures have pared earlier losses after hitting a one-month low in early European trade. Friday’s rig count saw oil drillers add rigs for the second consecutive week, a sign that US oil production could  soon exceed 10mln bpd. The Iranian Oil Minister Zanganeh stated that OPEC’s step to push up oil prices is short-lived and that any country that builds oil output capacity will ultimately win, while he also suggested to wait until the June meeting for a decision regarding an extension of cuts. In metals markets, spot gold trades higher, benefiting from its safe-haven status, albeit gains are relatively modest thus far with reports suggesting that Indian gold imports fell to a 17-month low in Jan. Elsewhere, Chinese steel futures were seen lower in quiet trading conditions while nickel prices in London have recovered from recent losses.

On today’s calendar, we will see the remaining January services and composite PMIs released in Europe and the US. Also due in the US is the January ISM non-manufacturing while in Europe the February Sentix investor confidence reading and December retail sales data for the Euro area will be due. Of most interest however will likely be ECB President Draghi’s comments in front of the European Parliament.

US Event Calendar

  • Feb. 5-Feb. 9: MBA Mortgage Foreclosures, prior 1.23%; Mortgage Delinquencies, prior 4.88%
  • 9:45am: Markit US Services PMI, est. 53.3, prior 53.3; Markit US Composite PMI, prior 53.8
  • 10am: ISM Non-Manf. Composite, est. 56.7, prior 55.9

DB’s Jim Reid concludes the overnight wrap

I’ve had plenty of time to contemplate last week’s price action as my late flight home last night from Geneva was cancelled after several hours hanging about. We were left stranded after midnight looking for a hotel. Given I do an annual mapping the world’s prices document that shows Switzerland has the most expensive hotels in the world this was a little suboptimal. It’s slightly ruined a great weekend skiing. Fantastic conditions but very cold.

So good morning from the Holiday Inn Express Geneva Airport where I’m about to see how good the all inclusive breakfast is. Anyway, bond markets. If you thought last week was a shock in fixed income, just imagine what would happen if we actually saw CPI numbers consistently beat expectations on either/both sides of the Atlantic. Global bond markets are still set up for a long period of low inflation ahead, in our view. In our global 2018 outlook tour, the biggest push back to our view was that most didn’t believe inflation would misbehave as much on the upside in 2018 as we did, so I don’t think markets will be well prepared if it does.

One higher average US hourly earnings print (2.9% yoy vs 2.6% expected) doesn’t make a trend but as we’ve been saying for several months now, in our view, everything is set up for higher US inflation this year (eg labour market tightness, late cycle tax cut boost, traditional lag between growth and inflation etc.). If it doesn’t happen this year with all the forces present you’d have to tear up all your textbooks really.

In terms of what impact higher inflation would have. You only have to see last week’s price actions for some clues. 10yr Treasuries moved 19bps higher (+5.1bps Friday), the S&P 500 -3.85% (-2.12% Friday) and the VIX (from 11.08 to 17.31 on the week, 3.8 points higher Friday). In the process, 10yr Treasuries hit their highest yield since January 2014, the S&P500 had its worst day since September 2016 and the VIX climbed to its highest level since the week of the Trump election victory 15 months ago. So for equity vol we’ve already bypassed the whole of the 2017 levels now in early 2018.

This move to higher inflation and higher yields probably won’t be a straight line but the risks are building that 2018 could have moments of big adjustments and spikes in vol. A reminder that our credit forecasts for 2018 are for IG to widen 25bps and HY c.100bps due to higher inflation and yields.

On this, our colleagues in rates and economics have raised their end-2019 Fed Terminal rates to 2.75% (from 2.45%) and year-end 2018 10yr US yield forecast to 3.25% (from 2.95% prior).

The post payroll week is typical pretty light on data so perhaps the shutdown risks towards the end of the week (Thursday 8th Feb.) will come into view. The number two US Senate Democrat Mr Durbin does not believe a deal to protect the c700k of undocumented immigrants brought to the US as children can be reached by this Thursday, but at the same time “don’t see a government shutdown coming”, in part as he expects Senator McConnell to bring the DACA issue “….to a full debate in the Senate” later on. Elsewhere, Bloomberg has noted Republicans are looking at extending the government funding till 23 March. This is broadly consistent with our US economist’s view where they expect another 3-4 week continuing resolution as the most likely outcome. They note the risk of a shutdown this week is not negligible, in part as it would begin to bring the debt ceiling into the mix as the Congressional Budget Office has recently estimated that the Treasury will run out of cash in the first half of March. Though our economists think the probability of a debt ceiling breach is extremely remote, the mid-March deadline adds pressure to already complicated funding negotiations.

Staying with politics, in Germany, Ms Merkel’s bloc and the SPD will resume talks this morning to potentially form the next coalition government. Talks over the weekend were “very constructive” and achieved agreement on many topics, but some topics are still far apart which both parties want to discuss “thoroughly and with focus” on Monday morning. Elsewhere, the Handelsblatt reported that the EU commission may scrap structural fund payments to relatively wealthier countries such as Germany, France, Netherlands and Sweden. The change could save about €100bn over the next seven years.

This morning in Asia, markets are extending the selloff. The Nikkei (-2.13%), Hang Seng (-1.36%), Kospi (-1.19%) and China’s CSI 300 (-0.49%) are all down and UST 10y yields are up c2bp as we type. Datawise, both China’s January  Caixin and Japan’s Nikkei composite PMI were modestly above last month’s readings, at 53.7 (vs. 53) and 52.8 (52.2) respectively. After the bell on Friday, Wells Fargo was down c6% after the Fed banned the bank from increasing its total assets beyond their size at the end of 2017 (US$1.95trn) until it cleans up its consumer and compliance issues. Elsewhere, the WSJ reported the CEO of JP Morgan has called some of the bank’s clients to assuage concerns and emphasis the bank’s plans to start a new healthcare company was only for its own staff.

Now recapping other markets performance from Friday. Key US bourses dropped 2%-2.5%, with all sectors in the S&P in the red, weighted down by softer results from energy companies and increased concerns from rising yields. Notably, the S&P was up 5.6% in January and +19.4% in CY17 so this is a small dent for now. In Europe, the FTSE (-0.63%), Stoxx 600 (-1.38%) and DAX (-1.68%) were all down, with the latter down the most since June 17 and erasing all YTD gains for this year.

In government bonds, both Bunds and Gilt 10y yields rose c4.7bp while peripherals rose 6-8bp. The US 5y breakeven rose to 2.04% (the highest since March last year) and the 2-10s curve steepened 7bps to 69.9bps (the highest since November). In currencies, the US dollar index rose for the first time in four days (+0.59%) while the Euro and Sterling fell 0.38% and 1.02% respectively.

In commodities, WTI oil fell 0.53% on Friday and is down further this morning. Elsewhere, Gold weakened 1.14% and Silver dropped 3.75% while other base metals were little changed (Copper -0.43%; Zinc flat; Aluminium +0.17%). Following on the strength of the USD, DB’s Alan Ruskin has looked back at history and noted that in an environment where 10y yields go up and equities go down, the USD tends to go up sharply versus the AUD and up substantially versus the JPY, but mixed to near flat versus the EUR. To summarize, past history does tend to support the thesis that when it feels like there is nowhere to hide between poor simultaneous trading conditions in the equity and fixed income markets, the USD and more recently the EUR have been the currencies to shelter in. Refer to his note for more details.

Away from markets and onto central bankers commentaries. Before we do this, it’s worth noting that Mr Powell will be sworn in at the Fed today. We hope he’s fresh from his 65th birthday celebrations from yesterday. On Friday, the Fed’s Kaplan’s hawkish comments partly accelerated the selloff in bonds after he noted “I think the base case for 2018 should be three (rate hikes) – it could be more than that, we’ll have to see”. Conversely, the Fed’s Williams has maintained his moderately dovish views. He noted that recent price data have been encouraging and that “we’ll continue to see inflation pick up this year and next”, but “given the economy is performing almost exactly as expected, you can expect policy makers to do the same”. Overall, he does not “…see an economy that’s fundamentally shifted gear” and that either three or four rate hikes are “both possibilities (that) are reasonable to think about, at this point, as options”.

Later on Sunday, former Fed Chair Mrs Yellen noted valuation in US equities were “high…but I don’t want to say too high”. Similarly, commercial real estate prices are now “quite high relative to rents”, but “it’s very hard to tell” whether it’s a bubble or not, although it is a source of some concern that asset valuations are so high. Overall she believes that if there were a decline in asset valuations, “it would not damage unduly the core of our financial system”, in part as the financial system is now “much better capitalised”.

In the UK, the BOE’s Deputy Governor Woods warned against loosening regulations post Brexit. He noted the Prudential regulation authority will “maintain standards of resilient in the financial sector at least as high as those we have today” and that “the idea that we would want to be sub-EU standard doesn’t bear scrutiny”.

We wrap up with other data releases from Friday. In the US, the January change in nonfarm payrolls was above market at 200k (vs. 180k expected), with the average payroll gains over the pastt hree months outpacing the last six months (192k vs. 180k). The average hourly earnings growth also beat at 2.9% yoy (vs. 2.6% expected) – marking the highest annual pace since May 2009. The unemployment rate was in line and steady for the fourth consecutive month at 4.1%. Elsewhere, December factory orders was above expectations at 1.7% mom (vs. 1.5%) while the final reading of the January Uni. of Michigan consumer sentiment was revised slightly higher at 95.7 (vs. 95 expected).

The Eurozone’s December PPI was in line at 0.2% mom while prior revisions lowered the annual growth to 2.2% yoy (vs. 2.3% expected). Italy’s January CPI fell less than expected at -1.6% mom (vs. -1.7%) and 1.1% yoy (vs. 0.8%).

The start of the week will see the remaining January services and composite PMIs released in Europe and the US. Also due in the US is the January ISM non-manufacturing while in Europe the February Sentix investor confidence reading and December retail sales data for the Euro area will be due. Of most interest however will likely be ECB President Draghi’s comments in front of the European Parliament.

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Super Bowl Mayhem: Philadelphia Celebrates With Fires, Looting And Shooting

Last night, after underdog Eagles defeated Tom Brady and the Pats to win the Superbowl, we predicted that “Philly GDP was set for a major Keynesian boost tonight”…

Sure enough, thousands of ecstatic Eagles fans took to the streets of Philadelphia Sunday night after their first ever Super Bowl win, beating the five-time champion New England Patriots 41-33 at U.S. Bank Stadium. 

 

Earlier in the day, Philly was hard at work preparing for whatever outcome was in store for the Eagles – including officers from 60 additional police departments, 400 National Guard members, US Secret Service, ICE, FBI, private security, County Sheriff’s Reserves, and over 10,000 civilian volunteers. Oh, and they also greased up the light poles for good measure: 

And despite all of that, tens of thousands of crazed Eagles fans poured into the streets and promptly chimped out with joy – much of which can be found in the Twitter feed of Barstool Sports.

As expected, celebrations of the historic Super Bowl victory of the Philadelphia Eagles led to havoc on Sunday night, as cheering crowds damaged property and turned cars upside down, and an explosion of unknown ripped in the downtown area and several people were injured in street violence.

Some highlights: 

The Ritz Carlton Awning was mercilessly partied on until it collapsed: 

A Toyota Prius owner should have known better than to park there. What if the Eagles had lost? 

Sadly, several traffic signals and other probably ungreased poles did not survive the night:

A dance party broke out and music spontaneously happened:

Little bit of fire, little bit of mayhem, little bit of eating horse poo:

Some guy went on the rails: 

Many vehicles were surfed:

A hoarde of zombies scaled a fence, because they can do that in this one:

With beer…

Happy cop:

 

A shooting was reported on a highway and the police are requesting back-up. The situation in some parts of the city is apparently out of control, with most of the traffic lights taken out and people continuing to vandalize buildings. The central Old Navy store has reportedly been vandalized, with its doors ripped open and/or its front window broken in.

Serious cops

 

And lastly – what better way to cap off an Eagles win? She pretty much had to say yes… 

 

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