Month: September 2018

With a net worth of over $7 billion, Liu ‘Richard’ Qiangdong, founder and CEO of Chinese e-commerce company JD.com, is China’s 20th richest man.

Liu’s fortune is derived from his 15% stake in JD.com, China’s second-largest e-commerce company. JD.com had more than 220 million active customers and 157,830 employees at the end of 2017, according to its 2017 annual report. It had revenue of 365 billion yuan ($53.7 billion) in 2017.

According to arrest records, Liu Qiangdong, who uses the English name Richard, was arrested in Minneapolis and brought in at 11:32 p.m. Friday on an accusation of “criminal sexual conduct” and released just over 16 hours later.

As Bloomberg reports, Minneapolis Police Department spokesman John Elder declined to provide any further details about the reasons for the arrest, but said authorities decided not to keep Liu in custody and haven’t imposed any travel restrictions on him while conducting their investigation.

“We are very much in the infancy of this investigation,” Elder said. Authorities may decide not to charge Liu at all, he added.

“There are no travel restrictions on him at the moment and he’s not charged with a crime at this time.”

Upon release, the billionaire flew swiftly back to the ‘safety’ of his home country, China. According to JD.com’s official Weibo (social media) account, the company claims that US police found no misconduct in their probe, but failed to explain how that assertion squared with the police’s own statement of an ongoing investigation.

As Bloomberg reports, police haven’t outlined specific accusations against Liu, said Joseph Friedberg, who JD confirmed as representing the billionaire. His team was now awaiting details from the authorities before deciding on next steps, and Friedberg wouldn’t elaborate further.

“No one has told him or us what the accusations are,” he said in a phone interview.

“If he were to be charged — and I don’t think there is any possibility of that — he would certainly come back to face charges.”

Most intriguingly, however, Bloomberg points out that earlier this year, a guest at a party Liu hosted in downtown Sydney was convicted of sexually assaulting a fellow guest after the event. There was no accusation of any misconduct by Liu. The billionaire lost a legal attempt to keep his name out of the records. Over the weekend, JD said it will take legal action against the publishing of untrue reports or rumors.

Liu’s net worth has fallen dramatically in the last few months (from over $10bn to ‘just’ $7.3bn currently) as the share price of his company has plunged relative to other tech stocks…

And, as Mark Natkin, managing director of Beijing-based Marbridge Consulting, notes, things may be about to get worse after these allegations: “Investors may treat the stock cautiously for the next short while as they wait to see how this issue is resolved.”

via RSS https://ift.tt/2oy3DzU Tyler Durden

With summer vacation on Wall Street officially over, and with an eventful August behind us, there is plenty for markets to get excited about this week even with the US closed Monday for Labor Day.

The key events this week include payrolls on Friday but before that the final PMIs are out today through Wednesday. The big data highlight next week comes on Friday with the August employment report in the US. Expect hourly earnings data to once again be the main focus with the market currently expecting a +0.3% mom print which should be enough to push the annual rate up one-tenth to +2.8% yoy and back to the May highs. Nonfarm payrolls is expected to print at a solid 191k which as a reminder follows that softer than expected 157k reading in July. The unemployment rate is expected to hold at 3.9% and average weekly hours at 34.5 hours.

The other potentially interesting data in the US next week comes in the manufacturing sector with the final August PMI and ISM readings due on Tuesday. The latter is expected to fall around half a point to 57.6. Outside of that we’ll also get August vehicle sales data on Tuesday, the July trade balance on Wednesday, August ADP and ISM non-manufacturing on Thursday as well as final July durable and capital goods orders data.

Focusing on the US, the key economic data releases this week are the ISM manufacturing report on Tuesday, the ISM non-manufacturing report on Thursday, and the employment report on Friday. There are several scheduled speaking engagements by Fed officials this week, including a speech by New York Fed President Williams on Thursday.

As DB’s Craig Nicol writes, away from all that the final global August PMI revisions should be a focus for the market during the week too. Today we got manufacturing prints in Asia and Europe while on Wednesday we’ll get the remaining services and composite readings. The final Q2 GDP reading for the Eurozone is also due on Friday with no change from the +0.4% qoq first revision print currently expected.

Outside of the PMIs today, a highlight was the Turkish CPI, which printed at 17.9%, a fresh 15 year high. Meanwhile, Turkish and Argentinian headlines will be closely watched all week too.

Elsewhere the trade war could also come back under the spotlight with Thursday marking the deadline for the end of a public comment period on a plan for the US to impose tariffs on $200bn in Chinese imports. This would mean the US administration could impose tariffs as early as the back end of this week with news reports last week suggesting that could be the case.

Meanwhile Fedspeak starts to pick up next week. On Monday Chicago Fed President Charles Evans is due to take part in a panel on ‘Global Macroeconomic Perspectives’ at a Central Bank of Argentina event. Evans then speak again on Tuesday when he takes part in a roundtable discussion on ‘Dealing with Monetary Policy Normalization’. Minneapolis Fed President Neel Kashkari will then speak at a town hall forum in Montana on Wednesday while Atlanta Fed President Raphael Bostic and New York Fed President John Williams are also scheduled to make comments on the same day. Williams is then slated to speak on Thursday at a fireside chat in New York before we end the week on Friday with Boston Fed President Eric Rosengren due to speak at a conference on the ‘Long Term Consequences of Low Interest Rates’, Cleaveland Fed President Loretta Mester moderating a panel titled a ‘Reality Check from the Markets’ and finally Dallas Fed President Robert Kaplan taking part in a energy and economy conference in Dallas.

Other potentially interesting things to keep an eye on next week include German Chancellor Merkel speaking at a conference on Tuesday on Germany’s future as a financial centre, while her Economy and Energy Minister colleague Altmaier may discuss Europe and US relations, Brexit and China at a town hall event on the same day. Tuesday also marks the day that the full US Congress returns. There will also be some fireworks on Wednesday as executives from Twitter, Facebook and Google are due to testify to Congress on possible Russia election interference according to Deutsche Bank.

Below is a daily breakdown of key events, courtesy of Deutsche Bank

• Monday: Kicking off the week on Monday will be the release of the final August manufacturing PMIs in Japan (Nikkei), China (Caixin), the Eurozone and UK. Prior to that we’ll get Q2 capital spending and capital profits data in Japan, while August CPI data in Turkey is likely to be closely watched in light of recent events in the country. Away from that the Fed’s Evans will speak on a policy panel in Argentina and the ECB’s Mersch will make comments in Paris. Markets in the  US will stay closed for the Labor Day holiday.
• Tuesday: Overnight on Tuesday we’ll get the August BRC like-for-like sales data in the UK. In Europe the only data of note is the July PPI report for the Eurozone while in the US the main focus will be on manufacturing data with the final August PMI and ISM due, as well as July construction spending data. Later in the evening we’ll also get August vehicle sales data, while the Fed’s Evans and BoE’s Carney are also scheduled to speak. Germany’s Chancellor Angela Merkel will also be speaking at a conference on Germany’s future as a financial center in Frankfurt while Germany’s Economy and Energy Minister Peter Altmaier may discuss Europe and US relations, Brexit and China at a town hall meeting. It’s worth noting that US Congress also returns on Tuesday.
• Wednesday: Wednesday is also set to be dominated by PMI releases with the final August services and composite prints due in Japan (Nikkei), China (Caixin), the Eurozone and UK. Also due out is July retail sales data for the Eurozone while in the US the July trade balance is due. The Fed’s Kashkari, Williams and Bostic are all due to speak during the day. It’s worth also noting that Twitter, Facebook and Google executives will testify before Congress on Wednesday concerning possible Russia election interference.
• Thursday: With no data of note in Asia on Thursday, the early focus will be on Germany where July factory orders data is due. It’s a lot busier in the US on Thursday with the August ADP employment change report, Q2 nonfarm productivity and unit labor costs, initial jobless claims, services and composite PMIs for August, ISM non-manufacturing for August, July factory orders and final July capital and durable goods orders data all due. Away from that the Fed’s Williams and BoJ’s Kataoka are also expected to speak during the day. Thursday also marks the deadline for the public comments period before the US administration potentially goes ahead with the next round of tariffs on China.
• Friday: The big highlight on Friday is the August employment report in the US. Prior to that though, we get July household spending and labor cash earnings data in Japan along with the preliminary July leading index. The main focus in Europe should be the final Q2 GDP print for the Eurozone, while July trade data in Germany and France and industrial production data in the former is also due. We will also be getting China’s August foreign reserves data at some stage during the day on Friday. Finally, the end of week is also a busy one for Fedspeak with Rosengren, Mester and Kaplan all due to speak.

Finally, focusing only on the US, here is Goldman with this week’s key events:

Monday, September 3

• Labor Day holiday. U.S. markets are closed, and there will be no major data releases.

Tuesday, September 4

• 09:45 AM Markit Flash US Manufacturing PMI, August final (consensus 54.5, last 54.5)
• 10:00 AM Construction spending, July (GS +0.3%, consensus +0.4%, last -1.1%): We expect construction spending to rebound 0.3% following a 1.1% decline in the June report that mostly reflected a decline in public construction.
• 10:00 AM ISM manufacturing, August (GS 58.1, consensus 57.6, last 58.1): Our manufacturing survey tracker – which is scaled to the ISM index – declined by 1.0pt to 59.0 following softer manufacturing surveys on net in July. But given a larger than expected decline in the ISM measure in the previous month and resilient sales growth and commentary at industrial firms, we expect the ISM manufacturing index to remain unchanged at 58.1.

Wednesday, September 5

• 08:30 AM Trade balance, July (GS -$50.0bn, consensus -$50.0bn, last -$46.3bn): We estimate the trade balance widened by $3.7bn in July, reflecting a similar widening in the goods trade deficit in the Advance Economic Indicators report last week.
• 04:00 PM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Fed President Neel Kashkari will speak at a town hall event in Bozeman, Montana. Audience Q&A is expected.

Thursday, September 6

• 08:15 AM ADP employment report, August (GS +205k, consensus +190k, last +219k): We expect a 205k gain in ADP payroll employment in August, reflecting a further improvement in initial jobless claims and generally solid employment surveys. While we believe the ADP employment report holds limited value for forecasting the BLS nonfarm payrolls report, we find that large ADP surprises vs. consensus forecasts are directionally correlated with nonfarm payroll surprises.
• 08:30 AM Nonfarm productivity (qoq saar), Q2 final (GS +2.9%, consensus +2.9%, last +2.9%); Unit labor costs, Q2 final (GS -0.9%, consensus -0.9%, last -0.9%): We estimate nonfarm productivity will be unrevised at +2.9% (qoq ar), and we expect growth in Q2 unit labor costs – compensation per hour divided by output per hour – to remain at -0.9% (qoq saar).
• 08:30 AM Initial jobless claims, week ended September 1 (GS 210k, consensus 213k, last 213k); Continuing jobless claims, week ended August 25 (consensus 1,718k, last 1,708k): We estimate that initial jobless claims declined to 210k in the week ended September 1. Initial jobless claims continue to decline steadily, and we believe there is scope for this trend to continue.
• 09:45 AM Markit Flash US services PMI, August final (consensus 55.2, last 55.2)
• 10:00 AM ISM non-manufacturing, August (GS 57.5, consensus 56.6, last 55.7): We expect the ISM non-manufacturing index to rebound 1.8pt to 57.5 in the August report. On net, our nonmanufacturing survey tracker moved up 0.8pt to 58.7, reflecting a strengthening of service-sector surveys. New highs in US equities may also boost sentiment among survey respondents.
• 10:00 AM Factory orders, July (GS -0.4%, consensus -0.6%, last +0.7%); Durable goods orders, July final (last -1.7%); Durable goods orders ex-transportation, July final (last +0.2%); Core capital goods orders, July final (last +1.4%); Core capital goods shipments, July final (last +0.9%): We estimate factory orders declined 0.4% in July following a 0.7% increase in June. Durable goods orders declined in the July advance report, largely driven by a decline in transportation equipment. However, core measures were solid, with increases in both core capital goods orders and shipments.
• 10:00AM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will hold a fireside chat on the regional and national economy in Buffalo, New York. Audience Q&A is expected.

Friday, September 7

• 08:30 AM Nonfarm payroll employment, August (GS +175k, consensus +193k, last +157k); Private payroll employment, August (GS +170k, consensus +194k, last +170k); Average hourly earnings (mom), August (GS +0.2%, consensus +0.2%, last +0.3%); Average hourly earnings (yoy), August (GS +2.7%, consensus +2.7%, last +2.7%); Unemployment rate, August (GS 3.8%, consensus 3.8%, last 3.9%): We estimate nonfarm payrolls increased 175k in August. Our forecast reflects a drag of 40k or more from negative residual seasonality in August, but we believe the underlying trend remains firm given solid employment surveys and jobless claims data. We also note a possible drag in the August report from uncertainty following the imposition of July tariffs. We expect the unemployment rate to fall one tenth to 3.8%, reflecting the further decline in continuing claims over the payroll month. Finally, we expect average hourly earnings to increase 0.2% month over month and 2.7% year over year, reflecting neutral calendar effects.
• 08:30 AM Boston Fed President Rosengren (FOMC non-voter) speaks: Boston Fed President Eric Rosengren will give opening remarks at a conference on the consequences of long periods of low interest rates at the Boston Fed.
• 09:00 AM Cleveland Fed President Mester (FOMC voter) speaks: Cleveland Fed President Loretta Mester will moderate a panel titled ‘Reality Check from the Markets’ at the Boston Fed.
• 12:45 AM Dallas Fed President Kaplan (FOMC non-voter) speaks: Dallas Fed President Robert Kaplan will take part in a Q&A session in Dallas during a conference on energy and the economy hosted by the Federal Reserve Banks of Dallas and Kansas City.

Source: DB, BofA, Goldman

via RSS https://ift.tt/2wBSjGF Tyler Durden

Via Dana Lyons’ Tumblr,

While stocks are finally back testing new all-time highs, the volatility market is well off of its yearly lows, a divergence that has been problematic for stocks the past 2 decades.

The S&P 500 (SPX) made its long-awaited (& much heralded) return to its January all-time highs this week. But while stocks are back at their highs, volatility expectations (specifically, the VIX, or S&P 500 Volatility Index) — which tend to trend in the opposite direction — remain well above their 52-week lows. Now, there are always bound to be divergences at new highs in the equity market  — and, thus, divergences that matter very little, or none at all. However, the extent of the recent SPX/VIX divergence has got our attention.

Specifically, on Tuesday, the SPX touched a new all-time high (intraday). However, the VIX closed more than 40% above its 52-week closing low of 9.14 set last November. Over the last 20 years (actually 19-plus years), there have been just 3 other similar occurrences, though, the prior occurrences experienced clusters of such days. As the chart indicates, those prior occasions were very inauspicious times to be investing in the stock market, to say the least.

As one can see in the chart, the only other such divergences since mid-1999 came at the following junctures:

• December 1999-March 2000: Cyclical Top

• April-October 2007: Cyclical Top

• December 2014-February 2015: Major Intermediate-Term Top

We don’t have to tell you how poorly the equity market did following these periods, but we will…

The long-term returns were the worst, especially the 1-year median return of -11.3%. Just 1 date (11/3/2014) saw a positive 1-year return and just 7 of the prior 26 saw a positive 6-month return. The short-term was also very weak with median 2-week and 1-month returns of -2.6% and -3.8%, respectively.

The intermediate-term saw a bit of a dead-cat bounce in some cases, mostly in December 1999, April-July 2007 and December 2014. That point highlights the fact that, while this signal has eventually been a warning sign for stocks, it has not necessarily been an immediate one. Indeed, the mere presence of clusters of signals around the aforementioned occurrences indicates that the first instance is not typically an immediate longer-term death knell for stocks. As tops are processes, we have seen these divergences take time to play out into negative ramifications during events in the past 19 years. However, overall, this divergence has been an extremely consistent and accurate warning sign eventually for stocks over the past 2 decades.

Now, along with the “cluster caveat”, we have another caveat to consider — the pre-1999 period. That’s because we observe a large sample of divergences occurring between 1987 and early-1999 that did not carry such negative consequences, at least not with the same consistency.

As the chart indicates, if we take the chart back another decade-plus, we observe an abundance of signals, particularly during the mid-1990’s, that accompanied mostly a rising stock market. There were a few good intermediate-term warning signs (that may be difficult to see), e.g., 1987, 1989, 1996, 1997, 1999. However, the majority of signals saw little to no ill-effects on the stock market.

The question is, are we currently in that mid to late-90’s melt-up stock market scenario, or more of the post-1999 environment. Our (strong) opinion is that we are in that latter market environment. Therefore, while this signal may just be the first of several clustered occurrences yet to come, our analysis would lead us to believe that this signal will indeed eventually have negative ramifications for the stock market.

*  *  *

If you’re interested in the “all-access” version of our charts and research, please check out our new site, The Lyons Share. You can follow our investment process and posture every day — including insights into what we’re looking to buy and sell and when. Plus, our Pre-FALL Sale (25% OFF!!) is going on THIS WEEKEND ONLY so it’s a great time to sign up! Thanks for reading!

via RSS https://ift.tt/2LRljzH Tyler Durden

With the Turkish lira plunging, it was not exactly a surprise that Turkish inflation data reported today came even hotter than expected, with inflation jumping a surprising 17.9% last month, up from 15.9% and above the 17.6% consensus, with monthly inflation rising 2.3%. This was the highest increase in annual inflation going back to 2003.

Core inflation increased from +15.1%yoy in July to +17.2%yoy, above the +16.0%expected, and contributed 1.2% to the overall 2.1% rise in the headline figure and more than fully accounted for the surprise in headline inflation compared to forecasts. Following the hike to electricity and natural gas prices, energy inflation contributed another 0.5%. The rest of the increase in headline inflation was due to higher gold and food prices.

As shown in the Goldman chart below, inflation in nonfood goods and energy categories were the main drivers behind the rise in the headline figure.

Looking ahead, Bloomberg economist Ziad Daoud said that Turkey’s year-on-year inflation is likely to jump to 19.1% in August, showing the initial economic impact of the recent meltdown in the lira.

Producer prices soared more than 32%, Turkstat reported on Monday: PPI’s nearly double increase vs CPI confirmed that companies are finding it next to impossible to pass on much of their added costs to end-users just yet, but eventually they will have little choice according to Bloomberg.

According to Bluebay Asset Management strategist Tim Ash the inflation data showed consumer demand collapsing, and it could weaken further if borrowing costs are raised. Still, “if they don’t hike again by something significant, the lira will be left exposed again,” Ash told Bloomberg. “They need to do whatever they need to do short-term to hold the lira, and that means hiking rates.”

And while the Turkish lira slumped promptly on the news of the higher than expected inflation, the loss was quickly offset after the Turkey’s central bank stepped in shortly after the inflation data was released, and signaled higher interest rates are imminent: “The monetary stance will be adjusted at the September monetary policy committee meeting in view of the latest developments,” the central bank said in a statement, citing the deterioration in the inflation outlook.

The central bank tipped its hand 10 days before it is scheduled to meet, and in verbal defense of the currency which looked set to resume its slide. As a result, after initially sliding then erasing all losses, the TRY was back to unchanged from its Friday close.

Whether the central bank will actually hike rates – much to the distaste of president Erdogan – remains to be seen.  Erdogan has opposed outright tightening, instead placing a premium on economic growth over the lira’s robustness. He’s accused foreign agitators of trying to undermine the Turkish economy by “attacking” the lira, and has said his country can withstand the alleged onslaught.

By signaling a hike, the bank has also created expectations that the increase will be big enough to stem the rise in inflation, according to Piotr Matys, a currency strategist at Rabobank in London. “Such a pledge puts more pressure on the Turkish central bank to deliver a proper rate hike,” Matys said. “Essentially, the central bank raised the bar for itself to exceed expectations on Sept. 13.”

The lira has lost more than 40% of its value against the dollar this year even as the central bank raised costs by around 5% points before the latest run on the lira. The bank used fringe tools and an extraordinary lending mechanism to increase the cost of cash it provides to commercial lenders from mid-August to deliver another 150 basis points of tightening.

via RSS https://ift.tt/2NHMa37 Tyler Durden

Asian stocks and emerging markets slumped, while European stocks rebounded from early losses as S&P futures traded 10 points with US cash markets closed for Labor Day. The pound dropped after Theresa May’s Brexit proposal came under attack and following a UK PMI report, while the dollar initially declined then rebounded in a a choppy session.

European shares opened lower, although they have since regained most losses with the DAX marginally underperforming due to weakness in auto sector as VW (-2.2%) faces further emissions allegations; while in Asia, MSCI’s broadest index of shares outside Japan and the Nikkei shed about 0.7 percent each. In early trading, MSCI’s All-Country World Index fell 0.2% and the main emerging equity index fell 0.5%, once again bearing the brunt of global trade fears with the US set to launch a new round of $200 billion in Chinese tariffs on Thursday.

In European bond markets, Italian bond yields edged lower after Fitch Ratings left its credit rating unchanged at BBB, revising only its outlook to negative.

China equities started off on the back foot, as the Shanghai Composite dropped over 1% back under 2,700 in the morning session, sliding after the Caixin manufacturing PMI printed at 50.6, below the 50.7 forecast, leaving the CSI 300 down 1%. The gloom spread across Asian stocks with MSCI Asia Pacific falling 0.8% and Nikkei down 0.7%. However, the SHCOMP found a second wind coming into the close, with some speculating that the national team had made a fresh appearance, pushed the Composite back to almost unchanged by the close of trading, and down just -0.17% at the close.

In Europe, gains in energy shares were offset by declines in automakers and construction firms in thin trading on the Stoxx Europe 600 Index, following Asian’s downbeat session. U.K. equities bucked the market, climbing as the pound weakened.

The pound dropped for a third day after British Prime Minister Theresa May ruled out a second referendum on Brexit. GBPUSD slipped as much as 0.5% after May wrote in the Sunday Telegraph that another vote “would be a gross betrayal of our democracy,” and said Britain would leave the EU by March 29. The pound also weakened after EU Chief Negotiator Michel Barnier said he was “strongly opposed” to British proposals on future trade ties after it leaves the EU. Finally, cable saw even more downside after the UK manufacturing PMI printed at 52.8, down from 53.8, and below the 53.8 expected.

The weakness in the pound however helped lift London’s blue-chip FTSE rose 0.7%.

Emerging-market equities fell. Emerging economies remain a key battle ground for investors, with Argentina and Turkey proving the latest epicenters for crises that are denting sentiment after a stronger dollar and tighter trade policies sent shock waves across markets in August.

As a result, EM turbulence continued with the Indonesian rupiah falling again to the lowest levels against the dollar since the country’s economic crisis two decades ago, and the central bank said it was intervening in foreign exchange and bond markets.

Turkey’s lira, which plunged again late last week, firmed on Monday to 6.56 per dollar, lifted by a statement from the central bank which said it would “adjust” its monetary stance at its upcoming Sept. 13 meeting. Inflation was above expectations in August, surging 18% and touching the highest since December 2003. “This morning’s inflation number was very high and the authorities still haven’t got a credible strategy to deal with that,” said Chris Scicluna, head of economic research at Daiwa Capital Markets. Turkish Finance Minister Berat Albayrak told Reuters that the central bank was independent of government and it would take all necessary steps to combat inflation.

 

While US exchanges are closed for Labor Day, S&P futures continue to trade and after initially hugging the flatline, ES jumped around 4am EDT, rising as much as 10 points on no news, and virtually no volume, in what appears to have been an algo-driven push higher to sniff out short stops.

“My view is to continue trading on the trends — staying bearish on emerging markets,” Chris Weston, head of research at Pepperstone Financial Pty Ltd., told Bloomberg TV from Melbourne. “We need to see a perception of the U.S. dollar going lower and clarity that the trade tensions are coming to some sort of a close. I don’t think we’re there yet.”

Global trade concerns supported the U.S. dollar, with dollar index nearing its highest level since Aug. 27. It has gained nearly 7% since mid-April when trade tensions first arose.

President Donald Trump said over the weekend that there was no need to keep Canada in NAFTA and warned Congress not to meddle with the trade talks. Worries about U.S. tensions with China were also kept alive by a Bloomberg report last week that Trump had told aides he was ready to impose tariffs on an additional $200 billion worth of imports from China as soon as a public comment period on the plan ends on Thursday. That would be a major escalation given the United States has already applied tariffs on $50 billion of exports from China.

There was also bad news on the economic data front as euro zone manufacturing growth slowed to a near two-year low in August as amid growing trade war fears, a survey showed on Monday.

Final #Eurozone Manufacturing #PMI at 54.6 in August (Flash: 54.6, July Final: 55.1). Concerns about tariffs and global trade weigh on confidence https://t.co/1SMlxdwRvO pic.twitter.com/0J0QeSRYya

— IHS Markit PMI™ (@IHSMarkitPMI) September 3, 2018

“As we head into a new week and month, trade concerns will remain front and center of investors’ minds, along with increasing concerns about stability in emerging markets, after the sharp declines seen in Argentina and Turkey’s currency last week,” said Michael Hewson, chief market analyst at CMC Markets.

Elsewhere, oil prices steadied on Monday, weighed down by rising supply from OPEC and the United States but supported by concerns that falling Iranian output will tighten markets once U.S. sanctions bite from November. Brent crude oil was up 23 cents at $77.87 a barrel. WTI was unchanged at $69.80. Copper steadied after last week’s losses.

Top Overnight News from Bloomberg

• President Donald Trump will skip two major summits in Asia in November, a move that could stoke concerns in the region about the U.S.’s reliability as a counterweight to China
• Michel Barnier, the European Union’s chief Brexit negotiator, tells Frankfurter Allgemeine Sonntagszeitung in interview he is strictly against U.K. blueprint for economic ties. “Exit agreement is about 80 percent negotiated. We will be close to our goal if we can find a pragmatic and realistic solution for Northern Ireland”
• Events are likely to unfold quickly for emerging markets this week following the battering some currencies suffered in August. Monday alone sees the release of Turkish inflation data and the unveiling of a new fiscal plan in Argentina. Meanwhile, Brazil will remain on tenterhooks after the country’s top electoral court banned imprisoned Luiz Inacio Lula da Silva — who was leading in the polls — from running in October’s presidential elections
• Italy’s yield spread will narrow as budget details are unveiled over the next month, Finance Minister Giovanni Tria predicted in an interview with la Repubblica
• European Aug. Manufacturing PMIs: Spain 53.0 vs 52.5 est; Italy 50.1 vs 51.2 est; France 53.5 vs 53.7 est; Germany 55.9 vs 56.1 est; Eurozone 54.6 vs 54.6 est; Markit say Italian manufacturing sector could slip into technical recession in 2H unless demand picks up
• U.K. Aug. Manufacturing PMI 52.8 vs 53.9 est; Markit note foreign demand declined for the first time since Apr 2016 despite the GBP weakness, future outlook at a 22-month low
• BBC: BOE’s Carney is in talks to extend his term as Governor, according to people familiar; FT reports decision could be revealed tomorrow
• Italy Deputy PM Salvini: Italy will ’touch’ 3% deficit limit without breaching it; Finance Minister Tria says Bund/BTP spread will tighten once budget plan is made fact
• Turkish Central Bank says policy stance will be adjusted at Sept. meeting; Aug. CPI y/y 17.9% vs 17.6% est.
• China Aug. Caixin Manufacturing PMI 50.6 vs 50.7 est.

Asian equity markets traded mostly lower with the region cautious heading into an event-packed week and as trade-related concerns clouded over risk sentiment. This followed a lack of breakthrough in last week’s NAFTA related talks between US and Canada with President Trump suggesting a willingness to go ahead without Canada, while fresh tariff concerns also lingered with the public comment period for the proposed US tariffs on a further USD 200bln of Chinese goods is set to expire by Thursday. This weighed on Nikkei 225 (-0.6%), Hang Seng (-0.9%) and Shanghai Comp. (-0.9%), with underperformance seen in China following disappointing Caixin Manufacturing PMI data, while the ASX 200 (Unch.) bucked the trend and remained afloat on mixed data which showed solid growth in Company Profits and as the local currency depreciated to its weakest since January 2017.

European equities trade mixed (Eurostoxx 50 -0.1%) with UK’s FTSE 100 outperforming (+0.8%) with the aid of currency effects amid weekend reports that EU’s Chief Negotiator Barnier strongly opposes UK PM May’s Brexit trade proposals. Softer-than-expected UK manufacturing PMI gave the GBP another leg lower, providing further support to the index. Energy names outperform, in-line with the recent price action in the complex, while consumer discretionary names lag, weighed on by German auto names amid reports an increase in US auto import tariff would cost German carmakers EUR 7bln per annum in revenues. In terms of individual movers, SBM Offshore shares spiked higher by 11.3% at the open after the Co. reached a final settlement on Saturday with MPF over alleged improper sales practices

In FX,  DXY traded within tight 95.000-230 trading parameters, and largely dependent on indirect impulses/drivers given the aforementioned US market holiday until a scheduled speech from Fed’s Evans that may provide some independent impetus. In EM the Try has been especially volatile around Turkish inflation data that saw CPI accelerate further and prompt a swift CBRT response flagging a policy adjustment at next Thursday’s meeting and pledge to use all tools available to restore price stability. The Lira rebounded from 6.7300 lows vs the Usd to 6.5075, but has lost some recovery momentum even though the Finance Minister seemed to ‘approve’ of the Central Bank’s tightening signal, awaiting to see how much official rates are hiked. AUD: Aud/Usd has reclaimed 0.7200+ status (albeit marginally) and 1.0900 vs the NZD on the back of less risk averse sentiment overall and a broadly softer Greenback in thin US Labor Day holiday trade. Note, the Aud was weaker overnight amidst mixed Aussie data in the form of a retail sales miss vs higher Q2 company profits, while the Kiwi is straddling 0.6600 vs its US peer.

WTI and Brent trade in the green, nursing some overnight losses, with the former eyeing USD 70/bbl to the upside amid comments from a few oil officials. The Nigerian Energy Minister stated he is comfortable with oil prices around the mid-70s, while an Omani oil official noted some OPEC+ states have trouble reaching their own output quotas, while adding oil prices may rise to USD 90/bbl due to a lack of investments leading to shortfalls. Elsewhere, gold benefits from a domino effect caused by the Turkish Central Bank, whose comments sparked some TRY strength, in turn weighing on the USD.

US event calendar

• Markets in the US will stay closed for the Labour Day holiday

DB’s Jim Reid concludes the overnight wrap

So we now move into September and the end of the meteorological summer… and what a summer it’s been. In market terms US equities still seem to be bathed in near permanent sunshine at the moment whereas for parts of the EM complex winter is most definitely coming!! European markets seem to have skipped straight to autumn this year and pretty much stayed there. So with a spring in our steps we’ve left behind an eventful August as we’ll discuss below. Today will be quieter given US Labour Day but there is plenty for markets to get excited about this week. We have a payrolls Friday to look forward to but before that the final PMIs are out today through Wednesday. Elsewhere the trade war could also come back under the spotlight with Thursday marking the deadline for the end of a public comment period on a plan for the US to impose tariffs on $200bn in Chinese imports.

This would mean the US administration could impose tariffs as early as the back end of this week with headlines at the back end of last week suggesting that could be the case. We could have some fireworks on Wednesday as executives from Twitter, Facebook and Google are due to testify to Congress on possible Russia election interference. Outside of the PMIs today, watch out for Turkish CPI. It might be too early for the big FX move to have had a major impact on inflation but that’s the risk over the months ahead. Clearly Turkish and Argentinian headlines will be closely watched all week too. The full week ahead is at the end.

Talking of EM, it was obviously the main under performer in August. Our normal performance review is at the end today including some new additions to reflect current market focus. Worst performers in our sample were the Argentinian Peso  (-25.8%) and the Turkish Lira (-25.0%) driving the EM FX index to a -6.2% loss – the largest since 2012. However the S&P 500 (+3.3%) continues to be bullet proof for now driven by the best month for Apple (+20.0%) since 2008 ($178bn increase in market cap) and a remarkable $115bn added to the value of Amazon! The full performance review is at the end.

Over the weekend there hasn’t been a great deal of newsflow although that hasn’t stopped markets in Asia from starting the week on the backfoot. The Nikkei (-0.87%), Shanghai Comp (-0.94%), Kospi (-0.68%) and Hang Seng (-0.98%) are all in the red as we go to print while EM currencies including the Turkish Lira (-1.50%) are also generally weaker. China’s Caixin manufacturing PMI didn’t move the dial too much with the August reading declining 0.2pts to 50.6 and a fraction below expectations for 50.7. Meanwhile Sterling (-0.27%) has also been on the move with various Brexit related headlines once again doing the rounds over the weekend including comments from the EU’s Barnier who said he is “strongly” opposed to key parts of PM May’s proposals for a future trade agreement. We’ve also had the usual daily budget related headlines from Italy this morning with Ansa quoting Deputy PM Salvini as saying that Italy will “touch” the 3% deficit limit without breaching it. The Euro is little moved despite that comment.

Friday’s trading session continued to be buffeted by the main recent themes around trade negotiations, stress in certain emerging markets, and the evolving rhetoric concerning Italy’s budget. Despite headwinds on all these fronts, the S&P 500 refused to stay down and rallied into the close (+0.01%) to end the week +0.93% stronger. The NADSAQ gained +0.26% on Friday while the DOW slipped -0.09%. The VIX index dropped 0.67pts to 12.86 and Treasuries traded 0.5bps higher.

Markets in Europe were not as resilient, with the Stoxx 600 shedding -0.80%. Trade-sensitive sectors led declines, with the auto and mining sectors falling -1.55% and -1.59%, respectively. The main driver was the news that the US will likely institute tariffs on another $200bn of Chinese goods as soon as this week, which broke last Thursday night. Separately on the trade front, the US formally announced a new NAFTA agreement with Mexico. The deal makes changes to supply chain requirements and rules of origin, but it will need to be approved by Congress. Canada has not agreed to the deal, and multiple Republican Senators have expressed a strong preference for a trilateral deal. Canada may still join, so negotiations will continue this week.

Despite the broadly negative trade headlines, EM equities (-0.18%) were only a shade lower and the DB EM currency basket rose +0.32% as the situations stabilized in both Argentina and Turkey. The Peso gained +4.48%, including a late afternoon rally after S&P affirmed Argentina’s long-term foreign currency debt rating at B+. They switched the outlook to negative, but the immediate result was apparently better than some investors feared. In Turkey, the authorities raised the tax rate on FX deposits and cut the rate on local currency deposits, effectively incentivizing market participants to buy lira. The Lira rallied as much as +6.36% off the intraday lows before closing +1.75% stronger on the day. Finally on the EM front, the Brazilian Real gained +2.35% on Friday as investors positioned ahead of a potential court ruling which may bar Lula da Silva from running for President.  He has been leading in polls but is viewed as market unfriendly.

Back to Europe, where the Italian budget saga rumbles on. Ten-year spreads to Bunds rose 12.0bps off their intraday lows on Friday and are now only 0.5 basis points away from their widest level of the year, following a series of unfavourable rhetoric. Outright 10-year yields are at 3.222%, their highest level since 2014. EU Economic and Financial Affairs Commissioner Pierre Moscovici said budget talks with Italy “risk not being easy,” and the Italian Cabinet Undersecretary Giancarlo Giorgetti said the deficit could exceed 3% “if necessary.” For context, a deficit number around 2% of GDP will likely be sufficient to mollify the European Commission and financial markets, while a number up near 3% would be more problematic. This saga is likely to continue throughout September. Staying with Italy it’s worth noting that Fitch revised down Italy’s rating outlook to Negative from Stable on Friday night reflecting a combination of the fiscal outlook and fragile political situation. The BBB sovereign rating was however maintained.

On the data front, August Eurozone core inflation printed at 1.0% and headline at 2.0%, both 10bps softer than consensus expectations but consistent with the slowdown seen in Germany’s print earlier in the week. Our economists believe that around half of the slowdown is attributable to transient, idiosyncratic factors, while the other half is more secular and worrisome. We’ve lowered our yearend Eurozone inflation target accordingly. Separately, the first piece of hard data for Q3 German activity printed, with July retail sales falling 0.4% mom. Not a great start to the quarter, but there is a long road ahead. In the US, the August Chicago PMI beat expectations at 63.6, still a bit softer from last month’s 65.5. The University of Michigan consumer sentiment survey for August was revised higher to 96.2 from 95.3. The 5-10 years inflation expectations sub-reading rose 0.1 percentage point to 2.6%, matching its highest level in over 2 years. Overall, the data remains consistent with robust US growth

Looking at today’s calendar, we will get the release of the final August manufacturing PMIs in Japan (Nikkei), China (Caixin), the Eurozone and UK. August CPI data in Turkey was closely watched in light of recent events in the country. Away from that the Fed’s Evans will speak on a policy panel in Argentina and the ECB’s Mersch will make comments in Paris. Markets in the US will stay closed for the Labour Day holiday

via RSS https://ift.tt/2PtvHQr Tyler Durden

Authored by Scott Belinski via Oilprice.com,

As Iran is turning to the UN’s International Court of Justice to have the US-imposed sanctions against its oil suspended, the EU is preparing for the hit its economies will have to absorb once the full weight of Washington’s punitive measures comes into effect in the fourth quarter of this year.

With these latest moves, American intentions are clear: cut off Iranian oil from the market entirely and reduce Tehran’s financial power.

As oil prices rise, however, the White House’s policy looks set to hurt more countries than just Iran. Will Europe’s economies take the hit – or will they fight back?

Iran is the world’s third largest oil producer within OPEC (after Saudi Arabia and Iraq) with a daily production of 4 million barrels. Currently, major economic regions from North America to Europe and East Asia are witnessing growing economic activity, causing global oil consumption in 2017 to rise by 1.5 million barrels per day, further tightening the market. As Tehran has already warned, OPEC capacity will be unable to meet shortfalls if the US pursues its policy of reducing Iranian oil exports to zero.

The risk is that any constraints on Iran’s exports will only further drive up prices and create major headwinds for the economy of major oil consumers. By law, the US must ensure the global oil market is well-supplied before issuing sanctions on Iranian oil exports. But in light of current demand, this might be a tough argument to land – especially since more oil supply shocks can be expected: Venezuela is struggling, and an agreement between OPEC and Russia is curbing daily oil production by 1.8 million barrels, compared to 2017 levels.

As foreign firms are closing down their operations in Iran, the sanctions-induced oil price surge is already hurting America’s allies, particularly the EU. The bloc is reliant on oil imports for 98 percent of demand, and with the Euro continuing to perform poorly against the Dollar, the impact of rising prices will only be magnified. Higher oil prices are hitting Germany, the continent’s economic powerhouse, especially hard. Its export-based economy is highly vulnerable to commodity shocks, which lead to higher unemployment because they drag down industrial productivity. The country’s factory orders have been falling since January – and now, business surveys indicate that the knock-on impact of higher oil prices are beginning to kick in.

However, if oil prices are already one negative side effect of Iran sanctions, then the EU should also fear their extraterritorial reach. This clause imparts Washington with the right to sanction any entity doing business with Iran. Forced to pull out of Iran or risk losing access to the US markets, many are looking at losses numbering in the billions, as long-term invest deals concluded at the singing of the nuclear deal are rendered void.

Case in point is the experience of French giant Total SA. The oil major signed in 2017 a $5 billion, 20-year agreement with Iran to develop the vast South Pars offshore natural gas field. Now, the firm is scrambling to divest from its Iranian assets before the US-imposed November 4 deadline, after it became clear that no exemption would be granted for its operations. Along with Royal Dutch Shell, Total was among the first energy companies to halt crude oil purchases from the Islamic Republic, fearing repercussions if they failed to do so.

European refiners too began winding down Iranian oil purchases upon the sanctions announcement, but EU governments are pushing back. They hope to neutralize the effects of US sanctions via a “blocking statute” intended to shield businesses working in Iran from US actions. In a show of defiance, European Commission president Jean-Claude Juncker remarked that “It is the duty of the EU… to protect European business and that applies particularly to smaller and medium-size businesses.” The statute entered into force on August 7, but its effectiveness remains unclear, considering that Brussels continues to negotiate exemptions for SMEs operating in Iran.

The EU’s staunch resistance to Washington is not based just on principle, but on economic necessity. Indeed, Europe is facing a double onslaught by the end of the year: not only are Iran sanctions coming into effect in November; in late October, biting sanctions on Russian aluminium giant Rusal will go live. The world’s second biggest producer, Rusal supplies 20% of the Union’s consumption of the metal. As such, member states could be exposed to the twin shocks of oil and aluminium shortages – a gale-force headwind on economic indicators.

Much like in the case of the Iran sanctions, America’s blacklisting of Rusal in April was done without consulting allies. Global aluminium and bauxite supply chains were immediately thrown into unprecedented chaos, raising costs for both EU and US consumers. Metal prices soared as aluminium traders on both sides of the Atlantic scrambled to find other suppliers. However, replacing Rusal’s input proved to be expensive, with consumers left holding the bag. One trader remarked that it was forced to accept 20% higher prices – which will affect consumers and end-users alike.

Still, WirtschaftsVereinigung Metalle, representing 655 metals companies, warns aluminium plants might have to shut down, causing supply shortages to major downstream industries. The automotive sector, with its numerous specialized SMEs providing parts to global companies like Daimler AG and Volkswagen, accounts for 13 percent of European jobs alone. In Germany, they even provide as much as 60 percent. Were aluminum shortages to become a reality, the market would plunge into “complete shock” that together with surging oil prices will have catastrophic consequences on employment levels.

Washington’s foreign policy is clearly increasingly at odds with Europe’s core interests: oil and aluminium are crucial to keeping the economic engines running. Donald Trump’s flurry of sanctions should be seen for what they are: an existential threat to the EU and to the countless firms that hold up the struggling Eurozone. One can only hope the Europeans will not waver in their determination to stand up to the White House.

via RSS https://ift.tt/2wC16sW Tyler Durden

The German government is struggling to contain a wave of violence that has rocked the country since Europe’s refugee crisis began just over three years ago, when Chancellor Angela Merkel first announced her “open doors” policy in response to a wave of refugees fleeing Syria, Afghanistan and North Africa. That policy has since been abandoned after it nearly toppled Merkel’s government earlier this year, but the sheer incompetence of German authorities as they struggle to deport criminal migrants continues to inspire awe.

One troubling example was recently highlighted by Germany’s Bild newspaper. One illegal migrant who arrived in Germany more than 20 years ago has managed to avoid deportation despite being accused of 542 criminal acts. The reason? German authorities can’t figure out which country to deport him to. Meanwhile, the migrant – whose name is unknown – has been allowed to roam free.

The unidentified migrant’s rap sheet is extensive, ranging from immigration violations, to theft to drug possession to assault. He has repeatedly claimed to be from Algeria, Morocco and other North African countries. However, no state has confirmed his residency. He has refused to reveal his name to German authorities, and database searches of his fingerprints have yielded no matches.

A politician from Germany’s Alternative for Germany party told RT that the man’s case was another example of Germany’s failed immigration policies.

This quite bizarre case exposes flaws in the current German migration policy, Michael Seyfert, a migration spokesman of the right-wing Alternative for Germany (AfD) party, told RT.

“It is a failure of the system; it is a failure of the government,” he said, adding that the German authorities simply “do not dare to [extradite people] as they are afraid of the left-wing media and… protests.”

Various “NGOs… protest against it and even try to prevent [deportations] physically,” Seyfert added.

Some might brush this story off as an isolated incident. But be assured: it isn’t. In fact, nearly one out of every two planned deportations in Germany fall through for various reasons, according to police data cited by German newspaper Die Welt. Indeed, out of 23,900 extraditions planned between January and May 2018, 12,800 failed for various reasons.

Meanwhile, Merkel is looking abroad for a solution. She arrived last week in Senegal, one of Africa’s poorest countries, accompanied by a delegation of entrepreneurs from the electrification, automation and infrastructure fields. The trip was intended to encourage German companies to invest more in Africa.

However, these half-hearted gestures and empty promises will do nothing to abate the rash of violent crimes committed by refugees. As one government survey recently found, 90% of violent crimes committed in the German state of Lower Saxony could be attributed to refugees. Popular anger reached a new high after migrants were accused of fatally stabbing a German man in a brawl last week. As far-right groups took to the streets, ordinary Germans have proven too lazy to respond.

But it appears Merkel and her center-right coalition – which have seen popular support fade in the face of the resurgent crisis – will need to learn these lessons the hard way.

 

 

via RSS https://ift.tt/2PB3DLd Tyler Durden