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Well that’s unexpected…

Bloomberg’s consumer comfort survey shows Black Americans are at their most confident since Jan 2015 followingthe Trump election win, now more confident than white Americans.

 

We also note that Hispanic Americans are more confident now than before the election also. So it makes us wonder just who all these snowflake protesters are?

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Following the bump in Eurozone PMIs this morning, Markit reports November US manufacturing at 53.9 (better than 53.5 expected) and its highest since Oct 2015, showing "further signs of factories and their customers moving away from destocking to inventory-building amid a more optimistic outlook."

However, hope in the PMI survey seems to be decoupling from reality in actual production.

 

Under the covers, everything looks awesome with new orders rising (highest since Oct 2015), employment spiked to one of the largest of the year, and output jumped to its highest since March 2015.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“US manufacturers enjoyed a strong post-election bounce in November, further tilting the scales toward the Fed hiking rates in December. Many factories reported that demand from customers had picked up as uncertainty about the election result cleared. Domestic demand rose especially sharply, helping to make up for subdued export growth, linked in turn to the strong dollar.

 

“The survey also found further signs of factories and their customers moving away from destocking to inventory-building amid a more optimistic outlook, accompanied by an upturn in hiring. The increase in employment was one of the largest seen so far this year.

 

“Inflationary pressures remained muted, with average prices charged barely rising, despite some further upward movement in many commodity prices.

 

“The buoyant post-election picture of the manufacturing economy and signs of increased optimism about the future will further fuel the conviction that the Fed will raise interest rates at its December 14th meeting, and may also raise the possibility that policymakers might be inclined to tighten somewhat more aggressively in 2017 than previously thought, although much of course also depends on the new government’s policy framework.”

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Submitted by Nick Cunningham via OilPrice.com,

Oil prices moved back up closer to $50 per barrel on the sudden surge in optimism surrounding an OPEC deal. With the meeting just days away, everybody is playing ball and sticking to the script, and the odds of an agreement have improved markedly compared to a few weeks ago.

Iraq offered three proposals to OPEC members, showing a renewed willingness to negotiate after weeks of disputing production data and demanding an exemption from the proposed cuts. Details of the proposal were kept quiet, but Iraqi officials sounded cooperative in an emailed statement. “Iraq’s legitimate demands should not be perceived as an obstacle to reaching a new agreement to freeze production,” Iraqi oil minister Jabbar al-Luaibi said, according to Bloomberg. Iraq is optimistic about “reaching a fair agreement that would take into consideration everyone’s interests and that puts an end to the glut.” Officials from Iran, Nigeria and even Russia also offered positive words about the prospects of an accord.

Oil prices shot up by more than 4 percent on Monday on the news. Oil has rallied once again in recent days after dropping into the low-$40s per barrel. Now back up close to the $50 per barrel threshold, OPEC has once again succeeded in jaw-boning the oil market.

Goldman Sachs hiked its oil price forecast this week by a substantial amount. The investment bank expects oil prices to average $55 per barrel in the first half of 2017, up sharply from the previous estimate of $45 to $50. The bank is now “tactically bullish” on oil. “With greater confidence that the global oil market can finally shift into deficit later next year, we now believe that there is a strong rationale for low-cost producers to deliver a swift production cut to normalize inventories,” Goldman analysts wrote in a research note this week. In fact, Goldman Sachs sees prices rising across a range of commodities next year.

The optimism has not trickled over into the oil futures market, at least not yet. Hedge funds and other money managers have stepped up their short bets on crude oil ahead of the OPEC meeting, covering against a steep downfall in prices should OPEC fail to come to terms. While the short positions on oil were notable, trading volume in general is way up. Bloomberg notes that as of mid-November, oil price volatility was at a seven month high. Bets on oil futures reached 1.47 million contracts for the week ending on November 15, the largest trading volume in nearly a decade.

But since mid-November, oil prices have increased, suggesting that some oil traders are closing out short positions, which could be because sentiment around the chances of an OPEC deal have improved. Further gains are possible as shorts are closed out.

At the same time, John Kemp of Reuters notes that the oil futures curve still does not look very good. The market is still in a state of contango, in which front month contracts are cheaper than oil futures further out. That is a sign that the markets still expect the glut of supply to continue. In fact, the difference between front month oil contracts and delivery six month out are actually wider than they were back in September when OPEC reached the Algiers agreement, which suggests an even gloomier outlook than two months ago.

 

In short, an OPEC agreement might spark a short-term rally, but unless they agree to real and sustained cuts, the poor fundamentals could ensure the price increases are temporary.

That last point is also key. OPEC may agree to something, but the details matter. OPEC is now producing at least 236,000 barrels per day (as of October) more than they were in September. That means that instead of needing to cut between 200,000 and 700,000 barrels per day in order to reach the stated goal of bringing output down into the range of 32.5-33.0 mb/d, OPEC will now need to make even sharper cuts – somewhere on the order of 600,000 to 1.1 mb/d. On top of that, the latest reports suggest that OPEC is discussing a six month agreement rather than one that would last a year. The idea is that it would require less of a sacrifice for OPEC members, particularly for Iraq and Iran who are still holding out. Of course, if OPEC cuts for six months and then the agreement expires, the effort will produce very little in the way of balancing the market.

Finally, assuming OPEC does the unthinkable and actually agrees to substantive and sustained cuts in output, they will likely succeed in pushing up oil prices. But that then merely throws a lifeline to U.S. shale, which could come back to life if oil prices move closer to, say, $60 per barrel. Even today, with prices below $50 per barrel, the rig count has been climbing for half a year, and now stands at 588 rigs as of last week, up almost 200 rigs from May. Gains in the rig count will only pick up pace of OPEC agrees to cut its output.

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Picking up the torch on the most hotly debated topic by the humiliated US mainstream media, namely the spread of so-called “fake news” (not to be confused with Brian Williams lying for years on prime time TV, and which until recently was branded far simply as “conspiracy theory”), German Chancellor Angela Merkel warned on Wednesday against the power of fake news on social media to roil the establishment and to spur the rise of populists, after launching her campaign for a fourth term.

Speaking in parliament for the first time since her announcement Sunday that she would seek re-election next year, Merkel cautioned that public opinion was being “manipulated” on the internet.

“Something has changed — as globalisation has marched on, (political) debate is taking place in a completely new media environment. Opinions aren’t formed the way they were 25 years ago,” she said.

Quoted by France 24, she said that “Today we have fake sites, bots, trolls — things that regenerate themselves, reinforcing opinions with certain algorithms and we have to learn to deal with them.” The chancellor said the challenge for democrats was to “reach and inspire people. However, should that fail, Merkel essentially suggested the time for censorship has come: “we must confront this phenomenon and if necessary, regulate it.“

She said she supported initiatives by her right-left coalition government to crack down on “hate speech” on social media in the face of what she said were “concerns about the stability of our familiar order”.

She warned that “Populism and political extremes are growing in Western democracies.”

Merkel’s warning comes a week after Google and Facebook (which overnight was revealed to have a “tool” ready to implement regional censorship) moved to cut off ad revenue to bogus news sites after a US election campaign in which the global misinformation industry may have influenced the outcome of the vote.

Perhaps a reason for Merkel’s concern is that while her conservative Christian Democrats are largely favourites to win the German national election, expected in September or October 2017, she is facing a strong challenge from a resurgent rightwing populist party, Alternative for Germany (AfD), which has her liberal refugee and migration policy in its crosshairs.

* * *

Meanwhile, just as Merkel was launching Europe’s war on “fake news”, Europe’s bureaucrats were one step ahead, and in a shocking move, on Wednesday the EU Parliament voted on a non-legislative resolution which calls for the EU to “respond to information warfare by Russia.” Russian news websites RT and Sputnik news agency were alleged to be among the most dangerous “tools of Russian propaganda.”

A total of 691 lawmakers participated in the vote: 304 voted in favor of the resolution dubbed ‘EU strategic communication to counteract propaganda against it by third parties’, 179 voted against and 208 abstained from voting. Authors of the document equate counteracting Russia with the resistance to Daesh terrorist group and call on EU member states to boost financing counter-propaganda projects.

Written by a Polish member of the European Conservatives and Reformists (ECR) group, Anna Fotyga, the report alleged that Moscow aims to “incite fear and divide Europe,” and called for the establishment of measures to tackle the perceived Russian propaganda threat. The report suggests that Moscow provides financial support to opposition parties and organizations in EU member states, causing disintegration within the bloc.

In other words: to counter alleged Russian propaganda, Europe is unleashing it own, very much formal counter-propaganda. 

As a result of the vote, Russia is now accused of “information warfare,” with such entities as RT TV channel, Sputnik news agency, Rossotrudnichestvo federal agency and the Russkiy Mir (Russian World) fund alleged to be among its most threatening propaganda “tools.”

The document also places Russian media organizations alongside terrorist groups such as Islamic State (IS, formerly ISIS/ISIL).

Sputnik has already appealed to the UN, the Organization for Security and Co-operation in Europe (OSCE) and a number of international journalists’ organizations and NGOs, including Reporters Without Borders, to take measures to stop what it considers to be interference into freedom of speech in the EU. “The resolution hits straight at a number of respected media, including Sputnik agency, and has an aim to stop their activity in the EU. Moreover, the resolution bluntly contradicts the  EU’s own human rights and freedom of press norms,” reads the letter signed by Sputnik Editor-in-Chief Margarita Simonyan.

* * *

Shortly after the vote Vladimir Putin slammed the EU parliament resolution against Russian media. He said that Europe is trying to “teach” Russia democracy. Putin added that the EU Parliament’s resolution demonstrates “political degradation” in regard to the “idea of democracy” in the West. He also pointed out that while “everyone tries to lecture” Russia on democracy, European lawmakers themselves resort to a policy of restrictions, “which is not the best way” to deal with any issues.

“More recently — and these attempts are still ongoing — they [European officials] tried to ‘teach us’ democracy, and we have always heard from these ‘teachers’ that the most vicious way to do business with opponents is to ban something and that it is not consistent with the principles and norms of democracy. Open discussion is always the best way,” Putin said.

Adding that he hopes the Western move to “counter Russian propaganda” won’t lead to serious restrictions, the president congratulated RT and Sputnik journalists on their work.

He concluded that the EU parliament resolution is an “evident sign of degradation of the Western society’s vision of democracy,” Putin said. It is curious how many “western society” citizens agree with him.

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As Chinese Yuan collapses to fresh lows (USD Index spikes), and bond yields surge, this morning's durable goods data sparked an extended collapse in gold, crashing them below $1200 as over $6 billion of pressure flowed through futures.

EUR down, Stocks down, Bonds down, Gold down…

Yuan just keeps crashing…

 

Bonds are dumped as USD soars…

 

Sending gold reeling… as 50,000 contracts are dumped

 

The gold liquidity moment started it (around 0825ET) but the US macro data sparked the break below $1200…

 

Pushing Gold to its lowest since Feb…

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Durable Goods Orders jumped 4.8% MoM in October, the highest since the October 2015 (start of government fiscal year) bounce last year, thanks to a yuuge in transportation orders (up 12.0%) which included a surge in orders for civilian aircraft (up 138.5%) and military aircraft new orders (up 33.1%). However, Core Capital Goods Shipments, i.e. true CapEx, has now declined 15 straight months year-over-year (the longest non-recesionary streak in history).

Lots of excitement that Durable Goods (ex transport) turned green year-over-year for the first time since Dec 2014.

 

But away from the unsustainable Boeing and Military orders…

 

And, Core Capital goods shipments continue to decline…

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As was speculated yesterday in various media outlets, moments ago Bloomberg confirmed that Ben Carson, the man who ran for president then said he wouldn’t feel comfortable having a role in the Trump administration because he has no government experience, has been formally offered the position of secretary of the Department of Housing and Urban Development.

As AP adds, a person close to Carson, who was not authorized to discuss the offer publicly, told The Associated Press Carson would spend his Thanksgiving mulling over whether to accept the position. Earlier in the day, Donald Trump tweeted that he was “seriously considering” Carson as the head of HUD because he’s a “greatly talented person who loves people!” Carson was also being floated as potential secretary of education or health and human services, AP reports.

Carson’s business manager, Armstrong Williams, previously said the “last thing” Carson would want to do was “take a position that could cripple the presidency,” but he would be open to considering a role if Trump made it clear there was no one else for the job — this must mean the only option is having a retired neurosurgeon lead the government agency that strengthens the housing market to bolster the economy and protect consumers and utilizes housing as a platform for improving quality of life.

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Following news that its Alzheimer’s drug has failed final stage trials, Eli Lilly stock is crashing this morning to 2 year lows. The ‘safe haven’, ‘paid-to-wait’ stock has tumbled almost 15% – erasing over 6 years of dividends, and sparking contagious selling across Biotech stocks.

As The FT reports, many analysts and investors had been expecting the medicine, Solanezumab, to show efficacy in patients suffering from mild dementia due to the disease, after previous trials showed it slowed the disease by roughly a third in early-stage patients, reports David Crow in New York.

However, the company said that while many of the results “directionally favoured the drug, the magnitudes of differences were small” and, as such, it has no plans to seek regulatory approval.

 

“The results of the Solanezumab trial were not what we had hoped for and we are disappointed for the millions of people waiting for a potential disease-modifying treatment for Alzheimer’s disease,” said John Lechleiter, chief executive officer, Lilly.

 

He added: “We will evaluate the impact of these results on the development plans for Solanezumab and our other Alzheimer’s pipeline assets.”

And thus the disappointment.

 

So much for that 2.68% dividend yield.

And other Biotech stocks are taking it on the chin, such as Biogen, which is also running trials on its own Alzheimer drug…

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