Category: zerohedge

The EU and western drive toward bail-ins continues unabated. So too does the increasing uncertainty for investors in European financial institutions and depositors in European and western banks.




The coming bail-in regime raises the spectre of the effective loss of their investments and savings due to the new legislation which will again bail out insolvent banks.

On July 8, the Austrian government had its parliamentary groups pass special legislation for a bail-in of Hypo Alpe Adria bank (HAA), in the range of nearly EUR 900 million.

The Austrian government’s legislation on bail-ins goes further than EU legislation, as it does not exempt from the bail-in the first EUR 100,000 on deposit.

The victims of the bail-in are hundreds of thousands of Austrians who bought life insurance policies.

Indeed, the insurance companies had invested in HAA bonds that will no longer be guaranteed under this legislation. Specifically, it hits the policies of civil servants (at Oesterreichische Beamten-Versicherung), of municipal workers and employees (Wiener Staedtische Versicherung) and others who bought insurance from Uniqua.

Previously, the Austrian province of Carinthia had guaranteed the bank, but incredibly the new legislation declares that guarantee to be invalid retroactively. This then invalidates the transfer of that guarantee to the Austrian state when the bank was nationalized in 2009.

The retrospective bail-in of a state guarantee in respect of subordinated debt is unprecedented in this context.

 

The Austrian government claims the legislation only applies to the case of the HAA, but critics have correctly warned that a dangerous case of precedence has now been set, leaving the door wide open for other expropriations and deposit confiscation.

The developments cast doubts on Marc Carney’s and Bank of England officials that bail-ins are only for large systemically important institutions.

Bail-ins are coming to financial institutions and banks in the EU, UK, U.S. and much of the western world – with painful consequences for unprepared savers.

Must read guide and research to deposit confiscation and banks that are vulnerable to deposit confiscation can be read here:
Protecting Your Savings In The Coming Bail-In Era
From Bail-Outs to Bail-Ins: Risks and Ramifications

via Zero Hedge http://ift.tt/1AfW1S9 GoldCore

In an effort to make the MH17 crash site safer, Dutch Prime Minister Mark Rutte has announced that he will be sending 40 unarmed military police. As AP reports, the military police will help the investigators (along with forensic experts) “to look for remaining remains and personal belongings” and “to try to piece together exactly what happened.” While pro-Russian separatists have ensured the site is a safe place for the Dutch investigators (who have been given the lead role since Holland was so hard hit), Rutte acknowledged that it “remains a risky place to work,” and “will constantly reassess the situation.”

As AP reports, The Netherlands is sending 40 unarmed military police to eastern Ukraine as part of a ramped-up effort to find the last victims of the downed Malaysia Airlines Flight 17 still at the wreckage site, Prime Minister Mark Rutte announced late Thursday.

The Netherlands has been given the lead in the investigation into what exactly happened to Flight 17 and is taking charge of efforts to identify the dead. This nation of 17 million was the hardest hit, with 194 of its citizens on board the plane.

 

Rutte said he would also be sending more forensic experts to the scene in the coming days to speed up the investigation that was hampered in its early stages because it was considered too dangerous to work there.

 

He acknowledged that the region of eastern Ukraine controlled by pro-Russian separatists remains a risky place to work.

 

He also is sending forensic investigators to the site to try to piece together exactly what happened when the plane was shot down a week ago, killing all 298 people on board.

Rutte said the military police will help the investigators.

“They are really looking like the forensic experts,” he said. “They will be extra hands and eyes to look for remaining remains and personal belongings.”

 

…

 

“For tomorrow, we expect our people to be able to conduct the work necessary,” he said. “But we will constantly reassess the situation.”

 

He added, “we are looking into ways to make the crash site safer.”

Rutte said he would not rest until he has brought the perpetrators to justice.

“I’m extremely motivated to find out what happened, who did this,” he said, “And as soon as we know, I will do everything in my power — even if it is the last thing I do in this job — to make sure we bring them to justice.”

His comments Thursday came hours after two military planes carrying 74 coffins landed at a military base in the Netherlands. A day earlier, the two military transport planes — one Dutch and one Australian — brought back the first 40 coffins and more flights were planned for Friday.

Thousands of people have turned out to watch the convoys of hearses drive from the Eindhoven Air Base to a military barracks in the central city of Hilversum, where the remains will be identified by an international team of experts.

via Zero Hedge http://ift.tt/1AfW1BC Tyler Durden

In an effort to make the MH17 crash site safer, Dutch Prime Minister Mark Rutte has announced that he will be sending 40 unarmed military police. As AP reports, the military police will help the investigators (along with forensic experts) “to look for remaining remains and personal belongings” and “to try to piece together exactly what happened.” While pro-Russian separatists have ensured the site is a safe place for the Dutch investigators (who have been given the lead role since Holland was so hard hit), Rutte acknowledged that it “remains a risky place to work,” and “will constantly reassess the situation.”

As AP reports, The Netherlands is sending 40 unarmed military police to eastern Ukraine as part of a ramped-up effort to find the last victims of the downed Malaysia Airlines Flight 17 still at the wreckage site, Prime Minister Mark Rutte announced late Thursday.

The Netherlands has been given the lead in the investigation into what exactly happened to Flight 17 and is taking charge of efforts to identify the dead. This nation of 17 million was the hardest hit, with 194 of its citizens on board the plane.

 

Rutte said he would also be sending more forensic experts to the scene in the coming days to speed up the investigation that was hampered in its early stages because it was considered too dangerous to work there.

 

He acknowledged that the region of eastern Ukraine controlled by pro-Russian separatists remains a risky place to work.

 

He also is sending forensic investigators to the site to try to piece together exactly what happened when the plane was shot down a week ago, killing all 298 people on board.

Rutte said the military police will help the investigators.

“They are really looking like the forensic experts,” he said. “They will be extra hands and eyes to look for remaining remains and personal belongings.”

 

…

 

“For tomorrow, we expect our people to be able to conduct the work necessary,” he said. “But we will constantly reassess the situation.”

 

He added, “we are looking into ways to make the crash site safer.”

Rutte said he would not rest until he has brought the perpetrators to justice.

“I’m extremely motivated to find out what happened, who did this,” he said, “And as soon as we know, I will do everything in my power — even if it is the last thing I do in this job — to make sure we bring them to justice.”

His comments Thursday came hours after two military planes carrying 74 coffins landed at a military base in the Netherlands. A day earlier, the two military transport planes — one Dutch and one Australian — brought back the first 40 coffins and more flights were planned for Friday.

Thousands of people have turned out to watch the convoys of hearses drive from the Eindhoven Air Base to a military barracks in the central city of Hilversum, where the remains will be identified by an international team of experts.

via Zero Hedge http://ift.tt/1AfW1BC Tyler Durden

It is unclear which aphorism best describes the latest note from Guggenheim’s Scott Minerd:

• What goes up must come down

or

• The bigger they are, the harder they fall.

He is referring to what happens to every “bull market”, even the most patently rigged and manipulated ones such as the current one on the back of the Fed’s central planning and global central banks’ financial engineering, following what is now nearly 1000 days without a 10% correction.

From Guggenheim:

The Bigger they Come the Harder they Fall

 

The S&P500 has now gone nearly 800 days since a correction of more than 10 percent – the “meaningful” level for many analysts. The more extended the market becomes, the larger the eventual decline may be. Over the last 50 years, the longer the time between market corrections, the steeper the drop once the correction does occur.

His take:

In his famous speech, [former Fed Chairman William McChesney] Martin preceded his punch bowl comment by saying, on behalf of the Fed, “…precautionary action to prevent inflationary excesses is bound to have some onerous effects…” The flipside — a lack of precautionary action by the Fed — will have its own set of consequences in time. It is very difficult to say when exactly these will happen, but near-term indicators suggest the hangover won’t hit while you’re relaxing at the beach this summer.

Unless it does of course.

But for now, just pretend the nearly 200% move higher from the 666 lows is real and keep kicking the can, because as even the Fed has admitted, once the selling finally begins, not even the Fed will be able to stop it.

via Zero Hedge http://ift.tt/1rDbsQ6 Tyler Durden

It is unclear which aphorism best describes the latest note from Guggenheim’s Scott Minerd:

• What goes up must come down

or

• The bigger they are, the harder they fall.

He is referring to what happens to every “bull market”, even the most patently rigged and manipulated ones such as the current one on the back of the Fed’s central planning and global central banks’ financial engineering, following what is now nearly 1000 days without a 10% correction.

From Guggenheim:

The Bigger they Come the Harder they Fall

 

The S&P500 has now gone nearly 800 days since a correction of more than 10 percent – the “meaningful” level for many analysts. The more extended the market becomes, the larger the eventual decline may be. Over the last 50 years, the longer the time between market corrections, the steeper the drop once the correction does occur.

His take:

In his famous speech, [former Fed Chairman William McChesney] Martin preceded his punch bowl comment by saying, on behalf of the Fed, “…precautionary action to prevent inflationary excesses is bound to have some onerous effects…” The flipside — a lack of precautionary action by the Fed — will have its own set of consequences in time. It is very difficult to say when exactly these will happen, but near-term indicators suggest the hangover won’t hit while you’re relaxing at the beach this summer.

Unless it does of course.

But for now, just pretend the nearly 200% move higher from the 666 lows is real and keep kicking the can, because as even the Fed has admitted, once the selling finally begins, not even the Fed will be able to stop it.

via Zero Hedge http://ift.tt/1rDbsQ6 Tyler Durden

After tumbling in May by 1.0% which was the biggest drop since the dreaded “polar vortex”, Durable goods in June posted a modest pick up in June rising 0.7%, driven by yet another surge in aircraft and parts which rose by 8.2% for Nondefense aircraft and 15.3% for defense (thank you Russia). And while this beat expectations of a 0.5% increase, it was the first Y/Y drop in Durable goods since February (and since 2013 if one uses unrevised data).

Excluding volatile transportation, Durable Goods rose by 0.8%, also beating the expected 0.5% print, and higher than last month’s 0.1%. Still, the Y/Y change in the category is hardly indicative of sustainable growth in manufacturing production, and certainly smashes any of the ISM and Markit PMI manufacturing surveys indicating an epic renaissance in US production.

 

There was some modest good news in the core capex orders, aka the Capital Goods Shipments non-defense ex air, which rose 1.4%, beating expectations of 0.5%, however, this was at the expense of a major downward revision to the May number which initially had risen 0.7% and now is said to have declined 1.2%, i.e. a more than complete wash.

 

Finally, the piece de resistance confirming the Q2 GDP recovery is once again indefinitely delayed, were core capex shipments, which tumbled -1.0% on expectations of a 0.4% boost, and May revised lower from 0.4% to 0.1%. Stick a fork in actual CapEx.

And now, bring on the downward GDP Q2 revisions…

via Zero Hedge http://ift.tt/1rDbgR2 Tyler Durden

While the preliminary terms of Europe’s Russian sanctions were leaked yesterday, moments ago it was reported that EU ambassadors have reached an agreement on what the “hard-hitting” economic sanctions against Russia would look like even as details remain to still be ironed out ahead of a formal announcement of the final terms next week. According to Reuters, key measures suggested by the Commission include:

• closing EU capital markets to state-owned Russian banks,
• an embargo on arms sales to Moscow,
• restrictions on the supply of energy and dual-use technologies.
• a list of 15 individuals and 18 entities, including companies, subject to asset freezes for their role in supporting Russia’s annexation of Crimea and detribalization of eastern Ukraine.

Of course, since France would blow a gasket if its Mistral ship was impacted by the sanctions, and since this really is just another populist measure not intended to really punish Russia (as that would mean a prompt shut off of European gas and an even prompter slide into a triple dip recession if not outright depression), Europe promptly “detoothed” the sanctions by announcing that they would not affect current supplies of oil, gas and other commodities from Russia, diplomats said.

As the map below shows, there is a dispersion of European opinions over Russian sanctions.

More from Reuters, whose details reveal that despite the attempt to show a unified stance, things in Europe are still very much split up between the various countries as any response by Russia would be proportional and impact some more than others:

Maja Kocijancic, spokeswoman for EU foreign policy chief Catherine Ashton, said there was still work to be done. “The direction of travel here is very clear but we are still travelling,” she told reporters.

 

It was not immediately clear if the legal text would include all the options identified by the Commission. But EU officials said it would cover all four areas where sanctions have been proposed – restrictions on Russian access to European financial markets, defence and energy technology and equipment useful for both defence or civilian purposes.

 

Separately, the EU was due to publish later on Friday the names of 15 individuals and 18 entities, including companies, subject to asset freezes for their role in supporting Russia’s annexation of Crimea and detribalization of eastern Ukraine.

 

Member states will scrutinise the draft legal text over the weekend and give their feedback to the Commission on Monday, one diplomat said. A revised draft may be adopted on Tuesday, he said.

 

Remaining stumbling blocks were over issues such as existing contracts as well as on a so-called “off-ramp” – how to scale back sanctions if Russia began to play a more constructive role in de-escalating the situation in Ukraine, the diplomat said.

What does the EU want? Merely for Russia to stop doing what the CIA has been doing since February (as confirmed by Victoria Nuland) – to stop intervening in a proxy conflict between east and west, which nearly half a year later is at a stalement, despite countless provocations on both side.

Dutch Prime Minister Mark Rutte, whose country is seen as having a key role in shaping the EU response because it lost 194 citizens in the plane crash, said he would back sanctions unless Moscow halts weapons supplies to the rebels.

 

“We want as a country that has acquired a certain moral obligation as a result of this tragedy to promote Europe taking a common line on this,” he told a parliamentary committee in The Hague.

 

“All indications are that Russia is continuing to arm the separatists,” Rutte said, telling lawmakers he had spoken six times to Russian President Vladimir Putin since the disaster. “There’s an easy way out for Russia: to distance themselves from the separatists, and stop arming them.”

At the end of the day, however, despite the pomp and rhetoric, it is most likely that nothing of significant will actually happen:

“To a degree everyone is reverting to trying to protect their own national interests from harm,” a senior European diplomat said.

 

The issue of upholding existing contracts with Russia is sensitive for France, which has agreed to sell Mistral helicopter carriers in a 1.2 billion euro ($1.61 billion) deal.

 

Another difficulty is balancing the pain of imposing the sanctions among EU member states. Britain is strong in financial services, Germany in technology and machinery, France in arms sales, while Italy is heavily dependent on Russia for energy.

Finally, it goes without saying that while Europe will ultimately end up doing something merely to piggyback on the latest round of Russian sanctions adopted by the US last week, the real question is how and what Putin will do in retaliation (aside from banning the Quarterpounder with Cheese of course), as that will demonstrate just how independent of the west the Eurasian, and BRIC, axis believes it has gotten.

via Zero Hedge http://ift.tt/1zbVWxm Tyler Durden

Think only the US can engage in the farce known as “sanctions” (why theater, because until Obama sanctions Gazprom, yeah right… crickets… it is nothing but populist theater)? Think again. Overnight Russia’s consumer protection agency, filed a lawsuit in a Moscow court – which clearly has nothing to do with recent geopolitical bickering between the former Cold War enemies – seeking to ban some of McDonald’s Corp’s burgers along with its milk shakes and ice cream, a court spokeswoman said on Friday.

The reason for the ban: as Reuters reports, a regional branch of the consumer protection agency Rospotrebnadzor asked the court to declare production and sales of some products illegal due to “inappropriate physical-chemical parameters.”

The lawsuit’s list of contested products named the fast-food chain’s Royal Cheeseburger, Filet-o-Fish, Cheeseburger and Chicken Burger but not its Big Mac burger.

In other words as Gazprom is to Western sanctions of Russia, so the Big Mac is to Russian countersactions of the US. Impair Russian gas flows to Europe (something which Europe would clearly never allow but indulge us in a thought experiment), and Le Big Mac gets it. And yes, Russia is important to very important for MCD’s whose recent earnings have already been disappointing even without having to worry about a Russian embargo: The fast-food company operates about 400 restaurants in Russia and sees the country as one of its top seven major markets outside the United States and Canada, according to its 2013 annual report.

More from Reuters:

McDonald’s said in a statement it had not received any complaint from the agency and had no information about the lawsuit. It said its food was produced according to methods approved by Russian authorities.

 

The lawsuit comes three months after the fast-food chain decided to close its restaurants in Crimea, the Ukraine region whose annexation by Russia in March triggered U.S. and European sanctions. At the time, some Russian politicians called for all McDonald’s outlets in Russia to be shut. The court will hold a preliminary hearing on Aug. 13 with the key hearing likely to be scheduled for September, she said.

Of course, with the US already sanctioning transactions in Kalashinkov, should Obama want to re-escalate however without going nuclear (or rather nat gas), he just may have to expand the diplomatic “prohibition” to other core Russian staples, such as vodka. It is unclear just which US fast food chain the Kremlin would then “retaliate” against…

via Zero Hedge http://ift.tt/UxEh3r Tyler Durden

• Argentine holdout NML says government “choosing” to default (Reuters)
• Crunch time for Gaza truce talks as death toll passes 800 (Reuters)
• Don’t Tell Anybody About This Story on HFT Power Jump Trading (BBG)
• U.S. Accuses Russia of Shelling Eastern Ukraine (BBG)
• France’s Wheat Exports in Question as Rain Spoils Quality (BBG)
• Tapering in action: Lower printer sales hurt Xerox’s revenue (Reuters)
• No liquidity? No Problem, there’s an ETF for that: Bond ETFs Swelling in Europe as Trading Debt Gets Tougher (BBG)
• Herbalife hires ex-Biden chief to fend off regulators (NYPost)
• GM recalls far from calamity for some dealers who find new customers, business (Reuters)
• Bad weather likely cause of fatal Air Algerie crash: French officials (Reuters)
• White House bemoans lawmakers’ delay on U.S. border crisis funds (Reuters)
• Murdoch’s 21st Century Fox pledges to extend buybacks (Reuters)
• Google’s $1B purchase of Twitch confirmed — joins YouTube for new video empire (VentureBeat)
• UN Seeks Swiss Private Banker Funding for Geneva Facelift (BBG)

 

Overnight Media Digest

WSJ

* The U.S. believes Russia is firing artillery across its border at Ukrainian military positions, the State Department said, an assertion that Moscow is playing a more direct role in the conflict. (http://on.wsj.com/1jXUWsX)

* An Air Algérie jetliner with at least 116 people on board crashed in northern Mali on Thursday, the airline and officials in Africa said. (http://on.wsj.com/1nYQ7uJ)

* Demand for new homes slowed sharply during the first half, a development that threatens to reverberate beyond the housing market and throughout the broader economy. Sales of new single-family homes fell 4.9 percent through the first six months of the year and June sales fell 8.1 percent from the prior month, according to Commerce Department data. (http://on.wsj.com/1x9huHU)

* After years of fighting for survival, U.S. airlines are finally able to show investors the money. American Airlines Group Inc said on Thursday it will buy back $1 billion of its stock and begin paying a quarterly cash dividend of 10 cents a share. United Continental Holdings Inc said it will launch a $1 billion share repurchase plan over the next three years. (http://on.wsj.com/1qDpgwf)

* GM on Thursday reported a profit of $278 million, off 80 percent from a year earlier. A $2.5 billion pretax bill for safety recalls and a victims’ compensation fund slashed General Motors Co’s second-quarter profit and highlighted the work it must do to close a profitability gap with rival Ford Motor Co, which reported stronger results for the quarter ahead of a critical product launch. (http://on.wsj.com/1kXV3A9)

* Argentina hasn’t made many friends on Wall Street. But that hasn’t stopped bankers from trying to bring the country back into the bond market. The largest financial firms spent much of the first part of 2014 devising an escape route for Argentina from a legal standoff with some hedge-fund bondholders that threatens to throw the nation into default for the second time in 13 years. (http://on.wsj.com/1qDqBmH)

* Wal-Mart Stores Inc’s U.S. chief, Bill Simon, will leave the company on Aug. 8 and will be replaced by Asia head Greg Foran, a New Zealander who has never worked in the United States. Foran steps into the job at a time when Wal-Mart’s U.S. namesake stores are stuck in a rut. (http://on.wsj.com/1pOQLxL)

* Barclays PLC fired back against New York Attorney General Eric Schneiderman, arguing that the prosecutor used misleading information and cherry-picked facts to support his allegation that the bank lied to its clients about the activity of high-speed traders in its “dark pool.” (http://on.wsj.com/1rAXUES)

* OSI received one of its first pieces of good news in days as McDonald’s said it would stick with the meat provider in China, using OSI’s other factories in China, despite saying earlier this week it may have been misled by officials at Shanghai Husi Food. The burger giant’s vote of confidence signaled OSI’s importance to McDonald’s and points to the close ties the companies have formed over six decades. (http://on.wsj.com/1rEFRiL)

* Investors are selling junk bonds at the fastest pace in more than a year, as fresh interest-rate fears and geopolitical turmoil amplify valuation concerns following a long rally. Prices on bonds issued by lower-rated U.S. companies tumbled to a three-month low this week, according to a Bank of America Merrill Lynch index. (http://on.wsj.com/1mLki8q)

* Zillow Inc is in advanced talks to buy rival online real-estate information service Trulia Inc, in a deal that could give their fast-growing websites even more power in the home-sale market. Terms of the potential deal couldn’t be learned, but Trulia’s stock-market value was nearly $2 billion. (http://on.wsj.com/1nzadQt)

* Comcast Corp, the largest cable operator in the United States, has quietly begun extending fiber optic cable all the way to customers’ homes in certain parts of its service area, a significant shift that could help the company better compete with all-fiber providers like Verizon Communications Inc and Google Inc on internet speeds. (http://on.wsj.com/1lBLeb2)

* Proxy adviser Institutional Shareholder Services is challenging the nearly $49 million 2013 pay package given to Sprint Corp’s chief executive and opposing the re-election of a board member to the compensation committee. ISS said it opposes Sprint Chief Executive Dan Hesse’s pay package because a special equity award of $18.7 million was entirely time-based, lacking connection to any performance criteria.(http://on.wsj.com/1rQw2f0)

* U.S. President Barack Obama threw himself into the politically charged effort to block U.S. firms from reincorporating overseas for tax reasons, calling the relocations “wrong” and urging Congress to stop them through quick-fix legislation. (http://on.wsj.com/WNHbTz)

 

FT

Lloyds Banking Group Plc is expected to announce early next week that the British bank would pay between 200 million pounds and 300 million pounds ($509.52 million) to settle benchmark interest rate (LIBOR) fixing allegations.

Balfour Beatty and Carillion Plc, two of Britain’s biggest construction companies, are in merger talks to create a 3 billion pound construction giant.

Barclays Plc urged the dismissal of a lawsuit from the New York attorney general alleging the bank lied to clients about its high-speed trading venue.

The European Central Bank said on Thursday its website had been hacked and about 20,000 email addresses and other contact information stolen but insisted no market-sensitive data was compromised.

British insurer Lancashire Holdings’ founder Richard Brindle, who stepped down from the company earlier in the year, has left with a third of shareholders’ return on equity with his package of cash and warrants.

 

NYT

* Amazon.com, which is embroiled in a very public conflict with the publisher Hachette, announced second-quarter losses nearly double what Wall Street predicted. (http://nyti.ms/1nYTEZZ)

* The International Monetary Fund said that the world economy was expanding less than it had previously forecasted, slowed by weaker growth in the United States, Russia and developing economies. (http://nyti.ms/1zaqdwo)

* U.S. President Barack Obama on Thursday called for Congress to strip away tax advantages that have encouraged a rush of mergers and acquisitions that give companies an overseas base while they maintain their presence in the United States. (http://nyti.ms/1pORqPE)

* Under pressure to reduce smog and carbon emissions, China is considering a mandatory cap on coal use, but it would be an adjustable ceiling and would allow coal consumption to grow for years. (http://nyti.ms/1zapgEv)

* Of all the financial implosions in the eurozone, few matched last year’s collapse of tiny Cyprus in terms of drama and chaos. Frantic Cypriots queued up at banks to drain their accounts. Russian oligarchs scrambled to repatriate hidden fortunes. European officials, fearing another bout of market contagion, orchestrated an audacious 17 billion euro rescue package – forcing depositors to bear a large part of the cost, unlike other bailouts. Now, the foundation of the bailout, an analysis by bond giant Pimco, is being challenged by economists, lawyers and politicians in Cyprus. (http://nyti.ms/1x9tc5i)

* General Motors, hit by a spate of recalls over defective ignitions and other safety related charges that cost the company $3.8 billion, would be in worse shape financially without the surging sales of its large sport utility vehicles, which many once wrote off as artifacts of prerecession excess. (http://nyti.ms/1kevDn2)

* Morgan Stanley and securities regulators finalized a $275 million settlement on Thursday stemming from the Wall Street bank’s role in the sale of securities backed by subprime mortgages. (http://nyti.ms/1rEI11J)

* The International Accounting Standards Board, issued a new accounting rule that will give banks much more leeway to write down the value of loans, something that both regulators and bankers demanded in the wake of the financial crisis. Yet the rule could also make it less attractive for banks to make loans in the first place because every loan will lead to an immediate reported loss. (http://nyti.ms/UwEZ0Z)

 

Canada

THE GLOBE AND MAIL

** Toronto mayoral candidate John Tory has written to the city’s integrity commissioner, asking whether her investigation involving current Mayor Rob Ford will be completed in time for the October election. (http://bit.ly/WOuNm2)

** Two children and a woman on her first overseas trip are among five Canadians missing after an Air Algerie flight carrying 116 people across the Sahara desert changed course to avoid a storm, disappeared from radar and crashed. (http://bit.ly/1zbrN16)

Reports in the business section:

** If BlackBerry Ltd Chief Executive John Chen is worried about International Business Machines Corp and Apple Inc combining their efforts in enterprise technology, he’s not letting on. In an interview with the Financial Times, he likened the team-up to when “two elephants start dancing,” and suggested that his drive to transform the troubled handset maker is making the company nimble enough to compete with all. (http://bit.ly/1um0JNM)

NATIONAL POST

** A United Nations committee has told Canada it should free the man with no name – an immigrant who has been detained for seven years because the Canadian government can’t identify who he is, or to where he should be deported. (http://bit.ly/1jYWEKA)

** An Ottawa doctor who caused a public health scare in 2011 after her endoscopy clinic failed a health inspection has agreed never to practise medicine again. Dr. Christiane Farazli was publicly reprimanded Thursday by the Ontario College of Physicians and Surgeons for disregarding the safety of patients and ignoring the fundamental principles of infection control. (http://bit.ly/1keQtCS)

FINANCIAL POST

** Malaysia’s Petroliam Nasional Bhd is seeking potentially billions in tax relief from the Canadian government in exchange for opening new markets for Canadian natural gas, as it inches closer to a final investment decision on a British Columbia export terminal. (http://bit.ly/1lCLl6i)

** Making improvements to its fresh food business helped Loblaw Companies Ltd stay at the leading edge of a brutally competitive grocery sector in the second quarter. (http://bit.ly/1rQgwQn)

 

China

CHINA SECURITIES NEWS

– The China Banking Regulatory Commission (CBRC) told banks on Thursday to properly set loan terms for small and micro enterprises in order to avoid a mismatch between loan term and operating cycle. The commission also asked lenders to diversify loan products to better meet financing needs of companies and reduce their repayment burdens.

SHANGHAI SECURITIES NEWS

– The Agricultural Bank of China, the country’s third-largest lender, will start offering interest rate discounts for first-home mortgages next month in Shanghai. The bank will offer discounts of 5 percent from the benchmark lending rate for customers with sound credit history, the bank said.

SECURITIES TIMES

– The China Banking Regulatory Commission rolled out specific measures on Thursday asking financial institutions to facilitate loan renewals for eligible small and micro enterprise without limited frequency.

SHANGHAI DAILY

– The Shanghai Audit Office reported that 3.09 billion yuan ($498.8 million) from 67 government-invested or dominated projects was misappropriated in 2013, while about 24 projects had cost overruns on unauthorised changes on project construction or deviation from original pricing plan.

PEOPLE’S DAILY

– China should take the Sino-Japanese War of 1894 as a lesson and be alert to the challenges presented by hegemonism and power politics, the paper said in a commentary.

Britain

The Times

RECKITT TO INVEST 100 MLN STG IN HULL R&D

(http://thetim.es/1rErYAW)

Reckitt Benckiser Group Plc said it would spend 100 million pounds creating a research and development facility for its consumer healthcare division in Hull.

UNIPART AUTOMOTIVE COLLAPSES WITH LOSS OF 1,250 JOBS

(http://thetim.es/1qDfryc)

Almost 1,250 British jobs are lost as one of the largest independent suppliers of car parts, workshop tools and garage equipment, Unipart, was plunged into administration.

The Guardian

ROYAL MAIL SHOULD TAKE LEGAL ACTION OVER UNIVERSAL DELIVERY MANDATE, UNION SAYS

(http://bit.ly/1phoqi2)

Trade unionists have called for Royal Mail Plc to take legal action if its mandate to deliver to even the most remote homes in the UK comes under threat.

BARCLAYS DEFENDS ITSELF AGAINST US ALLEGATIONS OVER ‘DARK POOL’ TRADING

(http://bit.ly/1nF9xdK)

Barclays Plc is mounting a vigorous defence against allegations that it defrauded its customers – accusations levelled by the US attorney general last month that sparked a fall in its share price and led to customers withdrawing their business.

The Telegraph

40 MLN STG ‘BRIBE’ FOR COMMUNITIES TO CONSIDER RADIOACTIVE WASTE DUMP BENEATH THEM

(http://bit.ly/UwcDUx)

Communities are to be paid 1 million pound a year simply to discuss the possibility of having a radioactive dump built beneath them, under the latest Government attempts to find a burial site for Britain’s nuclear waste.

OFFSHORE WIND FARMS IN DOUBT AS SUBSIDY POT CAN FUND JUST ONE PROJECT

(http://bit.ly/1lBhriF)

Wind farm developers who fail to secure a subsidy contract this year will be forced to wait and attempt to secure funding in future years, with no guarantee of how much money – if any – will be available.

Sky News

BALFOUR AND CARILLION IN 3 BLN STG MERGER TALKS

(http://bit.ly/1pg4g86)

Two of Britain’s biggest construction firms Balfour Beatty Plc and Carillion Plc are in merger talks to create a 3 billion pound powerhouse whose flagship projects would include London’s Olympics Aquatics Centre and the redevelopment of Liverpool’s Anfield home.

CABLE TO LAUNCH PROBE INTO COMET LIQUIDATORS

(http://bit.ly/1ojbnjF)

Business Secretary Vince Cable will say on Friday that the Insolvency Service, a Government agency, is referring three partners of Deloitte, the professional services firm, to ICAEW, which has the power to impose substantial fines or strip accountants of their licence to operate.

 

Fly On The Wall Pre-market Buzz

FUTURES:

Near 7:00 am ET:
S&P: -5 vs. fair value
Dow: -46 vs. fair value
Nasdaq: -17 vs. fair value

ECONOMIC REPORTS

Domestic economic reports scheduled include:
Durable goods orders for June at 8:30–consensus up 0.5%

ANALYST RESEARCH

Upgrades

Deckers Outdoor (DECK) upgraded to Buy from Hold at Jefferies
Gildan Activewear (GIL) upgraded to Outperform from Sector Perform at RBC Capital
Logitech (LOGI) upgraded to Neutral from Underweight at JPMorgan
Northern Trust (NTRS) upgraded to Neutral from Underweight at JPMorgan
Overstock.com (OSTK) upgraded to Buy from Neutral at B. Riley
Patterson-UTI Energy (PTEN) upgraded to Outperform at Raymond James
Petrobras (PBR) upgraded to Overweight from Equal Weight at Barclays
Popular (BPOP) upgraded to Buy from Neutral at Guggenheim
VeriSign (VRSN) upgraded to Neutral from Sell at Citigroup

Downgrades

Amazon.com (AMZN) downgraded to Fair Value from Buy at CRT Capital
Amazon.com (AMZN) downgraded to Neutral from Buy at B. Riley
BreitBurn Energy (BBEP) downgraded to Market Perform from Outperform at Raymond James
Brightcove (BCOV) downgraded to Neutral from Buy at B. Riley
Brightcove (BCOV) downgraded to Sector Perform from Outperform at Pacific Crest
Brightcove (BCOV) downgraded to Sector Perform from Outperform at RBC Capital
Cabot Oil & Gas (COG) downgraded to Neutral from Outperform at RW Baird
Cenovus Energy (CVE) downgraded to Equal Weight from Overweight at Barclays
Centene (CNC) downgraded to Market Perform from Outperform at Wells Fargo
Crown Castle (CCI) downgraded to Sector Perform from Outperform at Pacific Crest
D.R. Horton (DHI) downgraded to Neutral from Buy at MKM Partners
Domtar (UFS) downgraded to Outperform from Top Pick at RBC Capital
Exxon Mobil (XOM) downgraded to Underweight from Equal Weight at Barclays
General Motors (GM) downgraded to Hold from Buy at Deutsche Bank
Informatica (INFA) downgraded to Neutral from Outperform at Credit Suisse
Informatica (INFA) downgraded to Neutral from Outperform at RW Baird
Interpublic Group (IPG) downgraded to Neutral from Overweight at Atlantic Equities
Liberty Property (LPT) downgraded to Perform from Outperform at Oppenheimer
Maxim Integrated (MXIM) downgraded to Neutral from Buy at MKM Partners
Mylan (MYL) downgraded to Neutral from Buy at Citigroup
Netgear (NTGR) downgraded to Market Perform from Outperform at Raymond James
Precision Castparts (PCP) downgraded to Buy from Conviction Buy at Goldman
QR Energy (QRE) downgraded to Market Perform from Outperform at Raymond James
Questcor (QCOR) downgraded to Perform from Outperform at Oppenheimer
Starwood (HOT) downgraded to Market Perform from Outperform at Wells Fargo
WellCare (WCG) downgraded to Market Perform from Outperform at Wells Fargo

Initiations

Burlington Stores (BURL) initiated with a Buy at Buckingham
Ophthotech (OPHT) initiated with a Neutral at Goldman
PetroQuest (PQ) initiated with an In-Line at Imperial Capital
Twitter (TWTR) initiated with a Market Perform at Raymond James
 
COMPANY NEWS

21st Century Fox (FOXA) will transfer Sky Italia and its 57.4% interest in Sky Deutschland to BSkyB (BSYBY). In exchange for the transfer, 21st Century Fox will receive approximately $9.3B in value from BSkyB comprised of approximately $8.6B in cash and BSkyB’s 21% interest in National Geographic Channels International, raising 21st Century Fox’s ownership stake to 73%
Fox (FOXA) promised to to continue share buyback program in FY15
Lloyds (LYG) confirmed late stage settlement discussions with agencies
GM (GM) said 45 state AGs investigating ignition recalls
Amazon (AMZN) said Fire Phone can be viable product independently
James Schiro retired from the board of Goldman Sachs (GS), PepsiCo (PEP) due to health reasons

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Aon plc (AON), Arctic Cat (ACAT), Prosperity Bancshares (PB), Silicon Laboratories (SLAB), Covidien (COV), Stanley Black & Decker (SWK), Basic Energy (BAS), Deckers Outdoor (DECK), Sensient (SXT), Universal Health (UHS), Olin Corp. (OLN), Southside Bancshares (SBSI), Cape Bancorp (CBNJ), NewBridge Bancorp (NBBC), Dime Community (DCOM), Symetra Financial (SYA), Marketo (MKTO), Reinsurance Group (RGA), Celestica (CLS), LogMeln (LOGM), Republic Services (RSG), SPS Commerce (SPSC), Leggett & Platt (LEG), Altera (ALTR), QLogic (QLGC), Constant Contact (CTCT), Validus (VR), Ingram Micro (IM), Bryn Mawr Bank (BMTC), Dolby (DLB), AtriCure (ATRC), Proofpoint (PFPT), NetSuite (N), VeriSign (VRSN), Mellanox (MLNX), Pebblebrook Hotel (PEB), C.R. Bard (BCR), Freescale (FSL), Flextronics (FLEX), Chubb (CB), Qlik Technologies (QLIK), Abaxis (ABAX), BJ’s Restaurants (BJRI), Principal Financial (PFG), MDC Partners (MDCA), WSFS Financial (WSFS), Align Technology (ALGN), Pacific Biosciences (PACB), Echo Global (ECHO), Visa (V), Starbucks (SBUX), Netgear (NTGR), RF Micro Devices (RFMD), Monolithic Power (MPWR), Pandora (P), Acacia Research (ACTG), Lattice Semiconductor (LSCC), Columbia Sportswear (COLM), Datalink (DTLK)

Companies that missed consensus earnings expectations include:

Amazon.com (AMZN), Riverbed (RVBD), WABCO (WBC), Heritage Commerce (HTBK), WellCare (WCG), Builders FirstSource (BLDR), Simpson Manufacturing (SSD), Glacier Bancorp (GBCI), First Business Financial (FBIZ), Key Technology (KTEC), Gigamon (GIMO), Callaway Golf (ELY), Tempur Sealy (TPX), Altra Holdings (AIMC), Monarch Casino (MCRI), Federated Investors (FII), KLA-Tencor (KLAC), SBA Communications (SBAC), IGI Laboratories (IG), National Bank (NBHC), Spectranetics (SPNC), Uroplasty (UPI), Streamline Health (STRM), TESARO (TSRO), Heritage Financial (HBOS), Encore Wire (WIRE)

Companies that matched consensus earnings expectations include:

Barnes Group (B), Investors Bancorp (ISBC), Hancock Holding (HBHC), Universal Truckload (UACL), Shore Bancshares (SHBI), Digi International (DGII), Microsemi (MSCC), Informatica (INFA), Mettler-Toledo (MTD), Stericycle (SRCL), Oritani Financial (ORIT), Swift Transport (SWFT), Cerner (CERN), Regal Entertainment (RGC), HomeAway (AWAY)

NEWSPAPERS/WEBSITES

Google (GOOG) to buy Twitch for $1B, VentureBeat reports
China Telecom (CHA) to start selling Microsoft’s (MSFT) Xbox One in September, WSJ reports
Intel (INTC) to launch Core M for use in notebook/tablet models in Q4, DigiTimes says
Herbalife hires ex-Biden chief Alan Hoffman to fend off regulators, NY Post reports
Russian watchdog looks to bar certain McDonald’s (MCD) products, Reuters reports
Loan write down standards changed for non-U.S. banks, NY Times reports
Ford  (F) shares look attractive, Barron’s says

SYNDICATE

Advanced Drainage Systems (WMS) 14.5M share IPO priced at $16.00
Applied Genetic (AGTC) 2M share Secondary priced at $15.00
Compressco (GSJK) 15.28M share Secondary priced at $23.50
DragonWave (DRWI) files to sell C$21.5M of units
El Pollo Loco (LOCO) 7.142M share IPO priced at $16.00
Farmland Partners (FPI) 3.717M share Secondary priced at $12.50
Innocoll (INNL) 6.35M share IPO priced at $9.00
Ocular Therapeutix (OCUL) 5M share IPO priced at $13.00

via Zero Hedge http://ift.tt/1rCKDM2 Tyler Durden

Following yesterday’s disappointing results by Visa, which is the largest DJIA component accounting for 8% of the index and which dropped nearly 3%, while AMZN’s 10% tumble has weighed heavily on NASDAQ futures, it has been up to the USDJPY to push US equity futures from dropping further, which it has done admirably so far with the tried and true levitation pump taking place just as Europe opened. One thing to keep in mind: yesterday the CME quietly hiked ES and NQ margins by 6% and 11% respectively. A modest warning shot across the bow of what may be coming down the line?

And speaking of Europe, it was another baffle with BS session from the very beginning: first, the German GfK Consumer Confidence print rose from 8.9 to 9 in August, the highest print since December 2006, while a few hours later that other confidence index, the IFO Business Climate, dropped from 109.7 to 108.0, sliding below expectations of 109.4, and its third monthly decline in a row making economists caution on the second half German GDP. The EURUSD promptly reacted to this report by dropping to overnight lows below 1.345.

Also in Europe, the ECB reported the latest monetary aggregate data for the month of June where M3 supposedly rose from 1.0% (and 0.7% in April) to 1.5%, while loans to the private sector appeared to have tapered their pace of contraction modestly from -2.0% to -1.7%. Of course, following the conversion of ZIRP to NIRP one would hope there is some monetary response. If this is all there will be, QE is clearly inevitable.

Turning to the overnight markets, there is a broadly firmer tone across Asian equities this morning but gains have been capped by the soft performance of S&P500 futures after US markets closed – partially attributed to Amazon Inc’s 10%+ drop in after-hours trading. Asian equities are being paced by gains on the Nikkei (+1.1%), Hang Seng (+0.3%) and KOSPI (+0.4%). There was no major reaction following the Japanese CPI data where core inflation came in line with expectations (2.3% YoY). In China, following the bailout of trust product “Credit Equals Gold #1” in January, it’s perhaps not too surprising that a similar product “Credit Equals Gold #2” has delayed a $210m principal repayment scheduled for today (China Securities Daily). The trust’s sponsor, China Credit Trust Co, failed to raise funds in time to repay investors according to the report, and has pledged to liquidate assets within the product to repay investors over the next 15 months.

Stocks in Europe are seen mixed, as earnings by RBS (+13%) which in turn lifted other financials in Europe, offset the weakness stemming from the release of weaker than expected German IFO. On the other hand, disappointing earnings by Danone (-0.5%) and LVMH (-6.51%) meant that consumer discretionary related stocks underperformed, in turn weighing on the CAC index which lagged its EU peers. 7 out of 19 Stoxx 600 sectors rise; banks, telecom outperform, personal & household, oil & gas underperform. 37% of Stoxx 600 members gain, 58.2% decline. Eurostoxx 50 -0.3%, FTSE 100 -0%, CAC 40 -0.7%, DAX -0.1%, IBEX +0.1%, FTSEMIB +0%, SMI -0.4%.

Looking at today’s calendar, the major focus today will be on the US durable goods order data. Ahead of that, there is UK Q2 GDP (meeting expectations), the German IFO survey (missing expectations) and the Euroarea money and lending aggregates (beating expectations). Russia’s central bank will announce its rate decision today (surprisingly rising rates to 8% on expectations of an unchanged 7.5%).

Market Wrap

• S&P 500 futures down 0.2% to 1977
• Stoxx 600 down 0.1% to 343.9
• US 10Yr yield up 1bps to 2.51%
• German 10Yr yield up 0bps to 1.18%
• MSCI Asia Pacific up 0.2% to 148.6
• Gold spot down 0.1% to $1292.8/oz

Bulletin Headline Summary from Bloomberg and RanSquawk

• Stocks in Europe are mixed (Eurostoxx 50, -0.33%), with CAC underperforming following earnings by LVMH and Danone, while earnings by RBS lift financials in Europe.
• Focus turns to earnings by AbbVie, Lorillard and LyondellBasell, as well as the release of the latest US durable goods.
• Treasuries lower on the week, curve flattening trend continues as 5Y and lower yields rise amid expectations for Fed policy tightening, low inflation and wide spreads vs other major developed sovereigns helps long end.
• Germany’s Ifo institute business climate index fell to 108 from 109.7 in June, the third straight monthly decline; follows a series of weak German data including industrial production, factory orders and retail sales
• The U.S. accused Russia of shelling Ukrainian military positions across its border, raising tensions after the ruling coalition in Kiev broke apart while voting over the costs of funding its army and keeping a bailout deal afloat
• Putin will resist mounting pressure to abandon pro- Russian rebels immediately while seeking to convince the world that Ukraine, not the insurgents, shot down Malaysian Air Flight MH17, according to three people familiar with Kremlin discussions
• Russia’s central bank unexpectedly increased borrowing costs for a third time this year as the intensifying conflict over Ukraine and the threat of wider sanctions squeeze the economy and undercut the ruble
• Israel and Hamas will weigh a U.S.-backed proposal for a temporary cease-fire as the conflict in the Gaza Strip intensified and spurred violent Palestinian protests in the West Bank and east Jerusalem
• The U.K. has completely recovered the output lost during the financial crisis and is on track to be the best-performing G7 economy this year; 2Q GDP rose 0.8%, while the IMG raised its U.K. growth forecast to 3.2%
• RBS shares soared as the company said pretax profit almost doubled in 1H and forecast that it will meet a target to cut costs by GBP1b ($1.7b) in 2014
• Sovereign yields mixed, with EU sovereign yields sliding. Euro Stoxx Banks +1.5%. Asian stocks mostly higher. European equities, U.S. stock futures fall. WTI crude and gold steady, copper little changed

US Event Calendar

• 8:30am: Durable Goods Orders, June, est. 0.5% (prior -1%, revised -0.9%)
  • Durables Ex-Transportation, June, est. 0.5% (prior -0.1%, revised 0.0%)
  • Cap Goods Shipments Non-Defense, Ex-Aircraft, June, est. 1.3% (prior 0.4%, revised 0.5%)
  • Cap Goods Orders Non-Defense, Ex-Aircraft, June, est.  0.5% (prior 0.7%)

FIXED INCOME

Bunds traded steady ahead of the LTRO repayment announcement by the ECB which is unlikely to result in excess liquidity falling below EUR 100bln level. However the release of weaker than expected German IFO survey ensured that prices remained in positive territory. Looking elsewhere, peripheral bond yield spreads traded tighter this morning, with 10y SP/GE -1.8bps and IT/GE -1.2bps, supported by redemption payments due next week.

Barclays Prelim Pan Euro Agg Month-end Extension +0.11y (Prev. month 0.09y, 12m avg. 0.08y), Prelim Treasury Month-end Extension +0.08y (Prev. month 0.08y, 12m avg. 0.09y)

EQUITIES

Stocks in Europe are seen mixed, as earnings by RBS (+13%) which in turn lifted other financials in Europe, offset the weakness stemming from the release of weaker than expected German IFO. On the other hand, disappointing earnings by Danone (-0.5%) and LVMH (-6.51%) meant that consumer discretionary related stocks underperformed, in turn weighing on the CAC index which lagged its EU peers. Of note, US stock futures gapped lower at the reopen of trade yesterday, with particular weakness in NASDAQ-100 as Amazon (AMZN) traded lower by 6% after-hours following a bigger loss than expected. Also, Visa (V), the largest DJIA component, accounting for 8% of the index, traded down 2.8% in after-hours and have led to weakness in DJIA futures

FX

In spite of an inline UK GDP report, GBP/USD was dragged lower by firmer USD, driven by broad based EUR weakness following IFO release. Technically, the pair remains below the key 1.7000 level and supports are seen at the 50 DMA at 1.6967, and at the 55DMA at 1.6953, which is 50% Fib move of May to July rise

COMMODITIES

In terms of gold and other precious metals, price action remained steady overnight and in Europe this morning after breaking key technical levels yesterday following US data inspired moves, as the news flow remained relatively light. At the same time, both WTI and Brent prices traded near unchanged mark

* * *

DB’s Jim Reid Concludes the Overnight Recap

US equities struggled to build on their recent gains, as concerns around EU sanctions against Russia, weaker housing data and mixed corporate earnings offset better global PMIs. The S&P500 (+0.05%) failed to break through the 1,991 level and spent virtually the entire day in a narrow four-point trading range before closing almost unchanged. Much of the focus was on the micro tape with Thursday being of the heaviest days of the Q2 company reporting calendar (more than 50 index constituents reported earnings). Consensus-beating earnings from Ford (+0.34%) helped set an upbeat tone early in the session, but stocks were weighed by mixed results from GM (-4.5%) and Caterpillar (-3.1%). As always, Caterpillar’s management had some interesting words to say on the macro environment. The CEO said that US growth was “certainly purring along” which was offsetting flat sales in China. On the slowdown in the mining sector, the CEO said that the equipment maker’s business is still very slow but “for the first time in a long time, really since 2012 ….our second-quarter mining business was up very slightly from our first. That might be a green shoot”. He added that “We’re past the bottom in mining for sure”. Overall it was a fairly positive day for Q2 earnings. Of the 50 companies who reported yesterday, 78% beat EPS estimates, and around 67% beat top line estimates – both are higher than long term averages. We’ll provide a fuller summary of the Q2 earnings season to date in the EMR early next week.

As we’ve mentioned over the past couple of weeks, the developments in the US high yield sector are worth keeping a close eye on. The latest fund flow data released by Lipper late yesterday showed that US high yield funds experienced another large outflow this week. For the week ended Wednesday July 23rd, outflows from HY funds were $2.38bn which is the highest outflow in 13 months. It tops an already steep $1.67bn of outflows for the previous week, which had been the biggest since August 2013. Year-to-date cumulative flows remain in positive territory; however this number has fallen to just $2.6bn.

Though US HY has been struggling in terms of performance this month, there have not been broader signs of stress as of yet. Firstly, HY outflows seem to have been significantly driven by ETFs, suggesting that retail money is largely responsible for the last two weeks combined outflows of more than $4bn. Indeed, the ETF influence accounted for 45% of the latest week’s withdrawal, while ETF’s accounted for 63% of outflows in the prior week. The WSJ highlights that bearishness around HY ETFs has increased, pointing to the ratio of outstanding puts to calls written on the iShares iBoxx $ HY Corporate Bond ETF which has reached a 14-month high of 8 to 1. This compares to a 4.3 to 1 average since 2010. The largest options positions on this ETF are in September puts, rather than the next available monthly contract of August, possibly because the September FOMC will conclude two days before the September option expiry (WSJ). A number of Street forecasters have highlighted that September’s FOMC could see a more hawkish shift in the Fed’s rhetoric and perhaps the hedging activity is representative of that. The second thing to note is that the HY primary market remains open with another $1.3bn priced across 3 deals on Thursday – including yet another Private-equity-sponsored PIK toggle deal. US high yield, like most carry strategies, have worked well this year though we are keeping a firm eye on potential cracks in the market.

Turning to the overnight markets, there is a broadly firmer tone across Asian equities this morning but gains have been capped by the soft performance of S&P500 futures after US markets closed – partially attributed to Amazon Inc’s 10%+ drop in after-hours trading. Asian equities are being paced by gains on the Nikkei (+0.6%) and KOSPI (+0.3%). There was no major reaction following the Japanese CPI data where core inflation came in line with expectations (2.3% YoY). In China, following the bailout of trust product “Credit Equals Gold #1” in January, it’s perhaps not too surprising that a similar product “Credit Equals Gold #2” has delayed a $210m principal repayment scheduled for today (China Securities Daily). The trust’s sponsor, China Credit Trust Co, failed to raise funds in time to repay investors according to the report, and has pledged to liquidate assets within the product to repay investors over the next 15 months.

Recapping the other developments from Thursday, UST yields traded around 3-4bp higher, partly driven by jobless claims data, in a generally weaker day for rates overall. The data flow supported the move higher in US rates. Aside from the European PMIs, US jobless claims fell to an eight-and-a-half year low of 284k, which was 19k less than the prior week and 23k lower than consensus estimates. There was some caution around the claims number given the timing of auto plant shutdowns for retooling. Nevertheless, the four-week moving average was down by 7,250 to 302k. That was the lowest level since May 2007. Balancing against this, US new home sales data disappointed (406k vs 475k expected), and this sent the S&P500 homebuilder index down 5.9%. The US TIPs auction saw solid demand with the lowest yield in more than a year, and this sent US 10yr breakevens up 3.5bp to 2.24%.

On the topic of EU sanctions, the WSJ is reporting that governments could decide as early as Tuesday to move forward with economic sanctions that would restrict Russian access to European capital markets and prohibit exports of militarily sensitive goods and energy-sector technology to Russia. According to the article, there was little disagreement over the proposals for economic sanctions that were discussed by the EU on Thursday, and the chance of governments moving ahead is now very high, according to unnamed diplomats. The restrictions contain a number of exceptions. Access to EU capital markets will be mostly imposed on Russian banks but would neither affect institutions less than 50%-owned by the Russian government nor trade in financial assets issued before the sanction came into force. EU citizens would at first still be allowed to buy Russian sovereign bonds, since “Russia is a significant investor in issuance by several EU (member states),” the document says. EU bans on energy technology exports to Russia would only apply to longer term production and are not aimed to disrupt current supply. How these sanctions develop between now and Tuesday will be something to watch for early next week.

Looking at today’s calendar, the major focus today will be on the US durable goods order data. Ahead of that, there is UK Q2 GDP, the German IFO survey and the Euroarea money and lending aggregates. Russia’s central bank will announce its rate decision today (consensus is for the central bank to hold). As we go to print, mining giant Anglo American will report 1H earnings.

via Zero Hedge http://ift.tt/1t3dlHQ Tyler Durden