iftttwall

With investment grade credit risk soaring, it’s now or never for many firms to lever up at “relatively” low costs and two of the biggest buyback-ers are stepping up to the debt issuance window this week. Perhaps helping to explain the carnage in Treasuries at the end of last week (as rate-locks are set), Apple has unveiled a 10-part deal which could price today and IBM a 7 part deal. No size is indicated yet but Apple’s previous two issuances were $8bn and $6.5bn.

As the cost of funding buybacks rise, so the window is closing for releveraging on the cheap…

 

Apple sold $8b debt in 7-part offering in May 2015; $6.5b debt in 5-part offering in Feb. 2015, and so it is time for some more monetization of that overseas cash… in as many as a 10-part deal…

IPT:

• 2Y fxd +75a; 2Y FRN 3mL equiv
• 3Y fxd +90a; 3Y FRN 3mL equiv
• 5Y fxd +115a; 5Y FRN 3mL equiv
• 7Y green bond +145a
• 10Y fxd +160a
• 20Y fxd +200a
• 30Y fxd +215a

SEC Registered
Expected Issue Ratings: Aa1/AA+
UOP: General corporate purposes, including repurchases of Apple’s common stock and payment of dividends under the company’s program to return capital to shareholders, funding for working capital, capital expenditures, acquisitions and repayment of debt; the company intends to use the net proceeds from sales of the 2023 Fixed Rate Notes for the investment in one or more eligible projects
Bookrunners: BofAML, DB, GS, JPM
Settlement: T+5 (Feb 23, 2016)
Denom: 2,000 x 1,000

 

And IBM a 7-part deal…

IPT:

• 18-month FRN 3mL+55a
• 3Y +95a; 3Y FRN 3mL equiv
• 5Y +115a; 5Y 3mL equiv
• 10Y +180a
• 30Y +215-220

SEC Registered
Expected Issue Ratings: Aa3/AA-
Bookrunners: BNP, Barclays, C, JPM
Denoms: 100k x 1k
Use of Proceeds: GCP

via Zero Hedge http://ift.tt/247o3OE Tyler Durden

Yesterday we reported that the ECB has begun contemplating the death of the €500 EURO note, a fate which is now virtually assured for the one banknote which not only makes up 30% of the total European paper currency in circulation by value, but provides the best alternative to Europe’s tax on money known as NIRP.

That also explains why Mario Draghi is so intent on eradicating it first, then the €200 bill, then the €100 bill, and so on.

We also noted that according to a Bank of America analysis, the scrapping of the largest denominated European note “would be negative for the currency”, to which we said that BofA is right, unless of course, in this global race to the bottom, first the SNB “scraps” the CHF1000 bill, and then the Federal Reserve follows suit and listens to Harvard “scholar” and former Standard Chartered CEO Peter Sands who just last week said the US should ban the $100 note as it would “deter tax evasion, financial crime, terrorism and corruption.”

Well, not even 24 hours later, and another Harvard “scholar” and Fed chairman wannabe, Larry Summers, has just released an oped in the left-leaning Amazon Washington Post, titled “It’s time to kill the $100 bill” in which he makes it clear that the pursuit of paper money is only just starting. Not surprisingly, just like in Europe, the argument is that killing the Benjamins would somehow eradicate crime, saying that “a moratorium on printing new high denomination notes would make the world a better place.“

Yes, for central bankers, because all this modest proposal will do is make it that much easier to unleash NIRP, because recall that of the $1.4 trillion in total U.S. currency in circulation, $1.1 trillion is in the form of $100 bills.

So with one regulation, the Fed – if it listens to this Harvard charlatan, and it surely will as more and more “academics” get on board with the idea to scrap paper money – could eliminate the value of 78% of all currency in circulation, which in effect would achieve practically the entire goal of destroying the one paper alternative to digital NIRP rates in the form of paper currency.

That said, it would still leave gold as an alternative to collapsing monetary system, but by then there will surely be a redux of Executive Order 6102 banning the possession of physical gold and demanding its return to the US government.

Here is Summers’ first shot across the bow in the upcoming war against U.S. paper currency, first posted in the WaPo:

It’s time to kill the $100 bill

Harvard’s Mossavar Rahmani Center for Business and Government, which I am privileged to direct, has just issued an important paper by senior fellow Peter Sands and a group of student collaborators. The paper makes a compelling case for stopping the issuance of high denomination notes like the 500 euro note and $100 bill or even withdrawing them from circulation.

I remember that when the euro was being designed in the late 1990s, I argued with my European G7 colleagues that skirmishing over seigniorage by issuing a 500 euro note was highly irresponsible and mostly would be a boon to corruption and crime. Since the crime and corruption in significant part would happen outside European borders, I suggested that, to paraphrase John Connally, it was their currency, but would be everyone’s problem. And I made clear that in the context of an international agreement, the U.S. would consider policy regarding the $100 bill.  But because the Germans were committed to having a high denomination note, the issue was never seriously debated in international forums.

The fact that — as Sands points out — in certain circles the 500 euro note is known as the “Bin Laden” confirms the arguments against it. Sands’ extensive analysis is totally convincing on the linkage between high denomination notes and crime. He is surely right that illicit activities are facilitated when a million dollars weighs 2.2 pounds as with the 500 euro note rather than more than 50 pounds as would be the case if the $20 bill was the high denomination note. And he is equally correct in arguing that technology is obviating whatever need there may ever have been for high denomination notes in legal commerce.

What should happen next?  I’d guess the idea of removing existing notes is a step too far. But a moratorium on printing new high denomination notes would make the world a better place.  In terms of unilateral steps, the most important actor by far is the European Union. The €500 is almost six times as valuable as the $100. Some actors in Europe, notably the European Commission, have shown sympathy for the idea and European Central Bank chief Mario Draghi has shown interest as well.  If Europe moved, pressure could likely be brought on others, notably Switzerland.

I confess to not being surprised that resistance within the ECB is coming out of Luxembourg, with its long and unsavory tradition of giving comfort to tax evaders, money launderers, and other proponents of bank secrecy and where 20 times as much cash is printed, relative to gross domestic, compared to other European countries.

These are difficult times in Europe with the refugee crisis, economic weakness, security issues and the rise of populist movements.  There are real limits on what it can do to address global problems. But here is a step that will represent a global contribution with only the tiniest impact on legitimate commerce or on government budgets. It may not be a free lunch, but it is a very cheap lunch.

Even better than unilateral measures in Europe would be a global agreement to stop issuing notes worth more than say $50 or $100.  Such an agreement would be as significant as anything else the G7 or G20 has done in years. China, which is hosting the next G-20 in September, has made attacking corruption a central part of its economic and political strategy. More generally, at a time when such a demonstration is very much needed, a global agreement to stop issuing high denomination notes would also show that the global financial groupings can stand up against “big money” and for the interests of ordinary citizens.

Lawrence H. Summers, the Charles W. Eliot university professor at Harvard, is a former treasury secretary and director of the National Economic Council in the White House. He is writing occasional posts, to be featured on Wonkblog, about issues of national and international economics and policymaking.

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

The Empire Fed Manufacturing survey has been in contraction (below 0) since July 2015 and while February’s -16.64 print was above January’s -19.37, it was dramatically worse than the expected -10.0. New Orders and Shipments remain in contraction as both prices paid and recived tumbled. Hope improved modestly but remains markedly below December levels, as CapEx spending expectations weakened once again.

 

 

Still – we always have Services to take the pressure off manufacturing, right? Oh wait…

 

via Zero Hedge http://ift.tt/247o3Oz Tyler Durden

Turkey shelled Syria for a fourth consecutive day on Tuesday as Ankara steps up efforts to bolster rebels in the face of an advance by the Kurdish YPG. “As many as 150 terrorists were killed during the 4-day-long shelling targeting PYD points,” the pro-government Yeni Safak wrote today, adding that “the PYD, backed by both the US and Russia, is working with President Bashar al-Assad to control areas along the Turkish border.”

The move by Russia and Iran to encircle Aleppo and cut rebel supply lines to Turkey has allowed the YPG to advance on towns near the border, effectively consolidating the group’s grip on northern Syria, where they’ve been highly successful at holding large swaths of territory.That’s an especially undesirable outcome for Ankara where President Recep Tayyip Erdogan is hell bent on rolling back a groundswell of popular support for the pro-Kurdish HDP which, at least in AKP’s mind, is merely the political arm of the PKK.

Erdogan doesn’t distinguish between the PKK (which both Turkey and the US officially designate as a terror group) and the YPG. The US, on the other hand, openly supports the Syrian Kurds and has backed their advances with airstrikes. Ankara fears that if the YPG are allowed to bridge the territory they control east of the Euphrates with territory they control west of the river, they will effectively establish a proto-state on the border which would embolden the PKK to try something similar in southeast Turkey where some Kurds are already pushing for autonomy.

Throw in the fact that the towns the YPG are seeking to capture are held by rebels Ankara supports in the faltering bid to oust Bashar al-Assad, and there’s every reason to suspect that Turkey will not only persist in the shelling of Azaz, but will in fact invade Syria. You know, “to fight ISIS.”

On Tuesday we got still more indications that a major escalation in Syria is imminent when Turkey said it would “definitely” participate in a ground operation. “It’s impossible to end the war without it,” an official told Bloomberg, speaking on the condition of anonymity. You see how that works? It’s the same logic that France employed when officials declared that the best way to halt the refugee crisis is to bomb Syria. It’s “impossible” to the end the war in Syria without … going to war in Syria.

The official also said there was no plan for a “unilateral” ground operation by Turkey or Saudi Arabia, but according to Yeni Safak newspaper’s Ankara correspondent, Turkey is planning to send troops 10km into Syria to establish “a safe zone.” Ankara is apparently concerned that if Azaz-Tal Rifaat area falls to the YPG, 400K-500K refugees might mass at the Turkish border.

Now bear in mind, it’s not entirely clear why that would be the case. There are indeed questions about the YPG’s human rights record, but they’re hardly ISIS or al-Nusra. Why civilians would flee by the hundreds of thousands is far from evident and it certainly seems as though Turkey is just looking for an excuse to ensure that its supply lines to al-Nusra and other Sunni rebels aren’t cut, and to keep the Kurds from controlling key border towns. The “safe zone” plan – which is reminiscent of the absurd “ISIS-free” zone idea from last August – would reportedly require US support. America, Yeni Safak says “has never been sincere about Assad going from the very beginning.”

Additionally, Turkey now says 500 FSA troops have traveled to Azaz via Turkey to beat back the YPG advance. Here’s Yeni Safak again:

As many as 500 fighters from the Free Syrian Army (FSA) have entered Syrian territory through Turkey to defend Azaz town, besieged by Syrian Kurdish militia forces.

 

Russian-backed Syrian pro-government forces have cut off the last supply route, known as the Azaz corridor, linking partially opposition-held Aleppo with Turkey. If the last corridor completely falls, the rebel groups could lose the quarters of Aleppo they currrently control, mostly in the east.

 

It means that Assad’s regime, backed by Iran and Russia, and the PYD will gain the power to control the entire Turkish-Syrian border. PYD-linked armed groups’ attempt to advance to Aleppo and open harrassment fire into Turkish territory has prompted the Turkish military to retaliate with F?rt?na howitzers.

 

Syrian opposition forces have marched to the area which Turkish military targeted in lines with the rules of engagement. One of them is Sham Legion, known as Homs Legion, fighting in northern Idlib against forces, loyal to Assad. Sham Legion has sent its fighters to the besieged town to stop the advance of PYD’s armed groups. They appear to be protecting the corridor leading to the opposition-held eastern Aleppo.

 

The reports said that Sham Legion, an umbrella group of 19 different organizations some of which were previously affiliated with Syrian Muslim Brotherhood, had dispatched 500 fighters to conflict in the key town through Turkey’s Cilvegöz border crossing three days ago.

 

The fighters crossed into Syria under Turkey’s supervision after the government had approved their crossing into Syrian territory through the country’s border.

It’s easy to see why the Turks are getting worried. On Monday, the YPG seized control of Tal Rifaat, a town between Aleppo and Azaz. “Their latest advances are part of a bid to unite the Kurdish town of Afrin in western Aleppo province with Kurdish areas to the east,” Al Arabiya notes. “We will not let Azaz fall,” Turkish PM Ahmet Davutoglu said. “The YPG will not be able to cross to the west of the Euphrates (River) and east of Afrin.”

Obviously, simply shelling Azaz and Tal Rifaat isn’t going to do the trick. If Turkey wants to halt the advance, they’re going to have to send troops or F-16s, and the latter option is a virtual impossibility given Russia’s deployment of S-400s in the country. 

Meanwhile, Moscow and Ankara continue to accuse one another of being terrorists. What should be clear from the above is that there’s no telling who the Islamist rebels fighting to keep the Azaz corridor open are. It’s the same mishmash of Sunni militants fighting everywhere else in western Syria and it seems likely that al-Nusra elements are present as well. As Russian PM Dmitri Medvedev recently told TIME, “they’re all bandits.”

Yes, rampant banditry, facilitated by the Turks. 

Of course Russia isn’t innocent in all of this either. Although it’s impossible to verify the veracity of the reports, it seems possible that several Russian strikes hit hospitals on Monday, killing scores of civilians, some women and children. Ankara of course seized on the opportunity to accuse the Russians of being terrorists. “These attacks that we strongly condemn are unconscionable and obvious war crime under international law,” a statement from the Turkish foreign ministry reads. “If Russian Federation does not end those attacks immediately – which remove peace and stability – it is inevitable that Russia will face bigger and more serious results.”

The takeaway from all of this is simple: escalation imminent.

via Zero Hedge http://ift.tt/1SuX8Z9 Tyler Durden

As traders slowly (and then quickly) woke up to the fact that a "freeze" at record levels of production is not a "cut", WTI Crude has collapsed over 5% from its hope-stricken illiquid highs of early trading – now back below $30.

As Barclays warns:

• OPEC OUTPUT FREEZE WOULD LEAVE 1Q SURPLUS OF 1M B/D: BARCLAYS
  OIL UPSIDE LIMITED EVEN IF OUTPUT FREEZE SUCCESSFUL: BARCLAYS

And the reaction to reality…

 

And this is taking the shine off the equity market exuberance…

 

As we said last night, the market can now re-focus on the real underlying dynamics: not only excess supply but clearly slowing global demand…

 

… and U.S. oil land storage, which as we and the market have been warning, is about to overflow. This perhaps explains why after surging in the aftermath of the headlines from the non-deal hitting the tape, WTI is back under $30. As attention now shifts to nearly full land storage, an oil price in the teens could be next because as BMI Research writes, the risk of a price collapse into the $10-$20/bbl range is mounting as the drop in U.S. crude demand may outpace production declines. Change "may" to "will", and the next big catalyst on the oil horizon becomes apparent.

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

The world let out a collective gasp of shock last night when the PBOC announced that in January, China had created an absolutely gargantuan CNY3.4 trillion in new total debt (Total Social Financing) – or about $520 billion – more than 50% higher than expected, of which CNY2.1 trillion was in the form of new loans.

The breakdown of that massive number is shown in the table below:

What happened? Here is Goldman’s explanation:

January’s credit data was exceedingly strong. Part of the demand for new RMB loans is from demand to borrow RMB and pay down USD debt, though banks may have also started to behave differently amid profit pressures. The temporary suspension of local government bond issuance also directed more borrowing to bank loans and other channels. Strong mortgage loan growth also contributed (household medium to long term loans increased RMB 478.3bn in January, vs RMB 292.4bn in December). The window guidance meeting held by the central bank around mid-January to rein in rapid credit growth apparently did not have much effect on the behavior of commercial banks. (January loan supply tends to be very front-loaded; one would have expected there to be a more significant deceleration of credit supply if the central bank was sending a really tough message, hence market expectations were only RMB 1.9 tn even when they knew it was already RMB1.7 tn in the first half of the month.) The pace of January credit growth is likely above the comfort zone of the central bank. Should the lending continue to be as strong in February, we think it would likely invite more forceful administrative controls.

 

M2 growth was not quite as strong as credit growth and its sequential growth was just modestly faster than December at a sub-trend level. Fiscal deposit change was more favorable than last January, which was abnormally tight, but still significantly tighter than usual (implying a smaller amount of net spending). FX position changes which affect M2 growth were probably another drag. Judging from FX reserve data, this drag was likely not larger than it was in December though reserve change data is particularly noisy and we cannot be sure about this at the moment. 

 

January broad credit and money data is positive news for domestic demand growth, but the effects on aggregate demand growth are likely to be at least partially cancelled out by very weak exports growth. We still expect sequential activity growth to slow down in Q1 after a meaningful but short rebound in November and December last year. Only after the signs of another round of slowdown become clear would we expect meaningful cyclical loosening measures to be rolled out.

 

Another hurdle to more policy loosening is the recent abnormally cold weather conditions. These have pushed up food prices to a very high level which means January and February CPI data would likely show a clear upward trend (February CPI is almost surely going to breach 2% and may be close to 3%). We expect this to be a short term phenomenon and CPI is likely to moderate again from March.

But so much for words. Here, courtesy of Simon Rabinovitch, is a chart which puts China’s credit creation just in January in its proper context. If China’s new debt in January were a country, it would be the world’s 27th-biggest economy.

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

• Oil eases off highs after output freeze agreement (Reuters)
• Saudis and Russia agree to oil output freeze, Iran still an obstacle (Reuters)
• China Loses Control of the Economic Story Line (WSJ)
• Obama starts work to pick Supreme Court justice amid political ‘bluster’ (Reuters)
• The Never-Ending Story: Europe’s Banks Face a Frightening Future (BBG)
• Apollo Global to buy security services company ADT for $7 billion (Reuters)
• Anglo Hastens Retreat From Coal, Iron Ore as Losses Double (BBG)
• Markets Putting Faith in QE4 (WSJ)
• Technology stocks selloff may turn IPO chill into IPO freeze (Reuters)
• Goldman Channels FDR’s `Nothing to Fear’ With Sell Gold Call (BBG)
• Not in my backyard? Mainstream Scandinavia warily eyes record immigration (Reuters)
• Japan’s Banks Brace for Bleeding in Core Business as Negative Rates Kick In (WSJ)
• Wait Two Years for That $65 Million Gulfstream Personal Jet (BBG)
• Gordon and Bud Did It. Did You? Insider Trading Gets a Rethink (BBG)
• Hedge funder’s attack on renminbi draws scrutiny and doubt (FT)
• Fallen Giants Block Path to S&P Bull Market as Amazon Slumps (BBG)
• New York police probe assault claim against Eliot Spitzer; lawyer disputes (Reuters)

 

Overnight Media Digest

WSJ

– HSBC PLC ‘s decision to keep its headquarters in the U.K. rather than move to Hong Kong is prompting soul-searching in this former British colony about its perception on the world stage. (http://on.wsj.com/1PB9NpA)

– General Dynamics Corp, Britain’s BAE Systems PLC , and Germany’s Rheinmetall AG, are among those lining up for the right to replace Australia’s armored vehicles and tanks. (http://on.wsj.com/1PB9BH6)

– Japan’s SoftBank Group Corp on Monday moved to bolster its share price beaten down by worries about U.S. mobile subsidiary Sprint Corp, saying it would buy back up to 500 billion Yen, or as much as $4.4 billion, of shares, its biggest repurchase ever. (http://on.wsj.com/1PB9Wtc)

– Brazil’s southernmost state halted the use of a mosquito larvicide that an Argentine doctors’ group warns could be behind the recent surge of babies born with microcephaly. (http://on.wsj.com/1PBa1gt)

 

FT

UK phone network operator Vodafone Plc and John Malone’s cable company Liberty Global Plc agreed on Monday to form a 19 billion euros ($21.23 billion) mobile-and-cable operator in the Netherlands.

The Bank of England has rejected criticism from John Vickers, the chief architect of the UK’s banking reforms, by denying that it had gone soft on UK banks or watered down his recommended minimum capital levels for Britain’s biggest lenders.

The world’s top two oil exporters Saudi Arabia and Russia will hold talks on Tuesday, according to a person familiar with the matter, as producers try to tackle a glut that has pushed prices to their lowest in over a decade.

 

NYT

– Paragon Offshore Plc, which operates offshore drilling rigs from the Gulf of Mexico to the North Sea, filed for Chapter 11 bankruptcy protection. Over the last 16 months, about 60 oil and gas companies have filed for bankruptcy as commodity prices slide, and that figure is expected to double in the coming months if prices remain low. (http://nyti.ms/1PNQeIO)

– Turmoil in global markets is making the yen rise in value again. That has resulted in big hits to the Japanese stock market and has raised worries among economists that Prime Minister Shinzo Abe will not be able to deliver the economic growth his country needs to get back on track. (http://nyti.ms/1Tkti8n)

– Leo Van Munching Jr, whose stewardship of the importing company started by his father made the Dutch-brewed beer Heineken and its low-calorie sibling, Amstel Light, familiar brand names in the United States, passed away on Sunday. (http://nyti.ms/1mEhn8J)

– The multinational media and telecommunications conglomerate SoftBank said on Monday that it would buy back shares worth 500 billion yen ($4.36 billion), the biggest share repurchase it has ever made. (http://nyti.ms/1StTmiv)

 

Canada

 

 

Britain

The Times

The president of the European Central Bank rallied stock markets by pledging that it was “ready to do its part” to shore up the European economy from a rising tide of financial turmoil. (thetim.es/215xpYz)

Royal Dutch Shell reiterated its confidence in the North Sea oil industry as it sealed a 35 billion pound ($50.52 billion) acquisition of its rival BG Group and promised a rapid boost in output from Brazil. (thetim.es/1QhPCAx)

The Guardian

Mining giant Anglo American Plc’s debt has been downgraded further into junk territory by Moody’s, which cited a deterioration in commodities market conditions and doubts over how long it will take the company to reduce debt levels. (bit.ly/246aYFg)

Living standards in the UK have finally made up the ground lost as a result of the financial crash following the boost to incomes provided by rising employment and falling inflation, according to the Resolution Foundation. (bit.ly/1Lql2gD)

The Telegraph

Vodafone has agreed a deal with US cable giant Liberty Global to merge their Dutch operations. The UK mobile giant will pay Liberty, owned by billionaire John Malone, 1 billion euro ($1.12 billion) to “equalize ownership in the joint venture”, according to a statement released on Monday night. (bit.ly/1Tk7nhO)

A botched set of negotiations on Britain’s membership in the European Union could damage the eurozone, the European Central Bank president has warned. (bit.ly/1oF6Tr9)

Sky News

Supermarket chain Aldi will create 5,000 new jobs and open 80 new stores as part of its expansion plans in the UK. (bit.ly/20VDg6d)

Hornby shares have jumped by over a third after the company announced that it is parting company with Chief Executive Richard Ames. (bit.ly/1QEw3N8)

The Independent

HSBC could switch up to 1,000 jobs to Paris if Britain votes to exit the EU in the forthcoming referendum. (ind.pn/1SPXp9o)

 

via Zero Hedge http://ift.tt/20BaBhp Tyler Durden

One day after markets saw a violent return of optimism, which sent stocks around the globe and US equity futures soaring (the US was closed for President’s Day) driven by terrible Japanese and Chinese economic data which in turn hinted at more central bank easing, animal spirits have cooled off despite some truly unprecedented Chinese credit numbers.

As we showed last night, in January Chinese bank loans soared by CNY2.5 trillion, far above the CNY1.9 trillion expected, but it was the largest debt aggregate, the TSF which soared by a record CNY3.4 trillion, or $52 billion, more than 50% higher than expected, suggesting it was not only Japan which had panicked at the end of January with NIRP – China was literally flooding its economy with debt to stimulate growth.

We doubt it will work, as increasingly more companies are now beyond the Minsky tipping point where they have to issue debt just to pay interest. With China debt/GDP already at a world (ex Japan) record 350%, it is only a matter of time before China suffers a dramatic event, one which reprices its $35 trillion in bank “assets” substantially lower.

And while S&P500 futures appeared close to breaching above the 1900 level overnight following another strong Asian session where the SHCOMP surged 3.3% on record Chinese loan data, Europe crippled the rally, for now, and despite a positive start which sold European stocks up 0.8%, sold off heading into mid-morning amid risk off sentiment (Euro Stoxx: -0.32%). This has stemmed from the weakness in financials with concerns surrounding the health of banking sector still not abated entirely. At last check Deutsche Bank stock was down nearly 5%.

Also, the market had clearly been waiting for good news from the “secret” Saudi-Russian oil summit. As reported previously, it did not get the news, and instead it got the opposite, when the two oil superpowers agreed to freeze production at record high levels. As a result WTI has slid back under $30 after nearly hitting $31 in the kneejerk reaction to the news.

“Markets need more than just a freeze in oil production, they need a cut,” said Ralf Zimmermann, a strategist at Bankhaus Lampe in Dusseldorf. “People are looking at policy makers, be it central banks or OPEC, for more reassurance because everything boils down to what will happen to global growth.”

And that is indeed the bottom line, because even with China pumping out record amounts of debt to restart both domestic and local growth in what is increasingly a sign of desperation, growth just refuses to emerge.

Where global markets stand now

• S&P 500 futures up 1.1% to 1880
• Stoxx 600 down 0.7% to 320
• FTSE 100 down 0.2% to 5815
• DAX down 0.8% to 9134
• German 10Yr yield up 1bp to 0.25%
• Italian 10Yr yield up 1bp to 1.61%
• Spanish 10Yr yield up 4bps to 1.74%
• MSCI Asia Pacific up 1% to 119
• Nikkei 225 up 0.2% to 16054
• Hang Seng up 1.1% to 19122
• Shanghai Composite up 3.3% to 2837
• US 10-yr yield up less than 1bp to 1.76%
• Dollar Index up 0.55% to 96.47
• WTI Crude futures up 1% to $29.73
• Brent Futures up 1.6% to $33.91
• Gold spot up 0.2% to $1,211
• Silver spot down less than 0.1% to $15.32

Top Global News

• Saudi Arabia and Russia Agree Oil-Output Freeze in Qatar Talks: Ministers from Qatar, Venezuela also agreed to freeze; WTI Near $30 After Producers Agree Output Freeze
• Vodafone, Liberty Global to Combine Dutch Mobile-Phone Business: Deal to create cost, revenue synergies of ~$3.9b
• China Said to Weigh Cutting Minimum Bad-Loan Coverage Ratio: Some big banks said to have already used ratio of ~120% for their 2016 budgeting
• Supreme Court Vacancy Opens Up Partisan Chasm Over Senate’s Role: Clinton, Sanders both say an Obama nominee deserves a vote
• Berkshire Hathaway Buys 1.08m Shares of Phillips 66: Holds 75.6m shares after this week’s purchases
• Pershing, Berkshire among those to file as 13F deadline approaches: Hedge fund also adds to stake in Alphabet, which owns Google
• ‘Deadpool’ Delivers New Marvel Success to Fox With Record Debut: $135 million tally tops ‘Fifty Shades’ to set February record
• Apollo Said to Near Acquisition of Security Firm ADT, WSJ Says: PE firm to announce deal as soon as Tuesday
• Mondelez Cheese, Grocery Unit Up for Sale Next Month, Sunday Times Says: To go up for sale next month as part of $3b asset selloff
• Boeing Near Decision to Self-Fund More F/A-18 Fighters: Reuters: Awaiting U.S. govt decision on order for 28 fighter jets from Kuwait
• Daimler to Cut Over 1,200 Jobs at North Carolina Plants, WSJ Says: Truck unit layoffs to take effect Friday

We start our global equity round up as usual in Asia, where equity markets extended on yesterday’s gains after quiet global newsflow and an energy resurgence kept sentiment upbeat. Nikkei 225 (+0.2%) extended on Monday’s stellar performance, led by Telecoms after index heavyweight Softbank hit limit on an announcement of a JPY 500bIn share repurchase. Shanghai Comp (+2.5%) outperformed underpinned by record high financing and lending data, while energy names boosted the Hang Seng (+1.7%) after crude gained over 4% ahead of Russia-OPEC talks scheduled today. 10yr JGBs advanced despite the positive risk sentiment in stocks, supported by a well-received 20yr auction in while the BoJ are also expected to enter the market tomorrow.

As noted above, China’s January credit creation was simply stunning, with Chinese New Yuan Loans CNY Y/Y 2510.0B vs. Exp. 1900.0B (Prey. 597.8B); highest on record; Aggregate Financing CNY Y/Y 3420.0B vs. Exp. 2200.0B (Prey. 1820.0B); highest on record; leading to a surge in Money Supply M2 Y/Y 14.00% vs. Exp. 13.50% (Prey. 13.30%)

Top Asian News

• Chinese Premier Faults Regulators’ Handling of Stocks, Yuan Rout: Regulators didn’t respond actively to declines, some even have management problems
• Mobius Says China’s Irrational Stock Market Is Creating Bargains: Hang Seng China Enterprises Index plunged 49% from May high through last week
• China Said to Plan 400 Billion Yuan in Special Building Projects: Chief planning agency backs infrastructure projects to spur growth
• SoftBank Adds $7.3 Billion After Announcing Record Buyback Plan
• India Asks Vodafone to Pay Taxes or It May Face Asset Seizures: Vodafone should pay $2.1b tax bill, according to a letter sent to company
• Sharp Board Said to Be Split as Talks Continue on Rival Offers: Foxconn, INCJ have each won support of at least 4 of Sharp’s 13 directors

In Europe, despite a positive start sold off heading into mid-morning amid risk off sentiment (Euro Stoxx: -0.32%). This has stemmed from the weakness in financials with concerns surrounding the health of banking sector still not abated entirely. Additionally, the energy complex has somewhat pulled off best levels following comments by the Qatari energy minister stating that an agreement has been made by Saudi, Qatar, Russia and Venezuela to hold output at January levels, however this is contingent on other major producers also agreeing. Downside was seen in the energy complex in the wake of this news given that January levels of OPEC oil production was 33m1n bpd, a record high, while some participants had been hoping for a cut from oil producing nations. The news was also interpreted negatively due to the deal being contingent on other major producers also agreeing, given that the likes of Iran were not present at the meeting. In turn, the risk-off sentiment also saw Bunds come off their worst levels while notable curve steepening has been observed.

Top European News

• EDF Cuts Payout as It Sees Lower Power Prices Cutting Profit: Revenue to be ‘severely hit’ toward 2017-2018 by market drop
• Airbus Raises 2015 Tally; Order Backlog Value Tops $1 Trillion: Now includes additional net 44 aircraft to last year’s order book
• Anglo American to Exit Kumba Unit in Move Away From Iron Ore: Options for disposal include a spinoff of its 69.7% stake
• VW Loses European Market Share to Fiat in Wake of Scandal: VW brand drops 4% as overall European car demand jumps 6.3%
• Orange Says Bouygues Deal Needs More Time Amid Talks With Rivals: Talks for acquisition of smaller competitor to take weeks

In commodities, Brent for April settlement advanced as much as $2.16 to $35.55 a barrel before paring the gains. West Texas Intermediate rose 1 percent to $29.74 a barrel on the New York Mercantile Exchange. More than a year since the Organization of Petroleum Exporting Countries decided not to cut production to boost prices, oil remains about 70 percent below its 2014 peak. Supply still exceeds demand and record global oil stockpiles continue to swell, potentially pushing prices below $20 a barrel before the rout is over, Goldman Sachs Group Inc. said last week.

Qatar energy minister states an agreement has been made between Saudi Arabia, Russia, Venezuela and Qatar to hold output at January levels, however this is contingent on other major producers also agreeing. Of note, OPEC January production levels, were at a record high, while some participants had been hoping for a cut from oil production nations.

According to a senior source familiar with Iranian thinking, Iran would be willing to discuss over an oil output freeze once its production has reached pre-sanction levels. Of note, this is very similar to the recent rhetoric from Iran, consequently hinting that a cut in oil production is becoming increasingly unlikely.

Gold rose 0.4 percent in the spot market as demand for haven assets rebounded.

In FX, the yen advanced against all 16 of its major peers, climbing most versus the South Korean won and New Zealand dollar. It gained 0.5 percent to 127.19 per euro. The 19-member common currency strengthened 0.2 percent to $1.1177.

South Korea’s won dropped 0.7 percent to a two-week low as the central bank’s decision to keep the benchmark interest rate at a record-low 1.5 percent failed to quell speculation about a rate cut. Malaysia’s ringgit slid 0.6 percent, while Russia’s ruble slipped 0.5 percent. A gauge of emerging-market currencies lost 0.2 percent, halting two days of gains.

The yuan traded in the mainland weakened 0.3 percent a day after climbing the most in more than a decade, according to China Foreign Exchange Trade System prices. The currency surged on Monday as it caught up with declines in the greenback last week, when Chinese markets were shut for the Lunar New Year holidays. The People’s Bank of China set its daily reference rate little changed at 6.5130.

On today’s calendar in the US we get the February Empire manufacturing print, followed later by this month’s NAHB housing market index reading. Fedspeak wise we’re due to hear from Harker (at 2pm GMT) who is due to deliver his 2016 economic forecast, followed later on by comments from the new Minneapolis Fed President Kashkari (at 3.30pm GMT). Earnings wise we’ve got 14 S&P 500 companies set to report.

 

Bulletin Headline Summary

• European equities shrug off the positive lead from Asian bourses as concerns continue surround the health of financial names.
• Risk sentiment also dampened as Saudi Arabia, Qatar, Russia and Venezuela agree to freeze oil output at January levels, subsequently disappointing calls for an output cut.
• Going forward participants will be looking out for US Empire Manufacturing and comments from Fed’s Harker (Non-voter, Soft Dove) Kashkari (Non-voter-N/A) and Fed’s Rosengren (Voter, Dove)
• Treasury yield curve steeper as European equity markets mostly lower, oil rallies in overnight trading.
• Saudi Arabia and Russia, the world’s two largest crude producers, agreed to freeze output after talks in Qatar. The freeze is conditional on other nation’s agreeing to participate, Russia’s Energy Ministry said in a statement
• China’s broadest measure of new credit surged to a record as a seasonal lending binge coincided with a recovery in property prices. Aggregate financing rose to 3.42 trillion yuan ($525 billion) in January, according to a report from the PBOC
• China’s cabinet has discussed lowering the ratio of provisions banks must set aside for bad loans, potentially easing a drag on earnings after soured debts at lenders climbed to the highest in a decade
• The BOJ on Tuesday started charging 0.1% on a portion of the excess funds that financial institutions have in accounts at the central bank. The negative interest rate would have applied to ¥23.2 trillion ($203 billion) if the policy had been in place last month, the bank estimated
• With the ECB president set to give his next policy announcement on March 10, traders are positioned for a monetary-easing bonanza judging from the pace at which euro- region bond yields are dropping to new lows
• German investor confidence fell to its lowest level since October 2014 as equities plummeted amid slowing Chinese growth and concern over the profitability of euro-area lenders
• Prime Minister David Cameron takes his case for an overhaul of the terms of Britain’s membership of the European Union to Brussels Tuesday as the French government digs in its heels over aspects of his reform agenda
• U.K. inflation climbed to its highest in a year in January, driven by motor fuels, food and clothing. Consumer prices rose an annual 0.3% and core inflation slowed to 1.2%
• No IG corporates priced Friday, $1b priced on the week (YTD volume $182.575b) and no HY priced Friday, nothing priced on the week (YTD volume $9.275b)
  Sovereign 10Y bond yields mixed; European stocks mostly lower, Asian markets rise; U.S. equity-index futures higher. Crude oil, copper and gold rally

US Event Calendar

• 8:30am: Empire Manufacturing, Feb., est. -10.5 (prior -19.37)
• 10:00am: NAHB Housing Market Index, Feb., est. 60 (prior 60)
• 11:30am: U.S. to sell $37b 3M, $30b 6M bills
• 4:00pm: Total Net TIC Flows, Dec. (prior -$3.2b)
• Net Long-term TIC Flows, Dec. (prior $31.4b)
• TBA: Mortgage Delinquencies, 4Q (prior 4.99%)
• MBA Mortgage Foreclosures, 4Q (prior 1.88%)

Central Banks

• 8:30am: Fed’s Harker speaks in Newark, Del.
• 10:30am: Fed’s Kashkari speaks in Washington
• 7:00pm: Fed’s Rosengren speaks in Waterville, Maine

DB’s Jim Reid concludes the overnight event wrap

A fresh wave of optimism has swept through markets to start this week and it’s taken a double dose of soothing Central Bank rhetoric, along with further gains for Oil to get risk assets off to a flyer. With regards to the former and following on from PBoC Governor Zhou’s calming comments concerning China’s FX policy over the weekend, it was the turn of ECB President Draghi to weigh in with some reassuring comments of his own yesterday after speaking to European Parliament lawmakers.

Specifically, it was the ‘we will not hesitate to act’ comment which had markets and investors excited. Draghi referred to this in light of two key topics at the moment, that being the banking sector, and low energy prices and the associated read-through to inflation expectations. With regards to the latter, Draghi highlighted that at the March policy meeting ‘we will examine the strength of the pass-through of low imported inflation to domestic wage and price formation and to inflation expectations’. This was mentioned in conjunction to comments around Banks, saying that ‘in light of the recent financial turmoil, we will analyze the state of transmission of our monetary policy impulses by the financial system and in particular by banks’. Draghi concluded that if ‘either of these two factors entail downward risks to price stability’, then the ECB will not hesitate to act.

Perhaps unsurprisingly Draghi also made further comments aimed at dampening the recent concerns reverberating around European banks. The ECB President acknowledged that ‘the fall in bank equity prices was amplified by perceptions that banks may have to do more to adjust their business models to the lower growth/lower interest-rate environment and to the strengthened international regulatory framework that has been put in place since the crisis’. However, this was also followed up with the need to acknowledge that ‘the regulatory overhaul since the start of the crisis has laid the foundations for durably increasing the resilience not only of individual institutions but also of the financial system as a whole’ and that ‘perhaps most importantly, euro area banks have significantly strengthened their capital positions over the past few years’.

Bourses in Asia and specifically Japan held onto those big gains after we went to print yesterday, with the Topix (+8.02%) eventually closing up by the most since 2008. European equity markets started strongly and traded with a positive tone throughout. The end result was a sharp leg up for the Stoxx 600, eventually closing +2.99% and just outdoing the +2.91% gain made on Friday, with other core and peripheral bourses up similar amounts.

This morning in particular it’s been all about Oil with the complex extending gains which started on Friday, this time as headlines dominate the wires that Saudi Arabia, Qatar, Venezuela and Russia Oil Ministers are set to meet today in Doha. While the agenda is being kept private, the hope is that this could be a positive step forward for potential coordinated action around lower production levels for Opec and non-Opec members. In any case we’ve seen WTI rise +4.38% this morning and back towards $31/bbl, after being as low as $26 just last Thursday. Brent is up +3.89% to $34.69/bbl. One to keep an eye on as the day progresses.

Meanwhile there’s also been some China data for us to digest this morning. Aggregate financing in January has printed well above expectations at 3.42bn Yuan (vs. 2.2bn expected). Money supply growth has also strengthened, with M2 growth in particular +14.0% yoy (vs. +13.5% expected), having been at +13.3% in December. While on face value this would indicate some easing in credit conditions, seasonality may also be playing its part at this time of year.

This, combined with Draghi’s comments has helped markets in Asia build upon their strong start to the week. The Nikkei and Topix are currently up +0.72% and +0.90% respectively, while the Hang Seng (+1.33%), ASX (+1.37%) and Kospi (+1.40%) are also firmer. Its bourses in China which are leading gains however with the Shanghai Comp and CSI 300 currently +2.75% and +2.70% respectively. US equity market futures are up around half a percent while credit indices in Australia and Asia are both tighter. Meanwhile the onshore CNY has given up a little bit of yesterday’s strengthening, with the currency currently -0.28% weaker in early trading.

Wrapping up the price action yesterday. Along with the strong gains for equities, European credit markets extended the rally for a second day, led once again by moves for financials indices. ITraxx senior and sub fins closed 4.5bps and 13bps tighter respectively which helped Main (-3.5bps) and Crossover (-13.5bps) tighten further. The better tone for risk saw Gold tumble -2.32% yesterday and is down another 1% this morning which has taken it back below $1200. Other precious metals are also weaker while base metals were a bit more mixed yesterday.

Looking at today’s calendar, this morning in Europe the main data of note will firstly be the UK CPI/RPI/PPI docket for January, followed closely by the February German ZEW survey where current expectations are for a marked decline in both the current situation and expectations component. In the US this afternoon the February Empire manufacturing print is due, followed later by this month’s NAHB housing market index reading. Fedspeak wise we’re due to hear from Harker (at 2pm GMT) who is due to deliver his 2016 economic forecast, followed later on by comments from the new Minneapolis Fed President Kashkari (at 3.30pm GMT). Earnings wise we’ve got 14 S&P 500 companies set to report.

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