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On Friday, President Donald Trump plans to sign an executive action to scale back the 2010 Dodd-Frank financial-overhaul law, in a sweeping plan to dismantle much of the regulatory system put in place after the financial crisis. The order won’t have any immediate impact. But it directs the Treasury secretary to consult with members of different regulatory agencies and the Financial Stability Oversight Council and report back on potential changes. 

“There are quite a few things that we could do on Dodd-Frank … that we think will have fairly immediate and dramatic impact,” the official said, including personnel changes at regulatory agencies and additional executive orders.

That likely includes a review of the CFPB, which vastly expanded regulators’ ability to police consumer products — from mortgages to credit cards to student loans. Trump administration officials, like other critics, argue Dodd-Frank did not achieve what it set out to do and portray it as an example of massive government over-reach.

Trump will also sign a presidential memorandum Friday that instructs the Labor Department to delay implementing the so-called “fiduciary rule” – an Obama-era rule that requires financial professionals who charge commissions to put their clients’ best interests first when giving advice on retirement investments. The “fiduciary rule” was aimed at blocking financial advisers from steering clients toward investments with higher commissions and fees that can eat away at retirement savings.

The retirement advice rule was issued by the Obama administration and was set to take effect in April. It has been staunchly opposed by the financial services industry, who argue the rule limits retirees’ investment choices by forcing asset managers to steer them to the lowest-risk options. Opponents of the rule argued that the rule would result in high costs that will ultimately make small accounts unprofitable. While some lawsuits were filed against the rule, companies like Bank of America Corp’s Merrill Lynch and Morgan Stanley had announced plans to cooperate with the rule. The Labor Department had estimated that it could cost firms as much as $31 billion over the next decade to comply.

“Americans are going to have better choices and Americans are going to have better products because we’re not going to burden the banks with literally hundreds of billions of dollars of regulatory costs every year,” White House National Economic Council Director, and former Goldman president, Gary Cohn said in an interview with The Wall Street Journal. “The banks are going to be able to price product more efficiently and more effectively to consumers.”

A senior White House official outlined the measures in a background briefing with reporters Thursday. “We think that they have exceeded their authority with this rule and we think this is something that is completely overreaching,” the official told reporters at a briefing on Thursday.

Trump pledged during the campaign to repeal and replace the law, which also created the Consumer Financial Protection Bureau. “Dodd-Frank is a disaster,” Trump said earlier this week during a meeting with small business owners. “We’re going to be doing a big number on Dodd-Frank.”

Cohn said the actions are intended to pave the way for additional orders that would affect the postcrisis Financial Stability Oversight Council, the mechanism for winding down a giant faltering financial company, and the way the government supervises big financial firms that aren’t traditional banks, often referred to as systemically important financial institutions.

More from the WSJ:

Trump blamed the political establishment and Wall Street banks for leaving behind many Americans and vowed to break up both. Those promises have already been called into question as he has filled his administration with members of Congress and Wall Street executives, including Mr. Cohn, who retired as president of Goldman Sachs Group Inc. to join the Trump administration.

 

Adding to the potentially difficult optics for Mr. Trump, he will sign the actions on the same day he meets with a group of business executives, including J.P. Morgan Chase & Co. Chief Executive James Dimon and BlackRock Inc. CEO Laurence Fink. Asked about the potential political pushback because of his Wall Street past, Mr. Cohn said the administration’s goal of deregulating financial markets “has nothing to do with Goldman Sachs.”

 

“It has nothing to do with J.P. Morgan,” he said. “It has nothing to do with Citigroup. It has nothing to do with Bank of America. It has to do with being a player in a global market where we should, could and will have a dominant position as long as we don’t regulate ourselves out of that.”

The changes Cohn described are sure to face a fight from consumer groups and Democrats, who say postcrisis regulations are protecting average borrowers and investors from abusive practices, while making the financial system more resilient and bailouts less likely.

This path also may create political problems for Mr. Trump, whose campaign was successful in swaths of the Midwest where homeowners were hit hardest by the housing crash sparked by the financial crisis.

Meanwhile, asked about the potential political pushback because of his Wall Street past, in his WSJ interview Cohn said the administration’s goal of deregulating financial markets “has nothing to do with Goldman Sachs.”

“It has nothing to do with J.P. Morgan,” he said. “It has nothing to do with Citigroup. It has nothing to do with Bank of America. It has to do with being a player in a global market where we should, could and will have a dominant position as long as we don’t regulate ourselves out of that.” Cohn said existing regulations put in place by Dodd-Frank are so sweeping that it is too hard for banks to lend, and consumers’ choice of financial products is too limited.

Democrats and consumer groups have pushed for tighter controls on banks and other lenders, particularly after the subprime mortgage crisis that helped fuel the global financial crisis. But Cohn said that many of the postcrisis rules haven’t solved the problems they were supposed to be addressing. He said, for example, that there still isn’t a solid process to safely wind down the collapse of a giant faltering financial company or to ensure that those firms have access to short-term liquidity.

“I’m not sitting here saying we want to go back to the good old days,” Cohn said. “We have the best, most highly capitalized banks in the world, and we should use that to our competitive advantage,” he added. “But on the flip side, we also have the most highly regulated, overburdened banks in the world.”

Cohn also laid out a road map for how the Trump administration plans to target new financial rules. He said the Treasury Department would lead an effort to overhaul mortgage-finance giants Fannie Mae and Freddie Mac, which were put into government conservatorship after the crisis. He also said that the White House wouldn’t need a change in the law to redirect the mission of the Consumer Financial Protection Bureau, created by the 2010 law and which governs things like mortgage and credit-card rules. (Please see related article on B10.)

He suggested the White House could influence the mission of the bureau, set up as an independent agency, by putting a new person at its helm to replace Richard Cordray, the agency’s director. Asked about potential changes at the agency, he said, “Personnel is policy.”

* * *

Trump said repeatedly during the presidential campaign that the Dodd-Frank overhaul law was preventing banks from lending, which he said made it harder for consumers to access credit and get the economy to grow. Financial analysts have had mixed views on this assessment. Some believe that low demand from consumers has hurt the ability of banks to lend, and low interest rates have hurt the returns banks make on these loans. But smaller banks have said they are dealing with a crush of new regulations spurred by Dodd-Frank, something regulators have struggled to address.

Cohn didn’t specify how all of these regulations should be rewritten, but he said that financial markets have made their own corrections and that the environment that fueled the financial crisis no longer existed. He said, for example, that even if mortgage restrictions are rolled back, it doesn’t mean that there would be another boom in the subprime lending market. That is because, he said, those loans can’t be securitized and sold like they were before the financial crisis because the market for those products isn’t the same.

“We don’t want to do it an unregulated way,” he said. “We want to do it in a smart, regulated way.”

Translation: we want our bubble, we want to be able to securitize, package and sell it, we want to offload risky exposure to momentum-chasing retail investors and, potentially, widows and orphans.

via http://ift.tt/2k999aZ Tyler Durden

In an early tweetstorm, President Trump fired off a volley of five (so far) tweets early on Friday morning, touching on all the key salient newsitems over the past 24 hours, including the ongoing feud with Schwarzenegger, the Australia PM phone call, the imminent round of Iranian sanctions, his upcoming meeting with business leaders and last but not least, the “professional anarchists” who foiled a speech by Milo Yiannopoulos at UC Berkeley. The good news for traders is that none of them appear to be particularly market moving or focusing on any specific company or part of the market.

The tweets in order as they came in:

Yes, Arnold Schwarzenegger did a really bad job as Governor of California and even worse on the Apprentice…but at least he tried hard!

Yes, Arnold Schwarzenegger did a really bad job as Governor of California and even worse on the Apprentice…but at least he tried hard!

— Donald J. Trump (@realDonaldTrump) February 3, 2017

Iran is playing with fire – they don’t appreciate how “kind” President Obama was to them. Not me!

Iran is playing with fire – they don’t appreciate how “kind” President Obama was to them. Not me!

— Donald J. Trump (@realDonaldTrump) February 3, 2017

Thank you to Prime Minister of Australia for telling the truth about our very civil conversation that FAKE NEWS media lied about. Very nice!

Thank you to Prime Minister of Australia for telling the truth about our very civil conversation that FAKE NEWS media lied about. Very nice!

— Donald J. Trump (@realDonaldTrump) February 3, 2017

Meeting with biggest business leaders this morning. Good jobs are coming back to U.S., health care and tax bills are being crafted NOW!

Meeting with biggest business leaders this morning. Good jobs are coming back to U.S., health care and tax bills are being crafted NOW!

— Donald J. Trump (@realDonaldTrump) February 3, 2017

Professional anarchists, thugs and paid protesters are proving the point of the millions of people who voted to MAKE AMERICA GREAT AGAIN!

Professional anarchists, thugs and paid protesters are proving the point of the millions of people who voted to MAKE AMERICA GREAT AGAIN!

— Donald J. Trump (@realDonaldTrump) February 3, 2017

* * *

Yesterday we showed a histogram of Trump’s various tweeting hours, however it now appears that the 6-7am block will need to be revised, as it is rapidly becoming Trump’s favorite tweeting hour.

 

via http://ift.tt/2k3fMsI Tyler Durden

European stocks and S&P futures rose modestly ahead of January US payrolls data, along with the dollar, while Asian shares dropped after China returned from a week-long holiday. Bonds slid, oil rose while the JGB intervened in the bond market to prevent a bond rout, in one of two major surprises during the Asian session.

As reported last night, having closed at 0.109% yesterday the 10y JGB yield touched an intraday high of 0.150% this morning – the highest in 12 months – despite the BoJ offering to buy back ¥450bn of 5-10y maturities in a scheduled operation, which equaled the amount bought a  week ago. The quantity was clearly seen as too passive though in the context of breaking through what most think is the perceived upper limit of the BoJ’s level of comfort around the 0% 10y yield target. However after the market had tested their resolve the BoJ then made another move a couple of hours later in an unscheduled operation to buy back an unlimited amount of bonds again in the 5-10y bucket, at a fixed rate of 0.110%. The 10y yield has now fallen back. While that latter move has had a more obvious effect, it’s worth highlighting that the yield still remains above the BoJ’s perceived upper band, notwithstanding the fact that markets have been left a bit dazed and confused by all this. The Yen has also whipsawed and is currently -0.20% weaker.

 

That was not all: in the second unexpected Asian move, this morning China announced an unexpected tightening of policy when it raised rates on 7, 14 and 28-day reverse repos by 10bps to 2.35%, 2.50% and 2.65% respectively. That’s the first increase in the 28-day contracts since 2015 and since 2013 for the other two tenors. Keep in mind that this is the first working day following the New Year holiday in China, so it seems to be a decent statement of intent by the PBoC. Additionally, the SLF rate was increased to 3.1 percent from 2.75 percent. The implicit tightening sent Chinese stocks lower, with the Shanghai Composite closing down 0.6%, and accelerating the selloff in Chinese 10Y government futures.

While a set of well-received corporate results helped prevent the weakness from spilling over into European stocks, the focus now shifts to the U.S. labor market report.

All of which brings us to payrolls Friday, a fitting end to what has been a busy week. The current market consensus for today is 175k although the range between economists is a fairly lofty 140k to 238k. Remember that Wednesday’s ADP came in at a much better than expected 246k while the employment component of the ISM manufacturing also bounced 3.3pts to 56.1, so the whisper number might be a little higher than the where the consensus is. As always keep an eye on the other components of the report too. The market expects the unemployment rate to hold steady at 4.7% and average weekly earnings to rise +0.3% mom.

The Bloomberg’s Dollar Spot Index rose, paring a sixth weekly decline, its longest losing streak since 2010. Europe’s Stoxx 600 index advanced and the region’s bonds dropped, following moves in Treasuries. Britain’s pound dropped against most of its major peers after growth slowed in the service industry amid surging costs.  As Bloomberg notes, central bank decisions have dominated the financial markets all week, as policy makers from Japan to the U.S. try to assess the impact of America’s new leadership on global growth. Investors are also looking for clues on economic strength amid a wave of corporate earnings. While signs point to increasing confidence that growth will accelerate, data have painted a murkier picture, highlighting the significance of Friday’s jobs report.

“The next hurdle for the USD to overcome is the Fed,” said analysts at Morgan Stanley, led by strategist Hans Redekker, in a note to clients, adding, however, that conditions for a resumption of the dollar to resume its rally have improved. Reiterations of continued monetary policy in Europe, the Bank of Japan’s commitment to control the JGB yield curve and weaker yuan fixings by the People’s Bank of China, are “three pluses” for the US dollar, Morgan Stanley said.

“Investors are really cautious, taking a defensive posture, as they wait and see what U.S. jobs data will show about the economy and the pace of rate increases,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. “The direction of global interest rates is also a key element keeping investors at bay.”

European stocks rose 0.5 percent as of 10:51 a.m. in London, reversing the previous session’s losses. Only miners dropped, following lower-than-expected China macroeconomic data. Futures on the S&P 500 edged higher. The index has gained or retreated by less than 0.1 percent for five of the past six days, and is down 0.6 percent on the week.

Meanwhile, in commodities oil prices edged up on threat of U.S. issuing new Iran sanctions while comments by Russian energy minister Alexander Novak that oil producers had cut their output in accordance with a pact agreed in December also helped support prices. Brent crude futures were up 17 cents, or 0.3 percent, to $56.72 a barrel. Brent is set to gain more than 2 percent for the week. Front month U.S. West Texas Intermediate crude futures climbed 15 cents, or 0.3 percent, to $53.69 a barrel.

The yield on 10-year U.S. Treasuries rose one basis point to 2.48 percent. The yield on German bonds due in a decade also added one basis point to 0.43 percent.

* * *

Market Snapshot

• S&P 500 futures up 0.2% to 2280
• Stoxx 600 up 0.5% to 364
• MSCI Asia Pacific down 0.2% to 142
• US 10-yr yield up less than 1bp to 2.48%
• Dollar Index up 0.24% to 100.03
• WTI Crude futures up 0.3% to $53.69
• Brent Futures up 0.3% to $56.75
• Gold spot down 0.2% to $1,214
• Silver spot down 0.7% to $17.36

Top Global News

• Trump to Order Review of Dodd-Frank, Halt Obama Fiduciary Rule: plans executive action Friday to significantly scale back the regulatory system put in place in 2010
• America Movil Misses Estimates With Mexico Margins Pressured: Home market’s operating profit margin falls to 18% from 28%
• Visa Sticks to Forecast Despite Strong Dollar, Shares Rise: New CEO Al Kelly sees ‘good momentum in the business’
• Snap Files for IPO; 2016 Rev. $404.5m vs $58.7m y/y
• Nordstrom Says It’s Cutting Ivanka Trump Brand Due to Poor Sales: Cites the brand’s performance in making the decision
• Amazon Projects Spending That Concerns Investors Watching Profit: Company says earnings will shrink even as revenue soars
• Panasonic Falls as U.S. Authorities Investigate Avionics Unit: Panasonic also raises full-year profit and sales forecasts
• Snap Asks Non-Voting Investors to Focus on Vision, Not Losses: IPO investors only offered non-voting shares in company
• Amgen Cholesterol Drug Meets Goals; Profit Tops Estimates: Results of large study could unleash sales of pricey Repatha
• FireEye Falls After Disappointing Forecast, Executive Exits: Fourth-quarter sales were unchanged from a year earlier
• Daimler Reviewing Collaboration With Nissan at Mexico Auto Plant: Infiniti output set to start this year, Mercedes in 2018
• Escondida Strike Faces Delay as BHP Applies for Mediation: Request to labor authorities may add 5 days of negotiations

Asian markets were fractionally lower, following a subdued lead from as the region digested a miss on Chinese Caixin Manufacturing PMI and amid cautiousness ahead of NFP. This weighed on both the ASX 200 (-0.4%) and Nikkei 225 (Unch) with the latter choppy in reaction to BoJ-induced JPY fluctuations. Shanghai Comp. (-0.6%) and Hang Seng (-0.2%) traded negative on return of mainland participants who were greeted by the aforementioned miss on PMI data and after the PBoC raised rates for its reverse repo operations and Standing Lending Facility. 10yr JGBs whipsawed with initial pressure seen following a weak BoJ bond buying announcement of JPY 520BN vs. last Friday’s JPY 1.27TN total. However, 10yr JGBs then recovered after a late surprise by the BoJ to conduct a fixed-rate JGB purchase operation for unlimited amounts of 5-10yr JGBs, in which it offered to buy the benchmark 10yr at 0.11% and therefore effectively restricted further increases in yields.

Top Asian News

• China Tightens as Japan Keeps Easing as Monetary Policy Diverges: PBOC hikes money market costs, BOJ intervenes in bond market
• Jindal Said in Talks to Sell Power Plant for Over $1.5 Billion: Co. seeks to cut debt after eight straight quarters of losses
• GIC Investment Chief Sees ‘Structural’ Changes in Tech, Health: Sovereign fund has created two groups for tech, healthcare
• Mitsubishi UFJ Profit Unexpectedly Rises 17% on Bond Trading: Japan’s three biggest banks are on track to meet profit goals
• Honda Raises Operating Profit Forecast by 21% on Weaker Yen: Yen has weakened about 7% since Trump elected U.S. president

European indices are trading in the green with materials the only sector in the red after poor manufacturing data from China. Energies outperform after WTI and Brent crude prices hold up after a few days of gains. In terms of major movers this morning, Banco Popular shares fell in the wake of their pre-market earnings release. The Spanish bank posted losses of EUR 3.58b1n which led shares to fall 8% at the open. In fixed income markets supply is light today with only with the UK DMO coming to market with their usual Friday T-bill tender.

Top European News

• Banco Popular Posts $3.9 Billion Loss on Real Estate Purge: Troubled Spanish lender seeks to draw line under property bust
• Areva Agrees Equity Investments From Japan Nuclear Companies: France to subscribe to EU2.5b reserved capital increase
• Orange Seeks Africa Deals as Wireless Carrier Eyes Expansion: French wireless carrier ‘speaking to everyone,’ official says
• Goldman Sachs Sells $940 Million Stake in Denmark’s Dong: Goldman will still own a 7% stake in the Danish utility
• May Seeks to Ride Brexit Wave Targeting Historic By-Election Win: Conservatives are aiming for rare gain for a ruling party
• U.K. Services Growth Cools as Costs Dominate Companies’ Concerns: PMI index falls to 54.5 in Jan. from 56.2 in Dec.

In currencies, the usual pre US payrolls trade sees the USD meandering in some well worn ranges, with USD bulls still looking to find a base. Despite some glitches in the data series of late — including the Q4 GDP number this time last week — the market has also been trying to fight off comments from president Trump and his advisers (on currency devaluation), but today’s numbers could put some focus back on domestic led policy drivers, albeit with the Fed rate hike profile currently erring towards 2 for 2017. USD/JPY is showing signs of the strain more than anywhere else, and this may have contributed to a little more intent in EUR/USD, as sellers came in hard ahead of 1.0850 yesterday. Resilience coming in from the low 1.0700’s, with buyers pointing to the rise in inflation despite the ECB choosing to look through the energy led effects. Cable could come under attack once again if USD bulls look for a safer route, and this will have been enhanced by the UK services PMIs this morning, which saw the index falling more than expected from 56.5 to 54.5 vs 55.8 expected. EUR/GBP has tipped 0.8600, but is struggling to hold onto gains. Russia’s ruble pared an earlier loss and bonds retreated after the central bank left its key rate unchanged at 10 percent and said the potential for a cut in the first half of the year has diminished.

In commodities, China’s return has failed to produce the fresh bid in base metals as some were expecting, with softness in prices partly attributed to a modest bid in the USD. Zinc and Lead are showing the larger percentage losses on the day so far, while Copper found price resistance ahead of USD6,000p/t yesterday, extending the pull-back to just shy of USD5,8000. Nickel has also eased back despite the impact on mines in the Philippines from the environmental `moratorium’. Oil headed for a third weekly gain as OPEC reached about 60 percent of its output-cut target and the U.S. was said to be planning new sanctions on Iran after a missile test. West Texas Intermediate crude advanced 0.4 percent to $53.74 a barrel and Brent climbed to $56.78.  Gold pared the biggest weekly gain since Jan. 13 as demand rebounded to a three-year high in 2016 as investor concerns over political issues including Brexit spurred demand for a haven. Bullion for immediate delivery slipped 0.2 percent to $1,213.17 an ounce, poised for a weekly increase of 1.9 percent. Industrial metals declined after after weaker-than-expected factory data and signs of tighter monetary policy in China, highlighting risks of demand slowing. Copper dropped 0.9 percent to $5,832.50 a metric ton and zinc lost 2.6 percent. Nickel fell 1.8 percent as companies in the Philippines pushed back on mine-closure orders that could restrict supply of the metal.

Looking at the day ahead, this morning in Europe it’ll be all eyes on the remaining January PMI’s where we’ll get the final revisions to services and composite readings for the Euro area, Germany and France, as well as a first look at the data for the UK and the periphery. Also due out this morning is the December retail sales numbers for the Euro area, which printed a disappointing -0.3% on expectations of a +0.3% rise. In the US it’ll be all eyes on the aforementioned January employment report and of course the nonfarm payrolls print. As well as that, the final services and composite PMI revisions will be made, while the ISM non-manufacturing reading for January and factory orders in December will also be out. Away from the data we’ll also hear from Chicago Fed President Evans this afternoon at 2.15pm GMT when he is due to speak on the US economy and policy. On the earnings front it’s fairly quiet with only 6 S&P 500 companies set to report.

* * *

US Event Calendar

• 8:30am: Change in Nonfarm Payrolls, Jan., est. 175k (prior 156k); Unemployment Rate, Jan., est. 4.7% (prior 4.7%)
• 9:15am: Fed’s Evans Speaks on Economy and Policy in Olympia Fields
• 9:45am: Markit US Services PMI, Jan. F (prior 55.1)
• 10am: ISM Non-Manufacturing Composite, Jan., est. 57.0 (prior 57.2)
• 10am: Factory Orders, Dec., est. 0.7% (prior -2.4%)
• 10am: Durable Goods Orders, Dec. F (prior -0.4%); Capital Goods Orders Non-Def Ex-Aircraft & Parts, Dec. F (prior 0.8%)
• 1pm: Baker Hughes rig count

US Government Docket:

• 9am: House to consider joint resolution to disapprove Bureau of Land Management rule on conservation, waste prevention and production subject to royalties
• 3pm: Woodrow Wilson Center discusses year ahead in environment and energy

DB’s Jim Reid concludes the overnight wrap

Welcome to payrolls Friday, a fitting end to what has been a busy week. Well we say its been busy, what with the world getting used to the ebbs and flows of a Trump Presidency and the subsequent need to keep our Twitter accounts within eyeshot, central bank meetings from the BoJ, Fed and BoE, European politics bubbling below the surface and the corporate reporting calendar kicking up a gear. That said, aside from some brief excitement on Monday, the reality is that we’re still hovering around similar low levels of volatility and markets appear to be no more convinced about the near-term direction relative to where we sat last week.

Indeed we thought it would be worth taking a quick snapshot of what markets have done this week. The most interesting price action has come in FX where Mr Trump’s jawboning about currencies has been a big factor. As a result we’ve seen the Dollar index trade in a high-to-low range range of 1.77%, the Yen trade in a 2.53% range and the Euro in a 1.96% range this week. However that is about the extent of the excitement. In rates 10y Treasury yields closed last night at 2.475% after closing at 2.485% last week, and have traded in a fairly unexciting 8bp range this week. Credit markets are much the same with CDX IG just 1.5bps wider this week (with a 2.5bp range) while iTraxx Main is 2bps wider over the week (in a 4bp range). What has been most remarkable though is the amazingly small day to day moves for US equities. Following the -0.60% loss on Monday the last three daily moves for the S&P 500 have been -0.09%, +0.03% and +0.06%. In fact if we go back to the last six trading days, the index has closed either up or down by less than 0.10% on five of those six days. The current level of the VIX (11.93) is also not too far off the two and a half year low on Friday of 10.58.

If the overnight session in Asia is anything to go by though, then we might be in for a livelier day today. The first thing to note is the latest moves in JGB’s. Having closed at 0.109% yesterday the 10y yield touched an intraday high of 0.150% this morning – the highest in 12 months – despite the BoJ offering to buy back ¥450bn of 5-10y maturities in a scheduled operation, which equalled the quantum bought a  week ago. The quantity was clearly seen as too passive though in the context of breaking through what most think is the perceived upper limit of the BoJ’s level of comfort around the 0% 10y yield target. However after the market had tested their resolve the BoJ then made another move a couple of hours later in an unscheduled operation to buy back an unlimited amount of bonds again in the 5-10y bucket, at a fixed rate of 0.110%. The 10y yield has now fallen back. While that latter move has had a more obvious effect, it’s worth highlighting that the yield still remains above the BoJ’s perceived upper band, notwithstanding the fact that markets have been left a bit dazed and confused by all this. The Yen has also whipsawed and is currently -0.20% weaker as we type. The Nikkei is up +0.36%. A fascinating few hours.

That’s not all though as this morning China also announced that they are raising rates on 7, 14 and 28-day reverse repos by 10bps to 2.35%, 2.50% and 2.65% respectively. That’s the first increase in the 28-day contracts since 2015 and since 2013 for the other two tenors. Keep in mind that this is the first working day following the New Year holiday in China, so it seems to be a decent statement of intent by the PBoC. Bourses in China have opened lower with the Shanghai Comp and CSI 300 currently -0.57% and -0.61% respectively.

Away from that the ASX (-0.47%) and Kospi (-0.18%) are also down, while US equity index futures are also in the red. There’s also been some Trump news to highlight with the announcement last night that the new administration is to impose fresh sanctions on Iran, possibly as soon as today. This comes after Trump warned on Wednesday that he was putting Iran “on notice” for recent military action and also for supporting various military groups. The WSJ is suggesting that the sanctions are unrelated to Iran’s nuclear program and so won’t violate the nuclear deal forged under Obama’s administration.

Back to payrolls. The current market consensus for today is 180k although the range between economists is a fairly lofty 140k to 238k. Our US economists have a below-market 150k forecast which they note is consistent with real GDP growth near 2%. Remember that Wednesday’s ADP came in at a much better than expected 246k while the employment component of the ISM manufacturing also bounced 3.3pts to 56.1, so the whisper number might be a little higher than the where the consensus is. As always keep an eye on the other components of the report too. The market expects the unemployment rate to hold steady at 4.7% and average weekly earnings to rise +0.3% mom.

Moving on. While there wasn’t a huge amount to report from markets in the US yesterday, it was a bit of a weaker day for European equities where the Stoxx 600 fell -0.34%. More eye catching were the moves in rates though. 10y Bund yields finished 4.3bps lower at 0.420% and yields in the periphery were anywhere from 4bps to 10bps lower. That may have reflected some of the commentary out of the ECB yesterday. Board member Praet said that the firming recovery in Europe is “not yet sufficiently robust to ensure a self sustained convergence of inflation rates to levels closer to 2%”.

The bigger impact though was perhaps the BoE. As expected there were no surprises on the policy front. DB’s Mark Wall highlighted that the key change to the BoE’s latest assessment of the economy was not that GDP was revised up, which was more predictable – the forecast for GDP growth in 2017 is now 2.0%, up from 1.4% in November and 0.8% in August – but that the supply side potential of the economy was revised up too. The impact of the latter effectively neutralized the ramifications on inflation from the former. More specifically, the BoE has reduced its view on the natural rate of unemployment to 4.5% from  5.0%. Overall Mark viewed the neutral tone in the BoE’s press statement, MPC minutes and Inflation Report press conference as more dovish than he had expected. In his view the hurdle to changing the policy stance, or signalling a potential change, is high. There remains a fear also that Brexit could yet hurt the economy more substantially and that the costs of a policy error are asymmetric.

Staying in Europe, yesterday DB’s Marco Stringa published an update on the political situation in Catalonia. He highlights that Catalonia’s independence quest is likely to return to the headlines over the next few months. He believes that the call for an independence referendum there is not just posturing to get a better fiscal deal. Indeed it is his long-held view that the fragile Catalan government can survive only if it is seen continuing with the plan to hold an independence referendum. The President of Catalonia has said that the independence referendum will take place at the latest in September 2017 but that according to Spanish media, the Catalan government is considering bring it forward to early summer. In Marco’s central case scenario, he does not think that the current Catalan government has enough political support to implement a unilateral secession from Spain even if the hypothetical independence referendum takes place. The main risk in the short term is increasing tensions that play into the hands of the pro-independence movement.

Before we look at today’s calendar, in terms of yesterday’s data in the US, non-farm labour productivity rose a slightly stronger than expected +1.3% qoq annualised (vs. +1.0%) in Q4. Unit labour costs rose less than expected in the same quarter (+1.7% vs. +1.9% expected). Finally initial jobless claims decreased 14k to 246k last week. The only other data to note yesterday was the Euro area PPI reading which printed at +0.7% mom.

Looking at the day ahead, this morning in Europe it’ll be all eyes on the remaining January PMI’s where we’ll get the final revisions to services and composite readings for the Euro area, Germany and France, as well as a first look at the data for the UK and the periphery. Also due out this morning is the December retail sales numbers for the Euro area. In the US this afternoon it’ll be all eyes on the aforementioned January employment report and of course the nonfarm payrolls print. As well as that, the final services and composite PMI revisions will be made, while the ISM non-manufacturing reading for January and factory orders in December will also be out. Away from the data we’ll also hear from Chicago Fed President Evans this afternoon at 2.15pm GMT when he is due to speak on the US economy and policy. On the earnings front it’s fairly quiet with only 6 S&P 500 companies set to report. The only other thing to keep an eye on today is a meeting between EU leaders in Malta this morning where discussion topics are set to include migration and the political future of the bloc. Before we sign off, it’s worth noting that this Sunday President Trump is due to take part in a televised interview with Fox News prior to the Super Bowl  at 9pm GMT/4pm EST. So keep an eye on that one.

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11 people were arrested at NYU Thursday night when Anti-fascist fascists tried to organize a second night of protests riots to shut down the free speech of yet another conservative thinker on campus – this time being writer, actor, comedian and (no longer affiliated) Vice Co-founder Gavin McInnes. The NYPD wasn’t taking any chances after what happened at UC Berkeley Wednesday night, and showed up in force – though it wasn’t enough to prevent mollycoddled trust fund purse-dogs from shutting McInnes’ event down with intense yapping (video below).

Just saw 4 vans of cops unload outside of the NYU Anti-Fa protest of Gavin McInnes’ talk http://pic.twitter.com/aZU5e3abm0

— Jason Miller (@bronco7732) February 2, 2017

If there’s a silver lining to the death of free speech on yet another US college campus, it’s exposing people like this slobbering NYU professor who had a total meltdown over McInnes’ mere presence. Her profanity-laced tirade is a perfect example of  the type of fanatical, ignorant, intolerant, hyper-sensitized liberalism that US educators are steeping future generations in.

She’s shrieking at the cops to assault Gavin McInness “because the students shouldn’t have to.” (NSFW)

 

McInnes, having been pepper sprayed earlier in the day, was ambushed during his speech by a group of triggered snowflakes. When a NYU student affairs rep intervened to remind the students of NYU’s proud tradition of free speech, the enraged trust fund babies turned on him too! Then, when McInnes called the ringleader down to debate, the future of America just stared back cow-eyed, robotically chanting “who’s campus? Our campus!”

This isn’t the first time McInnes has dealt with Antifa. Here he is relaying his experience with rioting children at the Deploraball January 19th:

What do you think? (NSFW)

 

 

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The Louvre museum in Paris has been cordoned off after a French soldier shot a man wielding a machete as he tried to force himself into a shopping mall at Paris’s Louvre museum in what looked like a terrorist attack, according to police officials. The man shouted “Allahu Akbar” (God is great) and attacked another soldier before being shot near the museum’s shopping mall, police said, adding a second person had also been detained after acting suspiciously.

The attacker was alive but seriously wounded, the head of Paris police Michel Cadot told reporters at the scene, adding the bags he had been carrying contained no explosives.

Evénement grave de #sécurité publique en cours à #Paris quartier du #Louvre, priorité à l’intervention des forces de sécurité et de secours http://pic.twitter.com/PxTLacJk7a

— Ministère Intérieur (@Place_Beauvau) February 3, 2017

The French Interior Ministry reported that there has been a “grave public security incident” in the vicinity of the Louvre museum. The area has been sealed off.

The man was carrying bags when he attempted to enter the shopping mall. After being denied entry, the man stabbed one of the soldiers, injuring him lightly, said Michel Cadot, a senior police official in Paris. Soldiers then shot the assailant five times, including once in the stomach, Mr. Cadot added. The assailant is in custody. The French PM said the Louvre attack was ‘terrorist in nature.’

Les services de secours arrivent au Louvre http://pic.twitter.com/ULFZ8NqK3S

— Jonathan RT France (@Jonathan_RTfr) February 3, 2017

“The soldier fired five bullets,” Cadot said, describing how the man hurried threateningly towards the soldiers. “It was an attack by a person… who represented a direct threat and whose actions suggested a terrorist context.”

The attacker cried out “Allahu Akbar,” a French police spokesperson said, adding that no explosives have been found so far. Police also said that the attacker’s remarks led them to believe that he had intended to carry out a terrorist attack, and was possibly acting alone.  An anti-terrorism inquiry has been opened, the public prosecutor said in a statement.

The identity and nationality of the attacker remains unknown for now, French Interior Ministry spokesman Pierre-Henry Brandet told reporters.

The French interior ministry says 250 people locked inside the Louvre following attack and they will be allowed out in small groups once vetted

France has been hit by a series of militant Islamist attacks over the past two years that have killed more than 230 people, and which have been claimed by the militant Islamist group Islamic State. The country is less than three months away from a presidential election in which security and fears of terrorism are among the key issues. It has been living under a state of emergency since November 2015.

Paris was also planning to submit its official bid to host the 2024 Olympic Games on Friday with a launch show at the Eiffel Tower around 1730 GMT. The most recent deadly attack took place in the southern city of Nice when a man drove a truck into a crowd on the seafront killing 86.

Live feed from the scene of the attack:

LIVE: Scene of shooting outside #Louvre https://t.co/UEnta27E8P

— RT (@RT_com) February 3, 2017

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Submitted by Judith Bergmann via The Gatestone Institute,

• Swiss authorities are currently investigating 480 suspected jihadists in the country.
• "Radical imams always preached in the An-Nur Mosque… Those responsible are fanatics. It is no coincidence that so many young people from Winterthur wanted to do jihad." — Saïda Keller-Messahli, president of Forum for a Progressive Islam.
• Switzerland is the answer to those who claim that Islamic terrorism is reserved for those countries that have participated in operations against ISIS or other Muslim terror organizations. Switzerland has done neither, yet its flag figured among sixty other enemy flags shown in an ISIS propaganda video.
• "Huge sums of money from Saudi Arabia, the United Arab Emirates, Qatar, Kuwait and Turkey are flowing to Switzerland… There is a whole network of radically-oriented mosques in Switzerland. The Muslim World League is behind it…. The network is a hub for Salafists. The Swiss authorities make a big mistake of not looking into the mosques." — Saïda Keller-Messahli.
• There are around 70 Turkish mosques financed directly from Turkey through the Diyanet Foundation in Switzerland.
• The Swiss government appears to give Qatar, one of the primary propagators of Wahhabi Salafism in the world today, extremely special treatment.

In November 2016, Swiss police arrested the imam of the an'Nur mosque in Winterthur, in the canton of Zürich, for calling for the murder of Muslims who refuse to participate in communal prayer. The young imam, who had come from Ethiopia, had been in Switzerland for only a short time. The Zurich Federation of Islamic Organizations (Vioz) declared it was "shocked", and suspended the an'Nur mosque from the federation until further notice: "We are shocked that an imam in one of our houses of prayer called for violence."

There is little cause for "shock". Already in 2015, Winterthur made headlines in Switzerland as an emerging center for young Muslims with jihadi ambitions. Four people from Winterthur managed to travel to Syria to join ISIS and a fifth was stopped at the airport in Zürich.

The an'Nur Islamic Cultural Center in Winterthur, Switzerland. (Image source: Google Maps)

In November 2015, Swiss journalist and Syria expert, Kurt Pelda said, "The IS has a cell in Winterthur in the vicinity of the An'Nur Mosque in Hegi, there is no longer any doubt." He also said that in addition to the five known cases, another man from Winterthur had travelled to Syria as well.

The former president of the Islamic Cultural Association of An'Nur, Atef Sahoun, denied all claims at the time:

"If we discover radical tendencies in one member, then the appropriate person will be immediately excluded. We send them away, no matter who it is".

Atef Sahoun was arrested for incitement in November 2016, along with the Ethiopian imam, but later released.

According to Saïda Keller-Messahli, Islam expert and president of Forum for a Progressive Islam, the arrested imam from the an'Nur mosque is only "the tip of the iceberg":

"Radical imams always preached in the An-Nur Mosque… Those responsible are fanatics. It is no coincidence that so many young people from Winterthur wanted to do jihad".

In November 2015, Swiss police carried out a raid on the homes of two imams at the biggest mosque in Switzerland, the Geneva Mosque, which was inaugurated in 1978 by the former king of Saudi Arabia. The mosque is run by a foundation, Fondation Culturelle Islamique de Genève, which appears to have close ties to Saudi Arabia. While French police refused to comment on the raids or allegations surrounding the imams, a Swiss paper reported, "…a group of around 20 young extremists had attended the mosque for several months, two of whom allegedly travelled to Syria".

Swiss authorities are currently investigating 480 suspected jihadists in the country. Switzerland is thus an excellent answer to those who still claim Islamic terrorism is reserved for those countries which have participated in operations against ISIS or other Muslim terror organizations. Switzerland has done neither, yet its flag figured among sixty other enemy flags shown in an ISIS propaganda video.

Who funds the approximately 250 mosques in Switzerland? The Swiss government does not know, at least officially, as it has no jurisdiction to collect data on the financing of Muslim associations and mosques except in exceptional cases where internal security is threatened.

Doris Fiala is a center-right parliamentarian, who has urged authorities to create transparency. She wants to list every association that benefits from foreign money in a commercial registry, its accounts supervised by an independent cantonal authority and auditor. In response to her requests, the cabinet told her:

"It is nonetheless common knowledge that governmental organizations and private individuals send donations from abroad. But the Federal Intelligence Service does not currently have any information on possible external funding of mosques that could affect the protection of the State."

According to Reinhard Schulze, professor of Islamic Studies at the University of Bern:

"There are undoubtedly structured contacts between the Muslim World League and certain Islamic organizations in Switzerland. Donations from the World League and other funds coming from Saudi Arabia are given to those mosques and organizations that are open to the Wahhabi tradition".

Money from Saudi Arabia reaches Switzerland in various ways, according to Schulze. One example is the European Organization of Islamic Centers (EOIC), founded in Geneva by an Algerian in 2015, which has as its single goal the financing of the infrastructure of Muslim institutions, and the training and employment of imams.

"Huge sums of money from Saudi Arabia, the United Arab Emirates, Qatar, Kuwait and Turkey are flowing to Switzerland", Saïda Keller-Messahli, told the newspaper NZZ in November. According to Keller-Messahli, the an'Nur mosque is not a unique example of a "radical" Swiss mosque:

"There is a whole network of radically-oriented mosques in Switzerland. The Muslim World League is behind it, training young imams and sending them out into the world. These are true wandering preachers, who are not only active in Switzerland, but also in Austria, Germany, Norway and Denmark. The network is a hub for Salafists. The Swiss authorities make a big mistake of not looking into the mosques. The image of the pitiful backyard mosques is no longer true. Currently, new mosques are being built at the cost of several million francs, most recently in Volketswil, Netstal and Wil. The idea that these amounts come from members of the mosques is simply a lie – they come from the Muslim World League and its organizations, for example in Geneva, with the clear intention of spreading Salafist thought here".

Furthermore, there are around 70 Turkish mosques, which are financed directly from Turkey through the Diyanet Foundation in Switzerland. The most important ones are in Zurich, Lucerne, St. Gallen, Lugano, Biel, Freiburg and Neuchâtel.

In addition, the Swiss government appears to give Qatar, one of the primary propagators of Wahhabi Salafism in the world today, extremely special treatment. Qatar has invested billions of Swiss francs in Switzerland: Already in 2008, it invested 6 billion francs in Credit Suisse and the former emir's son is on the board of directors of the bank. It holds 8.42 percent of the shares of the commodity group Glencore Xstrata and 4.11 percent of the rice retailer Dufry. Qatar even has a bank of its own, the QNB Banque Privée Suisse, which operates in Geneva. Apart from these investments, Qatar has invested heavily in the Swiss hotel industry, where it is continuing to grow its influence. It is currently spending one billion Swiss francs on acquiring and renovating three luxury hotels and resorts in Switzerland in Lausanne, Berne and near Lucerne, known as the "Bürgenstock Selection" project. The largest of the three is a resort, high above Lake Lucerne, where three hotels, ten luxury villas and dozens of apartments are being built. In the words of Die Welt, "Qatar is building its own village" in Switzerland.

Most telling of all, perhaps, is a small occurrence, which took place at the end of December. Die Welt reported that the Swiss air force allowed the former Emir of Qatar, Hamad Bin Khalifa al-Thani, to land in the middle of the night at Zürich airport, despite the existing night flying ban. The 64-year-old Khalifa al-Thani had broken a leg on holiday in Morocco, and insisted on being flown to Switzerland immediately, not caring in the least that no one is allowed to land in Zürich between three and six o'clock in the morning. The Swiss Air Force nevertheless agreed to the landing, basing its decision on a "medical emergency". Just before six, two more airplanes – this time from Doha, the capital of Qatar – landed, also during the flight ban.

The Swiss government, evidently, does not mind the ruling family of Qatar treating Switzerland as an extension of Qatar – and that really sums up perfectly the ongoing Islamization of Switzerland.

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It seems many are starting to tire of President Trump’s outbursts already, but as Bloomberg's Mark Cudmore notes, while this might be worrying on a geopolitical level, it’s a positive for markets… until, of course, it's not.

Trump comments are becoming a catalyst for jokes rather than market moves. Yesterday it was revealed that Trump told Mexico’s president that he might send troops across the border and the concept barely registered across assets.

[ZH: in fact, realized volatility in the S&P 500 dropped to its lowest since 2007…]

It’s concerning on a number of levels that moral outrage is declining so quickly. But from an investment standpoint it does mean that it’ll take something really shocking to sustainably hit risk appetite.

Global economic data continue to be strong and should provide optimism if the administration doesn’t manage to derail trends.

This was meant to be the year of macro but so far fundamental analysis is taking a back seat to Twitter feeds. As a result, it’s actually a stock-pickers market. Those who are bearish don’t buy the VIX but instead purchase protection on individual sectors or equities that may be impacted by the next policy pronouncement.

So far, the administration’s decrees seem distinctly negative for global growth.

But markets are trading relatively well all things considered. Tuesday was the fourth straight day of losses in the S&P 500 Index and the session still closed within one percent of the record high.

[ZH: It has now been 78 days (Oct 11th) since the S&P 500 fell 1%…]

I remain worried and bearish.

Financial markets are overly complacent to the severe risks from Trump’s actions and a nasty correction is possible. However, the more outbursts survived by the market, the less marginal impact each will have.

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