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With the UK's referendum on EU membership due in four months, it appears the market is gravely concerned about the possibility of Brexit. Despite the unleashing of Project Fear (both military and corporate fearmongery), cable (GBPUSD) has crashed 2.3% (the most in 7 years) to its lowest in 7 years, and both FX volatility and credit risk Brexit indicators are soaring to record highs.

Just as we warned, Friday's dubious gains have evaporated and cable is crashing to 7 years lows…

 

 

As Deutsche Bank's Jim Reid notes,

So four months tomorrow we'll see yet another important referendum for financial markets as all of us here in the UK decide on EU membership. Maybe we're imagining it but it seems that important national referendums are becoming more widespread. In the last 12 months we've seen the Scottish Independence and the Greek EU deal referendums both of which were market moving events. Not long before those we had the Crimea referendum, although in fairness this was less of a market moving event, while Catalonia was the subject of a somewhat de-facto referendum back in September. If such national polls are becoming more frequent it perhaps reflects the weak global economic environment and the hope that a major change brings a better future.

 

Very crudely, the Brexit opinion polls in recent years have tended to be correlated to the economic data in Europe and the U.K. So the stay vote has polled notably higher in good times than bad. In the Euro crisis of 2012, 'Out' regularly polled around 70% amongst the UK population. In today's PDF (click on the link near the top), we show the YouGov polls on Brexit over the last 5 years which highlights this. The latest poll here showed a 9% lead for 'Out' but we should say that a Survation poll over the weekend had 'Remain' in a 15% lead. Indeed all the recent phone polls (like this one) show a big lead for the status quo whereas online polls are mixed with many having 'Out' in the lead. We've collated a table of a selection of the last two months of polls in the PDF as well to highlight this.

 

 

One problem for the 'Remain' campaigners is the declining growth across the globe and the continent. On Friday our European economists downgraded their 2016 GDP number from 1.6% to 1.4% following a 12 month period where their 2016 forecast has remained constant at 1.6%.

 

Thinking about it, if our European friends really want the UK to stay maybe they should let us win Eurovision this year and let us have a good start to Euro 2016. Maybe PM Cameron didn't dare hold the referendum any later than June 23rd as the UK home nations might not be in the tournament much past this date (final on July 10th) with the usual associated doom surrounding our exits.

 

Since the news of the EU deal for the UK and associated referendum date announcement wires have been dominated by the response of Cameron’s fellow Conservative members, six of which have announced that they will campaign for ‘Out’ including London Mayor Boris Johnson. This is significant given the Mayor’s approval ratings and a big personality now in the ‘Out’ camp, although it remains to be seen just how much of an active role he will play in campaigning, possibly choosing to keep a low profile in light of his future Conservative Party leadership chances. The news comes after Justice Secretary Michael Gove announced himself that he will also campaign for Britain to leave too.

And it appears Brexit indicators are pointing towards Brexit being likely…

 

One can only imagine the fearmongery ramp-up that will take place in the next few months to 'fix' this.

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

For the likes of Paul Krugman, the Riksbank provides a cautionary tale for central banks wary of committing so-called “policy mistakes.”

Back in 2010, the bank started to hike rates. That decision halted a decline in unemployment and shortly thereafter, it became apparent that “the rock star of the recovery had turned itself into Japan.” Or so Krugman says.

He went on to blame the “error” on “Sadomonetarism,” which he hilariously described as “an attitude, common among monetary officials and commentators, that involves a visceral dislike for low interest rates and easy money, even when unemployment is high and inflation is low.”

If these “sadomonetarists” are indeed “common among monetary officials,” then it’s news to us because everywhere you turn, DM central bankers have plunged headlong into the Keynesian abyss as NIRP proliferates and QE continues unabated in Europe, Japan, and yes, in Sweden, where the Riksbank made a U-turn in 2011 on the way to pushing rates deeply into negative territory.

Here’s where the world stands as it relates to NIRP.

The question one might fairly ask Krugman is why the world is still stuck with a stubborn deflationary impulse 8 years after Ben Bernanke mustered the “courage” to print. Central banks have eased, and eased, and eased and yet inflation is still below target (and that’s putting it nicely) while global growth and trade remain stuck in the doldrums.

It could be that the competitive nature of the rate cuts and QE expansion ultimately mean that no one gets to enjoy the benefits – or at least not for long. One round of easing simply offsets another in an endless race to some lunatic bottom or, ultimately, towards the abolition of cash. Or it could simply be that this isn’t the answer when it comes to juicing aggregate demand. But whatever the case, it’s pretty clear that what the global central banker cabal is doing simply isn’t working. What’s not clear – and this is the scary part – is what the consequences of these policies will ultimately be.

On Monday, we got a look at minutes from the latest Riksbank meeting and Deputy Governor Martin Floden is getting concerned. “The Riksbank has started to approach limit to how much it can cut rate without weakening impact or problems arising,” he warned. “Monetary policy tools are becoming increasingly difficult to use,” he continued, adding that “it’s likely that interest rate cut won’t have full impact on lending rates to households and companies.”

In the same vein, Denmark’s central bank governor, Lars Rohde says monetary policy has reached its limit. “We have reached a point where monetary policy no longer has a big overall impact,’’ he said on Monday. “[It’s] overstreched [and] there’s a limit to what more one can do’.”

We agree. But we don’t expect most central bankers do and indeed the Riksbank minutes suggest there may be more easing in the cards. “The executive Board was unanimous that it is important to have a high level of preparedness to make monetary policy even more expansionary,” one absurd passage from the meeting account says. 

Stefan Ingves did acknowledge one thing we’ve been pounding the table on for quite some time, namely that to the extent any of these policies are actually effective at rescuing the economy, central banks should be wary of getting themselves into a situation wherein the world careens into recession and officials are out of counter-cyclical bullets. “If the economy begins to slow down when the policy rate is zero or even negative, this could entail a very difficult situation for monetary policy further ahead.”

Why yes, yes it could. At least we know that the Riksbank is “unanimous in the need to be prepared,” to do more of what isn’t working and more of what is leaving the board increasingly boxed in. Einsteinian insanity at its finest, courtesy of global central banks.

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

One can devise all sorts of complex explanations why global stocks and US futures are on fire this morning, or one can just assume that alos are doing what they do best: fading Dennis Gartman.

From his latest note:

IF VOLUME IS SUPPOSED TO FOLLOW THE TREND…: If volume us supposed to follow the trend then the stock market is in very, very bad trouble indeed, for the volume is strong as the market weakens and its weak as the market weakens and its strong as the market rises.

 

We have changed our positions only by the very barest of margins here at TGL in our retirement account. Using our oldest trading rule which is to simply add to winning positions and try our very best to do less of those position that are serving us ill, we cut back on the long position we are holding in a small coal company headquartered in Illinois but otherwise we did nothing, leaving us a bit net shorter of the market…. We are sitting tighter, up 7.9% for the year-to-date and rather pleasantly out-performing global equities.

As for why gold is getting hammered today, perhaps it’s as simple as this:

SPOT GOLD IN MONTHLY TERMS: An Important Trend Line’s Been Broken: It’s been four years + since the peak but now this trend line’s been broken and the bullish case for gold is becoming easier and easier to make and to hold firmly to.

 

We are long of gold in EUR and Yen related terms via GEUR and GYEN and we are long of gold in US dollar terms via the shares of the largest gold mining firm in North America against which we have written out-of-the-money calls, having rolled our  deep-inthe-money-calls to a higher strike as the premium for the in-the-money-calls was evaporating.

As usual, the best signal to reset shorts will be when the virtual stops in the retirement portfolio are virtually hit.

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

• Futures sharply higher as oil extends gains (Reuters)
• Global Stocks Gain on Rising Commodities Prices, China (WSJ)
• Pound in freefall as Boris Johnson sparks Brexit fears (Telegraph)
• Pound Slides Most Since 2009 as Johnson Backs ‘Brexit’ Campaign (BBG)
• Donald Trump, Hillary Clinton Seize Leads for Their Parties’ Nominations (WSJ)
• Oil Glut Will Persist Into 2017 as IEA Sees Prices Capped (BBG)
• Japanese Seeking a Place to Stash Cash Start Snapping Up Safes (WSJ)
• San Bernardino victims to oppose Apple on iPhone encryption (Reuters)
• Apple Calls for Congress to Form Committee for Privacy Issues (BBG)
• Syrian Conflict’s Toll Pressures Allies (WSJ)
• Gold, Oil Go Their Separate Ways (WSJ)
• Europe’s Economy Strains as Global Slowdown Takes its Toll (BBG)
• Japan PMI Shows Manufacturing Weakened, Dragged By Drop In Exports To China (IBT)
• Republican Marco Rubio winning Wall Street fundraising race (Reuters)
• That Didn’t Work as Planned: Mexico’s Oil Monopoly Ends, Then Oil Tanks (BBG)
• China at the Heart of North Korea’s Illicit Cash-Flow Funnel (BBG)
• Banks Keep Cutting Currency Traders as Volatility No Job Saver (BBG)
• Buffett’s ‘Woodstock of capitalism’ goes global (Telegraph)
• HSBC Drops After First Quarterly Loss in More Than 5 Years (BBG)
• Emerging Markets Caught Between a Rock and Some Harsh Ratings (BBG)

 

Overnight Media Digest

WSJ

– Donald Trump and Hillary Clinton emerged from a weekend of voting as the clear leaders in the fight for their parties’ presidential nominations, with smoother potential paths to victory than seemed likely a few weeks ago. (http://on.wsj.com/1oCNWG2)

– The persistent civil war in Syria is fueling discord inside the U.S.-led military coalition and raising concerns about the long-term costs of the conflict for Washington and its allies, said current and former U.S. officials. (http://on.wsj.com/1Rh7l8d)

– While some U.S. federal agencies have funded the development of nearly unbreakable encryption software, the others, especially in intelligence and law enforcement, fume over their inability to read protected messages when they have a court order.(http://on.wsj.com/1oCNZl9)

– Samsung Electronics Co released its latest flagship smartphone Sunday on the sidelines of the Mobile World Congress trade show in Barcelona, getting the backing of Facebook Chief Executive Mark Zuckerberg, who said the companies are teaming up to push virtual-reality features in phones and social networking.(http://on.wsj.com/24kJqMr)

– Days before North Korea’s latest nuclear-bomb test, the Obama administration secretly agreed to talks to try to formally end the Korean War, dropping a longstanding condition that Pyongyang first take steps to curtail its nuclear arsenal. (on.wsj.com/1oCqFDT)

– A 45-year-old man suspected of killing six people and injuring two others in three attacks over the weekend in western Michigan was a driver for ride-sharing company Uber Technologies (http://on.wsj.com/20NvtCf)

 

FT

Swiss commodities trading group Trafigura will ship one of the first crude oil cargoes of benchmark West Texas Intermediate in the coming weeks to Israel, as the lift of the 40-year-old U.S. crude oil export ban allows the entry of American oil into the international market. (http://on.ft.com/1L48h0s)

After investors complained that top managers’ pay at HSBC Holdings Plc looked high compared to rival banks, the bank cut it to 30 percent of salaries. The change is expected to be announced on Monday. (http://on.ft.com/1LBs7LE)

According to claims in a legal battle, Standard Chartered Plc bought a $100 million “dirty debt” despite knowing that the loan had been part of a multimillion-pound embezzlement scheme and the bank used it to ask for compensation from an African government.

 

NYT

– With competition continuing to heat up in the handset market, Samsung Electronics is relying heavily on virtual reality to help distinguish its smartphones, and on Sunday announced two new Galaxy smartphones along with Gear 360, a camera for recording virtual reality videos.(http://nyti.ms/1VymTFP)

– Though Apple is resisting U.S. government demand’s to unlock an iPhone, it has repeatedly cooperated with court orders for access to online services like its iCloud and people familiar with how Apple’s products and services work, it is simply a matter of technology and not hypocrisy.(http://nyti.ms/1OoZn8x)

– A growing number of companies are offering their employees digital tools to help improve their eating habits in hopes of increasing productivity, reducing sick days and cutting health care costs.(http://nyti.ms/1XHaEs5)

– At the University of Surrey, the world’s top tech companies, including Samsung, and researchers are collaborating to offer mobile Internet speeds more than 100 times faster than anything now available.(http://nyti.ms/1QaTbGJ)

 

Canada

THE GLOBE AND MAIL

** Fentanyl has become the leading cause of opioid deaths in Ontario for the first time since Canada’s prescription painkiller crisis began more than a decade ago, preliminary figures from Ontario’s Office of the Chief Coroner show. (http://bit.ly/1XHGkgU)

** The federal government wants to improve the accuracy of its no-fly list and curb “false positives” by adding addresses, birth dates and social-insurance numbers to the security data it shares with airlines. Ottawa has been stung by a spate of complaints in recent months from airline passengers who have faced problems boarding flights because their names match those of people on the list. (http://bit.ly/1XHGll4)

NATIONAL POST

** Once Saskatchewan’s poster boy for economic growth, Estevan is now the canary in the coalmine, the first city to feel the full impact of the plunging price of oil. Nowhere in Saskatchewan has the slowdown in the economy been more pronounced or rapid. (http://bit.ly/1XHGRQ1)

** Mike Duffy – a sitting senator, a former close ally of a prime minister – is entering the second-last phase of his trial on 31 charges of fraud, breach of trust and bribery for behaving in a way he insists was completely normal in the Senate of Canada. (http://bit.ly/1XHHCbH)

 

Britain

The Times

Break up BT to boost the economy, says Sky boss

Jeremy Darroch, the chief executive of Sky Plc, has warned that Britain risks falling further behind other countries on broadband speeds if Ofcom does not break up BT Group and foster an era of fibre investment. Ofcom will reveal its plan to overhaul the regulation of Britain’s broadband infrastructure on Thursday amid a wider debate about whether BT’s consumer business should be split from Openreach, the network division that connects broadband lines. The regulator is expected to present a range of options but looks unlikely to remove the threat of a BT break-up at this stage. (http://thetim.es/1oCGLNW)

The Guardian

Sainsbury’s expected to ask for more time in Home Retail Group battle

Sainsbury’s is expected to ask for an extension of the Tuesday deadline to table a firm bid for the owner of Argos following the emergence of a 1.4 billion pound rival offer from South African retail group Steinhoff International Holdings . The request for more time from the Takeover Panel would come from Sainsbury’s with the agreement of Argos’s parent, Home Retail Group Plc, and would likely propose 18 March, the same date for Steinhoff to make a firm bid. (http://bit.ly/1UgGY5e)

Volvo recalls 59,000 cars over software glitch

Volvo is recalling 59,000 cars over faulty software that can briefly shut down the engine, including more than 7,000 in the UK. The recall affects five-cylinder diesel models S60, V60, XC60, V70 and XC70 built from mid-2015. Owners of the Swedish cars are being sent letters directly, asking them to take their vehicles to their local dealership for a 30-minute no-fee fix. The cars are being recalled across 40 markets, but those affected have been sold mainly in Sweden, Britain and Germany. (http://bit.ly/1ouxYNf)

The Telegraph

Boris Johnson backs Brexit as he hails ‘once-in-a-lifetime opportunity’ to vote to leave EU

Boris Johnson says Britain has a “once in a lifetime opportunity” to vote to leave the European Union as a way of securing an entirely new relationship with Brussels based around the single market. Johnson calls for Britain to be “brave” and says that “there is only one way to get the change we need – and that is to vote to go”. He says that “EU history shows that they only really listen to a population when it says No”. (http://bit.ly/1LA0W3A)

RBS and Lloyds forecast to cut hundreds of branches

The Royal Bank of Scotland and Lloyds Banking Group are expected to announce further plans to cut costs when they publish their 2015 financial results this week, which analysts believe could result in the closure of more than 400 more branches in the coming years. (http://bit.ly/1PQDR0K)

Sky News

HSBC slashes Gulliver pension by 250,000 stg

The boss of HSBC Holdings Plc had his pension allowance slashed by 250,000 pounds last year in a move aimed at appeasing big investors in Europe’s largest bank. HSBC will disclose on Monday that a cash sum handed to Stuart Gulliver in 2015 in lieu of a pension was cut from 625,000 pounds to 375,000 pounds. The move represents a decision by the bank to cut the awards from 50 percent of executives’ base salaries to 30 percent, following shareholder complaints that they had been excessive. (http://bit.ly/1KxQD5q)

Passenger Jet Veers Off Runway In Birmingham

An aircraft with 98 passengers on board ended up on a grass verge after it went off the runway following its landing. The plane was making its way to the terminal at Birmingham Airport when it “manoeuvred” off the tarmac, said officials. (http://bit.ly/1WC3HY7)

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

Last month, we noted that according to JP Morgan, persistently low oil prices are set to create a $75 billion headwind for global equities in 2016.

At issue are sovereign wealth funds, many of which are funded with proceeds from oil sales. For years, producers were next exporters of capital. That is, they funneled their crude revenue into a variety of assets including USTs and other core paper as well as equities and real estate.

All of that changed late in 2014 when Saudi Arabia moved to bankrupt the US shale sector by deliberately suppressing prices. Crude’s collapse meant revenues no longer exceeded expenses and suddenly, producing countries found themselves running deficits. That in turn left two options: tap the debt markets or tap the rainy day, SWF piggy banks.

We’ve seen this dynamic play out in Saudi Arabia where SAMA reserves have been steadily sliding as Riyadh struggles to fund a deficit that amounted to 16% of GDP in 2016 and is set to come in at 13% this year. And then there’s Norway, whose SWF is the largest in the world at $830 billion. Lower for longer crude has hit the country’s economy hard, but competitive devaluations from the likes of the ECB and the Riksbank have prevented the krone from weakening enough to absorb the blow. In order to help shield the economy from excessive damage, the country is resorting to fiscal stimulus which officials are paying for by tapping the oil fund.

To let JPMorgan tell it, all of the above will lead to a $75 billion outflow from global stocks this year. “Assuming selling in accordance to the average allocation of FX Reserve Managers and SWF across asset classes, we estimate that the sales of bonds by oil producing countries will increase from -$45bn in 2015 to -$110bn in 2016 and that the sales of public equities will increase from -$10bn in 2015 to -$75bn in 2016,” the bank wrote, in a note out last month. “There is little offset to this -$75bn of equity sales from accumulation of SWF assets by oil consuming countries, as we expect these countries to spend most of this year’s oil income windfall.”  

That figure, JPM went on to note, “isn’t huge,” but considering the bank thinks retail investor flows may actually flatline in 2016, SWF selling could have a significant impact.

Well according to the Sovereign Wealth Fund Institute, JPM’s numbers are off. By a lot.

If oil prices stay between $30 and $40 SWFI says outflows from equities could total $404.3 billion in 2016 and likely hit $213.4 billion last year.

That’s fairly substantial. And even those numbers might well be optimistic. On Sunday, the National Bank of Abu Dhabi PJSC said oil prices might well “spike down towards $20.” “For at least the next few years there do appear to be solid fundamental reasons why oil prices are likely to remain in a trading range, a report reads. That “range” tops out at $45 but is $25 on the low end and if prices remain below $30, it’s entirely reasonable to suspect that nearly a half trillion in SWF money could flee global equities by the end of the year.

To what extent that’s offset by buying by the likes of the SNB and the BoJ is an open question, but do note that SWFs have more than $7 trillion in total. If even a quarter of that comes out of global markets (and we’re talking about fixed income here as well)it would amount to a meaningful reduction in global liquidity just as the world careens into recession on the back of China’s rapidly decelerating growth machine.

As a reminder, here’s a handy list of the world’s SWFs:

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

The overnight news was decidedly downcast, with first London mayor Boris Johnson voicing his support for Brexit leading to a collapse in the pound, validating our Saturday warning and then some, resulting in the biggest drop in cable in over a year over fears that the EU will lose one of its most critical members…

 

… then followed by a surprising loss, the first in 5 years, by HSBC – the bank that makes money laundering for criminals around the globe a breeze – as revenue dropped and loans to oil and gas companies drove a jump in impairment charges, leading to a 5% drop in its share price, but more concerning is that HSBC said bad loan impairments and provisions soared 32% to $1.62BN driven by the oil and gas sector. In other words banks are concealing far more energy losses on their books than they have so far admitted.

Finally, we got yet another indication that the global slowdown is spreading to Europe, when first French composite PMI printed at 49.8 missing expectations, then Germany’s PMI likewise missed at 50.2, which meant that the Markit composite Purchasing Managers Index for the euro zone fell to 52.7, the lowest since January 2015, from 53.6. In Germany, manufacturing took a hit from falling overseas demand, while the composite gauge for France signaled “sluggish” economic growth.

And yet, despite – or rather thanks to – this slew of negative news, global markets and US equity futures soared from the moments Japan opened (driven by the traditional BOJ-inspired spike in the USDJPY), and never looked back – in the process even breaking Europe’s futures exchange Eurex, as traders focused on the record surge in Chinese loan creation, which as we reported last week will have hit $1 trillion in the first two months of 2016, which in turn pushed commodities and especially iron ore higher by 6.2%, back over $50, or $51.52 a dry ton specifically, the highest level since Oct. 27. The commodity has jumped 18 percent this year after plunging to $38.30 in December, the lowest in more than six years; the reason: Chinese corporations are taking advantage of the debt glut and doing what got them in trouble in the first place: stockpiling.

 

Helping lift the risk mood was the PBoC which provided CNY 169BN of funds under its Medium-term Lending Facility and the Finance Ministry announced a reduction of home transaction taxes, pushing the Shanghai Comp higher by 2.4%, the highest level in one month.

So propped up by the Chinese central bank and by a debt-spewing Chinese finance ministry, with further hopes a backsliding European economy will mean even more easing by Draghi, the risk on mood is back: “People are willing to take risk again,” Karl Goody, a private wealth manager at Shaw and Partners Ltd. in Sydney told Bloomberg. “People are looking at the selloff this year and saying: enough is enough, there’s been enough pain now.”

As a result of today’s commodity euphoria, the Stoxx 600 was led higher by miners and carmakers. BHP Billiton Ltd. and Rio Tinto Group jumped more than 5 percent, among the biggest gains in Britain’s FTSE 100 Index.  Ironlcally, U.K. equities added 1.2 percent. The FTSE 100 this year is the best performer among major national measures in western Europe, helped by a weakening pound.

“While we still have some pretty big risks out there, the market has sold off so much it was about time we got a bounce back,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “We’ve seen a turnaround in the commodities sector. Some of the drag from China is also starting to ease. We have a bit further to go in this relief rally”

Futures on the Standard & Poor’s 500 Index expiring in March rose 1.2 percent, indicating equities will extend gains after posting their strongest weekly advance since November. Allergan Plc is among four S&P 500 members posting earnings on Monday.

Where we stand now:

• S&P 500 futures up 1.2% to 1937
• Stoxx 600 up 1.6% to 332
• FTSE 100 up 1.2% to 6024
• DAX up 2% to 9574
• German 10Yr yieldunchanged at 0.2%
• Italian 10Yr yield down 3bps to 1.54%
• MSCI Asia Pacific up 0.7% to 120
• Nikkei 225 up 0.9% to 16111
• Hang Seng up 0.9% to 19464
• Shanghai Composite up 2.3% to 2927
• S&P/ASX 200 up 1% to 5001
• US 10-yr yield up 3bps to 1.78%
• Dollar Index up 0.65% to 97.23
• WTI Crude futures up 3.6% to $30.70
• Brent Futures up 3.2% to $34.07
• Gold spot down 1.8% to $1,204
• Silver spot down 2.3% to $15.00

Top Global News:

• Cameron to Make EU Case to Parliament as Johnson Backs ‘Brexit’: Possible Cameron successor among most popular U.K. politicians
• Pound Slides Most in a Year as Johnson Backs ‘Brexit’ Campaign: gauge of 6-mo. volatility climbs to highest since 2011
• Brent Oil Pares Losses as Russia Sees Output Talks Done by March: Futures up as much as 1.9% in London, paring 2-day, 4.3% slide
• For OPEC, Path From Oil Freeze to Output Cuts Isn’t Clear: Saudi Arabia is sending signals that its policy could change
• China Stocks Rise to Highest in Month Amid Regulator Reshuffle: Former chief of Agbank replaces Xiao Gang as CSRC chairman
• Yahoo Said to Start Approaching Possible Bidders Soon As Monday: Verizon, Comcast, AT&T likely to be among interested parties
• EFG to Buy BTG’s Swiss Private Bank in $1.34b Deal: Purchase will double assets under management for EFG
• PayPal Eyes Growth in New Alliances With Vodafone, America Movil: Mobile carriers are gateway to 740m potential customers
• HSBC Posts Surprise 4Q Loss; Dividend in Line With Est.: HSBC reported 4Q reported pretax loss $858m; est. $1.95b; HSBC’s Asia-Pacific Hiring Practices Being Probed by SEC: London-based bank says it’s cooperating with U.S. regulator on investigation

Looking at regional markets, we start in Asia where equities began the week on the front-foot with nearly all indices advancing, with China support measures and commodity gains lifting sentiment. Nikkei 225 (+0.9%) was driven higher by JPY weakness, while firm earnings underpinned the ASX 200 (+0.7%). Elsewhere, Shanghai Comp (+2.4%) was underpinned after the PBoC provided CNY 169bIn of funds under its Medium-term Lending Facility and the Finance Ministry announced a reduction of home transaction taxes, while China’s materials sector outperforms on steel and iron ore gains, with the latter rising limit-up to its highest levels since October. 10yr JGBs continued on its recent uptrend despite the risk-on sentiment in the region, while 20yr yields printed fresh record lows amid thin trade as participants await tomorrow’s 40yr auction and expectations of the BoJ to enter the market for the super long-end on Wednesday. As reported over the weekend, China replaced the head of its securities regulator and announced Shiyu as the new CSRC chief to replace Xiao Gang.

Asian Top News:

• Yuan Bears Who Beat Hedge Funds to the Trade See Pain Spreading: Walker of Asianomics predicts U.S. recession, Treasury rally
• DBS Profit Rises on Interest Income as Bad-Loan Ratio Holds: Fourth-quarter earnings jump 20% to beat analyst estimates
• In $39 Billion China Buyout Spree, Latest Offer Angers Investors: Jumei International’s going-private offer is less than 1/3 of IPO price
• Negative Rates Advocate Fujimaki Says BOJ’s Kuroda Got It Wrong: Bank of Japan can’t halt inflation once it takes hold, Fujimaki says
• China’s Debt Seen Rising Through 2019, Peaking at 283% of GDP: History points to financial crisis or slowdown, Goldman Sachs says
• BlackRock Is Betting on Japan Stocks as Other Foreigners Flee: Overseas investors have sold a net 2.24 trillion yen this year

After negotiations with his European counterparts, UK PM Cameron has agreed a package of changes to the UK’s membership of the EU and has subsequently announced a referendum on June 23rd to vote on whether Britain should remain a part of the EU. The agreement will take effect immediately if the UK votes to remain in the EU. Mr Cameron had originally wanted a complete ban on migrants sending child benefit abroad but had to compromise after some eastern European states rejected that and also insisted that existing claimants should continue to receive the full payment.

London Mayor Boris Johnson announced he would join the campaign for Britain to exit the European Union. A recent Ipsos/MORI poll found that of all the politicians in the UK, only Boris Johnson was capable of affecting the outcome of the referendum, adding a potential 15% to the ‘Leave’ campaign if he backed it publicly. (Huffington Post/Guardian)

European Top News:

• Deutsche Telekom CEO Says Not Considering Sale of Dutch Unit: CEO Timotheus Hoettges speakss in interview on Bloomberg TV
• Bank of Ireland Sees Dividend Next Year as 2015 Profit Soars 30%: underlying pretax, ex. items, EU1.2b in line with ests
• AB Foods Raises FY Adj. EPS Outlook; 1H Primark Sales Miss Ests.: AB Foods now only sees “marginal decline” in FY adj. EPS, had seen “modest decline”
• Telepizza Prepares to List Shares in Spain, Expansion Says: Could be valued at ~EU1.2b or 15 times Ebitda
• Cortefiel Suspends IPO Plans on Political Uncertainty: Mundo: Newspaper cites unidentified people who took part in discussions
• Unibail-Rodamco Sells Office Building for EU330m: Doesn’t disclose the name of the buyer
• Corum CEO Tells Le Temps Swiss Watch Brand Has Become Profitable: CEO Davide Traxler cited in interview with Le Temps
• Sanofi Says FDA Accepts NDA for Glargine, Lixisenatide Combo: Says decision anticipated in August

In FX, GBP underperforms this morning, with the most notable news over the weekend all focussed around Brexit concerns. While many were looking out for details of the deal between the EU and UK, the more interesting news came when London Mayor and touted possible PM successor Boris Johnson announced that he would campaign in favour of leaving the EU. A recent Ipsos/MORI poll found that of all the politicians in the UK, only Johnson was capable of affecting the outcome of the referendum, adding a potential 15% to the ‘Leave’ campaign. As such GBP plummeted overnight and fell further as European participants arrived at their desks, with EUR/GBP firmly above 0.7800 and GBP/USD lower on the day by almost 2.5 points, close to 1.4150.

In commodities, WTI and Brent futures have seen renewed strength today in tandem with the continuing rhetoric regarding an OPEC deal, with Russia stating they have set a March 1st deadline for completing consultations. While sources reported that the Iraq oil minister informed ministers that although Iraq will not join Doha’s MOU, they will not boost crude production level in next 4 months either. Separately, the risk-on sentiment alongside the strength in the USD-index which has made a firm break above notable resistance situated at 97.17, has seen significant pressure in the precious metal complex with Gold seeing losses of over USD 20.

Iraq Oil Minister states that they will support all efforts to control prices, adding that they are very much cooperative. (BBG) Additionally, sources reports said Iraq Oil Minister Adil Abd al-Mandi informed ministers that although Iraq will not join Doha’s MOU they will not boost crude production level in next 4 months either.

On today’s docket in the US we get the manufacturing print in the US this afternoon (expected at 52.5) along with the Chicago Fed national activity index expected at -0.10.

Bulletin Headline Summary from RanSquawk and Bloomberg

• Boris Johnson’s Brexit announcement sees significant selling pressure filter through GBP.
• Risk-on sentiment in full swing with European equities kicking off the week on the front foot.
• Looking ahead, highlights include US manufacturing PM! and comments from ECB’s Lautenschlager
• Treasury yields rise in overnight trading amid global equity markets rally, U.S. dollar strength as British PM Cameron will address the House of Commons today about the U.K. remaining in the European Union.
• The British pound weakened the most in a year against the dollar after London’s Conservative Mayor Boris Johnson said he’ll campaign for Britain’s exit from the EU, opposing Prime Minister David Cameron
• HSBC Holdings Plc posted an unexpected fourth-quarter loss, its first since at least 2009, as revenue dropped and loans to oil and gas companies drove a jump in impairment charges
• China’s stocks rose to the highest level in almost a month on speculation the new head of the nation’s securities regulator, Liu Shiyu, will take steps to boost the world’s second-largest equity market
• As banks around the world cut sales and trading jobs in an effort to reduce costs, the bloodletting in foreign exchange is proving to be among the deepest and most painful as the world’s 12 biggest banks have reduced foreign-exchange headcount by more than a quarter since 2010
• The world’s biggest banks last year generated the least revenue from fixed-income products since the 2008 financial crisis as businesses under-performed, clients pulled back from trading and assets lost value
• The global oil glut will persist into 2017, limiting any chance of a price rebound in the short term as the surplus takes even longer to clear than previously estimated, according to the International Energy Agency
• U.S. Treasury will auction $26b 2Y (Tuesday), $13b 2Y FRN and $34b 5Y (Wednesday), $28b 7Y (Thursday)
• $4.05b IG corporates priced Friday (YTD volume $225.5b) and no HY priced (YTD volume $11.125b)
• Sovereign 10Y bond yields mostly steady with Greece +12bp; European, Asian markets rally; U.S. equity- index futures rise. Crude oil and copper rally, gold falls

Key US Events:

• 8:30am: Chicago Fed Nat Activity Index, Jan., est. -.10 (prior -0.22)
• 9:45am: Markit US Manufacturing PMI, Feb P, est. 52.5 (prior 52.4)
• 11:30am: U.S. to sell $37b 3M bills, $30b 6M bills
• 1:00pm: NY Fed executive vice president Potter speaks in New York

DB’s Jim Reid concludes the overnight wrap:

Since the news of the EU deal for the UK and associated referendum date announcement wires have been dominated by the response of Cameron’s fellow Conservative members, six of which have announced that they will campaign for ‘Out’ including London Mayor Boris Johnson. This is significant given the Mayor’s approval ratings and a big personality now in the ‘Out’ camp, although it remains to be seen just how much of an active role he will play in campaigning, possibly choosing to keep a low profile in light of his future Conservative Party leadership chances. The news comes after Justice Secretary Michael Gove announced himself that he will also campaign for Britain to leave too.

In any case, the weekend news has meant Sterling was the big mover when markets opened in Asia this morning. The Pound is currently down 0.85% versus the US Dollar and 0.68% against the Euro, although it has pared back losses of as much as 1% for both. FTSE 100 index futures are up +0.8% however.

Looking at the rest of markets this morning and specifically in Asia it’s generally been a fairly positive start. The Nikkei (+0.94%), Shanghai Comp (+2.49%), Hang Seng (+0.91%) and ASX (+0.98%) are all kicking off the week on the front foot, with the Kospi (-0.06%) the only index in the red. Supporting gains are a 1.5% bounce for Oil. The constructive start has also come despite some softish data this morning. In China the MNI business indicator for February declined 2.4pts to 49.9, matching the level seen in November in the process. Meanwhile in Japan and kicking off a busy day for PMI’s the flash February manufacturing print tumbled 2.1pts this month to a well below market 50.2 (vs. 52.0 expected) which was the lowest since June.

Meanwhile, US equity index futures are up half a percent this morning. Over the weekend the latest twist in the US Presidential campaign saw Donald Trump secure victory in the South Carolina Republican primary, beating Rubio and Cruz into second and third place respectively. Jeb Bush has since announced that he has suspended his campaign.

Quickly recapping what was a softish day for the most part on Friday, closing out a week of two halves. The optimism that was initially sparked on the back of those Saudi/Russia/Iran meetings concerning OPEC production freezes seemed to wane into the close of last week, with WTI wiping out the bulk of the week’s gains after dropping -3.67% on Friday and back below $30/bbl which was where it had kicked the week off. Brent (-3.70%) was down a similar amount on Friday which took it to -1.05% for the five days last week. A slightly higher than expected US CPI number (more shortly) also seemed to weigh on risk assets initially, although in fairness markets did bounce back by the close and it feels like we’ll need sustained run of better economic data to really swing Fed rate expectations from the lowly levels at the moment

After dipping as much as -0.8% in early trading, the S&P 500 closed unchanged by the close. That meant the index finished up +2.84% last week for its first weekly gain since January, although remember that this included two consecutive +1.65% daily gains on Tuesday and Wednesday before momentum faded away. It was a similar pattern for markets closer to home. The Stoxx 600 finished Friday -0.77% as a rough day for financials also played its part. That saw the index close up +4.47% last week although again with gains frontloaded. US credit was a tad softer on Friday with CDX IG 1.4bps wider meaning the index was 4bps tighter on the week. In Europe we saw Senior and Sub Fins finish 3bps and 5bps wider respectively on the day paring the five-day rebound to 5bps and 18bps tighter respectively. Main closed 3bps wider and was 5bps tighter on the week.

With regards to that data, headline CPI for the US in January came in higher than expected at 0.0% mom (vs. -0.1% expected) which saw the YoY rate lift to +1.4% from +0.7% although largely due to favorable base effects. Much of the focus was on a decent core print with the monthly reading of +0.3% mom also one-tenth ahead of expectations. That saw the YoY rate notch up to +2.2% which is the highest level now since June 2012 and continuing the strong momentum of late. It was noted that a big contributor to that was again rising shelter costs although other services were also said to play a part including medical costs, airfares and financial services. Treasury yields did initially move sharply higher post the data, with the benchmark 10y yield hitting 1.783% (up 7bps from the lows) before mirroring much of the move in equity markets to finish more or less unchanged at 1.745%.

Meanwhile, Cleveland Fed President Mester became the latest in the line of recent Fedspeakers. A voter this year and seen as a hawkish leaner, Mester joined Williams in saying that she wants to stay away from negative interest rates, while commenting that ‘policy is going to be moving gradually higher, not going backwards’ but that the actual path the Fed chooses to take ‘could very well turn out to be either less gradual or more gradual than what we anticipate it to be today’. With regards to her outlook, Mester noted that ‘my current expectation is that the US economy will work through this episode of market turbulence and the soft patch of economic data to regain its footing for moderate growth’ and that despite the volatility and various factors impacting markets this month, it would be ‘premature’ for her to materially change her outlook.

There was also some notable chatter out of the ECB to mention. In particular it was comments from Constancio which got our attention, with the ECB official highlighting that ‘in looking to what can be done if we decide to ease further, we’ll have to mitigate the effect on banks as other countries have done’. The comments lending further weight to the possibility that the ECB might be shifting away from outright deeper depo cuts and possibly instead to a tiered deposit rate system or LTRO’s. Meanwhile, ECB Governing Council member Visco made comments of his own on Friday, the most significant being that he does not see any reason why the ECB could not take on bad loans as collateral, but also commenting that there has not yet been any discussion on this.

via Zero Hedge http://ift.tt/1oXa0Lm Tyler Durden

While in the US market breaks practically always happen when the market is sharply lower, and are intended to halt any downward momentum, in Europe this simple relationship has yet to be perfected, and for the past hour, following what it announced were technical issues, the Deutsche Boerse-owned Eurex derivatives exchange where futures on such indices as the DAX and Switzerland trade, has suspended trading in its T7 system “until futher notice.”

Sellers will just have to wait.

Link for the latest news on the trading halt.

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