• Markets Get the Worst Kind of Kuroda Surprise as BOJ Stands Pat (BBG)
• Bank of Japan brushes aside calls for more easing despite price falls (WSJ)
• Ford Profit Surges to Record as Sales of SUVs, F-150 Gain Speed (BBG)
• Valeant Pharmaceuticals to Make Sweeping Changes to Board (WSJ)
• Trump breaks taboos, attacks Clinton on gender issue (Reuters)
• Donald Trump Mocks Cruz: ‘What’s He Doing Picking Vice Presidents? (WSJ)
• Wealthy, educated voters fuel Trump’s East Coast sweep (Reuters)
• Dow Chemical Beats Profit Estimates as Margins Widen on Cuts (BBG)
• ECB should raise rates ‘the second inflation rises again’: BuBa (Reuters)
• ECB’s Nowotny can’t say exactly when inflation will pick up (Reuters)
• Puerto Rico Risks Historic Default as Congress Chooses Inaction (BBG)
• Protesters Have a Long History of Crashing Buffett’s Annual Party (BBG)
• SpaceX breaks Boeing-Lockheed monopoly on military space launches (Reuters)
• Venezuela Needs Oil’s Rally More Than Anyone as Economy Teeters (BBG)
• Ex-Im Bank Faces New Hurdle in Congress Over Board Nominees (WSJ)
• Currency Trading’s 20% Drop Raises Specter of Flash-Crash Future (BBG)
• Sanofi Makes $9.3 Billion Bid for Medivation (WSJ)
• Elon Musk Supports His Business Empire With Unusual Financial Moves (WSJ)
• This CEO’s $148 Million in Pay May Rank Him No. 1 for 2015 (BBG)

 

Bulletin Headline Summary

FT

German utilities will be asked to pay 23.3 billion euros ($26.38 billion) into a state fund to cover the costs of nuclear waste storage, members of a nuclear commission tasked with securing funds for the country’s nuclear exit said on Wednesday.

Billionaire financier Andre Esteves, who was ousted as head of Brazil’s Grupo BTG Pactual SA in November after his arrest in a spiraling corruption probe, has returned to Latin America’s largest independent investment bank in a senior advisory role.

Qatar Airways has raised its stake in British Airways owner International Airlines Group to under 12 percent from 9.99 percent, Chief Executive Akbar al-Baker said on Wednesday, without specifying the exact size of Qatar Airways’ holding or when it increased it.

 

Britain

The Times

Dominic Chappell, the twice-bankrupt former racing driver who owned retailer BHS for only a year before it collapsed into administration, is trying to buy it back with the help of American investors. (http://bit.ly/1SLcLtg)

Naz Shah, a Labour MP from Bradford West, who backed calls to transport all Israelis to America, has been suspended by Jeremy Corbyn after a revolt from within his party. (http://bit.ly/1NBiq6c)

The Guardian

Mounting urgency has returned to Greece with the country’s financial predicament igniting fears of a re-run of last summer’s nail-biting drama. Rejecting a Greek request for an extraordinary EU summit to discuss its troubled bailout programme, European Council President Donald Tusk instead urged euro zone finance ministers to resume talks that would avert further turmoil. (http://bit.ly/1NBiFOr)

UK factories produced 443,581 cars in the first three months of the year, up 10.3 percent from the same quarter last year, according to the Society of Motor Manufacturers and Traders. It was the strongest first-quarter performance since 2004. (http://bit.ly/1NBiO4G)

The Telegraph

Rolls-Royce Holdings Plc bosses are seeking to eke out even bigger savings from the embattled engineering business, according to a secret internal report. Consultants from Bain & Company are understood to have delivered a study to top executives at the FTSE 100 group, saying it could boost profits by 1 billion pounds ($1.45 billion).

International investment into UK commercial property has stalled as widespread market uncertainty ahead of the Brexit vote takes hold, new research has warned, with more than a third of those surveyed blaming the referendum. (http://bit.ly/1NBjFlV)

Sky News

MPs probing the collapse of retailer BHS will summon the entrepreneurs who bought BHS for 1 pound. The Business, Innovation and Skills Select Committee will announce on Thursday that it wants to examine the level of due diligence that Retail Acquisitions Limited was legally required to undertake before buying BHS from Philip Green just over a year ago, Sky News has learnt. (http://bit.ly/1SLchn8)

UK growth slowed in the first quarter, according to official figures, as a leading economic think-tank warned of the potential impact of Brexit. (http://bit.ly/1SLctTo)

The Independent

Standards of living in Britain lag behind the European average, according to a Glassdoor study. UK ranks 10th in an analysis of 18 European countries, behind Switzerland, Denmark and Germany, according to the study. (http://ind.pn/1NBkvPl)

 

via http://ift.tt/26wKaz6 Tyler Durden

As China’s credit fueled craziness rages on, individual “investors” have been tripping over themselves trying to get in on a piece of the action, opening up enough brokerage accounts for every man, woman, and child in LA and pouring hard earned money into “investment” opportunities such as P2P funds.

This has of course lead people to game the system, recall Ezubao’s $7.6 billion P2P ponzi scheme that led to the arrest of 21 people earlier this year, and more recently the shuttering of Zhongjin Capital Management, which also led to 21 arrests on charges of suspicion of illegal fundraising.

It now appears that we’ve reached the point in the game where instead of waiting around to be arrested, those running shady ponzi schemes are now pulling the ripcord, clearing out as many bank accounts as possible, and just disappearing.

In the latest development in the crumbling shadow banking sector, police in the Chinese city of Hangzhou are searching for the chairman of the Wangzhou Group who allegedly disappeared with $154 million according to Reuters.

The Wangzhou Group is the parent of asset management firm Wangzhou Fortune, has more than 20,000 investors.

 

Investors had reported “problems with the company’s cash flow” since last Monday, Xinhua said.

 

To repay investors, Wangzhou Group plans to retrieve about 1 billion yuan in principal and interest payments on loans it has made and cover the additional 1.2 billion yuan shortfall by selling property, Xinhua quoted a company statement as saying.

We expect this won’t be the last time we hear of such a thing taking place, because after all as the credit bubble starts to burst, China authorities will try to root out more fraudulent firms in order to try and get ahead of the situation.

An effort that will inevitably be too little, too late.

via http://ift.tt/1N2lFDM Tyler Durden

The great megadeal M&A drought of 2016 just came to an end when moments ago Abbott announced it would acquire St. Jude Medical for $25 billion, roughlya 30% premium to the price. According to the press release, under the agreement, St. Jude Medical shareholders will receive $46.75 in cash and 0.8708 shares of Abbott common stock, representing total consideration of approximately $85 per share. At an Abbott stock price of $43.93(2), this represents a total transaction equity value of $25 billion.

“The combined company will have an industry-leading pipeline expected to deliver a steady stream of new medical device products across cardiovascular, diabetes, vision and neuromodulation patient care.”

This is how Abbott justified the transaction:

St. Jude Medical’s strong positions in heart failure devices, atrial fibrillation and cardiac rhythm management complement Abbott’s leading positions in coronary intervention and transcatheter mitral repair. Together, the company will compete in nearly every area of the cardiovascular market and hold the No. 1 or 2 positions across large and high-growth cardiovascular device markets. This best-in-class combined portfolio will have the depth, breadth and innovation to help patients restore their health, reduce costs for payors and deliver greater value to customers.

 

“Bringing together these two great companies will create a premier medical device business and immediately advance Abbott’s strategic and competitive position,” said Miles D. White, chairman and chief executive officer, Abbott. “The combined business will have a powerful pipeline ready to deliver next-generation medical technologies and offer improved efficiencies for health care systems around the world.”

 

“Today’s announcement is an exciting next chapter for St. Jude Medical, bringing together two industry leaders with a shared passion for innovation, culture and patients,” said Michael T. Rousseau, St. Jude Medical president and chief executive officer. “Our combined scale will expand the global reach, competitiveness and impact of our medical device innovation for physicians and hospitals. This transaction provides our shareholders with immediate value and the opportunity to participate in the significant upside potential of the combined organization. I’d like to thank our 18,000 employees whose hard work and commitment help us deliver leading medical technologies to patients around the world.”

Regarding the financial impact of the transaction, “the acquisition of St. Jude Medical is expected to be accretive to Abbott’s adjusted earnings per share in the first full year after closing and increasing thereafter, with approximately 21 cents of accretion in 2017 and 29 cents in 2018.(1) The combination is anticipated to result in annual pre-tax synergies of $500 million by 2020, including both sales and operational benefits. One-time deal-related costs and integration costs will be provided at a future date.”

Translation: St. Jude 18,000 employees are about to be “synergized” by a few more thousand jobs lower.

St. Jude Medical’s net debt of approximately $5.7 billion will be assumed or refinanced by Abbott. Abbott intends to fund the cash portion of this transaction with medium- and long-term debt.

Perhaps most surprising about the deal is the absence of Goldman anywhere among the advisors: Evercore is serving as the lead financial advisor for Abbott with Wachtell, Lipton, Rosen & Katz serving as legal counsel. BofA Merrill Lynch will be providing financing and also is serving as a financial advisor to Abbott. Guggenheim Securities is acting as financial advisor and Gibson, Dunn & Crutcher LLP is serving as legal counsel to St. Jude Medical.

via http://ift.tt/1SMm3oO Tyler Durden

It is very fitting that on today’s April 28th anniversary of the bull market, the day that officially makes this the second-longest “bull market” in history, the market got a stark reminder of just how it got there: through constant and relentless central bank intervention, which has been “beneficial” to stocks for the most part, however last night was anything but.

Less than one week after the BOJ floated a trial balloon using Bloomberg, that it would reduce the rate it charged some banks which set off the biggest USDJPY rally since October 2014, we are back where we started following last night’s “completely unexpected” (for everyone else: we wrote “What If The BOJ Disappoints Tonight: How To Trade It” hours before said “shock”) shocking announcement out of the BOJ which did absolutely… nothing.

“It’s a total shock,” Nader Naeimi, Sydney- based head of dynamic markets at AMP Capital Investors told Bloomberg. “From currencies to equities to everything — you can see the reaction in the markets. I can’t believe this. It’s very disappointing.“

As we reported last night, the yen surged the most in 8 months, or since August’s market meltdown and Japanese equities plunged after the Bank of Japan refrained from adding to its monetary stimulus. Bonds jumped around the world and gold rallied as the Federal Reserve signaled no hurry to raise interest rates. The staggering move as seemingly everyone was caught wrong-footed is shown in the chart below.

 

As we warned readers in advance of the BOJ announcement, it all started with Goldman which one week before the BOJ announcement changed its “base case” for BOJ easing from June to April, expecting a doubling in ETF purchases, and immediately all the other sellside lemmings followed, assuing everyone would be flatfooted when the BOJ “disappointed.” As Bloomberg puts it, “the BOJ’s decision was a surprise because a majority of economists surveyed by Bloomberg had predicted some action to counter a strengthening yen that had cast a shadow over the outlook for wage gains and investment spending. That the market’s reaction was so violent shows the weight financial markets are attaching to shifts in monetary policy.”

The move confounded economists, a slight majority of whom had expected extra easing, and investors, who’d pushed the Topix index higher and the yen toward a one-month low in the hours before the decision.

The resulting screams of anger as the BOJ refuse to coddle spoiled “traders”, pardon central bank frontrunners, was absolutely hilarious: “I’m very disappointed. I wanted the BOJ to do something and the BOJ should have done something,” said Masaru Hamasaki, head of the investment information department at Amundi Japan Ltd. “Kuroda has created mostly positive surprises so far, but this time it’s negative. The BOJ hasn’t been on the same wavelength as markets this year.”

There was more: “Todays market reaction is all about the BOJ,” said Ralf Zimmermann, a strategist at Bankhaus Lampe in Dusseldorf, Germany. “‘Investor expectations that had been built ahead of the meeting have now been scaled back. Earnings in a nutshell look OK, but as earnings estimates further down the road are still too high, there will be a negative trend in earnings revisions.”

But wait, it gets even better: “Quite a few people have been wrong-footed by this,” said Andrew Clarke, Hong Kong-based director of trading at Mirabaud Asia Ltd. “Guessing what governments do next at this moment in time is not a good way to play these markets. Hoping that there will be more stimulus will lead to disappointment, because hope isn’t a very good strategy.”

Yes, hope is not a very good strategy, especially when you are betting it all on what an irrational central planner may or may not do.

Of course, Kuroda’s inaction doesn’t just matter to investors. Japan’s economy is struggling to break out of a funk, with consumer prices dropping in March by the most since 2013 and company profits getting hurt by the stronger yen. In refraining from adding to stimulus, officials are betting that their success in bringing down borrowing costs since unveiling a negative-rate policy in January will generate an acceleration in lending. Perhaps this is just Kuroda’s way of saying Abenomics (and the BOJ’s policies) have failed and it’s time to pack it up?

And while Japan’s troubling future just got even more nebulous, stocks around the world tumbled, with European and Asian stocks, and U.S. index futures all falling after the BOJ “shock.” The drop is so big that not even last night’s blowout earnings by Facebook appear to be able to make much of a dent.

The MSCI All-Country World Index dropped 0.2 percent. The Stoxx Europe 600 Index lost 1.3 percent, heading for its biggest decline since April 5 as almost all of its industry groups declined.  Among the notable movers, we say Banco Bilbao Vizcaya Argentaria SA plunge 7.9 percent and Lloyds Banking Group Plc falling 2.4 percent after they reported earnings declines. Deutsche Bank AG was the exception, rising 3.8 percent, as it posted a surprise profit. Electrolux AB jumped 9.5 percent after Europe’s biggest maker of home appliances announced earnings that beat analysts’ estimates and raised its forecast for U.S. growth.

Futures on the Standard & Poor’s 500 Index slid 0.8 percent after the gauge rose for a second day, closing near its highest level of the year. In the premarket, Facebook Inc. climbed 8.4 percent after reporting sales and profit that topped projections. Medivation Inc. added 2.3 percent after Sanofi offered to buy it. The U.S. will release details of its first-quarter economic growth on Thursday.

Market Wrap

• S&P 500 futures down 0.8% to 2074
• Stoxx 600 down 1.2% to 344
• FTSE 100 down 1.1% to 6248
• DAX down 1.3% to 10165
• German 10Yr yield down 6bps to 0.23%
• Italian 10Yr yield down 5bps to 1.47%
• Spanish 10Yr yield down 3bps to 1.6%
• S&P GSCI Index up 0.2% to 356.7
• MSCI Asia Pacific down 0.3% to 131
• Nikkei 225 down 3.6% to 16666
• Hang Seng up 0.1% to 21388
• Shanghai Composite down 0.3% to 2946
• S&P/ASX 200 up 0.7% to 5225
• US 10-yr yield down 3bps to 1.82%
• Dollar Index down 0.67% to 93.75
• WTI Crude futures down less than 0.1% to $45.32
• Brent Futures up less than 0.1% to $47.22
• Gold spot up 1% to $1,258
• Silver spot up 0.8% to $17.38

Top Global News

• Facebook’s Zuckerberg Wants Right to Be Bold After Revenue Beat: Proposed new share class to give CEO more freedom for big bets; 1Q adj. EPS 77c vs est. 63c; 1Q rev. $5.38b vs est. $5.27b; Zuckerberg Borrows Google Tactic in Splitting Stock for Control
• Sanofi Pursues Medivation for $9.3 Billion After Being Spurned: Offers $52.50 per share in cash, a premium of >50% to the 2-month volume-weighted avg. price prior to takeover rumors
• BOJ Holds Off More Stimulus to Gauge Impact of Negative Rate: Keeps three key tools unchanged; majority forecast some action
• Deutsche Bank Profit Beats Estimates as Legal Costs Drop: 1Q net attributable EU214m vs EU544m y/y; est. loss EU484.3m; debt trading revenue falls less than analysts had expected; Cryan, Fitschen call financial markets outlook “uncertain”
• Texas Instruments Forecast Shows Rising Auto-Industry Demand: Sees 2Q rev. $3.07b-$3.33b, est. $3.17b; sees 2Q EPS 67c-77c, GAAP est. 71c; 1Q GAAP EPS 65c, est. 62c
• First Cash Said to Be in Advanced Merger Talks With Cash America: Discussing an all-stock merger of equals and an agreement could be announced as soon as this week
• Valeant’s ‘Mistakes’ Raised Profit, Destroyed Value, Ackman Says: Drugmaker’s price strategy reassessed at Washington hearing
• PayPal Goes Mobile to Lure Customers, Fend Off Competitors: 1Q net rev. $2.54b vs est. $2.50b, adj. pro forma EPS 37c, est. 35c
• Hanesbrands Offers $835 Million for Aussie Underwear Firm: Agreed to buy Australia’s Pacific Brands Ltd. for A$1.15 per share in cash, 22% more than the target’s closing price on Wed., gaining iconic underwear labels including Bonds and Jockey
• Marriott 1Q Adj. EPS, Rev. Beat; Starwood Deal ‘On Track’: 1Q adj. EPS 87c, est. 84c, 1Q rev. $3.77b, est. $3.71b
• VW’s Biggest Brand Stumbles to Loss on Emissions Crisis: VW brand posted a loss of EU127m in the final three months of 2015, compared with a profit of EU780m a yr earlier
• House Panel Approves $610.5B Defense Policy Bill For FY 2017: House Armed Services Committee approves the $610.5b defense authorization bill by a vote of 60-2
• Qlik Tech Said to Draw Bids From Thoma Bravo, Bain, Permira: First-round offers said submitted by Tuesday deadline
• Puerto Rico Risks Historic Default as Congress Chooses Inaction: Island may impose moratorium if GDB payment isn’t delayed
• Suncor Takes Majority Syncrude Stake After Murphy Oil Deal: Additionanal Syncrude stake will provide 17,500 barrels
• Monsanto Says New Technology to Help GMOs Fight Pest Resistance: Technique may allow GMO plants to beat weed, insect resistance
• DreamWorks Said to Explore Sale Advised by Centerview: Reuters

Looking at regional markets, Asian stocks trade mixed following a mild positive lead from Wall St. where an unsurprising FOMC and strength in oil provided early support, while Nikkei 225 slumped after the BoJ disappointed markets and kept monetary policy on hold. This saw a firm break below 17000 in the Nikkei 225 (-3.6%) with the index wiping out Industrial Production inspired gains. ASX 200 (+0.6%) benefited from the uptick in energy after WTI broke above USD 45/bbl to post another YTD high, while the Shanghai Comp (-0.3%) weakened amid ongoing poor earnings with state-owned CNPC the latest addition after its profits dropped over 50%. 10yr JGBs are relatively flat despite the slump in Japanese stocks as the BoJ’s inaction kept fixed-income demand subdued.

Top Asian News

• China’s $1 Trillion Bond Leverage Unwinds as Pimco Senses Panic: Investors get squeezed as bond prices fall, repo rates rise
• Daiwa Securities Quarterly Profit Falls 45% on Trading Slump: Brokerage commissions and underwriting fees also drop
• Docomo Forecasts Jump in Profit as Phone Subsidy Ban Cuts Costs: To buy back up to 193b yen of shares from May 2 to Dec. 31
• Sony Reports Quarterly Loss, Holds Forecast to Assess Earthquake: 4Q net loss 88.3b yen vs 106.8b yen loss y/y
• ICBC Joins Bank of China in Breaching Bad-Loan Coverage Rule: Industrial & Commercial Bank of China breached a regulatory requirement for bad-loan coverage as it reported a 0.6% gain in 1Q profit
• Samsung Gets S7 Boost, Still Leaves Question of What’s Next: Latest smartphone model fuels gains in net income, sales; shares decline as analysts see few new hits on horizon; co. to uy back 2.03 trillion won worth of common and preferred shares
• Cnooc 1st Quarter Revenue Drops 31% After Crude Hits 12-Year Low: 1Q oil, gas revenue falls 30.7% y/y to 24.6b yuan
• India’s Tata Starts Tech Transformation With Yoga Wearables: Tata hopes to place technology at the heart of group strategy
• China Said to Mull Starting Trading of Credit-Default Swaps: NAFMII sought views on CDS and credit-linked notes, people say

European equities are broadly lower this morning as hopes of further stimulus had been shattered by the BoJ, after the central bank kept rates unchanged while also refraining from increasing the size of its asset purchase program. Alongside this, another bout of earnings have guided price action in Europe with IBEX the notable underperformer following a poor figures from BBVA. While the DAX saw a technical break below yesterday’s low amid VW’s annual conference, while weak regional German CPI’s point towards a poor national reading, subsequently adding to the dampened tone. Bunds have been bolstered by the negative tone across the region, with yields across the curve falling after the BoJ’s lack of action, coupled with signals from the FOMC that they are in no rush to tighten monetary policy. As such, CME FFR futures are now pricing in as much as 17% of a hike in June.

Top European News

• Lloyds Falls After Posting Decline in First-Quarter Revenue: Rev. fell 1% to GBP4.4b, lender cut operating costs 2% to offset revenue drop
• Anglo to Sell Niobium, Phosphate Business for $1.5 Billion: China Molybdenum agreed to buy the division and the transaction is expected to be completed in the second half of this year
• Euro-Area Economic Confidence Rebounded in April From 1-Year Low: Indicator rises to 103.9 in April from 103.0 in March, economists had forecast a gain to 103.4
• German Unemployment Extends Drop in Sign Economy Still Robust: Number of jobless fell for seventh straight month in April, unemployment rate remains at record low level of 6.2%
• Airbus Profit Falls on Delivery Delays as A400M Issues Brew: Earnings slump 23% after setbacks to A320Neo, A350 programs, said fresh problems with the troubled A400M transport plane could hurt future earnings.
• BBVA, CaixaBank Drop as First-Quarter Profit Miss Estimates: BBVA said net income fell 54% to EU709m, earnings were hit by lower trading revenue and currency fluctuations
• Telecom Italia Said to Target $1.1 Billion Cost Cuts by 2018: New CEO Cattaneo wants to double company’s prior savings goal
• WPP Sales Rise as U.S. Clients Spend More on Advertising: Forecast further increase this year, helped by the Summer Olympics in Rio and the U.S. presidential election
• Hermes Sales Buoyed by Bags After Boosting Leather Output: Sales of leather goods, saddles surges 15%, beating estimates
• TUI Agrees to $1.3 Billion Hotelbeds Sale to PE, Pension Funds: Price about 1.2 times 2015 rev. for online booking unit

In FX, In the wake of the FOMC statement last night, we see the market continue to pressure the USD, and focus is firmly on USD/JPY this morning after the heavy overnight losses based on the BoJ’s on-hold call. Heavy spec positioning on hints of a move saw the lead spot rate hit by 3 JPY, but early London has only managed a modest dip under 108.00 since. EUR/USD has been pressed higher as a result, with EUR/JPY showing the familiar resilience at the lows, but only after suffering a near 4 JPY drop. Similar losses seen in the rest of the major cross rates, but AUD, CAD and NZD all still higher against the USD, as is GBP which is back testing recent highs through 1.4600. German regional inflation all generally softer, but widely expected, with the unemployment rate unchanged at 6.2%. EU sentiment indices on the soft side also, but industrial above expectations — all to minimal effect on the EUR. Oil still pushing higher as Jun WTI eyeing $45.50+. CAD well bid but pre 1.2500 orders contain for now. US Q1 GDP the main event this afternoon, with USD sales fading in the last hour or so as a result.

In commodities, WTI and Brent have benefited from the decline in the USD index as the Fed look to be in no rush to hike rates, WTI currently trading near the USD 45.00/bbl level with the next major resistance at the psychological level of USD 46.00/bbl level. Gold has also been rising off the back of safe haven flows into the asset following the central banks decisions and comments. Silver has also been rallying reaching the USD 17.35/oz level eyeing the recent highs of USD 17.67/oz. In base metals copper prices were subdued amid the dampened tone in China and on the hourly chart price is currently at the 38.2 fib support level and could look to move higher after rejecting it for a second time.

On the US calendar today the big focus is on the Q1 GDP report, while the core PCE reading will be released alongside (expected at +1.9% qoq). Initial jobless claims data and the Kansas City Fed’s manufacturing survey rounds off the data. It’s another busy day for earnings too with 63 S&P 500 companies set to report including Amazon, UPS and Ford Motor. In Europe the corporate reporting calendar is highlighted by the banks today.

Bulletin Headline Summary from RanSquawk and Bloomberg

• Global equities slump amid the surprising lack of action by the BoJ, alongside a slew of rather soft earnings updates from large European names.
• JPY benefits from the BoJ’s action, coupled with the broad risk off tone in the region.
• Looking ahead, highlights include US Advance GDP, Unemployment Claims, German national Inflation figures alongside ECB’s Linde and Costa.
• Treasuries rise during overnight trading with European and Asia sovereign bonds after the BOJ held off on more stimulus to take more time to assess the impact of negative rates, and the Fed showed no sign of June rate increase.
• Haruhiko Kuroda hasn’t lost his power to jolt markets: but now he’s moving them by doing nothing as the yen soared the most in eight months and stocks sank in Tokyo
• New Zealand’s central bank said it may need to cut interest rates further after holding them steady Thursday, as slowing global economic growth and a strong currency prolong a period of low inflation
• Sweden’s krona is moving in the wrong direction with the threat of a major appreciation putting economic growth forecasts at risk, according to Riksbank Deputy Governor Per Jansson
• Currency trading via CME Group Inc., ICAP Plc and Thomson Reuters Corp. fell to $538 billion per day last month, from more than $669 billion in September 2014, according to data compiled by Bloomberg, which shows the extent of the slump in a market that this month saw some banks report less client activity
• PetroChina Co. posted its first-ever quarterly loss as falling prices for global crude and domestic gas wiped out earnings; China’s biggest oil and gas producer reported a 13.8 billion yuan ($2.1 billion) loss in the three months ended March 31 from a 6.15 billion yuan profit a year ago; Cnooc Ltd., China’s biggest offshore oil and gas explorer, reported a 31 percent decline in revenue and an increase in output amid a crash in crude prices
• China is considering starting trading of credit-default swaps as the number of corporate nonpayments surges, according to people familiar with the matter
• Brexit campaigners sought to seize back the initiative in the referendum battle as eight high-profile economists declared Britain would do better outside the European Union.
• Daiwa Securities Group Inc. said it has almost completed a round of job cuts overseas as a trading slump contributed to a 45 percent decline in fourth-quarter profit
• Sovereign 10Y bond yields lower; European, Asian markets lower; U.S. equity-index futures fall. WTI crude oil lower, metals higher

US Event Calendar

• 8:30am: Initial Jobless Claims, April 23, est. 259k (prior 247k)
• 8:30am: GDP Annualized q/q, 1Q A, est. 0.6% (prior 1.4%)
• 9:45am: Bloomberg Consumer Comfort, April 24 (prior 42.9)
• 10am: Freddie Mac mortgage rates
• 10:30am: EIA natural-gas storage change
• 11:00am: Kansas City Fed Mfg Activity, April (prior -6)

DB’s Jim Reid concludes the overnight wrap

It’s straight to Japan for us this morning where all eyes have been on the BoJ. Expectations had been growing in recent weeks that we might see some sort of further easing, a view also shared by a narrow majority of economists, however the big news is that BoJ has stayed put on all measures. That means annual asset purchases are unchanged at ¥80tn, the policy rate is to stay at -0.1% and the rate of ETF purchases is also unchanged. At the same time the BoJ has also pushed backed on its 2% inflation target, the fourth time in a year they have done so.

Pressure had only mounted leading into the meeting this morning after the BoJ reported lower than expected inflation data. Headline CPI was reported as dipping into negative territory at -0.1% yoy last month (vs. 0.0% expected), a fall of four-tenths. That’s the first deflation reading since 2013. Core inflation also slipped into negative territory at -0.3% yoy (vs. -0.2% expected), a drop of three tenths. The core core print (ex food and energy) was one-tenth lower at +0.7% yoy.

The most immediate impact to the BoJ decision was a huge rally in the Yen. Having hovered around 111.5 prior to the release, the currency surged over two big figures and broke through 109.0 (touching 108.77). It’s currently hovering around 109.3 which is a 2% rally on the day. Meanwhile Japanese equity markets have sharply reversed course. The Nikkei was up +1.41% prior to the decision, but sharply reversed to the tune of nearly 4.5% to trade at -2.96% as we go to print. It’s a similar story for the Topix which is currently -2.62%. Bourses elsewhere in Asia have given up earlier gains. The Shanghai Comp (-0.68%) and Kospi (-0.67%) are in the red post the news, while the Hang Seng (+0.50%) is up but has given up bigger gains from earlier in the session. 10y JGB yields are down 3bps.

The big focus now will be on Governor Kuroda who is scheduled to speak to the press shortly after this hits your emails at 7.30am BST. Given the massive adverse reaction from markets, this has arguably suddenly become the main event of the week where there will be huge attention placed on his every word.
Needless to say yesterday was all about the other big central bank meeting of this week with the conclusion of the FOMC meeting. All-in-all the tone of the statement didn’t offer a whole lot of new information, with the Fed still very much in a wait and see mode. Those banging the tightening drum for June will probably be a little disappointed and while that door is still being left open, the lack of any real reaction in futures markets – with the probability hovering around 21% this morning – indicates that investors were little swayed by the outcome yesterday.

The main focus of the statement was on the reference to global risks. After previously saying that global economic and financial developments pose risks to their outlook, they replaced that with the line that the Fed ‘continues to monitor inflation indicators and global economic and financial developments’.

With regards to economic developments, Fed officials appeared more downbeat saying specifically that growth of economic activity ‘appears to have slowed’ which has coincided with a moderation in household spending. On the flip side the committee also made mention to households’ real income rising at a ‘solid rate’ and consumer sentiment also remaining high. Business fixed investment and net exports were acknowledged as being soft, while the usual positive rhetoric around the labour market was referenced with ‘a range of recent indicators, including strong job gains, points to additional strengthening of the labour market’. On the inflation front market-based measures of inflation compensation were reported as remaining low, while survey measures are little changed. For the third time in a row, the balance of risks statement was omitted.

So it feels like its back to the data-watch train to determine the path ahead for the Fed. On that note, today’s advance Q1 GDP figures released this afternoon will be of huge interest. The current consensus forecast is for +0.6% qoq, which is also the latest forecast of the Atlanta Fed. That consensus forecast has actually been trimmed from as high as +2.5% back in January. Our US economists are a little lower than the market at +0.5%. We’ll know the exact outcome at 1.30pm BST.

In terms of what happened in markets yesterday, prior to the FOMC the bulk of risk assets in the US had been trading in the red, led by weakness in the tech sector from the weak Apple led results hangover. As the session dragged on however and post-FOMC, markets bounced back into the close albeit finishing with still fairly modest gains. The S&P 500 ended up with a +0.16% gain despite Apple closing some 6% lower, while the Dow (+0.28%) closed up slightly more. The Nasdaq (-0.51%) did however fail to recover from the early leg lower. Some better than expected results out of Facebook late last night however (shares traded up as much as 7% in extended trading) did see US equity index futures and particularly the tech-heavy Nasdaq trade higher this morning, but those moves have been wiped out post the BoJ decision.

Supporting the rebound also was another impressive performance for the Oil complex. WTI closed above $45/bbl after rallying close to 3% to mark a fresh 2016 high. That was actually after what was a fairly volatile session which saw Oil drop some 3% off its early highs in the afternoon following a surprise jump in US crude stockpiles levels, before then climbing back into the close late in the session post FOMC. The US Dollar continued its theme of declining each day this week with the Dollar index ending -0.20%, while some of the bigger moves were reserved for the Treasury market. Having risen for seven consecutive sessions, 2y yields ended 4.4bps lower yesterday at 0.819%, while 10y yields finished close to 8bps lower at 1.852%, albeit still back to where they were mid-way through last week.

Yesterday’s main economic data of note was the March advance goods trade balance reading for the US. The data showed an unexpected shrinking of the deficit to $57bn from $63bn reflecting a sharp slowdown in imports, after expectations had been for little change. Meanwhile the latest housing market data was reserved for the March pending home sales numbers which were reported as rising +1.4% mom last month (vs. +0.5% expected).

Meanwhile closer to home yesterday there was a similar bounce off the early lows for risk assets in Europe yesterday with the Stoxx 600 and DAX ending with a +0.29% and +0.39% gain respectively. The main focus data wise was on the ECB’s money and credit aggregates numbers for March. The data was fairly unspectacular with M3 money supply growth up one-tenth to +5.0% yoy as expected, while the credit impulse shrank. Meanwhile we also got wind of a number of regional consumer confidence surveys, with Germany reporting a rise in confidence, while France was little changed and Italy reported a decrease. Finally the advance Q1 GDP reading for the UK printed as expected at +0.4% qoq.

Looking at the day ahead, the early focus this morning is on the UK where the April house price data is due. Shortly after that we’ll get the latest unemployment reading out of Germany, while later this afternoon the April CPI print in Germany will be closely watched. We’ll also get confidence indicators for the Euro area today. Over in the US this afternoon the big focus is on the aforementioned Q1 GDP report, while the core PCE reading will be released alongside (expected at +1.9% qoq). Initial jobless claims data and the Kansas City Fed’s manufacturing survey rounds off the data. It’s another busy day for earnings too with 63 S&P 500 companies set to report including Amazon, UPS and Ford Motor. In Europe the corporate reporting calendar is highlighted by the banks today.

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Gold and Silver Update – It’s Game On!

Posted with permission and written by Sprott USA (CLICK FOR ORIGINAL)

 

 

 

 

Gold continues to consolidate. Two months of sideways price action is proving the yellow metal’s early-year gains were justified while setting the foundation for another move up.

That move will require some kind of impetus and there are many options to provide the push: more stimulus announcements in Europe or Japan, weak Q1 earnings, increasing inflation expectations, rising general economic uncertainty, US dollar weakness, and interest rate roulette, to name a few.

We don’t know if these things will transpire, let alone when. The US dollar is certainly declining, if in fits and starts:

 

 [1]

That helps gold, from both the fundamental angle that gold is priced in greenbacks and the investment rationale that a declining greenback encourages savers to find another safe haven hideout for their savings.

But a declining dollar is only one cog in a machine driving investor interest towards gold. Another is the fact that super low interest rates have removed investors’ go-to tool for hedging their stock portfolios: bonds.

No matter what you think the odds are of a recession in the near to medium term, the fact is we are in uncharted waters. Very low or zero to even negative interest rates had their intended effect, which was to force savers and investors into riskier assets like bonds and equities. That created a seven-year bull market in equities and bonds – but one not representative of the actual economy, which remained stagnant.

That is what already happened. Of interest now is what will happen next.

Bonds have long been the go-to hedge against equities. Bonds are supposed to rise in price when recessionary periods push equities down, because recessions prompt central banks to lower interest rates and that lifts bond prices.

But how’s that supposed to work when interest rates are already rock bottom?

Bonds will not hedge stocks if we enter a recession because central banks can’t do anything to support bonds. That means investors will look elsewhere for a hedge. Gold will be a natural conclusion.

As John Hathaway of Tocqueville Asset Management calculated, if investors were to increase their gold allocation from 0.55% (the current level) to 1.55%, that would represent 56,075 tonnes of demand. That is far more gold than is currently available in London. In fact, a 0.1% increase swamps the supply of physical gold.
[2]

That is the kind of logic that backs the idea that gold has a good run ahead.

Gold moving sideways and consolidating supports the view that gold’s run has truly begun. The way equities are acting adds weight.

Gold stocks outperform gold at the start of a bull cycle. Take a look back to the last cycle: gold bottomed in April 2001 but then ascended slowly, not making a new 52-week high until early 2002 and not establishing a higher high until almost the end of that year. Meanwhile, gold stocks as per the HUI more than doubled during 2002 while many juniors moved far more.

Gold stocks outperform the yellow metal the most at the start of the bull cycle. We are seeing that kind of outperformance now.

Then there’s silver, which has finally started to move.

 

  It doesn’t look like much on the five-year chart, but silver seems to have carved out a bottom. It is up 21% this year, making it the best-performing metal.

And silver has more ground to regain. Gold may have lost 45% in the bear market, but silver lost more than 70%.

The fact that silver is moving now matters. Silver never moves lock step with gold. When uncertainty prompts investors to seek out safe havens, they look to gold long before silver because gold is a far more straightforward safe haven. Silver, by contrast, is also an industrial metal, which means demand waxes and wanes more with economic demand.

However, after some time silver’s safe haven status starts to catch up. And once it starts to look like a safe haven, it acts increasingly so. That process usually starts when gold is consolidating its first big move and preparing to take out its next resistance.

In other words: we’re seeing gold consolidate, which gives confidence in the new price range, and gold is trailing gold equities, which is precisely the pattern we see to start new bull markets. Silver’s recent move only confirms the pattern.

Explorers, miners, and resource investors have been waiting for this pattern to emerge for years. With evidence of a new bull market mounting, they are getting busy.

Here’s a good comparison: in the fourth quarter of last year, miners and explorers raised a measly $565 million. The average placement totaled just $3.3 million.

In the first quarter of this year, the sector has raised $3.5 billion and the average size rose to $23 million. [3]

That’s a massive change. Granted, a few huge raises tipped the scale, including Franco Nevada’s $1 billion, Silver Wheaton’s $623 million, and Goldcorp’s $250 million.

But the money still matters.

For one, royalty and streaming companies like FNV and SLW put capital to use by investing in other assets and companies. That helps the whole sector.

For another, doozies aside the sector still raised a lot of cash and about a fifth of the financings went to explorers and developers. That is significant – in the depths of the bear market, explorers just didn’t have access to capital.

Then there’s the deal flow. The quarter saw several big deals: Tahoe buying Lake Shore Gold, Endeavour buying True Gold, and Newcastle buying Catalyst Copper. There were a good number of smaller deals as well: Probe Metals and Adventure Gold merged, Kootenay Silver took over Northair Silver, and First Mining Finance bought both Clifton Star Resources and the Pitt project from Brionor Resources, among others.

Also really interesting are the moves by majors and mid-tiers to acquire stakes in smaller companies. Goldcorp’s move on Gold Standard Ventures is one example (and it prompted Oceanagold to put more money into GSV to maintain its stake); Oceanagold’s investment in NuLegacy is another.

A favorite question during the bear market was: what will it take to bring mining back to life?

Our answer was always the same: investors have to make money.

In that sense, a mining revival becomes a self-fulfilling prophecy. A bit of recovery gives companies confidence to raise capital. Capital enables exploration, development, and deals, which in turn adds life to share prices.
Reinvigorated share prices means more financings, more activity and happier investors.

 

 

It’s game on.

 

 

 

 

Please email with any questions about this article or precious metals HERE

 

Gold and Silver Update – It’s Game On!

Posted with permission and written by Sprott USA (CLICK FOR ORIGINAL)

 

 

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Authored by Pepe Escobar, Op-Ed via RT.com,

The famous Hollywood adage – 'nobody knows anything' – seems to perfectly apply to the current turbulence in the oil market. So in an effort to clarify where the global oil economy is heading to, let’s engage in a Battle of the Oil Analysts.

Relying on these Oil Analysts (OA) does not necessarily mean you will be handed straightforward answers, but perhaps with some luck you will see a ray of light.

Saudi Arabia is saying that they are raising oil production to 12 million barrels a day. That’s highly debatable. Russia is saying that they can raise oil production to 13 million barrels a day. OA1 cuts to the chase: “Both are bluffing. Prices are still rising. That means no one believes them.”

OA2 kicks in, reminding that, “oil price is holding because of the 1.5 million barrels a day pulled off the market by a strike in Kuwait of about 10,000 workers. That cut their 3 million barrels a day production in half. Now they are going back to work. Yet the price of oil is still rising.”

I had explained before how the oil price was holding over $40.00 a barrel even with concerted Washington pressure over Saudi Arabia to keep it down. Then, OA3 had told me: “that’s because oil demand and supply is tightening.”

But then OA4 came up with a totally different outlook; the whole thing was about 'The Big Long', upon which I based my prediction of $45/$50 per barrel when I was in Tehran in November 2011 and the price was approaching $100 a barrel. The Saudis have been supporting the price and while they have plenty of capital to do so at high prices, storage is finite. Aligning with this, OA4 added that: “the market is about to crash, and is only being supported by the financial positions of the Saudi/GCC support operation, now unwinding."

OA5, predictably, could not agree that the Saudis are supporting the market and about to let it collapse. He elaborated on how “hard it is to predict day-to-day prices. The only way you can know what is happening is to watch by satellite or surface observation the tankers coming out of each exporter, assume they are full, check their names to look up their capacity, and then add up what is leaving each exporter. What they say otherwise means nothing. There are services that do this that cost about $300,000 a year.”

OA6 kicked in with some perspective, explaining what happened in the middle of 2014: “The oil price started to crash with no visible increase in production. The deduction had to be that the surplus in the Gulf – which was the only place where there was a surplus – was being dumped in the market by the Gulf States, under orders from Washington. And this fit geopolitically with the uprising in Kiev as a replay of Afghanistan.”

If there is a consensus amongst most OAs, it is that Saudi Arabia is hurting. OA7 says he’s been “watching the markets, and a lot of this static comes from Iran trying to break into the market. The Gulf States are trying to prevent that as much as possible and trying to cut Iran's throat.

However, I do not see overall that the situation is deteriorating. Such a severe drop in price restrains production. The amount of excess was not more than about 5 percent of the market; not 20 per cent, as in 1985. It has to be tight now based on macro-logic and that is why a famous Goldman Sachs former trader who picked the collapse is not massively buying.”

Still confused? You should be. Because now another variable kicks in – the rise of US  gasoline demand. OA8 has a fine take on the matter: “I was expecting this in the second quarter, not now. We should be over fifty to sixty dollars a barrel then. Fundamentals always prevail in the end.”

The $2 trillion game

So a credible scenario seems to be a world not exactly awash in crude oil, and with the price of a barrel going up soon. And right at this juncture we find China’s CNPC making a play to become a major shareholder of Rosneft – Russia’s top oil producer, which plans to sell 19.5 percent of its shares.

Predictably, US analysts don’t seem to understand why Rosneft may become a top Russia/Chinese-owned corporation. This has nothing to do with selling oil assets when prices are down; Rosneft shares are doing fine, by the way. It’s about the energy/financial consolidation of the Russia-China strategic partnership – from Pipelineistan (those massive, $300 billion gas deals clinched in 2014) to the close connection of Moscow and Shanghai stock exchanges. Translation: all these sophisticated moves further bypass the US dollar.

Oil, in this complex equation, is just one component. For instance, the Ministry of Economic Development in Moscow works with two basic hypotheses: best case at $40 a barrel, and worst case at $25 a barrel. It is duly preparing for both.

And now comes what could be a potential game-changer: the House of Saud’s “vision” for a  post-oil economy.

These are the basics, as announced by Warrior Prince Mohammed bin Salman, 30, the conductor of the – illegal – war on Yemen that is overflowing with “collateral damage”. Saudi Arabia’s power stems from its possession of Mecca and Medina, and geostrategic “Arab and Muslim depth”; it’s central to global trade, with 30 percent passing through the Red Sea and the Persian Gulf; and the future lies in the creation of a $2 trillion sovereign wealth fund, coming from the sale of 5 percent of shares in Aramco, the number one oil company on the planet.

Riyadh, we got a problem. Assuming that Aramco’s partial IPO will yield that astonishing $2 trillion, and these funds are invested all across the West, Saudi Arabia could collect around $100 billion a year. Not much; in fact, only 1/6 of Saudi Arabia’s GDP in 2015 ($653 billion, of which 70 percent come from oil exports). In a nutshell: this plan will not deliver Saudi Arabia a viable post-oil economy.

As if this was not enough, the oil hacienda is currently invested in two expensive wars – in Yemen (directly) and Syria (indirectly). Crucial: the Warrior Prince de facto conducts both. Moreover, the House of Saud will continue to buy spectacularly costly weapons from the usual suspects – the US, UK and France – like there’s no tomorrow.

Back to our OAs. OA8 says that the Saudis under the Warrior Prince made a major mistake: “They have now antagonized the Russians and the Americans. Brennan wants their blood no matter what he says as he thinks of them as terrorists. Also, he believes that they have nuclear tipped missiles from Pakistan. The US cannot reconcile themselves to this.”

Moscow, on the other hand, wants friendly relations with Riyadh, but there’s a perception Russia was betrayed at Doha (cutting oil production was a done deal until the Warrior Prince scuttled it on the very day of the signing.)

Which brings us to OA9: “The self-inflicted wound of cutting the oil price by the Saudis for market share is foolish. The time now is to conserve oil and refrain from selling it, awaiting the tripling of the Chinese economy with the Belt and Road plan. Demand in five or ten years would be massive and oil will be then near $200 a barrel.”

So, in the end, our oil thriller will be all about China; Beijing will need to buy all the energy it needs to pursue the completion of the New Silk Roads. Meanwhile, the House of Saud faces a stark choice. Its “post-oil economy” plan will fail, as others before failed. The Warrior Prince must decide which of the superpowers to ally with. If he thinks he can pull it off all by himself, there’s a cab driver gig waiting for him in London. If he can make it to Heathrow in one piece.

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