Tag: finance

The BBC reports that police are responding to an alert at Paris’s Notre Dame cathedral amid reports of gunshots and panic.

Le Parisien confirms an incident…

La préfecture de police conseille d’éviter le secteur du Parvis de Notre-Dame. https://t.co/INGg7EYhm3

— Le Parisien (@le_Parisien) June 6, 2017

BFM TV report a policeman has shot a man after he tried to assault him near Notre Dame.

More details to come…

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Is a new bull market in metals about to “Get Started?” Lets look at one indicator that is attempting to send a bullish signal, for the first time in 6-years.

Below looks at the Gold Futures/US Dollar ratio, since 1999 on a weekly basis-

CLICK ON CHART TO ENLARGE

The Gold/King Dollar ratio broke above resistance in 2001 and a strong breakout took place. For a decade, Gold was much stronger than the US$ at (1). Gold, Silver and miners did very well in this time frame. Once the ratio broke rising support in 2011, the ratio turned lower. This is where the bear market in Gold, Silver and miners started.

Currently the ratio is attempting to do something it hasn’t in the past 6-years, which is a breakout at (2). A break above resistance is the first for the ratio since the highs back in 2011. If the ratio can keep moving higher and clear the highs of last summer, it would send the first longer-term bullish message to the metals space in years.

We would be honored to have you and a Premium or Metals member, if research in the Gold, Silver and Miners is of interest to you.

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Overall, a very mixed JOLTS reports, with several trading desks quantifying its as outright “schizophrenic”, and as a reminder, JOLTS tends to be goalseeked retroactively during major inflection points in the payrolls series. And with the BLS reporting that job additions in recent months have declined substantially, it may soon be time for the BLS to take a long, hard look at yet another downward JOLTS revision.

Finally, as expected, the latest Beveridge Curve confirms that the “new normal” divergence between job openings and the unemployment rate continues.

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If the collapse in Qatar's bond and stock markets was not enough to warrant concerns, the Riyal peg is now coming under great pressure as FX forwards crash to their weakest on record

It is clear that this is not just speculation in the forwards market, as the spot market has also been slammed, presumably by outflows, sending it to its weakest since 1998…

This is not the first time the Riyal peg has come under pressure. As the chart above shows, the last time speculators bet against the peg holding, some quick jawboning by the central bank chief saved the day…

The Qatari riyal's peg to the U.S. dollar has been of great benefit to Qatar's economy, the country's central bank governor Sheikh Abdullah bin Saud al-Thani said in an interview published on the central bank's website on Monday.

 

Asked by the local Lusail news website about the fluctuations of the dollar against other currencies, Sheikh Abdullah replied:

 

"Such concerns do not exist for us – as you know the U.S. economy is the strongest in the world and depreciation of the dollar against some foreign currencies is usually in small percentages over a limited amount of time.

 

"And our long experience with the riyal peg against the dollar has proved to us that it is best for our economy to continue this peg as it has many benefits.

 

"This peg in recent decades has spared us many of the risks associated with exchange rates, and has contributed to a large reduction of imported inflation, which has a role in the retreat of domestic inflation."

 

"Keeping in mind the increase in the high level of capital, and a reduction in non-performing loans, the banks have great space to withstand any additional pressures in the system if they appear,"

We suspect however that things are a little different for Qatar this time.

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In a world where stat arbs do most of the trading, and where central banks set the prices, everything is a correlation of a correlation of a correlation, and as we have not tired of pointing out since 2010, virtually every correlation starts with the USDJPY, the preferred funding vehicles for BOJ intervention in capital markets, as well as an indicator of Japanese pension fund, in most cases the GPIF, activity in the US risk assets.

It is this USDJPY’s anchor that overnight angered SocGen FX strategist Kit Jucker who writes that “the correlation between USD/JPY and US Treasury yields remains stupidly strong.” As expected, the flow-thru starts with the BOJ:

“The causation seems clear enough – the BOJ is anchoring Japanese yields and the relative appeal of the yen is a function of yields overseas, encapsulated by the global bellwether. The last year can be divided into two ranges. Pre-Trump, USD/JPY traded in a 98-108 range and 10s in a 1.3-1.8% range. Since mid-November, USD/JPY has traded in a 108-119 range, 10s in a 2.15-2.70 range. We are at the bottom of that range, in both FX and bond markets.”

What are the implications for these two key asset classes according to the SocGen strategist?

From here, I’d rather be short yen than short Treasuries, but I wouldn’t like to be long either. Is this week’s move caused by the soft US data on Friday 9adn soft Ism prices paid yesterday) or by risk aversion (Comey testimony, UK election, Qatar)? Both play a part, obviously, but the pound’s ignoring the polls, and glancing through equity markets and commodity market moves, there’s no evidence of wider risk aversion. Oil prices have dropped back, partly on the grounds that there are not yet any economic sanctions being imposed on Qatar. I’m more inclined to see this fall in US yields as the last leg of the rally which started when huge bearish positions were squeezed at the end of Q1. 

 

  

 

Now that we’ve see a sizeable long position build-up in CFTC data, I’m more inclined to view this latest move as the last hurrah of the bond bulls, and fade it by staying long EUR/JPY and going long USD/JPY.

Juckes’ contrarian bearishness on TSYs is hardly that “contrarian” as many other strategists, Goldman most notably, have been urging to sell any rallies… even as yields have dropped to YTD lows as they did this morning. Now that China has made a firm commitment to buying more US paper, however, as per today’s Bloomberg report, it may be time to reevaluate now that a path to a sub-2% yield appears to have emerged.

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Authored by Ron Paul via The Ron Paul Institute for Peace & Prosperity,

President Donald Trump's proposed budget has generated hysteria among the American left. Prominent progressives have accused the president and his allies of wanting to kill children, senior citizens, and other vulnerable Americans.

The reaction of the president’s allies – including some conservatives who should know better – is equally detached from reality as they hail Trump for launching a major assault on the welfare state and making the hard choices necessary to balance the budget.

President Trump’s budget does eliminate some unnecessary and unconstitutional programs such as the Overseas Private Investment Corporation, and the National Endowment for the Arts. However, it largely leaves the welfare-warfare state intact. In fact, this so-called “radical” budget does not even cut domestic spending! Instead, it plays the old DC game of reducing “the projected rate of growth.” For example, under Trump’s budget, Medicaid spending increases from $378 billion this year to $525 billion in 2027. Only in the bizzaro world of Washington, DC can a 38 percent increase be considered a cut.

President Trump's budget combines phony cuts in domestic spending with real increases in military spending. Specifically, the budget increases the military budget by $23 billion over the next ten years. Trump claims that the increase is necessary to reverse the damage done to our military by sequestration. But, despite the claims of the military-industrial complex and its defenders in Congress, on K Street, and in the media, military spending has increased over the past several years, especially when the "off-budget" Overseas Contingency Operations funding is added to the "official" budget.

The restrained American Frist policy promoted by candidate Trump does not require a large and expansive military that literally spans the globe. This budget is the latest indication that President Trump is embracing the neocon foreign policy that candidate Trump correctly denounced.

The budget also relies on rosy scenario economic projections of three percent growth without even a mild economic recession to justify the claim that the federal budget will achieve balance in a decade. This claim bears little or no resemblance to reality.

It certainly is true that some of Trump’s proposed tax and regulatory reforms can increase economic growth. However, the benefits of these pro-liberty policies will not offset the continued drag on the economy caused by the continued growth of federal spending, and the resulting monetization of debt by the Federal Reserve. Far from bringing about endless prosperity, Trump’s big-spending budget increases the odds that Americans will face a Greece-style crisis in the next few years, while the Federal Reserve’s inflation tax evaporates the benefits of any tax reductions passed as part of tax reform.

Some of President Trump’s apologists claim his proposed $1 trillion infrastructure spending plan will help create jobs and grow the economy. But government spending programs do not create real wealth; they only redistribute resources from the private sector to the (much more inefficient) government sector. Therefore, any short-term gains from these programs are illusionary and outweighed by the long-term damage the expansion of government inflicts on the economy. Trump's proposed new parental leave mandate will also hurt the economy, as well as the job prospects of the new entitlement's supposed beneficiaries.

Far from presenting a radial challenge to the status quo, President Trump’s budget grows the welfare-warfare state, albeit with more emphasis on the warfare. This budget is thus more evidence that, for a pro-liberty political revolution to succeed, it must be preceded by an intellectual revolution that reignites the people’s desire and demand for liberty.

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In its latest weekly Economic Indicators Update, Goldman charts the ongoing paradoxical divergence between the Fed’s professed tightening path and what is actually taking place in the US stock market, where it finds that financial conditions are the easiest they have been in two years.

One month ago, Goldman discussed this topic in depth when Jan Hatzius implicitly asked if Yellen has lost control of the market, and warned that in order to normalize fin conditions, the Fed may be forced to follow through with a “policy shock.”

Overnight, Deutsche Bank also focused on the ongoing divergence between Fed intentions and market reality, noting that despite another weak Q1 for US growth and several soft inflation prints in recent months, “the Fed has for the most part stuck to the script for policy over the remainder of the year.” The German bank notes “recent communication has continued to signal that at least one rate hike – the first likely coming at next week’s June FOMC meeting – and a reduction in the balance sheet are still likely by year-end.” It posits one reason why the Fed has remained on message “is that financial conditions have persistently eased despite two rate hikes since December. In fact, our financial conditions index has recently neared the loosest (i.e., most supportive of growth) levels since 2014.“

We consider these questions through the lens of our financial conditions index (FCI). In brief, our high-frequency FCI is a composite of various financial market indicators – the trade-weighted dollar, equities, the 10-year Treasury term premium, VIX, mortgage spread, and corporate bond spread. The variables are transformed when needed (e.g., by taking growth rates), standardized by their pre-crisis mean and standard deviation, and then aggregated into an index using weights based on each variable’s historical relative ability to forecast out-ofsample real GDP growth. The index is constructed such that positive values indicate that financial conditions are supportive of growth, while negative values are consistent with tight financial conditions that exert a drag on growth.

It’s not just DB’s (and Goldman’s) own calculations that reveal an easing in financial conditions:

“The supportive trend in financial conditions evident in our FCI is not dependent on the methodology we use to construct our index. Indeed, the signals from various alternative FCIs – including from Bloomberg and the Chicago, Kansas City and St. Louis Federal Reserve Banks – are similar: financial conditions have eased materially in recent months even as the Fed has raised rates.”

So the next question, as asked by Goldman one month ago, is “what does this easing mean for the Fed?” Here is DB’s answer:

One way to approach this question is to translate the move in our FCI into a “fed funds equivalent.” We do this by comparing the GDP implications from recent changes in our FCI – based on a regression of real GDP growth on our FCI with lags – to the impact of Fed rate hikes on real GDP growth. To pin down the latter, we use simulations from the Fed’s model of the US economy (FRB/US) which suggest that a 100bp cut in the fed funds rate boosts real GDP growth over the coming year by about 0.5 percentage points.

 

Since the Fed raised rates in December 2016, our FCI has risen by about 0.35 index points. Based on a regression, this rise in the FCI would tend to add about 0.2 percentage points to real GDP growth during this quarter and in Q3, after which the impact on growth would dissipate. The boost to growth over the nex four quarters from this easing in financial conditions is equivalent to about one Fed rate cut of 25bp.

 

In addition to supporting the baseline near-term growth outlook, there is evidence that financial conditions provide important information about the risks around the outlook, with loose conditions reducing downside risks to growth.

Simply said, in terms of its impact on real GDP growth, the Fed’s “tightening” since the December 2016 FOMC meeting is the equivalent to one 25bp rate cut, even though the Fed has raised twice over this period.

The conclusion: the divergence can’t – and won’t – continue, and “whether or not this easing of financial conditions persists as the Fed continues to raise rates and also begins to unwind its balance sheet will be an important factor in whether the market or the Fed view proves correct about monetary policy in 2018.“

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Shortly after naming the third suspect in this weekend’s terror attack in London, British police have told office workers on Southwark Street – just yards away from the scene of the London Bridge attack –  to evacuate.

The Express reports that the street has been cordoned off since the ISIS attack but office workers were previously able to sign in and out of work. Police have offered no details but there is some color on social media…

Chris Elmer tweeted: “We have just been evacuated from offices in Southwark street by cordon. They told us not to come back tomorrow either.”

 

Nick Reeve wrote: “Offices on Southwark Street being evacuated. No sense of urgency or emergency though.”

No official comment yet from The Mtropolitan Police.

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While starting a little later than usual, Trump unloaded his now traditional morning tweetstorm, where in a three tweet salvo the president first lashed out at the “FAKE MSM” accusing it of trying to stop him from tweeting and saying reporters “hate” his use of Twitter while criticizing election analysts that predicted he would lose. In a separate tweet he took credit for Monday night’s diplomatic crisis in which a Saudi-led alliance cut ties with Qatar, accusing it of being the region’s only source of terrorist funding.

In the first two related tweets, Trump said “The FAKE MSM is working so hard trying to get me not to use Social Media. They hate that I can get the honest and unfiltered message out,” followed by “Sorry folks, but if I would have relied on the Fake News of CNN, NBC, ABC, CBS, washpost or nytimes, I would have had ZERO chance winning WH,” he added shortly after.

The FAKE MSM is working so hard trying to get me not to use Social Media. They hate that I can get the honest and unfiltered message out.

— Donald J. Trump (@realDonaldTrump) June 6, 2017

Sorry folks, but if I would have relied on the Fake News of CNN, NBC, ABC, CBS, washpost or nytimes, I would have had ZERO chance winning WH

— Donald J. Trump (@realDonaldTrump) June 6, 2017

Addressing the topic of Trump’s use of social media, on Monday, White House deputy press secretary Sarah Huckabee Sanders said that no one in the White House vets Trump’s tweets, following recent reports from the WSJ that as part of Trump’s “war room” White House lawyers would seek to curb Trump’s twitter usage.

“I think social media for the President is extremely important. It gives him the ability to speak directly to the people without the bias of the media filtering those types of communications,” Sanders said.

In the aftermath of the latest London terrorist attack, Trump sent out a series of incendiary tweets Sunday and Monday criticizing the mayor of London after a terror attack in the city, and touting his “travel ban” on individuals from six majority-Muslim countries, in the process provoking a furious political response by UK politicians, some of whom demanded that Trump’s invitation to the UK later this year be rescinded.

Commenting on Trump’s tweeting, Axios reported this morning that after Trump’s tweets yesterday undermining his own Supreme Court case on the travel ban, his Republican allies on Capitol Hill and downtown sounded weary and irritated at day after day of self-inflicted wounds:

• A top GOP operative said: “People are running out of patience. He’s in a very tenuous position, where it wouldn’t take a lot more bad news for things to come crumbling apart. Their complete inability to get ahead of the Russia story is so strange to people.”
• The N.Y. Times’ Michael Schmidt, who broke the story that Comey had kept memos of his conversations with Trump, made the remarkable disclosure on “Morning Joe” last week that it was Trump’s twitter threat to Comey (“James Comey better hope that there are no ‘tapes’ of our conversations before he starts leaking to the press!”) “that motivated some of the folks that I was talking to … and led to them talking about how Trump told Comey to end the Flynn investigation. … [T]he tweets … loosen them up to talk about things

In a separate tweet, Trump appeared to take credit for the latest Gulf scandal in which many of Qatar’s neighbors cut ties with the wealthy nation, saying that there cannot be funding for “Radical Ideology.”

“During my recent trip to the Middle East I stated that there can no longer be funding of Radical Ideology. Leaders pointed to Qatar – look!”

During my recent trip to the Middle East I stated that there can no longer be funding of Radical Ideology. Leaders pointed to Qatar – look!

— Donald J. Trump (@realDonaldTrump) June 6, 2017

As some sarcastically pointed out in response to Trump’s tweet, “Saudi-led GCC effectively blockaded Qatar and isolated a country hosting US bases, as per the US President?”

As a reminder, on Monday Bahrain, Egypt, Saudi Arabia and the United Arab Emirates on Monday announced they were cutting diplomatic ties with Qatar, citing what they say is Qatar’s support for extremist groups and its relations with Iran, which as the FT later reported may have been catalyzed by a $1 billion payment made by Qatar to Iran and various al-Qaeda spinoffs operating in the region. Some have alleged that the Saudi-led action was merely an attempt to scapegoat Qatar for ongoing support of terrorism in the region which as even Hillary Clinton noted previously includes not only Qatar but also America’s biggest arms customer, Saudi Arabia.

In response, Qatar has denied any support for militant groups and says the crisis is being fueled by “absolute fabrications” and is a “violation of its sovereignty.” In the aftermath of the scandal, U.S. officials downplayed the growing dissension between Qatar and the four other Arab nations, saying the dispute would not affect the fight against ISIS. As Bloomberg reported earlier, Kuwait is trying to mediate the crisis between Qatar and its Arab neighbors Qatar’s foreign minister said Tuesday.

In an interview with Doha-based satellite news network Al-Jazeera, Foreign Minister Sheikh Mohammed Bin Abdulrahman Al Thani said Kuwait’s ruler had asked Qatar’s emir to hold off on giving a speech about the crisis late Monday night.

Sheikh Tamim bin Hamad Al Thani “received a call from the emir of Kuwait asking him to postpone it in order to give time to solve the crisis,” Sheikh Mohammed said. Still, the minister struck a defiant tone, rejecting those “trying to impose their will on Qatar or intervene in its internal affairs.”

The state-run Kuwait News Agency reported Kuwaiti ruler Sheikh Sabah Al-Ahmad Al-Sabah spoke with Qatar’s emir Monday evening and urged him to give a chance to efforts that could ease tensions. The call came after a senior Saudi royal arrived in Kuwait with a message from the Saudi king. An Omani diplomat traveled to Qatar on Monday.

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