Tag: finance

Earlier today, the Bureau of Economic Analysis surprised everyone by announcing a final Q3 GDP growth of 4.1% compared to 3.6% in the first revision (and 2.8% originally), driven almost entirely by the bounce in Personal Consumption which rose 2.0% compared to estimates of 1.4%. As a result many are wondering just where this “revised” consumption came from. The answer is below: of the $15 billion revised increase in annualized spending, 60% was for healthcare, and another 27% was due to purchases of gasoline. The third largest upward revision: recreation services.

In other words, the BEA thought long and hard what it could revise and decided on the following: in Q3 the US economy was revised to the strongest since 2011 because Americans, it would appear, were gassing up more to visit (and pay) their doctor, and then going to the movies.

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Blackstone Group appears to be trying to oligopolize the business of renting single-family homes in the U.S.. As Bloomberg reports, after the housing crash left more than 7 million foreclosed homes in its wake, the investment firm has spent more than $7.8 billion purchasing about 41,000 single-family homes for rental conversion. The world’s largest private equity firm has quickly become the largest landlord (of rental homes) in the U.S. and in October, Blackstone offered the first-ever “rental-home-backed” security on Wall Street. One has to wonder if this was the plan all along?

 

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When a month ago, the BEA released its first revision to Q3 GDP, the lament from even the biggest sycophants of data manipulation was that the bounce in estimated Q3 economic output from 2.84% to 3.61% was driven entirely by inventory accumulation, while personal consumption as a % of the final GDP number actually declined from 1.04% to 0.96%.Sequentially, the ever missing personal consumption was revised up 2% vs the estimated up 1.4%, far above the highest estimate of 1.6%, and also the prior 1.4% print.

Which is why absolutely nobody was surprised to see the BEA mysteriously keep virtually every other GDP component unchanged but boost Personal Consumption Expenditures from 0.96% of GDP to 1.36%. The end result is that the GDP reported in the first revision number has been boosted once again to a simply ludicrous 4.1%, smashing expectations of a 3.6% print. Putting this “revision” in perspective, the final GDP is now 45% higher than the first GDP estimate of 2.84%, and there is a whopping 1.5% delta between the first and final revision, which in our record books is the biggest revision on record.

What can one say: close enough for government data-fudging work.

Some additional data in the GDP release:

Corporate Profits 

 

Profits from current production (corporate profits with inventory valuation adjustment (IVA) and capital consumption adjustment (CCAdj)) increased $39.2 billion in the third quarter, compared with an increase of $66.8 billion in the second.  Taxes on corporate income decreased $0.4 billion, in contrast to an increase of $10.0 billion.  Profits after tax with IVA and CC Adj increased $39.5 billion, compared with an increase of $56.9 billion.

 

Dividends decreased $179.0 billion in the third quarter, in contrast to an increase of $273.5 billion in the second.  The large third-quarter decrease primarily reflected dividends paid by Fannie Mae to the federal government in the second quarter.  Undistributed profits increased $218.6 billion, in contrast to a decrease of $216.6 billion.  Net cash flow with IVA — the internal funds available tocorporations for investment — increased $231.1 billion, in contrast to a decrease of $205.3 billion. 

 

Corporate profits by industry

 

Domestic profits of financial corporations increased $9.7 billion in the third quarter, compared with an increase of $24.5 billion in the second.  Domestic profits of nonfinancial corporations increased $12.7 billion, compared with an increase of $37.8 billion.  The increase in profits of financial corporations reflected increases in both Federal Reserve banks and “other” financial industries.  The increase in nonfinancial corporations primarily reflected increases in manufacturing and in “other” nonfinancial corporations that were partly offset by a decrease in information.  Within manufacturing, the largest increases were in “other” durable goods and in food and beverage and tobacco products. These increases were partly offset by decreases in petroleum and coal products and in chemical products. 

 

The rest-of-the-world component of profits increased $16.7 billion in the third quarter, compared with an increase of $4.6 billion in the second.  This measure is calculated as the difference between receipts from the rest of the world and payments to the rest of the world.

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As reported yesterday, following a surge in various short-term and money market rates in the aftermath of the Fed’s taper announcement, the PBOC admitted after the close that it used Short-term Liquidity Obligations (SLO) to add funding to the market, and in doing so, bailing out money markets – the same product that nearly collapsed the financial system in the aftermath of Lehman.

The bank didn’t specify when it added the funds but, in another direct echo of the June panic, the PBOC said it is prepared to add more. However, it seems the market was less the convinced, and despite an early plunge in the seven day repo rate by over 2%, it suddenly and rapidly reversed direction and instead blew out hitting a whopping 9%, the highest since the June near-crash of the Chinese banking sector.

The outcome: China said it injected another $50 billion to bailout and stabilize its money markets in what is increasingly looking like a replay of this summer’s liquidity lock up. Perhaps the PBOC hinting at tapering at a time when the Fed is actually doing so is not the smart choice…

From the WSJ:

China’s central bank said it had injected over 300 billion yuan ($49.2 billion) into the nation’s money markets over a three-day period as interbank interest rates surged to their highest levels since June.

 

The People’s Bank of China said on its official Twitter-like weibo account that the banking system had current excess reserves of over CNY1.5 trillion and it called that level “relatively high.”

 

The central bank said that it had injected the funds through its “short-term liquidity operations” and this was in response to the year-end market factors.

 

The interest rates banks charge each other for short-term loans jumped to 8.2%, the highest level since the June cash squeeze. 

 

The stress in the banking system is starting to spread elsewhere, with stocks in Shanghai falling for a ninth straight day to the weakest level in four months while government bonds dropped, pushing the 10-yield up to near the highest in eight years.

 

The turmoil has been sparked by a scramble for funds by banks as they near the end of the year when they typically need extra cash to meet regulatory requirements as well as the demand for funds from companies.

 

The central bank also said reminded banks that they need to manage liquidity better.

As to what drove the rapid mood reversal, the Chinese market was hit early on with talk of a missed payment at a local Chinese bank. For now it has not been confirmed, and even if it was the PBOC is expected to never allow any government-backstopped bank to fail. Still, a few more days like the last two and the world may just find out how prepared for a bank failure a credit-stretched China really is.

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Submitted by Michael Krieger of Liberty Blitzkrieg blog,

The “Too Big Too Jail” nonsense that surrounds large U.S. banks and their above the law employees has been glaringly obvious and thoroughly documented for quite some time now. Yet what represents an even larger slap in the face to millions of hard-working, law-abiding citizens, is how relentlessly the “justice” system goes after small time criminals, while merely fining oligarch thieves for far worse crimes. I first covered this theme earlier this year in my piece Some Money Launderers are “More Equal” than Others, which discussed how HSBC was caught laundering billions of dollars for Mexican drug cartels.

Well HSBC is back in the news. This time it relates to their transferring funds on the behalf of financiers for the militant group Hezbollah. If transactions such as these had even the slightest link to Bitcoin, there would be endless uproar, calls for countless Congressional hearings and demands to stop the currency at all costs. But when HSBC is caught doing it, what happens? A $32,400 settlement.

More from The Huffington Post:

A major U.S. bank has agreed to a settlement for transferring funds on the behalf of financiers for the militant group Hezbollah, the Treasury Department announced on Tuesday.

 

Concluding that HSBC’s actions “were not the result of willful or reckless conduct,” Treasury’s Office of Foreign Assets Control accepted a $32,400 settlement from the bank. Treasury noted, as did HSBC in a statement to HuffPost, that the violations were voluntarily reported.

 

Everett Stern, a former HSBC compliance officer who complained to his supervisors about the Hezbollah-linked transactions, told HuffPost he was “ecstatic and depressed at the same time.”

 

“Those are my transactions, I reported them,” he said, satisfied that the government was taking action. But, he added, “Where I am upset was those were a handful of transactions, and I saw hundreds of millions of dollars” being transferred.

 

Stern said he hopes the government’s enforcement actions against HSBC have not come to an end with the latest settlement. “They admit to financing terrorism and they get fined $32,000. Where if I were to do that, I would go to jail for life,” he said.

 

And the government watchdog’s claim that HSBC committed no “substantially similar apparent violations” in the past five years is likely to raise some eyebrows. In December 2012, the bank agreed to pay a $1.9 billion settlement for moving money that a 2012 Senate report found had likely helped drug cartels and a Saudi Arabian bank the CIA has linked to al Qaeda.

 

No one at HSBC was criminally charged for what U.S. Assistant Attorney General Lanny Breuer called at the time ”stunning failures of oversight.” The Senate report faulted the Office of the Comptroller of the Currency, an independent bureau with the Treasury Department, for weak oversight of HSBC.

You know you are a Banana Republic if…

Full article here.

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• China cash injection fails to calm lenders (AFP)
• European Union Stripped of AAA Credit Rating at S&P (BBG)
• Last-Minute Health-Site Enrollment Proves a Hard Sell (WSJ)
• Bernanke’s Recession-Fighting Weapon Developed by 1900s Banker (BBG)
• Asia Stocks Are Little Changed Amid China Funding Concern (BBG)
• BlackBerry reports huge loss on writedown, impairment charges (Reuters)
• Regulators’ Guidance on Volcker Rule Gives Banks Little Relief on Debt Sales (WSJ)
• On one hand: Man Who Said No to Soros Builds BlueCrest Into Empire (BBG); on the other: Michael Platt’s BlueCrest Capital Poised for Rough Close to 2013 (WSJ)
• BOJ Keeps Record Easing as Fed Taper Helps Weaken Yen (BBG)
• Bank of England becomes more cautious on economic predictions (FT)
• Gold Climbs From Lowest Close Since 2010 as Goldman Sees Losses (BBG)
• Fed’s Mortgage Role Expands (WSJ)
• Wall Street Unlocks Profits From Distress With Rental Revolution  (BBG)
• Cities Try to Lure Young Professionals With Cheap ‘Micro’ Units (WSJ)
• Obama Issues Rare Veto Threat on Iran Bill (WSJ)

 

Overnight Media Summary

WSJ

* The Senate has delayed until January a vote on confirming Janet Yellen as chairman of the Federal Reserve. Senate Majority Leader Harry Reid proposed the new schedule late Thursday and got no objections. The vote will now occur on Jan. 6, when the Senate returns, instead of by Saturday.

* The Obama administration said Thursday it would allow some of the millions of Americans whose insurance policies had been canceled to purchase bare-bones plans next year, in another 11th-hour tweak to the law likely to cause consternation among health insurers.

* Gold prices slid to three-year lows, effectively closing the book on a historic rally that lured investors on both Wall Street and Main Street. Barring a rebound of unprecedented scale, the price of gold is set to notch its first annual decline in 13 years and its biggest drop since 1981. Gold is down 29 percent year-to-date.

* The Securities and Exchange Commission on Thursday charged a former senior portfolio manager at Microsoft Corp, along with his friend and business partner, with insider trading.

* Steve Forbes and members of his family are enmeshed in a tax dispute with the Internal Revenue Service tied to their publishing company’s former New York headquarters, documents filed in U.S. Tax Court reveal.

* Fighting a battle with Amazon.com Inc to be the preferred entry point for Internet shopping, Google Inc last year retooled its lucrative search page. Its strategy is showing signs of progress.

* Telstra Corp agreed to sell its Hong Kong-based mobile business to HKT Ltd in a deal worth US$2.43 billion, exiting a highly saturated smartphone market that is facing regulatory changes to increase competition.

* FedEx Corp on Thursday disclosed that it had deferred by two years options to buy 11 more Boeing Co 777 freighter jets earmarked to fly goods between Asia and the United States, a market that’s borne the brunt of the global slowdown in air cargo.

* Mark Zuckerberg will likely pocket about $1 billion from his first stock sale since Facebook Inc’s initial public offering, part of a complex transaction in which the founder and chief executive also plans to donate stock valued at roughly $1 billion to charity.

* Like clockwork, WhatsApp announced another milestone Thursday, claiming 400 million monthly active users. In April, the company said 200 million people were using its smartphone-messaging app. Every two months since, it has said another 50 million people were on board.

 

FT

BAE Systems suffered a bruising setback after Britain’s negotiations to supply 60 Typhoon fighter jets to the UAE collapsed and pricing talks on a separate deal with Saudi Arabia stalled.

The Bank of England has become more pessimistic about Britain’s growth and export performance after publishing its first detailed analysis of its forecasting errors.

Markets soured on the day after the US Federal Reserve’s dramatic tapering of its asset purchases from $85bn to $75bn per month as the dollar climbed and vulnerable emerging markets came under pressure.

Overstock plans to become the first big U.S. online retailer to accept Bitcoin, as Patrick Byrne, the company’s libertarian chief executive, warms to the virtual currency as a refuge from government control.

Bidders for JPMorgan Chase’s physical commodities business have complained that the bank is refusing to release enough information for them to value the assets. The sale has presented a challenge for bankers running the process as they are negotiating with some of their fiercest trading rivals.

Businesses will be paid to cut their energy use on winter evenings next year, highlighting the rising threat of blackouts as the UK’s ageing coal plants are closed.

 

NYT

* Millions of people facing the cancellation of health insurance policies will be allowed to buy catastrophic coverage and will be exempt from penalties if they go without insurance next year, the White House said Thursday night.

* The International Monetary Fund issued on Thursday a scathing report on Ukraine’s financial situation, saying that the government of President Viktor F Yanukovich had largely abandoned much-needed economic reforms that it had agreed to undertake as part of a deal in 2010 that provided more than $15 billion in loans.

* The Wolf of Wall Street is about to have his day. The Martin Scorsese film about the Wolf – Jordan Belfort in real life, played by Leonardo DiCaprio – tells how Belfort swindled thousands of investors out of more than $100 million as head of a penny-stock boiler room in the 1990s.

* If President Obama adopts the most far-reaching recommendations of the advisory group he set up to rein in the National Security Agency, much would change unde
rneath the giant antennas that sprout over Fort Meade, Md., where America’s electronic spies and cyberwarriors have operated with an unprecedented amount of freedom since the Sept. 11, 2001, attacks.

* Governments, led by the United States, are increasingly demanding that Google remove information from the Web. The company received 3,846 such requests to remove 24,737 items in the first half of 2013, an increase of 68 percent over the second half of 2012, according to an update to Google’s transparency report released on Thursday. Google complied with more than a third of all requests.

* Despite what has been a buoyant market for Chinese companies’ share offerings in Hong Kong in recent weeks, shares in China Everbright Bank sank on their trading debut on Friday. Everbright Bank raised around $3 billion last week in an initial public offering – Hong Kong’s biggest of the year – after pricing its shares at 3.98 Hong Kong dollars, or 51 U.S. cents, apiece, near the lower end of their marketed range.

* The battle for Telecom Italia’s future heats up Friday when shareholders vote on whether to oust the company’s board. Minority investors are seeking to combat a threat from the Spanish giant Telefonica, which has increased its stake in a holding company that owns around 22 percent of Telecom Italia.

* Following in the footsteps of companies like Google and Facebook, Verizon Communications is going to reveal more about what customer information it shares with the government. On Thursday, the company announced plans to publish its first transparency report, which will provide data on the number of law enforcement requests for customer information it received this year.

 

Canada

 

THE GLOBE AND MAIL

* An armored-vehicle
program, once deemed essential to protect soldiers from roadside bombs,
is being ditched by the Conservative government, defense and government
sources say. The $2.1 billion, close-combat vehicle acquisition joins a
long list of troubled and failed military procurements.

*
The National Energy Board has given a conditional green light to the
Northern Gateway pipeline project, handing off to Prime Minister Stephen
Harper a crucial decision that threatens to intensify aboriginal
opposition and become a political flashpoint in the next federal
election.

In a report Thursday, an NEB review panel recommended
that Ottawa approve the $6.5 billion pipeline and crude supertanker
terminal in Kitimat, British Columbia once the government and Enbridge
Inc have addressed the 209 environmental, safety and financial
conditions set down by the panel.

Reports in the business section:

*
Canadian regulators alleged on Thursday that a Silvercorp Metals Inc
short-seller committed fraud when he wrote negative reports about the
mining company in order to profit from a drop in the miner’s stock.

*
A move by the Canadian government to block Pizza Pizza Ltd and other
Canadian restaurant chains from importing low-cost U.S. mozzarella is
stoking trade tensions with the United States.

A senior U.S. trade
official has bluntly warned Ottawa that the decision could harm its
exporters and was made without proper notice or justification.

*
Canada is once again delaying emissions regulations in the oil and gas
sector, despite major pipeline projects that continue to put intense
scrutiny on the energy industry’s environmental track record.

NATIONAL POST

*
Gregory Logan, an Alberta ex-Mountie who for 10 years orchestrated the
most pervasive narwhal tusk-smuggling ring of modern times, is now set
to face U.S. prosecutors only two months after a New Brunswick court
handed him Canada’s largest-ever wildlife penalty.

*
Prime Minister Stephen Harper says he felt betrayed and deceived at
being left in the dark over the secret $90,000 check his former chief of
staff gave to senator Mike Duffy.

FINANCIAL POST

*
Canada’s broadcast regulator, Canadian Radio-television and
Telecommunications Commission, offered a preview of a television system
based on individual choices in a decision on Thursday that also
highlighted its willingness to intervene in the marketplace to promote
news programming.

* Canadians will ramp up their record levels of debt in 2014, says one of the country’s leading rating agencies.

Credit-monitoring
agency TransUnion predicts in its first such annual forecast that the
average consumer’s total non-mortgage debt will hit an all-time high of
$28,853 by the end of 2014.

* It’s been a busy week for
Canadian regulators as they roll out new rules designed to meet global
regulatory reform in the area of derivatives trading.

On Thursday,
the Canadian Securities Administrators proposed a model for central
counterparty clearing of over-the-counter derivatives. The new system,
if implemented in its current form, will determine which derivatives are
subject to central clearing.

 

 

China

CHINA SECURITIES JOURNAL

– Jiang Yang, vice-chairman of the China Securities Regulatory Commission, said the commission will push forward with the opening up of capital markets in the Shanghai pilot Free Trade Zone. It will reveal detailed rules for cross-border bilateral investments for companies and individuals, he added.

– The manufacture and sales of automobiles from January to November this year stood at 19.99 million and 19.86 million units respectively, a gain of 14.34 percent and 13.53 percent from a year earlier, according to data from the China Association of Automobile Manufacturers. Insiders expect the automobile market growth to reach 15 percent.

SHANGHAI SECURITIES NEWS

– The Shanghai Stock Exchange said it will improve corporate governance for listed companies and regulate the operations of their audit committees under the board.

CHINA DAILY

– Max Baucus, who is expected to be nominated as the next US ambassador to China, will have to play a balancing act between implementing Washington’s policies and addressing Beijing’s concerns over its strategic interests, observers said.

SHANGHAI DAILY

– China will quicken reforms of its massive state-owned enterprises, according to the SOE regulator. The focus is to transform the SOEs, especially parent companies, quickly into joint-stock companies where public shareholders can have a bigger voice, said Huang Shuhe, vice-chairman of the State-owned Assets Supervision and Administration Commission.

 

Britain

The Telegraph

BLOW FOR BRITAIN AND BAE SYSTEMS AS UAE RULES OUT EUROFIGHTER DEAL

Defence contractor BAE Systems has been hit by a double-blow from the Gulf over its Typhoon fighter jet programme, damaging its export ambitions and forcing the company to warn on profits.

(http://link.reuters.com/mex55v)

BRUSSELS CHIEF MICHEL BARNIER BANS BANKER MEETINGS

The European Commission has banned all meetings with bankers and bank lobbyists as it prepares new rules to deal with failed financial institutions.

(http://link.reuters.com/nex55v)

The Guardian

INTEREST RATE RISE WITH NO WAGE INCREASE ‘WILL PUSH HEAVILY-INDEBTED TO EDGE’

Heavily indebted homeowners will be hit hard if interest rates start to rise before wages have picked up, according to research by the Bank of England that underlines the dilemma facing policymakers as the eco
nomy recovers.

(http://link.reuters.com/pex55v)

SERCO’S £68.5M FINE DISGUISES WHAT LOOKS TO BE A BRIGHT FUTURE

Serco’s reputation seems to have escaped relatively unscathed compared to G4S and may soon be bidding for government contracts

(http://link.reuters.com/qex55v)

The Times

RETAIL SALES BREAK THE ICE BUT CHRISTMAS FEARS REMAIN

Retail sales rallied last month after a decline in October as the colder weather brought shoppers out for winter clothes – but the rise was not enough to dispel fears that Christmas trading will be weak.

(http://link.reuters.com/gex55v)

SWAPS SCANDAL MAY WIDEN, WATCHDOG WARNS

Banks may be exploiting the powerlessness of regulators to continue selling unsuitable hedging products to small firms, the chief City regulator has warned.

(http://link.reuters.com/hex55v)

The Independent

SERCO TO PAY BACK £69M OVER FRAUDULENT TAGGING CONTRACTS

More than two-thirds of Government contracts held by the controversial outsourcing giants Serco and G4S are open to fraud and error, ministers have admitted.

(http://link.reuters.com/jex55v)

BT BLASTS OFCOM OVER ‘UNFAIR’ NEW RULES BENEFITING RIVALS

BT has hit out at industry regulator Ofcom for imposing what it described as “unfair” rules on Britain’s biggest telecom company, claiming that they benefit rivals such as BSkyB and TalkTalk who gain wholesale access to its network at “artificially low prices”.

(http://link.reuters.com/kex55v)

 

 

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

3M Company (MMM) upgraded to Neutral from Underweight at JPMorgan
ARRIS (ARRS) upgraded to Buy from Hold at Jefferies
Carnival (CCL) upgraded to Outperform from Neutral at Credit Suisse
Empresas ICA (ICA) upgraded to Buy from Neutral at Citigroup
Lexmark (LXK) upgraded to Equal Weight from Underweight at Barclays
Mobile TeleSystems (MBT) upgraded to Buy from Hold at Deutsche Bank
Red Hat (RHT) upgraded to Buy from Neutral at UBS
Red Hat (RHT) upgraded to Outperform from Market Perform at Raymond James

Downgrades

BRE Properties (BRE) downgraded to Hold from Buy at Deutsche Bank
First Niagara (FNFG) downgraded to Sell from Neutral at Citigroup
TIBCO (TIBX) downgraded to Neutral from Buy at UBS

Initiations

Advent Software (ADVS) initiated with a Hold at Jefferies
Brookfield Residential (BRP) initiated with an Outperform at Credit Suisse
Criteo (CRTO) initiated with a Buy at Societe Generale
FireEye (FEYE) initiated with a Neutral at Wedbush
Himax Technologies (HIMX) initiated with a Buy at Topeka
Imperva (IMPV) initiated with a Hold at Topeka
Infinera (INFN) initiated with an Outperform at FBR Capital
Montage Technology (MONT) initiated with a Buy at Topeka
Nimble Storage (NMBL) initiated with an Outperform at RBC Capital
Prospect Capital (PSEC) initiated with a Buy at Deutsche Bank
Ruckus Wireless (RKUS) initiated with a Market Perform at JMP Securities
Semiconductor Manufacturing (SMI) initiated with a Buy at Topeka
Spansion (CODE) initiated with a Hold at Jefferies
Surgical Care Affiliates (SCAI) initiated with an Equal Weight at Morgan Stanley
TriMas (TRS) initiated with an Outperform at Wells Fargo
eHealth (EHTH) initiated with a Buy at SunTrust
lululemon (LULU) initiated with a Buy at Topeka

HOT STOCKS

Telstra (TLSYY) entered into agreement to sell CSL in Hong Kong for $2.43B
Alcatel-Lucent (ALU) to sell LGS Innovations to Madison Dearborn Partners, CoVant
Jazz Pharmaceuticals (JAZZ) to acquire Gentium (GENT) for $57 per share
Jones Group (JNY) to be acquired by Sycamore Partners for $15.00 per share in cash, or about $1.2B
TowerJazz (TSEM) to acquire three Panasonic (PCRFY) semiconductor factories in Japan
Caesar’s (CZR, CACQ) announced partnership with Live Nation (LYV)
DealerTrack (TRAK) acquired Dealer.com for 8.7M shares, $620M in cash
Xerox (XRX) acquired German-based Invoco

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Cintas (CTAS), Nike (NKE), TIBCO (TIBX), Red Hat (RHT)

NEWSPAPERS/WEBSITES

• The Federal Reserve’s role in the mortgage market has expanded over the past three months and could remain large for now, even as the central bank attempts to shrink its bond-buying program, the Wall Street Journal reports
• At least half a dozen banks are working on proposals for financing a bid by Sprint (S) for T-Mobile (TMUS), sources say, another sign that Sprint is laying the groundwork for a potential offer for its smaller rival, the Wall Street Journal reports
• This year has been the biggest for equity fundraising globally since 2010, thanks to improving confidence among companies on the back of the strong investor demand for stocks, according to Thomson Reuters data. A total of $774B has been raised worldwide from equity capital market offerings as of December 18, a rise of 24% on 2012, Reuters reports
• Lloyds Bank (LYG) is poised for a return to private ownership within 18 months, while part-nationalized rival Royal Bank of Scotland (RBS) faces some major hurdles before it can regain independence, Reuters reports
• The Fed will probably reduce its bond purchases in $10B increments over the next seven meetings before ending the program in December 2014, economists said, Bloomberg reports
• Investment bankers have said a recovery was around the corner throughout the current slump, awaiting a stronger U.S. economy, rising stock markets or an end to the European debt crisis. All those conditions have been satisfied, yet dealmaking has remained stagnant as CEO’s continue to worry about the viability of the economic recovery, Bloomberg reports

SYNDICATE

BPZ Resources (BPZ) files $500M mixed securities shelf
Biostar Pharmaceuticals (BSPM) files $35M mixed securities shelf
DHT Holdings (DHT) files to sell 28.13M shares of common stock for holders
Verastem (VSTM) files $150M mixed securities shelf

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Overnight one of the main stories is that the European Union has been downgraded to AA+ from AAA by S&P. While the market digests the impact of the downgrade, all eyes remain on the US treasury market. As Deutsche Bank notes, treasuries are increasingly being viewed as a potential sign of the success or not of the Fed taper in early 2014. From the lows in the immediate aftermath of Wednesday’s FOMC, 10yr UST yields have added more than 10bp. Yields continue to leak this morning (-2bp to 2.95%) though we’re still hovering at levels last seen in early September just before the Fed surprised markets with its non-taper. Despite this, US equities and credit were both reasonably well supported yesterday. However the combination of higher UST yields and a stronger dollar resulted in a fairly difficult day for EM. In EMFX, the Brazilian Real fell 1.1% against the USD, underperforming most other EM currencies. The move was exacerbated by the announcement from the BCB that it would wind back its intervention in the currency market, following the initial positive reaction to tapering on Wednesday. Other EM currencies also struggled including the TRY (-0.7%), MXN (-0.7%) and IDR (-0.3%). A number of EM equity markets struggled including in Poland (-0.7%) and Turkey (-3.5%).

Turning to Asian markets, the post-FOMC rally has paused in Asian equities with losses across the Nikkei (-0.4%) and Hang Seng (-0.5%) overnight. The focus is again on China where there is plenty of discussion on the squeeze in interbank funding markets. Following a spike in rates early yesterday, the PBoC acted late on Thursday to inject liquidity via short term operations which resulted in a sharp drop in short term rates. However, the relief has been shortlived, and the closely-watched Shanghai 7-day repo rate has once again spiked up (+170bp today to 6.90%). The repo rate is now higher than yesterday amid market talk of a missed payment at a local Chinese bank. This is something to monitor over the next few days as Chinese interbank rates typically fluctuate towards month/year end. The cautiousness in funding markets is weighing on Chinese equities today with the Shanghai Comp and HSCEI down by 1.0% apiece. Elsewhere, there were no major surprises from the BoJ meeting today and it appears that the central bank is content to wait for the impact of sales tax hikes in April 2014 before deciding on policy adjustments if any.

European equities remain on the front foot, on track for the third consecutive daily gain as markets continue to find solace in the Fed’s non-aggressive QE taper. This brings the DAX into close proximity to all-time highs at 9424. Financials lead the way higher, as Italian and Spanish banks add to their recent gains, not perturbed by the looming Italian budget vote, wherein Letta’s 2014 budget is expected to be passed through smoothly. GBP/USD has pulled back from near-YTD highs, as an upward revision to Y/Y GDP to 1.9% was countered by the biggest UK current account deficit on record, somewhat tarnishing S&P’s decision this morning to affirm the UK at AAA. Another rise in Eurozone excess liquidity has failed to weaken the EUR, with all eyes looking ahead to the ECB’s final LTRO repayment announcement of the year due after 1100GMT.

Finally, in the Asia-Pacific session, the Bank of Japan’s decision to keep their monetary policy on hold provided no surprises, but the eradication of an option barrier in USD/JPY at 104.50 pushed the pair to five year highs at 104.59, albeit this was not sustained. Countering the positive equity sentiment are the Chinese indices, who mark the second day of losses as money markets in China constrict local stocks once more after the PBoC’s decision yesterday to inject CNY 200bln was not enough to sate traders.

Looking at the day ahead, a number of US equity options and futures contracts expiries occur today. French business confidence, the Kansas City Fed manufacturing survey and the third estimate of US GDP are the data releases to note as we head into the final trading days before the Christmas break.

Overnight headline bulletin from RanSquawk and Bloomberg

• European equities remain on the front foot, on track for the third consecutive daily gain as markets continue to find solace in the Fed’s non-aggressive QE taper.
• GBP/USD has pulled back from near-YTD highs, as an upward revision to Y/Y GDP to 1.9% was countered by the biggest UK current account deficit on record.
• Finally, in the Asia-Pacific session, the Bank of Japan’s decision to keep their monetary policy on hold provided no surprises, but the eradication of an option barrier in USD/JPY at 104.50 pushed the pair to five-year highs at 104.59.
• Looking ahead there is the release of US GDP, which is expected to be unrevised. However, volatility is expected in the US indices as markets head through quadruple witching (expiration of index futures & options and single stock futures & options).
• Treasury yield curves continue to flatten as 2Y-10Y maturities head for weekly loss after Fed announced $10b/month QE taper, strengthened forward guidance.
• Fed will probably reduce its bond purchases in $10b increments over the next seven meetings before ending the program in December 2014, economists said
• The Fed’s balance-sheet assets rose $14.1b in the week ended Dec. 18 to top $4 trillion for the first time, according to data released by central bank
• The Bank of Japan kept its pledge to expand the monetary base by an annual 60t-70t yen ($670b) today after a two-day    meeting in Tokyo, in line with forecasts of all 35 economists surveyed by Bloomberg News
• China’s money-market rates surged and stocks dropped for a ninth day, the longest losing streak in 19 years, as targeted fund injections by the central bank failed to alleviate the worst cash crunch since June
• S&P cut its rating on the European Union to AA+ from AAA, citing the deteriorating creditworthiness of the bloc’s 28 member nations
• A final confirmation vote on Janet Yellen to head the Fed was delayed until early January after the U.S. Senate dropped plans to consider her nomination this weekend
• Americans whose health plans are being canceled because their coverage doesn’t meet Obamacare rules will be exempt from the mandate that they carry insurance, under a change announced by the Obama administration; insurers warn the new exemptions risk destabilizing the marketplace
• Obama would veto Iran sanctions legislation introduced in the Senate yesterday, according to White House spokesman Jay Carney, who said the measure would increase chances for war
• Sovereign yields decline. EU peripheral spreads little changed. Nikkei little changed while Shanghai falls 2%. European stocks mixed, U.S. equity index futures gain. WTI crude declines, gold and copper gain

Asian Headlines

The BoJ unanimously voted to keep monetary policy unchanged. The BoJ stated that it will continue easing until 2% inflation is stable, adding that it will examine risks and make policy adjustments as needed.

BoJ governor Kuroda says don’t think pace of monthly JGB buying will change much next year. This was followed by reports that the Japanese Government Pension Investment will begin purchasing inflation linked JGBs from April, according to Health Ministry

State economist sees China 2013 GDP growth 7.6-7.7% according to Xinhua.

EU & UK Headlines

UK GDP (Q3 F) Q/Q 0.8% vs Exp. 0.8% (Prev. 0.8%)
– UK GDP (Q3 F) Y/Y 1.9% vs Exp. 1.5% (Prev. 1.5%)
– UK Index of Services (Oct) M/M 0.1% vs Exp. 0.3% (Prev. 0.2%)
– UK Index of Services (Oct) 3M/3M 0.8% vs Exp. 0.9% (Prev. 0.7%, Rev. 0.8%)
UK Current Account Balance (Q3) Q/Q -20.7bln vs. Exp. -14.0bln (Prev. -13.0bln, Rev. -6.2bln) – Largest deficit on record
S&P affirms UK long term sovereign rating
at AAA; outlook still negative.
S&P cut the European Union to AA+; stable

S&P affirms Ireland’s rating at BBB+/A-2; outlook remains positive.

ECB’s Weidmann says risk that governments, private sector get used to cheap money, neglect structural reforms, keep zombie banks alive. Weidmann went on to say that low interest rates have side effects that increase the longer rates stay low and the ECB is ready to act if needed.

Italian Premier Enrico Letta’s government’s contested 2014 budget package will be put to a confidence vote in the Lower House today.

US Headlines

US Treasury Secretary Lew urged US Congress to take prompt action to raise the debt limit, ideally well before Feb. 7.US Senate sets vote on Fed chair nominee Yellen for Friday, with the possible confirmation vote on January 6.

Despite opposition from the Obama administration , 26 US senators introduced legislation on Thursday to impose new sanctions on Iran if the country breaks an interim deal under which Tehran agreed to curb its nuclear programme.

Equities

Following on from the mixed Asia session, European equities are green across the board despite being mixed in early trade. The Swiss SMI is leading the way with gains of around 0.60%, the periphery also being supported by the likes of Banca Monte dei Paschi following on from yesterday’s gains, with Banco Popolare also seen up and thus Financials are leading the way. Elsewhere E.ON markets reacted positively to news that E.ON are planing to sell Spanish business. Finally, BAE systems are trading with losses of around 5% following reports that the UAE have decided against defense order including typhoon jet.

FX

During the Asian session USD/JPY tripped upside stops as it broke above yesterday’s high and rallied heading into the European open above the 104.50 level, with unconfirmed market talk of an option expiry in USD/JPY at 104.50 with barriers on the upside at 104.75 and 105.00. Elsewhere, GBP/USD is seen down following the release of the UK Current Account which showed the largest deficit on record.

Commodities

China are to overtake India as the top gold producer this year, according to analysts at ANZ.
Goldman Sachs forecasts gold at USD 1,144/OZ in 2014.
OPEC December oil output up 100,000 bpd vs November at 29.4bln bpd.
Enbridge’s Gateway pipeline was approved with conditions

* * *

We conclude with Jim Reid’s overnight summary

As we go to print, the European Union has been downgraded to AA+ from AAA by S&P. While the market digests the impact of the downgrade, all eyes remain on the US treasury market. Indeed treasuries are increasingly being viewed as a potential sign of the success or not of the Fed taper in early 2014. From the lows in the immediate aftermath of Wednesday’s FOMC, 10yr UST yields have added more than 10bp. Yields are slightly firmer as we type this morning (-1bp to 2.92%) though we’re still hovering at levels last seen in early September just before the Fed surprised markets with its non-taper. Despite this, we should note that US equities and credit were both reasonably well supported yesterday. However the combination of higher UST yields and a stronger dollar resulted in a fairly difficult day for EM. In EMFX, the Brazilian Real fell 1.1% against the USD, underperforming most other EM currencies. The move was exacerbated by the announcement from the BCB that it would wind back its intervention in the currency market, following the initial positive reaction to tapering on Wednesday. Other EM currencies also struggled including the TRY (-0.7%), MXN (-0.7%) and IDR (-0.3%). A number of EM equity markets struggled including in Poland (-0.7%) and Turkey (-3.5%).

LATAM sovereign credit spreads closed marginally wider on the day – but tightened into the close helped by another solid day for US credit led by CDX HY (+0.1% in price) and IG (-1.5bp in spread). On a more positive note, S&P announced overnight that it was upgrading Mexico’s credit rating to BBB+ from BBB prompted by the passage of energy reforms and changes in its fiscal framework..

Coming back to DM, it was a strong day for European equities (Stoxx 600 +1.7%) as they played catch up to the post-FOMC rally. However US equities spent the day in consolidation mode. The S&P 500 closed broadly unchanged (- 0.06%) after recovering from a 0.5% fall shortly after the open. Risk sentiment was probably weighed by the data flow which had a weaker tone. USNovember existing home sales fell for the third straight month (-4.3% vs. -3.2% prior and -2.0% expected). The National Association of Realtors noted that the government shutdown and lack of housing inventory all contributed to the drop off. The NAR also said that median home prices were up 9.4%yoy in November which is slightly lower than the double-digit price increases that we’ve become accustomed to of late. The Philly Fed survey ticked up incrementally from November (7.0 vs 6.5) but it was lower than the consensus of 10.0. The details of the report were more encouraging with new orders (15.4 vs. 11.8), shipments (13.3 vs. 5.6) and employment (2.2 vs. 1.1) all firmer in the month. Initial jobless claims were also worse than expected (379k vs 336k) as they rose to a near 9-month high. Seasonal holiday effects probably played a part in the claims data. The Fed announced yesterday that its balance sheet reached a record $4 trillion and Senator Reid said that the US senate will likely vote on Yellen’s confirmation in early January.

After the market close, consumer-bellwether Nike Inc reported Q2 results which were fairly mixed. Revenues of $6.43bn were slightly below consensus estimates but earnings were a bit better. Futures orders for delivery between December and April grew 12% (or 13% ex-currency effects), compared with growth of 6% in the same period last year with expectation. Encouragingly, futures orders in Western Europe were up 23% versus Bloomberg-compiled estimates of 11%. Nike’s China futures orders were up 1%, lagging estimates of around 3%. Nike’s shares traded about 1% lower in after-market trading. Another consumer-bellwether which made headlines was US retailer Target (-2.2%) which underperformed after it confirmed that it was investigating a data breach potentially involving millions of customer’s credit card records.

Turning to Asian markets, the post-FOMC rally has paused in Asian equities with losses across the Nikkei (-0.4%) and Hang Seng (-0.5%) overnight. The focus is again on China where there is plenty of discussion on the squeeze in interbank funding markets. Following a spike in rates early yesterday, the PBoC acted late on Thursday to inject liquidity via short term operations which resulted in a sharp drop in short term rates. However, the relief has been shortlived, and the closely-watched Shanghai 7-day repo rate has once again spiked up (+170bp today to 6.90%). The repo rate is now higher than yesterday amid market talk of a missed payment at a local Chinese bank. This is something to monitor over the next few days as Chinese interbank rates typically fluctuate towards month/year end. The cautiousness in funding markets is weighing on Chinese equities today with the Shanghai Comp and HSCEI down by 1.0% apiece. Elsewhere, there were no major surprises from the BoJ meeting today and it appears that the central bank is content to wait for the impact of sales tax hikes in April 2014 before deciding on policy adjustments if any.

Looking at the day ahead, a number of US equity options and futures contracts expiries occur today. French business confidence, the Kansas City Fed manufacturing survey and the third estimate of US GDP are the data releasesto note as we head into the final trading days before the Christmas break.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/CaupRFn4P40/story01.htm Tyler Durden

Today gold slid under $1200 per ounce, dropping to a level not seen in three years. Judging by the price action one would think that gold is not only overflowing from precious metal vaults everywhere, but can be found thrown away on the street, where nobody even bothers to pick it up. One would be wrong. In fact, as Bloomberg’s Ken Goldman reports, “you could walk into a vault in London and they were packed to the rafter with gold, and the gold would trade from me to you to somebody else. You could walk into these vaults today and they are virtually empty. All that gold has been transferred out of London, 26 million ounces….” To find out where it has gone and why it is never coming back, watch the clip below (spoiler alert: listen for the line: “the Chinese don’t want US dollars anymore, they want gold“).

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/GphWsjUZsU0/story01.htm Tyler Durden

Today gold slid under $1200 per ounce, dropping to a level not seen in three years. Judging by the price action one would think that gold is not only overflowing from precious metal vaults everywhere, but can be found thrown away on the street, where nobody even bothers to pick it up. One would be wrong. In fact, as Bloomberg’s Ken Goldman reports, “you could walk into a vault in London and they were packed to the rafter with gold, and the gold would trade from me to you to somebody else. You could walk into these vaults today and they are virtually empty. All that gold has been transferred out of London, 26 million ounces….” To find out where it has gone and why it is never coming back, watch the clip below (spoiler alert: listen for the line: “the Chinese don’t want US dollars anymore, they want gold“).

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/GphWsjUZsU0/story01.htm Tyler Durden

While we joked on Monday this week with regard the Harvard evacuations, we were still a little shocked that, as the NY Post reports, a Harvard University student was due in court Wednesday after prosecutors said he made bomb threats to try to get out of a final exam. Eldo Kim, 20, acting alone, sent the bomb hoax messages to five or six Harvard email addresses he picked at random (via the Dark Web browser Tor), about half an hour before he was scheduled to take a final in Emerson Hall, one of the buildings threatened. The maximum penalties for a bomb hoax are five years in prison and a $250,000 fine – plenty of time to study there…

 

Via NY Post,

The U.S. attorney’s office in Boston filed a criminal complaint Tuesday against Eldo Kim, 20, alleging he sent hoax emails saying shrapnel bombs would go off soon in two of four buildings on the Cambridge, Mass., campus. The emails came minutes before he was to take a final exam in one of the buildings

 

The threats led to the buildings’ evacuation Monday, shutting them down for hours before investigators determined there were no explosives.

 

Harvard said it was saddened by the allegations but would have no further comment on the investigation.

 

…

 

An FBI affidavit says Harvard determined Kim had accessed TOR, a free Internet product that assigns a temporary anonymous Internet protocol address, using the university’s wireless network.

 

The affidavit says Kim told an agent Monday night that he had acted alone and sent the messages to five or six Harvard email addresses he picked at random.

 

He said he sent them about half an hour before he was scheduled to take a final in Emerson Hall, one of the buildings threatened…

Of course, in a world of little to no consequences, why would we be surprised at the awful lengths Kim went to in order to avoid the finals…?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/09QCCbOa87M/story01.htm Tyler Durden