Tag: news

As we discussed two weeks ago, it would appear Germany's lack of willingness to throw itself on the pyre of self-sacrifice and not adopt a global Fairness Doctrine – as engendered by the US Treasury's (and IMF's) bashing of the core European nation's for maintaining its export strength and daring to keep Europe in tact and thus a periphery-damaging strong Euro – is gathering steam. None other than Europe itself is now 'probing' Germany's trade surplus, using enhanced powers over how euro nations manage their economies with the IMF urging German Chancellor Angela Merkel to curtail the trade surplus to an “appropriate rate” to help euro  partners cut deficits.

As we previously noted, Jack Lew (and everyone else) appears surprised at the following chart all of a sudden…

 

It is also a complete shock to the US Treasury that the current layout of the Eurozone – the same Eurozone that the Fed has stepped in on numerous occasions to bailout, common currency and all – was simply to facilitate German exports to fellow European countries.

Which is probably why, after years of saying nothing, in its semi-annual currency report released yesterday and "employing unusually sharp language, the U.S. openly criticized Germany's economic policies and blamed the euro-zone powerhouse for dragging down its neighbors and the rest of the global economy."

 

And now – it's the Europeans jumping on the 'Bash Germany' bandwagon…

Via Bloomberg,

European Union regulators began a probe of Germany’s trade surplus, using enhanced powers over how euro nations manage their economies.

 

The decision to step up monitoring of imbalances in the German economy follows criticism that the country’s current-account surplus — which at 7 percent of gross domestic product is the second highest in the euro area — is limiting exports from other euro countries by adding to the strength of the  single currency.

 

The opening of an in-depth review into the imbalances in Germany’s economy comes after the U.S. Treasury blamed German surpluses for draining European and global growth. The International Monetary Fund also reprimanded Germany for its surpluses, urging German Chancellor Angela Merkel to curtail the trade surplus to an “appropriate rate” to help euro  partners cut deficits.

 

“Crucially, a rise in domestic demand in Germany should help to reduce upward pressure on the euro exchange rate, easing access to global markets for exporters in the periphery,” EU Economic and Monetary Affairs Commissioner Olli Rehn said in a blog post on Nov. 11. “Removing the bottlenecks to domestic demand would contribute to a reduction in Germany’s external trade surplus.”

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/3CxraRFEAI8/story01.htm Tyler Durden

With a shiny red ballon dog selling for $58 million, perhaps it was time to take a little profit in the equity exuberance. S&P futures are down 9 points from last night’s close – which in the new normal is considerable (sadly) – with no macro data headlines this morning to spark a move, we will be watching JPY (which for now is rallying awkwardly) for signs of ignition. Meanwhile, as the USD flatlines (despite dispersion in FX), Bitcoin just toppped $400 for the first time ever – doubling in the last two weeks. Precious metals are up modestly; treasury yields are limping lower; and European equities (and sovereign bonds) are having another tough day.

 

S&P Futures an odd shade of green (called red we hear) this morning…

 

 

Bitcoin tops $400…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/29a-D_i9590/story01.htm Tyler Durden

The lack of prosecution of bankers responsible for the great financial collapse has been a hotly debated topic over the years, leading to the coinage of such terms as “Too Big To Prosecute“, the termination of at least one corrupt DOJ official, the revelation that Eric Holder is the most useless Attorney General in history, and even members of the judicial bashing other members of the judicial such as in last night’s essay by district judge Jed Rakoff. And naturally, the lack of incentives that punish cheating and fraud, is one of the main reasons why such fraud will not only continue but get bigger and bigger, until once again, the entire system crashes under the weight of all the corruption and all the Fed-driven malinvestment. But what can be done? In this case, Vietnam may have just shown America the way – use the death penalty on convicted embezzling bankers. Because if one wants to promptly stop an end to financial crime, there is nothing quite like the fear of death to halt it.

Bloomberg reports that a Vietnam court will consider the death penalty for a Vu Quoc Hao, the former general director of Agribank Financial Leasing Co. who is charged with embezzling 531 billion dong. While that sounds like a whole lot of dong, converted into USD it is only $25 million, or what Goldman would call “weekend lunch money.” Just imagine how much cleaner Wall Street would be, where the typical bank fraud is generally in the billions, if bankers and other white collar criminals had the fear of death if caught manipulating petty prices or outright stealing amounts that are considered petty cash by most of the 0.001%.

But back to Vietnam and its shining example:

The trial comes as the government seeks to shore up Vietnamese banks saddled with Southeast Asia’s highest rate of bad debt and turn around an economy that grew last year at the slowest pace since 1999. The central bank governor vowed to crack down on violations by groups of shareholders working against banking reforms last year.

 

Eleven defendants, including Hao, 58, and Hai, are charged with embezzlement, mismanagement, abuse of power and fraud, according to a statement on the court’s website. Prosecutors allege that Hao and Hai formed 10 fake financial leasing contracts to disperse almost 800 billion dong.

 

At the trial yesterday, Hao said he regrets his violations and hopes the judges will give other defendants lighter sentences, Tuoi Tre newspaper reported today. The verdict and sentencing is expected to be announced Nov. 15, according to the newspaper.

 

Under Vietnam law, those convicted of embezzling property valued at 500 million dong or more, or creating “other particularly serious consequences,” can be sentenced to life imprisonment or death.

 

“The party, the government, prosecutors and our courts will give stiff verdicts in these types of cases,” Deputy Prime Minister Nguyen Xuan Phuc, said on the sidelines of an anti-corruption conference in Hanoi yesterday. “We need to make our regulations and legal framework tighter to reduce and prevent corruption.”

 

“It would be a signal: You could be executed for being caught doing large-scale corruption,” said Adam McCarty, the Hanoi-based chief economist at Mekong Economics. “It has implications for the whole bank restructuring the government is about to do. They want to really dig into these bad debt issues and find out who is responsible for the problems.”

And while one can dream, an outcome such as this in the US is impossible: after all it is these same embezzling bankers that control the legislative and judicial branches (the executive branch is too busy with 404 website errors), which is why deterrence of any substantial scale will never take place in the US and small, medium and large-scale theft will continue unabated, with the occasional slaps on the wrist, until there is nothing left to steal.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/v0pvTpcRXzc/story01.htm Tyler Durden

• Headline du jour: Granted ‘decisive’ role, Chinese markets decide to slide (Reuters)
• Desperate Philippine typhoon survivors loot, dig up water pipes (Reuters)
• Fading Japanese market momentum frustrates investors (FT)
• China’s meager aid to the Philippines could dent its image (Reuters)
• Central Banks Risk Asset Bubbles in Battle With Deflation Danger (BBG)
• Navy Ship Plan Faces Pentagon Budget Cutters (WSJ)
• Investors pitch to take over much of Fannie and Freddie (FT)
• To expand Khamenei’s grip on the economy, Iran stretched its laws (Reuters)
• Short sellers bet that gunmaker shares are no long shot (FT)
• Deflation threat in Europe may prompt investment rethink (Reuters)
• Apple’s $10.5B on Robots to Lasers Shores Up Supply Chain (BBG)
• Japan passes law to launch reform of electricity sector (Reuters)
• Attack on Junk-Loan Excess Risks LBO Profits as U.S. Cracks Down (BBG)
• Equity Traders’ Bonuses Seen Rising as Rates Salesmen Face Drop (BBG)

 

Overnight Media Digest

WSJ

* New guidelines for reducing cholesterol and heart-attack risks mark the biggest shift in cardiovascular-disease prevention in nearly three decades. The change could more than double the number of Americans who qualify for treatment with the cholesterol-cutting drugs known as statins. ()

* China’s Communist Party plans to establish a new state security committee that analysts say will cement President Xi Jinping’s hold on the military, domestic security and foreign policy. ()

* AMR Corp and US Airways Group reached an antitrust settlement with the U.S. government to allow their $17 billion merger to proceed with only limited concessions, paving the way for a new global airline colossus. ()

* Microsoft is abandoning major elements of its controversial “stack ranking” employee review and compensation system, the latest blow against a once-popular management technique. ()

* Starbucks was ordered to pay nearly $2.8 billion for backing out of a partnership with Kraft Foods to distribute packaged coffee to grocery stores. ()

* President Barack Obama tapped senior Treasury Department official Timothy Massad to head the Commodity Futures Trading Commission, setting up a tight deadline to avoid a commission hobbled by vacancies. ()

* Boeing’s unionized workers were set to vote Wednesday on a contract that could have a far-reaching impact on relations between America’s biggest exporter and organized labor. ()

* Francis Bacon’s “Three Studies of Lucian Freud” just became the most expensive work at auction when it sold for $142.4 million at Christie’s in New York. Christie’s in New York made auction history Tuesday when it sold well over half a billion dollars worth of contemporary art in less time than it takes to watch a football game. ()

 

FT

US Airways Group Inc and AMR Corp, parent of bankrupt American Airlines, will be allowed to merge to become the world’s largest airline after they agreed a series of divestments to settle a suit filed by U.S. antitrust regulators to stop the $11 billion merger.

Britain’s Financial Conduct Authority, one of seven regulators investigating a global probe on foreign exchange manipulation, has so far requested information from at least 15 of the world’s biggest banks, according to two people close to the situation.

Activist investor Dan Loeb, founder of hedge fund Third Point LLC, said Tuesday that his investment firm has taken a stake in FedEx Corp and that he met Chief Executive Fred Smith to discuss ways to improve the U.S. parcel delivery company’s performance.

Starbucks Corp has been ordered to pay Kraft Foods $2.76 billion for ending the companies’ grocery deal at least three years early, the coffee chain said on Tuesday.

IntercontinentalExchange Inc confirmed it would float Euronext, dismissing speculation that the owner of the Paris and Amsterdam stock exchanges could be sold, as it completed the $10 billion takeover of NYSE Euronext on Wednesday.

EDF Energy, one of the Britain’s “big six” energy suppliers, said it would raise gas and electricity prices for British households by 3.9 percent, significantly lower than the size of increases announced by four of its competitors.

 

NYT

* Nearly half of the members of the House of Representatives have signed letters signaling opposition to “fast track” authority for a trade pact with Pacific Rim nations.

* After months of setbacks and delays, the merger of American Airlines and US Airways to create the world’s largest airline became all but certain on Tuesday after the airlines reached a settlement with the Justice Department just two weeks before a scheduled trial.

* President Obama nominated Timothy Massad, who oversaw the unwinding of the government’s bailout program, to succeed Gary Gensler at the Commodity Futures Trading Commission.

* Johnson & Johnson has tentatively agreed to a settlement that could reach up to $4 billion to resolve thousands of lawsuits filed by patients injured by a flawed all-metal replacement hip, said two lawyers briefed on the plan. ()

* Mayor Michael Bloomberg on Tuesday insisted that Bloomberg News, which he owns, did not censor itself by killing two articles related to China. But he also asserted that, for at least a couple more months, he is not involved with the news service because of his role as mayor. ()

* Janet Yellen, President Obama’s choice to lead the Federal Reserve over the next four years, has championed the idea that the Fed can stimulate the economy simply by speaking clearly. ()

* High-voltage, superfast public devices for recharging electric cars are appearing more frequently, though some are more expensive for drivers than home chargers, or even gasoline. ()

* Starbucks said on Tuesday that it would pay Kraft Foods $2.75 billion, ending a long-running spat over an agreement the two food titans had for distribution of Starbucks packaged coffee in grocery stores. ()

* Private bank consultants, long known as Wall Street’s shadow regulators, are now facing some regulation of their own. The Office of the Comptroller of the Currency, which oversees some of the nation’s biggest banks, announced on Tuesd
ay that it had adopted some of the first federal standards governing the use of consultants. ()

* Hotel operator Extended Stay America priced its initial public offering on Tuesday at $20 a share, in the middle of its expected range. At that price, the company will have raised $565 million and will be valued at $4 billion. ()

 

Canada

THE GLOBE AND MAIL

* The Conservative government will squeeze public-service salaries and sell off government assets to enter the next federal election with a budget surplus of at least $3.7 billion, paving the way for promised big-ticket tax cuts.

* Ontario is looking to clamp down on tax-dodging corporations, reform its system of credits and drag the black market into the light of day – all in a bid to raise more revenue.

Reports in the business section:

* The U.S. oil boom will vault the country into first place among crude producers within two years, the International Energy Agency says, which will pose a stiff challenge for the Canadian energy industry as it faces rapidly declining American demand for imported oil.

* Canada’s finance minister Jim Flaherty says he’ll intervene in the housing market for a fifth time, if that’s what’s needed, to head off any bubble. Canada’s housing market is seen by some groups as among the frothiest in the world, though most economists do not expect a U.S.-style meltdown.

NATIONAL POST

* Ottawa has earmarked $2.8 billion to pay for Alberta’s flood recovery costs. Federal Employment Minister Jason Kenney says the amount is less than the $3.1 billion Alberta had asked for following the devastating floods that hit southern Alberta in June.

* Members of Canada’s top court directed sharp questions at federal lawyers Tuesday about whether the Harper government can unilaterally change the Senate and thus alter Canada’s democratic landscape.

FINANCIAL POST

* The Chinese state-owned firm CNOOC Ltd has plunked down $12 million with the British Columbia government to secure land for a potential gas plant on Canada’s West Coast, in the latest move by a state-owned energy company doubling down on the province’s gas resources.

* The Canadian Secured Credit Facility, one of Ottawa’s responses to the credit crisis, may be the most financially successful government program in recent history. The reason: every penny of capital that was provided has now been repaid and the government received market interest rates along the way.

 

China

SHANGHAI SECURITIES NEWS

– The People’s Bank of China is mulling the creation of a commodities trading platform in the Shanghai free trade zone, starting with an oil futures contract, an unnamed industry source said at a forum on the free trade zone (FTZ) in Shanghai.

– China’s central bank is considering a platform for trading commercial paper in the Shanghai FTZ, said an academic.

SHANGHAI DAILY

– Shanghai will adjust the city’s air pollution warning system after it took 27 hours to report poor air quality last week, the Shanghai Environmental Protection Bureau said on Tuesday. Changes may include a lower threshold and a more finely delineated pollution gauge.

CHINA DAILY

– The Ministry of Public Security says it is preparing to crack down on websites brokering marriages between Chinese and foreigners on concerns they enable human trafficking and fraud.

– Electric luxury car maker Tesla continues to struggle with a trademark dispute in China preventing it from selling cars under the Tesla or Tesla Motors name.

– SOHO China has begun to “rebalance” its real estate portfolio in Shanghai and Beijing, according to a microblog post by SOHO Chairman Pan Shiyi, indirectly confirming domestic media reports that the property giant was beginning to sell off property in both markets.

PEOPLE’S DAILY

– China’s reforms stand at a historic starting point, said a commentary in the paper that acts as the government’s mouthpiece, referring to announcements of new policy directives from the third party plenum that closed on Tuesday. The overall objective of comprehensive reform is to improve the socialist system with Chinese characteristics, it said.

 

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

ATK (ATK) upgraded to Outperform from Neutral at Credit Suisse
Heartland Express (HTLD) upgraded to Outperform from Market Perform at Wells Fargo
NuStar GP Holdings (NSH) upgraded to Neutral from Underperform at Credit Suisse
Pernix Therapeutics (PTX) upgraded to Hold from Sell at Cantor
Red Hat (RHT) upgraded to Overweight from Neutral at Piper Jaffray
Synutra (SYUT) upgraded to Outperform from Perform at Oppenheimer
U.S. Steel (X) upgraded to Overweight from Equal Weight at Morgan Stanley
Western Refining (WNR) upgraded to Buy from Neutral at UBS

Downgrades

Air Methods (AIRM) downgraded to Hold from Buy at WallachBeth
Amedisys (AMED) downgraded to Sell from Hold at Deutsche Bank
Aon plc (AON) downgraded to Neutral from Buy at UBS
Computer Programs (CPSI) downgraded to Equal Weight from Overweight at First Analysis
Dean Foods (DF) downgraded to Neutral from Outperform at Credit Suisse
Denbury Resources (DNR) downgraded to Market Perform from Outperform at Raymond James
Nucor (NUE) downgraded to Equal Weight from Overweight at Morgan Stanley
WhiteHorse Finance (WHF) downgraded to Equal Weight from Overweight at Barclays
WhiteHorse Finance (WHF) downgraded to Hold from Buy at BB&T

Initiations

Aetna (AET) initiated with an Outperform at FBR Capital
Boyd Gaming (BYD) initiated with a Market Perform at FBR Capital
Centene (CNC) initiated with an Outperform at FBR Capital
Durata Therapeutics (DRTX) initiated with a Buy at Janney Capital
Flamel Technologies (FLML) initiated with a Buy at Janney Capital
Humana (HUM) initiated with a Market Perform at FBR Capital
Impax (IPXL) initiated with a Buy at Janney Capital
Las Vegas Sands (LVS) initiated with an Outperform at FBR Capital
lululemon (LULU) initiated with an Overweight at JPMorgan
MGM Resorts (MGM) initiated with an Outperform at FBR Capital
Penn National (PENN) initiated with a Market Perform at FBR Capital
Splunk (SPLK) initiated with a Hold at Jefferies
Tableau Software (DATA) initiated with a Buy at Janney Capital
UnitedHealth (UNH) initiated with an Outperform at FBR Capital
Wellpoint (WLP) initiated with a Market Perform at FBR Capital
Wynn Resorts (WYNN) initiated with a Market Perform at FBR Capital

HOT STOCKS

Five banks (C, BK, JPM, HBC, BAC) to provide information on U.S. taxpayers with offshore bank accounts
PetroChina (PTR) acquired Petrobras (PBR) assets in Peru for about $2.6B
Mondelez (MDLZ): Arbitrator ruled Starbucks (SBUX) must pay $2.7B to end contract dispute (KRFT)
CNOOC (CEO) to examine LNG development in British Columbia
Cooper Tire (CTB) filed to delay 10-Q
Clean Energy (CLNE), UPS (UPS) signed LNG fuel agreements to supply LNG in North America
YRC Worldwide (YRCW) in contract talks with International Brotherhood of Teamsters
Tim Hortons (THI) to buy back up to 2.12M common shares
Cosi (COSI) adopted shareholders rights plan

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
TRI Pointe Homes (TPH), E-House (EJ), Copa Holdings (CPA), SINA (SINA), WuXi PharmaTech (WX), Hyperion Therapeutics (HPTX), Babcock & Wilcox (BWC), Luxoft (LXFT), MBIA (MBI), GenMark (GNMK), Potbelly (PBPB), RealD (RLD), Cvent (CVT), Woodward (WWD)

Companies that missed consensus earnings expectations include:
Dawson Geophysical (DWSN), NGL Energy Partners (NGL), Thompson Creek (TC
), Banro Corporation (BAA), Frank’s International (FI), Discovery Labs (DSCO), MarkWest Energy (MWE), Federal Agricultural Mortgage (AGM), YRC Worldwide (YRCW), Codexis (CDXS),

Companies that matched consensus earnings expectations include:
NQ Mobile (NQ)

NEWSPAPERS/WEBSITES

• Royal Dutch Shell (RDS.A) and the Iraqi government are nearing a deal to build an $11B petrochemical facility in southern Iraq, sources say, the Wall Street Journal reports
• The pay TV industry (DISH, VZ, CHTR, T, DIS) continued to lose subscribers in Q3, analysts estimated, providing further evidence that some consumers are dropping their pay TV subscriptions, or cutting the cord, the Wall Street Journal reports
• The Federal Reserve should keep monetary policy ultra-easy given the economy’s tepid growth and an uncertain outlook for jobs growth, two senior officials said, reinforcing views that the U.S. central bank will not taper bond buying before next year, Reuters reports
• NTT Docomo (DCM), Japan’s largest mobile-phone operator, said the addition of Apple’s (AAPL) iPhone to its handset lineup in September is helping reduce subscriber losses to competing carriers (SFTBF), Bloomberg reports
• Wynn Resorts (WYNN) has yet to receive a demand for information for a U.S. criminal investigation into the company’s donation to the University of Macau seven months after prosecutors disclosed the probe, Bloomberg reports

SYNDICATE

Annie’s (BNNY) announces secondary offering of 2.54M shares for holders
Atossa Genetics (ATOS) files to sell 4.2M shares of common stock for holders
Baltic Trading (BALT) files to sell common stock
BreitBurn Energy (BBEP) files to sell 15M common units
Chegg (CHGG) 15M share IPO priced at $12.50
Chelsea Therapeutics (CHTP) to offer common stock
Dynagas LNG (DLNG) 12.5M share IPO priced at $18.00
EROS International (EROS) 5M share IPO priced at $12.00
Einstein Noah (BAGL) files to sell 2.5M shares of common stock for holders
Extended Stay America (STAY) 28.25M share IPO priced at $20.00
Luxoft (LXFT) files to sell common stock for Rus Lux Limited
Safe Bulkers (SB) files to sell 5M shares and 1M shares in private placement
Synta Pharmaceuticals (SNTA) files to sell common stock

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Jz_uz5rNlLg/story01.htm Tyler Durden

As non-collocated, carbon-based traders walk in today, they are once again greeted by a very unfamiliar shade of green in the equity futures market. There has not been a specific catalyst for another day of equity weakness however it started in Asia, where we again witnessed a bout of EM vulnerability led by the likes of Indonesia. This follows weakness in EM across EMEA and LATAM yesterday that saw major EM sovereign CDS about 3-5bp wider while a number of LATAM 10yr rates were up between 5-10bp. EM FX in EMEA was under some pressure yesterday as well (PLN and ZAR notably), but this abated as the day wore on. This morning Indonesia CDS is quoted about 6bp wider while cash bonds are down about half to 1 point. Asian EM FX is generally weaker across KRW, INR and IDR. Asian equities have been sold from the open today including a 2% drop in the Jakarta Composite index which is on track for its largest fall since Sept 30th. The disappointment over lack of detail from the Chinese government’s Third Plenum meeting is showing up via a 2.0% drop in the HS China Enterprises Index and 1.3% drop in the Hang Seng.

In Europe, stocks also traded lower, with the FTSE-100 index underperforming its peers where a number of blue-chip companies traded ex-dividend. Overall, financials and basic materials sectors led the move lower, where UniCredit shares fell over 4% as credit spreads widened (iTraxx subFin index up 6bps). The focus was very much on the UK, where market participants digested the release of better than expected jobs report and then the latest Quarterly Inflation Report by the BoE, who brought forward likelihood of 7% jobless rate to 2015 Q3. As a result, GBP outperformed its peers and the short-sterling strip bear steepened as market participants reassessed future interest rate path. Looking elsewhere, softer stocks supported Bunds, which edged higher after supply from Italy and Germany was successfully absorbed.

As DB notes, it appears that markets continue to steadily price in a greater probability of a December taper judging by the 2bp increase in 10yr UST yields, 1.2% drop in the gold price and an edging up in the USD crosses yesterday. Indeed, the Atlanta Fed’s Lockhart, who is considered a bellwether within the Fed, kept the possibility of a December tapering open in public comments yesterday. But his other comments were quite dovish, particularly when he said that he wants to see inflation accelerate toward 2% before reducing asset purchases to give him confidence that the US economy was not dealing with a “downside scenario”. Lockhart stressed that any decision by the Fed on QE would be data dependent – so his comments that the government shutdown will make coming data “less reliable” than might otherwise have been, until at least December, were also quite telling. The dovish sentiments were echoed by Kocherlakota, a FOMC voter next year.

In other words, an Oscar-worthy good-cop/bad-cop performance by the Fed’s henchmen, confusing algotrons for the second day in a row.

Going forward, the US Treasury will auction off USD 24bln in 10y notes, while Cisco will report after the closing bell on Wall Street. After the US market close, Bernanke will be speaking at townhall of teachers on the history of the Fed. He will be taking Q&A.

 

Overnight news bulletin from Bloomberg and RanSquawk

• BoE brings forward likelihood of 7% jobless rate to 2015 Q3, cuts forecast for near-term inflation on lower data and GBP.
• UK Jobless Claims Change (Oct) M/M -41.7K vs Exp. -30.0k (Prev. -41.7k, Rev. to -44.7k) – 12th straight monthly decline.
• German government advisers see 0.4% 2013 growth, 1.6% in 2014 vs. Exp 2013 GDP of 0.5% and 1.70% in 2014.
• Treasuries gain, led by belly of curve; 10Y yield retreat from highest level since mid-Sept. as stocks decline across the globe, copper falls.
• Focus remains on timing of any Fed decision to taper asset purchases; Yellen may shed light at tomorrow’s confirmation hearing. Lockhart yday said taper would likely be considered in December; Kocherlakota said tapering could impede economy’s slow progress
• 10Y notes to be sold today yield 2.790% in WI trading; drew 2.657% at October auction and 2.946% in Sept., which was highest since June 2011
• Bank of England Governor Mark Carney signaled that officials may consider raising interest rates sooner than they previously forecast as the U.K. economy recovers “robustly” and inflation slows * U.K. unemployment declined to 7.6% in 3Q, closer to the  BOE’s key threshold, while a narrower measure of joblessness fell for a 12th month in October
• U.K. Deputy Prime Minister Nick Clegg will distance himself from David Cameron’s call for permanently lower state spending, saying his Liberal Democrats aren’t ideologically wedded to budget cuts
• Merkel’s willingness to compromise with the Social Democrats to form a coalition risks rolling back steps taken by her predecessor that made Europe’s biggest economy stronger, her Council of Economic Experts said
• Former President Bill Clinton endorsed altering a key provision of Obamacare, saying Obama should keep a pledge he repeatedly made in campaigning for the law that Americans wouldn’t lose coverage they liked when it took effect
• China elevated the role of markets while maintaining the state’s dominance in the nation’s economic strategy, seeking to balance finding new sources of growth with sustaining the Communist Party’s grip on power
• Sovereign yields mostly lower, EU peripheral spreads widen. Asian and European stocks, U.S. equity-index futures fall. WTI crude, and gold gain; copper lower

Asian Headlines

On the Chinese third plenum, Goldman Sachs says China Plenum is ‘insufficient’ to drive China stocks up.

Separately S&P’s Kim Eng Tan says the implementation of reforms that support the decisive role of market forces in the allocation of resources could in turn support the long term sovereign credit ratings on China. In other news, Morgan Stanley says China to cut interest rates twice in 2014.

BoJ’s Miyao said won’t rule out any steps in advance if BoJ were to act again.

EU & UK Headlines

BoE brings forward likelihood of 7% jobless rate to 2015 Q3, cuts forecast for near-term inflation on lower data and GBP.

BoE’s Carney said constant rate scenario shows potential advantages of keeping rates unchanged after hitting 7% unemployment. He also did not rule out lower jobless threshold to 6.5% from 7.0%. Forecasts are based on market expectations, not nominal rates and uses market forecasts of key rate reaching 1% by 2015 Q4.

UK Jobless Claims Change (Oct) M/M -41.7K vs Exp. -30.0k (Prev. -41.7k, Rev. to -44.7k) – 12th straight monthly decline.
– ILO Unemployment Rate 3-months (Sep) 7.6% vs. Exp. 7.6% (Prev. 7.7%)
– Employment Change 3M/3M (Sep) 177K vs. Exp. 113K (Prev. 155K)
– Claimant Count Rate (Oct) M/M 3.9% vs Exp. 3.9% (Prev. 4.0%) – lowest Since Jan 2009
– Average Weekly Earnings (Sep) 3M/Y 0.7% vs Exp. 0.7% (Prev. 0.7%, Rev. to 0.8%)
– Weekly Earnings ex Bonus (Sep) 3M/Y 0.8% vs Exp. 0.9% (Prev. 0.8%)

German government advisers see 0.4% 2013 growth, 1.6% in 2014 vs. Exp 2013 GDP of 0.5% and 1.70% in 2014.

Eurozone Industrial Production SA (Sep) M/M -0.5% vs Exp. -0.3% (Prev. 1.0%)

Eurozone Industrial Production WDA (Sep) Y/Y 1.1% vs Exp. 0.0% (Prev. -2.1%) – biggest gain since September 2011.

Italy successfully sold EUR 5.468bln (vs. exp. EUR 5.5bln) in 3y, 30y and CCTeu bonds. The shorter dated paper was sold at lowest yield since March 2010. Germany also sold EUR 4.032bln in 0.25% 2015, b/c 2.2 (Prev. 2.3) and avg. yield 0.1% (Prev. 0.19%), retention 19.4% (Prev. 15.18%).

US Headlines

PIMCO’s Bill Gross raised the percentage of Treasuries and other US g
overnment-related debt in his flagship fund in October after the Federal Reserve unexpectedly maintained its bond purchases.

CME Group has substantially raised transaction fees for the first time in four years as it flexes its pricing muscle as the dominant US futures exchange operator.

Equities

Risk averse sentiment dominated the session this morning, with the FTSE-100 index underperforming its peers where a number of blue-chip companies traded ex-dividend. Overall, financials and basic materials sectors led the move lower, as credit spreads widened (iTraxx subFin index up 6bps) and Bunds moved into positive territory after supply from Italy and Germany was absorbed.

FX

GBP outperformed its peers, driven by the release of better than expected jobs report and also the release of the latest Quarterly Inflation Report by the BoE, who brought forward likelihood of 7% jobless rate to 2015 Q3. As a result, the pair managed to recover some of the losses made yesterday following the release of softer than expected inflation data.

RBNZ Financial Stability Report said the NZD remains elevated, and timing and size of interest rate increases are uncertain. RBNZ’s Wheeler said interest rates are likely to rise.

Commodities

Commerzbank’s technician Axel Rudolph says that a slip through the six-month support line at USD 1270.16 will confirm bearish outlook.

AMCU lowered basic wage increase demand to ZAR 8,668 from ZAR 12,500, according to Impala spokesman. Also, according to AMCU, Impala Platinum raises wage offer to union by 0.5%. It was also reported that Amplats security disperses protest with rubber bullets, according to SAFM.

The Israeli PM Netanyahu has called for Western countries to trim their dependency on oil for the transportation sector due to the instability of the commodity.

Libya’s Zawiya refinery has reopened, according to the National Oil Corp

Following last month’s late payment by Ukraine to Russia, Ukraine has said it does not need to buy any Russian gas before the year’s end.

Key Macro/FX highlights from SocGen

Let’s hear it from the horse’s mouth this morning: does BoE governor Carney now believe that the UK unemployment rate threshold of 7% will be reached earlier than it though t back in August? GBP is not an outright buy vs the USD if that is the case (UK real rates are falling vs the US), but sterling should stay bid vs the currencies where deflationary or disinflation pressures reign supreme, ie the Scandis, the EUR and the Swiss Franc. EUR/GBP did well yesterday to reach back over the 50d ma (0.8440) but this should be as good as it gets if the BoE revises up its short-term growth and inflation forecast. UK rate hike expectations have eased back thanks to the delayed tapering in the US, but short sterling may not easily be swayed by the governor to give up pricing in a first hike at the turn of 2014/2015 in particular if the employment data due one hour ahead of the QIR shows a fall in the unemployment rate to 7.6%.

UST 10y yields traded a 2.79% high yesterday (swaps 2.92% high) giving the USD free rein to strengthen vs its major counterparts. Scandi currencies continued to take a beating after CPI data showed Sweden slipped into deflation in October. Whether that leads the majority on the Riksbank committee to give in to the two doves Ekholm and Flordenand vote for a 25bp rate cut at the December meeting remains to be seen, but the high correlation with US 10y yields suggests there is further upside potential for USD/SEK. Also keep an eye on USD/JPY. As the pair approaches 100.00, short-term vol has started to pick up.

Bank of Indonesia, in a surprise decision yesterday increased its benchmark reference rate by 25bps to 7.25% a move aimed at easing its current account shortfall. Meanwhile, INR depreciated for a 9th day in a row (MSCI EM down for an 8th day on trot) and there could be more pain for the rupee after weaker industrial output (+2% yoy) and higher inflation (10.09%) sparked worries of stagflation.

The RUB took no solace from the flash GDP estimate yesterday (Q3 GDP +1.2% yoy in Q3). The central bank widened tio corridor by 5 kopeks to 32.45-39.45 rubles. We believe another quarter of growth below1.5% would force CBR to cut its benchmark rate in early 2014. With EUR/HUF on the verge of 300, we will be paying close attention to the minutes of Hungary’s central bank meeting. Will these provide justification to expect future policy easing after a sharp drop in CPI inflation to 0.9% in October? Next resistance is at 303.21.

DB’s Jim Reid concludes the overnight event recap

It appears that markets continue to steadily price in a greater probability of a December taper judging by the 2bp increase in 10yr UST yields, 1.2% drop in the gold price and an edging up in the USD crosses yesterday. Indeed, the Atlanta Fed’s Lockhart, who is considered a bellwether within the Fed, kept the possibility of a December tapering open in public comments yesterday. But his other comments were quite dovish, particularly when he said that he wants to see inflation accelerate toward 2% before reducing asset purchases to give him confidence that the US economy was not dealing with a “downside scenario”. Lockhart stressed that any decision by the Fed on QE would be data dependent – so his comments that the government shutdown will make coming data “less reliable” than might otherwise have been, until at least December, were also quite telling. The dovish sentiments were echoed by Kocherlakota, a FOMC voter next year.

In Asia this morning, we are again witnessing a bout of EM vulnerability led by the likes of Indonesia. This follows weakness in EM across EMEA and LATAM yesterday that saw major EM sovereign CDS about 3-5bp wider while a number of LATAM 10yr rates were up between 5-10bp. EM FX in EMEA was under some pressure yesterday as well (PLN and ZAR notably), but this abated as the day wore on. This morning Indonesia CDS is quoted about 6bp wider while cash bonds are down about half to 1 point. Asian EM FX is generally weaker across KRW, INR and IDR. Asian equities have been sold from the open today including a 2% drop in the Jakarta Composite index which is on track for its largest fall since Sept 30th. The disappointment over lack of detail from the Chinese government’s Third Plenum meeting is showing up via a 2.0% drop in the HS China Enterprises Index and 1.3% drop in the Hang Seng. On this point, DB’s Jun Ma thinks further detail may be released a few days later, but it’s fair to say that the market has been a little underwhelmed thus far. US treasury secretary Jack Lew said this morning that there are “lots of questions still to be answered” on Chinese reforms, particularly in the area of currency.

Coming back to the issue of low inflation, European inflation has been topical recently especially following the low inflation reading for the euro area in October, the recent rate cut from the ECB and a dovish report on Draghi yesterday (Germany’s FAZ newspaper reported that Draghi is concerned about the possibility of deflation in the euro zone although he will dispute that publicly). Indeed yesterday we saw the October inflation reading in Germany confirmed at just 1.2% YoY, while in the UK the annual inflation reading was below consensus at both the headline (2.2% vs 2.5% expected) and at the core level (1.7% vs 2.0% expected). Indeed the UK’s core inflation number is at a level that was last seen in 2009. Again this ties in with the arguments made in our long-term study from September “A Nominal Problem” where we highlighted how we were having a global problem with both low real GDP and low inflation. The latter get mentioned less when talking about central bank policy, especially in connection with the US taper. In terms of the market reaction, EURGBP gained 0.75% yesterday, with the bulk of the increase coming after the UK inflation p
rint with 10yr gilts outperforming amid a generally weakish day for fixed income.

The economic data calendar looks light again today but one highlight will be the Bank of England’s inflation report. UK employment, Eurozone industrial production and Spanish CPI are also worth looking out for today. It will be a bumper day of Italian auctions with more than $5bn in new issuance today consisting of 5yr floaters, 2016s and 2044s. After the US market close, Bernanke will be speaking at townhall of teachers on the history of the Fed. He will be taking Q&A.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/v25lBWBJJxA/story01.htm Tyler Durden