Tag: news

We can now put to rest the debate whether the “most transparent in its communication” Fed, is also the most confused (if not to use a far more derogatory word) ever.

One one hand, Bloomberg reports that Fed Chairman Yellen laments that “she wants investors to be prepared for the possibility that the Fed will raise interest rates sooner than they currently project” and yet “her words are going unheeded.”

 

 

And yet, on the other hand, at virtually the same time, Bloomberg also reports that the man who many say is truly in charge of the Fed, and certainly its market-moving branch, the 147x levered New York Fed, Goldman’s former employee Bill Dudley warns about the need for “patience” on interest-rate increases and may require letting the economy run “a little hot.” By a little hot, he means letting the global assets bubble Citi warned about yesterday, grow to truly monstrous instead of merely epic proportions.

Completing the comedy, a third Bloomberg commentator, Richard Breslow, accurately summarizes the situation:

“for Fed to rail against what the market is doing seems to me the height of absurdity. They should probably put all their speeches together, read them to each other, and find some way to talk coherently to the market.“

But why? After all these Princetonian demi-gods are all the bullish case has left: if the baffle with bullshit strategy fails, it’s game over, as the last thing the Fed can afford is to tell even a remote version of the truth. Said otherwise, the moment the Fed starts talking coherently to the market, is the moment the market plunges.

So until then, monetarist god talks in mysterious ways.

via Zero Hedge http://ift.tt/Y1KI0h Tyler Durden

We can now put to rest the debate whether the “most transparent in its communication” Fed, is also the most confused (if not to use a far more derogatory word) ever.

One one hand, Bloomberg reports that Fed Chairman Yellen laments that “she wants investors to be prepared for the possibility that the Fed will raise interest rates sooner than they currently project” and yet “her words are going unheeded.”

 

 

And yet, on the other hand, at virtually the same time, Bloomberg also reports that the man who many say is truly in charge of the Fed, and certainly its market-moving branch, the 147x levered New York Fed, Goldman’s former employee Bill Dudley warns about the need for “patience” on interest-rate increases and may require letting the economy run “a little hot.” By a little hot, he means letting the global assets bubble Citi warned about yesterday, grow to truly monstrous instead of merely epic proportions.

Completing the comedy, a third Bloomberg commentator, Richard Breslow, accurately summarizes the situation:

“for Fed to rail against what the market is doing seems to me the height of absurdity. They should probably put all their speeches together, read them to each other, and find some way to talk coherently to the market.“

But why? After all these Princetonian demi-gods are all the bullish case has left: if the baffle with bullshit strategy fails, it’s game over, as the last thing the Fed can afford is to tell even a remote version of the truth. Said otherwise, the moment the Fed starts talking coherently to the market, is the moment the market plunges.

So until then, monetarist god talks in mysterious ways.

via Zero Hedge http://ift.tt/Y1KI0h Tyler Durden

• A Month of Bombs Dropped in One Night of Strikes on Syria (BBG)
• Air strikes in Syria hit Islamic State-held areas near Turkey (Reuters)
• Pimco ETF Draws Probe by SEC (WSJ)
• Shadowy al Qaeda cell, hit by U.S. in Syria, seen as ‘imminent’ threat (Reuters)
• Yellen Warns on Market Calm Before ‘Considerable Time’ Up (BBG)
• Dudley Says Fed Needs U.S. Economy to Run ‘A Little Hot’ (BBG)
• Websites Are Wary of Facebook Tracking Software (WSJ)
• Tokyo Gas in no hurry to buy new LNG from Russia due to sanctions (Reuters)
• Just a joke now: Barclays Fined Twice in One Day for Compliance Failures (BBG)
• Companies in Bakken Shale Fight Limits on Oil Trains (WSJ)
• Fired UPS worker kills two supervisors, self, in Alabama shooting (Reuters)
• Citizens Financial IPO Prices at $21.50 a Share, Below Range (WSJ)
• NYC Luxury-Condo Buyers Await New Towers as Sales Slow (BBG)
• San Francisco Skyscraper Values Soar as Tech Lifts Rents (BBG)
• NYC’s Most Expensive Condo to Be Listed at $130 Million (BBG)
• Planned obsolescence 101: May I Borrow Your Shower? Ukraine Braces for Winter Cold (BBG)
• The iPhone 6’s latest free feature: it bends in your pocket (MacRumors)
• U.S. hospitals unprepared to handle Ebola waste (Reuters)
• Dutch parcel service TNT Express issues profit warning, warns of weak growth in Europe and the US (Expatica)

 

Overnight Media Digest

WSJ

on.wsj.com/1xbTjx3)

* Pfizer Inc explored a potential tax-lowering takeover of rival Actavis PLC in recent weeks, but talks between the two pharmaceutical companies have ended, according to a person familiar with the matter. (on.wsj.com/ZcBTT4)

* Investors had to wait more than a decade for a bank offering the size of Citizens Financial Group Inc’s $3 billion initial stock sale. In the deal priced Tuesday, Royal Bank of Scotland Group PLC offered 140 million shares of the U.S. regional bank for $21.50 each. That is below the company’s expected range of between $23 and $25 a share, according to filings. Citizens’ common stock is expected to begin trading on the New York Stock Exchange on Wednesday under the ticker “CFG.” (on.wsj.com/1mrSmNc)

* Executives from the top oil companies in the Bakken Shale told state regulators that their crude is safe to transport by train, opposing possible requirements that they make the oil less volatile before shipping it. The industry pushback comes as North Dakota considers new rules on treating crude to stabilize it, spurred by growing public concern about the safety of oil-laden trains crisscrossing the country.(on.wsj.com/1uXEg7F)

* Google Inc must improve its proposal to settle European Union concerns over its search practices or face formal antitrust charges, the bloc’s competition chief said, even as he rejected calls to break up the U.S. search giant. (on.wsj.com/1pbDI8B)

* Frank Tamayo, who surrendered to the FBI last week, worked as a home lending officer for Citigroup Inc in Midtown Manhattan, across the street from the bank’s headquarters, according sources and confirmed by the bank. The U.S. attorney’s office of New Jersey on Friday named Tamayo as part of the alleged insider-trading ring, and said he had pleaded guilty to securities fraud. Citigroup said in a statement on Tuesday that it “terminated this individual as soon as we learned of his admission of guilt.” (on.wsj.com/ZJvcIa)

* Oracle Corp paid Larry Ellison, who vacated the chief executive post last week, $67.3 million for his final full year in the job, the company said. Nearly all of Ellison’s compensation consisted of stock options. For the fiscal year 2014, Ellison’s salary remained $1, as it has been since 2011. (on.wsj.com/1mOxH6A)

* Brazilian authorities have filed a criminal action against eight Embraer SA employees accusing them of bribing officials in the Dominican Republic in return for a $92 million contract to provide the country’s armed forces with attack planes. (on.wsj.com/XZjV4M)

* Mitesh Parikh, Goldman Sachs Group Inc’s European head of spot foreign exchange trading, is leaving to join a hedge fund, according to people familiar with the matter. (on.wsj.com/1v8Q4mF)

 

FT

Royal Bank of Scotland Group Plc was pressured into cutting the price of shares sold in the Citizens Financial stock market offering to $21.50, to ease investor concerns over the lender’s ability to perform on its financial goals.

Airbus Group is packing more seats into its A380 superjumbo aircraft, hoping to revive interest in the world’s largest passenger jet. German venture capital group Rocket Internet has priced shares for its initial public offering at a midpoint market capitalization of 6.2 billion euros ($7.96 billion).

British technology company Arm Holdings Plc is releasing a chip designed for connected home appliances and wearable products, hoping to open up new avenues for future growth.

Norwegian fertilizer firm Yara International is in merger talks with U.S.-based CF Industries Holdings Inc – a deal that would make them one of the largest international crop nutrient producers.

 

NYT

* President Obama, emboldened by his use of executive powers to fight climate change at home, challenged China on Tuesday to make the same effort to reduce its greenhouse-gas emissions and join a worldwide campaign to curb global warming. (http://nyti.ms/1wL6DVX)

* Maurice R. Greenberg, 89, the former American International Group Inc chief executive, who still holds a large stake in the insurance company, filed a lawsuit on behalf of fellow shareholders that accuses the government of shortchanging the AIG in its 2008 bailout.(http://nyti.ms/ZJu0Vc)

* The three largest soda companies – The Coca-Cola Co , PepsiCo Inc and the Dr Pepper Snapple Group – have pledged to cut the number of sugary drink calories that Americans consume by one-fifth in about a decade, through a combination of marketing, distribution and packaging. (http://nyti.ms/ZcC7cO)

* After 26 years within the Royal Bank of Scotland Group , the Citizens Financial Group, the American retail bank, is setting off on its own. The bank raised $3 billion in its initial public offering on Tuesday, valuing itself at $12.9 billion, which was below expectations. (http://nyti.ms/1rjpx4q)

* Tiger Global Management, the $15 billion investment firm that has invested in the likes of the Alibaba Group <IPO-BABA.N> and the sunglasses maker Warby Parker, has begun raising a $1.5 billion fund, just five months after raising another $1.5 billion vehicle, a person briefed on the matter said on Tuesday. (http://nyti.ms/1rmH0KH)

* A week after Zalando <IPO-ZLDO.F>, the German e-commerce giant, announced plans for
an I.P.O. that could value the company at up to $7.3 billion, Rocket Internet, another Berlin-based Internet company, said on Tuesday that its own public offering could value the company at up to $7.8 billion. (http://nyti.ms/1xbZWiQ)

 

Canda

THE GLOBE AND MAIL

** The unique marriage of Maple Leaf Foods Inc and activist shareholder Greg Boland ended earlier this month when Bay Street fund West Face Capital Inc sold its four-year-old stake in the company. (http://bit.ly/Y0FeTA)

** Canada’s environment minister says the government is committed to reaching a new global climate deal in Paris next year, as leaders from two of the world’s biggest carbon emitters, the United States and China, pledged to take tougher action to combat global warming. (http://bit.ly/1sXhFUn)

** Liberal Leader Justin Trudeau says he will “continue to not engage” with Sun Media – one of the country’s largest newspaper and media organizations – after one of its columnists and TV hosts made critical and personal remarks about Trudeau’s parents. (http://bit.ly/1xdoLeg)

NATIONAL POST

** The day after Netflix Inc defied an order from Canada’s broadcast regulator to hand over its subscriber data, the U.S. video-streaming service insisting it was not bound by Canadian regulations, legal observers said the Canadian Radio-television and Telecommunications Commission has little recourse to force the matter besides taking the company to court. (http://bit.ly/1ohvPOH)

** If the question going into the mayoralty debate on Tuesday evening was what kind of Doug Ford would show up, the answer was this: one that was fired up. Sticking to tried and tested slogans about gravy trains, subways and a tax and spend yesteryear, Councillor Ford proved he can spar with the best of them at his first performance since joining the race, in front of a decidedly friendly crowd at York Memorial Collegiate. (http://bit.ly/1tYG3t7)

** After undergoing chemotherapy to combat a rare form of cancer, Toronto Mayor Rob Ford is home with his family after being discharged from a Toronto hospital on Tuesday afternoon. (http://bit.ly/1msaK8L)

 

China

CHINA DAILY

– China’s top food and drug regulator plans to grade food and drug producers and issue a blacklist with information on enterprises, in a move to address serious food safety issues that have emerged in recent years.

CHINA SECURITIES JOURNAL

– China may take a dual approach of lowering interest rates and adjusting the exchange rate when the economy is under pressure, the paper said in its front-page comment.

SHANGHAI SECURITIES NEWS

– China Securities Depository and Clearing Corporation Limited announced on Tuesday the unified account online platform would be launched on Oct. 1 and that account fees would be lowered starting from Oct. 8.

PEOPLE’S DAILY

– Different countries have different methods of governance and consultative democracy is China’s most important, unique governing channel, the official People’s Daily said in an editorial.

 

Britain

The Times

SFO PUTS TESCO IN THE SPOTLIGHT AS CRISIS DEEPENS Britain’s Serious Fraud Office is following events at the country’s biggest supermarket chain Tesco Plc closely as the company investigates whether any deliberate manipulation was involved in the creation of 250 million pounds ($409.75 million) of illusory profits. (http://thetim.es/1sWBeMt)

TESCO’S RETAIL RIVALS WARNED OVER RISKS IN ACCOUNTS Auditors have warned leading retailers including J Sainsbury , Wm Morrison and Travis Perkins Plc that they could be at risk of a Tesco-style accounting fiasco. (http://thetim.es/1rmAq6V) ANOTHER FINE MESS FOR BARCLAYS, THE BRITAIN’S MOST PENALISED FINANCIAL GROUP Barclays Plc has been officially declared the most-fined financial institution in Britain after confirming that it is paying a 38 million pound penalty for failings that put billions of pounds of client money at risk. (http://thetim.es/1uFjhUJ)

The Guardian

JIMMY CHOO PLANS FLOTATION VALUED AT MORE THAN 700 MLN STG Jimmy Choo <IPO-JIM.L> has set out plans to join the London Stock Exchange next month in a deal that could value the upmarket shoemaker at more than 700 million pounds, seeking to woo investors with the prospect of expansion in Asia. (http://bit.ly/XYdSO4)

BANK OF ENGLAND DEPUTY CALLS FOR U.S. CO-OPERATION OVER BANK FINES The deputy governor of the Bank of England has called for better co-operation with U.S. regulators over the scale of fines being levied on banks to ensure they do not weaken their financial position. (http://bit.ly/ZcrKpi)

The Telegraph

MOBILE OPERATORS IN TALKS FOR RURAL COVERAGE COMPROMISE

Britain’s mobile operators are in talks with the government over a deal to share access to their masts in an effort to improve coverage in rural areas. The plans would allow EE, O2, Three and Vodafone Group Plc to avoid a more economically and technically challenging ‘national roaming’ regime being imposed, according to government sources. (http://bit.ly/1wKT6xF)

BRITISH TAXPAYERS SET FOR $3 BLN WINDFALL AFTER RBS-OWNED CITIZENS PRICES IPO Citizens Financial Group, the U.S. bank owned by Royal Bank of Scotland, has priced its initial public offering at $21.50 a share, releasing more than $3 billion that has been trapped in America to taxpayers in the Britain. (http://bit.ly/1tXXfiq)

Sky News

SINGAPOREAN STATE FUND GIC IN TAKEOVER TALKS RAC FOR OVER 2 BLN STG

Singaporean state fund GIC is in talks to lead a takeover of roadside recovery business RAC for over 2 billion pounds, a move that would end the prospect of a stock market listing of RAC. (http://bit.ly/1riGeNv)

TESCO PROFIT ERROR: NEW FINANCE BOSS RUSHED IN Tesco Plc has managed to secure the services of its new Chief Financial Officer Alan Stewart more than two months early – a day after revealing a 250 million pound profits error. (http://bit.ly/1DvOSP9) The Independent

GOLDMAN SACHS’S NEW LONDON HQ FACING LEGAL CHALLENGE FROM NEIGHBOURS OVER THEIR ‘RIGHT TO LIGHT’ Goldman Sachs Group Inc’s new headquarters in London is facing a possible legal challenge from the owners of neighbouring buildings – who claim the proposed office will steal their light. (http://ind.pn/1B4bD8G)

Fly On The Wall Pre-market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
New home sales for August at 10:00–consensus up 4.4% to 430K rate

ANALYST RESEARCH

Upgrades

FTI Consulting (FCN) upgraded to Outperform from Market Perform at William Blair
Hi-Crush Partners (HCLP) upgraded to Buy from Hold at Wunderlich
Marvell (MRVL) upgraded t
o Market Perform from Underperform at JMP Securities
Rio Tinto (RIO) upgraded to Overweight from Equal Weight at Morgan Stanley
SYNNEX (SNX) upgraded to Outperform from Market Perform at Raymond James
Sage Therapeutics (SAGE) upgraded to Buy from Neutral at Goldman
WuXi PharmaTech (WX) upgraded to Conviction Buy from Neutral at Goldman

Downgrades

Ascena Retail (ASNA) downgraded to Neutral from Buy at Goldman
Auxilium (AUXL) downgraded to Sector Perform from Outperform at RBC Capital
Ericsson (ERIC) downgraded to Neutral from Buy at UBS
Medivation (MDVN) downgraded to Neutral from Buy at Goldman
Morgan Stanley (MS) downgraded to Neutral from Overweight at JPMorgan
TriMas (TRS) downgraded to Market Perform from Outperform at Wells Fargo
Unilever (UN) downgraded to Underperform from Hold at Jefferies

Initiations

Autoliv (ALV) initiated with an Outperform at Exane BNP Paribas
BNY Mellon (BK) initiated with a Neutral at Citigroup
Basic Energy (BAS) initiated with an Outperform at Wells Fargo
Cameron (CAM) initiated with a Market Perform at Wells Fargo
CoreLogic (CLGX) initiated with an Overweight at Piper Jaffray
FMC Technologies (FTI) initiated with a Market Perform at Wells Fargo
FNFV (FNFV) initiated with a Neutral at Piper Jaffray
Farmer Bros. (FARM) initiated with a Buy at B. Riley
Fidelity National (FNF) initiated with an Overweight at Piper Jaffray
First American (FAF) initiated with a Neutral at Piper Jaffray
Helmerich & Payne (HP) initiated with an Outperform at Wells Fargo
HomeAway (AWAY) initiated with a Buy at SunTrust
IMS Health (IMS) initiated with a Buy at Topeka
Nabors Industries (NBR) initiated with an Outperform at Wells Fargo
National Oilwell (NOV) initiated with a Market Perform at Wells Fargo
Northern Trust (NTRS) initiated with a Neutral at Citigroup
Pacific Drilling (PACD) initiated with a Market Perform at Wells Fargo
Paragon Offshore (PGN) initiated with a Market Perform at Wells Fargo
Patterson-UTI Energy (PTEN) initiated with an Outperform at Wells Fargo
Pioneer Energy (PES) initiated with an Outperform at Wells Fargo
Realogy (RLGY) initiated with an Overweight at Piper Jaffray
Ruckus Wireless (RKUS) initiated with a Neutral at SunTrust
State Street (STT) initiated with a Buy at Citigroup
Ubiquiti Networks (UBNT) initiated with a Buy at SunTrust
Wafergen Biosystems (WGBS) initiated with a Buy at Brean Capital

COMPANY NEWS

Atossa Genetics (ATOS) reports FDA does not clear ForeCYTE aspirator for U.S. marketing
Bill Barrett (BBG) to replace ITT Educational (ESI) in S&P 600 as of 9/30 close
Delek US (DK) declares 10c per share special dividend
Echo Therapeutics (ECTE) suspends operations to conserve liquidity
Egalet (EGLT) needs to conduct more clinical trials for Egalet (EGLT)-001
Green Dot (GDOT), Wal-Mart announce nationwide rollout of GoBank
Inovio (INO) Ebola vaccine moving into human trial with GeneOne Life Science
International Game (IGT) and GTECH amend merger agreement 
KCG Holdings (KCG) to cut 4% of workforce, recognize pre-tax charge of $5M-$6M
LyondellBasell (LYB) evaluating further expansion at Channelview
Malvern Federal Bancorp names Anthony Weagley as president, CEO
Pershing’s Ackman sends letter to Allergan (AGN), threatens suit
Provectus (PVCT) cancer candidate PV-10 shows positive Phase II results
Starbucks (SBUX) to purchase remaining 60.5% share of Starbucks Japan for $913.5M
Starbucks (SBUX) sees Japan acquisition accretive to FY15 non-GAAP results
Urban Outfitters (URBN) targets doubling revenue by 2020
ZS Pharma (ZSPH) announces positive top-line results from HARMONIZE trial of ZS-9

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Bed Bath & Beyond (BBBY), Steelcase (SCS)

Companies that missed consensus earnings expectations include:
Copart (CPRT), AAR Corp. (AIR)

NEWSPAPERS/WEBSITES

Apple (AAPL) iOS 8 upgrade prompts more frequent app collapse, Bloomberg says
Apple (AAPL) iPhone 6 Plus bending in pockets, MacRumors says
Starz (STRZA) hires investment bank to explore sale, WSJ reports
Starz (STRZA) met with 21st Century Fox about takeover, LA Times reports
Data breach at Home Depot (HD) triggers fraudulent transactions across U.S., WSJ says
Experts see new tax rules not halting inversions, WSJ reports
GFI (GFIG), BGC (BGCP) merger talks slowed by confidentiality dispute, Bloomberg says
Pfizer (PFE), Actavis (ACT) takeover talks ended last week, WSJ reports
Verizon (VZ) hires TAP Advisors for tower sale, lease agreement, Bloomberg says

SYNDICATE

American Midstream (AMID) files to sell 4.62M units for limited partners
Avanir (AVNR) 18.2M share Secondary priced at $11.00
Citizens Financial (CFG) 140M share IPO priced at $21.50
CyberArk (CYBR) 5.36M share IPO priced at $16.00
Envision Healthcare (EVHC) files to sell 17.5M shares for holders
GasLog Partners (GLOP) files to sell 4.5M common units
Gladstone Land (LAND) files to sell 1.15M shares of common stock
Martin Midstream Partners (MMLP) files to sell 3M common units
Medley Management (mdly) 6M share IPO priced at $18.00
Seadrill Partners (SDLP) files to sell 8M common units
Smart & Final Stores (SFS) 13.45M share IPO priced at $12.00

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

If yesterday the bombardment, no pun intended, of bad news from around the globe was too much even for Mahwah’s vacuum tubes to spin as bullish – for stocks – news, then tonight’s macro economic updates have so far been hardly as bombastic, with the only real news of the day has Germany’s IFO Business Climate reading, which dropped from 106.3 to 105.8, declining for the 5th month in a row, missing expectations, and printing at the lowest level of since April 2013! (More from Goldman below) Net result: Bunds yields were once again pushed in the sub-1% category, even if stocks today are higher because the European data is “so bad it means the ECB has no choice but to do (public instead of just private) QE” blah blah blah.

Goldman on the IFO:

Bottom line: The Ifo index declined more than expected in September. The decline is in contrast to yesterday’s marginal increase in the September German Composite PMI, pointing to some uncertainty about the underlying trend of the German economy.

 

The Ifo index declined to a level of 104.7.0 in September against expectations of a small easing to 105.8. The ‘assessment of current conditions’ edged lower to 110.5 after 111.1, while ‘expectations’ declined to 99.3 after 101.7. The decline in sentiment was broad-based, with all major sub-indices of the survey showing a lower reading in September.

 

Today’s Ifo figure stands in contrast to the stabilization of the composite PMI, which on the flash reading printed at 54.0 in September after 53.7.

 

Expect USDJPY momentum ignition to go berserk any minute as the HFTs wake up and are ordered by central banks to send futures higher, and the USDJPY 109 tractor beam to support the broader “market”, especially if today’s new home sales is as bad as we (and Goldman’s former head of housing research) think it may be: because the time to start pricing in the untaper has almost arrived.

Asian investors are more on the front foot overnight as key equity markets rebounded from their previous day’s losses. Chinese equities extended their run higher overnight with the HSCEI and Shanghai Composite up +1.0% and +0.8% following the slight beat in China’s flash PMI headline yesterday. Markets are also seemingly overlooking another corporate default story in China. Chinese steel transporter Anhui Wanjiang Logistics said RMB2bn of its loans were overdue and that its chairman had been detained by police. The company has about RMB16.7bn in debt and is said to have used up its credit quota leaving it with no working capital (Reuters). Staying on China, S&P has said overnight that widespread defaults by local government financing vehicles are unlikely in the next year or so as they have sufficient resources (ie to cut non-core spending, improve revenue collection or make asset sales) to absorb weaker property related revenue (which accounted for about 20% of local government revenues in 2013). Away from China we are seeing modest gains across Taiwan and Korea although Japan has reopened after hols with a softer tone. Australian equities are lagging the rest not helped by a rather bleak commodity price projection by the Bureau of Resources and Energy Economics with broadly flat Iron ore and lower thermal coal prices in 2015.

Asian stocks little changed with CSI 300 outperforming and the ASX 200 underperforming. MSCI Asia Pacific little changed to 143.2. Nikkei 225 down 0.2%, Hang Seng up 0.4%, Kospi up 0.3%, Shanghai Composite up 1.5%, ASX down 0.7%, Sensex down 0.1%. 6 out of 10 sectors rise with utilities, energy outperforming and telecom, information technology underperforming.

European equities languish around yesterday’s lows with initial commodity-inspired support faltering as markets head into the US session. Initial positive sentiment has eroded with European participants provided with a lack of further catalysts to the upside, with the mixed German IFO report (business climate 104.7 vs. Exp. 105.8) revealing a 5th monthly consecutive decline for the headline figure adding to the recent negativity. In terms of stock specific news Pfizer (PFE) is said to be undeterred by Treasury restriction inversions and are weighing options including AstraZeneca bid. Elsewhere, Dutch courier TNT (-11%) is the underperformer in Europe after issuing a profit warning amid a deterioration in European trading conditions. 7 out of 19 Stoxx 600 sectors rise; basic resources, telecom outperform while media, banks underperform. 26.2% of Stoxx 600 members gain, 69% decline. Eurostoxx 50 -0.1%, FTSE 100 -0.2%, CAC 40 little changed, DAX -0.2%, IBEX -0.9%, FTSEMIB -0.1%, SMI +0%

In summary, European equities mixed with media, financials underperforming and oil & gas, telcos outperforming. German business confidence fell to level below median forecasts. Shanghai market rises, Japanese, Indian shares decline. U.S. equity index futures rise. Commodities little changed with platinum, WTI crude rising while Brent falls, dollar little changed. Aug. new home sales among today’s U.S. economic data.

On the US docket today, we have new home sales data and a 5yr Treasury auction in the US on top of a few Fed speakers scheduled. Fed’s Mester will speak on monetary policy in Cleveland and Fed’s Evans will speak at a labour market conference in Washington. Germany’s IFO survey (which missed again and printed at the lowest since April 2013, falling for the 5th consecutive time) was the main release in Europe.

Market Wrap

• S&P 500 futures up 0.2% to 1975.3
• Stoxx 600 down 0.1% to 341.4
• US 10Yr yield up 1bps to 2.53%
• German 10Yr yield down 1bps to 1%
• MSCI Asia Pacific little changed at 143.2
• Gold spot little changed at $1221/oz

Bulletin Headline Summary from RanSquawk and Bloomberg

• European equities trade mixed/lower (Eurostoxx 50 +0.1%, DAX -0.1%) with European participants shrugging off the commodity-inspired gains seen overnight.
• Fixed income products trade in close proximity to yesterday’s highs alongside the softness in equities, while the German IFO survey painted a relatively mixed picture of the nation’s economy.
• Looking ahead, attention turns towards today’s US new home sales, any comments from Fed’s Mester, and the 5y note auction.
• Treasuries steady in overnight trading as week’s auctions continue with 2Y FRN and 5Y notes; yield 1.795% in WI trading, highest since May 2011.
• German business confidence fell more than forecast in September, with the Ifo institute’s index dropping to 104.7 from 106.3
• Weak Ifo is boosting the case for large-scale government bond purchases by the ECB, Commerzbank says
• More regional authorities in China are relaxing mortgage policies to boost demand after removals of home-purchase restrictions failed to stem a slide in the property market amid tight credit
• Indian Prime Minister Modi starts a five-day trip to the U.S. Sept. 26, the first since he was denied a U.S. visa over 2002 anti-Muslim riots in his state of Gujarat; his landslide election win in May sent the Obama administration scurrying to rebuild ties with the new leader of the world’s biggest democracy
• Strikes by the U.S. and its five Arab allies against Islamic State positions in Syria may benefit President al-Assad, whose removal is a declared goal the U.S./Arab coalition and expose regional powers to retaliatory attacks
• The U.S. dropped almost as many bombs and missiles on Islamic State positions in Syria in its first night of airstrikes there as it did in the first month of attacks on the group in Iraq
• Three men suspected of having fought for Isla
  mic State in Syria and deported by Turkey weren’t arrested on their return to France after police waited for them at the wrong airport
• Pfizer Inc. has approached Actavis Plc to express its interest in an acquisition that could allow the U.S. drugmaker to move overseas and reduce taxes, in a sign the Obama administration’s efforts to curtail such deals could fall short
• Sovereign yields mostly lower. Nikkei declines, Shanghai Composite higher. European stocks mixed, U.S. equity-index futures gain. WTI crude, gold and copper little changed

US Event Calendar

• 7:00am: MBA Mortgage Applications, Sept. 19 (prior 7.9%)
• 10:00am: New Home Sales, Aug., est. 430k (prior 412k); New Home Sales m/m, Aug., est. 4.4% (prior -2.4%)
• 11:30am: U.S. to sell $13b 2Y FRN
• 1:00pm: U.S. to sell $35b 5Y notes

Central Banks

• 12:15pm: Fed’s Mester speaks in Cleveland
• 1:00pm: Fed’s Evans speaks in Washington
• 10:30pm: Reserve Bank of Australia’s Stevens speaks in Melbourne
• POMO 11:00am: Fed to purchase $950m-$1.15b notes in 2036-2044 sector

ASIA

The Nikkei 225 traded in negative territory (-0.24%) weighed on by weakness in global equities and JPY strength. JGBs were higher from the get-go following the gains in US Treasuries but traded in a relatively tight range amid a lack of major market-moving data and events. Chinese markets shrugged-off early declines to trade higher (Shanghai Comp +1.47%, Hang Seng +0.35%) with telecoms benefiting from comments by China’s regulator, who stated the iPhone 6 is in the final review stages and reports in Shanghai Daily that Shanghai banks are to ease lending for home buyers. Nonetheless, growth concerns linger after Goldman Sachs cut their Chinese 2015 GDP forecast to 7.1% from 7.6%.

FIXED INCOME

Bunds have been provided further support from the softness in equities although have currently failed to break back above yesterday’s highs, with the German 10yr yield remaining below 1.0%. The GR/GE spread continues to widen amid fears that Greece may require a third aid package. Elsewhere, the Netherlands books for its new 5yr offering remain open with books in excess of EUR 13.7bln and results due to be published before tomorrow’s open.

Pan Euro Agg month-end extensions +0.08yrs (Prev. +0.03yrs), 12-month average +0.07yrs (IFR)

RANsquawk sources report large Sterling month-end extensions, ranging between +0.28yrs to +0.31yrs – Unconfirmed*. Note, that this is much higher than the monthly average of +0.05yrs, but broadly in-fitting with this time last year at +0.33yrs.

EQUITIES

European equities languish around yesterday’s lows with initial commodity-inspired support faltering as markets head into the US session. Initial positive sentiment has eroded with European participants provided with a lack of further catalysts to the upside, with the mixed German IFO report (business climate 104.7 vs. Exp. 105.8) revealing a 5th monthly consecutive decline for the headline figure adding to the recent negativity. In terms of stock specific news Pfizer (PFE) is said to be undeterred by Treasury restriction inversions and are weighing options including AstraZeneca bid. Elsewhere, Dutch courier TNT (-11%) is the underperformer in Europe after issuing a profit warning amid a deterioration in European trading conditions.

FX

In FX markets, commodity currencies have trimmed their overnight gains with NZD failing to hold onto the upside stemming from NZ trade data showed a smaller deficit than expected as exports were higher than forecast. Elsewhere, AUD has come off its overnight highs after approaching a USD 130mln option expiry at 0.8900 which is due to roll off today. JPY has been seen stronger throughout the session after Japanese PM Abe said he wants to be careful about the impact on local economies from recent JPY weakness.

COMMODITIES

Overnight, copper was seen higher with increased interbank lending in China supporting Asian equities and in turn spurring copper demand. However, this positive sentiment has since eroded with European participants being provided with a lack of further catalysts to the upside. Brent and WTI crude futures have also pared overnight gains in the run up to today’s DoE inventories report with the headline figure expected to reveal a build of 750,000bbls, while spot gold has continued to move in line with the broad trend in commodities markets.

* * *

DB’s Jim Reid concludes the overnight recap

DM risky assets had another challenging session yesterday as we saw broad based equity market weakness on both sides of the Atlantic. Treasuries benefited from the broader flight to quality which also saw Gold and the US Dollar rally off their intraday lows. There was some renewed focus on geopolitics with the escalating military tension in Syria as we reported yesterday but in reality the round of global PMIs were just not that impressive (more below). With all that we saw the S&P 500, NASDAQ, DAX, CAC, and IBEX down -0.58%, -0.42%, -1.58%, -1.87% and -1.33%, respectively. Specifically for the S&P 500, yesterday marked the 3rd consecutive down day for the index. We’ve had 6th consecutive 3-day declines this year but never a fourth so another down day today would be a first for 2014.

Back to market drivers, new rules set by the US government to clamp down on tax inversion structures also added pressure on European health care stocks especially those companies that were previously priced in as takeover targets. The rule which took immediate effect and apply to all pending deals basically blocks US corporate from acquiring foreign firms just so that they can move their tax address overseas to avoid higher corporate tax rates back home. We are no legal experts but can’t help thinking that law firms will be at the benefiting end of the rule change. Shares in AstraZeneca (-3.6%), Shire (-2.5%) and Smith & Nephew (-2.8%) all suffered yesterday.

On the brighter side of things Asian investors are more on the front foot overnight as key equity markets rebounded from their previous day’s losses. Chinese equities extended their run higher overnight with the HSCEI and Shanghai Composite up +1.0% and +0.8% following the slight beat in China’s flash PMI headline yesterday. Markets are also seemingly overlooking another corporate default story in China. Chinese steel transporter Anhui Wanjiang Logistics said RMB2bn of its loans were overdue and that its chairman had been detained by police. The company has about RMB16.7bn in debt and is said to have used up its credit quota leaving it with no working capital (Reuters). Staying on China, S&P has said overnight that widespread defaults by local government financing vehicles are unlikely in the next year or so as they have sufficient resources (ie to cut non-core spending, improve revenue collection or make asset sales) to absorb weaker property related revenue (which accounted for about 20% of local government revenues in 2013). Away from China we are seeing modest gains across Taiwan and Korea although Japan has reopened after hols with a softer tone. Australian equities are lagging the rest not helped by a rather bleak commodity price projection by the Bureau of Resources and Energy Economics with broadly flat Iron ore and lower thermal coal prices in 2015.

Staying on the EM theme, the Brazilian complex went through some consolidation yesterday following Monday’s sell-off. Brazil’s CDS spreads were 5bp tighter to 154bp whilst the local 10yr bond yield was little changed. The upcoming Presidential election next month will likely remain a key driver so upcoming polls will receive plenty of focus. Per the WSJ, the latest opinion poll shows a tightening in the race between President Dilma Rousseff and her main challenger, Marina Silva. Both candidates would g
et 41% of the vote in a head-to-head contest, according to the survey by the Ibope polling organization for the Globo television network and the Estado de S. Paulo news organization. Marina Silva’s lead has narrowed based on a previous poll released on the Sept 16 which showed a 3pt lead.

In other parts of EM, our strategists have covered their tactical underweight in Russia following recent signs of de-escalation in the Russia/Ukraine crisis. However over the longer term they continue to see reasons to be strategically underweight and recommend reducing on strength because they think the conflict will likely persist given the fundamental differences and the wide gap between the positions taken by different parties while economic conditions continue to deteriorate. More on geopolitics, the US and its Arab allies (Saudi Arabia, Qatar, Jordan, Bahrain and the United Arab Emirate) bombed militant groups in Syria for the first time yesterday, killing scores of Islamic State fighter. The attacks encountered no objection from President Bashar al-Assad’s Syrian government (NYT).

Back to the developed world and onto the European PMIs. We won’t spell out the actual details here but they were generally speaking soft across the board (especially in manufacturing). As our European economists noted these readings are consistent with a modest revival of the recovery after euro-area GDP stalled in Q2. However, the message is one of a slow, uneven and fragile recovery. The PMIs imply a +0.3% qoq pace of GDP growth in Q3 and marginally slower in Q4 if PMIs remain unchanged at September’s level. This would be not fast enough to close the significant negative output gap. The ECB will likely have to be very aggressive to combat persistent downward pressure on inflation. On the other side of the pond the Markit US PMI reading was broadly as expected (57.9 b 58.0) whilst the Richmond Fed survey (14 v 10) came ahead. The FHFA house price index (+0.1% v +0.5%) rose less than expected in July though.

Before we wrap up, Fed officials are warning banks that rising levels of HY credit exposures on their balance sheet may trigger more capital requirements (Bloomberg). The article said that regulators are stepping up monitoring after the 2013 guidance issued by the Fed, the FDIC and the Office of the Comptroller of the Currency didn’t slow deal volume or the declining standards. We can’t help thinking that this will have some impact on dealers’ market making abilities with volatility implications for the asset class.

In terms of today, we have new home sales data and a 5yr Treasury auction in the US on top of a few Fed speakers scheduled. Fed’s Mester will speak on monetary policy in Cleveland and Fed’s Evans will speak at a labour market conference in Washington. Germany’s IFO survey will be the main release in Europe.

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Despite the recent bout of price weakness, gold American eagle coin sales from the U.S. Mint have picked up significantly from last month.

The latest bullion coin sales figures from the U.S. Mint show a tentative pickup and robust retail bullion demand, with September sales stronger for both the  American Eagle and American Buffalo gold coins as well as for the American Eagle silver 1oz coins.

U.S. Mint Gold Buffalo Bullion Coin (1 oz)

Month-to-date for September, gold Eagle sales across all coin sizes have already reached 43,200 oz compared to total gold Eagle sales of 25,000 oz in August. This is also well ahead of September 2013, when total gold Eagle sales for the month only touched 13,000 oz.

Year-to-date American Eagle sales have now reached 364,200 oz.

Gold American Buffalo 1 oz sales so far this month have reached 10,500 oz, up from 8,000 oz in August, and 5,500 oz in July. With a strong first quarter, year-to-date American Buffalo sales are now running at a cumulative 135,500 oz for 2014. 

Taken together, U.S.  Mint gold Eagle and Buffalo sales for 2014 have now reached 500,000 troy oz, or 15.5 tonnes.

While this gold total falls short of the 1.1 million ozs of gold coins sold by the US Mint in 2013, if Q4 of 2014 continues the trend seen in Q3, then total gold sales by the Mint could reach just shy of 700,000 oz for all of 2014, which demonstrates an element of resilience in the face of the ongoing gold price weakness. 

 

U.S. Mint Silver Eagle (1 oz)

Silver American Eagle 1 oz sales are also stronger for the month-to-date, at 2.42 million ozs compared to 2.0075 million ozs for the full month of August. 

While these monthly totals are weaker than the monthly sales in August and September 2013, which came in at 3.625 million ozs and 3.103 million ozs respectively, the year-to-date silver total for 2014 is running at a relatively strong 30.53 million ozs, and if the trend continues, silver sales may finish 2014 in the region of 40 million ozs which compares well with the 2013 silver sales total of 42.675 million ozs. This is because although 2013 silver sales has a very strong start compared to 2014, this year has seen relatively strong sales across most months. 

The U.S. Mint is unusual in that its gold and bullion coin sales figures are updated very frequently and, as far as possible, the figures include sales activity in the most recent week or previous week.

Working stock of gold bars in the United States Mint Facility in West Point, New York – Bloomberg

Other government mints such as the Royal Canadian Mint and the Royal Mint in Britain do not have such real time bullion sales reporting. Publically available bullion coin sales data from these institutions has to be sourced from their quarterly, half yearly and annual report updates. 

However, in Australia, the Perth Mint does release monthly data on gold and silver coin and bar sales with a one month lag. Data for August shows gold sales stronger at 36,369 ozs compared to 25,103 ozs in July, with silver sales also up strongly at 818,856 ozs compared to 577,988 ozs in July. 

Overall, the U.S. Mint bullion sales figures, due to their real-time nature, are used extensively in the industry as a proxy for retail gold and silver investor sentiment, and are even included in a number of well known bullion bank commodity and precious metals research reports.

While extrapolating the U.S. Mint figures to other Mint bullion sales requires caution, the sales trends of the U.S. Mint tend to be confirmed when quarterly data from the Mint’s main competitors is put into the public domain. 

By Ronan Manly, edited by Mark O’Byrne

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by Keith Weiner

 

The European Central Bank again cut the interest rates it controls. Notably, the deposit rate was moved deeper into negative territory. It is now -0.2% (minus 20 basis points, that is not a typo). The ECB says it’s trying to nudge prices higher, but it’s actually feeding the cancer of falling interest.

The linked article above, like most, is focused on the quantity of euros and the presumed direct relationship to price. The following bit of editorializing from that article is uncontroversial in Frankfurt, London, New York, Mumbai, or Shanghai.

“Inflation weakened to a five-year low in August, just 0.3% in annual terms. That is far below the ECB’s target of a little under 2% over the medium term, raising fears that the region could face a debilitating stretch of weak or falling prices that hampers debt-financing and investment. Those fears intensified as market-based measures of inflation expectations weakened, too.”

Every assumption in this short paragraph is wrong. One, inflation should not be conceived as rising prices. There are many reasons for prices to rise or fall that have nothing to do with the currency. For example, every business is constantly working to cut costs. Without monetary debasement, and a steady stream of onerous new regulations, prices would be falling.

Two, inflation is monetary counterfeiting. Inflation is the fraud of selling a bond into the market, when the debtor lacks the means or intent to repay. The deadly danger is that it seems good to creditors who buy it, often using leverage. Eventually, every fraudulent debt will default.

Three, central banks keep trying to engineer rising prices, in the name of some sort of good, like Stalin and his Five Year Plans. The economic theory that demands this is frivolous at best. There is no there, there. This does not stop the central planners from trying their worst anyway.

Four, it should be obvious by now that central banks do not have control over prices. If they did, we would not still be struggling with prices that stubbornly refuse to rise. How many times has the ECB tried to get prices to rise since the last acute phase of the monetary crisis?

Five, falling prices do not hamper financing or investment. Look at the massive investment in first electronics, then computers, then computer networking, and most recently communications. Prices have been falling, for a long time and by a large amount even in nominal dollars.

Finally, we must distinguish between the prices of consumer goods and the prices of assets that are bought with leverage. The latter is a threat to those who borrow short-term to finance long-term assets. For example, when a real estate developer sells 3-year bonds to buy a large commercial building. Since the developer can’t amortize the debt in three years, it will roll its liabilities—sell new bonds to pay off the old ones. This is a form of counterfeit credit. One way to get in trouble is if the market value of the property falls. Then the bonds cannot be rolled.

These are some of the errors in the conventional, quantity analysis approach. It’s the wrong approach, though it seems intuitive. Suppose we think about wheat. We consider if we had ten huge bags of grain how would we feel if a truck pulled up to attempt to deliver the 11^th. Or if we had a basement full of copper bars and contemplated buying more. No one wants to bury himself under a hoard of useless stuff.

Money is not like any commodity. No matter how much money we have, the thought of receiving a big check in the mail is exciting. We don’t think we have too much money already. Even the most die-hard gold bug, is eager to sell you his newsletter in exchange for dollars. No one rolls his eyes or sighs at the prospect of making more money.

We cannot assume that a rise in the money supply translates into a rise in prices. It might or might not. However, there is a danger in focusing too much on prices, and missing the terminal monetary problem. Imagine a doctor obsessing over a patient’s body temperature. He could easily miss the signs of cancer.

I saw a different approach in an article this week. The author suggests that rates on government bonds are now negative, because investors trust they will get their money back. Presumably, this school of thought regards the US government as less trustworthy because the Treasury bond pays a higher yield. This approach is also wrong.

Let’s take a look at the yield curve in Germany.

There is a reason why the yield on government bonds in Europe is falling to zero and below. Banks have a choice to hold cash or government bonds, with the main factor being liquidity. However, when the ECB lowers the deposit rate for bank cash to below zero, this changes the incentive. The lower the yield on cash, the more the banks will tend to prefer bonds.

I am no European political expert, but perhaps this is the intent of the ECB. Perhaps they would simply like to buy more government bonds, but cannot or dare not due to treaty, law, or politics. But they clearly have the power to create incentives for banks to do it.

The right approach to understanding what’s happening in the euro begins with the observation that a paper currency like the euro is a closed loop system. You may think that you can protest a negative interest rate by getting out of the currency. For example, you can buy antique Ferraris, paintings, real estate, stocks, a foreign currency, or even gold. This may protect you personally, but it does not alter the trajectory of the interest rate.

The former owner of the asset is now the owner of those euros. What will he do with them? Deposit them in a bank. What will the bank do? Buy a bond. At one time, all roads led to Rome. Today, all monetary roads lead to the government bond that backs the currency.

We are all disenfranchised by the regime of irredeemable money. The central bank may have some control. Or, as I argue in my theory of interest and prices, they have little control but set up a positive feedback loop that drives interest to zero. However, the people have no control. The rate has been falling for decades, pushed down by massive forces beyond even the control of central banks. The price of the bond, and hence the interest rate, is set free from constraint.

Consider for a moment, the price of wheat. If the price falls below the cost of growing, then farmers stop planting it. Alternatively, if the price rises above that of other starches, then manufacturers will stop buying wheat. The cost of wheat and every other real thing is dependent on the price of oil, machinery, labor, and many other inputs, it is tied to everything else in the economy.

By contrast, the bond price in a paper currency is not tied to anything. It could collapse and give us an interest rate of 17%. Or it could have a 33-year bull market, and give us an interest rate below 1% (the bond price is inverse to the yield). The rate can keep falling.

There is a cancer metastasizing in the body economic. Zero interest is creeping out from the short-term credit facilities provided by central banks. In Germany, it is now out to the 4 year bonds. Zero interest on overnight deposits is like gangrene in your fingernail. When it hits the 1-year bond, it is spreading to your whole finger. The 2-year bond is like the lower part of the hand. The German 3-year bund now has a negative yield. The all but zero-yield on the 4-year bond is like rot moving up towards your elbow.

What will they do when necrosis spreads up to the shoulder and beyond?

We need a new concept to understand the nature of the problem. The bur
den of debt is
a measure of the pressure on debtors. The net present value of a stream of future payments depends on the interest rate. This is not just the interest rate at the time the asset was purchased. The present value should be recalculated whenever the interest rate changes. Each time the interest rate falls the net present value rises.

This seems good for the bond speculator, who gets a capital gain. However, this is a zero sum game. His gain comes at the expense of the bond issuer. The bond issuer feels an increase in his burden of debt as rates fall. With each halving of the rate of interest the burden doubles. Of course, the falling rate is also an incentive to borrow more, because the monthly payment is lower. Debtors owe more euros of debt, and the burden of each euro owed is doubling. Here is a graph of the history of the German 10-year bund, a reasonable way to measure burden of debt.

In June of 2008, the 10-year bund yielded 4.5%. This is labeled point 1. By August of 2010, point 2, the rate was cut in half to 2.25%. The burden of every debt in Germany—and arguably Europe—doubled. In July of this year, it was lopped in half again to just about 1.13%, at point 3. Now it is 0.94 and well on its way to the next milestone of 0.56%. Not coincidentally, Japan is already there.

This burden of debt is one of the most important concepts, because the entire basis of the system is debt. One man’s debt is another’s asset. The ultimate asset is the debt of the government. If debtors begin to default in earnest and if one default causes others in a cascade, then the system can collapse like dominoes.

The analogy of dominoes is apt because creditors are themselves debtors. They are typically leveraged, so a small loss can cause insolvency.

The financial system must collapse—necessarily so—when the interest on the long bond hits zero. Debtors cannot hold up an infinite burden of debt, and that is what a zero long-term rate means.

Consumer prices in Europe may continue to eke out small gains, especially as the carry trade begins to press down the value of the euro compared to the dollar. Or prices may begin to fall, perhaps slowly.

Either way, who cares? The patient’s arm is turning black.

 

The Gold Standard Institute Presents The Gold Standard: Both Good and Necessary, in Manhattan on Nov 1. You are cordially invited to join us for a discussion of ideas you won’t get anywhere else. The gold standard is the monetary system of the free market—of capitalism. Dr. Andy Bernstein, a rock star of the liberty movement, shows why capitalism is good. In my talk, I explain why capitalism is impossible with fiat money, and why we have not recovered from 2008, and we won’t without gold.

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Submitted by Mike Krieger of Liberty Blitzkrieg blog,

In an apparent attempt to advise investors on how they can take advantage of America’s transformation into a neo-feudal oligarchy in a 50-page research report, Morgan Stanley has put together some very interesting charts.. We will be sharing many of them in the next few days but none is more telling and depressing than the one that shows how the U.S. leads the developed world in the share of low wage jobs…

 

 

Of course, this shouldn’t come as any surprise to readers. I have covered the death of America’s middle-class for many years now, most notably in the post from last summer: How Does America’s Middle Class Rank Globally? #27.

As the middle-class has been destroyed, and the poor placated temporarily by various government benefits, the oligarchy has had free reign to thieve and expand its wealth at a dizzying pace. The Federal Reserve fueled stock market has been a key tool in the process of keeping the 1% silent, as the chart below demonstrates:

 

While I can’t say the above is surprising, it certainly seems to confirm my prior contention that the stock market is merely: Food Stamps for the 1%.

U.S. policy is all about keeping the 99.9% quiet and distracted, while the oligarchs strip-mine the nation. Unfortunately, that strategy is working... for now!

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