This is an open letter I received from a group of 57 Greek intellectuals, addressed to the EU and America, concerning the waves of refugees (migrants, immigrants) that ‘wash ashore’ on Greek territory in increasing numbers.
We all know by now to what extent Europe has dropped the ball on the issue, and I’ll have much more to say on that soon. I thought it would be a good and respectful idea to let this letter stand on its own, and on its own merit.
The number of refugees trying to make it to Greece was estimated at 30,000 in 2014. It’s certain to be a multiple of that this year. The EU may quote numbers like 150,000 for all of southern Europe for 2015, but in real life it will easily be over 500,000.
The EU has no idea what it’s doing, what it’s up against, or what to do next. Brussels figured if it would just close its eyes, the problem would go away. And even today, after almost 1000 victims drowned last weekend, passing the buck to its weakest member nations is apparently still too tempting an opportunity to resist.
Greece Can No Longer Withstand The Waves Of Desperate People Arriving From War Zones:
Your Immediate Action Is Imperative
• The Leaders of all European countries
• All Members of the European Parliament
• President Obama and All Members of the United States Congress
Greece, April 2015
The conflicts in many Middle-Eastern and African countries have devastated life in these regions and made survival uncertain. While the world has been witnessing the horrific decapitations and burning alive of human beings, large scale events are also occurring that can change the history and the fate of the affected countries and the world. Thousands of people, Christians and Muslims, are fleeing the war zones in any way they can; entire families jump into boats hoping to reach Europe, if they do not drown on the way.
Southern Europe is the most accessible, and particularly Greece and Italy. Tragedies in the Mediterranean Sea, with desperate people drowning on the way to Europe, have been happening for a few years by now. But only recently this news reached the United States (US) and every part of the world, due to the extensive loss of human lives, while it is hardly in the news that Greece and Italy have been left essentially with no help to deal with these tragedies.
Greece has now close to a 27% unemployment rate and is struggling to convince her lenders of the obvious: that the economy will not recover by more cuts in salaries and pensions, more mass layoffs, and the sell-off of public assets. Signs of the crisis are everywhere. An increasing number of Greeks are being fed by their local churches. Illegal immigrants already fill the streets of Athens and try to survive by searching the garbage or turn to criminal activities. Hospitals struggle to provide care to all of Greece’s inhabitants. Against this background, the waves of hungry and sick people from war zones arriving at Greece’s ports and islands are growing.
Others arrive by crossing the borders with Turkey, whose government seems to turn a blind eye to this situation, giving the human traffickers free rein. Greece, a small country with a population of only about 10 million, already has an estimated one and a half million immigrants (legal and illegal), and the number of refugees has been increasing dramatically in recent months.
Even hospitable Greeks cannot take care of the refugees. They simply cannot feed and provide shelter in the short-term, or employment in the long-term. Greece is akin to a boat where those aboard are trying to prevent it from sinking, while people who are desperate to avoid drowning appear all around the boat and try to jump in. The fate of such a boat and all of those aboard is sadly predictable.
The European Union (EU) and the US cannot remain observers to this externally-inflicted Greek drama. Steps that must be taken immediately include:
1) Efforts to resolve the conflicts in the Middle East and Africa must intensify. Success will not be achieved if lessons from past mistakes are not heeded. The words “dictator” and dictatorship” do not sound good to our “democratic ears”, but if one has to choose between favoring on one hand, a dictatorship under which Christians and all Muslims live peacefully side and side, and on the other hand complete chaos and devastation, the choice is obvious.
2) The Dublin Regulation, according to which the Member State through which an asylum seeker first enters the EU is responsible for the care of the refugee who must be returned to the “Member State of Origin” if caught in another European country must be cancelled or modified. Among other serious shortcomings, it places excessive pressure on South Europe, and particularly on Greece and Italy.
Who can honestly say that such a regulation is in accordance with the spirit of fair share of the burden among the EU countries? The Dublin regulation has been criticized by the European Council of Refugees and Exiles, as well as by the UN High Commissioner for Refugees. It is high time for changes to this regulation, which will be beneficial to all concerned.
3) A number of good proposals have been offered by Ms. Federica Mogherini (European Union High Representative for Foreign Affairs and Security Policy) and Mr. Dimitris Avramopoulos, Commissioner for Migration, Home Affairs, and Citizenship. Such are the transfer of Syrian Refugees to Northern Europe and the creation of safe zones within the regions of conflict, where asylum cases and other refugee issues can be resolved.
These proposals must move from the discussion to the implementation phase immediately. Additionally, the US should accept her fair share of these refugees.
The EU and US need to hear the pleas coming from the southern European countries, as well as those of the refugees. The humanitarian catastrophe has reached large scale, with profound and irreversible consequences. Greece is paying a disproportionately high price, although Greece played no role in triggering this catastrophe. The EU and the US have the moral obligation, which is also consistent with their long-term interests, to take the necessary steps to put an end to the suffering of those in war zones, while at the same time preventing Greece’s collapse under the mounting pressure of refugees.
* * *
- Anagnostopoulos Stavros A., Emeritus Professor, University of Patras, Chief Editor (Europe), Earthquakes and Structures GREECE.
- Anastassopoulou Jane, PhD, Privatdozent, Professor, National Technical University of Athens, GREECE
- Andreatos S. Antonios, Prof. of Comp. Engineering, Hellenic Air Force Academy, GREECE.
- Angelides Demos, Ph.D., P.E., Professor Emeritus of Marine Structures, Department of Civil Engineering Aristotle University of Thessaloniki, Thessaloniki 54124, GREECE
- Angelides Chr. Odysseas, DIC, CEng, MIET, Chartered Engineer, CYPRUS
- Argyropoulos, Yiannis, Ph.D., Principal Member of Technical Staff, AT&T Labs, USA.
- Arkas Evangelos Ph.D. Physics & Th.D. CEO. PHOS Solar Technologies Ltd London, UK.
- Aroniadou-Anderjaska, Vassiliki, Ph.D., Research Associate Professor, Maryland, USA.
- Baloglou George, retired SUNY Professor of Mathematics, GREECE .
- Blytas, George C. Ph.D. Physical Chemistry and Chemical Engineering. Research Consultant, Royal Dutch-Shell; President, GCB Separations Technology, Founder and Conductor: The Houston Sinfonietta. Author, The First Victory, Greece in the Second World War, 2009. USA.
- Christakis Christofi, General of Cyprus Army (Ret.), CYPRUS.
- Cefalas Alkiviadis-Constantinos, Director of Research, National Hellenic Research Foundation, Theoretical and Physical Chemistry Institute, GREECE.
- Christou Theodora, PhD in Law from Queen Mary University of London, UK
- Dokos Socrates, PhD, Associate Professor, Graduate School of Biomedical Engineering, University of New South Wales, Sydney, UNSW, 2052, AUSTRALIA
- Economidis Alexandros, Engineer, GREECE.
- Eleftheriades George Savva, OAM, GCSCG, CETr, JP, Retired Academician, Australia.
- Eleftheriadou Eugenia, CLETr, CSH, Retired Academician, AUSTRALIA.
- Eleftheriou Panicos, Bank customer service officer, GREECE
- Euthymiou Pavlos N., Emeritus Professor, Aristotle University of Thessaloniki, GREECE
- Evangeliou, Christos C., Professor of Philosophy, Towson University, Maryland, USA.
- Foutsitzis George, PhD. Ecole Superieure Robert De Sorbon, FRANCE.
- Fytrolakis Nikolaos, Emeritus Professor, National Technical University of Athens, GREECE.
- Gatzoulis, Nina, Professor, University of New Hampshire, USA.
- Georgiadis Georgios, Maj. General (Ret.), GREECE.
- Georgiadis Sotirios, Admiral (Ret.), GREECE.
- Giannoukos Stamatios, Ph.D., University of Liverpool, UK.
- Gryspolakis Joachim, Professor Emeritus, Technical University of Crete, 73100 Chania, GREECE.
- Ioannides Panos, Lawyer-Industrialist, Nicosia, CYPRUS.
- Ioannou Petros, Professor, Electrical Engineering Systems, University of Southern California, Director Center for Advanced Transportation Technologies, Associate Director for Research METRANS, Director of Financial Engineering Masters Program, Los Angeles, CA, USA
- Kakouli-Duarte, Thomais, PhD., Lecturer, Institute of Technology Carlow, Past President Hellenic Community of Ireland, Trustee Greek Orthodox Church of the Annunciation in Dublin, Patron and Director at Phoenix Project Ireland, IRELAND.
- Kaloy, Dr. Nicolas, Ph.D.(Philosophy), Geneva, SWITZERLAND.
- Katsifarakis Kostas, Professor, Department of Civil Engineering, Aristotle University of Thessaloniki, GREECE.
- Kostas/ Konstantatos Demosthenes Ph.D,MSc, MBA, Greenwich CT USA
- Kostopoulos K. Dimitra, LLB.,LLM (International Law of the Sea), GREECE.
- Kostopoulos S. Konstantinos, B.A., M.Sc. (Transport Economics), GREECE.
- Koumakis Leonidas, Jurist, Author, GREECE.
- Kyriakou Georgios, Professor, Democritus University of Thrace, GREECE.
- Kyratzopoulos S Vassilios, System Analyst, Voula, Attica, GREECE.
- Lazaridis Anastasios, PhD, Professor Emeritus, Widener University, Chester, PA, USA.
- Magliveras Spyros S., Ph.D., Professor of Mathematics, Florida Atlantic University, and Assoc. Director CCIS.
- Mermigas Lefteris, Pathology SUNYAB, USA.
- Moraitis L. Nicholaos, Ph.D., International relations-Comparative politics. University of california, U.S.A.
- Negreponti-Delivanis, Maria, Former Rector and Professor in the University of Macedonia, President of Delivanis’ Foundation, GREECE.
- Papagiannis Grigorios, Dr. Phil., Associate Professor, Democritus University of Thrace, GREECE.
- Papadopoulos Nikolaos, Th., Ph.D., FEBO Emeritus Professor of Medicine, Aristotle University of Thessaloniki, GREECE.
- Papadopoulos A.P. Tom, Senior Research Scientist and Adjunct Professor, Windsor, Ontario, CANADA
- Papadopoulou Maria, Civil Engineer, Ph.D. Candidate, Author, Director of the Institute for the Preservation of Hellenic Culture, GREECE.
- Papakostas Stefanos, MBA (Univ. of Texas at El Paso), Ex Professor of the American Colleges in Athens, Southeastern College, Deree College, Univ. of Indianapolis, GREECE.
- Pavlos Georgios, Associate Professor, Democritus Technological University of Thrace, GREECE.
- Phufas-Jousma Ellene, Professor, SUNY ERIE, Buffalo NY USA.
- Rigos, Capt. Evangelos, Master Mariner, BBA Pace University of New York, GREECE.
- Salemi Christina, MSc, Mechanical Engineering, GREECE.
- Stampoliadis, Elias, Professor, Technological University of Crete, GREECE.
- Tjimopoulou Fryni, Chemist, University of Athens, GREECE.
- Vallianatos Evaggelos, Ph.D. Scholar and Writer, USA.
- Vamvakousis Georgios, PhD. Engineer, University of Paul Sabatier, FRANCE
- Yannopoulos Panayotis, Professor, Department of Civil Engineering, University of Patras, GREECE.
Amid the 'glorious' earnings last night, Nasdaq is on its own today, surging to higher highs as The Dow and S&P are unch to down. As this exuberance exudes, gold and silver are being smashed lower... which is odd given The ECB's threat to pull Greek financing. Crude prices are also tumbling post-Durable Goods.
Stocks are mixed...
Crude crushed after Durable Goods...
Gold is getting clubbed... on major volume...
Which is odd given hardly any move in The Dollar Index (though note the craziness at 830ET when durable goods hit)..
Oil just jumped north of $58— its high for the year!
So is it time for you to pull the plug on the cheap oil trade? No way Jose. It’s just getting started…
And now you have another chance at double-digit gains trading the cheap oil theme. And don’t worry, if crude gains a few bucks from here it won’t sink this ship.
Look, we ain’t gonna see $100 oil anytime soon. That’s great news for businesses guzzling a lot of fuel. Operating costs are way down, which means higher profits. And higher stock prices. And yes, you can still find plenty of great opportunities to book profits as companies save money on fuel…
In February I highlighted the scorching performance of the Dow Jones Transportation Average. “It’s up a muscular 18% since the October bottom,” I wrote. “Compare that to the Industrials, which are up less than 12%.”
Airlines, freights, truckers and trains all went bananas, rocketing 20% higher in just six weeks…
It was a ridiculous rally. But it needed time to cool off. Airline stocks lost altitude after spikes in December and January. Railroads got derailed along the way because many make money transporting oil, which fell off dramatically.
As Ritholtz Wealth Management’s Michael Batnick explains, “I think it’s quite possible that the Transports pulled forward some returns, the old ‘too far too fast.’”
Exactly. Transports got ahead of themselves. Too far too fast.
That naturally made traders nervous. After all, transports sagged as the Dow Industrials were getting their act together earlier this year. But while everyone was looking elsewhere for trading opportunities the transports were setting up again. Just look at the extreme right side of the chart.
After going nowhere for the better part of the first quarter transports are on the move again.
You already were able to nail the perfect transportation trade this past winter: trucking.
Trucking stocks were King of the Transports. And your bet on powerhouse JB Hunt Transport Services Inc. (NASDAQ:JBHT) is rolling right now. As of yesterday, you’re up almost 8% on this trade.
And now the railroads are getting in on the action. These stocks couldn’t get out of the station this winter. But now they’re getting ready to roll…
Tamah Clark apparently wasn’t ready to accept her husband Jason Clark’s incarceration on aggravated assault and domestic battery charges, so she did what anyone would do when aggrieved by the US justice system: she loaded up her AK-47 assault rifle and .45 caliber pistol, procured some wilderness survival gear, strapped the couple’s one year old son into his car seat, and went to break her husband out of prison. Or at least that’s how the story goes.
Although phone records reportedly indicate that Tamah did indeed conspire to stage a prison break with Jason, she was apparently never convicted and would later move to sue the state of Georgia for $10 billion (which, if awarded, would have made Clark the seventh richest woman in America). Surprisingly, that suit was dismissed last month — and Tamah is not happy.
In what can only be described as perhaps the most epic court document ever filed, the Pensacola native — on behalf of herself “Jason Clark and ‘Baby’ Clark” — proceeds to explain why she believes Judge William B. Hunt erred in his ruling. The title is “To F*ck This Court And Everything It Stands For,” and although most will invariably and quite understandably focus on the innumerable profanity-laden quotables (some of which are featured below), the peculiar thing about the document is that attached to it is a 13-page manifesto entitled “Why Most Americans Do Not Inherently Owe Federal Income Taxes” which not only includes a dedication, a lengthy copyright notice, a preface, and a “legal notice to US officials”, but also reads like it was written by an 18th century statesman.
Without further ado, here are some highlights, and the full document is embedded below.
* * *
From “To F*ck This Court And Everything It Stands For”:
“That's right-I had a cocked and fully loaded AK-47 assault rifle, as well as a .45 caliber pistol. What's your point? And NO, I was never convicted of anything. But you know what? They can go right ahead and try to convict me ifthey want to-I don't give a d*mn. This whole system is a joke.”
“All that the people need is a proper education, free of propaganda and lies - and I'm working on that. See Attachment A, entitled "Why Most Americans Do Not Inherently Owe Federal Income Taxes". Let me know ifyou want to write the introduction to my next publication-there are many more to come.”
“It took me about I month to study the history of the world and to learn the history and inner workings of American jurisprudence, literally. I was born to do this here. Don't you know that your FBI and CIA have been trying to recruit me since grade school? Lol. But they're unscrupulous losers like you, so it won't be happening.”
“Well, just in case you haven't noticed-I couldn't give two f*cks about you or what you have to say. F*ck you, old man. You're a joke. Your court's a joke. You suck nuts.”
“Answer me this, genius: if the original states were in existence before the federal government-with their own constitutional provisions for protecting their citizens' unalienable human rights- then why would state citizens need to claim protection for those rights under the federal constitution? They don't. That makes no sense. At all.”
And from “Why Most Americans Do Not Inherently Owe Federal Income Taxes”:
From the 14th Amendment (and onward), having been given a legal definition by the same, when used in the U.S. Constitution, the term "citizen of the United States" specifically refers to the second class of citizenship created thereby. But due to deception on the part ofthe U.S. Federal Government and ignorance on the part of the American People, the latter, by general consensus, now accepts the unconstitutional application of said amendment upon itself.
As a result, the general population is now regarded and treated as a federal citizenry; and state citizens, within the meaning of the original Constitution, do not presently exist. Amendments to the Federal Constitution following the 14th have been directed at citizens o f the United States. The 14th Amendment marked the beginning o f the end of the constitutional U.S. Republic and the beginning of what has, overtime, through neglect ofcivic duty, become an unconstitutional U.S. Democracy.
In revisiting the 16th Article of Amendment, it now becomes apparent that it does not inherently apply to citizens of one of the United States (e.g. constitutionally-recognized state citizens); as it neither repealed nor superseded the organic Constitution’s limitations on congressional taxation authority.
Bloomberg's Richard Breslow, author of "Trader's Notes" is painfully accurate with his latest take on the "markets."
I’m Not Crazy, I’m Scared
The SPX flirted with all-time highs. The Nasdaq Index made 15 year highs; Chinese equities, and so many other equity indices are flying. Bonds sold off this week, but the German 10-year yield is still ~17bps, the U.S. 10-year yield unable to get beyond 2%, and Greek bonds had a two-day rally that would be truly impressive if it wasn’t on volume that made it just an exercise moving wide bid/offer spreads, representing sentiment not trading.
The USD is selling off on the view that Greece is saved, the Fed is scared, and a “we can’t sit with positions because it never works” mentality. The only really new thing the market needs to digest is that commodities may be nearing a bottom
Happy days seemingly, but there have been some very discordant and troubling comments from the creme de la creme of smart - and big - investors.
Over the last three days, we have reported that some of the most important investment voices in the world are more than a little scared about the ravenous appetite for risk playing out in the market, and the fact that they have been ignored is beyond unnerving. Central banks are driving all investment decisions, and what this implies is that they are in this trade so deeply that there is no obvious or practical exit.
Over the course of this week we have heard Larry Fink of Blackrock talking about the severe risks of investing in Europe; Bill Gross of Janus saying German bonds are the short trader’s dream; Pimco warning that markets have not addressed the potential of a Fed tightening (I remember 1994); the incoming CEO of Allianz, that TWO trillion dollar asset manager, saying, “We see generally meager growth prospects, political dangers and risks of a stock market crash.” Even Abby Cohen thinks it is a stock pickers world, not a buy anything and kick back world. And yet, the market didn’t even blink.
What is different this time?
Central Banks and their sovereign wealth funds have become the major players dominating market activity. One central banker after another has admitted they are fixated on market reaction to their comments and actions. They are relying on markets blessing their actions even though it was market dysfunction (and regulatory malfeasance) that brought us here. This is a dangerous situation. The focus must return to the REAL economy; we cannot trade our way out of past mistakes.
And we must look at commodities. One thing central bankers do, because forward curves drive all their forecasts, is extrapolate ad infinitum current trends into the future. No central bank in the world got oil right, and that is arguably the most important commodity in the world. Well, oil has made new YTD highs. Why do you think TIPs auctions have been blowing off the shelves? If central bankers have this wrong, their forecasts are wrong, and the Fed, for one, will be way behind the curve. I posit that a lot of central bankers will be tacking right if Brent holds above $63.
So the big question to ponder is why all these very smart people who control trillions of dollars of assets don’t seem to be voting with their money. If the biggest fund managers and thought leaders of the world were radically changing their asset allocations, wouldn’t we see it? Not if central banks are all on the other side of the trade. Maybe they think they can just hold to maturity. A wise central banker told me I should learn to live with central banks being the dominant force in the market, whether I like it or not. I, unhappily, think he is right. Oh, how I wish Louis Rukeyser could get them on his couch.
The recent unprecedented surge in oil imports has again prompted a review of things here. In a prior story, we wrote that the lack of capacity to process light sweet crude at refineries produced via shale plays could be playing a role in the stock build. As mentioned previously, refineries over the next 24 months are expected to add 700,000 B/D in capacity to handle this type of crude. In the meantime, we have noticed an unusual amount of crude being imported, possibly as a result of this imbalance in refinery capacity. Or could it be that a more sinister plot is afoot?
To quantify the scale of the issue, we turn to Cornerstone Analytics’ work in uncovering the magnitude of the impact of imports on the rise in oil inventory stocks. We haven’t seen this level of import imbalance period since 2013, as the chart below demonstrates via Cornerstone. In the past 6 months, the level of imports relative to the requirement or need by refineries has jumped not once but twice. The 1M B/D “gap” goes a long way in explaining the oil inventory stock build which has been 5MB-10MB per week.
If adjusted, the builds over the past 6 months without such imports would not exist at all or at the very least be greatly reduced. So is this occurring as part of the inability of refineries to handle the mix of output domestically or is this part of some plot to build inventories to crash the prices of oil? Quite frankly we can’t say for sure but anomalies such as this must be exposed so that they can be debated given that there has been ample debate on Saudi motivations for holding down oil prices and the ongoing media cheerleading on lower oil prices.
Regardless, it is very clear that the source of the inventory build is not tied to US production but tied to actual imports, whatever the reason. Further investigation into this should be pursued and only the refineries themselves have the real answer. What is clear is that the level of imports will normalize and, when combined with lower US production, the oil imbalance seems very likely to correct in the near future.
All the comparisons to 2000 seemed a little far-fetched.........until today.
Before the opening bell, I was looking at my iPad from the comfort of my bed, and I took a few screen shots for posterity.
First, the fact that a brokerage's highly-elevated new price target was already exceeded before the market even opened for the day........
The fact that, pathetically, even ZeroHedge has started promoting equity bullishness:
And the real kicker, straight out of early 2000, a call for the NASDAQ to double again......in a year.........just because..........big, round numbers.
Dear German tourists: please be wary of blowback in Athens today, following the Troika, pardon Institutions' comments saying they are being "pushed toward hostility on Greece."
Having missed expectations for 5 of the last 7 months, Durable Goods New Orders jumped 4% MoM in March - the biggest jump since the July Boeing aberration all driven by a 112% surge in defense Aircraft new orders. Not surprisingly the Department of Commerce tried to pull this trick off in late 2007 in a last gasp desperate attempt to mask the arrival of the US recession then.
Durable Goods New Orders (ex-Transports) fell 0.2% MoM (missing expectations of a 0.3% rise) for the biggest YoY drop since 2012, some -1/9%, and under the covers it is ugly - Capital Goods New Orders non-defense, ex-aircraft have now fallen for 7 straight months, missing expectatons dramatically (-0.5% vs +0.3% exp.). These numbers have never fallen for this long a period without a recession.
Durable Goods New Orders Ex-Transports... never fallen for this long witghout a recession...
and Capitakl Goods New Orders Ex Defense/Aircraft dropped yet another month...
Meanwhile, one can now add core durable goods to factory orders, wholesale sales, export growth, credit rejection and control retail sales as declining year over year.
... oh, and core capital goods orders as well.
- UK economy a ’timebomb' and will explode after election
- Telegraph warns of "Lehman moment" stemming from possible election chaos
- Currency traders view pound as being particularly vulnerable
- Latest data shows UK poised to slip into deflation for the first time since 1960
- Polls place Labour and Tories neck and neck as election looms
- Hung parliament may force either side to enter coalition with potentially disliked partners
- Outright majority for either side would also lead to further uncertainty
- Political uncertainty may impact sterling and UK assets
- UK has massive debt and vulnerable to Eurozone debt crisis
With the British general election due in just under two weeks on May 7, concerns are growing about the outlook for the UK pound after the election and the long term outlook of the UK economy due to the extremely high levels of debt - particularly in the private sector in the UK.
UK debt has continued to rise throughout the recovery and has soared to an eye-watering £1.48 trillion. In recent days, a slew of foreign exchange analysts have warned that the pound is vulnerable to falling in value.
London's Telegraph warned last week that election ‘chaos’ could lead to a "Lehman moment" for the pound. The pound has been in steady decline since July apparently due to traders pricing in uncertainty around the election. It is currently trading at $1.51, down from $1.71 in July.
The incumbent government have not reined in public and trade deficits and have been accused of juicing the property market and the economy to postpone a crisis until after the election. Indeed, the Guardian reports that the current account deficit "was the widest for more than 60 years in 2014".
This is under a Tory government. The deficits would likely have been worse under a Labour or coalition government.
To compound the problem, data for February and March show that the UK is on the verge of deflation for the first time in over 25 years.
There was 0% inflation in both months. It was expected that data for March would show negative growth. In the event, the data was neutral which led to what is likely to be a temporary bounce for the pound.
The Telegraph quoted Forex.com analyst Kathleen Brooks as saying “If you got a big shock, say -0.3pc, I think that would be when the panic stations would ring and then we’ll get into a real parabolic phase when you just see the pound drop like a stone.”
Gold’s hedging properties would then come into their own and this would be bullish for gold in pound terms, after a period of consolidation around the £800 per ounce level in recent months.
Election polls variously place both Labour and the Tories in the lead by a narrow margin. It looks likely that the UK is facing a hung parliament in May.
Under the British system only the party who gain 325 seats out of a total of 650 can form a government. Latest polls show that both the major parties are far short of the necessary majority.
A YouGov poll suggests both parties will have less than 290 seats and so concessions will have to be made with smaller parties to entice them into a coalition.
The same poll sees the Lib Dems gaining 53 seats which places them in the strongest position. Nick Clegg has indicated that he would enter into coalition with either major party and act as a buffer to protect against the excesses of either side.
In terms of seats the Scottish National Party are polling at 6 but at this point neither the Tories nor Labour appear willing to enter coalition with them with Cameron suggesting that the SNP would blackmail Labour if it formed a minority government with the SNP.
UKIP are polling well in terms of percentages although how it will translate into seats remains unclear. The YouGov poll sees UKIP with 13% of the vote. The two leading parties have around 35% while the LibDems score just 7%.
So UKIP are increasingly a force to be reckoned with. However, given that their policies are diametrically opposed to those of Labour and following a stream of defections from the Tories - and therefore posing a serious threat to the Conservatives - it seems certain that they will remain an opposition party.
Either way UKIP's mandate is strengthening and the potential for a "Brexit" from the EU is a growing one.
However, much could change in the interim period. In the event of a hung parliament the incumbent Prime Minister will remain in office while negotiations begin between the various power brokers.
As London's Independent explains,
"There is only one clear rule for forming a government in the hung Parliament, and even that is a loose one: the politician who can tell the Queen that he has a workable majority in the House of Commons is the one the Queen will authorise to form a government."
Time will tell how it all unfolds. In the mean time the uncertainty stemming from a hung-parliament and a potential minority government is likely to affect confidence in the pound and UK assets as investors defer making decisions until Britain's status within the EU, Scotland's status within the UK and the fiscal policies of the next government are clarified.
Ironically, an outright majority for either side would also cause uncertainty for the pound.
The pall of uncertainty that would hang over a Tory government as the country awaits the "Brexit" referendum could gravely undermine the pound. Miliband's more traditional Labour party is likely to exacerbate budget and current account deficits.
Albert Edwards, head of global strategy at investment bank Société Générale has warned that the current coalition government has left a legacy of “grotesquely wide deficits” in both the public sector finances and on the UK’s current account – its overall trading position with the rest of the world.
He says that the Lib Dem Tory coalition has left the UK economy ‘up to its eyeballs in macro manure’ by failing to cut deficit, sterling will suffer and that the UK economy is a “ticking timebomb”.
Given the fragile nature of the London property market, the UK economy and uncertainty regarding a Grexit and new Eurozone debt crisis, such high levels of uncertainty could not come at a worse time.
Given the interlinked nature of so many financial institutions a "Lehman moment" for the pound and the UK could lead to widespread contagion and quickly morph into a Lehman moment for the world.
When this is viewed in the context of the widespread risks to the financial system globally, it would be prudent for UK investors and investors globally to have an allocation to physical gold to hedge against these risks.
Breaking Gold News and Research Here
Today’s AM LBMA Gold Price was USD 1,192.15, EUR 1,097.49 and GBP 788.04 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,187.75, EUR 1,107.92 and GBP 792.31per ounce.
Gold climbed 0.67 percent or $7.90 and closed at $1,194.70 an ounce yesterday, while silver rose 0.63 percent or $0.10 closing at $15.89 an ounce.
Spot gold in Singapore was $1,194.35 an ounce near the end of day trading and fell slightly more in European trading.
Gold looks set for its third weekly drop in spite of more mixed U.S. economic data. The weekly losses have been very marginal but this is bearish technically. Gold's likely third lower weekly close and the poor technicals mean that gold looks likely to succumb to further weakness in the short term.
Gold is also marginally lower in euros and pounds this week. The short term trend is lower and momentum is a powerful thing.
The same is the case with silver which is heading for 2.6 per cent loss for the week. Contrarian investors see silver as great value below $16 per ounce and are buying the dip. We continue to see flows into silver while gold has seen mixed flows with some buying this week but nearly as much liquidations as some gold owners throw in the towel.
U.S. weekly unemployment claims rose more than expected to 295,000 in April, against an estimate of 288,000. U.S. new home sales for March were lower than the previous month at 481,000 below the forecast of 514,000 and 11.4 percent less than last month.
Potential ‘Grexit’ is still weighing on the markets and things appear to be getting worse between Greece and its creditors.
Greek Finance Minister Yanis Varoufakis was heavily criticised by his euro-area colleagues today amid mounting frustration at what they say is his refusal to deliver measures to fix his country’s economy and release financial aid, “three people familiar with the talks” told Bloomberg.
Greece offered further concessions today on reforms demanded by international lenders in return for new funding before Athens runs out of money, but euro zone creditors said negotiations needed to speed up to get a deal done by June.
German Chancellor Angela Merkel commented yesterday that everything must be done to prevent Greece running out of money before it reaches a cash-for-reform deal with its international creditors, amid heightened concern that Greece is nearing the brink.
The Greek Prime Minister told Merkel that Greece has already done everything it can for the euro and eurozone and it was time for the eurozone partners to help Greece.
Investors have the U.S. Federal Open Market Committee meeting next week to try and gain more clues on the Fed’s much vaunted first interest rate hike in nearly ten years. Even a small interest rate will likely badly impact frothy risk assets such as bonds and stocks.
Gold could also be vulnerable in the short term but would benefit from renewed weakness in paper assets.
Chinese premiums are still above the global benchmark by $2. Although weaker than the prior session they show that Chinese demand remains robust. Sales from Akshaya Tritiya festival in India saw a 15 percent increase over the holiday.
Indian demand continues and looks set to be near the 1,000 metric tonnes again this year.
For now, markets are ignoring considerable geopolitical risk emanating from the Middle East and from tensions between the U.S. and Russia.
The Russian Defense Ministry said overnight that U.S. specialist troops were training Ukrainian forces in the conflict zone in eastern Ukraine. The Pentagon denied it, accusing Moscow of a "ridiculous attempt" to obscure its own activity in the region.
Interfax quoted Russian Defense Ministry spokesman Major General Igor Konashenkov as saying U.S. troops were training Ukrainian forces not only in western Ukraine "as Ukrainian TV channels show, but directly in the combat zone in the area of Mariupol, Severodonetsk, Artyomovsk and Volnovakha.”
This would appear to be an escalation and may result in deepening tensions and an intensification of the conflict.
In London in late morning trading gold for immediate delivery is at $1,191.64 an ounce or off 0.18%. Silver is down 0.16 percent at $15.86 and platinum is also down in U.S. dollars at $1,131.46 an ounce.
Download: 7 KEY GOLD STORAGE MUST HAVES
By Mark O'Byrne
By Michael Lewis, originally posted in Bloomberg
The first question that arises from the Commodity Futures Trading Commission’s case against Navinder Singh Sarao is: Why did it take them five years to bring it?
A guy living with his parents next to London's Heathrow Airport enters a lot of big, phony orders to sell U.S. stock market futures; the market promptly collapses on May 6, 2010; it takes five years for the army of U.S. financial regulators to work out that there might be some connection between the two events. It makes no sense.
A bunch of news reports have suggested that the CFTC didn’t have the information available to it to make the case. After the flash crash, the commission focused exclusively on trades that had occurred that day, rather than orders designed not to trade -- at least until some mysterious whistle-blower came forward to explain how the futures market actually worked. But this can’t be true.
Immediately after the flash crash, Eric Hunsader, founder of the Chicago-based market data company Nanex, which has access to all stock and futures market orders, detected lots of socially dubious trading activity that May day: high-frequency trading firms sending 5,000 quotes per second in a single stock without ever intending to trade that stock, for instance. On June 18, 2010, Nanex published a report of its findings.
The following Wednesday, June 23, the website Zero Hedge posted the Nanex report. Two days later the CFTC’s chief economist, Andrei Kirilenko, e-mailed Hunsader. “He invited me out to D.C. and I talked with everyone there (and I mean everyone -- including a commissioner),” Hunsader says. “The CFTC then flew out a programmer to our offices where we showed him how to work with our data. Took all of a day. We sent him back with our flash crash data, and that was pretty much the last we heard about that project.”
In October 2010, Hunsader was still poring over data from the flash crash. “Between October 7 and October 14, I noticed Sarao’s spoofing,” he says. Hunsader assumed it to be the work of an algorithm of some large high-frequency trading firm -- as this sort of deception had become common practice for big HFT firms. He told the CFTC about it in a phone call -- but that they hadn’t discovered it already for themselves surprised him.
“It’s important to know the CFTC had our data, and the ability to use it in August 2010,” Hunsader says. “We were focused on stocks (the CFTC does futures), so they should have seen it right away.”
Which raises another obvious question: If you are going to sit on this information for five years, why not sit on it forever? The people at the CFTC who decided to come forth, five years after the fact, with this new and improved explanation for the flash crash, must have known they would be creating a controversy with themselves at the center of it. It’s actually sort of brave of them.
They’ve been ridiculed in the news media and will no doubt soon be hauled before various congressional committees. They’ll have annoyed their colleagues at the Securities and Exchange Commission, who now look like even greater fools than they did before, for not bothering to mention in their report on the crash the various nefarious activities of algorithmic traders, and instead offering up as the primary cause of the crash a stupid mistake made by a money manager in Kansas. The authors of the SEC report either consciously ignored or did not bother to acquire from the CFTC a lot of accessible, and damning, information about what was happening in the U.S. stock markets the day of the flash crash. The world will now want to know why they did this. (And why we should not instantly listen to Paul Volcker and fold these two regulators into one.)
But it’s unfair to dwell too long on the regulators. Financial regulators, like editorial writers, are at best the markets’ last line of defense; they are less inclined to join any battle than they are to wander in afterward and shoot the wounded.
Traders who seek to manipulate the U.S. stock market are meant to encounter resistance from the market itself. During the flash crash, Navinder Sarao apparently used Jon Corzine’s now defunct MF Global to place orders and clear trades. Why didn’t MF Global see what he was up to, or at least call him to ask him about it? There’s now a big business on Wall Street of firms renting out their HFT infrastructure to prop shops. Does that business depend on the brokers paying no attention to what their customers are doing? Do the big Wall Street firms that rent out their technology bear any responsibility for what their customers do with the weapons they've been given? For that matter, why don’t U.S. securities exchanges assume any responsibility for what happens on them?
Sarao’s manipulative orders were placed on the Chicago Mercantile Exchange. Why didn’t the CME notice what was going on? Or did they notice, and simply not care, as the behavior was standard practice for their high-frequency trading clients?
Then there is the biggest question of all: How can a guy working from his parents’ house in suburban England whose only actionable orders were to BUY stock market futures cause such a sensational collapse in U.S. stocks? On the day of the flash crash, Sarao never actually sold stocks. He was trying to trick the market into falling so that he could buy in more cheaply. But whom did he fool with his trick? Whose algorithms were so easily gamed that they responded to phony sell orders by creating a crash? Stupidity isn’t a crime. Still, it would be interesting to know who, at this particular poker table, on this particular day, was the fool.
It would also be interesting to know how it occurred to Sarao that his trick might work. There’s a fabulous yet-to-be-told story here, about a smart kid in the U.K. who somehow figures out that the machines that execute the stock market trades of others might be gamed -- and so he games them. One day while he is busy trying to trick the U.S. stock market into falling, the market collapses, more sensationally than it has ever collapsed. And instead of digging some hole in Hounslow in which he might hide for a decade or so, or fleeing to Anguilla, where he has squirreled away his profits, he stays in his parents’ home and keeps right on spoofing the U.S. stock market -- and then is shocked when people turn up to accuse him of wrongdoing. He’s not some kind of exception to the standard operating procedure in finance. He’s a parody of it.
- Obama’s Drone-Strike Rules to Be Reviewed (WSJ)
- Hostage locations difficult to track - and may be getting harder (Reuters)
- Varoufakis Said to Take Hammering From Riled EU Ministers (BBG)
- EU Frustration Mounts as Greeks Try to Bypass Aid Process (BBG)
- Kleiner Perkins seeks almost $1 million in costs in Pao case (Reuters)
- Google Misses, Caps Costs as Growth Slows (WSJ)... stock surges
- Oil prices trade near 2015 highs on Yemen worries (Reuters)
- Pentagon Announces New Strategy for Cyberwarfare (NYT)
- Bloomberg Oil at $65 Seen Freeing 500,000 Barrels From Shale Fracklog (BBG)
- ‘Flash Crash’ Trader Navinder Sarao: It Was Wits, Not Bits (WSJ)
- HSBC Reviews Moving Headquarters From London on Regulation (BBG)
- Migrant influx strains Greece as economy suffers (Reuters)
- Putin’s Miracle Dissolves as Russian Middle Class Faces Crunch (BBG)
- Low-key launch as Apple Watch finally goes on sale (Reuters)
- Germany Recognizes Armenian Killings in 1915 as Genocide (BBG)
- Xerox revenue dips as printer sales fall (BBG)
- Minnesota declares state of emergency over bird flu in poultry (Reuters)
- U.S. Bird Flu Scourge Means Months of Dead Turkey Cleanup (BBG)
Overnight Media Digest
* Comcast Corp's soon-to-be abandoned plan to acquire Time Warner Cable Inc ran up against the challenge of overcoming scrutiny by two federal agencies, including a Justice Department review that was more skeptical. (http://on.wsj.com/1GdqekE)
* Tough new environmental rules and cheap energy prices are heightening the battle between coal miners and natural-gas pumpers over which fuel will dominate the U.S. power market.(http://on.wsj.com/1GdqPCH)
* Cablevision Systems Corp is pitching new packages aimed at cord-cutters that combine broadband service with a free digital antenna to pick up local television signals.(http://on.wsj.com/1Gdr0xO)
* The European Union could create a powerful new regulator to oversee a swath of mainly U.S.-based Internet companies, according to an internal document that lays bare the deep concerns in top EU policy circles around the economic threat posed by companies such as Google Inc and Facebook Inc .(http://on.wsj.com/1GdrEM3)
* New concerns have been raised in the wake of revelations that restrictions President Barack Obama imposed two years ago on the drone program failed to prevent the deaths of hostages.(http://on.wsj.com/1Gdsx7a)
Business leaders have become frustrated at the tactics and tone of the Conservative election campaign. Twenty FTSE 100 and other business leaders told the FT that they are anxious that despite presiding over an economic recovery, David Cameron has not opened a lead over Labour.
David Cameron and Angela Merkel led pledges to send more ships to deal with a Mediterranean refugee crisis in a move that marked a sharp policy about-turn for both the UK and Germany.
International sales at US blue-chips are being hit by the strong dollar and the emerging markets slowdown, despite the companies enjoying a recovery at home.
Deutsche Bank paid a record $2.5 billion to authorities in the U.S. and UK to settle allegations that it manipulated the Libor benchmark rate. The bank was also ordered to dismiss seven employees, while a London subsidiary, DB Group Services, is pleading guilty to U.S. criminal wire fraud charges.
Comcast has pulled its $45 billion bid for Time Warner Cable after failing to convince regulators that a deal that would have transformed the US media and internet landscape was in the public interest.
The Nasdaq Composite closed in record territory on Thursday, completing a 15-year recovery from one of the most spectacular equity market busts experienced by investors.
* Facing intense regulatory scrutiny, Comcast Corp is planning to abandon its $45 billion takeover of Time Warner Cable Inc, people briefed on the matter said on Thursday, ending a bid that would have united the country's two largest cable operators and reshaped the rapidly evolving video and broadband markets. (http://nyti.ms/1GbLdEu)
* The Pentagon on Thursday took a major step designed to instill a measure of fear in potential cyberadversaries, releasing a new strategy that for the first time explicitly discusses the circumstances under which cyberweapons could be used against an attacker, and naming the countries it says present the greatest threat: China, Russia, Iran and North Korea. (http://nyti.ms/1aWSIGA)
* Chinese antitrust regulators on Thursday fined Daimler AG's Mercedes-Benz 350 million yuan ($56.49 million), accusing the company of fixing prices on luxury cars and some spare parts. The penalty is just the latest for a foreign carmaker in China, the world's largest auto market. (http://nyti.ms/1JA8eUq)
* Venture capital firm Kleiner Perkins Caufield & Byers is offering a new deal to the former associate who unsuccessfully sued the firm, accusing it of gender discrimination: Promise not to pursue this case any further or pay us $1 million. (http://nyti.ms/1DiqegU)
* The family office for the Google Inc chairman Eric E. Schmidt has purchased a large stake in the $36 billion hedge fund, D. E. Shaw. (http://nyti.ms/1yVifeH)
* Deutsche Bank agreed to pay $2.5 billion in penalties, a record settlement for the interest rate cases, which have already stung the likes of Barclays Plc and UBS Group AG. Deutsche Bank also agreed to accept a criminal guilty plea for the British subsidiary at the center of the case (http://nyti.ms/1HyqSNH)v
SOUTH CHINA MORNING POST
- A financial tech start-up based in Hong Kong will soon launch a hedge fund in the US managed by artificial intelligence. Ben Goertzel, co-founder and chief scientist of the venture, called Aidyia, said there will be millions of US dollars in the fund when it starts trading in US equities in June. (bit.ly/1d6FCbv)
- Barry Cheung Chun-yuen, the former executive councillor and chairman of the now-defunct Hong Kong Mercantile Exchange, was sentenced to six weeks in jail - after being slammed by a magistrate for his "lack of priority" in paying a former employee. He had earlier pleaded guilty to failing to pay wages to a member of his staff. However, Cheung was allowed to remain free on bail pending an appeal against the sentence.(bit.ly/1PreSAb)
- The student body that took a leading role in the Occupy Central movement last year is facing a crisis as a third member university disaffiliates from it. The future of the Federation of Students was a "worry", secretary general Nathan Law said ahead of the results of Baptist University's student vote, which decided late on Thursday to pull the students' union out of the body. (bit.ly/1d6Hj8O)
- Hong Kong's booming stock market might have attracted mainland money, some of which might have flowed in through illegal channels, said JPMorgan Asset Management market strategist Grace Tam Wai-man. Much of the funds came from overseas like the United States or Europe and this trend will continue, Tam said. (bit.ly/1bmRXHh)
- HTC chairwoman Cher Wang Hsiueh-hong has resigned as non-executive director of Television Broadcasts and will be succeeded by Gravity Corp executive Thomas Hui To. Taiwanese tycoon Cher Wang is among the investors of Young Lion, which bought a 26 percent stake in TVB in 2011. (bit.ly/1PrhIoW)
- The Hospital Authority will raise its retirement age to 65 from 60 for new recruits from June 1. The move mirrors plans for civil servants. But unlike the government, the authority has not raised the retirement age for existing staff. The authority has about 70,000 staff, and is the second biggest employer after the Hong Kong government. (bit.ly/1I1yxok)
HONG KONG ECONOMIC JOURNAL
- Turnover of warrants linked to Hong Kong Exchanges and Clearing surpassed the turnover of the actual company shares for two consecutive days, the first time since 2007. The warrant turnover amounted to HK$8.4 billion ($1.08 billion) on Thursday, much higher than HK$6.8 billion turnover of the company shares.
* Deutsche hit with record Libor fine
Deutsche Bank has been ordered to dismiss six managers in London after pleading guilty to fraud and being fined a record $2.5 billion for rigging benchmark interest rates while lying to regulators. (http://thetim.es/1FiaZdT)
* Sainsbury's bids goodnight to 800 jobs
In the latest indication of the financial toll being exacted on food retailers by a grocery price war, J Sainsbury Plc is making cutbacks that include the abolition of the roles of "deputy manager" and certain departmental heads in its supermarkets. (http://thetim.es/1bz3cx4)
* Barclay brothers sell stake in three luxury London hotels
The Barclay brothers have abandoned their four-year battle to seize control of three of London's most prestigious five-star hotels, including Claridges, selling out to a business controlled by Qatari sovereign funds. (http://bit.ly/1OiRwQh)
* Alexis Tsipras seeks interim deal for Greece in talks with Angela Merkel
Greece's increasingly desperate financial state was highlighted on Thursday when the country's prime minister, Alexis Tsipras, urged the German chancellor, Angela Merkel, to use her influence to speed up deadlocked negotiations over a new aid package. (http://bit.ly/1JijjwK)
* U.S. alarmed by Greek energy alliance with Russia
The U.S. is scrambling to head off a Greek pipeline deal with Russia, fearing a disastrous change in the strategic balance of the Eastern Mediterranean as Greece's radical-Left government drifts into the Kremlin's orbit. (http://bit.ly/1DFB4Ow)
* McFarlane vows change at Barclays as he is urged to 'bring chainsaw'
Barclays Plc new chairman has vowed to speed up the bank's restructuring on his first day in the job, raising the prospect of bold moves to placate shareholders. John McFarlane, who officially replaced Sir David Walker as the bank's chairman at Thursday's annual meeting, promised investors a "dynamic reallocation" of resources that would allow the bank to pursue "a number of growth options".(http://bit.ly/1FidQ6T)
* AstraZeneca braced for investor pay protest
AstraZeneca Plc is braced for dissent from leading investors over executive pay almost a year after it saw off a 69 billion pounds takeover bid from Pfizer. The FTSE-100 drugs giant will be the subject of a modest shareholder revolt at its annual meeting on Friday. (http://bit.ly/1OM5vZK)
* Ideal Shopping Direct owner crafts 200 mln pounds sale
One of the UK's biggest home shopping groups has been put up for sale for more than 200 million pounds ($301.02 million) , four years after being taken private for less than half that sum. (http://bit.ly/1aVzmld)
Futures Fizzle After Greece "Hammered" In Riga, Varoufakis Accused Of Being "A Time-Waster, Gambler, Amateur"
Even though no rational person expected that the Greek situation would be resolved at today's talks in Riga, Latvia, apparently the algos were so caught up in spoofing each other to new record highs that futures, after surging once more overnight following the latest Google miss which sent the company and the Nasdaq soaring, actually dipped modestly into the red following headlines that the latest Greek talks have broken down after a "hostile" Troika "hammered" the Greek finmin, who was accused by European finmins of "being a time-waster, a gambler and an amateur."
It appears Europe is not a fan of game theory.
Bloomberg has the best summary of the latest Greek "negotiation" farce, all of which at this point serves only to kick the can not by months but by weeks until Greece runs out of confiscated money and is forced to either fold completely to Troika demands, leading to new elections or a referendum or conclude its pivot to Russia, setting off the next phase of the second cold war:
Greek Finance Minister Yanis Varoufakis was heavily criticized by his euro-area colleagues amid mounting frustration at his refusal to deliver measures to fix his country’s economy and release financial aid, according to three people familiar with the talks.
Euro-area finance chiefs said Varoufakis’s handling of the talks was irresponsible and accused him of being a time-waster, a gambler and an amateur, one of the people said. Another said the Greek complained of the hostile atmosphere in the meeting, as he was criticized from all sides. A Greek official in Riga, Latvia, for the meeting wasn’t able to comment on the talks when reached by phone.
Going into the talks, the 19-nation bloc’s finance ministers voiced their frustration over Greek Prime Minister Alexis Tsipras’s attempt to bypass their veto on financial aid with an appeal to Angela Merkel. “I demand very urgently that we get results on the table,” Austrian Finance Minister Hans Joerg Schelling said before sitting down for talks. “If you follow the media of the past days you hear time and again that ‘Tsipras says’ and ‘Tsipras thinks’, so apparently this has been moved to leaders’ level.”
With Greece running out of money and stalling over commitments to reform, euro-zone finance chiefs said the country’s authorities still haven’t shown sufficient progress on plans to revamp the economy to justify a loan payout.
Tsipras sought to circumvent the finance ministers’ authority less than 24 hours earlier, pleading his case with the German Chancellor and French President Francois Hollande on the sidelines of a summit on immigration in Brussels. Under euro-area procedures, it’s the finance ministers who have to sign off on any aid disbursement and Merkel said last month she’s not prepared to override those controls.
It could have been worse: someone could have literally beaten up VaroufakisL
- SCICLUNA: INSTITUTIONS BEING PUSHED TOWARD HOSTILITY ON GREECE
End result of today's meeting?
- MOSCOVICI SAYS FAR FROM A GLOBAL AGREEMENT ON GREECE
- DIJSSELBLOEM SAYS BIG, BIG PROBLEMS TO BE SOLVED FOR GREECE
- DIJSSELBLOEM SAYS WIDE DIFFERENCES BETWEEN GREECE, CREDITORS
- DIJSSELBLOEM: ASSESS GREECE AGAIN AT REGULAR MAY MEETING
Even the "apolitical" ECB hinted that stories leaked earlier of a surge in the collateral haircut may come true in the coming days:
- DRAGHI: ECB MAY EXAMINE CHANGE IN HAIRCUTS FOR GREEK FUNDING
So with Greece again achieving nothing, and not securing any new funds (aside from the cash it confiscated from its mayors), expect another round of pivoting toward Russia, which will promise much in exchange for the Turkish Stream deal being concluded and assuring that European energy needs are "met" courtesy of Gazprom for the next decade while leaving Ukraine in gas transit limbo.
Expect the brief bout of Greek euphoria which sent Greek banks surging, i.e., Piraeus Bank: +16.6%, AlphaBank: +9.2%, National Bank of Greece: +9.6%, to promptly fizzle following this latest disappointment. The Euro is already feeling the brunt of the algo disappointment, and after surging over 1.08 on another stop hunt just before the Europen open, the EURUSD has pared nearly all its gains.
Elsewhere in Europe, on a stock specific basis, HSBC (+3.2%) has also been in the spotlight with the Co. contemplating whether it should move its headquarters away from the UK, with China a touted possibility. AstraZeneca (-3.1%) announced their earnings pre-market and have traded lower throughout the session as profits were negatively impacted as two of the Co.’s bestselling drug patents are due to expire and competition from generic sales.
Today’s pre market US earnings include: LyondellBasell (LYB), with results expected to show an increase in profits as a consequence of capacity expansion and management comments on potential buybacks and M&A deals; Biogen (BIIB), as investors eye Q1 financials after the drug maker reported positive updates in Alzheimer's and MS and American Airlines (AAL), where focus will fall on PRASM outlook for Q2 to see if the airline will continue to experience improving margins.
In fixed income markets, Bunds (159.02) are underperforming USTs amid the strength in equity markets, while the GR/GE 10yr spread is tighter by around 10bps today ahead of the aforementioned European Finance Minister meeting.
Asian equities mostly rose with Chinese bourses at the forefront, in the wake of further disappointing Chinese data. Chinese HSBC flash Mfg PMI fell tumbled to a 12-month low at 49.2 vs. Exp. 49.6, the 4th consecutive month of contraction. Shanghai Comp (-0.5%) and Hang Seng (-0.2%) traded higher, the latter posting a fresh 7yr high, as the data supports the case for more government easing, before falling from their best levels towards the close to end the session in negative territory. Nikkei 225 (-0.5%) originally rose higher than yesterday’s 15yr peak after finishing yesterday’s session above 20,000 for the first time since Apr’00, before falling in tandem with the Shanghai Comp and Hang Seng prior to the close.
The energy complex sees Brent crude futures outperform their WTI counterparts and trade above the USD 65.00 handle, bolstered by ongoing Saudi strikes in Yemen, with the ongoing conflict inciting fears that supply from the region could be affected. Elsewhere, in the metals complex, copper is the best performer today as May’15 futures contracts broke above their overnight range of USD 2.70, while iron ore is on track to rise for the third consecutive week. UK miners Anglo American (+2.1%) and BHP Billiton (+1.8%) have outperformed on the back of commodity strength, with the latter announcing BHP Billiton announced they are curbing plans to expand.
In Summary: European shares remain higher, though off intraday highs, with the bank and telco sectors outperforming and insurance, media underperforming. German IFO above estimates. HSBC starts review over where to be headquartered. Euro-zone finance ministers meet in Latvia today. Greek finance minister heavily criticized by his euro-area colleagues, according to three people familiar with the talks. The Spanish and Italian markets are the best-performing larger bourses, Swiss the worst. The euro is stronger against the dollar. Japanese 10yr bond yields fall; Portuguese yields decline. Commodities gain, with corn , WTI crude underperforming and nickel outperforming. U.S. durable goods orders, capital goods orders due later.
- S&P 500 futures up 0.1% to 2108.5
- Stoxx 600 up 0.5% to 409.1
- US 10Yr yield little changed at 1.96%
- German 10Yr yield down 0bps to 0.16%
- MSCI Asia Pacific up 0.3% to 155.7
- Gold spot down 0.2% to $1191.6/oz
- Eurostoxx 50 +0.7%, FTSE 100 +0.5%, CAC 40 +0.6%, DAX +0.8%, IBEX +1.4%, FTSEMIB +1.3%, SMI +0.2%
- Asian stocks rise with the ASX outperforming and the Sensex underperforming.
- MSCI Asia Pacific up 0.3% to 155.7; Nikkei 225 down 0.8%, Hang Seng up 0.8%, Kospi down 0.6%, Shanghai Composite down 0.5%, ASX up 1.5%, Sensex down 1.1%
- Euro up 0.28% to $1.0854
- Dollar Index down 0.2% to 97.08
- Italian 10Yr yield up 1bps to 1.41%
- Spanish 10Yr yield little changed at 1.37%
- French 10Yr yield little changed at 0.42%
S&P GSCI Index up 0.2% to 435.9
- Brent Futures up 0.8% to $65.3/bbl, WTI Futures down 0.4% to $57.5/bbl
- LME 3m Copper up 1.2% to $6014/MT
- LME 3m Nickel up 1.7% to $12925/MT
- Wheat futures down 0% to 501.3 USd/bu
Bulletin Headline summary from Bloomberg and RanSquawk
- USD (-0.4%) has been the notable mover of the session so far, with the greenback paring all overnight gains to the benefit of major pairs, despite the USD moving off its worst levels later in the session.
- EUR saw strength this morning after positive German IFO and a relatively conciliatory tone ahead of today’s Eurogroup Finance Minister meeting, however comments heading into the North American crossover have been less optimistic and EUR gains have been capped by the large option at 1.0900 (713mln) set to expire at today’s NY cut
- Looking ahead, today sees US Durable Goods Orders (1330BST/0730CDT), comments from BoC’s Poloz and developments from the European Finance Minister meeting
- Treasuries steady overnight, head for weekly decline; market focus on Fed meeting next week, 2Y/5Y/7Y note auctions.
- Euro-area finance chiefs said Greek FinMin Varoufakis’s handling of talks was irresponsible and accused him of being a time-waster, a gambler and an amateur, according to people familiar
- Another said the Greek complained of the hostile atmosphere in the meeting, as he was criticized from all sides
- Eurogroup head Dijsselbloem says no chance of aid without comprehensive deal; Draghi says ELA will continue as long as Greek banks are solvent
- HSBC Holdings Plc is reviewing whether to move its headquarters out of Britain after more than two decades because of rising tax and regulatory costs
- Germany’s Ifo institute business climate index rose for a sixth month to 108.6 from 107.9 in March. The median estimate was for an increase to 108.4, according to a Bloomberg survey of 36 economists
- BoJ policy makers are likely to forecast that inflation will reach 2% and hold that level for two straight years from the year starting in April 2016, said people familiar with central bank’s discussions’’
- Meiji Yasuda Life, Japan’s third-largest life insurer. plans to boost unhedged foreign bonds by over JPY1t in FY2015, it says in outline of investment for the year started April 1
- A slew of negative stories raised yet more questions over donations to the Clinton Foundation and hefty speaking fees paid to Bill Clinton during his wife’s tenure as secretary of state, a steady rumbling that could prove detrimental to her presidential aspirations
- Sovereign bond yields mostly higher. Asian stocks mostly lower, European stocks, U.S. equity-index futures gain. Crude oil mixed, gold lower, copper higher
US Event Calendar
- 8:30am: Durable Goods Orders, March, est. 0.6% (prior -1.4%)
- Durables Ex-Transportation, March, est. 0.3% (prior -0.4%, revised -0.6%)
- Cap Goods Orders Non-def Ex Air, March, est. 0.3% (prior -1.4%, revised -1.1%)
- Cap Goods Ship Non-def Ex Air, March, est. 0.3% (prior 0.2%, revised 0.3%)
DB's Jim Reid completes the overnight recap
Despite risk assets shrugging it off, it was hard to ignore the softer data coming out of the US yesterday. The flash manufacturing PMI print of 54.2 fell 1.5 points from the March reading and was also below market expectations of 55.7. New home sales for March attracted plenty of attention as the -11.4% mom (vs. -4.5% expected) was the single largest monthly decline since July 2013. The oil-sensitive Kansas City Fed manufacturing activity index for April declined for the fourth consecutive month to a lower than expected -7 (vs. -2 expected) and the lowest since May 2009. Employment data was the lone bright spot yesterday with initial jobless printing another sub 300k print (295k), keeping the four-week average at 285k. Yesterday’s weaker data in fact means that the Bloomberg US economic surprise index has struck a fresh 6-year low after a modest rebound earlier in the month. The big release today is the often volatile durable goods orders and it’ll be interesting to see what we get as analysts firm up their Q1 GDP expectations ahead of next Wednesday. Just on that, it’s interesting to take an early look at expectations for the reading. With median estimates currently running at an annualized +1.0%, it’s the range that’s fairly impressive with analyst expectations anywhere from +0.1% to +1.7%. With the Atlanta Fed GDPNow model running at +0.1%, it’ll be an important release given the now data dependent Fed.
Moving on and in terms of earnings yesterday, it was a relatively mixed session as investors digested results out of Caterpillar (beat), Proctor and Gamble (miss), 3M (miss), PepsiCo (beat) and Dow Chemical (beat) in particular. There were some encouraging signs from earnings reports after the bell however as Microsoft and Amazon in particular reported above market, while Google rose 4% in after-market trading. We’ve highlighted the stronger Dollar effect this reporting period which again was highlighted in a lot of the management calls after, however it was also interesting to hear both PepsiCo and Caterpillar highlight weaker demand out of emerging markets, with both noting the instability in Brazil as a cause for concern. Caterpillar in fact also cautioned for a somewhat bleaker outlook for the remainder of the year, suggesting that demand in the remaining three quarters this year will be lower than Q1, with the impact from the downturn in oil markets potentially being felt more in the next quarter.
Having coming close to testing the 2% level intraday, Treasuries eventually ended 2.1bps tighter at 1.958%. The Dollar was a notable decliner meanwhile as the DXY finished 0.67% weaker for its second consecutive day of declines. CDX IG (-0.23bps) was a touch tighter but the main news in credit came post US close when AT&T announced that they had sold $17.5bn of debt in the third largest corporate bond offering on record and second biggest this year.
Elsewhere, a bounce yesterday in oil markets certainly aided energy stocks (+0.62%) as both WTI (+2.81%) and Brent (+3.38%) finished higher – the latter reaching a new YTD high. The news yesterday that a Saudi Arabia led coalition has resumed airstrikes on Houthi rebels in Yemen – after previous reports that they were halting the strikes – probably contributed with reports on Reuters suggesting that forces would continue to target the movements of the rebels.
Closer to home yesterday, the damper tone was largely as a result of some disappointing PMI indicators for the region. For the Euro-area a 0.3pts fall in the manufacturing print and 0.5pt fall in the services print caused to the composite to fall to 53.5 (vs. 54.4 expected). Regionally, it was a similar story as Germany’s composite fell 1.2pt to 54.2 (vs. 55.6 expected) and France’s composite reading dropped 1.3pts to 50.2 (vs. 51.8 expected). Our colleagues in Europe noted, however, that although the fall was disappointing, the Euro levels generally remained above their Q1 averages and are about in line with their GDP forecasts for Q1 (+0.5% qoq) and Q2 (+0.4% qoq). They also noted that the relative resilience of the Euro area PMIs compared to Germany and France, suggest that economics outside of the ‘big two’ performed well on average in April. Wrapping up the data, UK retail sales were slightly disappointing with both the headline (-0.5% mom vs. +0.4% expected) and ex-autos (+0.2% mom vs. +0.5% expected) coming in below market.
Continuing the theme of late, Greece remained firmly in the headlight yesterday. Ahead of today’s Eurogroup, headlines on the wires suggesting that Greek PM Tsipras is urging an acceleration of talks with creditors and claiming that ‘a big part of the distance has been covered’ in particular attracted some attention, however we still remain cautious around these sorts of headlines with comments from Euro officials conflicting. European Commission Vice President Dombrovskis said yesterday that ‘progress is not good’ and that ‘it will apparently take more time’ while another EC member, Katainen, noted that ‘you cannot negotiate if you don’t trust’. With the Eurogroup meeting today however, it’ll be interesting to see where talks currently stand.
Despite the fall most European equity markets yesterday, Greek equities (+2.39%) closed higher with the headlines yesterday while 3y (-242bps), 5y (-139bps) and 10y (-52bps) yields all rallied in hope. The Euro was also a beneficiary, finishing 0.92% higher. Elsewhere, bond markets took something of a breather in Europe after the huge moves on Wednesday as 10y yields in both Germany and France closed unchanged at 0.163% and 0.412% respectively. Peripherals were a tad more mixed as Portugal (-3.0bps) and Spain (-0.6bps) closed tighter, while Italy (+1.5bps) widened.
Taking a look at today’s calendar, the only notable release in the European session this morning is the German IFO survey for April. The Eurogroup meeting in Riga and the associated commentary surrounding Greece will require a lot of attention meanwhile. The aforementioned durable goods orders in the US this afternoon will be of much focus, we’ll also get capital goods orders at the same time. Earnings wise it’s the turn of American Airlines and Xerox.