Archive - Jul 15, 2015

As everyone knows by now, a nuclear 'deal' between Iran and the P5+1 (US, France, China, Germany, UK, Russia) was announced earlier this week. Under this agreement, Iran promises to limit its nuclear program in return for various international sanctions to be lifted. Republicans are not happy with the deal (Boehner: "Obama's deal will only embolden Iran"); Israel's PM Netanyahu warned it was "a stunning historical mistake," but we are sure President Obama will put everyone straight as he heads into the next 60 days of Congressional wrangling...

Update: TSIPRAS TELLS LAWMAKERS IT WILL BE DIFFICULT TO REMAIN PM WITHOUT THEIR SUPPORT

Today, the Greek parliament is being asked to legislate away its sovereignty in exchange for a bridge loan and a third bailout program that should allow the country to remain in the euro. Facing a rebellion from within Syriza, Tsipras will have to rely on opposition party support to secure approval for what is effectively a German coup.

We said previously that today's "Humphrey-Hawkins" testimony Q&A would be punchy and sure enough while Chairman Hensarling took an early swing, Wisconsin Rep. Sean Duffy was the man to go toe-to-toe with Janet "I am the law" Yellen over the Fed's stunning ignorance of Congressional legal proceedings. "You did nothing," he begins, "you're so concerned about bringing the leaker to the forefront that what will you do? Nothing!" Yellen replies, reading from a seemingly prepared statement, The Fed has "clear rules" for leak investigations and Duffy cuts her off with a sharp upper cut, "That's true, you did not follow those rules.. if anyone is trying to sweep this under the rug, it is The Fed!" We suspect somewhere Pedro da Costa is smirking...

Yellen, in an important sequence in her semiannual testimony to Congress, according to WSJ's Jon Hilsenrath, tipped her hand to the benefit of raising short-term interest rates sooner rather than later...

Last night we asked "is the paper gold selling over?" Judging by today's plunge in GLD - the biggest Gold ETF - to 5 year lows, it has a way to go...

While Janet Yellen's prepared remarks were her normal bland data-dependent-when-we-want-to-be, rate-hikes-maybe-sooner-or-later self, we suspect the Q&A of The Fed Chair's Humphey-Hawkins testimony will be worth the price of admission. Face to face with Jeb Hensarling - who dares to demand The Fed respond to Congressional probes - will be a highlight but it will be interesting to see if the politicians suck up to their debt-monetizer-in-chief or try to score politically populist points with elections not so very far away...

Now you see it: "The chances that that data is real is very low," said Alicia Garcia Herrero, Natixis's chief economist for the Asia-Pacific region. "Would you publish GDP data that looks south at this point in time? I don't think so."

Now you don't.

Confirming API's report of a significant inventory draw, DOE just reported that, after 2 weeks of builds, US crude inventories fell 4.346 million barrels last week. Crude production also fell 0.44% - the most in 2 months. Crude initially drooped but is rising now...

The real danger to the euro area probably doesn’t emanate from Greece, but from two of its heavyweights, namely France and Italy. If one thinks things properly through, Greece is really a side-show. The euro zone remains full of accidents waiting to happen and some of them have the potential to become truly gigantic accidents.

Comments by Greek Prime Minister Alexis Tsipras on Tuesday evening undermined trust that Greek govt will take ownership of economic adjustments in new bailout program, German Deputy Finance Minister Jens Spahn says on ARD public television. Spahn is a member of Chancellor Angela Merkel’s CDU party.  “What the Greek prime minister did on Greek television yesterday irritates me."

In what seems to have surprised FX trader, Bank of Canada has taken an ax to growth forecasts and rates...

*BOC CUTS CANADA 2015 GDP FORECAST TO 1.1% FROM 1.9%
*BANK OF CANADA CUTS 2Q GDP ESTIMATE TO -0.5% FROM 1.8%
*BANK OF CANADA CUTS BENCHMARK INTEREST RATE TO 0.5%

Furthermore, it warns that "consumer debt vulnerabilities are edging higher" and export weakness is "puzzling."

Any editor, analyst or commentator who claims that a “Greek bailout deal has been reached” is lying.

Western countries are increasingly displaying symptoms of instability as described by Nassim Taleb, the author of the The Black Swan, ever since the publication of an essay written with Gregory Treverton entitled “The Calm Before the Storm.” The wider public and the press seem unjustifiably complacent at this time. It seems likely that the seemingly unending “recovery” is simply the calm before the storm.

Industrial Production rose just 1.54% YoY, the weakest growth since Feb 2010 and flashing a major recessionary red light. Utilities were the biggest contributor, as Manufacturing output ended June unchanged (against expectations of a modest 0.1% rise), missing for the 2nd month in a row. Notably vehicle production tumbled 5.5% MoM. Not exactly the end to Q2 that GDP hockey-stick'rs will be wanting.

It appears hotter than expected PPI has reignited the rate hikes sooner meme as Treasury yields surge, EURUSD plunges (to a 1.09 handle) and gold and silver are monkey-hammered...