Following the catalysts of broken down US-sponsored peace-talks and the teenager deaths on both sides Hamas (admitting its responsibility for the first time) unleashed more than 240 rockets into Israel in the past four weeks (including 100 since yesterday), Israel has drawn the line. As Bloomberg reports, Israel struck more than 90 targets in the Hamas-controlled Gaza strip from air and sea and PM Netanyahu suggested the option of a ground incursion was on the table. This is heaviest barrage since November 2012 and is set to worsen as Defense minister Ya'alon warned, this "will not end in just a few days," adding that Israel "is prepared to expand the campaign by every means at our disposal." In preparation for escalation, Israel has called up 40,000 reservists today as news hits that Tel Aviv airport has been closed due to shelling as "Operation Protective Edge" expands.
European bank stocks are down over 6% in the last 3 days to 5 month lows - the biggest such drop in 13 months. The combination of Draghi's "no QE", Austrian bank contagion concerns, and rumors of German banks about to be 'BNP'd by US regulators has removed all the exuberant recovery chatter (confirmed by economic data itself collapsing too). Remember all those oh-so-positive PMIs? European peripheral bond spreads surged around 10bps and individual stock markets plunged (Portugal -3% today, Italy -2.5%, Spain -1.8%)
For all those upwardly mobile middle class Americans (amazing they still exist under the current central planning regime which takes from the middle class and gives to the ultra rich and uber poor) who are eager to buy a better house, and suddenly find themselves priced out due to an ongoing surge in the prices of ultra-luxury segment, here is what you need to know: blame China.
At almost double the $2 billion that many had expected, The Washington Post reports that The White House will request $3.8 billion from Congress in emergency funding to deal with an influx of unaccompanied minors from Central America. Funds would be allocated to send more immigration judges to the southern border, build additional detention facilities and add border patrol agents, to help stem the recent surge of women and children from El Salvador, Guatemala and Honduras.
What did investors in the growth-leveraged momo-darling stocks, that have raced back to record highs and "proved" that all is well in the world again, see in the Non-farm payrolls report that scared them short? From the peak last week, momo growth names have been monkey-hammered and even M&A-driven Biotech exuberance has given up over 7%...
There was some good news in the JOLTS report released earlier today, mostly in the form of the Job Openings category which surged from 4,464K in April to 4.635K in May, well above the 4350K expected and the highest print since 2007 (granted the unadjusted data showed something completely different but that's a different story). And since this is one of Yellen's favorite labor market indicators, it means that the Fed is that much closer to finally turning the liquidity tap off (at least until the market crashes and the market is promptly forced to rush back in and bail everyone out all over again). Alas, there was also bad news. As the following chart shows, the trend that we have pounded the table on for the past year, namely the lack of actual hiring continues to persist. In fact, while job openings may have soared by nearly 300K in May, the actual number of Hired declined by 52K to 4,718K.
As is now well-known, following the news broken first by Zero Hedge in May, Belgium, or rather "Belgium" (because clearly someone is using Belgian-based Euroclear as a front to cover their insatiable appetite for US paper) has emerged as the biggest buyer of US Treasurys in 2014, close to surpassing even the Federal Reserve as the biggest monetizer of the US deficit. But what about other countries in the world, such as for example France: a country whose economy virtually everyone admits is in shambles and yet whose bond yields have followed the rest of the world to slide to near record lows of 1.70% most recently. Here is the answer.
Every US equity index is now in the red post-"great" jobs report on Thursday. Bond yields have plunged and stocks have caught down to that weakness. USDJPY appears the main culprit for now as chatter of JPY repatriation over Super-Typhoon concerns sends USDJPY back to 101.50 and below all key technical levels. Whocouldanode that stock exuberance last week was over-done? On a side note, it's small caps that are getting slammed from yesterday's opening... and it's Tuesday!!
For a brief month of "we've been down so long, everything looks up", the NFIB Small Business survey suggested the 'recovery' was real and so serial extrapolators (throwing out the 'and small business is the engine of job growth' meme) jumped on it as 'proof' that stocks are cheap and bonds should be sold... then comes June data today (and it's a disaster). 6 of the NFIB's 10 indicators decreased, with about half of the decline in the overall index due to less confidence in future business conditions, the report said, with only 2 indicators improving. CapEx dropped, Sales expectations dropped, 'good time to expand' dropped, actual sales dropped with only hiring plans rising (which seems odd in the face of all the negativity in the rest of the survey) - we will see.
Now that even that bedrock of the Keynesian voodoo religion, the Gross Domestic Product calculation, has become a ridiculous farce, with everyone in Europe suddenly adding the uncalculable "contribution" from drug dealers and hookers all in a mad dash to make debt/GDP ratios appear better than they are, it is truly time to unleash the clowns as none other than the country which has taken fabricating economic data to an artform, no not the US for those confused but China, is preparing to change the way its calculates its GDP, with the biggest contribution coming from, hold on to your hats, R&D. One wonders if "reverse engineering" of pirated products and services is covered in this "non-GAAP GDP" category. The end result? GDP for the country which cumulatively will be several percentage points higher once the entire fudging/recasting exercise is completed. Here are the details.
It appears that having pushed France forcefully into the Russia-China Eurasian, and anti-US camp, the US will now do the same with Germany. Because by infuriating the German population with first refusing to return their gold contained (the legend goes) at the New York Fed, and then with scandal after spying scandal, now the time has come to "punish" Germany's largest banks for the same kind of money laundering that BNP was engaged in. As the NYT and Reuters report, the time has come to shift away from the BNP scandal and focus on what will soon be the Commerzbank and Deutsche Bank fallout. According to the NYT, the money laundering crackdown is "bound for another European financial center: Germany. As NYT adds, correctly, "The Commerzbank investigation features an added twist: The bank is 17 percent owned by the German government. It is unclear whether — as in the BNP case, which led French authorities to intervene on the bank’s behalf — the settlement talks could inflame diplomatic tensions between Washington and Berlin."
- Headline of the day: Complacency Breeds $2 Trillion of Junk as Sewage Funded (BBG)
- Israel intensifies Gaza offensive after surge in rocket fire (Reuters)
- Profits plunge at Vatican bank (FT)
- Investors Are Buying Troubled Golf Courses and Giving Them Makeovers (NYT)
- Pimco Dissidents Challenge Bill Gross in ‘Happy Kingdom (BBG)
- That's a new one: Marks and Spencer blames new website for sales drop (Reuters)
- Iran's Supreme Leader calls for more enrichment capacity (Reuters)
- Boeing Faces Long-Term Credit Risk if Ex-Im Bank Closed, S&P Says (WSJ) not to mention the collapse risk to US durable goods orders
- U.K. Manufacturing Unexpectedly Slumps Most in 16 Months (BBG)
- Some Still Lack Coverage Under Health Law (WSJ)
Poor algos: after they got no love on Monday from the overnight USDJPY selling team which took the all important pair back to the 200 DMA, today, inexplicably (it is a Tuesday after all, and if one can't frontrun a rigged market surging higher on Turbo Tuesday may as well throw in the towel on free money and learn about fundamental analysis) the same overnight USDJPY selling team has pushed the key carry pair to below the 200 DMA, and has dragged US equity futures lower with it for the second day in a row.
Back in April, we warned of the consequences of Saudi King Abdullah has clamped down on all forms of political dissent and protests that could “harm public order”. Concerns that this law would be used to silence dissent and crackdown on basic human rights were apparently well justified, as the Wall Street Journal reported today that a Saudi court has sentenced human rights lawyer and activist Waleed Abu Alkhair to 15 years in prison for “inciting public opinion,” i.e., effectively utilizing free speech. We are currently living in one of the most interesting times in human history as we witness the transformation of society away from centralized, bureaucratic structures, into decentralized, networked organization. It’s imperative that each and every one of us does everything he or she can to make this revolutionary transition as painless as possible.