• Pivotfarm
    04/18/2014 - 12:44
    Peering in from the outside or through the looking glass at what’s going down on the other side is always a distortion of reality. We sit here in the west looking at the development, the changes and...

Tyler Durden's picture

Another Stagflationary Indicator: European Industrial Orders Post Steep Decline In March

Following the recent negative Chinese PMI print, the latest confirmation of the global economic slowdown/stagflation comes from Europe where Eurostat reported that EMI Industry Orders declined 1.8% in March, in line with expectations. This was the first M/M decline since September, although the Y/Y number was still a substantial +14.1%. Not surprisingly, previous months were revised lower: February revision: +0.5% m/m (+0.9%) January revision: +1.1% m/m (+1.2%). The momentum of previous months assured a 3.4%
average gain in 1Q. As Market News reports: "The drop in March was accentuated by falling demand for heavy transport equipment, which tends to be very volatile with a limited immediate impact on production. Excluding this category, orders fell 1.1% on the month and were 15.2% higher on the year. Intermediate goods orders increased 0.6% on the month and were 19.2% higher on the year, suggesting that the industry recovery will continue for some time. The drop in heavy transport demand helped drag down capital goods orders 4.6% on the month, giving a 14.5% rise on the year. Consumer durable goods orders plunged 6.8% in March and were 2.6% lower on the year. Still-sluggish consumer demand and competition from low-cost producers abroad have undermined capacity in this branch. Non-durables orders fell 3.5% on the month and were 0.5% lower on the year." And for those still wondering why there is a concerted effort at pushing the EUR lower, here it is: "Leading indicators suggest that demand will wane in the months
ahead. Manufacturers polled by the European Commission in April expected
new orders to lose steam in 2Q. The outlook index fell 5.1 points from
the record high in January to return to the level in July.
Still, their
assessment of order book levels continued to improve, thanks mainly to
higher export back orders. They estimated that orders on hand would
assure 3.7 months of production, up from 2.6 months in January." In other words: must keep that export dynamo turning or else.



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Today's Economic Data Docket - New Home Sales, $35 Billion In 2 Year Bonds To Be Issued Despite Breached Debt Ceiling

New home sales and speeches from several Fed officials. Even with the debt ceiling breached, and retirement funds tapped, it does not prevent the Treasury from issuing new bonds: $35 billion in 2 Years to be auctioned off at 1 pm. But never fear: Brian Sack will pump another $5-7 billion in our daily POMO.



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Frontrunning: May 24

  • French government says China backs Lagarde for IMF (Reuters)
  • ...but, China has actually not backed Lagarde (WSJ)
  • “You Americans Are Funny” — You Start an IMF (Forbes)
  • Norquist Emerges as Barrier to U.S. Debt Deal (Bloomberg)
  • Scarcity, Usefulness, and Getting an Edge (Hussman)
  • Bullard Says Fed May Keep Rates, Balance-Sheet Steady to Assess Economy (Bloomberg)
  • For Global Steel Industry, China Poses Guessing Game (WSJ)
  • Goldman Finding Third Time a Charm in Russia (Bloomberg)
  • Greece Will Accelerate State Asset Sales to Stem Debt Crisis as Bonds Drop (Bloomberg)
  • It can go wrong? It will go wrong (WaPo)


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Moody's Warns Of Greek Default Spillover As Greece Opposition Leader Rejects New Austerity Package

The Greek bankruptcy, pardon, sovereign liability management exercise, pardon reprofiling, is once again front and center in the news this morning, after Moody's had some words of caution about a broad spillover effect in Europe should Greece file. From Reuters: "A Greek debt default would hurt other peripheral euro zone states and could push Portugal and Ireland into junk territory, Moody's said on Tuesday, warning it would classify most forms of restructuring as a default.  "A Greek default would be highly destabilising and would have implications for the creditworthiness of issuers across Europe," Moody's Investors Service's chief credit officer in the region, Alastair Wilson, told Reuters in a telephone interview. "This would result in more highly polarised credit worthiness and ratings among euro zone sovereigns, with the stronger countries retaining very high ratings and the weaker countries struggling to remain in investment grade." And yet a Greek bankruptcy seems increasingly more inevitable after a brand new fissure has now appeared in the government, after the chief opposition, New Democracy, party leader Antonis Samaras said he would oppose the latest round of austerity which, nonetheless, must pass in order for Greece to not run out of funds in 2 months, as we previously reported, and finally set off the dominoes. While the political bickering will likely hit fever pitch, and result in new and increasingly more violent protests in Athens, it is likely that austerity will pass as western banks are licking their chops at acquiring Greek "privatized" assets, at least when it comes to infrastructure and real estate, banks not so much, at below cost prices.



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Gold In Pounds Rises To New Record High After Moody’s Lists 14 UK Banks For Downgrade Review

Gold has reached a new record nominal high in British pounds due to the growing risk of stagflation in the U.K. and due to Moody’s somewhat belated threat to cut its ratings on most UK banks. This was not helped by Chinese ratings provider Dagong Global Credit downgrading the U.K.’s local and foreign currency sovereign credit rating from AA- to A+ with a negative outlook. The increasingly powerful Chinese credit rating agency warned that the U.K. government's fiscal deficit is likely to be a very high 9% of GDP this year and the U.K.'s banking system has a large amount of risk exposure, which could create risks for the government. It estimates that about 40% of the banking system's GBP 2 trillion worth of assets is exposed to risk.



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RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 24/05/11

A snapshot of the European Morning Briefing covering Stocks, Bonds, FX, etc.
Market Recaps to help improve your Trading and Global knowledge



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Dagong Downgrades The UK From AA- To A+, Outlook "Negative"

With everyone trading the GBP in the overnight session eagerly awaiting the leaked Moody's report that the rating agency, which has yet to be at least 2 years behind the curve, is set to downgrade "more than a dozen British financial institutions to reflect the eventual withdrawal of Government support for the banking industry", China has gone and upstaged the beating around the bush poser by downgrading the UK outright from AA- to A+, with an outlook negative. The premise: stagflation and deteriorating "debt repayment capability." Poor fools: they have yet to meet the full debt repayment capability of 20 Primary Dealers.



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Goldman Downgrades China, Upgrades The Nikkei, As It Hikes Oil, And Other Non-Sequiturs

Following its just announced flip flop on oil, Goldman's "sellsiders" go ahead and not only cut Chinese growth prospects, but raise the Nikkei. So let's get this straight: Goldman raises its prices forecast for oil, even as it downgrades the primary driver of demand - China, and somehow the Japanese market, which suddenly is overreliant on natural resources for energy creation in the aftermath of Fukushima, is supposed to surge... Was this script written in Bollywood? Anyway, for those with a sense of humor, here is the gist on China: "Recent data have been worse than we expected. The growth slowdown has been even sharper than we forecast, especially evident in April industrial production (which mainly reflected tighter monetary and fiscal policy, although some specific industries have seen supply-side constraints). In addition, inflation is not coming down as rapidly as we hoped. We now cut our 2011 GDP growth forecast to 9.4% from 10.0%. This partly reflects the lower-than-expected 1Q2011 GDP print (9.2% qoq ann.), but we have also cut 2Q2011,3Q2011, and 4Q2011 growth to 8.0%, 9.0%, and 9.3% qoq ann. from 8.8%, 9.5%, and 9.7% respectively. This is only very slightly above the last official consensus, which came before the disappointing April data, and so we are likely to be above the true consensus now. We expect annual average inflation of 4.7% (up from 4.3%), with a peak in yoy terms of 5.6% in June. We also nudge down our 2012 GDP growth forecast to 9.2% from 9.5%, reflecting in part the impact of higher oil prices. Although we maintain our annual average inflation forecast of 3.0% in 2012, we have a slight acceleration within 2012 as higher oil prices eventually get passed on more fully." Yet while this conclusion in and of itself makes some sense, the following from Goldman's Kathy Matsui in the Nikkei, regarding the firm's outlook on the Japanese stock market, confirms that whoever is coordinating the Goldman sellside push may have crossed the Tropic of Thunder: "Contrary to popular opinion, we believe the disaster will accelerate - rather than delay - Japan's exit from deflation. We see reconstruction demand and exports driving gross domestic product growth to an above-trend pace of 2.5 per cent in 2012...Market participants have argued for some time that it will take a cataclysmic event to drive structural change in Japan; now the world is watching." Bottom line: China down, Japan up, and oil far, far away. Sigh.



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Well That Was Quick: Goldman Goes Long Crude, Raises 12 Month Brent Forecast To $130/bbl

Anyone remember that rapid succession of brent downgrades by Goldman last month which did nothing until the CME and the administration launched an all out war on speculators a relentless barage of crude margin hikes? Well, uber momo Goldman sure doesn't. Just out from David Greely: "While near-term downside risk remains as the oil market negotiates the slowdown in the pace of world economic growth, we believe that the market will continue to tighten to critical levels by 2012, pushing oil prices substantially higher to restrain demand. Events in the Middle East and North Africa are having a persistent impact, which leads us to increase our oil price targets We expect that the ongoing loss of Libyan production and disappointing non-OPEC production will continue to tighten the oil market to critically tight levels in early 2012, with rising industry cost pressures likely to be felt this year. We are now embedding in our forecasts that Libyan production losses will lead to the effective exhaustion of OPEC spare capacity by early 2012. Consequently, we are raising our Brent crude oil price forecast to $115/bbl, $120/bbl, and $130/bbl on a 3, 6, and 12 month horizon." Welcome back volatility. CME petroleum product margin reduction in 5...4...3...



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Co-Founder Of Reaganomics, Paul Craig Roberts, "There Is Probably More Democracy In China Than There Is In The West"

Paul Craig Roberts: "The west prides itself that it is the standard for the world, that it is a democracy. But nowehere do you see democratic outcomes: not in Greece, not in Ireland, not in the UK, not here, the outcomes are always to punish the innocent and reward the guilty. And that's what the Greeks are in the streets, protesting. We see this all over the west. There is no democracy, there are oligarchies, some of these smaller European countries are not even run by their own governments, they are run by Wall Street... There is probably more democracy in China than there is in the west. Revolution is the only answer... We are confronted with a curious situation. Throughout the west we think we have democracy, we hold ourselves up high, we demonize China, we talk about the mafia state of Russia, we talk about the Arabs and so on, but where is the democracy here?"



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The Market Is Like A Child In Search Of Santa Claus

We have all heard the saying that the market is like a bug in search of a windshield. Today, courtesy of Peter Tchir we proposed another one: the market is like a child in search of a Santa Claus (and Bernanke will likely be the jolly fat man).To clarify: "Tthe markets are waiting for the ECB or FED or both, or Santa Claus, to announce some new program to stop this horrific decline of a couple percent in the market. Smart money is betting that the ECB, FED, or some other government agency will step up and give us a reason to rally. The data shows that the economy is taking a leg lower. Very few of the 'macro' problems have been fixed. Japan is still spewing radiation. MENA, with the possible exception of Egypt is worse than ever. Killing Osama eliminated one man, only to expose the potential danger from a nation, that we half considered allies while never trusting them or treating them well. The PIGS are back at the trough with their unending appetite for cheaper debt. We are using accounting tricks to keep exactly 25 million under our debt ceiling until at least August 2nd (or whatever date that Tim deems appropriate). Against the logic that things are getting worse and nothing has worked, is the Pavlovian response that governments bailout the markets and it is stupid to bet against a fresh round of stupid intervention. On data alone, the market would be lower, but we are so conditioned to expecting support at every crisis that no one is willing to miss the next rally. We all know St. Nicholas comes on December 25th, and we all know Trichet, Ben, and crew come every time the Dow drops 3%."



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David Stockman: "Both Parties And The White House Are Advocating A US Default"

Last week David Stockman was on Tom Keene, making the usual media rounds (sometimes we marvel at his patience and endurance), as one of the few voices of fiscal prudence available to TV producers who seek to hold a balanced debate on the topic of US insolvency. Today, Reagan's budget director was again on Bloomberg TV explaining the reality of the situation to Matt Miller for the nth time (by now even a 2 year old will understand the cul-de-sac facing the US), although presenting a new spin on the situation, namely that we have gotten to a point where both parties are implicitly pushing for a US default, while though their inability to reach a political compromise, blaming each other for this inevitable outcome. "The real problem is the de facto policy of both parties is default. When the Republicans say no tax increases, they're saying we want the U.S. government to default. Because there isn't enough political will in this country to solve the problem even halfway on spending cuts. When the Democrats say you can't touch Social Security, when you have Obama sponsoring a war budget for defense that is even bigger than Bush, then I say the policy of the White House is default as well...That is the question that really needs to be understood better and appraised by the bond market. Both parties are advocating default even as they point the finger at each other."



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DSK To Maid: "No, baby. Don’t worry....Don't You Know Who I Am"

The DSK soap opera continues. The latest revelations about the alleged rape that occurred last Saturday at the Sofitel now detail the specific language attemptedly used by the former IMF head, in what is becoming apparent was nothing more than a case of entitlement gone horribly wrong, and unchecked, thus encouraged, for many years. Per Fox news: "Dominique Strauss-Kahn told a New York hotel maid, “Don’t you know who I am! Don’t you know who I am?” while pinning her down during the alleged sexual assault, law enforcement sources close to the investigation told FoxNews.com. The 32-year-old African immigrant repeatedly told her alleged attacker, “Please, please stop. No!” Strauss-Kahn allegedly responded: “No, baby. Don’t worry, you’re not going to lose your job. Please, baby, don’t worry,” Strauss-Kahn responded, according to investigators. “Don’t you know who I am? Don’t you know who I am?." As usual, with most opinions on the matter appear to have been already determined well in advance of the actual jury trial, the one reasonable assumption is to take everything with a grain of salt.



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Weekly Insider Selling To Buying Ratio: 60x

Little can be added to the ongoing discussion of insider selling (and occasionally, buying): while last week the ratio of selling to buying was over 350x, Bloomberg reports that the just ended week saw the ratio drop to the still massive 60x, primarily courtesy of the Titanium Metals Buyer appearing on the scene again, whose $7.6 million purchase accounted for 61% of total purchases of $12.4 million, spread among 14 transactions. The selling, meanwhile, barely abated, and while it was not last week's nearly record $1 billion, insiders did sell just about $750 million worth of stock in 130 transactions. The top 5 sales were in Microsoft, where $377 million was sold, either before or after the company's earnings. MSFT was followed by 3M, Pepsi, Estee Lauder and Praxair. All in all, total selling-to-buying was roughly 2 times the threshold of the bearish barrier, which however has been the case for the bulk of the past two years.



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Latest Chinese Fraud May Cost Maverick Capital Nearly $200 Million

For the most part Chinese micro fraudcaps, as most Chinese companies trading in the US are now affectionately known to most, have so far been small companies, with market caps topping at around $250 million. They have also been a veritable gold mine of P&L as short after short has generated massive returns, to the point where our proprietary ZH short basket has just hit a record low and has returned over 38%. Most have been happy as the SEC has continued to largely ignore the topic of Chinese reverse-merger (and other) IPOs on US exchanges, meaning free money would likely continue as many, many more such frauds would continue to be exposed by share sleuths armed with lots of time. All this is about to change, courtesy of the biggest Chinese (alleged) fraud to date: $1 billion market cap (said market cap will be a fraction of this number once LFC is unfrozen for trading), whose largest investors are not some mom and pop retail investors, but Fidelity, as well as investment "legends" Maverick and Tiger Global (and JPMorgan in 4th). And with Maverick standing to lose as much as up to $200 million, one can be sure the SEC is suddenly going to promptly move to pop the Chinese fraud bubble, after over 6 months of warnings by the likes of Zero Hedge, thereby finally removing the "market efficiency" function that speculative shorters (who are apparently the only ones who actually do their homework) truly provide in this case, as well as in all others.



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