This week brings some key events and releases in DMs, including US FOMC (Goldman expects $10bn tapering, in line with consensus), IP, CPI, and Philly Fed (expect 13.5), EA final May CPI (expect 0.50%), and MP decisions in Norway and Switzerland (expect no change in either).
Yesterday, the IMF and World Bank issued warnings about rising interest rates, housing crashes and the global economy. The World Bank’s chief economist is inadvertantly offering important advice to investors and savers when he said that "now is the time to prepare for the next crisis ..."
‘Creativity’ isn’t usually a word associated with ‘government’. Words like stodgy, bureaucratic, and incompetent are typically more appropriate. But there is at least one area where bankrupt governments in particular tend to be exceptionally creative - finding unique ways to steal people’s money... and among the most unique just hit the great state of Georgia.
Over 1 in 5 homes (with $674 billion of mortgages) in China stand empty... and if you think that urbanization will fix that, as WSJ reports, a 10 percentage point rise in the urbanization rate (already at 54%) would result in only a 2.6% drop in vacancy rates. China has a major over-supply issue thanks to property developers who had rushed into the market to build homes, which have been a popular investment as prices seemed bound to keep rising. But now, as Vanke recently warned, things are changing and "the golden era" of China's property market are over. The vacancy rate of sold residential homes in urban areas reached 22.4% in 2013 and as new home prices are slashed to move product, a 30% drop would leave 11.2% of Chinese homes underwater on their mortgages...
As each of the following seven towns from history around the world boomed on the back of resource-hungry bubbles, no one could have foreseen (or even believed) that it would ever end... but as the following dismal images show - end it did. Is this the future for North Dakota or Texas? or Silicon Valley? (of course not stupid... it's different this time).
Two years ago, stories of fake tungsten-filled gold coins and bars began to spread; it appears, between the shortage of physical gold (after Asian central bank buying) and the increase in smuggling (courtesy of India's controls among others) that gold fraud is back on the rise. As SCMP reports, a mainland China businessman, Zhao Jingjun, discovered that HK$270 million of 998kg of gold bars he bought in Ghana had been swapped for non-precious metal bars. What is perhaps even more worrisome, given the probe into commodity-financing deals and the rehypothecation evaporation; these gold bars were shipped to a Chinese warehouse before Zhao was able to confirm the fraud.
It is highly likely that bond markets come under pressure and interest rates rise within the next five years. Do you have an insurance policy against that?
Nothing lasts forever: Why the perceptions of North Korea may be different from reality
In today's abnormally quiet overnight session one could hear a pin, or the USDJPY, drop: with everyone focusing on the ECB announcement in one hour, not a single algo is willing to make any big moves, or even start some momentum ignition, ahead of Draghi's announcement, which absent launching full scale QE, which it won't, will be a disappointment which means the EUR will ultimatly move higher after a kneejerk lower as the market forces Super Mario to do even more next time. As Bloomberg adds, a cut in refi and deposit rates is fully priced in and latest price action suggests investors brace for disappointment if ECB stops short of signaling asset purchases or other liquidity measures to combat deflation.
How The West Spies On The Middle East: The Location Of The GCHQ's Top Secret Internet Spy Base RevealedSubmitted by Tyler Durden on 06/04/2014 21:44 -0400
Until yesterday, a piece of the global spying puzzle was missing: not because it did not exist, but because certain of Snowden's preferred outlets had refused to reveal it. That piece, as Duncan Campbell of The Register (incidentally Campbell has been breaking exclusives for more than three decades: he was the first journalist to reveal the existence of GCHQ in 1976) revealed yesterday, is the GCHQ's (and thus indirectly the NSA's) top secret middle eastern Internet spy base located in Seeb, Oman (officially known as Oman Comms Link Site 1), smack in the middle of the middle east, located southwest of the Straits of Hormuz, and in close proximity to America's closest petroleum-exporting "friends": Kuwait, Saudi Arabia, and the United Arab Emirates.
Topics discussed in the interview were - China and Russia’s gold hoarding - - Do not trust government ‘headline inflation’ - Importance of owning physical gold internationally - Likelihood of bank bail-ins in G20 countries - Cyprus bail-in did not hurt Russians; Hurt Cypriot savers - You have to be prepared ... Better to be a year early than a day late
If yesterday's non-record, red-tick close can be attributed to algos applying the wrong ISM seasonal factor to the day, believing it was Wednesday instead of the permabullish Tuesday, today there is no such excuse, which is why we fully expect the unallowed redness with which futures are currently trading to promptly morph into a non-red color especially with the USDJPY doing it best to ramp to 103.000 levels overnight, stopping out all shorts, and push spoos to fresh record highs. It is an algo world after all. It appears that already record low volatility is being pushed even lower in anticipation of numerous imminent data releases, including today's ADP and Services ISM (first, second and final release), tomorrow's ECB announcement and Friday's payrolls number. Which while good for low volume levitation means bank trading revenues continue to deteriorate forcing banks to pitch M&A deals to clients, which in turn result in even more synergies and more layoffs: because in order to preserve the bottom line, crushing real employment further is perfectly acceptable collateral damage.
Considering that both key overnight news reports: the Chinese HSBC PMI (printing at 49.4, vs 49.7 expected) and the Eurozone CPI print from a few hours ago (print of 0.5%, down from 0.7% and below the 0.6% expected), we find it odd that futures are red: after all this is precisely that kind of negative data that has pushed the market to record highs over the past five years. And speaking of odd, considering the ongoing non-dis-deflation in Europe, the fact that Bunds and TSYs are being sold off today makes perfect sense in a New Normal bizarro world.
A number of Vietnamese officials have now threatened to bring legal action against China over their territorial dispute in the South China Sea; but it does not seem to be having any impact on China's efforts to defend and sustain their presence. As Bloomberg reports, a total of five Chinese fighter jets have now been deployed to the area of exploration in disputed waters off the coast of Vietnam today (compared to 1 previous day) citing Fishing Control Department under Vietnam’s agriculture ministry. China has refused to answer the case the Philippines filed with an international tribunal at The Hague. It is likely to pursue a similar strategy if Vietnam appeals to international law in its own disputes with China.
This week's busy calendar starts off with today’s global PMIs and ISMs. On Tuesday, President Obama begins a four day European trip ahead of the G7 meeting which starts on Wednesday. This G7 meeting is replacing the G8 meeting that was originally scheduled in Sochi but was cancelled after Russia’s annexation of Crimea. Tuesday’s data docket is important with Euroarea data releases including inflation and unemployment expected to further cement the ECB’s resolve in easing policy come Thursday. Wednesday features the global services ISMs and PMIs. Other data releases scheduled for that day includes the ADP employment report, which will provide an important preview to Friday’s NFP, and US trade. The Fed releases its Beige Book on Wednesday too and the second estimates of Euroarea GDP will be published on Wednesday as well. Apart from the ECB on Thursday, we also have the BoE policy meeting.