Bank of England
Almost all gold (95%) traded in London is unallocated and without legal title. This makes it easier to trade, but it also raises concerns about a market that is opaque to begin with. There are 5,500 tonnes of paper gold exchanging hands on paper each day, but there are only 300 tonnes of gold vaulted in London outside of the reserves for ETFs or the Bank of England. What would happen if there was ever even a small rush to get the physical asset behind the paper? Is there a system in place for such an event, and how does it work?
Heck of a Job ...
- Oil nudges $50 a barrel as investors bet on shrinking overhang (Reuters)
- From hinterland to wonderland: China's 'teapot' refinery boomtowns (Reuters)
- Peter Thiel Has Been Secretly Funding Hulk Hogan's Lawsuits Against Gawker (Forbes)
- China Wants to Set Prices for the World's Commodities (BBG)
- Big Banks Ladle On the Risk (WSJ)
- China Said to Plan Asking U.S. on Timing of Fed Rate Hike (BBG)
The last few weeks have seen 'Project Fear' taken to all new levels by the UK establishment as doom-mongering over a possible Brexit conjure images of post-apocalyptic movies. UK PM Cameron and Chanceller Osborne's latest op-ed tirade warns of 800,000 jobs lost and an "immediate year-long recession" if the Brits exercise their democratic right to vote for sovereignty over tyranny. Judging from the polls, which show Brexit odds tumbling, the fear-mongery is working, however, the markets disagree as forward volatility measures near 2016 highs.
Financial and economic prospects for the Eurozone have many similarities to the 1972-75 period in the UK, which this writer remembers vividly. This time, the prospects facing the Eurozone potentially could be worse. The obvious difference is the far higher levels of debt, which will never allow the ECB to run interest rates up sufficiently to kill price inflation. More likely, positive rates of only one or two per cent would be enough to destabilise the Eurozone’s financial system. Let us hope that these dangers are exaggerated, and the final outcome will not be systemically destabilising, not just for Europe, but globally as well. A wise man, faced with the unknown, believes nothing, expects the worst, and takes precautions.
- Lacking new ideas, G7 to agree on 'go-your-own-way' approach (Reuters)
- Japan's Aso tells G7 FX stability vital, no competitive devaluations (Reuters)
- Snubbed by West, Russia rolls out red carpet for Asian leaders (Reuters)
- The Fed Has Something to Prove to Wall Street (BBG)
- Trump's Supreme Court list: all conservative, some provocative (Reuters)
- Nasdaq Raises Lawsuit Threat Over SEC’s IEX Speed-Bump Plan (WSJ)
Saxo Bank chief economist Steen Jakobsen said that zero rates, zero growth, zero productivity, and zero reforms have left a great many countries adrift in a “new nothingness”. The products of this nothingness, said Jakobsen, include apathy, stagnation and “an economic outlook based more in peoples’ heads than in reality”.
- Fed Puts June Rate Increase on Table Provided Economy Says Go (BBG)
- European shares drop as mining stocks weaken, airlines fall (Reuters)
- Oil drops below $48 on Fed hike speculation, fading support from outages (Reuters)
- Violent Struggle Over Oil and Money Rattles Global Energy Market (BBG)
- Bayer Proposes to Acquire Monsanto (WSJ)
- Stocks sag as U.S. rate rise expectations revive (Reuters)
- Clinton, Sanders hit final stretch of nominating contest (Reuters)
- Bernie Sanders Wins in Oregon, But He Needed Kentucky, Too (NBC)
- Clinton less than 100 delegates from nomination (The Hill)
- Trump needs 66 delegates to officially clinch nomination (The Hill)
- Japan GDP Rebound Not Enough to Stave Off Stimulus (WSJ)
It has been more of the same overnight, as global stocks piggybacked on the strong US close and rose despite the lack of good (or bad) macro news, propelled higher by the two usual suspects: a higher USDJPY and a even higher oil, if mostly early on in the trading session.
- European Stocks Fall as Chinese Economic Data Disappoint (WSJ)
- Oil Climbs to Highest Since November as European Shares Retreat (BBG)
- Yen weakens on Japan intervention talk before G7 meets (Reuters)
- Wall Street’s Bond Forecasters Splinter as Fed Credibility Wanes (BBG)
- Amazon to Expand Private-Label Offerings—From Food to Diapers (WSJ)
- Oil prices rise on Nigerian outages, Goldman forecast (Reuters)
The main risk over the weekend was that markets, which have now dropped for three consecutive weeks the longest negative streak since January, would focus their attention on the latest batch of negative Chinese economic news released over the weekend, which missed expectations across the board, most prominently in Retail Sales and Industrial Production, and following Friday's disappointing new credit loan data, would sell off as the Chinese slowdown once again becomes a dominant concern. However, after some initial weakness, the risks were all but gone when first the USDJPY jumped on another round of deflationary Japanese economic data which led to renewed hopes of more BOJ easing and a jump in the USDJPY and thus US futures.
“It is business - not government - which generates wealth for the Treasury and jobs for our communities. Outside the EU, British business will be free to grow faster, expand into new markets and create more jobs. It's time to Vote Leave and take back control.”
Colonel Sanders is raising a robot army to serve fried chicken at a restaurant near you. KFC’s first automated restaurant, called Original+, went live in Shanghai on April 25th, complete with an artificially intelligent robot manager named “Du Mi” who works at the front counter.