Global Equities In "Sea Of Red" After German Industrial Data Horror, Hints Japan May Give Up On Weak YenSubmitted by Tyler Durden on 10/07/2014 06:44 -0400
While the economic data, especially out of Europe, just keeps getting worse by the day, with the latest confirmation that Europe is now officially in a triple-dip recession coming out of Germany and the previously observed collapse in Industrial Production which tumbled the most since February 2009, it was once again the Dollar and especially the New Normal favorite currency, the Yen, that was in everyone's sights overnight, when it first jumped to 109.20 only to slide shortly after midnight eastern, when Abe repeated once again that a plunging Yen is hurting small companies and consumers - and to think it only took him 2 years to read what we said would happen in late 2012 - but also the BOJ minutes which did not reveal any addition easing, which apparently disappointed algos and triggered USDJPY slel programs, pushing the USDJPY 80 pips lower to 108.40.
While the biggest micro news of the weekend is certainly the report that Hewlett-Packard has finally thrown in the towel on organic growth (all those thousands laid off over the past ten years can finally breathe easily - they were not fired in vain), and has proceeded to do what so many said was its only real option: splitting into two separate companies, a personal-computer and printer business, and corporate hardware and services operations (which will certainly lead to even more stock buybacks only not at one but two companies) which in turn has sent its stock and futures higher, perhaps the most notable development in the macro world is Japan's realization finally that the weaker Yen is crushing domestic businesses, which has resulted in the USDJPY sliding to lows last seen at Friday's jobs report print, and also generally leading to across the board wekness for the dollar, whose relentless surge in the past 3 months is strongly reminiscent of the euphoria following the Plaza Accord, only in the other direction (and making some wonder if the Plaza Hotel caterer are about to see a rerun of September 22, 1985 in the coming weeks).
"I Lied To Get A Loan, And Now It Is Forgiven" - UK's Largest Payday Lender Just Wrote Off 330,000 LoansSubmitted by Tyler Durden on 10/02/2014 10:38 -0400
While the Obama administration is furiously scratching its head how to write off the debt of a few hundred million Americans, so they can once again load up on debt from scratch, spend like drunken sailors, and blow up the system once more, others are already a few steps ahead, such as UK's largest payday lender, the Wonga Group Ltd., which we learn today has written off the debt of 330,000 customers after British regulators introduced tougher rules to "protect consumers" such as Master Elliot Gomme, 20, who admits he lied to get a loan: "the 20-year-old admitted lying on his application and told Newsbeat it was "too easy" to be accepted."
At the heart of the problem is the fact that the Federal Reserve’s manipulation of the money supply prevents interest rates from telling the truth: How much are people really choosing to save out of income, and therefore how much of the society’s resources — land, labor, capital — are really available to support sustainable investment activities in the longer run? What is the real cost of borrowing, independent of Fed distortions of interest rates, so businessmen could make realistic and fair estimates about which investment projects might be truly profitable, without the unnecessary risk of being drawn into unsustainable bubble ventures? All that government produces from its interventions, regulations, and manipulations is false signals and bad information.
When earlier today, the Fed released its latest Z.1 (Flow of Funds report) for the second quarter, there were no surprises: thanks to the relentless liquidity injections by global central banks (charted here) resulting in record stock market levels, total household net worth rose once more, increasing by $1.4 trillion in the quarter (up from a downward revised $1.2 trillion in the previous quarter) to a new record high $81.5 trillion. This was the result of a $95.4 trillion in total assets, offset by $13.9 trillion in liabilities, mostly mortgage debt of $9.4 trillion, as well as some $3.2 trillion in consumer credit, which may or may not account entirely for the student debt bubble.
If you like living beyond your means, you can keep on living beyind your means. US Consumer credit grew by over $26 billion in July - smashing expectations of $17.35bn - and rising by the most since 2011. As usual, the leap was led by non-revolving credit (rising $20.6 billion) as auto and student loans continue to surge.
One of the more amusing comments overnight came from Bank of America, which now predicts that China's export growth will be boosted by iPhone 6 by 1% per month through year-end. Whether or not this is accurate is irrelevant, but we are happy that unlike before, BofA has finally figured out that iPhone sales are positive for Chinese GDP, not US, which was the case with the release of the iPhone 4 and 5, when clueless strategists all came out boosting their US (!) GDP forecasts on the iPhone release. We note this because the long-awaited release of Apple's new iPhone will certainly grab some attention tomorrow. According to a BofA poll last week and of the 124 respondents surveyed, 66% of those have noted that they are going to buy the new iPhone and of those planning to buy 75% of those will be replacing their iPhone 5/5s.
- Scotland split jitters send sterling to 10-month low (Reuters)
- S&P 500 Beating World Most Since 1969 Doesn’t Spark Flows (BBG)
- Happy ending guaranteed: Vietnam building deterrent against China in disputed seas with submarines (Reuters)
- China Posts Record Surplus as Exports-Imports Diverge (Bloomberg)
- Russia, U.S. to hold talks on 1987 arms accord (Reuters)
- Halcon’s Wilson Drills More Debt Than Oil in Shale Bet (BBG)
- Deadly Disappointment Awaits at Ebola Clinics Due to Lack of Space (WSJ)
- Latinos furious at Obama on immigration delay, vow more pressure (Reuters)
- Japan GDP Shrinks at Fastest Pace in More Than Five Years (WSJ)
After being solidly ignored for weeks, suddenly the Scottish independence referendum is all anyone can talk about, manifesting itself in a plunge in the GBPUSD which ha slide over 100 pips in the past 24 hours, adding to the slide over the past week, and is now just above 1.61, the lowest since November 2013. In fact, the collapse of the unionist momentum has managed to push back overnight news from Ukraine, major Russian sanction escalations, Japan GDP as well as global trade data on the back burner. Speaking of global trade, with both China and Germany reporting a record trade surplus overnight, with the US trade deficit declining recently, and with not a single country in the past several month reporting of an increase in imports, one wonders just which planet in the solar system (or beyond) the world, which once again finds itself in a magical global trade surplus position, is exporting to?
"when we look at wages for the 25th percentile of college graduates, the picture is not quite so rosy. In fact, there is almost no difference in the wages for this percentile ranking of college graduates and the median wage for high school graduates throughout the entire period. This means that the wages for a sizable share of college graduates below the 25th percentile are actually less than the wages earned by a typical worker with a high school diploma. While we can’t be sure that the wages of this group wouldn’t have been lower if they had never gone to college, this pattern strongly suggests that the economic benefit of a college education is relatively small for at least a quarter of those graduating with a bachelor’s degree."
Growth in Consumer Credit dropped for the 2nd month in a row (at $17.25bn) missing expectations by the most since November 2013. The March/April credit impulse has now completely faded. Given that "debt is the great bridge between working hard and playing hard in this country," it would seem this news will disappoint Steve Liesman. Revolving credit dropped to its lowest since February as spend-what-you-don't-have appears to be fading also...
- Russia bans all U.S. food, EU fruit and vegetables in sanctions response (Reuters)
- Snowden receives three-year Russian residence permit (Reuters)
- Headline of the day: Europe's Recovery Menaced by Putin as Ukraine Crisis Bites (BBG)
- Americans worry that illegal migrants threaten way of life, economy (Reuters)
- Almost 90% of Uninsured Won't Pay Penalty Under the Affordable Care Act in 2016 (WSJ)
- Germany’s Bond Advance Sends 2-Year Note Yield Below Zero (BBG)
- Gaza War’s Critics in Crosshairs as Israelis Back Offensive (BBG)
- The 1% May Be Richer Than You Think, Research Shows (BBG)
- Bank of America Near $16 Billion to $17 Billion Settlement (WSJ)
- Deep Water Fracking Next Frontier for Offshore Drilling (BBG)
There were some minor fireworks in the overnight session following the worst Australian unemployment data in 12 years reported previously (and which sent the AUD crashing), most notably news that the Japanese Pension Fund would throw more pensioner money away by boosting the allocation to domestic stocks from 12% to 20%, while reducing holdings of JGBs from 60% to 40%. This in turn sent the USDJPY soaring (ironically, following yesterday's mini flash crash) if only briefly before it retraced much of the gains, even as the Pension asset reallocation news now appears to be entirely priced in. It may be all downhill from here for Japanese stocks. It was certainly downhill for Europe where after ugly German factory orders yesterday, it was the turn of Europe's growth dynamo to report just as ugly Industrial Production which missed expectations of a 1.2% print rising only 0.3%. Nonetheless, asset classes have not seen major moves yet, as today's main event is the ECB announcement due out in less than an hour. Consensus expects Draghi to do nothing, however with fresh cyclical lows in European inflation prints, and an economy which is clearly rolling over from Germany to the periphery, the ex-Goldmanite just may surprise watchers.
Unlike last week's economic report deluge, this week has virtually no A-grade updates of note, with the key events being Factory Orders (exp. 0.6%), ISM non-mfg (exp. 56.5), Trade balance (Exp. -$44.9 bn), Unit Labor Costs (1.2%) and Wholesale Inventories (0.7%).
Dispassionate, non-conspiratorial rant , fact-based high level discussion of the sigificant drivers of the week ahead.