Japanese Finance Minister said an IMF funding increase to USD 400bln is "coming into sight", and that he expects the BRIC nations to offer funds to the IMF at the appropriate time. The finance minister sees funding figures to be released as early as tomorrow. (Sources) The IMF looks set to reach or pass that target, with USD 320bln secured yesterday and many of the largest emerging economies still to contribute. ECB’s Knot and EU’s Rehn have said IMF commitments may have to be up to USD 500bln, and expects China to boost resources. Brazil’s finance minister has said his country is still not ready to give numbers on their IMF contribution. The Indian finance minister has said he will take time to provide an answer to the funding question for the IMF. China also remains undecided on an increased IMF contribution.
Contrary to BP's Happy Talk, the Gulf Ecosystem Is Being Decimated ...
According to the latest OPEC data, Saudi Arabia, which in its own view, is some endless pool of easily retrievable crude, yet which Phibro's Andy Hall, as well as leaked confidential docs, claim is nothing but one big lie, pumped a record 9.834 million barrels per day, an increase of just 24K barrels from February's total (based on secondary market data, not direct communication). While we salute Saudi's peak production, which has never crossed over the 10 MMBPD level, we wonder, just how and where will Saudi get the 25% extra spare crude capacity needed to fully replace Iran's embargoed oil, which however continues to flow. Or it does at least according to Iran - oil production rose in February and March, if just redirected: India and certainly China (which is currently adding to its strategic reserves as pointed out here some time ago) are delighted to buy excess Iran production. Based on secondary market sources, Iran production has declined from 3.46MM BPD to 3.35MM BPD: hardly much of an "embargo" impact.
As Europe approaches the halfway point of the week, equities are suffering losses on the day as North America comes to market, with underperformance observed in the CAC and peripheral bourses. Markets have been weighed down upon from the open with commentary from the Portuguese PM garnering attention in the press, saying that there are ‘no guarantees’ that Portugal will return to the financial markets as planned. A Bank of Spain release has shown the bad loan ratio for the country’s banks has increased to 8.16%, further weighing on sentiment. There was also market talk of stop-loss buying of German Bunds at the cash open, the security had sold off since then but safe haven flows have kept the Bund in positive territory.
Following a blistering two days of upside activity in Europe and a manic depressive turn in the US in the past 48 hours, the rally is now be running on fumes, and may be in danger of flopping once again, especially in Spain where the IBEX is tumbling by over 3% to a fresh 3 year low. Still, the Spanish 10 year has managed to stay under 6% and is in fact tighter on the day in the aftermath of the repeatedly irrelevant Bill auctions from yesterday, when the only thing that matters is tomorrow's 10 Year auction. Probably even more important is that the BOE now appears to have also checked to Bernanke and no more QE out of the BOE is imminent. As BofA summarizes, "The BoE voted 8-1 to leave QE on hold at their April meeting: a more hawkish outturn than market expectations of an unchanged 7-2 vote from March. Adam Posen - the most dovish member of the BoE over the last few quarters - took off his vote for £25bn QE, while David Miles judged that his vote for £25bn more QE was finely balanced (less dovish than his views in March)." Even the BOE no longer know what Schrodinger "reality" is real: "The BoE judged that developments over the month had been relatively mixed, with a lower near-term growth outlook, but a higher near-term inflation outlook. However, they thought that the official data suggesting very weak construction output and soft manufacturing output of late were “perplexing”, and they were not “minded to place much weight on them”." Naturally, this explains why Goldman's Carney may be next in line to head the BOE - after all to Goldman there is no such thing as a blunt "firehose" to deal with any "perplexing" issue. Finally, the housing market schizophrenia in the US continues to rule: MBA mortgage applications rose by 6.9% entirely on the back of one of the only positive refinancing prints in the past 3 months, which rose by 13.5% after a 3.1% drop last week. As for purchases - they slammed lower by 11.2%, the second week in a row. Hardly the basis for a solid "recovery."
Billionaires, Corruption, and Crony Capitalism
The Brent-WTI spread has compressed under $14 for the first time in 10 weeks but it is being led by the margin-hiker-in-chief's most visible indication of dastardly speculation - the WTI contract as Brent remains close to unchanged. Perhaps, just perhaps, there really is little to no speculation (remember there is a speculative seller for every speculative buyer no matter how many speculator-surveilled market participants there are). As WTI breaks $105 for the first time in almost three weeks, we suppose this is not what Obama was hoping for and just as we pointed out earlier - just as every failed attempt at central planning, all Obama will achieve is another spike in crude prices - an hour later - we are proved right.
Oil Speculator Crackdown Cometh: Central Planner In Chief Announces Self-Promotion To Margin Hiker In Chief At 11:10AMSubmitted by Tyler Durden on 04/17/2012 07:23 -0500
When it comes to evil, evil speculators driving stocks higher on endless gobs of cheap zero-cost liquidity, one will hear nary a peep out of the administration: after all: wealth effect or bust. However, when someone hears oil speculators, run and hife. Indeed, now that Obama's uber-central planning mandate has proven completely powerless to redirect the flow of zero-cost money from acquiring real, as opposed to paper-based, assets (read crude), the Teleprompter in Chief will have a sit down with the nation at 11:10 am and in the latest sermon from the White House mound, will "confront" oil speculators once and for all. His plan: why encourage margin hikes of course - the same principle that crushed the spine of the gold and silver spike in 2011. Unfortunately, unlike gold and silver, whose trading is still dominated by the Comex, energy has numerous alternative venues, such as the ICE, and increasing exchanges in China, which also happens to be the marginal demand setter with 3 consecutive months of near record imports. Which is why we are 100% confident that just like every failed attempt at central planning, all Obama will achieve is another spike in crude prices, just in time for the next global reliquification cycle, just in time for 2012's debt ceiling scandal, and just in time for the reelection.
European markets are seen trading higher as North America comes to market, with some momentum seen following the release of the forecast-beating German ZEW Survey. An economist from the institution commented that downside risks have decreased significantly over the past month, prompting some risk-appetite in Europe during the morning. Participants were also looking towards the Spanish T-Bill auction with particular focus, but it did not confirm the nation’s worst fears as the auction passed with strong bid/covers, selling to the top of the indicative range. Yields, however, did increase over both lines. As such, the Spanish 10-yr yield has fallen below the key 6% mark and remained below that level for most of the session. Peripheral 10-yr spreads against the German Bund are seen tighter throughout the day, amid some market talk early in the session of domestic accounts buying the paper, however this remains unconfirmed.
When it comes to sovereign bond issuance out of Europe the market either continues to be blissfully ignorant or is purposefully stupid: a few hours ago Spain sold €3.18 billion in 12 and 18 month bills, which was more than the expected €3 billion, and which, while coming at higher rates than before, set off a futures buying spark. What however has been pointed out over and over is that issuance of Bills that come due (by definition) within the LTRO's 3 year maturity is meaningless: all it does is concentrate and front-load maturity risk. After all what happens if and when the ECB were to ever not roll the LTRO forward? As such, the only true Spanish bond issuance test this week comes on Thursday when the country issues 10 year bonds. Everything else is merely designed to take advantage of a headline driven market. Specifically, Spain issued €2.09 billion in 364-day bills, which priced at an average yield of 2.623% vs 1.418% at auction on March 20, and at a 2.90 Bid to Cover compared to 2.14 previous. The yield on the second tranche, or €1.086 billion in 546-Day bills soared from 1.711% on March 20 to 3.11% as the Spanish curve again flattens, and despite the rise in Bid to Cover from 3.92 to 3.77, the internals were largely meaningless. Once again, when it comes to true paper demand, the only ones that matter are those that mature outside of the LTRO's 3 years. However today this sleight of hand has worked, and the Spanish 10 year is again under 6.00%, if only for a few hours, sending equity futures higher across the board. Elsewhere, proving once again that no other indicator is better at ramping up stocks, is the coincident indicator known as confidence, German Zew for April came in at 40.7 in April, much higher than expectations of 35, on what however we don't know: dropping markets, soaring inflation, or a return to a declining trendline. Even BofA noted that "There seems to be some disconnect between the latest releases of "hard data" (industrial production, orders received) and the investors expectations." Finally, the Royal Bank of India surprisingly cut its rate from 8.5% to 8.0%, as at least one country can not wait for Bernanke to do his sworn duty of CTRL-P'ing. Oh, and Japan, which has 1 qudrillion Yen in debt, promised to give the IMF $60 billion. So when Japan needs a bail out, we now know that Argentina will step up.
Based on supply, demand and even after taking into account the geopolitical factor, we believe oil could experience a correction later this year and in the next three years or so.
We all know the Status Quo's response to the global financial meltdown of 2008 has been a travesty of a mockery of a sham--smoke and mirrors, flimsy facades of "recovery," simulacrum "reforms," and serial can-kicking, all based on borrowing and printing trillions of dollars, yen, euros and yuan, quatloos, etc. So when will the travesty of a mockery of a sham finally come to an end? Probably around 2021-22, with a few global crises and "saves" along the way to break up the monotony of devolution.
All you need to read and some more.