- French unemployment rises again to highest since 1999 (Reuters)
- BoJ rejects call for monetary easing (FT)
- North Korea threatens pre-emptive nuclear strike against US (Guardian)
- Firms Race to Raise Cash (WSJ)
- Time Warner Will Split From Magazine Unit in Third Spinoff (BBG) - slideshows, kittens, "all you need to knows" coming to Time
- U.S. economy, world's engine, remains in "neutral": Fed's Fisher (Reuters)
- BOE Keeps QE on Hold as Officials Weigh More Radical Measures (BBG)
- Jobs start to go as US sequestration cuts in (FT)
- BofA Times an Options Trade Well (WSJ)
- Congress Budget Cuts Damage U.S. Economy Without Aiding Outlook (BBG)
- Dell’s Crafted LBO Pitch Gets Messy as Investors Circle (BBG)
- Dell says Icahn opposes go-private deal (Reuters)
- Portugal Rating Outlook Raised to Stable by S&P on Budget Plan (BBG)
- China’s Richer-Than-Romney Lawmakers Reveal Reform Challenge (BBG)
- Kuroda to Hit ‘Wall of Reality’ at BOJ, Ex-Board Member Says (BBG)
- Venezuelans mourn Chavez as focus turns to election (Reuters)
- South Korea says to strike back at North if attacked (Reuters)
- Milk Powder Surges Most in 2 1/2 Years on New Zealand Drought (BBG)
- As Confetti Settles, Strategists Wonder: Will Dow's Rally Last? (WSJ)
- Pollution, Risk Are Downside of China's 'Blind Expansion' (BBG)
- Obama Calls Republicans in Latest Round of Spending Talks (BBG)
- Ryan Budget Plan Draws GOP Flak (WSJ)
- Samsung buys stake in Apple-supplier Sharp (FT)
- China Joining U.S. Shale Renaissance With $40 Billion (BBG)
- Say Goodbye to the 4% Rule (WSJ)
- Traders Flee Asia Hedge Funds as Job Haven Turns Dead End (BBG)
- Power rustlers turn the screw in Bulgaria, EU's poorest country (Reuters)
Throughout history, bankrupt governments in decline almost ALWAYS fall back on a time-tested playbook. This includes imposing controls on everything - wage and price controls, trade controls, capital controls, border controls, people controls. Everything. And this idea goes back to the dawn of human civilization. From Mesopotamia to Rome and from France to Argentina, these policies have been a complete disaster for the country. But as the rest of the world looks on, people in ‘rich’ countries foolishly believe that ‘it can’t happen here.’ So, again, if you think that gold criminalization, price controls, and IRA/pension confiscation could never happen where you live, think again. This is wishful, ignorant, dangerous thinking. It can happen. It is already happening.
With gold dropping nearly 3% on February 20, we had to look closely at the FOMC minutes, which were partially responsible for that movement. Since there are quite a few highlights, we have split this analysis into three sections: the confusion over the minutes in the market; the ambiguous language hinting at deep problems; and a few quotes to make your blood boil.
- Italy sold EUR 6.5bln in 5y and 10y BTPs this morning, solid b/c and competitive yields, especially when considering the uncertain political situation in Italy.
- Moody's also said that Italian election is indirectly credit negative for other pressured EU sovereigns.
- Fears rise that ECB plan has a weakness as the strings in the Eurozone bond buying programme may be its frailty.
As we speculated from the very beginning, and as was reaffirmed in "Is Nigeria, And Its Light Sweet Crude, About To Be Drawn Into The Mali "Liberation" Campaign?", the "French" (with complete and fully-comped US support) Mali campaign is slowly but surely migrating to its intended target: Nigeria, and rather its holdings of light sweet crude. And while the US presence in this latest resource land grab, this time in Africa, was so far rather stealthy, it appears the time for foreplay is over and moments ago Obama told congress has has dispatched 40 more American troops to Niger this week, bringing the total U.S. military presence in the west African country to 100. Let's hear it for the full retroactive transparency demanded by the War Powers Resolution.
A listless overnight session with just the previously noted first disappointing LTRO-2 repayment and the now traditional big beat out of the "other" German confidence indicator, IFO, which beat expectations of 104.9, rising to a 10 month high of 107.4 to attempt to push the economy out of the recessionary slump (just don't mention yesterday's PMI), and nothing on today's US calendar is a fitting way to end the week, and further shows that markets are once more completely oblivious to the risks of the Hung Parliament outcome that this weekend may bring in Italy should the Berlusconi juggernaut maintain its momentum. The EURUSD and the US futures have disconnected once more, with almost all of yesterday's market weakness filled in the overnight session as the good old low-volume levitation returns. Here are the few news items worth reporting.
Regardless of whether a market is moving up or down, there is always someone making money somewhere. There are various examples every day – be it a billionaire selling a stock short (i.e., Herbalife) or a company selling a meal short on ingredients (i.e., horsemeat economics). Some methods are legitimate, and some are not. But one thing is for sure... energy markets are by no means immune to such collusion. The natural gas market is coming under increased scrutiny, as price movement ahead of the main event of the week – the weekly storage report – appears to be being manipulated by high-frequency trading (HFT). High-frequency trading is nothing new to financial markets, but it is new to the natural gas market. It has also spawned some wonderfully inventive names to describe the pre-storage report shenanigans. The best term by far has to be ‘banging the beehive’, which is where a flood of orders is sent to trigger a huge price swing immediately before the data is released. Regardless of how comical these names are, however, this creation of ‘synthetic momentum’ is market manipulation and is being investigated accordingly.
Please do not adjust your monitors: that strange, non-green color greeting you this morning is not a "glitch." Following yesterday's market drubbing, in which a modest 1% decline in the S&P ended up being the biggest market drop of 2013, we next got a wipe out in China, where the SHCOMP plunged by 3% the most in 15 months, down the third day out of four since the start of the year of the Snake on renewed concerns around home purchase restrictions urged by the government, but mostly driven by rampant liquidations of commodity-related stocks following yet another liquidity withdrawing repo (not reverse) by the PBOC which took out even more money out of the market. We then continued to Europe where despite the near-record surge in German optimism (because in the New Normal hope is a strategy - the only strategy), German manufacturing PMI missed expectations of a rise to 50.5 from 49.8, instead printing at 50.1, while the Services PMI outright declined from 55.7 to 54.1 (55.5 expected). We wonder how much higher this latest economic disappointment will push German investor confidence. Not too unexpectedly, Europe's suddenly weakest economy France also disappointed with its Mfg PMI missing as well, rising from 42.9 to 43.6, on expectations of a 43.8 print, while Services PMI declined from 43.6 to 42.7, on "hopes" of a rise to 44.5. The result was a miss in Europe's composite PMIs with the Manufacturing posting at 47.8 on expectations of 48.5, while the Services PMI was 47.3, with 49.0 expected, and a blended PMI missing just as much, or 47.3 with 49.0 expected, and down from 48.6. The news, which finally reasserted reality over hopium, immediately pushed the EURUSD to under 1.32, the lowest print since January 10. Therefore while Germany may or may not escape recession in Q1, depending on how aggressively they fudge their export numbers, for France it seems all hope is now lost.
We have noted the incessant slamdown in the precious metals markets, and highlighted that the only thing that can slow the flood of liquidity into each and every market is a rise in energy prices. The former represents 'trust' in the system; the latter represents 'real economics' as it squeezes the global economy forcing the central banks to pull back or tighten (see China's lack of rev repo recently). To wit, we just noted the plunge in WTI this morning; but Nanex, given their depth of data, noticed something considerably more concerning... "Because the circuit breaker tripped after the market had somewhat stabilized, we think another large sale appeared that would have decimated prices - which CME's circuit breaker logic picked up on, causing the halt." Did someone intentionally try to crash the WTI Crude contract? And if so, who? We don't know, but the usual suspect (singular) does emerge, considering that with gas prices hitting new February daily record every day, and every dollar in increase in WTI means even less (seasonally adjusted) GDP, and less consumer purchasing power, those evil speculators who are taking the Fed's free money to buy commodities (and very unpatriotically not the S&P or Russell 2000) must be promptly punished.
It would appear that the combination of the last day of trading for the March futures contract and some earlier concerns (via CAT) over global growth are enough to warrant a huge block of selling in the April futures contract for WTI crude. Of course, the now standard rumor of a commodity fund liquidation is doing the rounds - 'standard' in so much as whenever there is a sudden unexplained sharp sell-off in the commodity space it is trotted out. As an aside, this drop in WTI perfectly recouples it with gold -1.7% on the week. It appears, as Nanex notes, that this 'two-second 2500 contract block' ~$250mm plundering of all resting market orders then caused CME to halt trading for 10 seconds. Human? hhmm
- Office Depot Agrees to Buy Officemax for $13.50/Shr in Stock
- Bulgarian Government Resigns Amid Protests (WSJ)
- Rome will burn, regardless of Italian election result (Reuters)
- Abe Says No Need for Foreign Bond Buys Under New BOJ Chief (BBG)
- Rhetoric Turns Harsh as Budget Cuts Loom (WSJ)
- Muddy Waters Secret China Weapon Is on SEC Website (BBG)
- Business Loans Flood the Market (WSJ)
- Staples May Be Winner in Office Depot-OfficeMax Merger (BBG)
- Fortescue Won't Pay Dividend, Profit Falls (WSJ)
- Key Euribor rate on hold after rate cut talk tempered (Reuters)
- FBI Probes Trading in Heinz Options (WSJ)
- Spain Said to Impose Yield Ceiling on Bond Sales by Regions (BBG)
- BOK’s Kim Signals No Rate Cut Needed Now as Outlook Improves (BBG)
The oil and gas game can be a tricky one for junior companies, but if played right the pay-off can be massive. At a time when juniors are risking a lot in volatile venues in the Middle East and Africa, Canada’s Aroway Energy (ARW) is planting its feet firmly in homeland soil and in conventional plays. Why? Because for the smaller juniors this is not a long-term game and blowing all your capital to drill a single unconventional well in a risky frontier won’t pay off. Canada still has plenty to offer for juniors, even though you have to kiss plenty of frogs to find the prince. The end game, after all, is merger and acquisition. In an exclusive interview Aroway CEO Chris Cooper discusses: How to make or break a junior oil and gas company; Why rail is becoming more attractive than pipeline transit; Why most juniors won’t make it big in risky frontiers; Why Keystone XL will get the green light; Why oil and gas prices will increase; Why the smaller juniors will stick to the conventional plays; How the asset market is heating up … and what is ideal; Why having control of infrastructure is key to success; Where Canada’s oil and gas industry will be in a decade; What every junior’s goal should be.
Precisely a month ago, when we last looked at the ongoing French campaign in Mali, whose diplomatic justification before the people of the "democratic" world was the eradication of "insurgents", and various other "Al Qaeda rebels", we asked readers, rhetorically, to look at a map of Mali and tell us what they see. We even provided an answer: "Nothing. Mali is one of the most irrelevant countries in West Africa from a resource standpoint, and what happens inside of it is certainly irrelevant from a greater geopolitical standpoint. What is more important is what this map doesn't show, specifically the name of the country located a few hundred miles to the south: Nigeria. Now Nigeria is important: very important. Or rather, Nigerian light sweet, one of the highest quality crudes in the world, is. And thanks to the "bungled" French peacemaking attempt, the US now has a critical foothold in what is the most strategically placed stretch of desert in Western Africa, a place where US "military trainers" will now be deployed at will. Be on the lookout for curious escalations in violence around the capital Abuja, and key port city Lagos, in the coming months once the current Mali fracas is long forgotten." It appears that Nigeria will be drawn into the fray far sooner than even we expected following today's news that Islamist militants from neighboring Nigeria abducted a French family of seven, including four children, in northern Cameroon on Tuesday, French President Francois Hollande said. Next up: Al Qaeda is mysteriously discovered to be aiding and abetting "evil" insurgent Malians out of Nigeria, and the French campaign, with the generous and stealthy support of the US, shifts slowly but surely southward to its ultimate destination: liberating all that Nigerian light sweet oil.
- Here comes the replay of 2011 as China starts the counter-reflation moves: China Central Bank Reverses Cash Pump (WSJ)
- Security group suspects Chinese military is behind hacking attacks (Reuters)
- Iceland Foreshadows Death of Currencies Lost in Crisis (BBG)
- China Allows More Firms to Sell Mutual Funds to Bolster Market (BBG)
- Uncertainty looms for Italians (FT)
- Forget the big comeback; Detroit focuses on what can be saved (Reuters)
- SAC’s Cohen May Face SEC Suit as Deposition Hurts Case (BBG)
- Hollande wrestles with austerity demands (FT)
- Obama Golf With Woods in Florida Risks Muddling Messsage (BBG)
- Simpson and Bowles to Offer Up Deficit (WSJ)
- Aso Says Japanese Government Not Planning Foreign Bond Buys (BBG) - ... until it changes its tune once more
- Abe to Decide on Bank of Japan Governor Nomination Next Week (BBG)