The two most important questions by far, those whose answer will determine not only the near term return of the S&P, but also global equity markets as well as that all-important commodity, oil, are the following: Can the oil price hold up even as the dollar rises; and, Can the CNY depreciate without hurting asset prices? Here is Deutsche Bank's attempt at an answer.
One does not have to be financial wizard to to know that a firm which has to borrow more than it can generate from core operations is not a sustainable business model, and yet today's CFOs, pundits and central bankers do not. But more are starting to pay attention as the corporate debt pile hits epic proportions. As Bloomberg writes this morning, when it also issued a stark warning about the next source of credit contagion, while "consumers were the Achilles’ heel of the U.S. economy in the run-up to the last recession. This time, companies may play that role."
In its ubiquitous manner, crude futures decided to try and run the stops at the US equity open but were unable to get to $50 (49.984 in July WTI) before fading back a little. Ths driver - according to the narrative-du-jour - is turmoil in Libya and ongoing Nigeria and France disruptions, which are both offsetting a surge in OPEC production to its highest level since 2008 in the minds of the machines. "The market is pretty much on hold until we get all this information," says Deutsche Bank's Jens Pedersen of the data dump and OPEC meetings this week. "We need to get that out of the way to see if there is a reason for oil to go higher."
After yesterday's US and UK market holidays which resulted in a session of unchanged global stocks, US futures are largely where they left off Friday, up fractionally, and just under 2,100. Bonds fell as the Federal Reserve moves closer to raising interest rates amid signs inflation is picking up. Oil headed for its longest run of monthly gains in five years, while stocks declined in Europe.
In the latest tragic news from the world of finance, earlier today Zurich Insurance, the largest Swiss insurer which employs 55,000 people and provides general insurance and life insurance products in more than 170 countries, reported that Martin Senn, the company's former chief executive officer who stepped down in a December reshuffle, has committed suicide. He was 59.
European banks today are universally feared and hated. But throwing the baby out with the bathwater has created an attractive investment opportunity...
Overnight the Commerce Department escalated its trade war with China when it implemented the latest clampdown on a glut of steel imports, when it announced that corrosion-resistant steel from China will face final U.S. anti-dumping and anti-subsidy duties of up to 450%. China's Commerce Ministry said it was extremely dissatisfied at what it called the "irrational" move by the United States, which it said would harm cooperation between the two countries. "China will take all necessary steps to strive for fair treatment and to protect the companies' rights," it said, without elaborating.
'... the prospects for another shock from China as the dollar strengthens on the back of the Fed re-pricing, suggests that financial conditions, and thus the future path for Fed rate hikes, will not be immune to this re-pricing"
- 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 news unfortunately just keeps getting worse for customers and creditors of Northwest Territorial Mint. The prominent bullion dealer located near Seattle, Washington filed for bankruptcy court protection at the end of March. The losses of customers who never received delivery of orders plus the losses of other creditors could be as high as $50 million, according to news reports.
If even 0.1% of this money is “at risk” it would wipe out 10% of the big banks equity. If 1% were “at risk” it would wipe out ALL of the big banks’ equity.
For the bank with the tens of trillions in derivatives, being seen as an increasingly more distressed counterparty was not good news and explains why the CEO took the unexpected step of having to defend his firm following the downgrade. "We are very disappointed," Cryan said in an interview on the sidelines of the Institute of International Finance’s conference in Madrid. "We have enough capital to repay all of our debt four-times over."
Despite warnings that "your life is at risk," the threat of Zika, a collapsing government, and rising social unrest, many will still visit Brazil this summer for the Rio Olympics. As a public service announcement, we believe that making the trip should be worthwhile for those strong-willed travelers treking to South America; and, courtesy of Deutsche Bank, we have found a 'foolproof' way to turn a 56% return... should you wish to.
In Historic First, Singapore Shuts Local Private Bank Due To "Worst Gross Misconduct" Is Has Ever SeenSubmitted by Tyler Durden on 05/24/2016 08:03 -0400
Over one year after the collapse of 1MDB, aided and abetted by none other than Goldman Sachs, officials have finally started to piece together the fund flows, and BSI was the first casualty: "BSI Bank is the worst case of control lapses and gross misconduct that we have seen in the Singapore financial sector," Ravi Menon, managing director of MAS, said in the statement. “It is a stark reminder to all financial institutions to take their anti-money laundering responsibilities seriously."
Yesterday's weak dollar headfake has ended and overnight the USD rallied, while Asian stocks dropped to the lowest level in 7 weeks and crude oil fell as speculation returned that the Federal Reserve will raise interest rates as early as next month. The pound jumped and European stocks gained thanks to a weaker EUR.