Recent price action amid the heavily shorted solar stocks has seemingly been predicated on hope that late May chatter of negotiated settlements in the industry would occur and everyone could go happily about their business. While hope remains for a settlement - and tariffs have been delayed 2 months, as the WSJ reports - the EU is set to announce drastic anti-dumping levies on Chinese solar panels in a move that could trigger a trade war between two of the world's largest economies:
- *EU SAYS SOLAR-PANEL DUTY TO START AT 11% ON JUNE 6
- *EU SAYS SOLAR-PANEL DUTY TO RISE TO 47.6% IN AUGUST
- *EU'S DE GUCHT SAYS NOT CLOSE TO SOLAR-PANEL PACT WITH CHINA
Sadly this is playing out very similarly to the Great Depression period as tariffs and protectionism replaced domestic focused fiscal and monetary policy and escalated problems rapidly. China rejects the EU's price-dumping allegations, but the problem is not new for Beijing. The U.S. last year imposed punitive tariffs on solar panel imports after finding that China's government was subsidizing companies that were flooding the U.S. market.
Following April's surprising drop in crude imports which led to a multi-year low in the March trade balance (revised to -$37.1 billion), the just released April data showed an 8.5% jump in the deficit to $40.3 billion, if modestly better than the expected $41.1 billion. This was driven by a $2.2 billion increase in exports to $185.2 billion offset by a more than double sequential jump in imports by $5.4 billion, to $222.3 billion. More than all of the change was driven by a $3.2 billion increase in the goods deficit, offset by a $0.1 billion surplus in services.The Census Bureau also revised the entire historical data series, the result of which was a drop in the March deficit from $38.8 billion to $37.1 billion. In April 233,215K barrels of oil were imported, well above the 215,734K in March, and the highest since January. Furthermore, since the Q1 cumulative trade deficit has been revised from $126.9 billion to $123.7 billion, expect higher Q1 GDP revisions, offset by even more tapering of Q2 GDP tracking forecasts. And since the data is hardly as horrible as yesterday's ISM, we don't think it will be enough on its own to guarantee the 21 out of 21 Tuesday track record, so we eagerly look forward to today's POMO as the catalyst that seals the deal.
The European Union is leading the nations of Europe nowhere. They have sat there and languished in their own self-adoration, propped up their egos on self-congratulation and flounced recitals of praise fluffed and huffed by one politician and told to another. They have a central bank promising what cannot be delivered and they have used up all of their capital to buy the debt they have created to support the artifice. Then having mutilated the pension funds of their citizens and having pressured every money manager on the Continent they congratulate themselves on their lower yields. They see a road without end; we can see the end. They congratulate themselves; we yawn as the mumbo jumbo continues.
- Record unemployment, low inflation underline Europe's pain (Reuters)
- The ponzi gets bigger and bigger: Spanish banks up sovereign bond holdings by more than 10% (FT)
- California Lawmakers Turn Down Moratorium on Fracking (BBG)
- China’s Growing Ranks of Elderly Beset by Depression, Study Says (BBG)
- Tokyo Prepares for a Once-in-200-Year Flood to Top Sandy (BBG)
- Morgan Stanley Cutting Correlation Unit Added $50 Billion (BBG)
- IMF warns over yen weakness (FT)
- Rising radioactive spills leave Fukushima fishermen floundering (Reuters)
- India records slowest growth in a decade (FT)
Two days ago we reported that the most recent escalation in the Syrian proxy war involved a bitter exchange between Russia and Israel, where the latter warned the former that it would proceed with destroying any arms shipments from Russia into Syria, specifically referencing the S-300 missiles that has been known to be en route to Damascus for several weeks now. The Israel defense minister warned that: "The shipments haven't set out yet and I hope they won't. If they do arrive in Syria, God forbid, we'll know what to do." Well, according to Lebanese newspaper al-Akhbar not only has the shipment been sent out, but it has already arrived. Check to Israel and coming through on its warning to begin an offensive action not only against Syria, but more importantly, implicitly against Russia.
Algirdas Šemeta, the European Commissioner responsible for Taxation and Customs Union, Audit and Anti-Fraud has announced in a speech that there are ten nations in the EU that need to cut the tax burden on labor if they are going to aid the growth of the European Union. They are hindering investment and holding back output of firms across the EU, although he admits that it is not reducing the tax burden alone that will solve the problems of the economic crisis.
Syria Goes Hot: Russia To Deliver Weapons, Deploys Air Defense; Israel Warns Russia; Obama Demands No Fly ZoneSubmitted by Tyler Durden on 05/28/2013 16:32 -0400
Those who were intently following the USDJPY pair formerly known as the stock market today missed the biggest news of the day: the proxy war in Syria just went hot, following a confluence of news, first that Russia insisted "it would deliver anti-aircraft missiles to Syria despite international criticism, as fears of spillover from the conflict grew" and in logical retaliation to yesterday's decision by Europe to lift an arms embargo to the Al Qaeda-supported, Qatari mercenaries operating in Syria, also known as "rebels. This lead Israel's defense minister Moshe Yaalon to immediately signal that "its military is prepared to strike shipments of advanced Russian weapons to Syria." Meanwhile back in the US "the White House has asked the Pentagon to draw up plans for a no-fly zone inside Syria that would be enforced by the U.S. and other countries such as France and Great Britain, two administration officials told The Daily Beast." And just to make it very clear that Russia is not bluffing, it announced overnight that its four regiments of S-300 air defense systems have been deployed at the Ashuluk firing range in southern Russia as part of another snap combat readiness check of the Russian armed forces "The missions will be carried out in conditions of heavy electronic warfare to test the capabilities of the air defense units to the highest limit." And to think: yet another threat of a global war over some natgas pipelines from Qatar to Europe, and a threat to Gazprom's monopoly.
The Belgian Central Bank said yesterday that about 25 tons of the European nation’s gold reserves have been lent to bullion banks according to Bloomberg. Nearly 10% or about 25 metric tons of the National Bank of Belgium’s remaining 227.5 tons of gold reserves are currently lent to bullion banks, Director and Treasurer Jean Hilgers told the central bank’s annual meeting in Brussels. The proportion of gold reserves on loan declined from 84.3 tons on December 31, 2011, and averaged 48.1 tons in 2012 as loans matured and some gold loans were reimbursed early. Hilgers said that the Belgian central bank sees gold lending decreasing further this year. During the 1990’s, Belgium sold some 1,000 tons of gold into the market - more than three quarters of its remaining holdings. The Belgian gold reserves, which had already seen sizeable liquidation in late 1978, fell from 33.7 million ounces on 12/31/88, to just 5.7 million ounces on 03/31/98, or a fall of 83% in less than 10 year.
- ‘Cov-lite’ loans soar in dash for yield (FT)
- Cambodian police clash with thousands of garment workers, 23 hurt (Reuters)
- Obama Accepting Sequestration as Deficit Shrinks (BBG)
- Having done nothing to restore confidence in a fragmented market, the SEC turns back to main street fraud (WSJ)
- Europe's austerity-to-growth shift largely semantic (Reuters)
- Germany thwarts EU in China solar fight (FT)
- In EU-China dispute, Beijing warns of trade (FT)
- U.S. Oil Boom Divides OPEC (WSJ)
- Record Cash Sent to Balanced Funds (BBG)
- Hilsenrath: Fed Wrestles With Market Expectations About Pace of QE (WSJ)
- Worse-Than-Cyprus Debt Load Means Caribbean Defaults to Moody’s (BBG)
- States Raise College Budgets After Years of Deep Cuts (WSJ)
- U.K. Banks Cut 189,000 With Employment at Nine-Year Low (BBG)
First, the important news: in a few hours the Fed will inject between $1.25-$1.75 billion into the stock market. More importantly, it is a Tuesday, which means that in order to not disturb a very technical pattern that will have held for 20 out of 20 Tuesdays in a row, the Dow Jones will close higher. Judging by the futures, this has been telegraphed far and wide: it is a Ben Bernanke risk-managed market, and everyone is a momentum monkey in it. In less relevant news, the underlying catalyst for the overnight rip higher in risk was the surge in the USDJPY, which left the gate at precisely Japan open time, and after languishing at the round number 101 support for several days, did not look back facilitated by what rumors said was a direct BOJ intervention via a Price Keeping Operation in which banks bought ETFs directly. This was catalyzed by the usual barrage of BOJ and FinMin individuals engaging in post-crash damage control and chattering from the usual script.
Europe Opens $80 Trillion Shadow Banking Pandora's Box: Will Seek To Collapse Repo "Collateral Chains"Submitted by Tyler Durden on 05/24/2013 10:51 -0400
In what may be the most important story of the day, or maybe year, for a world in which there already is an $11 trillion shortfall in high-quality collateral (and declining every day courtesy of Ben's monetization of Treasury paper) so needed to support the deposit-free liability structures of the shadow banking system (as most recently explained here), Bloomberg has just reported that Europe may begin a crackdown on that most important credit money conduit: the $80 trillion+ global shadow banking system, by effectively collapsing collateral chains, and by making wanton asset rehypothecation a thing of the past, permitted only with express prior permission, which obviously will never come: who in their right mind would allow a bank to repledge an asset which may be lost as part of the counterparty carnage should said bank pull a Lehman. The result of this, should it be taken to completion, would be pervasive liquidations as countless collateral chain margin calls spread, counterparty risk soars all over again, and as the scramble to obtain the true underlying assets finally begins.
We totally get why many are excited by the recent cyclical improvement in the Japanese economy. However, just because industrial production is turning up on the back of exports and 1Q GDP grew more than expected doesn’t mean Abeconomics is working. Most of the improvement in Japan is probably best described as a standard cyclical improvement in the aftermath of very depressed growth that was also heavily influenced by last year’s downturn in global trade. There are definitely signs that Japan’s economy are improving cyclically. However, as UBS notes, structurally, demographics remain a major headwind to raising aggregate demand. We feel many investors have not yet considered what slower growth for Asia will mean for Japan in the medium term. This will make it more difficult to raise aggregate demand above supply since capacity is sticky and Japan already has excess capacity. So for Abe-believers there will be fuel to support their optimism. However, once you move beyond that and think about what comes afterwards things look more challenging.
Most people do not think that Europe engages in Quantitative Easing. They know that the United States engages in it, that Britain engages in it and now that Japan engages in it but they think that Europe has so far refused to be involved. They think this because this is what they have been told. Unfortunately this is inaccurate. The European Quantitative Easing takes place every day just not in the manner utilized by America and others. However, it takes place all the same and it is done in a manner to circumvent the rules of the European Union. This is also why the ECB has such a massive balance sheet. What Europe has done is gotten around their own regulations which forbid the ECB from lending money directly to nations.
With Greece suffering the biggest economic depression in decades, all so a few rich men can preserve their wealth and not have their EUR-denominated savings wiped out (even if the alternative means finally being able to rebalance externally using the Drachma instead of forcing internal rebalancing via unemployment and plunging wages), it was only a matter of time before we found out just how humiliating the conversion of the entire economy to a "gray", non-tax paying one would be for the citizens of Greece. As the NYT reports, in just the past two years, the numbers of Greeks engaging in prostitution as a last course source of income has more than doubled: according to the National Center for Social Research, the number of people selling sex has surged 150 percent in the last two years.
- Apple Bonds Stick Buyers With $280.6 Million Loss as Rates Climb (BBG)
- Iceland Freezes EU Plans as New Government Shuns Euro Crisis (BBG)
- "Transparent Fed" - Ben Bernanke meets privately with Darrell Issa (Politico)
- Bank of Japan vows market steps to curb bond turbulence (Reuters) holds policy (FT)
- Stockholm riots spread in third night of unrest (FT)
- Dudley Says Decision on Taper Will Require 3-4 Months (BBG)
- Senate panel passes immigration bill; Obama praises move (Reuters)
- Italy to outline youth jobs plan as government struggles (Reuters)
- Apple CEO Tim Cook, Lawmakers Square Off Over Taxes (WSJ)
- Google Joins Apple Avoiding Taxes With Stateless Income (BBG)
- Sony Board Discussing Loeb’s Entertainment IPO Proposal (BBG)
- Vote Strengthens Dimon's Grip (WSJ), Dimon performance well choreographed (FT)