France

Natural resource speculators know that past uranium bull markets offered some ’explosive’ (pun intended) upside. I have been fortunate enough to experience two uranium bull markets: the 1970s bull market, which saw a tenfold increase in the uranium price and a hundredfold increase in some uranium equities, and the bull market of the last decade, which saw a repeat of the earlier performance.#0066cc;">[1] If past is prologue, the stage may be set for a third uranium bull run.

Confirming that in a world in which either commercial or central banks have to be constantly be churning out debt, and in a world in which Europe is doing neither (with European commercial loan growth posting sequential declines across the board, and the ECB's balance sheet still declining although likely not for long), "growth" as defined by conventional standards, is impossible, we got today's European Q1 GDP data. Not only was it bad, but it was even worse than most had expected.

• Once a beacon, Obama under fire over civil liberties (Reuters)
• Eurozone in longest recession since birth of currency bloc (FT)
• EU Oil Manipulation Probe Shines Light on Platts Pricing Window (BBG)
• BMWs Cheaper Than Hyundais in Korea as Tariffs Crumble (BBG)
• Stock Boom Isn't a Bubble, Says BOJ's Kuroda (WSJ)
• Struggling France strives to shake off economic gloom (FT)
• JPMorgan investors take heat off Dimon (FT)
• Private-Equity Firms Build Instead of Buy (WSJ)
• Bloomberg Saga Highlights Clash Between Two Worlds (WSJ)
• Bank documents portray Cyprus as Russia's favorite haven (Reuters)
• HSBC Signals 14,000 Jobs Cuts in $3 Billion Savings Plan (BBG)
• Argentines Hold More Than $50 Billion in U.S. Currency (BBG)

So much for Europe's "recovery." In a quarter when the whisper was that some upside surprise would come out of Europe, the biggest overnight data releases, European standalone and consolidated GDPs were yet another flop, missing across the board from Germany (+0.1%, Exp. 0.3%), to France (-0.2%, Exp. 0.1%), to Italy (-0.5%, Exp. -0.4%), and to the entire Eurozone (-0.2%, Exp. 0.1%), As SocGen recapped, the first estimate of eurozone Q1 GDP comes in at -0.2% qoq, below consensus of a 0.1% drop. The economy shrank by 1.0% yoy, the worst rate since Dec-09. The decline of 0.5% qoq in Italy means that the economy has been in recession continuously since Q4-11. A 0.2% qoq drop in France means the economy has ‘double-dipped’, posting a second back-to-back drop in GDP since Q4-08. The increase of 0.1% qoq in Germany was disappointing and shows the economy is not in a position to support demand in the weaker member states (table below shows %q/q changes).

Yesterday was another less than convincing session. Indices off recent tops and Europe weaker. Treasuries tumbled then rallied part way back on less than stellar retail sales report. It rather feels like we are going through the motions with little conviction one way or another (even with today's mini-melt-up). Markets crave direction. What I'd like to see is the JGB curve bull-flatten to restore faith in Global easing and the asset grabathon. Don’t fight Kuroda – it will happen.. but when? That's the macro-trade. But the short-term trade may be to hedge some risk, like the Nikkei's recent gains, and think about how to hedge bursting bubble risks in the credit markets. Or is there something bigger going-on just behind the horizon? A "No-See-Em" that is about to confirm a particular market direction? After all... the global economy is either growing, is set for growth, or this recession is becoming a long-term depression. So let’s take a look at what's going on for signs of the hidden menace...

• Controversies give Obama new governing headaches (Reuters)
• About that Capex... BHP to Rein In Investment, Chief Says (WSJ), considers returning cash to shareholders (FT)
• Bloomberg users’ messages leaked online (FT)
• Japanese mayor sparks China outrage with sex-slave remarks (Reuters)
• Economists Cut China Forecasts (WSJ)
• U.S. oil boom leaves OPEC sidelined from demand growth (Reuters)
• U.S. banks push back on change in loan loss accounting (Reuters)
• Fed’s Plosser Says Slowing Inflation No Concern for Policy (BBG)
• Watchdog probes 1m US swap contracts (FT)
• Used Gold Supply Heads for ’08 Low as Sellers Balk (BBG)
• Ex-BlackRock Manager Said to Be Arrested in U.K. Probe (BBG)

There was a time three months ago, when "beating" German confidence served as an upward stock and EURUSD catalyst not once but twice in the same week. One would therefore assume a German confidence miss, such as with today's German ZEW, which barely budged from 36.3 to 36.4 on expectations of a rise to 40.0, with the current situtation dropping from 9.2 to 8.9, on expectations of a rise to 9.8, should be risk negative. Well, it wasn't: it is the new normal after all, and in fact the EURUSD jumped in a kneejerk reaction at 5 am, rising over 1.3000, albeit briefly, assisted by ZEW members saying that respondents do not see a further ECB rate cut - well, of course not - they are Germans, and Draghi isn't. Perhaps the news of a better than expected Eurozone Industrial Production print, which rose from 0.3% to 1.0%, on expectations of a more modest increase to 0.5%, is what catalyzed the subsequent drop in both the EUR, and US stock futures. The IP strength was driven by Germany, Spain and Netherlands offset be decline in France and Italy. 

In some surprising news, and quite contrary to what its record low bond yields would indicate (for a key reason for said artificial demand for French, see The Greater Fool) today the Pew Research center released results from a poll of 7646 EU citizens in March 2013, showing that the new sick man of Europe is Europe itself, or rather the great unification project itself: the European Union. Perhaps most surprisingly, nowehere is this more evident than in France itself - the country where the idea of a European Union germinated in the first place - and where the decline in support for the EU has been the greatest in the past year, with just 22% responding affirmatively to the question whether 'economic integration strenghtened the economy', down from 36% a year ago, and the biggest drop of all surveyed EU member states.

We have recently explained (here and here) just how dismal the outlook for France is. The gaping divide between French and German perspectives on austerity, growth, and policy is widening by the day. And yet French credit spreads (and yields) have been collapsing ever tighter at the behest of a world gone mad on monetary munificence. We know who the greater fool is in Spain and Italy (the domestic banks and pension funds); and so now, thanks to SocGen, we know who the greater fool is in French debt (OATs). The BoP data also show that Japanese institutions have been sellers of USTs every month from January to March; and France has been by far the largest recipient of Japanese debt purchases. In March alone flows into OATs rose to JPY232bn, a 3-month high. Institutions have been buying OATs for 16 months in a row for a cumulative JPY5.7trn (E43.8bn) since December 2011. A marked 31bp decline in 10y OAT yields in April indicates that Japanese investors stepped up their purchases last month. This will not end well... and there is a limiting factor...

Neither side wants to talk about the real lesson of Benghazi: interventionism always carries with it unintended consequences. The US attack on Libya led to the unleashing of Islamist radicals in Libya. These radicals have destroyed the country, murdered thousands, and killed the US ambassador... Previously secure weapons in Libya flooded the region after the US attack, with many of them going to Islamist radicals who make up the majority of those fighting to overthrow the government in Syria. The US government has intervened in the Syrian conflict on behalf of the same rebels it assisted in the Libya conflict, likely helping with the weapons transfers... The real lesson of Benghazi will not be learned because neither Republicans nor Democrats want to hear it. But it is our interventionist foreign policy and its unintended consequences that have created these problems, including the attack and murder of Ambassador Stevens. The disputed talking points and White House whitewashing are just a sideshow.

We, and the TBAC, previously made clear there is a massive shortage of high-quality collateral - the stuff that forms the backbone of modern monetary practice- some $11 trillion to be exact , as the insolvent world encumbers every possible asset that is not nailed down with more and more and more debt. However, we didn't realize that the asset shortage has also spread to food. As it turns out, Malthus may have been right after all. But fear not: the UN has a modest proposal how to resolve this particular asset shortage: Eat Moar Insects, at least according to the FAO's latest report: "Edible insects Future prospects for food and feed security."

Critics of Japanese policy worry about its potential failure, here is a discussion of what happens if it succeeds.

In the US, retail sales are expected to continue to slow in the headline, while retail sales ex autos, building materials, and gas should turn positive in April according to Wall Street analysts. Goldman remains below consensus for Thursday's Philadelphia Fed survey, forecasting a slight improvement on the previous month. The firm also expects the flash reading for Euro area Q1 GDP to come in slightly below consensus, consistent with a shallow contraction. We forecast German GDP will turn positive in Q1 after Q4 2012's negative reading. In Japan, GS sees Q1 GDP at 2.8% qoq ann., slightly above consensus, with stronger consumer spending the main driver. Among the central bank meetings this week, Russia, Chile, and Indonesia are expected to remain on hold, in line with consensus.

Currency wars are so pre-"QE eternity." At least that is the opinion of Indian multi-billionaire Lakshmi Mittal, and owner of the world's biggest steelmaker, who urged Europe to embrace protectionism and erect trade barriers to "protect" its manufacturers (benefiting one ArcelorMittal among others), while at the same time bashing austerity, saying "the futures of EU manufacturing depended on politicians in Brussels helping industry face what he said was unfair competition from China." In other words, it's time for Europe to escalate into full blown trade warfare with China. It is unclear if Mr. Mittal had any thoughts on how China would, in turn, escalate to this progression in trade warfare: whether with tariffs, subsidies, or outright dumping. What does appear quite clear is that the owner of ArcelorMittal, who on Friday posted a net loss of $345 million (down from a $92 million profit a year earlier) on Q1 sales plunging by 13%, whose stock is just off its 52 week lows, and who said he may close plants in Eastern Europe if the "economy continues to slump", may have some ulterior motives in asking that Europe fight his war for him.

While the H7N9 birdflu epidemic is still raging in China, with 4 news deaths bringing the total confirmed death toll to 31 (and who knows how many unconfirmed) on 129 infections leading to a mortality rate that is simply staggering, even if the mordibity rate is largely a function of Chinese data censorship, Europe and the middle east may be set for a viral breakout of their own. First is the case of Saudi Arabia where two more people have died from novel coronavirus, a new strain of the virus similar to the one that caused SARS, in an outbreak in al-Ahsa region of Saudi Arabia, the deputy health minister for public health said on Sunday. What is more troubling is that with the lack of accurate newsflow out of Saudi Arabia, come unforeseen consequences, such as the eventual spread of the virus from its localized region to a new area, such as Europe or in this case France, to start. Reuters report that a "second diagnosis of the new SARS-like coronavirus has been confirmed in France, the Health Ministry said on Sunday, in what appeared to be a case of human-to-human transmission. The new infection was found in a 50-year-old man who had shared a hospital room with France's only other known sufferer, the ministry said in a statement."