Hong Kong

Last week it was the Nasdaq, today it was the Eurex Exchange, which broke down "due to technical issues" shortly after 2 am Eastern and which was offline for over an hour. Further keeping a lid on liquidity and upward momentum is today's UK market holiday which has resulted in a driftless move lower across European stocks, following a red close in the Nikkei225. It only means that the inevitable ramp up in the disconnected from all fundamentals and reality market will have to come only during US trading hours when the NY Fed trading desk steps up its POMO-aided levitation.

Liquidated ETF gold holdings are being shipped from the U.K to Switzerland for refining into smaller one kilogramme gold bars, Australian bank Macquarie wrote in a note yesterday. These were then sent to Asia and bought by Asian investors. The note  confirmed, what has been known anecdotally for some weeks.

Following yet another rout in Asia overnight, which since shifted over to Europe, US equity futures have stabilized as a result of a modest buying/short-covering spree in the 10 Year which after threatening to blow out in the 2.90% range and above, instead fell back to 2.81%. Yet algos appear confused by the seeming USD weakness in the past few hours (EURUSD just briefly rose over 1.34) and instead of ploughing head first into stock futures have only modestly bid them up and are keeping the DJIA futs just above the sacred to the vacuum tube world 15,000 mark. A lower USDJPY (heavily correlated to the ES) did not help, after it was pushed south by more comments out of Japan that a sales tax hike is inevitable which then also means a lower budget deficit, less monetization, less Japanese QE and all the other waterfall effect the US Fed is slogging through. Keep an eye on the 10 Year and on the USD: which signal wins out will determine whether equities rise or fall, and with speculation about what tomorrow's minutes bring rife, it is anybody's bet whether we get the 10th red close out of 12 in the S&P500.

• Egypt, U.S. on Collision Course (WSJ), Gunmen kill 24 Egyptian police in Sinai ambush (Reuters)
• India’s efforts fail to prevent new rupee low (FT)
• More bad news for AAPL: Steve Jobs Biopic Crashes on Opening Weekend (WSJ)
• "Sustainable" - U.S. Stocks Beat BRICs by Most Ever Amid Market Flight (BBG)
• Merkel cancels election rally after hostage taking (Reuters)
• Some day, Abenomics might work... Not today though: Japan Exports Rise Most Since ’10 as Deficit Swells (BBG)
• China July Home Prices Rise as Nation Seeks Long-Term Policy (BBG)
• Spanish Bank’s Bad Loan Ratio Rises to Record in June (Reuters)
• Recovery... for some - Ferrari NART Spyder Sets $27.5 Million Auction Record (BBG)
• Bund yields hit 17-month high, rupee slumps (Reuters)
• Regulatory Headaches Worsen for J.P. Morgan (WSJ)

When one thinks Hong Kong, one usually imagines overlevered opulence, nouveau riche wealth, shady backroom deals hashed out in a cigar smoke mist and the occasional opium den. One does not usually think bad Nicholas Cage spinoffs. Yet that is precisely what happened last week at a luxury watch store at the Oriental Watch outlet in an arcade at the Holiday Inn Golden Mile on Mody Road in Hong Kong, when thieves struck in a smash-and-grab that took three thieves just three minutes, and stole 240 Tudor watches valued at HK$6.5 million (USD $840K).

• Vocal billionaire activist IRR - 150x: Icahn bought $1 billion of AAPL stock, seeks $150 billion buyback (BBG)
• BlackBerry Said to Have Sought Buyers Since 2012 (BBG) - for a phone or the entire company?
• IPhone Fingerprint Reader Talk Boosting Biometric Stocks (BBG) - also, the NSA will need to grow its Utah data center
• UPS Jet Crashes in Birmingham, Ala. (WSJ)
• America's Farm-Labor Pool Is Graying (WSJ)
• Hong Kong Lowers Storm Signal as Typhoon Closes on China (BBG)
• Indian submarine explodes in Mumbai port (FT)
• BofA Banker Sued by Regulator Later Joined Fannie Mae (BBG)
• Software that hijacks visits to YouTube uncovered (FT)
• Chinese Billionaire Huang Readies Iceland Bid on Power Shift (BBG)
• China to launch fresh pharmaceutical bribery probe (Reuters)
• Defeat at J.C. Penney Hurts Ackman as Performance Trails (BBG)

The amusing news overnight was that following slightly better than expected Q2 GDP data out of Germany (0.7% vs 0.6% expected and up from 0.0%) and France (0.5% vs 0.2% expected and up from -0.2%), driven by consumer spending and industrial output, although investment dropped again, which meant that the Eurozone which posted a 0.3% growth in the quarter has "emerged" from its double dip recession. The most amusing thing is that on an annualized basis both Germany and France grew faster than the US in Q2. And they didn't even need to add iTunes song sales and underfunded liabilities to their GDP calculation - truly a miracle! Or perhaps to grow faster the US just needs higher taxes after all? Of course, with the all important loan creation to the private sector still at a record low, and with the ECB not injecting unsterilized credit, the European depression continues and this is merely an exercise in optics and an attempt to boost consumer confidence.

Since the end of last April, registered gold held at the COMEX depositories has collapsed from a total of 2,147,398 ounces to just 852,930 ounces. That is a collapse of 60% of the registered gold inventory in less than 4 months.

• Fukushima: "300 metric tons of contaminated water were likely leaking into the ocean daily" (WSJ)
• Unexpected strength in China trade data eases some gloom (Reuters) - actually, perfectly expected data fakery
• Pimco, BlackRock Seek to Bar California Mortgage Seizures (BBG)
• How will Amazon's Bezos change The Washington Post? (Reuters)
• Montreal Maine Railway Files for Bankruptcy After Crash (BBG)
• Fed Belongs to Everybody as Public Says It’s Our Money in Crisis (BBG)
• Local Russian TV channel broadcasts rare critical segment about Putin (Reuters)
• Loeb’s Reinsurer With No U.S. Staff Gains From Obama’s Jobs Act (BBG)
• As Berlusconi star fades, daughter Marina tipped as new leader (Reuters)
• Detroit Rattles Muni Market (WSJ)

• Libor Settlements Said to Ease CFTC’s Path in Rate-Swaps Probe (BBG)
• Manhattan Homes Under $3 Million Never Harder to Buy (BBG)
• Just two years late: Abe Pledges Government Help to Stem Fukushima Water Leaks (BBG)
• Chesapeake drops energy leases in fracking-shy New York (Reuters)
• Hedge Fund Magnetar Won't Face Charges Tied to Mortgages (WSJ)
• U.S. envoy leaves Cairo after talks declared over (Reuters)
• Credit-Crisis Oracle Rajan to Head India’s Central Bank (BBG)
• Bank of England Changes Policy Tack (WSJ)

While there was little macro news to report overnight, the most notable development was yet another USDJPY-driven crash in the Nikkei 225 which plunged by a whopping 576 points, or 4%, to 13825, while the Yen soared to under 96.80 in the longest series of gains since mid-June before recouping some of the losses on pre-US open program trading. The reason attributed for the move were reports that Japan would adhere to pledge to cut its deficit which is the last thing the market wanted to hear, as it realizes that boundless QE is only possible in a context of near-infinite deficit spending.  The index, which has now become a volatility joke and woe to anyone whose "wealth effect" is linked to its stability, pushed not only China's Shanghai composite lower by 0.7% but led to losses across the board and as of this moment is seen dragging US equity futures lower for the third day in a row.

If there was any doubt that the taper would take place shortly, it can be wiped out following the just released June international trade data, which showed a surge in exports to a record high $191.2 billion, an increase of $4.1 billion compared to May, even as imports declined by $5.8 billion to $225.4 billion, resulting in a trade deficit of just $34.2 billion, or 22.5% lower compared to the $44.1 billion in May, which is the lowest trade deficit since October 2009.  It is also the biggest beat to expectations of -$43.5 billion since March 2005. Whether this plunge in the deficit was the result of the new GDP methodology is unknown, however the resulting surge in revised Q2 GDP following this bean-counting addition to the last month of Q2, means that the economy grew even more than expected and that the Fed's tapering course is now assured. It also means Q3 GDP based on July trade data will be dragged down as there is no way this surge in the collapsing deficit can be sustained.

• Botulism toxin? There's an apology for that - Fonterra CEO apologizes, sees China dairy curbs lifted within days (Reuters)
• Patent troll-In-Chief strikes again: Veto of Apple Ruling Likely to Upend Big Patent Battles (WSJ)
• Because scapegoating means justice FTW - SEC Gets ‘Shot in the Arm’ With Victory in Tourre Case (BBG)
• Insider-Trading Probe Caught in a Washington Knot (WSJ)
• Miners return to hedging as gold  (FT)
• Toyota’s $37 Billion Cash Pile Means Turning Point for Abenomics (BBG)
• Inside the battle at Germany's Siemens (Reuters)
• ‘One million’ UK workers on zero hours contracts (FT)
• Wag the dog, part 1984: Iran Seen Trying New Path to a Bomb (WSJ)
• Tokyo Cheap to Hong Kong Luring Asian Bargain Hunters (BBG)

Over two years after Zero Hedge first accused Goldman and JPMorgan of becoming monopolists in the commodity warehousing business (see "Goldman, JP Morgan Have Now Become A Commodity Cartel"), and two weeks after the NYT's reminder the world of just this leading to the latest Kangaroo Court congressional hearing on the matter, which may or may not have resulted in JPMorgan announcing it would exit the physical commodities business, the long overdue legal fight began this Friday when lead plaintiff Superior Extrusion sued Goldman and London Metal Exchange owner HKEx for engaging in "anticompetitive and monopolistic behaviour in the warehousing market in connection with aluminium prices" and accusing the firms of violating the Sherman anti-trust act. Precisely what Zero Hedge said, some 26 months ago.

Many high profile investors, economists and companies got burned during China's recent woes. We look at the errors they made and what you can learn from them.