The Fed, by raising its rates and relinquishing its downward pressure on the US dollar, is about to kill off most of the emerging markets. That’s a whole lot of misery in one pen stroke. That’s a whole lot of millions of people who will see their dreams of better lives shattered, just as they were beginning to think they had a chance. It’s how the game is played. The weak must be sacrificed so the strong be stronger.
With the snoozer of an FOMC meeting in the rearview mirror, as well as Scotland's predetermined independence referndum, last week's key events: the BABA IPO and the iPhone 6 release, are now history, which means the near-term catalysts are gone and the coming week will be far more relaxed, if hardly boring. Here is what to expect.
No one disputes that the amount of Russian gas being piped through Ukraine has been cut by at least 20 percent. But who’s responsible?
As reported ealier this morning, here, courtesy of Bloomberg, are the nominees for the next European Commission under the presidency of Jean-Claude "If Serioues Then lie" Juncker, with one from each of the European Union’s 28 countries. Job assignments were announced today by the incoming president, Jean-Claude Juncker of Luxembourg. What do these appointments mean for the European Union? The attached flash analysis from Open Europe should answer most initial questions.
As 'rumors' of European sanctions against Russia's major oil energy firms are leaked strawman-like to the market and expected to be enacted as soon as tomorrow, it appears there is a 'glitch' in the union. The FT's Peter Spiegel reports that one country is holding out on EU sanctions and that is the reason for an emergency unscheduled meeting of EU diplomats this evening. While it is unclear which country it is, something tells us its name begins with an 'A' and ends in 'ustria'... or starts with 'S' and ends in 'lovakia'...
One of the more amusing comments overnight came from Bank of America, which now predicts that China's export growth will be boosted by iPhone 6 by 1% per month through year-end. Whether or not this is accurate is irrelevant, but we are happy that unlike before, BofA has finally figured out that iPhone sales are positive for Chinese GDP, not US, which was the case with the release of the iPhone 4 and 5, when clueless strategists all came out boosting their US (!) GDP forecasts on the iPhone release. We note this because the long-awaited release of Apple's new iPhone will certainly grab some attention tomorrow. According to a BofA poll last week and of the 124 respondents surveyed, 66% of those have noted that they are going to buy the new iPhone and of those planning to buy 75% of those will be replacing their iPhone 5/5s.
The US may be closed on Monday, but after a summer lull that has seen trading volumes plunge to CYNKian lows, activity is set to come back with a bang (if only for the sake of banks' flow desk revenue) with both a key ECB decision due later this week, as well as the August Nonfarm Payrolls print set for Friday. Among the other events, in the US we have the ISM manufacturing on Tuesday, with markets expecting a broadly unchanged reading of 57.0 for August although prices paid are expecting to decline modestly. Then it is ADP on Thursday (a day later than usual) ahead of Payrolls Friday. The Payrolls print is again one of those "most important ever" number since it comes ahead of the the September 16-17 FOMC meeting and on the heels of the moderation of several key data series (retail sales, personal consumption, inflation). Consensus expects a +225K number and this time it is unclear if a big miss will be great news for stocks or finally bad, as 5 years into ZIRP the US economy should be roaring on all cylinders and not sputtering every other month invoking "hopes" of even more central bank intervention.
Last week, Ukrainian Prime Minister Yatsenyuk pushed a bill through the Verkhovna Rada that would see his country’s gas transportation system sold off to a group of international investors. The provisions of the law would permit the transit of natural gas to be blocked. This decision may hurt the fragile industrial recovery in Germany and finish off Ukraine’s potential as a gas transit route to Europe.
Key highlights in the coming week: US Durable Goods, Michigan Conf., Services PMI, PCE, and CPI in Euro area and Japan. Broken down by day: Monday - US Services PMI, New Home Sales (Consensus 4.7%); Singapore CPI; Tuesday - US Durable Goods (consensus 7.5%) and Consumer Confidence; Wednesday - Germany GfK Consumer Confidence; Thursday - US GDP 2Q (2nd est., expect 3.70%, below consensus) and Personal Consumption; Euro area Confidence; CPI in Germany and Spain; Friday - US Michigan Conf. (consensus 80.1), PCE (consensus 0.10%), Chicago PMI; Core CPI in Euro area and Japan (consensus 2.30%). Additionally, with a long weekend in the US coming up, expect volumes into the close of the week to slump below even recent near-record lows observed recently as the CYNKing of the S&P 500 goes into overdrive.
The pattern should be seared in your memory by now. If you fail to recognize it, you could be struck with a huge financial blow. It’s a pattern that has played out over and over throughout history: a government gets into financial trouble, then denies there’s a problem, which is followed by a surprise wealth grab. That’s exactly what happened when bank deposits in Spain and Cyprus were raided. We’ve also seen retirement savings confiscated in some form in Poland, Portugal, and Hungary. Capital controls have been imposed in Cyprus and Iceland. Of course these aren’t the only examples of blatant government thievery. These examples are just within Europe and just within recent years. They can and will happen anywhere.
If you don’t understand the concept of “order out of chaos,” then you’ll never understand a thing. Each supposed disintegration of global unity has eventually led to greater centralization, and this is something the skeptics seem to forget. The progression of crises suggests that the next war will lead to total globalization under the dominance of a minority of elitists posing as "wise men" who only wish to bring peace and harmony to the masses. In the meantime, the skeptics will continue to mindlessly debate in the face of all reason that the whole thing was a fluke, an act of random mathematical chance, leading coincidentally to the one thing the establishment rulers crave: total global totalitarian micromanagement.
If a trader knew nothing about the growth, the debt, the inflation, the exporters vs. importers, the serial defaulters, currency manipulators, hot-money or conversely deflation fighters; simply grouping the nations of the world on whether they were 'friend' or 'foe' to the US would provide an odd highly correlated value perspective on the interest rates paid on 1yr and 10yr sovereign debt... It appears your status with the central bank cabal was more important than your ability to repay the loaned money?
While Ukraine has long since ceased being a customer of Gazprom (for the simple reason being that it can't afford to pay for historical gas purchases let alone future ones, and with a long cold winter just 3 months ahead, Kiev is praying that its brand new Western "allies" will give it the loans it needs to buy Europe-sourced gas), the bulk of Russia-sourced gas into Europe still transits through Ukraine. Not surprisingly, Ukraine correctly understands this is the last trump card it has in any negotiation with the west, or the east. It is this trump card that went into play moments ago when Ukraine's Prime Minister who recently resigned and whose resignation was not accepted, said that Ukraine is considering banning the transit of all Russian "energy resources", i.e. European gas.
Unlike last week's economic report deluge, this week has virtually no A-grade updates of note, with the key events being Factory Orders (exp. 0.6%), ISM non-mfg (exp. 56.5), Trade balance (Exp. -$44.9 bn), Unit Labor Costs (1.2%) and Wholesale Inventories (0.7%).
Now that the World Cup is over, and following last week's global macro reporting slumber (aside for the Portuguese risk flaring episode of course), things pick up quite a bit in the coming week. Here are the key events.