... the Bank of Israel!
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.
Following up on the earlier report that Israel had warned the US that Russia was preparing to sell "advanced" military equipment to Syria (in False Flag Broken Telephone fashion), it was only a matter of time before the new US Secretary of State voiced his indignation over a development whereby someone else was providing arms to a conflict country's government, instead of the US providing its own weapons to said country's Al Qaeda-assisted rebel forces. Sure enough, he did: "I think we have made it crystal clear that we would prefer that Russia is not supplying assistance," Mr. Kerry said at a news conference after meeting the new Italian Foreign Minister Emma Bonino." While there was no immediate quote substantiating it, there is a rumor that Russian foreign minister Sergei Lavrov's response was a less than politically correct phrasing along the lines that he "would prefer that the US not supply assistance to Syrian rebels."
We almost got an entire 24 hour period that did not have news about imminent war rumblings out of Syria. Almost. Late last night WSJ reported about the civil war torn country (in which the rebels may or may not be using chemical weapons, but are backed by both Al Qaeda and the US government) again, this time on a leak by Israel having warned the US that Russians are "imminently" going to sell advanced ground-to-air missile systems to Syria "that would significantly boost the regime's ability to stave off intervention in its civil war." Supposedly this means that Israel would be unable to continue its unimpeded military incursions of Syrian sovereign airspace and blow stuff up at whim just because it feels like it, and for whatever pretext the Israeli defense forces come up with.
At the center of any military campaign is the art of deception. In the military nothing is done without a strategy, generally planned well in advance, and the misdirection of the enemy is always part of any campaign. It would be a political disaster for Israel to attack Iran. We may begin our consideration with this premise. On the other hand, it would be politically acceptable for Israel to respond to any aggression that was inaugurated by Iran. Self-protection is always a respectable retort. The Israeli attacks are not irrelevant.
Over the weekend Israel carried out two air strikes against Syrian positions within 48 hours. Iran is a strong supporter of Assad’s regime in Syria, and is deeply involved in the efforts to repel the rebel forces. Israel has long voiced its desires to attack Iran in order to force them to end their nuclear program before they achieve the capability to create nuclear weapons. This attack against Syria could be viewed as an indirect attack on Iran. "Israel is taking a calculated risk that Assad, Iran and Hezbollah are right now fighting a war against the Syrian rebels and probably don’t want to open up a second front against a far more formidable enemy."
Russia, China Urge Respect Of Syrian Sovereignty As UN Finds Only Syrian Rebels Used Chemical WeaponsSubmitted by Tyler Durden on 05/06/2013 08:21 -0400
Carla Del Ponte, a member of the UN independent commission of inquiry on Syria, said that testimony gathered from casualties and medical staff indicated that the nerve agent sarin gas was used by rebel fighters. "Our investigators have been in neighbouring countries interviewing victims, doctors and field hospitals and, according to their report of last week which I have seen, there are strong, concrete suspicions but not yet incontrovertible proof of the use of sarin gas, from the way the victims were treated," Ms Del Ponte said in an interview with Swiss-Italian television, broadcast on Sunday. "This was used on the part of the opposition, the rebels, not by the government authorities," she added, speaking in Italian. Ms Del Ponte added that the inquiry has yet to see any direct evidence suggesting that government forces have used chemical weapons, but said further investigation was required before this possibility could be ruled out. The new claims come one week after the United States said it had "varying degrees of confidence" that sarin had been used by Syria's government on its people.
On the third year anniversary of the flash crash, and in a week in which earnings season unwinds and in which there is very little macro news, the bulk of the newsflow happened overnight, starting with a drop in the Chinese Service PMI, which tumbled from 54.3 to 51.1, the lowest in two years, then we got Australian retail sales which dropped -0.1% on expectations of 0.4% gain, indicating that the Chinese slowdown is dragging down the entire Asia-Pac region further. Afterwards, we got a barrage of European non-manufacturing PMI data starting with Spain, at 44.4, down from 45.3, the lowest since December (although one wonder if Spain has finally opened a branch of the BLS, reporting that unemployment actually dipped by 46.1k, on expectations of just a 2k decline, and down from 5k the prior month: how curious the timing of the "end of austerity" and the immediate "improvement" in the economy), then Italy Service PMI printing at 47.0, up from 45.5, on expectations of a 45.8 print, the highest since August 2011, French Services PMI rising modestly from 44.1 to 44.3, Germany's up from 49.2 to 49.6, on expectations of an unchanged print, all of which leading to a combined Eurozone PMI at 47.0, up from 46.6, and beating expectations of a 46.6 print.
An overview of this week's drivers.
In the aftermath of last night's second attack in two weeks by Israel on Syria, the immediate response has so far been muted, with Syria condemning the aggression as an act of war. According to UPI, Syria "vowed to retaliate after an apparent Israeli airstrike on the capital Damascus early Sunday. A government official said on CNN the attack on a military research facility was "an act of war" that the government would not take lightly. "Syria is a country that does not accept insults and it doesn't accept humiliation," said Omran Zoabi, Syria's information minister. Zoabi added the attack had opened "a wide door for all possible options." It remains to be seen what, if any, option Syria will take or if it will merely jawbone toothlessly, inviting further unrequited air-based incursions into its territory. Most likely any response will need the preapproval, and the assistance, of Putin. Incidentally, the only response so far has come from Israel. As Stratfor reports, citing Israel News, the airspace in northern Israel has been closed until May 9 due to an Israel Defense Forces directive issued May 5. Which means the only planes flying in north Israel, which borders Syria through the Golan Heights, would be military.
Citizens in Syria's capital woke up early on Sunday to a series of powerful explosions shaking the outskirts of Damascus, sending massive fireballs into the night sky. Preliminary reports that this was an Israeli attack were subsequently confirmed by NBC citing a senior US official who said Israeli jets had bombed a military research center near of Damascus. This would be the second Israeli attack on Syrian territory in the past week, following US media reports that Israel targeted a weapons shipment to the militant group Hezbollah in neighboring Lebanon overnight Thursday to Friday, although the Jewish state has refused to confirm or deny the bombing. As RT further reports, during the attack, one Israeli jet was reportedly shot down by Syria's Air Force, according to Hezbollah's Manar TV channel, citing security sources in Damascus. This has yet to be confirmed through official channels although if accurate one expects Syrian media to promptly confirm with video evidence.
- U.S. Bulks Up to Combat Iran (WSJ)
- Taking sides in Syria is hard choice for Israel (Reuters)
- Gold Traders Most Bearish in Three Years After Drop (BBG)
- It's a Hard Job Predicting Payrolls Number (WSJ)
- EU economies to breach deficit limits as economic picture darkens (FT)
- IBM Says U.S. Justice Investigating Bribery Allegations (BBG)
- At Texas fertilizer plant, a history of theft, tampering (Reuters)
- SAC Sets Plan to Dock Pay in Cases of Wrongdoing (WSJ) - "in case of"?
- EU to propose duties on Chinese solar panels (Reuters)
- Billionaire Kaiser Exploiting Charity Loophole With Boats (BBG)
- SEC Zeroing In on 'Prime' Funds (WSJ)
- Apple Avoids $9.2 Billion in Taxes With Debt Deal (BBG)
- China April official services PMI at 54.5 vs 55.6 in March (Reuters)
Stanley Fischer, who cost his central bank a lot of money with his ill-timed bet to invest billions of the Bank of Israel's foreign currency reserves on names such as Apple last year, has demonstrated that Einstein's definition of insanity is alive and well when it comes to central-planners, has just decided to double down on stocks. Alas, this is not a joke. Bloomberg reports that "The Bank of Israel plans to almost double equity holdings by the end of the year after falling bond yields prompted the central bank to invest in European shares for the first time. The bank will increase its stock holdings to as much as 6 percent of foreign-exchange reserves, or about $4.5 billion, from 3 percent at the end of 2012, according to Yossi Saadon, a Bank of Israel spokesman. Investments in shares rose to about 4.5 percent of assets in the first four months of 2013 as the institution made a “small allocation” to European equities in addition to its U.S. funds, he said." Well, if the BOI's investment in AAPL was the beginning of the end for that company, one can start shorting Europe - an academic Keynesian just called the top.
When tin-foil-hat wearing digital dickweed blogs first suggested that Central Banks were actively buying stocks, the mainstream media scoffed at the idiocy and un-independence of such an idea. However, it is clear the central banks themselves are now not only actively buying stocks but are activley encouraging it and propagandizing their efforts to lever this last policy tool left in the toolbox. As Bloomberg reports, 23% of central bankers surveyed said the bank owns shares and plans to buy more. From the Bank of Japan to the Bank of Israel and with the SNB and the Czech National Bank now at over 10% allocation of reserves to stocks, is it any wonder there is an inexorable bid under the 'free' markets. Rick Santelli is rightly concerned that, "there is a danger that everyone is loaded in the same direction," asking what happens if all the Central Bank pump-priming does not work, given these equity valuations, "who gets caught holding the bag? What chairs are left when the music stops?"
- UK economy shows 0.3% growth (FT)
- Texas University Fund Sold $375 Million in Gold Bars (BBG)
- Spain Jobless Rate Breaches 27% on Recession Woes (BBG)
- Letta calls for easing of austerity policies (FT)
- Italy Led by Letta Brings Berlusconi Back as Winner (BBG)
- Fed Debate Moves From Tapering to Extending Bond Buying (BBG)
- South Korea wants talks with North on shuttered industrial zone (Reuters)
- Republicans advance bill to prepare for debt ceiling fight (Reuters)
- Republicans claim White House failed to warn on severity of cuts (FT)
- Xi meets former US heavyweights (China Daily)
- Next BoE chief Carney says clear framework key to policy success (Reuters)
- Chinese roll out red carpet for Hollande (FT)