While Banco Espirito Santo continues to exist on fumes and life support (that last ditch equity injection by Baupost a week ago may not have been Seth Klarman's wisest investment), a key link in the Espirito Santo Holding Company structure is preparing to default. According to Reuters:
ESPÍRITO SANTO GROUPS HOLDING COMPANY RIOFORTE PREPARING TO FILE FOR CREDITOR PROTECTION IN LUXEMBOURG - SOURCES
For those confused, "creditor protection" = bankruptcy.
- Microsoft to announce biggest round of job cuts in 5 years (BBG)
- Palestinian rocket fire persists, Israel warns truce at risk (Reuters)
- China tells U.S. to stay out of South China Seas dispute (Reuters)
- Merkel Resists Sundering U.S. Ties Over Spying Affair (BBG)
- BES slide, tumbling German sentiment hit markets (Reuters)
- Top 1 Percent Is Even Richer Than Surveys Say, ECB Paper Finds (BBG)
- Puerto Rico Utility May Default on January Interest Payment (BBG)
- Can't Get a Job From an Algorithm, or So It Seems as Hot Resumes Go Nowhere Fast (BBG)
- Bank of China-CCTV drama may reveal power struggle in Beijing (SCMP)
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.
- Secret Path Revealed for Chinese Billions Overseas (BBG)
- Traders Flood U.S. With $3.4 Trillion of Bond-Auction Demand (BBG)
- Just in time to cover bad earnings in a massive $3.8 billion "one-time charge": Citi says to pay $7 billion to settle securities investigation (Reuters)
- Troubled Epirito Santo family loosens grip on Portugal's BES (Reuters)
- BES puts in place new executives after central bank push (Reuters)
- Bank of China-CCTV drama may reveal power struggle in Beijing (SCMP)
- Portugal speeds up Banco Espírito Santo management changes (FT)
- Dark pool probe builds pressure on Barclays boss (Reuters)
- Russia Vows to Respond After Shelling From Ukraine (BBG)
- Ukraine forces end rebel airport blockade (Reuters)
- Obama Contends With Arc of Instability Unseen Since '70s (WSJ)
Another round of overnight risk on exuberance helped Europe forget all about last week's Banco Espirito Santo worries, which earlier today announced a new CEO and executive team, concurrently with the announcement by the Espirito Santo family of a sale of 4.99% of the company to an unknown party, withe the proceeds used to repay a margin loan, issued during the bank's capital increase in May. This initially sent the stock of BES surging only to see it tumble promptly thereafter even despite the continuation of a short selling bank in BES shares this morning. Far more impotantly to macro risk, it was that 2013 staple, the European open surge in the USDJPY that has reset risk levels higher, while pushing gold lower by over 1% following the usual dump through the entire bid stack in overnight low volume trading. Clearly nothing has been fixed in Portugal, although at least for now, the investing community appears to have convinced itself that the slow motion wreck of Portugal's largest bank even after on Sunday, Portugal’s prime minister said taxpayers would not be called on to bail out failing banks, making clear there would be no state support for BES.
"To the residents of Beit Lahiya, The IDF intends to attack terrorists and terror infrastructures in the area east of Al-Atatra and Al-Salatin St., and in the area west and north of Ma'bscar Jabalyia. Israel is currently attacking, and will continue to attack, every area from which rockets are being launched at its territory.
The civilians are requested to evacuate their residences immediately and move by 12:00 PM today, south of Jabalyia Al-Badr via Shar'a Al-Faluja. The IDF's campaign is to be short and temporary. Those who fail to comply with the instructions will endanger their lives and the lives of their families.
Silver Up 10.3% YTD - Should Continue To Outperform Gold And Other Assets - Silver’s Unique Properties - Silver: Increasing Technological, Industrial and Medical Demand - Increasing Investment Demand - Silver Undervalued Versus Gold - Conclusion
With EURUSD hardly budging, constantly disappointing economic data (from periphery to the core now), and central bank transmission mechanisms that are entirely clogged and useless for anything but stuffing the pockets of bloated bank balance-sheets with domestic sovereign debt, it is no wonder Germany's Bundesbank has said 'enough'. "If we pursued our own monetary policy... it would look different," explained Bundesbank chief Jens Weidmann. As Reuters reports, Weidmann noted that many savers in Germany were irritated by low interest rates and property prices were overvalued in some big city areas in Germany; implicitly threatening the ECB's chatter-box that "this phase of low interest rates, this phase of expansive monetary policy, should not last longer than is absolutely necessary."
Syrian refugees, whose numbers are set to pass 3 million in the next few weeks, are almost all in Lebanon, Jordan and Turkey, with smaller numbers in Iraq and Egypt. But, as Reuters reports, that looks set to change: UNHCR chief spokeswoman Melissa Fleming exclaimed that Europe must open its doors to more Syrian refugees, having welcomed only a "miniscule" number while Syria's neighbors have reached "saturation point."
The person in charge of navigating the "transition" from the old fixing mechanism, of which he was part as recently as April, was a person who was, drumroll, supervising said transition. Surely, his "consulting" was fair and impartial. Naturally, Mr. Spall is no longer at gold-rigging Barclays, a bank which is for all intents and purposes, falling apart but at GCubed Consultants: enjoy perusing the company at the following link.Said another way, one of the Barclays guys who was accountable in the Gold Market Fixing Company for the price manipulation of his trader (the infamous Daniel Plunkett) is then rewarded by the LBMA to conduct an independent review of the applicants to run the Silver fix!
- Carl Icahn says 'time to be cautious' on U.S. stocks (Reuters)
- Banco Espirito Santo Lifts Lid on Exposure to Group (BBG)
- Slowing Customer Traffic Worries U.S. Retailers (WSJ)
- Insurgents enter military base northeast of Baghdad (Reuters)
- Obama tells Israel U.S. ready to help end hostilities (Reuters)
- Japan economics minister warns of premature QE exit, sees room for more easing (Reuters)
- Greek Banks See Quadrupling of Housing Loans by Next Year (BBG) ... to fund buybacks like in the US?
- Piggy Banks Being Raided Signal Swedish Housing Dilemma (BBG)
- London Seeks New Spenders as Russians Skip $719 Champagne (BBG)
On the heels of Wal-Mart's dismissal of the "great" jobs report, The Container Store CEO yesterday explained how Q1 weakness was "not just the weather" but an overall 'funk' in consumer spending. Last night we had a second firm - the much more integrated into the housing recovery, Lumber Liquidators - come out with some heresy about Q2 bounce backs and the weather..."demand strengthened for 30 days beginning in mid-March. But in May demand slowed and further weakened in June. We were somewhat surprised by the magnitude of the continued weakness in the stores designated as impacted by weather in the first quarter." There goes Q2 GDP...
Remember when everyone ignored this story about Espirito Santo in May: "Portugal's Largest Bank "In Serious Financial Condition" Auditor Warns." Good times. Alas, one can only kick the can of Europe's banking sector insolvency so far before everything blows up in everyone''s face all over again and Draghi has to come out of his crypt and spook everyone that he will do "whatever it takes" to ignore reality and just pretend stuff is fixed which carries Europe over for a few more months before the whole charade has to be repeated.
- Espirito Santo Financial Suspends Shares, Bonds on ESI Exposure (BBG)
- Europe Stocks Drop for Fifth Day as Espirito Santo Sinks (BBG)
- Espirito Santo Creditors Doubt Containment on Missed Payment (BBG)
- French Stocks Seen Extending Losses on Economy Concern (BBG)
- Stocks Slide With Portugal Bonds as Yen Gains; Oil Drops (BBG)
- U.S. Probes Hacking of Government Computers at Personnel Agency (WSJ)... finds terabytes of porn
- It's Congress' fault: Obama rejects criticism over border crisis (Reuters)
- Israel Mobilizes 20,000 Troops for Possible Gaza Invasion (BBG)
- Chinese hackers pursue key data on U.S. workers (NYT)
- Donetsk Primed for Siege as Ukraine Army Hems In Rebels (BBG)
Gold had strong chart resistance at $1,334/oz as this was the 61.8% retracement of the March to June retreat. Gold has now broken convincingly above resistance and the key 50, 100 and 200 day moving averages (see chart).