Europe's leaders, we assume under pressure from Washington, appear to be making a big weather-related bet with their taxpayers' lives this winter. As they unleash funding sanctions on Russia's big energy producers, Europe has pumped a record volume of natural gas into underground inventories in an effort to 'outlast' Russia and mitigate any Napoleonic "Winter War" scenario. The plan appears to be to starve Russian energy firms of cashflow - as flows to Europe are already plunging - and remove their funding ability, potentially forcing severe hardship on Russia's key economic drivers. There appears to be 3 potential problems with this plan...
We can see it now, a wine-stained David Cameron staggers slowly towards Hadrian's Wall eying the hordes of Scottish gentlefolk staring at him; he glances back at his supporters (who cheer somewhat begrudgingly) before rapidly returning his eyes to the Scots and proclaiming... "you can take your freedom; but you'll never take our... Gold." As Reuters reports, an independent Scotland could lay claim to a part of the United Kingdom's 310-tonne gold reserves if votes go in favour of the "Yes" campaign this month, with ownership of Britain's bullion hoard up for negotiation along with other assets.
For those just catching up on the main news event of the weekend, namely the sudden surge in Scotland "Yes" vote polling surpassing 50% for the first time, here is a complete round up of the background, updates and expert reactions from RanSquawk, Bloomberg and AFP.
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.
UK In "Full Panic Mode", Rains Brimstone, Bribes On Scotland As "Yes" To Independence Poll Crosses 50%Submitted by Tyler Durden on 09/07/2014 22:59 -0400
All pundits who over the past few months have been saying the possibility of Scottish independence as a result of the September 18 ballot, is at best a pipe dream got a rude wake up call overnight, when Scottish YouGov poll for the Sunday Times put the "Yes" (for independence campaign) on top for the first time since polling began, with No below the majority cutoff line for the first time, at 49, when undecided voters are excluded, and even when including undecideds "Yes" is still ahead by two points at 47-45. As the Spectator reports, "in the space of four weeks, "No" has blown a 22-point lead."
We warned here that the "Yes" vote for Scottish Independence was a "high risk" event, and as we noted earlier, with polls indicating its a high probability and 'English' leadership in full panic mode, it is perhaps not surprising that the British Pound opened down 160pips at 10-month lows... (a 500 pip drop in 3 days)... But, didn't the clever people on TV tell us 'it was priced in'?
- Euro left reeling after ECB's liquidity splurge (Reuters)
- Coalition Emerges to Battle Islamic State Militants (WSJ)
- Ukraine Gas Chief Takes on Gazprom in Race With Winter (BBG)
- Nato leaders fail to agree spending targets (FT)
- JPMorgan Had Exodus of Tech Talent Before Hacker Breach (BBG)
- Mercedes-Benz Sales Rise Despite Weak German Demand (WSJ)
- Secret Network Connects Harvard Money to Payday Loans (BBG)
- ICE looks to crack financial data market (FT)
- Global stocks bounce on sign ECB could launch ABS program (Reuters)
- Putin unveils Ukraine ceasefire plan, France halts warship (Reuters)
- Poroshenko Flummoxes Investors With About-Face on Truce (BBG)
- No Free Lunch for Companies as IRS Weighs Meal Tax Rules (BBG)
- Turkey Struggles to Halt Islamic State 'Jihadist Highway' (WSJ)
- Lego Becomes World's Largest Toy Maker on Movie Success (WSJ)
- U.N. says $600 million needed to tackle Ebola as deaths top 1,900 (Reuters)
- Goldman Sachs Named 'Stabilization Agent' for Alibaba Stock Offering (WSJ)
Sterling fell sharply yesterday as traders became nervous of a possible vote for Scottish independence. The referendum on Scottish independence from the United Kingdom takes place on Thursday 18th September.
While the referendum and the potential impact of an independent Scotland have been on the horizon for some time, the approaching vote in two weeks is causing upheaval for the British pound in currency markets, and also more general macro uncertainty in the regional economic and monetary system.
As we explained previously, the market appeared woefully under-priced for the potential risk of a Scottish "yes" vote. However, this weekend saw the margin between 'yes' and 'no' voters narrowed dramatically (53% "No" vs 47% "Yes" - a 6-point spread now versus a 14 point spread just 2 weeks ago). UK Gilt yields are higher, GBP is falling (its lowest since March) and implied volatility has spiked by the most since 2008 as hedgers pile in, now suddenly fearful.
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.
UK Home Secretary Theresa May has announced that a terrorist attack on the UK is :highly likely," although stressed that there is no information to suggest an attack is imminent:
*UK TERROR THREAT LEVEL RAISED TO SEVERE FROM SUBSTANTIAL
*REAL AND SERIOUS THREAT IN THE UK FROM TERRORISM, MAY SAYS
Her decision is based on the latest intelligence from Syria and Iraq (and we suspect, as Brandon Smith notes, "the goal will be to terrify you and those around you into seeking out a more powerful, more centralized government authority to protect your security.")
The National Security Agency is secretly providing data to nearly two dozen U.S. government agencies with a “Google-like” search engine built to share more than 850 billion records about phone calls, emails, cellphone locations, and internet chats, according to classified documents obtained by The Intercept.
"Rather than trying to spur private-sector spending through asset purchases or interest-rate changes, central banks, such as the Fed, should hand consumers cash directly.... Central banks, including the U.S. Federal Reserve, have taken aggressive action, consistently lowering interest rates such that today they hover near zero. They have also pumped trillions of dollars’ worth of new money into the financial system. Yet such policies have only fed a damaging cycle of booms and busts, warping incentives and distorting asset prices, and now economic growth is stagnating while inequality gets worse. It’s well past time, then, for U.S. policymakers -- as well as their counterparts in other developed countries -- to consider a version of Friedman’s helicopter drops. In the short term, such cash transfers could jump-start the economy... The transfers wouldn’t cause damaging inflation, and few doubt that they would work. The only real question is why no government has tried them"...
- That will teach the UAE who's boss: U.S. Won’t Consult Syria on Militant Strikes: White House (BBG)
- Putin Set to Meet Poroshenko as Ukraine Tensions Escalate (BBG)... but the de-escalation algo?
- Tim Hortons’ Canadian Fans Squeamish of American Hookup (BBG)
- Israeli air strikes target more Gaza high-rises (Reuters)
- How Steve Ballmer Became a Rookie Basketball Mogul (WSJ)
- Buffett to Help Finance Burger King Tax-Saving Deal (BBG)
- U.S. Factories Keep Losing Ground to Global Rivals (WSJ)
- Boehner, Camp Profit From Corporate Bid to Avoid U.S. Tax (BBG)
- Experimental U.S. hypersonic weapon destroyed seconds after launch (Reuters)
- The Neo-Neocons (WSJ)