Yuan

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Gazprom Ready To Drop Dollar, Settle China Contracts In Yuan Or Rubles





Something very dramatic happened overnight when, in a little noticed statement, Gazprom's CFO Andrey Kruglov uttered the magic words:

  • GAZPROM READY TO SETTLE CHINA CONTRACTS IN YUAN OR RUBLES: CFO

In other words just as the US may or may not be preparing to export crude - a step which would weaken the dollar's reserve status as traditional US oil trading partners will need to find other import customers who pay in non-USD currencies - the world's two other superpowers are preparing to respond.

 
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Up To $80 Billion Gold-Backed Loans Are Falsified, Chinese Auditor Warns





As the probe into alleged fraud at Qingdao continues to escalate (with liquidity needs growing more and more evident as Chinese money-market rates surge), Bloomberg reports that China’s chief auditor discovered 94.4 billion yuan ($15.2 billion) of loans backed by falsified gold transactions, in "the first official confirmation of what many people have suspected for a long time - that gold is widely used in Chinese commodity financing deals." As much as 1,000 tons of gold may have been used in lending and leasing deals in China and Goldman reports that up to $80 billion false-loans may involve gold. As one analyst noted, this was unlikely to have a significant impact on the underlying demand for gold in China and as we have pointed out before, any unwind of the Gold CFDs would lead to buying back of 'paper' gold hedges and implicitly a rise in prices.

 
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Frontrunning: June 26





  • Minorities Seen Driving U.S. Household Growth (Reuters)
  • GM prepares to recall some Cruze sedans with Takata air bags (Reuters)
  • PBOC Halts Repos as China Money Rate Climbs to Seven-Week High (BBG)
  • Ukraine Optimism Wavers on Peace as Cease-Fire Winds Down (BBG)
  • Economic Rebound Seen Undercut by Weak Pay as Vote Winner (BBG)
  • Cracks Open in Dark Pool Defense With Barclays Lawsuit (BBG)
  • The Survivor: How Eric Holder outlasted his (many) critics (Politico)
  • IBM, Lenovo Tackle Security Worries on Server Deal (WSJ)
  • Militants take Iraqi gas field town, president calls parliament session (Reuters)
  • Carney Surprises Confounding Markets as BOE Manages Guidance (BBG)
 
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Chairman Of China's Largest Copper Producer Commits Suicide By Jumping From Hotel





While news of high-ranking financial executive suicides in the west have become week to week news, the troubling trend has spread to Asia. A string of Chinese officials have killed themselves in recent months, with speculation linking many to a crackdown on graft. However, as SCMP reports, this weekend saw the head of China's largest copper producer 'fell to this death' from a hotel owned by his company with a state-run newspaper claiming the 52-year-old committed suicide (due to work pressures) following corruption allegations. The timing of Wei Jianghong, chairman of state-owned Tongling Nonferrous Metals Group, suicide appears catalyzed by the growing anxiety over the widespread implications of China's rehypothecation commodity-finance scandal. That leaves one question - what did he know that markets remain ignorant of for now?

 
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Frontrunning: June 25





  • Obama Administration Widens Export Potential for U.S. Oil (BBG)
  • WTI Pares Gains as U.S. Export Ruling Seen Limited (BBG)
  • Senator Cochran defeats Tea Party rival in Mississippi Republican runoff (Reuters)
  • Militants attack Iraq air base, U.S. assessment teams deploy (Reuters)
  • Maliki rules out national emergency govt (AFP)
  • Koch to Start EU Power Trading as It Plans LNG Expansion (BBG)
  • Obama Said to Ready Sanctions on Russian Industries (BBG)
  • Ghana Sends Plane With $3 Million to Calm World Cup Team (BBG)
  • Ghana’s First Hedge Fund Planned by Ex-Exchange Regulator (BBG)
  • SEC Is Gearing Up to Focus on Ratings Firms (WSJ)
  • Abe Declares Deflation End as Growth Plan Confronts Skeptics (BBG)
 
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Copper Snaps Win-Streak As Imports Plunge 17% & Default Fears Reignite





Quietly behind the scenes, amid all the chaos of the Qingdao probe's contagion, copper has rallied modestly in the last seven days. That streak ended last night as the warehousing concerns we noted spreading to the entire sector, combined with a collapse in Chinese copper imports (down 17% in May), and yet another default (China Ting holdings said said two borrowers defaulted on entrusted loans). So it seems that not only are the commodities missing, but so is the money...as the slow motion train wreck gathers pace (no matter what PMIs or minis stimulus do to evade the tightening) as China's money-market rates (at 5 month highs) suggest liquidity demand is very high (and desperate).

 
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Frontrunning: June 20





  • Must be an early winter: Housing Falters as Forecasters See U.S. Sales Dropping  (BBG)
  • China Property Failures Seen as $33 Billion in Trusts Due (BBG)
  • Polish Prime Minister Says Recording Scandal May Trigger Early Election (WSJ)
  • Iraqi forces ready push after Obama offers advisers (Reuters)
  • Priorities: U.S. cuts aid to Uganda, cancels military exercise over anti-gay law (Reuters)
  • Kurds' Takeover of Iraqi City of Kirkuk Strengthens Their Hand (WSJ)
  • U.S. says government lab workers possibly exposed to anthrax (Reuters)
  • Netflix Up 21% With Tesla: The best U.S. stocks this month are ones that just a few months ago were the biggest losers (BBG)
  • Architects of Iraq Invasion Return to Blame Obama (BBG)
  • Nato claims Moscow funding anti-fracking groups (FT)
  • Lawmakers Skeptical GM Bosses Were Unaware of Defect (WSJ)
  • Corinthian Colleges Warns of Possible Shutdown (WSJ)
  • Taiwan's Quanta to start mass production of Apple's smartwatch in July (Reuters)
 
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"De-Dollarization" Continues - China Starts Direct Trade With UK





Following the initial de-dollarization meeting, there has been a slew of anti-dollar moves around the world (including Gazprom's shift of 90% of its clients to non-dollar payments). However, on the heels of the "anti-dollar alliance" discussions yesterday, DW reports that China would start direct trade between the renminbi and the British pound on Thursday. China's Foreign Exchange Trade System (CFETS) confirmed Sterling and yuan would be directly swapped without using the US dollar as an intermediary.

 
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Frontrunning: June 19





  • Currency Probe Widens as U.S. Said to Target Markups (BBG)
  • Battle for Iraq refinery as U.S. hesitates to strike (Reuters)
  • Ukraine forces battle separatists after truce 'refused' (Reuters)
  • Fed Dots Ignored as Investors Focus on Yellen’s Message (BBG)
  • Retirees Suffer as $300 Billion 401(k) Rollover Boom Enriches Brokers (BBG)
  • American Apparel ousts CEO; source says Dov Charney 'will fight like hell' (LA Times)
  • House Panel Is Subpoenaed as Trading Probe Heats Up (WSJ)
  • GM Officials Ignored Alert on Car Stalling (WSJ)
  • Russia’s $20 Billion Bond Void Filled by China to Mexico (BBG)
 
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Frontrunning: June 18





  • Levin Hearing Ups Volume in High-Frequency Call to Action (BBG)
  • Ukrainian President Fires Central Bank Chief (BBG)
  • Argentina Plans Debt Swap (WSJ)
  • Fed Decision Day Guide From Dot Plots To Exit Strategy (BBG)
  • World Bank Economist: China May Face US-Style Financial Crisis (WSJ)
  • Premier Li says no hard landing for China, expects medium to high growth (Reuters)
  • Putin Talks Peace With Ukraine Leader After Gas Pipe Fire (BBG)
  • Poll Shows Erosion in President's Support (WSJ)
  • U.S. mortgage applications plunge in latest week (Reuters)
  • Ex-Goldman director goes to prison, still owes $13.9 million fine (Reuters)
 
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Shanghai Limits Individual Purchases Of Risky Bonds As China Overtakes US As Biggest Corporate Borrower





With China's shadow banking system's collateral chain's collapsing amid government crackdowns on the ponzi, the 'desperate for liquidity' borrowers have increasingly turned to global capital markets' suckers to fund the next malinvestment. As China's currency becomes more internationalized and yields around the world collapse (thanks to central bank largesse), demand from investors has driven, for the first time ever, the Chinese corporate bond market has overtaken the United States as the world's biggest. As S&P warns, this is raising global credit risk as "as much as 10% of global corporate debt is exposed to the risk of a contraction in China's informal banking sector," or around $4-$5 trillion, "causing overall corporate risk to increase globally," and it's not expected to slow anytime soon. It appears the authorities are starting to recognize the bubble as they plan to 'limit individuals' purchases of risky bonds'.

 
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The Good News In All The Bad Data





Today's financial markets make a mockery out of sanity and logic. The difference between what SHOULD happen and what IS happening is perhaps the greatest it has been in our investing lifetimes. If you're perplexed, flummoxed, frustrated, stymied, enraged, bored, irritated, insulted, discouraged -- any or all of these -- by the ever-higher blind grinding of asset prices over the past several years, despite so many structural reasons for concern, you have good reason to be.

 
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China's Collateral Rehypothecation Fraud Is Systemic





It's official - everyone's involved! According to the 21st Century Business Herald, at least 17 financial institutions involved in copper, aluminum and other nonferrous metals financing business face losses of almost 15 billion Yuan (not including the contagious rehypothecated collateral chains involved) due to the over-invoicing of the Qingdao port. Crucially, it appears that the evaporation of collateral (i.e. multiple loans secured by the same collateral) has been confirmed officially and banks such as Standard Chartered have already ceased any new business via this supposedly secured channel.

 
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Frontrunning: June 13





  • Tea Party struggles to repeat Cantor-style shock in Tennessee (Reuters)
  • Iran Deploys Forces to Fight al Qaeda-Inspired Militants in Iraq (WSJ)
  • Oil Rallies as Militant Advance in Iraq Threatens Crude (BBG)
  • Gold Set for First Back-to-Back Weekly Gain Since April (BBG)
  • Hedge Funds Get Stung by Slow Markets (WSJ)
  • Sterling nears 5-year high after Carney speech (FT)
  • Britain Warns Boom in Real-Estate Prices Threatens Economy (WSJ)
  • East Europe Leaders Urge EU Unity to Counter Russia (BBG)
  • Formula One Said to Be Valued at $8 Billion as Malone Seeks Stake (BBG)
  • Dumb and dumber: Abe Plans Company Tax Cut in 2015 as Kuroda Warns on Budget (BBG)
 
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Oil Surges To Highest Since September As Algos Finally Find Iraq On The Map





With another day of little otherwise completely irrelevant macro news (because following last night's abysmal Australian jobs data one would think the AUD would be weaker; one would be wrong), market participants - all 3 of them - and algos (which have finally uncovered where Iraq is on google maps) are finally turning their attention to the latest conflict in Iraq (because they obviously no longer care about the martial law in Thailand or the civil war in Ukraine), where the Al Qaeda spin off ISIS overnight seized at least 310K B/D in refinery capacity in northern Iraq according to the Police, and what is more concerning, is now less than a 100 kilometers away from Baghdad. Will ISIS dare to venture further south? Keep an eye on crude for the answer.

 
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