Yuan

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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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Mindblowing Fact Of The Day: China Has Over 52 Million Vacant Homes





Over 1 in 5 homes (with $674 billion of mortgages) in China stand empty... and if you think that urbanization will fix that, as WSJ reports, a 10 percentage point rise in the urbanization rate (already at 54%) would result in only a 2.6% drop in vacancy rates. China has a major over-supply issue thanks to property developers who had rushed into the market to build homes, which have been a popular investment as prices seemed bound to keep rising. But now, as Vanke recently warned, things are changing and "the golden era" of China's property market are over. The vacancy rate of sold residential homes in urban areas reached 22.4% in 2013 and as new home prices are slashed to move product, a 30% drop would leave 11.2% of Chinese homes underwater on their mortgages...

 
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Chinese GDP Set To Plunge As Government Shuts 20 Million WeChat Prostitution Accounts





WeChat, the popular instant messaging service in China, has been the subject of a 3-month crackdown on cyber-crime by police in the Guangdong Province where Tencent (WeChat's parent) is based. Having created a CNY 10 million fund for whistleblowers, the company reports:

*WECHAT SHUTS 20M PROSTITUTION-RELATED ACCOUNTS: XINHUA

WeChat has over 600 million active users (so there's stillplenty of pr0n we suspect), but we wonder just how much carnage this will do the now hookers-and-blow dominated GDP calculations of the world's major economies.

 
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Frontrunning: June 11





  • World Bank Cuts Global Growth Forecast After ‘Bumpy’ 2014 Start (BBG)
  • Al-Qaeda Offshoot Threatens Iraq Oil Site After Taking Mosul (BBG)
  • Fed Prepares to Keep Record Balance Sheet for Years to Come (BBG)
  • EU investigates tax rulings on Apple, Starbucks, Fiat unit (Reuters)
  • Cantor Loss Shocks Republicans, Dims Immigration Changes (BBG)
  • More surveillance: Google to Buy Satellite-Imaging Startup for $500 Million (WSJ)
  • Tea Party activist who defeated Cantor focused on budget, immigration (Reuters)
  • Airbus Suffers Worst Order Loss as Emirates Deal Scrapped (BBG)
  • Amazon.com plans local services marketplace this year (Reuters)
  • Amazon Stops Taking Advance Orders for ‘Lego’ and Other Warner Videos (NYT)
 
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Overnight USDJPY Selling Gives Algos An Early BTFATH BTFD Opportunity





The tidal patterns of this market have become so well-known to even the least observant: push the USDJPY (or other JPY carry pairs) higher starting around 6am Eastern, then ramp it just before US open to launch cross-asset momentum ignition algos in FX which then carry over to spoos and the broader "market." In the meantime, overnight selling of USDJPY allows a reset before ensuing buying during the US daytime session. Rinse. Repeat. Sure enough, just after 6 pm Eastern, the same USDJPY which catalyzed yet another all time high close had been sold off, leading to a 0.85% drop in the Nikkei and US equity futures which are showing an unprecedented ungreen color. Don't worry though: the pattern is too well-known and practiced by now, and we fully expect USDJPY levitation to pick up shortly, which is the only signal ES-algos need, trampling over any kind of newsflow both good and bad, and leading to yet another all time record high which it goes without saying is completely detached from any underlying reality at this point and at any time over the past 5 years.

 
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