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)
As the US spreads its message of cheer around the world, it appears an increasing number of trade 'partners' are more than willing to consider alternatives to the hegemony. As AFP reports, China's Yuan usage in global trade and finance has more than doubled this year. While still notably below USD usage in international payments it remains firmly in second place for trade finance and according to a recent survey by HSBC, the number of US companies planning to use Yuan has almost tripled this year (from 8% to 22%). De-dollarization continues...
- 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)
A money-laundering butterfly flaps its wings in China... and the US housing market crashes?
- 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)
- Xi Says China Conflict With U.S. Would Be Disaster (BBG)
- Short selling drops to lowest level since Lehman (FT)
- Scoping the new subprime as watchdogs cry 'bubble' (Reuters)
- Carlos Slim to break up América Móvil empire (FT)
- Jury Acquits Rengan Rajaratnam in Insider-Trading Case (WSJ)
- Hamas rockets land deep in Israel as it bombards Gaza Strip (Reuters)
- Hong Kong Buyers Queue for New Homes After Prices Plunge (BBG)
- Rebel Stronghold in Ukraine Braces for Its Showdown (WSJ)
- Tiny Houses Big With U.S. Owners Seeking Economic Freedom (BBG)
- Chinese Cash-Bearing Buyers Drive U.S. Foreign Sales Jump (BBG)
While the situation between Israel and Gaza continues to escalate, pulling the markets' attention away from the recent developments in Iraq (as for the Ukraine civil war, forget it), the big news overnight came out of Chine which reported another contraction in consumer prices, which both declined to 2.3% and missed expectations of a 2.4% print (down from 2.5%). Producer Prices had another negative print, the 28th in a row, and have remained negative since 2012. This led to the Hang Seng Index falling at the fastest rate since late June to erase all YTD gains. However, as has now become the norm, macro news hardly impacted US equity futures, which are driven exclusively by the Yen carry trade, which unlike yesterday's pounding, has traded rangebound between 101.6-101.7 keeping US equity futures just barely in the green. We expect the momentum ignition algo to kick in at some point, for absolute no fundamental reason beside the NY Fed trading desk issuing a green light, sending the USDJPY surging, taking the Spoos with them, and helping stocks forget all about the weak Asian session.
In Wenzhou - dubbed the capital of China's private businesses - nearly 90 per cent of loan guarantors have failed since the start of the credit crisis arising from the underground banking system, according to the media. As SCMP reports, although their services are critical for the economic system and the millions of small firms - that provide the majority of the mainland's jobs - hundreds of loan guarantee groups are creaking under the weight of bad loans and are simply unable to bear any more. "It could become the last straw that breaks the camel's back," exclaims the head of a local law firm, "without the privately owned small businesses, China's economy won't have a future." But PMIs are up so everything's fine?
The dollar's demise has been often foretold. The euro, SDRs, the yuan, Bitcoins all were going to be viable alternatives. The dollar persists.
Uber Launches War Against Yellow Cabs, Cuts New York Fares By 20% As Ali-Baba Launches Chinese Uber CompetitorSubmitted by Tyler Durden on 07/07/2014 11:25 -0400
Curious what Uber is spending the record $1.2 billion in cash it raised in its most recent funding round (which valued it at a whopping $18.2 billion)? The answer: subsidies. In a page right out of Amazon's playbook, the management of Uber has found that the best use of proceeds now that it may have finally saturated addressable markets, is to use its cash on hand to fund sub-equilibrium pricing losses and in the process, hopefully, put its competition out of business. Earlier today, the Uber blog announced that UberX is "now cheaper than a New York City taxi."
- Bond Anxiety in $1.6 Trillion Repo Market as Failures Soar (BBG), as reported first by Zero Hedge
- As Food Prices Rise, Fed Keeps a Watchful Eye (WSJ)
- Yellen’s Economy Echoes Arthur Burns More Than Greenspan (BBG)
- Draghi’s $1.4 Trillion Shot: Silver Bullet or Misfire? (BBG)
- Israel's Netanyahu phones father of murdered Palestinian teen (Reuters)
- Ukraine says forces will press forward after taking rebel stronghold (Reuters)
- Goldman Sachs Brings Forward Rate Forecast as Treasuries Drop (BBG)... you mean rise?
- Super typhoon takes aim at Japan (Reuters)
- Kidnapped Nigerian girls 'escape from Boko Haram abductors' (Independent)
- Merkel says U.S. spying allegations are serious (Reuters)
A look at the investment climate through the currency market and upcoming events and data.
Gold has held firmly above $1300 for over two weeks, confounding those who said it would never see that key level again, but as the constantly-bearish SocGen explains in this 'astounding' report, gold's downturn is set to return... except their reasoning has a fatal flaw - it's entirely factually incorrect.
For all the theoretical explanations about China's profound commodity rehypothecation problems, the one thing that was missing was an empirical case study framing just how substantial the problem is. After all, it is one thing to say banks expect "X millions in losses", but totally different to see the rehypothecation dominoes falling in practice. Today, courtesy of Bloomberg we got just such an example.
Meet Decheng Mining.