Zurich

Today (like pretty much every other day), it will be all about the Fed and the start of its 2-day FOMC meeting, whose outcome will be influenced by today's 8:30 am CPI report as inflation (Exp. 0.1%) according to many is the only thing stopping the Fed from tapering in light of better than expected recent economic data as well as a clearer fiscal outlook. Or at least that's what the watercooler talk is. The hardliners now agree that since the Fed openly ignored the bond market liquidity considerations in September, that it will plough on through December with no announcement, and potentially continue into 2014 with zero chances of tapering especially now that we approach the end of the business cycle and the Fed should be adding accommodation not removing it. To that end, the consensus still is in favour of January or March for the first taper so markets are not fully set up for a move; conversely a dovish statement would probably result in yet another pre-Christmas, year end market surge, which in the lower market liquidity days of December is likely what the Fed is going for, instead of a volatile, zero liquidity sell off, despite Thursday's double POMO.

The rise of the yuan has been exaggerated.  Strip out data involving Hong Kong and the claims of trade flows that are concealed capital flows and one might get a more accurate picture. 

Western central banks have tried to shake off the constraints of gold for a long time, which have created enormous difficulties for them. They have generally succeeded in managing opinion in the developed nations but been demonstrably unsuccessful in the lesser-developed world, particularly in Asia. It is the growing wealth earned by these nations that has fuelled demand for gold since the late 1960s. There is precious little bullion left in the West today to supply rapidly increasing Asian demand, and it is important to understand how little there is and the dangers this poses for financial stability.

• JPMorgan $13 Billion Mortgage Deal Seen as Lawsuit Shield (BBG)
• J.P. Morgan Is Haunted by a 2006 Decision on Mortgages (WSJ)
• World powers, Iran in new attempt to reach nuclear deal (Reuters)
• Keystone Foes Seek to Thwart Oil Sands Exports by Rail (BBG) - mostly Warren Buffet?
• How Would Fed Deal With Debt Ceiling Crisis? Look to Minutes for Clues  (Hilsenrath)
• Anything to prevent the loss of prop trading: 'Volcker Rule' Faces New Hurdles (WSJ)
• BOE Sees Case for Keeping Record-Low Rate Beyond 7% Jobless (BBG)
• Obama Backs Piecemeal Immigration Overhaul (WSJ)
• Abenomics Seen Cutting Japan Bad-Loan Costs to 2006 Low (BBG)

• Investors are stampeding into initial public offerings at the fastest clip since the financial crisis (WSJ)
• Kerry hails disgruntled Saudi Arabia as important U.S. ally (Reuters)
• SAC Capital prepares for a second life (FT)
• BlackBerry's Fate Goes Down to the Wire (WSJ)
• Dutch Gamble on U.S. Housing Debt After Patience Wins (BBG)
• U.S. Wants Broad Divestitures From AMR, US Airways (WSJ)
• Tensions with allies rise, but U.S. sees improved China ties (Reuters)
• China berates foreign media for Tiananmen attack doubts (Reuters)
• China manufacturers squeezed as costs rise (FT)
• European Borders Tested as Money Is Moved to Shield Wealth (NYT)
• Zurich Probe Finds No ‘Undue Pressure’ Put on Late CFO (BBG)

Why China DOESN'T WANT the Yuan to Become the Reserve Currency

“This could turn into a very violent wake-up call for [screen-traded gold]. People talk about ‘fiat currencies’, but we also have ‘fiat gold.’ Volatility is too cheap right now.”

• Dot Com part deux: Investors are showing increasing hunger for initial public offerings of unprofitable technology companies  (WSJ)
• Poll Finds GOP Blamed More for Shutdown (WSJ)
• House, Senate Republicans Offer Competing Plans on Debt-Limit, Government Shutdown (WAPO)
• Obama, Republicans aim to end crisis after meeting, hurdles remain (Reuters)
• US Rethinks How to Release Sensitive Economic Data (WSJ)
• Chinese East Oil Fuels Fresh China-US Tensions (WSJ)
• ECB Agrees on Swap Line With PBOC as Trade Increases (BBG)
• China September Auto Sales Surge 21% on Japanese Rebound (BBG)
• JPMorgan Taps Taxpayer-Backed Banks for Basel Rules (BBG)

• U.S., Russia to push for new Syria peace talks (Reuters)
• Elite Syrian Unit Scatters Chemical Arms Stockpile (WSJ)
• Obama to nominate Summers as Fed chief: Nikkei (Reuters)
• Boehner Wants Joint Talks on Debt, Budget (WSJ)
• House Republicans go for broke in fiscal battles (Reuters)
• Pimco, BlackRock Together Received More Than a Quarter of Verizon's $49 Billion Bond Deal (WSJ)
• Insane financial system lives post-Lehman (Gillian Tett)
• JPM to add $2.5 billion to its litigation reserves in the second half of the year (WSJ)
• Goldman’s Zurich offices visited over working-hours complaint (FT)

• Yes: Support Builds in Congress for U.S. Strike Against Syria (WSJ)
• No: Boehner backs Obama on Syria, but House leaning toward ‘no’ (The Hill)
• U.S. Congress fight over Syria pits establishment versus upstarts (Reuters)
• Wednesday humor: Japan’s Abe Says Fukushima Will Be Resolved Before 2020 Olympics (BBG)
• Bank of Japan to Consider Further Easing if Sales Tax Hike Goes Ahead (Reuters)
• S&P accuses U.S. Justice Department of filing $5 billion lawsuit against it in "retaliation" for the company's downgrade of America's debt in 2011 (WSJ)
• German Candidates Spar Over Records (WSJ)
• Emerging Nations Save $2.9 Trillion Reserves in Rout (BBG)
• Split Congress Mulls Denial of Military Force Request (BBG)
• Sharp Fall in Overseas Investment By Chinese Firms (WSJ)
• Jorge Lemann: He Is...the World's Most Interesting Billionaire (BusinessWeek)
• Why Amazon Is on a Warehouse Building Spree (BW)

• Al-Qaeda Links Cloud Syria as U.S. Seeks Clarity on Rebels (BBG)
• Administration Tells Lawmakers of Evidence Linking Assad to Attack (WSJ)
• Director of National Intelligence James R. Clapper to publish numbers of secret spying orders (CBS)
• U.S., Switzerland strike bank deal over tax evasion (Reuters)
• Another Budget Deal Bites the Dust (WSJ)
• Contemplating Summers Drives Investors to Seek Beltway Expertise (BBG)
• Austerity Test Looms in Australia as Abbott Pledges Cuts (BBG)
• Gay Spouses in All States Now Married Under U.S. Tax Law (BBG)
• Shadow banks face limits to securities trading (FT)
• EU's Rehn sees European recovery strengthening in 2014 (Reuters) ... or 2015... or 2022... or never?

Overnight, the market continued to digest news out of the UK that the formerly solid pro-war alliance has splintered following a historic vote by the House of Commons, leaving Obama to "go it alone." The result was a rather sizable slamdown in both crude and gold, accelerating as Europe opened for trading, and pushing gold back under $1400. This happened even as data out of Europe showed that European unemployment remained at a record high 12.1%, while inflation missed expectations and printed at 1.3%, or below 2% for the seventh month. Earlier in the session, headline data out of Japan showed that inflation had risen at the fastest pace since 2008. However, before the deflation monster is proclaimed dead, the core-core figure (excluding foods and energy) of the Tokyo CPI was down 0.4% yoy, unchanged since June for three months, suggesting that prices are still largely driven by energy-related costs. In other words cost-push inflation is rampant, which is the worst possible scenario and means the BOJ's QE is going to all the wrong place.

Mere days after the CFO of Zurich Insurance, Pierre Wauthier, was found dead (of suspected suicide) at his home in Zurich, the WSJ reports that CEO Josef Ackerman has abrutly resigned. Just 18 months after his appointment at Zurich (after leaving Deutsche Bank's top position), Ackerman's sudden resignation appears based on his view that the late CFO's family felt he had some responsibility for the death. Following a dismal 7% drop in Q1 profits and having struggled in a low-rate environment since Ackerman took the reins, the reasons for the CFO's suicide are not apparent but a statement from Ackerman oddly commented, "I have reasons to believe the family is of the opinion that I should take my share of responsibility."

• UN Insecptors to leave Syria early, by Saturday morning (Reuters)
• Yellen Plays Down Chances of Getting Fed Job (WSJ)
• JPMorgan Bribe Probe Said to Expand in Asia as Spreadsheet Is Found (BBG)
• No Section 8 for you: Wall Street’s Rental Bet Brings Quandary Housing Poor (BBG)
• Euro zone, IMF to press Greece for foreign agency to sell assets (Reuters)
• Brothels in Nevada Suffer as Web Disrupts Oldest Trade (BBG)
• U.S., U.K. Face Delays in Push to Strike Syria (WSJ); U.S., U.K. Pressure for Action on Syria Hits UN Hurdle (BBG)
• Renault Operating Chief Carlos Tavares Steps Down (WSJ)
• Vodafone in talks with Verizon to sell out of U.S. venture (Reuters)
• Dollar Seen Casting Off Euro Shackles as Fed Tapers (BBG)

Liquidated ETF gold holdings are being shipped from the U.K to Switzerland for refining into smaller one kilogramme gold bars, Australian bank Macquarie wrote in a note yesterday. These were then sent to Asia and bought by Asian investors. The note  confirmed, what has been known anecdotally for some weeks.