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Futures Slide On Renewed Catalan Independence Jitters, Disappointing Chinese Inflation
Following yesterday's confusing exuberance, which saw the sluggish market rise in the last hours of trading as the latest Scottish poll showed a reverse of the "Yes" momentum (and fading Gartman's latest reco of course), overnight European jitters have re-emerged once more following a speech by Catalonia's Artur Mas, who has long pushed for independence of the region, and who said that while there are different ways Catalonia can vote, the important issue is that Catalans vote somehow. Mas says Spanish govt will likely try to block Catalan vote "the reasons why the central government is blocking the vote are political not legal", which in turn has once again brought attention to Europe's artificial, unstable and temporary political and monetary union, which threatens a reversion of the nightmare days from 2012 when Mario Draghi was promising he would do everything in his power to send the EUR higher (as opposed to now).
Additionally, the latest inflation data overnight from China, with the CPI missing expectations of 2.2% to just 2.0%, while producer prices contracted once more, this time by 1.2%, down from -0.9% and below the 1.1% consensus, which was a record 30th consecutive month of PPI declines in China, signaling overcapacity in China's factories and weaker commodities prices.. The main driver, as we have been noting recently, was the clobbering in the commodity sector but also lower food prices. And while deflation for a country which creates a little under a trillion in new loans per quarter is an absolute disaster, BofA was quick to point out the silver lining: "Benign inflation in August and probably September should allow adequate room for further policy easing including targeted monetary easing." Great: so more of the same monetary stimulus which has failed to fix the world for the pastr 6 years will be unleashed and this time everything will be fixed.
And while US equity futures are broadly lower for now, this time something is different because even as the USDJPY soars to new multi-year highs touching 107.14 moments ago, this time it has failed to pull TSY yields higher with it, and as a result treasuries gain for first time in six sessions with the 10Y yield trading at 2.514%, rising through both 50-DMA (2.467%) and 100-DMA (2.527%) this week amid speculation Fed may be closer to signaling rate increase.
The picture overnight in Asian bourses was somewhat mixed with bourses in China (-0.3%), Hong Kong (-0.2%) and Japan (+0.8%) taking the positive lead from the US. China’s inflation reading for August was the main release. CPI moderated to 2.0% yoy in August, from 2.3% in July (consensus 2.2%). PPI deflated further to -1.2%yoy, from -0.9% yoy in July (consensus -1.1%). In reality the soft inflation readings were consistent with the recent downtrend in commodity prices. A stronger Dollar since the end of June certainly didn’t help but we note that Brent crude and Iron ore prices are both down by around 12% in the current quarter. Brent is stabilising at around US$98/bbl overnight after having sold off another 1% yesterday. Being a net importer of oil, lower fuel prices should be fundamentally positive for Asia. The tone in Asian credit seems firm with IG spreads generally 1-2bp narrower whilst new issues are also breaking tighter in secondary. Asian stocks fall with the Nikkei outperforming and the Kospi underperforming. MSCI Asia Pacific down 0.3% to 146.3. Nikkei 225 up 0.8%, Hang Seng down 0.2%, Kospi down 0.7%, Shanghai Composite down 0.3%, ASX down 0.5%, Sensex down 0.2%.
European equity markets trade lower, led by the Spanish IBEX-35 on Catalonia break-up fears, with an initially stronger German equity market ebbing away after the first few hours. Chinese inflation knocked confidence from the open as lower than expected CPI and PPI highlighted the difficulties that the Chinese authorities face in stoking economic rejuvenation without resorting to broad-based fiscal and monetary stimulus. Following the data, commodities prices have fallen across the board, with iron ore, copper and oil touching multi-month lows (5-year lows in the case of iron ore), impacting the profit outlook for some of Europe’s biggest miners and oil & gas producers. 15 out of 19 Stoxx 600 sectors rise; travel & leisure, tech outperform, autos, food & beverage underperform. 49.8% of Stoxx 600 members gain, 47.2% decline. Eurostoxx 50 -0.1%, FTSE 100 -0.2%, CAC 40 -0.1%, DAX +0.2%, IBEX -0.3%, FTSEMIB +0%, SMI +0.1% The Swedish and German markets are the best- performing larger bourses, Spanish the worst. The euro is little changed against the dollar.
Japanese 10yr bond yields rise; Spanish yields decline. Commodities decline, with zinc, copper underperforming and natural gas outperforming. U.S. jobless claims, monthly budget statement due later.
Looking ahead to today, we have a 30-year Treasury auction to look forward to whilst on the data front we have the weekly jobless claims, the August budget statement and the Quarterly Services Survey for Q2. The latter is used to revised preliminary estimates of spending on services and our economists think the market will be keen to see what the data show for healthcare spending given its recent tendency to be a swing factor on quarterly GDP growth. In Europe, Inflation readings in Germany and France are the highlights although we’ll also watch for any interesting sound bites from Draghi’s keynote speech at the Eurofi Financial Forum in Milan at 8pm UKT this evening.
Market Wrap
- S&P 500 futures down 0.2% to 1990.4
- Stoxx 600 up 0.2% to 345.3
- US 10Yr yield down 3bps to 2.51%
- German 10Yr yield down 1bps to 1.04%
- MSCI Asia Pacific down 0.3% to 146.3
- Gold spot down 0.4% to $1244.7/oz
Bulletin Headline Summary from RanSquawk and Bloomberg
- China’s inflation paradox continues, as PPI falls for the 30th consecutive month and CPI falls to a four month low – all lower than expected
- European equity markets flag as lower commodity prices hit European miners, oil & gas names profitability outlook
- Looking ahead, ECB’s Draghi and Coeure eyed for any further clues on the upcoming ABS program and the US Treasury conclude the week’s issuance with their USD 13bln 30yr bond sale
- Treasuries gain for first time in six sessions; 10Y yield, trading at 2.514%, has risen through both 50-DMA (2.467%) and 100-DMA (2.527%) this week amid speculation Fed may be closer to signaling rate increase.
- Week’s auctions conclude today with $13b 30Y bonds; WI 3.26% vs 3.224% award in August
- Obama said last night that the U.S. would be joined by a broad coalition of partners, including Saudi Arabia, for a “steady, relentless effort” against Islamic State
- No American ground combat troops will be needed, he said, as American airpower will support local forces, primarily Iraqis and select members of the Syrian opposition; Secretary of State John Kerry will urge Sunni Arab leaders to enlist in the battle
- Scottish independence lost ground in an opinion poll a week before the referendum, with a survey by Survation for the Daily Record in Glasgow put the No vote at 53%, Yes at 47%
- Scotland’s financial-services industry is threatening to head for the border, with RBS and and Lloyds Banking Group Plc saying they plan to move to England if the country votes for independence
- Credit Agricole SA will probably reach an accord with U.S. officials in the next two months to settle a probe of the bank’s business in sanctioned countries including Iran, a person with knowledge of the matter said
- European Union to enact new package of Russia sanctions tomorrow, while also announcing terms for possible future review or suspension, two officials say
- Japan should proceed with another increase in the sales tax as planned to signal it’s serious about reining in the world’s biggest debt burden, an adviser to central bank governor Haruhiko Kuroda said
- Sovereign yields lower. Asian mostly lower, European stocks mixed, U.S. equity-index futures decline. WTI crude, gold and copper lower
FIXED INCOME
Bund futures and T-notes have gained alongside modestly shallower equities as German fixed income capitulates recent supply-inspired losses. The German 2s/10s curve has flattened in a correction of the sharp steepening seen since the beginning of the week and the Spanish/German spread has tightened, possibly as Scotland’s Independence campaign slightly faltered yesterday where the unionists regained the top spot in the latest polling.
Both bond sales in Europe went strongly today, with both Italy and the UK selling longer-dated debt to stronger bid/covers and softer yields – particularly in Italy, as the Tesoro recorded record low yields at its auction of 3-, 7- and 15-year debt.
EQUITIES
European equity markets trade lower, led by the Spanish IBEX-35 on Catalonia break-up fears, with an initially stronger German equity market ebbing away after the first few hours. Chinese inflation knocked confidence from the open as lower than expected CPI and PPI highlighted the difficulties that the Chinese authorities face in stoking economic rejuvenation without resorting to broad-based fiscal and monetary stimulus. Following the data, commodities prices have fallen across the board, with iron ore, copper and oil touching multi-month lows (5-year lows in the case of iron ore), impacting the profit outlook for some of Europe’s biggest miners and oil & gas producers.
FX
USD/JPY managed to knock out barriers at the 107.00 handle, briefly lifting the pair to fresh six-year highs for the fourth consecutive session, however the move was short-lived as lower Treasury yields and profit-taking took the pair off highs. GBP/USD still trades approximately 100 pips shy of closing the gap from Monday’s open, however yesterday’s opinion poll has allowed GBP to pull back around 150 pips of the most recent losses. AUD was the biggest mover overnight bolstered by a stellar employment report, with the M/M employment change reading showing the biggest increase on record (121.0K vs. Exp. 15.0K (Prev. -0.3K). Nonetheless, AUD/USD has since pulled off best levels with the reading largely reinforced by a surge in part-time jobs (Part Time Employment Change (Aug) M/M 106.7K (Prev. -14.8K, Rev. -19.5K).
COMMODITIES
Brent crude futures sit just above the 2013 lows of USD 96.75/bbl, as Saudi Arabia’s oil minister indicated OPEC are not close to intervening despite the recent slide in prices. The sentiment was reiterated by Kuwait’s oil minister who stated that oil prices are still relatively stable, and are to rebound on winter demand. Elsewhere, copper has printed 12-week lows in early European trade with prices declining on weaker-than-expected inflation data overnight from China and depressed demand in the EU as ongoing uncertainty over new sanctions curbs investor confidence.
* * *
DB's Jim Reid cincludes the summary of overnight events
after the European markets closed yesterday the results of the latest survation poll were released. The poll had been anticipated to cement how close the vote had become as this had previously been the poll with the highest support for the YES campaign. However the 'YESs' came in at 42%, and 'NOs' at 48% with 'don't know' at 10%. This is unchanged from the last Survation poll on the 28th August. Interestingly the sample dates (5-9th Sept) covers some of the period when the public were aware of the first surge towards the 'YES' campaign. Is it random or signs of some cold feet coming in from the recent YES converts. As far as we're aware the next poll will be released over the weekend. This is the YouGov Sunday Times poll that caused all the furore this week. We'll then get 5 or 6 more before the referendum next Thursday. So a lot to play for but the "Better Together" campaign has a boost which has been reflected in how Sterling has traded since the poll hit the market. The Pound spiked to 1.619 from around 1.613 against the Dollar post news before hitting an intraday high of around 1.623. We have given back some of these gains in Asia overnight though with the currency easing back to around 1.619 as we go to print.
Staying in Europe, yesterday was another weak session for Governments. The 10-year yields in the UK, Germany, Italy and Spain rose +3bp, +5bp, +3bp and +6bp on the day to close at around 2.51%, 1.05%, 2.40%, 2.26%, respectively. The moves were probably not helped by comments from ECB’s Yves Mersch who said that the ABS purchases are not a prelude to government bond purchases but we suspect some specific factors might be at play for Spain. Indeed Spain has risen by 22bps this week and is set for its weakest weekly performance since June 2013 if we don’t get any relief over the next 48 hours. Investors seem to be worried that the independence push in Scotland may have some read-through for Catalonia. More than 450,000 people are expected to attend a pro-independence demonstration today on the streets of Barcelona, all ahead of an independence referendum on 9 November. That said, unlike the ongoing event in Scotland, the Spanish government has deemed the Catalonia vote to be illegal.
On the other side of the Atlantic, Treasuries moved in tandem with the 10yr yield closing nearly 4bps higher at 2.54%, marking its fifth consecutive day of losses. The 10-year auction yesterday yielded a bid/cover ratio of 2.71x, not far off from the average of the last 10 occasions. Foreign participation was higher though with indirect bidders buying up 53% of the notes (highest since December 2011 and up against the average of 45% in the past 10 auctions). US equities had a better day, led by gains in the Tech space. Apple gained 3% the day following the release of its new iPhones. The S&P 500 and NASDAQ ended the day +0.36% and +0.75% higher, respectively.
Moving on to Asia, the picture overnight is somewhat mixed with bourses in China (+0.7%), Hong Kong (+0.2%) and Japan (+0.4%) taking the positive lead from the US. China’s inflation reading for August was the main release. CPI moderated to 2.0% yoy in August, from 2.3% in July (consensus 2.2%). PPI deflated further to -1.2%yoy, from -0.9% yoy in July (consensus -1.1%). In reality the soft inflation readings were consistent with the recent downtrend in commodity prices. A stronger Dollar since the end of June certainly didn’t help but we note that Brent crude and Iron ore prices are both down by around 12% in the current quarter. Brent is stabilising at around US$98/bbl overnight after having sold off another 1% yesterday. Being a net importer of oil, lower fuel prices should be fundamentally positive for Asia. The tone in Asian credit seems firm with IG spreads generally 1-2bp narrower whilst new issues are also breaking tighter in secondary.
Meanwhile Ukraine’s President Poroshenko yesterday said that bulk of Russian forces had retreated from Ukrainian territory. EU seems to be holding off from the Russian sanctions on seemingly rising optimism of a lasting ceasefire although the WSJ is reporting that the US is close to imposing new energy sanctions which would ban energy firms from working with Russia on future oil exploration. In Germany, Angela Merkel told the Parliament on Wednesday that the new sanctions, approved by leaders of the European Union on Monday, should be applied immediately because the cease-fire protocol had not been put fully into effect, even if the situation had improved (NYT).
Looking ahead to today, we have a 30-year Treasury auction to look forward to whilst on the data front we have the weekly jobless claims, the August budget statement and the Quarterly Services Survey for Q2. The latter is used to revised preliminary estimates of spending on services and our economists think the market will be keen to see what the data show for healthcare spending given its recent tendency to be a swing factor on quarterly GDP growth. In Europe, Inflation readings in Germany and France are the highlights although we’ll also watch for any interesting sound bites from Draghi’s keynote speech at the Eurofi Financial Forum in Milan at 8pm UKT this evening.
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PGNiG: Russia reduces gas flow to Poland by 45% .
http://wyborcza.biz/biznes/1,100896,16621883,Gazprom_zegna_rzad_Tuska__p...
Pretty sure more is coming.
As I am from Poland - I'm not very thankfull... but:
The supreme art of war is to subdue the enemy without fighting.
This comes to mind
https://i.imgflip.com/8ckv2.jpg
As I am from Poland
You must know some of the hot Polish military women.....can you introduce me?
Putin hurts one of them.....we're gonna have a problem. Send that message up the line my little KGB litchez.
http://www.youtube.com/watch?v=5huWVN54KYQ
The Catalans must be shelled mercilessly if they attempt to separate from Kiev, er, Madrid.
Would start to create interesting bed fellows:
Middle of November 2014: "AND THE VOTE IS IN! Catalonia votes for independence from Spain."
5 Minutes Later:
Russian Foreign Ministry: "Russia hereby recognizes the independent Republic of Catalonia."
3 Minutes Laters:
Weiß-Russland Foreign Ministry: "Weiß-Russland hereby recognizes the independnece of the Republic of Catalonia."
2 Minutes Later:
China recognizes Catalonian independence.
THE NEXT DAY -
Putin agrees with the Prime Minister of Catalonia to station Russian troops there for the time being to guarantee Catalonian security and to train their new army.
At which point John Kerry has to go before a ton of cameras and explain why the Catalonians are terrorists and bombing begins in 5 minutes.
Next, they will need to start shelling Venice.
At least Madrid is open for discussion up to a certain point. Kiev isn't.
Polish chicks are so hot, that we need no gas from Russia
At least for keeping our houses warm. Fuck the rest
ps. Mr. Putin is known for his love for beautiful women so let's hope he will spare some of them.
"You must know some of the hot Polish military women.....can you introduce me?"
Not exactly military fan , but maybe we can find something for You Zee.
I like the tough and mean.....but cute.....ones.
again Russia wins http://www.youtube.com/watch?v=XMEvYSmMce4
I Watch
CL going into no support land, til the upper eighties. Alot of sellers jumping in this early AM. But rollover coming for most instruments so might be the typical confusion.
Setting buy stops at 87.20, 85.32, and full-stop buy at 82.12. NG is getting pretty funny with how flat it has been over the past 24 hours.
Not all the Lemmings want to run to and off the cliff. More Europeans start leaving the EU zone now, small group of Lemmings will not jump.
https://www.youtube.com/watch?v=AOOs8MaR1YM
13th Anniversary of 9/11 Thursday Followed by Massive Solar Storm Friday Night
http://winteractionables.com/?p=14514
"...which in turn has once again brought attention to Europe's artificial, unstable and temporary political and monetary union..."
unions, plural
and the reason would be... what? all those independentist movements draw strenght and courage to go "small nation-statewise" because of the supranational orgs EU and ECB
not even one of them is proposing to have an own regulatory environment, wanting to use the EU's. not even one of them is proposing to have it's own monetary setup, wanting to use the old one. those are facts, but of course don't let me disturb a good narrative
You're right. All the movements, Catalonia, Scottland, shit even the Flemish (Sudden Debt I am looking at you) say they would join the EU. (Lets not forget where YOU are from, good ol' Süd-Tirol)
However, Spain has said before it would block Catalonia from joining the EU like it did Kosovo -- and a senior policy maker did in fact say (definitely not from the Spanish government's mouth, but someone who you could say is mildly authoritative) that Spain would block Scottland as well. Then there are the Belgians, and while they voted FOR Kosovo, and if they did vote for Scotland, if Catalonia breaks off, the Belgians would likely be next -- and the French-belgians have a good gig right now. They wouldn't want to screw it up, and would likely vote "no" if -- but for no other means than simple self-preservation.
This idea of "European Socialism" that the EU and EMZ are based upon is beginning to unravel as those who are going to have to pay into the system forever without getting equal benefit in return begin to see they will work forever for other's benefit. The wealthy places (Catalonia, Flemish Belgium and Süd-Tirol) are inching closer to ejecting the poorer places from their sphere of socialism.
I would think you would be all for this. No more having to support the lazy Sicilians.
Madrid has it's reasons to block independentists, and has an understanding with London, yes, including on Gibraltar, where both huff and puff in public but want to keep the status quo. Paris and Brussels (the capital of Belgium) are too in the no-independence bloc
yet where do you get this "European Socialism" in the form of the EU and EMZ from? both "projects" are undeniably liberal in their scope (think about the Four Freedoms) and both are driven by coalitions of social democrats and conservatives, something that is very visible in the EU parliament, too, and in the composition of the newly appointed Commission
if the EU would endorse a socialist agenda then your claim would have more bite. but we don't have any EU minimum wage, or personal EU subsidies, or anything even remotely resembling socialism in the way europeans would recognize it
(btw, why Süd-Tirol? not from there) Where were you in Italy that left you sooo disgusted about that country? did you ever visit Sicily?
if the EU would endorse a socialist agenda
Heh heh.....if only.
I doubt you would recognize a socialist agenda even if it would bite your nose off, GetZeeGold. But you are excused, as American. Your politics function on a completely different ideological plane, and so the classical political terms truly don't make sense in your country
But you are excused, as American.
Soooo....can I go now?
nope, you still have to send us Bush Junior. Keep your Republican party, go and win elections, it's all fine... but send us our hero and idol
Keep your Republican party
Like a typical woman.....you clearly not listened to a damn thing I've said.
If you stop talking you might be surprised as to what I actually think.
Ghordo has a vagina?
just checked, just to be sure. nope. did he write something I should have noticed? whenever I mention Bush Junior, he gets mad at me. go figure
Just hysterical like one is all......you know I hate those damn progressive republicans.
Either that or you've been stumbling around here in a zanax laced haze for quite some time.
European Socialism is the idea that the continent of Europe should "look out for one another" and to prevent imbalances in wealth various financially sucessful areas find themselves habitually supporting (via bailouts, low interest rates, NIRP, etc., etc.,) the less productive regions. While this sounds ok to those who are quite "social" -- when one group habitually finds itself giving away more than they receive, resentment begins to breed, which, is normal. People want to benefit from the spoils of their labor. However, when Athens gets a remodeled sewer system via EU funds, you have to ask --
Where is Berlin's free sewer system, and who paid for it? Odds are that Germany paid 22% of the costs for that sewer system -- but why? What net benefit do the German tax payers receive on that investment? The answer is very little to zero. So then you have to ask yourself "Why did they pay out for it then?" And when you press people who are fans of the project, some ridiculiousness comes out like "Europäische Einheit." So then you would kinda scratch your head, and go, well, ok if capital funds used for infrastructure are paid out by the EU they must be in proportion to what is paid in ... nope. The "poorer" nations in the EU get materially more cash via various channels than the "wealthier" ones do. So, this is a lightweight form of socialism. Wealth redistribution acorss cultures, borders, languages, economicsystems, etc., etc., quite scare if you ask me.
I guessed Süd-Tirol because you told me you were "Austrian" once -- and you are pretty good with Italian from what I hear, thus, my guess is Süd-Tirol, which really should belong to Austria.
EDIT - Yeup been to Sicialy. Worst vacation of my life. I was in Rome last weekend. Still better than Athens, but at least the OSCD agrees with me that Greece is no longer a first world country.
and does this idea have any real connotations? at EU level? no. it's just that, an idea
sewers are still usually funded by the cities themselves (often through muni bonds, btw). you are confusing talk with action, I fear
though I have to admit that listening too long to seriously pro-EU european socialists does get you there, particularly when you listen to them through the distorted lens of their strongest detractors, including the right wing of the Alternative für Deutschland party
there is no wealth redistribution of the socialist kind in the EU, at EU level. agrarians subsidies are perhaps the closest you can find, and they are all but socialist in their scope. if you stick to the socialist europe meme, then you have to look at the nation states, not the EU
compared to the EU, it's the US that engages in socialist redistribution at federal level
TBF - I don't really listen that much to AfD. I know they want an end of the Euro as we know it, don't want to deport me, and thus, they get 25€ a month from me. Too bad I cannot vote.
The US is super slutty as well, however the distribution of funds from the EU "federally" is a foregone conclusion.
http://ec.europa.eu/enterprise/sectors/tourism/files/studies/structural_...
This is "take from those who have to give to those who have not" at its finest.
Listen to those swivel-eyed EU-federalists parading around Brussels sound like nothing more than Minnie Mouse in heat would drive anyone into the "lesser of two evils" camp, irrespective of who the other evil is. I barely even register what they say anymore, and wrote off the entire project when HvR renamed WWI and WWII as "European Civil Wars"
http://eu-un.europa.eu/articles/en/article_12699_en.htm
back in 2012.
are you sure they don't want to deport you in the future? this counts doubly if you are both a German and American national, the "worst kind" for some of them
I cannot explain in a comment like this in detailed way how EU funding and intervention function. the very general idea is that: a nation state has a project, and the EU funds part of it. Yet remember that all EU monies are granted by the member countries, and it's really not much, compared to what they keep
lol, "swivel-eyed" is actually how Cameron was calling the UKIP grass-root activists (with an "eye" on Nigel Farage)
As long as I don't drain the system, and continue to improve on the language I think I am safe. Plus I am probably going to pop the question to the GF (a German) next year -- so I think they are stuck with me at this point in time -- although I am the worst kind of person to debate the EU with for these people, the only topic I am better at (making them pull their hair out) is the American gun control debate.
Haus - "So what do you think about the Germany politican who enacted contemporary German gun-control laws."
Shitlib - "They are great! Its a fantastic idea, and I 100% support it."
Haus - "It was Adolf in 1934."
Shitlib - " :-| well ... uhhh ... I..."
Priceless every time.
LOL, can imagine
WTF would you go to Athens?
The small islands is where it's at, my friend. Samos and Cephalonia are my favorite. Great food, beaches, private villas, no disgusting city smog, no dumb for-tourist restaurants that charge premiums for shit...Probably gonna retire on a Greek island now that I think about it
Much easier to stop people from voting if they do not have any guns.
Work and no guns....will set you free.
http://images.travelpod.com/users/the_stamms/eurochalli-2006.1158800400.01_auschwitz_entry_-_work_will_set_you_free.jpg
USJPY <107
Spain is in big trouble - but then again, so is the rest of Europe...
http://www.globaldeflationnews.com/spain-enters-the-deflation-zone-europ...
no jobs
http://seekingalpha.com/article/2486115-jobs-friday-when-bubblevision-misses-the-epic-failure-of-the-us-labor-market?source=feed_tag_editors_picks
Senction that fuckers!