That didn't take long. BBC reports that "Military bases in South Africa have been placed on high alert for the first time since the advent of democracy in 1994, defence officials have confirmed. The move comes as firebrand politician Julius Malema prepares to address disgruntled soldiers near Johannesburg. The defence minister accused him of trying to "mobilise against the state"." In other words, striking miners are about to be considered enemies of the state, if they hinder record high profit margins at various international precious metal conglomerates. Hopefully South Africa does not test the theory that the worker exterminations (as a reminder tens of striking workers were previously killed by local police) will continue until worker morale improves, because i) it won't, and ii) it will lead to a complete shut down of commodity extraction in the country.
Ten days ago, when describing the latest casualty of the ongoing South African miner revolution, we said: "Expect more South African mines to shutter, as gold production in the world's third largest gold producer grinds to a halt, and the local workers grasp they had the leverage all along. Should the South African example spread to other countries, then expect the price of gold to soar regardless of how much printing the central planners engage in the coming weeks and month." Fast forward to today: "Labour unrest sweeping across South Africa's mining sector hit top world platinum producer Anglo American Platinum on Wednesday, with striking miners blockading roads leading to shafts belonging to the mining giant, police said. The platinum price jumped as much as 1.5 percent to $1,624.74 an ounce, its highest since mid-April amid fears of more disruption to supplies of the precious metal used in jewellery and vehicle catalytic converters." The good news: the complete mining shut down has not spread to other countries. Yet. The bad news: as expected, one after another South African mine is going offline. Why is this an issue? Because Chinese demands is soaring, even as the world is about to lose its third largest producer of gold. Not even the CME hiking gold margins to infinity will do much to prevent what will inevitably be a surge in precious metal prices. Factor in what is likely to be more easing by Bernanke tomorrow, and it may be time to eye the all time nominal high of just over $1,900 gold hit a year ago.
- Germany Can Ratify ESM Fund With Conditions, Court Rules (Bloomberg)
- Obama Discusses Iran Nuclear Threat With Netanyahu (Bloomberg)
- Stocks, Euro Gain as Court Allows ESM; Irish Bonds Climb (Bloomberg)
- U.S. cautions Japan, China over escalating islands row (Reuters)
- Draghi alone cannot save the euro (FT)
- 'New York Post' Runs Boldest Anti-Obama Ad Yet (Bloomberg)
- Another urban legend: Fish Oil Pills Don’t Fix Heart Ills in 24-Year Data Review (Bloomberg)
- Troika Says Portugal’s Program is ‘On Track’ (Bloomberg)
- Russia Wants to Steer Clear of 'Gas War' (WSJ)
- U.S. Said Set to Target First Non-Bank Firms for Scrutiny (Bloomberg)
- Wen Says China’s Policy Strength Will Secure Growth Targets (Bloomberg)
- UK faces clash with Brussels on City (FT)
While everyone, everywhere is earnestly scratching their heads if under the 'Fairness Doctrine' the murder of a US ambassador to a recently "liberated" Muslim country is considered casus belli, or merely the signal to turn the other cheek, and eagerly awaiting Hillary Clinton to advise on the issue, here is the just released statement by the president.
Europe's chicken or egg problem is about to strike with a vengeance. As a reminder, the biggest paradox of the recently conceived "make it up as you go along" bailout of Europe is that "in order to be saved, Spain (and Italy) must first be destroyed". Sure enough, the markets have long since priced in the "saved" part with the Spanish 10 year sliding to multi-month lows, but in the process everyone forgot about the destruction. Because as has been made quite clear, secondary market bond buying will not be activated without a formal bailout request by a country, in essence admitting its insolvency, and handing over domestic fiscal and sovereign control to the IMF and other international entities. As a further reminder, many, Goldman Sachs especially, had hoped that Spain would request a bailout as soon as Friday. To wit: "With a large (and uncovered) redemption looming at the end of October (and under pressure from other Euro area governments), we expect Spain to move towards seeking support." Alas, as we expected, this is now not going to happen, and the pricing in of the entire "saved" part will have to be unwound as Spain is forced to accept being "destroyed" first. To wit: "I don't know if Spain needs to ask for it," Rajoy told parliament in a debate session, referring to an international rescue for Spain."
Below is an extract of the full statement whose summary kept everyone up this morning, most certainly the headline reacting algos, and which the robots so far seem to like more than dislike.
The "fate of Europe" rests in their hands. Watch the decision live here.
Despite an initial knee-jerk higher on the 'ratification' confirmation, risk-asset markets seems less than enamored at the new European Conditional Union. European and US stocks popped but are falling back now - only marginally higher. EURUSD is back to pre-decision levels - though swung around in some crazy stop-seeking runs up and down. Bunds and TSYs are modestly higher in yield; Spainish and Italian bond yields are flat (so spreads are marginally lower). The biggest movers are Gold and Silver so far.
UPDATE: EURUSD unsure - but seems like 'Unlimited' ECB Bazooka's trigger (ESM) is now capped at EUR190bn from Germany.
The Kardinals of Karlsuhe kame through. As somewhat expected, they declined the complaint that, simply put - and among many other things, the ESM structure (i.e. German payments into it) stretches German constitutionality and can proceed to a broader vote next year - but basically - in a nutshell - there's no coming back now. As expected there are conditions though - that the market seems perturbed by:
- *GERMAN COURT ALLOWS ESM RATIFICATION WITH CONDITIONS :13347Z US
- *GERMANY MUST SET CAP FOR LIABILITY UNDER ESM WEHEN RATIFYING
- *GERMANY MUST MAKE SURE ITS ESM SHARE IS CAPPED AT EU190 BLN
Limited ESM (primary market) vs Unlimited secondary bond market buying (OMT). Go figure it out
On the anniversary of the most emotional day in our collective memory, here are some key statistics in the interest of truth, justice and the American way:
As the world waits with baited breath for the Karlsruhe Klan to decline (the positive risk-on decision), markets are leaking modestly off their overnight best levels. Barroso's State of the Union seemed to have been the trigger for some weakness as he reminded everyone just how political this problem is. EURUSD is up 10pips, S&P 500 e-mini futures are up 2.5pts, European stocks are up marginally (IBEX +0.5%, MIB +0.17%, CAC -0.15%, EuroStoxx unch), Financial and corporate credit is 2-5bps tighter (XOver -9bps at one-year tights), and Sovereign spreads unch to slightly tighter.
- *BARROSO CALLS FOR DECISIVE DEAL TO COMPLETE EMU
- *BARROSO SAYS FEDERATION WILL ULTIMATELY REQUIRE NEW TREATY
- *BARROSO SAYS EU MUST COMPLETE DEEP ECONOMIC, POLITICAL UNION
- *BARROSO CALLS FOR FEDERATION OF NATION STATES, NOT SUPER-STATE