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CIA-Armed And Trained Syrian Rebels "On Way To Battlefield"





It seems that the reason why Obama has been such a staunch supporter of a Syrian campaign without a land component, is because US-armed and trained Qatari mercenaries, also known elsewhere in the media as "rebels", are about to take to the battlefield (ignoring for a moment prior reports that American, Israeli and other troops have already long operated on Syrian territory). The Telegraph reports that "the first cell of Syrian rebels trained and armed by the CIA is making its way to the battlefield, President Barack Obama has reportedly told senators. During a meeting at the White House, the president assured Senator John McCain that after months of delay the US was meeting its commitment to back moderate elements of the opposition. Mr Obama said that a 50-man cell, believed to have been trained by US special forces in Jordan."

 
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Boehner Comes Out, "Supports Obama's Call For Action" Says Colleagues Should Also; Stocks Slide





Gold and silver prices are jumping, bonds are bid off their high yields, and US equities have dropped to the lows of the day as Boehner gets behind Obama:

BOEHNER SAYS WILL SUPPORT OBAMA'S CALL FOR ACTION IN SYRIA, BELIEVES COLLEAGUES SHOULD DO THE SAME
BOEHNER SAYS `ONLY THE UNITED STATES' CAN RESPOND TO SYRIA
BOEHNER SAYS UN, NATO UNLIKELY TO TAKE ACTION ON SYRIA

Not surprisingly, Boehner's call is promptly supported by both Cantor and Pelosi.

Of course, given the military's moves over the weekend, was there really any de-escalation (as we warned Friday)?

 
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Silver Beats Brent To Top August Performance





It was overall a fairly dismal month for most assets as Deutsche's Jim Reid notes sentiment was weighed down by a) ongoing tapering fears, b) a further shakeup in EM assets and currencies, and later during the month c) the escalating tension in Syria. Clearly returns in fixed income and the broader emerging market space were tapered down further by tapering concerns but DM equities were also not immune to the softer risk backdrop. The biggest loser in August were EM bonds, followed by Wheat and the S&P 500. The biggest gainer in Auguest was Silver followed by Brent crude and Chinese stocks.

 
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"War-Off" Premium Gone - Dow Turns Red





While gold, silver, and crude oil prices had already recovered their initial knee-jerk losses from the "war-off" moves Sunday night, US equities were sticking to their BTFD guns until Boehner, Pelosi, Cantor, and Levin came out behind President Obama's Syria strike plan. S&P futures slumped to Sunday night's open, vacillated, then the Dow dumped over 120 points from its pre-ISM highs to break red (followed by Trannies and the S&P). Treasuries have been slow to react; holding on to losses (30Y +12bps) until the decision was clear from stocks, and then yields fell more significantly as investors greatly rotated back to safety. The USD is not moving much but JPY strength (carry-off) is driving it modestly lower. VIX is back over 17%.

 
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And Now The Pope Tweets In





 
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Yellen's Odds To Replace Bernanke Slide To Contract Lows





It is not a good time for Janet Yellen. The one time Bernanke-replacement favorite who many were confident would be the next Fed chair, and whose odds in the initial stages of the Fed race were 75%, is so far out of the running one can almost ignore her candidacy. At least if the market makers behind Paddy Power, and the Fed Chair market betting participants have it right. As of today, her odds have slumped to the lowest in the life of the contract, or 29.4%, below the 36.4% from mid August. The leader by an even greater margin: Larry Summers whose 2/5 odds, or 70%, mean that absent a material change in rhetoric, will be the person Obama announces as Fed chairman replacement over the next month.

 
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India Scrambles For Plan D As Stocks, Currency Resume Collapse





After a modestly weak start, India's FX and stock markets accelerated lower overnight in the currency's second biggest daily collapse in 17 years, and stocks second biggest daily plunge in 2 years. Rubbing further salt into an already gaping wound of capital outflows, S&P re-iterated its downgrade threat overnight following India dismal PMI print and this appears to have pushed the Indian government to Plan D. Following the failure to halt outflows of Plan A (status quo and blame it on the Fed/Speculators), Plan B (well something is up so 'capital controls' on FX and tariffs on gold), Plan C (that's not working so let's confiscate people's gold), the Indian government is trial-ballooning Plan D - ditch the USD for trade-payments (especially oil which is up 50% in INR terms in 4 months).

 
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Treasury Yields Spike Most In 2 Months; 10Y Closes In On 3%





Whether it is growth hopes or Taper fears, good-news was bad-news for bond bulls this morning as better-than-expected ISM and construction spending data jarred bond yields from already rising levels to their biggest jump in two months. With the 30Y up 11bps and back over 3.8% and the 10Y pushing 10bps higher in yield to 2.89%, the line in the sand level of 3.00% grows ever closer. Equity markets are unsure of what to make of it but appear to have a bias to the downside on this good-news-is-bad-news data but gold, silver, and crude oil is rising.

 
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Israel President's Not So Veiled Threat To Assad





What is the best way to avoid a veiled threat? Unveil it.

  • ISRAELI PRESIDENT PERES COMMENTS SENT IN E-MAILED STATEMENT
  • PERES SAYS HE ADMIRES OBAMA'S EXAMINING `EVERY POSSIBILITY'
  • PERES SAYS `ASSAD WILL DISAPPEAR ONE WAY OR THE OTHER'

Truly a great line for any Hollywood action movie, which is what the whole staged conflict in the middle east resembles more and more with every passing day.

 
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Manufacturing ISM Rises To 55.7, Beats Expectations, Highest Since April 2011





Unless this Friday's NFP number plummets, the taper is now assured. Moments ago the US joined the rest of the world in its "manufacturing renaissance" spurt reported over the past two months, with the Manufacturing ISM headline number rising from 55.4 to 55.7, beating expectations of a 54.0 print, and printing the highest number since April 2011 and the biggest beat since August 2011. The components which posted a notable increase were New Orders, which rose from 58.3 to 63.2, recording the largest 3 month rise in 4 years, Prices jumped the most or 5 from 49.0 to 54.0, while exports also rose by 2.0 to 55.5 as it appears everyone is exporting more to everyone else at the same time: hopefully someone is reminded that trade just happens to be a zero sum game. Among the decliners, the most notable one was Employment which dropped from 54.4 to 53.3, Production down 2.6 to 62.4, and  Customer Inventories down 5 to 42.5. Maybe there is a reason why customers are rapidly destocking despite the the ramp up of production at the material stage.

 
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Where The Pain Is Today





Whether or not the Nokia-Microsoft deal makes any economic sense is up for analysts to argue but judging by the market's reaction to MSFT this morning, we'd say 'not' as the stocks is down almost 5% (devouring the entire Ballmer-bounce). However, Nokia is up a stunning 41% as investors seem not just relieved at the firm's dumping of the loss-making mobile business (always a greater fool?) for $7.2 billion; but concerned at the massive short-interest in the name. While the absolute number of shares short has dropped in recent weeks, it remains high at 11.9% of float (according to Markit); but in terms of days-to-cover it has never been higher and in fact will take around 15 days at average volume to unwind fund's massive short positions.

 
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Russian Defense Ministry Reports Two "Ballistic Targets" Launched In Mediterranean, Israel Says Was "Missile Test"





Update from AFP: Mediterranean missile launches were US-Israel drill: Israel media

Moments ago Russian RIA news agency reported that Russia’s Defense Ministry said, citing its ballistic missile early warning system, that the launch of two "ballistic targets" has been detected in the Mediterranean,  "The launch was detected at 10:16 Moscow time (06:16 GMT) by a radar in the southern Russian city of Armavir, a Defense Ministry spokesman said. The targets’ trajectories ran from the central to the eastern Mediterranean, the spokesman said. A diplomatic source in the Syrian capital, Damascus, told RIA Novosti that the targets fell into the sea. The Russian Embassy in Damascus said it did not have any information about the launch, and the streets and residents of the Syrian capital appeared calm, a RIA Novosti correspondent reported. Russia's Defense Minister Sergei Shoigu reported the launch to President Vladimir Putin, the spokesman told Russian journalists. The Defense Ministry's press service was not immediately available for further comment."

 
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Spain's Ying-Yang Charts





While we understand Europe's desperation to telegraph an improvement in its economy, driven by both GDP and such sentiment indicators as PMI data, very much as we saw in early 2011 before the carpet was pulled from beneath Europe and it promptly slid into a double dip, one thing that is unclear is why Europe continues to insist using Spain as the marginal indicator of improvement. After all, for every 50+ PMI print or "just barely positive" GDP there is a total (or youth) unemployment chart rising to fresh highs and confirming there is no consumption, and certainly no loan creation - the two driving forces of Keynesian economic growth. But while those two data dynamics are well-known to most, perhaps the true Ying and Yang indicators of Spain's economy are these two, somewhat less popular, charts.

 
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India Bans All Gold Coin Imports, Increases Capital Controls





Not satisfied with raising import tariffs on gold and putting in place jarring new FX flow capital controls, it seems the war on a weakening Rupee continues. We previously discussed the unintended consequence of such actions - including the rise of the gold smuggler - but the latest total ban on the importation of gold coins and medallions is edging India closer and closer to the Argentinian edge of Cristina Fernandez totalitarianism (after the initial ban on sales in June). In an effort to "moderate outflows" of Rupee, the Indian central bank slashed the amount of money families can send out of the country per year to $75k (from $200k) and limited overseas investment to 100% of net worth (from 400%). "We will leave no stone unturned" to control the current account deficit and stabilize the rupee, the finance minister warned; which of course removes any hope that monetary easing to revive growth will occur anytime soon.

 
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Abenomics Is Crushing The Japanese Worker





It seems the hopes and dreams of a Japanese public (and their illustrious leaders) is being dashed on the same rocks as the US worker. Amid surging input prices (thanks to a devalued currency) with consumer prices rising at the fastest rate since 2008, Bloomberg notes that Japanese salaries extended the longest slide since 2010 squeezing the consumer as the failure of demand pull inflation becomes more than real. Despite a stock market that is surging and politicians the world over proclaiming Japan's victory, "companies aren't confident enough on the sustainability of the economic recovery," instead cutting salaries (in an oh-so-American manner) to manage higher input costs. With a sales-tax increase on its way, the consumer faces even more pressure, "if wages don't improve much, it may pose a political risk" to Abe's administration.

 
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