Verizon

Plastic phones, a gold cover, and no China Mobile deal seems to have disappointed more than a few AAPL investors this morning. Downgrades are a plenty but we await confirmation from Carl Icahn's twitter account of what to do next as the price of the stock has just fallen below his initial tweet level. Oh well, perhaps now that Apple's conversion to a Wall Street darling is complete (despite the downgrades by UBS, BofA, Credit Suisse and JPM) it is time for even more iBonds to reclaim the largest bond issuer ever title from Verizon...

• Obama Holds Fire on Syria, Waits on Russia Plan (WSJ)
• China Shadow Banking Returns as Growth Rebound Adds Risk (Reuters)
• Not one but two: Greece May Need Two More Aid Packages Says ECB’s Coene (WSJ)
• BoJ insider warns of need for wage rises (FT) ... as we have been warning since November, and as has not been happening
• California city backs plan to seize negative equity mortgages (Reuters)
• Home Depot Is Accused of Shaking Down Suspected Shoplifters (BBG)
• Most-Connected Man at Deutsche Bank Favors Lightest Touch (BBG)
• Norway Pledges to Limit Oil Spending (BBG)
• China Shadow Banking Returns as Growth Rebound Adds Risk (BBG)
• Gundlach Says Fed Is Mistaken in How It's Ending Easing (BBG)

Despite earlier comments from Obama on Tuesday night, who called for a pause in authorizing military strikes on Syria, which led to another drop in crude prices overnight, the drop has since reversed and both WTI and Brent Crude contracts are trading in the green. Whether this is the result of a note by Goldman analysts who noted that the Brent crude sell-off was overdone and that they see no improvement regarding the conflict in Libya which is constraining oil production, or because Russia is once again throwing hurdles in the international process to force Syrian disarmament, is unknown.  The lack of any key catalysts and no USDJPY levitation, led to most global markets unchanged, and futures currently trading sideways. What is not trading sideways is Apple which is down over 2% to just over $480 as all hopes of a China Mobile deal fall apart, coupled with pervasive critical panning of the new iPhones which, aside for the commodity version, is just the old iPhone with an extension that allows the NSA's new fingerprint database to be filled in record time.

• Obama Shrinking Second-Term Hastened by Syria Opposition (BBG)
• Obama says Russian proposal on Syria a potential 'breakthrough' (Reuters)
• Poll Finds Support Fading for Syria Attack (WSJ)
• France to Introduce Resolution Aimed at Dismantling Syria's Chemical Arsenal (WSJ)
• Apple to Unveil IPhones Seeking End to Year of Struggles (BBG)
• Verizon Plans Largest Debt Sale Ever: Proceeds From Deal, Expected to Raise $20 Billion, Would Fund Venture Buyout (WSJ)
• Shipping Rates Seen at 2010 High on Record Ore to China (BBG)
• Ads coming to Twitter: Twitter makes its largest acquisition, a mobile ad company (FT)
• Houses on fire as fighting erupts in southern Philippines (Reuters)
• Banks Seen at Risk Five Years After Lehman Collapse (BBG)

As macro news continues to trickle in better than expected, the latest batch being benign (if completely fake) Chinese inflation data (CPI 2.6%, Exp. 2.6%, Last 2.7%) and trade data released overnight which saw ahigher than expected trade balance ($28.5bn vs Exp. $20.0; as exports rose from 5.1% to 7.2%, and imports dipped from 10.9% to 7.0%, missing expectations), markets remain confused: is good news better or does it mean even more global liquidity will be pulled.  As a result, the release of an encouraging set of macroeconomic data from China failed to have a meaningful impact on the sentiment in Europe this morning and instead stocks traded lower, with the Spanish IBEX-35 index underperforming after Madrid lost out to Tokyo to win rights to host 2020 Olympic Games. Even though the news buoyed USD/JPY overnight, the pair faced downside pressure stemming from interest rate differential flows amid better bid USTs. The price action in the US curve was partly driven by the latest article from a prolific Fed watcher Jon Hilsenrath who said many Fed officials are undecided on whether to scale back bond purchases in September. Hilsenrath added that the Fed could wait or reduce the programme by a small amount at the upcoming meeting. Going forward, there are no major macroeconomic data releases scheduled for the second half of the session, but Fed’s Williams is due to speak.

• BOE Leaves Policy Unchanged as Carney’s Guidance Assessed (BBG)
• Surprise or not, U.S. strikes can still hurt Assad (Reuters)
• Samsung Gear: A Smartwatch in Search of a Purpose (BusinessWeek)
• 'Jumbo' Mortgage Rates Fall Below Traditional Ones  (WSJ)
• Capital Unease Again Bites Deutsche Bank  (WSJ)
• Technical snafus confuse charges for Obamacare plans (Reuters)
• JPMorgan subject of obstruction probe in energy case (Reuters)
• U.S. Car Sales Soar to Pre-Slump Level (WSJ) - i.e., to just when the market crashed
• BoJ lifts assessment of Japan’s economic health (FT)
• Dead Dog in Reservoir Helps Drive Venezuelans to Bottled Water (BBG)
• Russia Boosts Mediterranean Force as U.S. Mulls Syria Strike (BBG)

Just when the market thought it had priced in a new equilibrium without (or with - it is not quite clear) a Syria war, here comes Thursday with a data dump that will make one's head spin. Central bankers are once again on parade starting overnight, when the BOJ announced no change to its QE program and retaining its monetary base target of JPY270 trillion. The parade continues with both the BOE and ECB, the latter of which is expected to address the recent pick up in Eonia rates and take praise for the recent very much unsustainable "recovery" in the periphery even as Germany continues to slide lower (this morning's factory orders plunged 2.7% on exp. -1.0%), which in turn lead the Bund to pass above 2.0% for the first time since March 2011. Speaking of bonds blowing out, the US 10Y is now just 6 bps away from 3.00%, the widest since July 2011, and likely to breach the support level, taking out a boatload of stops and leading to the next big step spike in rates as the second selling scramble ensues. And just to keep every algo on its binary toes, today we also get a NFP preview with the ADP private payrolls at 8:15 am (Exp. 180K, down from 200K), Initial Claims (Exp. 330K), Nonfarm Productivity and Unit Labor Costs (Exp. 1.60% and 0.9%), Factory Orders (Exp. -3.4%), Non-mfg ISM  (Exp. 55), Final Durable Goods, EIA Nat Gas and DOE Crude Inventories, oh and the G-20 meeting in St. Petersburg where Putin and Obama are not expected to share much pleasantries, and where John Kerry's swiftboat may not be allowed to dock.

• 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)

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.

• Mediterranean 'Ballistic Targets' Were Part of Israeli Test – Defense Ministry (RIA)
• Microsoft to Buy Nokia’s Devices Unit for $7.2 Billion (BBG)
• Long-Term Jobless Left Out of Recovery (WSJ)
• Swiss banks apologize for assisting tax cheats (Reuters)
• As Obama pushes to punish Syria, lawmakers fear deep U.S. involvement (Reuters)
• India Looking to Expand Rupee-Payment System (WSJ)
• Citigroup Dialing Back Its 'Alternative' Holdings (WSJ)
• Libya Seeks New Solutions to Oil Crisis (WSJ)
• Lenovo Chief Yang Shares Bonus With Workers a Second Year (BBG)

It is convenient that in a recent post covering the latest historic Verizon M&A deal we showed a spaghetti chart, created by the WSJ, of the US telecom space because it lays roughly how many current subscribers that other US telecom giant, AT&T, has.  The reason for this is that according to the latest revelations from the NYT, which following recent work-sharing with the Guardian is now another official distributor of the Edward Snowden leaks (who in a brilliant move has decided to spread out his disclosures week after week, many times allowing such staggered disclosures to catch the administration - which has no idea what is coming next - in flagrant lies), the chart above shows that 140 million landline and wireless paying AT&T customers is the minimum number of affected Americans whose every call is recorded, however not directly or indirectly by the government, but rather by a private corporation working in collaboration with the US government.

The name of the collaboration: the Hemisphere Project, fomerly Hudson Hawk.

Vodafone is to sell its 45% stake in Verizon Wireless to Verizon for $130bn in cash and stock, subject to regulatory approvals, comprising $61.4bn in cash and assumption of net liabilities, $60.2bn in stock (within a $47-51 per share collar), $5bn in a VZ loan note and $3.5bn ascribed to VZ’s 23.1% stake in Vodafone Italy. As the WSJ reports, this is the second-largest ever behind another Vodafone deal - the $172 billion acquisition of Mannesmann AG in 1999 (which is somewhat ironic in its largesse and timing). The cash component - nearly twice the state budget of Verizon Wireless's New Jersey home - is by far the largest amount of cash ever deployed in an acquisition and will be financed by 4 $15 billion 'bridge loans', "until more permanent financing can be found over the next 12 to 18 months." Of course, we assume investors will be over-subscribing to the higher-leveraged firm's bonds (just like they did with AAPL but 4 times bigger!)

• Tables turn: Syria asks the United Nations to stop U.S. strike (Reuters)
• More tables: Putin sees chance to turn tables on Obama at G20 (Reuters)
• Obama’s Decision Stirs Doubts About America’s Resolve (BBG)
• Kerry says US tests prove sarin used in Syria attacks (FT) - is this based on more YouTube or Vine this time?
• Italy Coalition Reels as Berlusconi Threatens to Sink Letta (BBG)
• Steinbrueck’s Jabs Fail to Knock Out Merkel in Election Debate (BBG)
• India's crisis within a crisis; finance minister fights on two fronts (Reuters)
• Ikea signals slower expansion (FT)
• US spied on Brazil, Mexico presidents (AFP) - since it spies on its people, is this a surprise?
• What's the Difference Between U.S., Chinese Corruption? (BBG)
• First Strut Default Jolts High-Yield Market: South Africa Credit (BBG)
• Vodafone, Verizon Agree on $130 Billion Deal (BBG)

Equity futures stormed out of the gate on initial relief that a Syria attack may be avoided, which sent oil and the PM complex flash crashing lower. However, overnight, sentiment shifted that the Syrian escalation is at best delayed and as a result Brent regained all losses, with the precious metals also largely unchanged from Friday's close. Futures on the other hand, were perfectly happy to rise on the transitory Syrian risk moderation reduction, and then continue rising when Syria returned to the forefront, this time prodded higher by PMI exuberance out of China and Europe. How credible such manufacturing data remains to be seen. A surging USDJPY was also rather helpful, with the pair breaching 99.00 stops to the upside shortly after the European PMI data printed. And with the cash US market closed, and electronic equity trade halted at 10:30 Central, it is unlikely that concerns about all those "other" things that will define September, will seep in and it is likely the HFTs will push equities to session highs before reopening for the Tuesday trading.

• 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?