To complete the French triple whammy offensive against the US Dollar this weekend (first, French central banker Noyer suggesting de-dollarisation; second, French oil major Total's CEO "seeing no reason for the Petrodollar"), French finance minister Michel Sapin says "now is the right time to bolster the use of the euro" adding, more ominously for the dollar, "we sell ourselves aircraft in dollars. Is that really necessary? I don’t think so." Careful to avoid upsetting his 'allies' across the pond, Sapin followed up with the slam-dunk diplomacy, "This is not a fight against dollar imperialism," except, of course - that's exactly what it is... just as it was over 40 years ago when the French challenged Nixon.
A look at the investment climate through the currency market and upcoming events and data.
The USA is fast running out of friends to support its 'exorbitant privelege'. Having alienated the Germans over NSA-eavesdropping, 'boomerang'd the Russians into de-dollarization, tariffed and quantitatively eased China into diversification, and finally 'punished' France into discussing the dollar's demise; it appears no lessor person than the CEO of Total (the world's 13th biggest oil producer and Europe's 2nd largest), believes "There is no reason to pay for oil in dollars." Clearly, based on Christophe de Margerie's comments, that we have passed peak Petrodollar.
Not even we anticipated this particular "unintended consequence" as a result of the US multi-billion dollar fine on BNP (which France took very much to heart):
- NOYER: BNP CASE WILL ENCOURAGE ‘DIVERSIFICATION’ FROM DOLLAR
And, the biggest irony of all is that in "punishing" France for dealing with Russia, that core country of the Eurasian alliance of Russia and China, the US just accelerated the graviation of France (and all of Europe) precisely toward Eurasia, and away from the greenback.
All around Asia, PMIs are tumbling... except for China's government-sponsored Manufacturing PMI. This week saw Aussie Services PMI (linked significantly to China) tumbled to 2014 lows, Japan's PMI drop, and China's own Services PMI disappoint and fade to 2-month lows. So where is all this exuberance coming from in China's manufacturing industry (despite a 8-month in a row drop in employment)? We don't know; but the fact that China coal prices just hit a record low hardly supports the smog-choking industry of China being at 7-month highs... Hard data vs soft surveys? You decide.
Gold has held firmly above $1300 for over two weeks, confounding those who said it would never see that key level again, but as the constantly-bearish SocGen explains in this 'astounding' report, gold's downturn is set to return... except their reasoning has a fatal flaw - it's entirely factually incorrect.
JPM's latest (and certainly not least) prophecy for the full year GDP: precisely one half of what it expected 6 months ago, or just 1.4%, following a cut to Q2 GDP to 2.5% from 3.0% (which means negative growth for the entire first half, something in a less insane world would be called a recession), while keeping Q3 and Q4 GDP miraculously at 3.0% for both quarters.
How this entrepreneur is capitalizing on two exciting trends
For all the theoretical explanations about China's profound commodity rehypothecation problems, the one thing that was missing was an empirical case study framing just how substantial the problem is. After all, it is one thing to say banks expect "X millions in losses", but totally different to see the rehypothecation dominoes falling in practice. Today, courtesy of Bloomberg we got just such an example.
Meet Decheng Mining.
The Arms Race Is Back... With A Twist: US Congressman Urges NATO To Purchase French Warship Destined For RussiaSubmitted by Tyler Durden on 07/03/2014 11:22 -0400
The saga of the French Mistral amphibious assault warship which was ordered by Russia years ago, and whose delivery - at least according to Putin - was the reason behind the US record $9 billion DOJ fine of French BNP (which the Russian president called "blackmail" by the US designed to intimidate France and prevent it from completing the transaction) just took a turn for the bizarre. In a note written in the Atlantic Council's website, Democrat representative for New York's 16th district, Eliot Engel, has proposed that instead of letting France conclude its deal with Russia, now that even the BNP "blackmail" has failed to dent Hollande's intention to see the delivery to its end, that NATO (read the US) should step up and "collectively purchase or lease the warships as a common naval asset."
- Obama Decries Big Bonuses at Bank Trading Desks as Risky (BBG)
- India central bank seeks to swap gold to improve reserves quality (Reuters)
- There goes Q3 GDP: Arthur Strengthens to Become First Atlantic Hurricane (BBG)
- Airports Serving U.S. Tighten Checks on Stealth-Bomb Threat (BBG)
- Fear, cash shortages hinder fight against Ebola outbreak (Reuters)
- Brent Declines as Libya Rebels Say Ports Are Open (BBG)
- Shiites Train for Battle in Iraqi Holy City (WSJ)
- Dimon’s Cancer Has 90% Cure Rate With Demanding Therapy (BBG)
- Goldman says client data leaked, wants Google to delete email (Reuters)
- ECB Watchers in the Dark Look to Draghi for Illumination (BBG)
Once again, US equity futures are roughly unchanged (while Treasurys have seen a surprising overnight bid coming out of Asia) ahead of an avalanche of macroeconomic news both in Europe, where the ECB will deliver its monthly message, and in the US where we will shortly get jobless claims, ISM non-manufacturing, trade balance, nonfarm payrolls, unemployment, average earnings, Markit U.S. composite PMI, Markit U.S. services PMI due later. Of course the most important number is the June NFP payrolls and to a lesser extent the unemployment rate, which consensus expects at 215K and 6.3%, although the whisper number is about 30K higher following yesterday's massive ADP outlier. Nonetheless, keep in mind that a) ADP is a horrible predictor of NFP, with a 40K average absolute error rate and b) in December the initial ADP print was 151K higher than the nonfarms. Those watching inflation will be far more focused on hourly earnings, expected to rise 0.2% M/M and 1.9% Y/Y. Should wages continue to stagnate and decline on a real basis, expect to hear the "stagflation" word much more often in the coming weeks.
While numerous massively indebted administrations around the world hope to divert the attention of what's left of their struggling middle class away from its daily impoverished existence and distract it with flashing lights and glitzy animations showing another all time market high on a daily basis, a significantly more important shift taking place behind the scenes is appreciated by very few: the ongoing de-dollarization of the world. For the latest example of how increasingly more countries are setting the stage for the final currency war, we go again to Russia where VOR's Valentin Mândr??escu explains that slowly but surely the BRICS - that proud Goldman acronym which was conceived to perpetuate the great American way of life by releasing trillions in US-denominated debt in heretofore untapped markets - are morphing into an anti-dollar alliance.
In a QE dominated world - in the Golden Age of the Central Banker - renminbi strengthening has been an unmitigated disaster. Chinese political stability depends on the actual production of actual things by actual people working in actual factories, and the prospects for that real economic growth are made significantly worse the longer the West persists in favoring financial asset inflation and the ossification of a low-growth status quo. While the West may be able to accept, even celebrate, unlimited private wealth – China cannot. Not if it wants to remain a politically unified Great Power. We think this is just the start of a multi-year weakening of the renminbi, a sea change in Chinese monetary policy that will inevitably create broad political tensions with the US and make Japan’s devaluation/inflation course infinitely more difficult to achieve.