For fast-food workers (and their unions) of the world, the following image is truly terrifying... As People's Daily China reports, the first restaurant featuring robotic waiters and chefs has opened in Suzhou, Jiangsu...
Despite President Obama's dictating that Russia is increasingly "isolated," it appears they have found a whole new set of friends to play with in the global trade sandpit. In retaliation to Western sanctions, Putin yesterday unveiled a total food import ban from all sanctioning nations, and, just as the BRICS created their own 'IMF-lite' away from Washington's prying eyes, Russia plans to substitute banned goods with not just domestic supplies but imports from Latin America, China, and several other nations. Agriculture Minister Nikolai Fedorov said "no food shortages are expected," but more isolation for the West...
- Russia bans all U.S. food, EU fruit and vegetables in sanctions response (Reuters)
- Snowden receives three-year Russian residence permit (Reuters)
- Headline of the day: Europe's Recovery Menaced by Putin as Ukraine Crisis Bites (BBG)
- Americans worry that illegal migrants threaten way of life, economy (Reuters)
- Almost 90% of Uninsured Won't Pay Penalty Under the Affordable Care Act in 2016 (WSJ)
- Germany’s Bond Advance Sends 2-Year Note Yield Below Zero (BBG)
- Gaza War’s Critics in Crosshairs as Israelis Back Offensive (BBG)
- The 1% May Be Richer Than You Think, Research Shows (BBG)
- Bank of America Near $16 Billion to $17 Billion Settlement (WSJ)
- Deep Water Fracking Next Frontier for Offshore Drilling (BBG)
There were some minor fireworks in the overnight session following the worst Australian unemployment data in 12 years reported previously (and which sent the AUD crashing), most notably news that the Japanese Pension Fund would throw more pensioner money away by boosting the allocation to domestic stocks from 12% to 20%, while reducing holdings of JGBs from 60% to 40%. This in turn sent the USDJPY soaring (ironically, following yesterday's mini flash crash) if only briefly before it retraced much of the gains, even as the Pension asset reallocation news now appears to be entirely priced in. It may be all downhill from here for Japanese stocks. It was certainly downhill for Europe where after ugly German factory orders yesterday, it was the turn of Europe's growth dynamo to report just as ugly Industrial Production which missed expectations of a 1.2% print rising only 0.3%. Nonetheless, asset classes have not seen major moves yet, as today's main event is the ECB announcement due out in less than an hour. Consensus expects Draghi to do nothing, however with fresh cyclical lows in European inflation prints, and an economy which is clearly rolling over from Germany to the periphery, the ex-Goldmanite just may surprise watchers.
The worst possible approach is to give Putin more credibility at home...
Step Aside Panama Canal: China To Build Nicaragua Canal, "World's Largest Infrastructure Project Ever"Submitted by Tyler Durden on 08/06/2014 23:00 -0400
A month ago, a Nicaraguan committee approved Chinese billionaire Wang Jing's project to create The Nicaraguan Canal. With a planned capacity to accommodate ships with loaded displacement of 400,000 tons (notably bigger than The Panama Canal), the proposed 278-kilometer-long canal that will run across the Nicaragua isthmus would probably change the landscape of the world's maritime trade. "The project is the largest infrastructure project ever in the history of man in terms of engineering difficulty, investment scale, workload and its global impact," Wang told reporters.
With Shanghai having limited retail exposure to high-yield bonds, and the Chinese corporate bond market has overtaken the United States as the world's biggest and is set to soak up a third of global company debt needs over the next five years, it is no wonder that, as Bloomberg reports, analysts fear "a prelude to a storm." Privately issued notes totaling 6.2 billion yuan ($1 billion) come due next quarter, the most since authorities first allowed such offerings from small- to medium-sized borrowers in 2012. This week a 4th issuer has faced a "payment crisis" and while officials are trying to expand financing for small companies (which account for 70% of China's economy, with debt-to-equity ratios exceeding 200%, this is nothing but more ponzi. As Goldman warns, it appears China's Minsky Moment is drawing near (as the hangover from Q1's credit impulse kicks in).
But... China's manufacturing PMIs said everything's great in the mal-investment capital of the world? It appears for all the record credit creation in China, none of it is spilling over into demand from its closest trading partners. Australian unemployment spiked to 6.4% - its highest since 2002, missing the 6.0% expectation by the greatest margin on record. No "qualified' economists believed the print would be above 6.1%. AUDJPY is getting battered which implicitly means S&P futures have legged lower...
Is this stock market decline the "real deal"? (that is, the start of a serious correction of 10% or more) Or is it just another garden-variety dip in the long-running Bull market? Let’s start by looking for extremes that tend to mark the tops in Bull markets.
In the first seven months of 2014, Goldman notes that equity, fixed income, and FX markets were most intently focused on the labor market with a number of the largest moves occurring due to employment reports and jobless claims. The equity market responded to a mix of economic, monetary policy, and geopolitical news. The fixed income market focused on employment reports, although other factors also resulted in large one-day moves. The dollar, although less volatile than usual, did move on both US economic developments and news out of Europe.
A few years ago, the definition of "strong banking" was Switzerland; now, not so much. But eager to restore some of its former banking luster, Switzerland has taken note of this and is rapidly positioning itself to become a major center of European RMB trade. Continuing to believe that the dollar is going to maintain its global reserve status is now not only foolish, but financially hazardous. To countries, businesses and individuals. Those who ignore the trend do so at their own peril.
Moments ago the BEA reported that the June trade deficit (which is the last month of Q2 GDP) came in $3 billion better than expected, declining from $44.7 billion to $41.5 billion, beating consensus $44.8 billion, as exports increased and imports decreased. The previously published May deficit was $44.4 billion. The goods deficit decreased $3.0 billion from May to $60.3 billion in June; the services surplus increased $0.1 billion from May to $18.7 billion in June. But perhaps most importantly, the trade deficit excluding the shale boom, i.e., America's reduced petroleum import needs which may last for a few more years before shale oil too is exhausted - just printed close to record highs. In other words, US trade ex oil is about as bad as it has ever been!
- So that's what Obama meant by "costs" - Italy Recession, German Orders Signal Euro-Area Struggle (BBG)
- Russia worries, weak German data weigh on Europe (Reuters)
- Hedge Funds Betting Against Banco Espírito Santo in Line for Big Gains (WSJ)
- Bankers Called Up for Ukraine War as Rolls-Royce for Sale (BBG)
- Double Punch for 'Inversion' Deals (WSJ)
- Statist Strongmen Putin-Xi See History’s Capitalism Clash (BBG)
- China bans beards, veils from Xinjiang city's buses (Reuters)
- BATS to Settle High-Speed Trading Case (WSJ)
- Second Ebola patient wheeled into Atlanta hospital for treatment (Reuters)
With everyone focused on China as the source of next systemic risk, most forgot or simply chose to ignore Europe, which through Draghi's verbal magic was said to be "fixed." Or at least everyone hoped that the rigged European bond market would preserve the "recovery" illusion a little longer giving the world some more time to reform pretend it is doing something to fix it. Turns out that was a mistake, confirmed earlier not only by the plunge in German Factory Orders which cratered -4.3%, down from 7.7% and below the 1.1% revised, and UK Industrial production which missed expectations of a 0.6% boost, rising only 0.3%, but most importantly Italy's Q2 GDP shocker, which as we reported earlier, dropped for the second consecutive quarter sending the country officially into recession. As a result, European stock markets, Stoxx600, has joined the DJIA in the red for the year while Germany's 2 Year Bund just went negative on aggressive risk aversion, the first time since 2012.