Economic principles explain why the Saudis began, in late 2014, to pump crude as fast as they could – or close to as fast as possible. In fact, there is a good reason why the Saudi princes are panicked and pumping.
The global meltup continues with the S&P set to open at new all time highs, some 20 points higher from yesterday's close, however the driver for the latest rally is not so much the imminent BOE announcement which is expected to cut rates by 25 bps from 0.50%, but a dramatic surge in the USDJPY just after 1am Eastern when Bloomberg revealed more details about Ben Bernanke's masterplan for Japan's helicopter money.
As China's deflationary refined product finally hits the world, and leads to a flood of gasoline and diesel across the continents, a curious development is the build up of gasoline tankers in New York City's own harbor...
In a year marked by surprisined "exits," resignations, and political turmoil, earlier today Japan contributed the latest shocker when Japanese Emperor Akihito, who spent much of his time on the throne "trying to heal the wounds of World War Two" according to Reuters, intends to abdicate in a few years, public broadcaster NHK and other domestic media said on Wednesday, a step that would be unprecedented in modern Japan.
Overnight tensions surrounding the disputed South China Sea territory soared when Taiwan, which shares territorial claims with China in the disputed area, sent a naval frigate to patrol the disputed waterway Wednesday, to show the government’s “determination" to defend its national interest. Taiwan’s decision has put the country at odds with its chief security protector, the U.S., which has called on China to abide by the ruling.
Following May's 1.4% MoM spike - the most since 2011 - June's import prices rose just 0.2% MoM, less than half expectations. Import prices actually declined ex-petroleum. However, this is the 23rd month in a row of year-over-year import price declines with China's exported deflation at 2010 lows.
In an otherwise quiet overnight session, which among other things saw Germany sell 10Y Bunds with a zero coupon and a negative yield (-0.05%) for the first time ever (despite being uncovered with just €4.038BN sold below the €5.00BN target) anyone hoping for a confirmation that China will be able to prop up the world economy once more, was left disappointed when earlier this morning China reported June exports and imports that once again dropped substantially in dollar terms as soft demand at home and abroad continued to weigh on the world’s largest trading nation.
To paraphrase John F. Kennedy, if the aristocrats make peaceful and necessary change impossible, they will make violent resistance inevitable. It’s not a war they can win, but if it’s a war they are too foolish and arrogant to avoid, bring it on.
ACQ: “Look, it doesn’t matter what you or I think. The President wants the TPP, and the Party isn’t going to oppose him....They don’t see much of a risk. Most Americans don’t know or care about the TPP.”
RR: “But they know big corporations are running economic policy. They think the whole system is corrupt. Believe me, Trump will use this against Hillary.” ACQ: “I think you’re being too cynical.”
Back in April, when the world was still reeling from the China devaluation inflicted market slump, the Fed's discount rate minutes for the months of March/April showed that 4 regional Feds wanted a 25 bps rate hike, up from just two - the Richmond Fed and Kansas City - in the Feb/March meeting. Moments ago the Fed released its latest May/June Discount Rate Minutes which revealed that both the (Jim Bullard's) St. Louis and Boston Feds joined four other regional Feds, Cleveland, Richmond, Kansas City and San Francisco, in seeking a quarter point increase in Fed discount rate to 1.25 percent prior to the June 14-15 FOMC meeting.
"The U.S. actions near China, particularly those on the South China Sea issues, are part of its Asia-Pacific Rebalance strategies. Its intentions are no more than containing China to preserve its interests in the Asia-Pacific region and its global hegemony. The U.S. motives are apparent to the world, especially to the Chinese people. The current China is nothing like the country it was one hundred years ago. Any act that tries to violate China's territorial sovereignty will fail."