After months of posturing, promising, prevaricating, and proclaiming; the time is rapidly upon us where the central planner of the world will have to actually make actions rather than words. As SocGen notes, Central Bank decisions at the BoJ, ECB and BoE will take centre stage tonight/tomorrow but it is the BoJ announcement that is most highly anticipated after the epic jawboning. SocGen’s Sebastien Galy: "Only the truly brave can feel confident trading into the BoJ event"; adds, "It is not completely clear what economic consensus is expecting in terms of BoJ decision apart from broad outlines." Given positioning, the risk of disappointment and short JPY covering cannot be underestimated should Kuroda underdeliver.
Physical gold and silver demand remains robust in many markets internationally. Demand from the Middle East remains robust as seen in the near record imports of gold and silver into Turkey. Turkey’s gold imports climbed to an eight-month high in March as prices averaged the lowest since May, according to the Istanbul Gold Exchange. Silver imports rose 31% from a month earlier according to Bloomberg. Gold imports increased to 18.26 metric tons, the most since July. That’s up from 17.34 tons in February and compared with 2.91 tons a year earlier, data on the exchange’s website show. The country shipped in 120.8 tons last year. Turkey was the fourth-biggest gold consumer in 2012, according to the London-based World Gold Council. Bullion averaged $1,593.62 an ounce last month and is trading about 17% below the record nominal high of $1,921.15 set in September 2011.
- Cyprus leader invites family firm probe (FT)
- How the Fed fueled an explosion in subprime auto loans (Reuters)
- Wal-Mart Customers Complain Bare Shelves Are Widespread (BBG)
- JC Penney CEO gets no bonus, stock award after dismal year (Reuters)
- New Bird Flu Virus Kills 2 in China, Sparking WHO Probe (BBG)
- Algorithms Play Matchmaker to Fight 7.7% U.S. Unemployment (BBG)
- Fed hawk Lacker and dove Evans face off over inflation (Reuters)
- Infamous silver market "cornerer" WH Hunt Becomes Billionaire on Bakken Oil After Bankruptcy (BBG)
- Japan Auto Sales Fall on Subsidy End as Korea Extends Drop (BBG)
- Black Hawks Near North Korea Show Risk in U.S. Command Shift (BBG)
- SEC Embraces Social Media (WSJ)
- Tesla Touts ‘True Out of Pocket’ Financing for Model S (BBG)
- U.K. Banks Try to Dodge Bonus Caps by Defining Risk-Taker (BBG)
The driftless overnight sessions are back. After the Nikkei soared by 3% following several days of declines, and the Shanghai Composite continued its downward ways despite Non-Manufacturing PMI prints for March which rose both per official and HSBC MarkIt data, Europe was unsure which way to go, especially with the EURUSD once more probing the 1.28 support level. The USDJPY was no help, and even with the BOJ meeting at which new governor Kuroda is finally expected to do something instead of only talking about it, imminent, has hardly seen the Yen budge and provide the expected carry-funding boost to global risk. In terms of newsflow there was little of it: European CPI in March printed at 1.7%, above expectations of 1.6%, but below February's 1.8% rise in inflation. UK continued telegraphing the inevitability of Mark Carney's imminent QE, with construction PMI the latest indicator missing, at 47.2, below expectations of 48.0 (above 46.8 last). Elsewhere, Spanish Prime Minister Mariano Rajoy on Wednesday called for Europe to implement growth policies to balance its austerity drive and for countries with room for fiscal manoeuvre to increase public spending. "Europe is the only region in the world in recession. To overcome this situation we need three things: every country needs to do its homework, we need more (European) integration and we need growth policies," Rajoy said in a televised speech to leaders of his People's Party. "That's why countries which can afford it should spend more." Surely Europe will get right on it: after all, it's only "fair."
There is no hope whatsoever of so-called U.S. "energy indepedence" unless three things happen. First, environmental rules have to be wound back to 1970 standards -- in other words, disband the EPA and make civil plaintiffs show actual harm, not just hypothetical harm because someone goofed on a sheaf of mandated paperwork. Second, stop wasting taxpayer money on nonsense like $25 per gallon biofuel. Third and most urgently, stop subsidizing Wall Street. Let the market decide what interest rates make sense, rewarding companies who can find and produce oil, instead of gorging themselves sick on artificially cheap junk bonds that money-losing shale swindlers will never pay off.
While everyone knows about the epic oversupply of dry bulk containerships as a result of the pre-bubble surge in charter rates (and subsequent collapse), which sent many shipping companies to an early bankruptcy or outright liquidation and also resulted in very depressed shipping rates for the last several years as the supply overhang continues to be cleared out of the system (coupled with still depressed end-demand for "dry" commodities) , few may be aware that in the past several months the same fate has befallen the oil-tanker industry. As Bloomberg reports, John Fredriksen's oil-tanker behemoth Frontline Ltd., said it’s rejecting some cargoes after a rout in rates for the vessels. "Frontline is offering tankers for charters “selectively” and the market is in a “state of panic” as excess ship supply drives down charter costs, Jens Martin Jensen, chief executive officer of the Hamilton, Bermuda-based company’s management unit, said by phone today." The reason for the charter rate crunch: plunging rates. "Crude rates remain in the doldrums,” RS Platou Markets AS, an Oslo-based investment bank, said by e-mail today. VLCCs earned $17,000 a day on average in the first quarter, down 32 percent from a year earlier, it said. Fredriksen split Frontline Ltd. in two in December 2011, forming Frontline 2012 to withstand a slump in returns that put the original company at risk of running out of cash. Frontline Ltd.’s shares fell to the lowest since May 1999 last month and slumped 95 percent since the end of 2007.
I don't care how much money Japan prints. Those printing presses can't offset the powerful force of demographics, at least not for long.
European macro data surprises have dropped into negative territory for the first time in 3 months as the last 3 weeks have seen the biggest drop in 19 months. Of course, none of that matters, as EURJPY was bid all the way through the European day, lifting European stocks and the all-important Italian and Spanish bond markets. Markets were relatively thin still today but just as we have seen around the world (most specifically in Japan and the US recently) equity markets push on ahead despite the collapse in macro data - but we've seen this before a few times (and it did not end well)...
Economists have adjusted their forecasts and it will be difficult for the US data to continue to surprise on the upside. Moreover, there are signs that the economy lost some momentum into the end of Q1 that will likely spill over in Q2. We look at the relatively subdued reaction to the losses that will be incurred by uninsured depositors in Cyprus and recognize that it is far from unprecedented. In the US, the last time uninsured depositors took a hit (50%) was in the IndyMac failure. We show a deterioration of the financial situation in Italy, on top of the political and economic challenges. Lastly, we bring to your attention the deteriorating technical tone for the dollar against the yen and Japanese shares.
- The revolving door continues: Mary Schapiro joins Promontory Financial (WSJ)
- First Peek at Health-Law Cost (WSJ)
- Abe warns over Japan inflation target: warns 2% inflation target may not be reached within two years (FT)
- BoJ's Kuroda tested by divided board (Reuters)
- Nanjing poultry butcher fourth person infected with H7N9 bird flu (SCMP)
- What time do top CEOs wake up? (Guardian)
- Cyprus Seeks More Time to Meet Targets in Talks With Troika (BBG)
- Investors Ignore Negativity at Their Peril (WSJ)
- Apple bows to Chinese pressure (FT)
- One can only laugh: North Korea to restart nuclear reactor in weapons bid (Reuters)
- Visa Demand Jumps (WSJ)
- Bloomberg's refutation of Stockman: yes, yes but... look over there, stocks are up! (BBG)
The past 10 days have seen the Japanese Yen strengthen 3% against the USD - its largest such move in two years - with today's rally prompting a rather painful 'crash' in the Nikkei 225 at the open and envoking the anger of Abe:
- *ABE SAYS CURRENCY CORRECTION HELPING EXPORTERS COMPETITIVENESS (except that there is no evidence of this in any macro data at all)
- *ABE SAYS IT'S POSSIBLE BOJ WILL FAIL TO REACH INFLATION TARGET (like for the last two decades)
- *ABE SAYS ECONOMY SUBJECT TO UNFORSEEN CIRCUMSTANCES (unpossible)
- *ABE SAYS BOJ MUST EXPLAIN IF IT FAILS TO REACH INFLATION TARGET (not my fault!)
It seems that perhaps the wise investing public is waking up to the fact that words do not speak louder than actions, that macro fundamentals are bad and getting worse, and that 36,000 target for the Nikkei may be a stretch goal here.
Last week saw a full court press in defense of the current money printing exercise. As we have frequently pointed out, modern-day economic policy is evidently in the hands of utter quacks. It matters little to them that their prescriptions have failed time and again for hundreds of years – they do the same thing over and over again, as though they were escapees from an insane asylum.
The paper studied the non-linear relationships between Italy sovereign risk as gauged by CDS and the liquidity levels in the secondary bond market, using Bid/Ask Spreads as the gauge for liquidity in an attempt to determine the viability of the ECB's OMT & LTRO interventions.
With Europe and the UK closed today, it was unclear if the traditional overnight futures levitation would take place as scheduled. To nobody's big surprise, it did, driven as usual by the EURUSD, which rose from an overnight low in the mid 1.27s following news that the Cypriot parliament head wanted to pull his country out of the Eurozone as reported here, but more importantly as that second ramp funding carry pair of choice, the USDJPY fell to the lowest in a month following yet another miss in the Japan Tankan big manufacturer index, touching under 93.30 for the first time since March 6, pushing the Nikkei 225 lower by over 2% - has the magic of Japanese rhetoric finally worn off and is the market finally demanding action instead of hollow promises, threats and simply, words? In China we got a miss in the official PMI data setting up yet another Schrodinger PMI split in Chinese economic growth indicators where the official details once again deteriorating while those tracked by HSBC/Markit are mysteriously improving. Also in Asia, rumblings out of South Korea, which continues to miss on key export and economic growth indicators, that it should cut rates mean the export-driven country is on the verge of joining the global currency warfare at which point the free Japanese lunch is over.