Good evening Ladies and Gentlemen:
Here are the following closes for gold and silver today:
Gold: $1123.20 up $15.60 (comex closing time)
Silver $15.47 up 18 cents.
In the access market 5:15 pm
Gold $1124.00
Silver: $15.55
First, here is an outline of what will be discussed tonight:
At the gold comex today, we had a good delivery day, registering 450 notices for 45,400 ounces Silver saw 1 notice for 5,000 oz
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 230.85 tonnes for a loss of 72 tonnes over that period.
In silver, the open interest fell by 2531 contracts despite the fact that silver was unchanged in price yesterday. The total silver OI continues to remain extremely high, with today’s reading at 177,902 contracts In ounces, the OI is represented by .889 billion oz or 128% of annual global silver production (ex Russia ex China). This dichotomy has been happening now for quite a while and defies logic. There is no doubt that the silver situation is scaring our bankers to no end as they continue to raid as basically they have no other alternative.
In silver we had 1 notices served upon for 5,000 oz.
In gold, the total comex gold OI rests tonight at 435,489. We had 450 notices filed for 45,000 oz today.
We had a huge addition in gold deposited at the GLD today to the tune of 4.18 tonnes / thus the inventory rests tonight at 671.87 tonnes. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. I thought that 700 tonnes is the rock bottom inventory in GLD gold, but I guess I was wrong. However we must be coming pretty close to a level of only paper gold and the GLD being totally void of physical gold. In silver, we had no changes in silver inventory at the SLV, / Inventory rests at 326.209 million oz.
We have a few important stories to bring to your attention today…
1. Today, we had the open interest in silver fell by 2531 contracts down to 177,902 even though silver was unchanged in price with respect to yesterday’s trading. Again, we must have had some short covering. The OI for gold rose by 4166 contracts to 435,489 contracts despite the fact that gold was up by $3.40 yesterday. We still have close to 21 tonnes of gold standing with only 15.206 tonnes of registered gold in the dealer vaults ready to satisfy that which stands.
(report Harvey)
2.Gold trading overnight, Goldcore
(/Mark OByrne)
3. Three stories today on the Greek supposed bailout
(zero hedge/Clive Hale)
4. Three stories on China devaluing again last night
(Agence France-Presse/zero hedge)
5 Trading of equities/ New York
(zero hedge)
6. One oil related story
(zero hedge)
7. Spain’s recovery/economy is one big lie
(zero hedge)
8. USA stories:
i) Kraft cutting 2500 jobs
ii)10 yr USA bond yield plummets
Let us head over and see the comex results for today.
The total gold comex open interest rose from 431,323 up to 435,489, for a gain of 4166 contracts as gold was up $3.40 with respect to yesterday’s trading. For the past two years, we have strangely witnessed two interesting developments with respect to the gold open interest: 1) total gold comex collapse in OI as we enter an active delivery month, and 2) a continual drop in the amount of gold standing in an active month, and today the latter continued with its decline after a two day hiatus. What is also interesting is that the LBMA gold is continually witnessing a 7.00 plus premium spot/next nearby month as gold is now in backwardation over there. We are now in the contract month of August and here the OI fell by 339 contracts falling to 2910 contracts. We had 172 notices filed upon yesterday and thus we lost 167 contracts or 16,700 additional ounces will not stand for delivery. We must have had some cash settlements today. The next delivery month is September and here the OI fell by 7 contracts down to 2251. The next active delivery month is October and here the OI fell by 824 contracts down to 26,446. The estimated volume on today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was good at 234,368. The confirmed volume on yesterday (which includes the volume during regular business hours + access market sales the previous day was fair at 205,785 contracts.
Today we had 450 notices filed for 45,000 oz.
And now for the wild silver comex results. Silver OI fell by 2531 contracts from 180,433 down to 177,902 as silver was unchanged in price yesterday . We continue to have some short covering as our bankers pulling their hair out with respect to the continued high silver OI as the world senses something is brewing in the silver arena. We are in the delivery month of August and here the OI fell by 1 contract falling to 29. We had 1 delivery notice filed yesterday and thus we lost 0 contracts or an additional nil ounces will stand for delivery in this non active August contract month. The next major active delivery month is September and here the OI fell by 7,192 contracts to 90,566. The estimated volume today was huge at 67,913 contracts (just comex sales during regular business hours). The confirmed volume yesterday (regular plus access market) came in at 75,522 contracts which is excellent in volume. We had 450 notices filed for 45,000 oz.
August contract month:
initial standingAugust 12.2015
Gold
Ounces
Withdrawals from Dealers Inventory in oz
nil
Withdrawals from Customer Inventory in oz
39,970.160. oz (JPMorgan)
Deposits to the Dealer Inventory in oz
nil
Deposits to the Customer Inventory, in oz
nil
No of oz served (contracts) today
450 contracts (45,000 oz)
No of oz to be served (notices)
2460 contracts (246,000 oz)
Total monthly oz gold served (contracts) so far this month
3823 contracts(382,300 oz)
Total accumulative withdrawals of gold from the Dealers inventory this month
nil
Total accumulative withdrawal of gold from the Customer inventory this month
448,877.6 oz
Today, we had 0 dealer transactions
total Dealer withdrawals: nil oz
we had 0 dealer deposits
total dealer deposit: zero
we had 1 customer withdrawal
i) Out of JPMorgan: 39,970.16 oz
total customer withdrawal: 39,970.16 oz
We had 0 customer deposits:
Total customer deposit: nil oz
We had 0 adjustments
JPMorgan has 7.1966 tonnes left in its registered or dealer inventory. (231,469.56 oz) and only 844,938.531 oz in its customer (eligible) account or 26.28 tonnes
.
Today, 0 notices was issued from JPMorgan dealer account and 450 notices were issued from their client or customer account. The total of all issuance by all participants equates to 450 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account
To calculate the total number of gold ounces standing for the August contract month, we take the total number of notices filed so far for the month (3823) x 100 oz or 382,300 oz , to which we add the difference between the open interest for the front month of August (2910) and the number of notices served upon today (450) x 100 oz equals the number of ounces standing.
Thus the initial standings for gold for the August contract month:
No of notices served so far (3823) x 100 oz or ounces + {OI for the front month (2910) – the number of notices served upon today (450) x 100 oz which equals 628,300 oz standing so far in this month of August (19.54 tonnes of gold).
We lost 167 contracts or an additional 16,700 ounces will not stand for delivery. Thus we have 19.54 tonnes of gold standing and only 15.206 tonnes of registered or dealer gold to service it.
Total dealer inventory 489,964.93 or 15.239 tonnes
Total gold inventory (dealer and customer) =7,422,118.983 or 230.85 tonnes)
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 230.85 tonnes for a loss of 72 tonnes over that period. The gold comex is bleeding gold.
end
And now for silver
August silver initial standings
August 12 2015:
Silver
Ounces
Withdrawals from Dealers Inventory
nil
Withdrawals from Customer Inventory
110,069.05 oz (HSBC, Scotia)
Deposits to the Dealer Inventory
nil
Deposits to the Customer Inventory
697,516.098 oz (Delaware,CNT)
No of oz served (contracts)
13 contracts (65,000 oz)
No of oz to be served (notices)
26 contracts (80,000 oz)
Total monthly oz silver served (contracts)
59 contracts (295,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
85,818.47 oz
Total accumulative withdrawal of silver from the Customer inventory this month
6,512,645.1 oz
Today, we had 0 deposits into the dealer account:
total dealer deposit: nil oz
we had 0 dealer withdrawal:
total dealer withdrawal: nil oz
We had 2 customer deposits:
i) Into CNT: 594,261.700 oz
ii) Into Delaware; 103,254.398 oz
total customer deposits: 697,516.098 oz
We had 2 customer withdrawals:
i) Out of HSBC: 50,041.35 oz
ii) Out of Scotia: 60,027.700 oz
total withdrawals from customer: 110,069.700 oz
we had 1 adjustment
i) Out of CNT:
440,457.85 oz was adjusted out of the dealer and this landed into the customer account of CNT
Total dealer inventory: 55.399 million oz
Total of all silver inventory (dealer and customer) 172.106 million oz
The total number of notices filed today for the August contract month is represented by 13 contracts for 65,000 oz. To calculate the number of silver ounces that will stand for delivery in August, we take the total number of notices filed for the month so far at (59) x 5,000 oz = 295,000 oz to which we add the difference between the open interest for the front month of August (29) and the number of notices served upon today (13) x 5000 oz equals the number of ounces standing.
Thus the initial standings for silver for the August contract month:
59 (notices served so far)x 5000 oz + { OI for front month of August (29) -number of notices served upon today (13} x 5000 oz ,= 375,000 oz of silver standing for the August contract month.
we neither lost nor gained any silver ounces standing in this non delivery month of August.
for those wishing to see the rest of data today see:http://www.harveyorgan.wordpress.comorhttp://www.harveyorganblog.com
end
The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.There is now evidence that the GLD and SLV are paper settling on the comex.***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:i) demand from paper gold shareholdersii) demand from the bankers who then redeem for gold to send this gold onto Chinavs no sellers of GLD paper.
And now the Gold inventory at the GLD:
August 12./ a huge deposit of 4.18 tonnes of gold into the GLD/Inventory rests at 671.87 tonnes
August 11.2015: no change in gold inventory at the GLD/Inventory rests at 667.93 tonnes August 10/no change in gold inventory at the GLD/Inventory rests at 667.93 tonnes
August 7./no change in gold inventory at the GLD/Inventory rests at 667.93 tonnes August 6/no change in gold inventory at the GLD/Inventory rests at 667.93 tonnes August 5.we had a huge withdrawal of 4.77 tonnes from the GLD tonight/Inventory rests at 667.93 tonnes
August 4.2015: no change in inventory/rests tonight at 672.70 tonnes
August 3.2015: no change in inventory at the GLD./Inventory remains at 672.70 tonnes
July 29/no change in inventory/rests tonight at 680.13 tonnes July 28/no change in inventory/rests tonight at 680.13 tonnes
July 27/no change in inventory/rests tonight at 680.13 tonnes July 24.2015/we had another massive withdrawal of 4.48 tonnes of gold form the GLD/Inventory rests at 680.13 tonnes.
July 23.2015: we had another withdrawal of 2.68 tonnes of gold from the GLD/Inventory rests at 684.63 tonnes
july 22/another withdrawal of 2.38 tonnes of gold from the GLD/Inventory rests at 687.31 July 21.2015: a massive withdrawal of 6.56 tonnes of gold from the GLD. Inventory rests at 689.69 tonnes. China and Russia need their physical gold badly and they are drawing their physical from this facility.
August 12 GLD : 671.87 tonnes
end
And now SLV:
August 12.2015: no change in SLV inventory/rests tonight at 326.209 million oz.
August 11./ no changes in SLV inventory/rests tonight at 326.209 million oz.
August 10: no changes in SLV inventory/rests tonight at 326.209 million oz.
August 7.no changes in SLV/Inventory rests this weekend at 326.209 million oz
August 6/no changes in SLV/inventory rests at 326.209 million oz
August 5/ a small withdrawal of 142,000 oz of inventory leaves the SLV/Inventory rests tonight at 326.209 million oz
August 4.2015: a small withdrawal of 476,000 oz of inventory at the SLV/Inventory rests at 326.351 million oz August 3.2015; no change in inventory at the SLV/inventory remains at 326.829 million oz
July 29/no change in silver inventory/326.829 million oz
July 28/we had a huge withdrawal of 2.005 million oz from the SLV/Inventory rests at 326.829 oz July 27/no change in silver inventory/inventory rests tonight at 328.834 million oz July 24/no change in silver inventory/inventory rests tonight at 328.834 million oz July 23.2015; no change in silver inventory/rests tonight at 328.834 million oz july 22/no change in silver inventory/inventory rests at 328.834 million oz. July 21.we had a massive addition of 1.241 million oz into the SLV/Inventory rests tonight at 328.834 million oz.
August 12/2015: tonight inventory rests at 326.209 million oz
end
And now for our premiums to NAV for the funds I follow:
Sprott and Central Fund of Canada.(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)
1. Central Fund of Canada: traded at Negative 9.7 percent to NAV usa funds and Negative 9.5% to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 61.4%
Percentage of fund in silver:38.3%
cash .3%( August 12/2015)
2. Sprott silver fund (PSLV): Premium to NAV rises to -0.11%!!!! NAV (August 12/2015) (silver must be in short supply)
3. Sprott gold fund (PHYS): premium to NAV rises to – .36% to NAV August12/2015)
Note: Sprott silver trust back into negative territory at- 0.11%Sprott physical gold trust is back into negative territory at -.36%Central fund of Canada’s is still in jail.
Sprott formally launches its offer for Central Trust gold and Silver Bullion trust:
SII.CN Sprott formally launches previously announced offers to CentralGoldTrust (GTU.UT.CN) and Silver Bullion Trust (SBT.UT.CN) unitholders (C$2.64) Sprott Asset Management has formally commenced its offers to acquire all of the outstanding units of Central GoldTrust and Silver Bullion Trust, respectively, on a NAV to NAV exchange basis. Note company announced its intent to make the offer on 23-Apr-15 Based on the NAV per unit of Sprott Physical Gold Trust $9.98 and Central GoldTrust $44.36 on 22-May, a unitholder would receive 4.45 Sprott Physical Gold Trust units for each Central GoldTrust unit tendered in the Offer. Based on the NAV per unit of Sprott Physical Silver Trust $6.66 and Silver Bullion Trust $10.00 on 22-May, a unitholder would receive 1.50 Sprott Physical Silver Trust units for each Silver Bullion Trust unit tendered in the Offer. * * * * *
>end
And now for your overnight trading in gold and silver plus storieson gold and silver issues:
(courtesy/Mark O’Byrne/Goldcore)
Gold Price Rises After Currency Wars Reignite As China Devalues
By Mark O’ByrneAugust 12, 2015No Comments
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DAILY PRICES
Today’s Gold prices were USD 1,116.80, EUR 1003.23 and GBP 717.18 per ounce.
Yesterday’s Gold prices were USD 1,113.25, EUR 1008.97 and GBP 713.74 per ounce.
[LBMA AM prices]
Gold in USD – 1 Year
Gold and silver rose on the COMEX yesterday – up 0.5% to $1,108.70 and silver was up 0.6% to $15.34 per ounce.
This morning, gold is 0.85% higher to $1,119 per ounce. Silver is up 0.1% to $15.47 per ounce. Platinum and palladium are 0.5% and 1% higher to $996 and $610 per ounce respectively.
Gold Rises After Currency Wars Reignite As China Devalues
China surprised global markets yesterday by devaluing its currency on concerns about sharply decelerating Chinese economy
We were not surprised as had said that this was likely as the Chinese economic numbers are bogus
The devaluation was condemned by U.S. politicians as a grab for an unfair export advantage
Mark Hill via Merck Investments
China’s central bank set its official guidance rate down nearly 2 percent to 6.2298 yuan per dollar
It was the biggest one-day fall since a massive devaluation in 1994
The devaluation hit global equities and U.S. oil prices, with investors fearing a new currency war
Gold prices ticked higher as the move will increase deflation pressures in the U.S. and could lead to the Fed not being able to increase interest rates
As expected and currency wars and competitive currency devaluations are set to escalate once again
Gold, silver and tangible assets will benefit once again
Continue reading
end
(courtesy New York Sun/GATA)
New York Sun editorial: The fiat yuan
Submitted by cpowell on Tue, 2015-08-11 22:27. Section: Daily Dispatches
From the New York Sun
Tuesday, August 11, 2015
If the Communist Chinese devalue the yuan against a dollar that is appreciating against gold, has the yuan gone up or down? We ask because the leading story on the New York Times Web site this morning reports not only that the Chicom authorities “sharply devalued” the renminbi but also that the move “could raise geopolitical tensions and weigh on growth elsewhere.” We ran the Times’ entire text through the Sun’s old hand-crank Von Mises brand language-species prose separator. It failed to find any mention of — or even allusion to — gold. …
… For the remainder of the commentary:
http://www.nysun.com/editorials/the-fiat-yuan/89249/
end
So much for “one-off”
(courtesy Agence France)
China cuts yuan rate against US dollar for second day
Submitted by cpowell on Wed, 2015-08-12 12:32. Section: Daily Dispatches
From Agence France-Presse
via Yahoo News
Wednesday, August 12, 2015
SHANGHAI — China cut the yuan’s value against the dollar for the second consecutive day Wednesday, roiling global financial markets and driving expectations the currency could be set for further falls.
The daily reference rate that sets the value of the Chinese currency against the greenback was cut by 1.62 percent to 6.3306 yuan, from 6.2298 on Tuesday, the People’s Bank of China said in a statement on its website.
The move took the reductions to 3.5 percent this week — the largest in more than two decades — after a surprise devaluation on Tuesday, but the central bank played down expectations it would continue to depreciate the currency.
The combined drop is the biggest since China set up its modern foreign exchange system in 1994, when it devalued the yuan by 33 percent at a stroke. …
Analysts said the move could also delay an expected US hike in interest rates and even threaten a currency war as other countries come under pressure to devalue as well. …
… For the remainder of the report:
http://news.yahoo.com/imf-welcomes-chinas-currency-valuation-mechanism-0…
end
And now your overnight Wednesday morning trading in bourses, currencies, and interest rates from Europe and Asia:
1 Chinese yuan vs USA dollar/yuan drops big time to 6.3723/Shanghai bourse: red and Hang Sang: red
2 Nikkei down 327.98 or 1.58%
3. Europe stocks all in the red /USA dollar index down to 96.38/Euro up to 1.1147
3b Japan 10 year bond yield: falls hugely to 36% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 124.27
3c Nikkei still just above 20,000
3d USA/Yen rate now just above the 124 barrier this morning
3e WTI 43.78 and Brent: 49.80
3f Gold up /Yen up
3gJapan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.
Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.
3h Oil up for WTI and up for Brent this morning
3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund slightly falls to .61 per cent. German bunds in negative yields from 4 years out.
Except Greece which sees its 2 year rate falls to 14.72%/Greek stocks this morning down by 1.55%: still expect continual bank runs on Greek banks /
3j Greek 10 year bond yield falls to : 10.22%
3k Gold at $1117.25 /silver $15.34
3l USA vs Russian rouble; (Russian rouble down 6/10 in roubles/dollar) 64.82,
3m oil into the 43 dollar handle for WTI and 49 handle for Brent/Saudi Arabia increases production to drive out competition.
3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation. This can spell financial disaster for the rest of the world/China may be forced to do QE!!
30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9758 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0879 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.
3p Britain’s serious fraud squad investigating the Bank of England/
3r the 4 year German bund remains in negative territory with the 10 year moving closer to negativity to +.61%
3s The ELA rose another 900 million euros to 90.4 billion euros. The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”. Greece votes again and agrees to more austerity even though 79% of the populace are against.
4. USA 10 year treasury bond at 2.10% early this morning. Thirty year rate below 3% at 2.79% / yield curve flatten/foreshadowing recession.
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Equity Futures Tumble Again, S&P To Open Under 200DMA, 10Y Yield Approaches 1-Handle
The overnight market has been a repeat of yesterday’s action, when following China’s repeat 1.6% devaluation of the CNY (which was to be expected since the PBOC made it quite clear the fixing would be based off the market value, a value which continues plunging), the second biggest in history following Monday’s 1.9% plunge, traders appeared stunned having believed the PBOC’s lies that the devaluation was a one-off and as a result the E-Mini tumbled overnight, and is now 30 points lower from last night’s PBOC fixing announcement, trading at around 2058, and far below the “magical” 200-DMA support line, which has now been solidly breached.
Perhaps the only saving grace right now is that the PBOC stepped in the last minutes of trading to prop up the yuan, or else today’s bloodbath, not just across Asian FX as shown earlier, but in US and European equity markets would have been far, far worse. For Asia, however, it was too late: all major indices were firmly in the red, with the Nikkei 225 (-1.6%), ASX 200 (-1.7%) and Hang Seng (-2.4%) and Shanghai Comp. (-1.1%) pressured, which followed in tandem with US equity futures as the actions by the PBoC further added uncertainty and concerns of weak underlying Chinese growth. At the same time, JGBs gained 29 ticks amid a risk off tone.
But what was bad for stocks was delightful news for Treasurys, whose yields tumbled overnight, and at last check were trading just modestly off the overnight lows of 2.07%. We fully expect a 1-handle in the 10 Year within days. As RanSquawk notes, the latest move by the PBOC caused an uproar across various asset classes, with USTs now up over 1.5 points since Monday and stocks in Europe trading lower over 2% this morning amid fears of negative spill over effects. As a result, US inflation swap forward 5Y5Y rate now trades at the lowest since March while Euro 5-year/5-year inflation swap rate trades at its lowest since April 28. It’s called “currency war” for a reason: the same reason it is also called “exporting deflation.”
Looking at sectors, the exporters led the move lower in Europe and on the sector breakdown , the weakness was particularly evident across auto and luxury names. The move lower saw the DAX index break below the key 11,000 level, while the S&P e-mini future looks set to break the 200DMA line to the downside.
Focusing on FX, the USD index failed to benefit from the risk averse sentiment as lower yields, with USTs 10y yield breaking below its 200DMA yesterday, and the consequent flattening of the curve prompted realignment of market expectations with regards to potential rate hike. At the same time, FX managers recycling into EURs, together with the ongoing unwind of short carry trades (EUR/USD and EUR/CNY) see the major pair rallying to 1-month high, while EUR/CHF continued to consolidate above the key 200DMA line.
The commodity complex did see initial weakness on the back of the latest news from China, with the exception of gold which benefitted from a safe haven bid to trade higher on the day by around USD 10.00 and is now on track for its 5th straight day of gains . Away from gold, WTI crude futures initially extended losses having settled at its lowest level in 6-years despite the latest API crude report showing a 3rd consecutive drawdown. (-847K vs. Prey. -2400K), however the energy complex has retraced some of these losses this morning, with Brent and WTI trading above USD 49.00 and USD 43.00 respectively.
In Summary: European shares remain lower though are off intraday lows after the biggest two-day selloff in Asian currencies since 1998. The onshore yuan fell ~1.9%, Shanghai Composite down 1.1%. The personal & household and autos sectors underperform and oil & gas, real estate outperform. Most European government bond yields fall, German bund yield drops to two-month low. The euro rises to a one-month high against the dollar. IEA sees oil glut enduring in 2016 after reaching 17-year high. Crude oil rises. U.K. unemployment in line with estimates, wage growth below. European industrial production below estimates. The French and Dutch markets are the worst-performing larger bourses, the U.K. the best. The euro is stronger against the dollar. Japanese 10yr bond yields fall; German yields decline. Commodities gain, with nickel, soybeans underperforming and WTI crude outperforming.
Market Wrap
U.S. mortgage applications, monthly budget statement, JOLT job openings due later.
S&P 500 futures down 1.1% to 2056.1
Stoxx 600 down 2.2% to 384.8
US 10Yr yield down 6bps to 2.08%
German 10Yr yield down 2bps to 0.61%
MSCI Asia Pacific down 1.5% to 137.9
Gold spot up 0.8% to $1117.3/oz
All 19 Stoxx 600 sectors rise; oil & gas, real estate outperform, personal & household, autos underperform
2.8% of Stoxx 600 members gain, 96.8% decline
Eurostoxx 50 -2.6%, FTSE 100 -1.4%, CAC 40 -2.8%, DAX -2.4%, IBEX -1.9%, FTSEMIB -2.4%, SMI -1.9%
Asian stocks fall with the Kospi outperforming and the Hang Seng underperforming; MSCI Asia Pacific down 1.5% to 137.9
Nikkei 225 down 1.6%, Hang Seng down 2.4%, Kospi down 0.6%, Shanghai Composite down 1.1%, ASX down 1.7%, Sensex down 1.2%
0 out of 10 sectors rise with health care, utilities outperforming and materials, financials underperforming
Pearson to Sell Economist Stake for $731m to Exit News
Euro up 0.78% to $1.1128
Dollar Index down 0.71% to 96.6
Italian 10Yr yield down 1bps to 1.78%
Spanish 10Yr yield down 2bps to 1.92%
French 10Yr yield down 1bps to 0.92%
S&P GSCI Index up 0.8% to 370
Brent Futures up 0.9% to $49.6/bbl, WTI Futures up 1.2% to $43.6/bbl
LME 3m Copper little changed at $5123.5/MT
LME 3m Nickel down 1.4% to $10600/MT
Wheat futures up 0.2% to 513.3 USd/bu
Bulletin headline summary from RanSquawk and Bloomberg
Risk averse sentiment dominates the price action, as the PBOC weakens the CNY fix for the 2nd consecutive day, causing an uproar in financial markets
The USD index failed to benefit from the risk averse sentiment, as lower yields, with Videos USTs 10y yield breaking below its 200DMA yesterday and the consequent flattening of the curve prompted realignment of market expectations with regards to potential rate hike
Going forward, market participants will get to digest the release of the latest US JOLTs report and the weekly DOE data. In terms of earnings, the focus will be on Cisco and Macy’s.
Treasury yields dropped overnight led by long-end as China’s currency devaluation sparks FTQ flows and drives equities lower; this week’s U.S. Treasury auctions continue with $24b 10Y, WI 2.095% vs. 2.225% in July.
China’s yuan led the biggest two-day selloff in Asian currencies since 1997, fueling concern that financial-market volatility will curb global economic growth
Bill Gross says a weakening Chinese yuan will bring slower inflation worldwide and the nation’s move to devalue its currency is also fueling demand for dollar- denominated assets
While the PBOC followed through on a pledge to align its fixing more closely with the previous close, people familiar with the matter said authorities intervened to support the currency and told banks to limit some companies’ dollar purchases
China’s industrial production, investment and retail data all trailed analysts’ estimates, putting additional downward pressure on an already weakening currency
The weakest corporate borrowers are finding the days of free-flowing credit quickly evaporating as the $39.6 billion of junk-rated bonds and loans issued since July is the least since the summer of 2008, according to data compiled by Bloomberg
Greece’s third bailout risks being held up by German lawmakers just as the Greek government submits a new raft of proposals to its parliament, throwing into jeopardy a timeline that aims to get cash to the country
$750m IG and $1.8b HY priced yesterday. BofAML Corporate Master Index OAS widens +1 to new YTD wide 162; YTD low 129. High Yield Master II OAS +16 to 567, new YTD wide; YTD low 438
Sovereign 10Y bond yields lower. Asian, European stocks drop, U.S. equity-index futures lower. Crude oil, cooper and gold rise
DB’s Jim Reid completes the overnight recap
So a bit late, but the reason I think this could be a big deal is because it may mark the point where the global currency wars move from being friendly to being more antagonistic. Clearly the China moves so far are minor but do seem to mark a change in strategy which is the important point. So far the global currency war has been relatively benign because in my opinion the two main protagonists – namely Japan and the Euro-Area – can point to genuine reasons why they needed to do something to arrest years of growth under-performance. With China it’ll be hard for the international community to have the same sympathy for a country that is struggling to migrate from a high single digit growth rate to one supposedly around or just beneath 7% – but on official stats still faster than virtually any country in the world.
So the key here is whether this is part of a series of moves from China or perhaps more importantly whether the market or its trading partners think it is. However the big positive for financial assets (at some point) is that it surely must influence the Fed to some degree and other central banks for that matter. A full blown China devaluation would surely stop the Fed dead in their tracks and the even threat of it may slow them down. The probability of a September US hike went down from 48% before the announcement (and 54% late Monday) to 40% currently. So one has to balance the risk of a destabilising currency war with the extra global liquidity it would bring. Net net we still think the global financial system is incredibly fragile and essentially being artificially propped up by mass liquidity. This view hasn’t changed yet but the risk of something more destabilising depends on China’s likely follow-through. As you’ll see below our economists are relatively sanguine about the scale of further moves in the currency but anything like this involves risks.
Before we look at this, how have we reacted so far this morning? The headlines are dominated again by a material shift in the Yuan fix at the open this morning. The fix was set at 6.3306, a 1.6% devaluation versus the previous days fix and a 0.1% discount to yesterday’s closing level. The Yuan (-1.62%) has plummeted as a result and is on course for its biggest two-day drop (-3.48%) since 1994. The offshore Renminbi meanwhile is down 2.46% in trading this morning. We’ve seen another selloff in FX markets in Asia as a result with the Aussie Dollar (-0.84%), Korean Won (-1.25%), Taiwanese Dollar (-2.25%) and Indonesian Rupiah (-1.57%) a few of the notable movers while the Malaysian Ringgit (-1.38%) has fallen to the lowest level since 1998. We’ve also seen the first sign of a reaction from a Central Bank to China’s moves, with the State Bank of Vietnam this morning announcing a widening in the trading band of its own currency, citing the PBoC action as the reason.
Meanwhile, in reaction to the moves the IMF has this morning said that ‘greater exchange rate flexibility is important for China’ and that the economy can and should aim to achieve an effectively floating exchange rate system in two to three years. This came after the PBoC stated that the currency exchange rate fluctuation is ‘normal and should be treated objectively’ and that the daily fixing price will ‘gradually move towards stability’.
Elsewhere, 10y Treasuries have dropped a further 6bps this morning while equity bourses in Asia have sold off. The Nikkei (-1.70%) is lower, not helped by a soft PPI print while the Hang Seng (-1.75%), Kospi (-1.87%) and ASX (-1.74%) have extended moves lower. The Shanghai Comp (-0.45%) and Shenzhen (-0.36%) are again trading with little obvious direction as we head into the midday break while credit indices in Asia, Australia and Japan are generally 2-3bps wider.
Writing in a note yesterday, our China Chief Economist Zhiwei Zhang said that, in his view, the Chinese government had already sent a clear signal to the market on July 24th when it announced a set of policies to boost trade, including a statement to allow more flexibility in the exchange rate and so as a result he’d already expected some depreciation in the Yuan to occur. Zhiwei sees the move as a positive step towards a more market orientated exchange rate policy framework but doubts the government will allow depreciation of more than 10% in the next 12 months, expecting volatility on both sides. Zhiwei has reiterated his CNY forecast of 6.5 by the end of 2016 but acknowledges that the risks are balanced towards more depreciation (albeit less than 10%). Crucial in his mind for the government is the avoidance now of sharp capital outflows. In that sense he thinks we may see some volatility in the fixing and CNY spot market, as the government may want to avoid any built-up expectations of the CNY becoming a one-way trade. Despite yesterday’s move, Zhiwei has reiterated his growth and policy outlook, expecting GDP to grow at 7.0% in Q3 and 7.2% in Q4 as well as one rate cut and one RRR cut for the rest of the year (most probably Q3).
Taking a look back at the impact of the move yesterday, the Yuan eventually finished the session 1.86% weaker versus the Dollar at 6.325. Like this morning, the initial pain was felt in the more China-sensitive currencies as we saw the Aussie Dollar (-1.47%), NZ Dollar (-1.25%), Korean Won (-1.36%) and Taiwanese Dollar (-1.27%) amongst others, tumble in the aftermath. There was a general feeling of uncertainty for the most part and the move by the PBoC clearly rattled markets resulting in a risk-off session yesterday. Equity markets on both sides of the pond fell, highlighted by the S&P 500 (-0.96%), Dow (-1.21%), Stoxx 600 (-1.55%) and DAX (-2.68%). The decline for Apple (-5.15%) in particular highlighted the effect of the move at the micro level and for those companies with significant revenue exposure in China with luxury goods makers the other notable names to retreat yesterday. Meanwhile, credit markets also came under reasonable pressure with CDX IG 1.5bps wider in the US and Main (+2.5bps) and Crossover (+10bps) leaking wider through the European session.
The moves in the equity markets yesterday were probably slightly better than expected in light of the tumbles in the Oil complex yesterday. Energy stocks (-0.19%) were a notable outperformer in the S&P 500 despite WTI falling -4.18% and closer to 5% from the intraday high to close at $43.08/bbl – the lowest settlement price now since March 2009 but still not quite at the intraday low of $42.03/bbl we saw back in mid-March. There was a similar fall for Brent (-2.44%) while industrial metals were hard hit with Aluminum (-1.95%), Copper (-3.47%), Zinc (-3.99%) and Nickel (-3.54%) suffering heavy losses. It was the sovereign bond market which benefited from yesterday’s moves meanwhile. With the poorer sentiment driving the weakness in risk assets, along with more pressure in the Oil space, 10y Treasury yields fell 8.6bps lower to 2.142%
(2.08% as we go to print) and to the lowest yield level since May 29th. 2y (-4.8bps) and 30y (-8.7bps) yields also moved lower while across the Fed Funds contracts we saw 2.5bps and 6.5bps taken off the Dec15 and Dec16 contracts to 0.315% and 0.980% respectively. It was a similar story in Europe where we saw 10y Bund yields close 6.6bps lower at 0.630% and the peripherals declining similar amounts.
Of relatively passing interest, all things considered, was yesterday’s data. In the US we saw a slight uptick in the NFIB small business optimism survey to 95.4, a rise of 0.3pts as expected. Nonfarm productivity for Q2 rebounded +1.3% qoq saar (vs. +1.6% expected) during the quarter after some weakness in the prior two quarters. Unit labour costs for the quarter were higher than expected (+0.5% qoq saar vs. 0.0% expected). Meanwhile the June reading for wholesale inventories was solid (+0.9% mom vs. +0.4% expected) and the highest monthly increase since April last year. Trade sales for the month (+0.1% mom vs. +0.5% expected) were more disappointing however. Over in Europe and specifically in Germany, the August ZEW survey reading made for a mixed bag also with the current situations reading rising a better than expected 1.8pts to 65.7 (vs. 64.2 expected), but with the expectations print declining 4.7pts to 25.0 after expectations of a modest rise to 31.9. That latest leg lower marks a fifth consecutive monthly decline from the high print of 54.8 in March, a signal perhaps that the concerns around the commodity slump and China have overshadowed the progress in Greece for now.
On this subject, having dominated headlines for much of this year it seems Greece reached an accord yesterday on a €85bn deal with its creditors. The agreement paves the way for the parliamentary approval process to begin and a tentative Eurogroup finance ministers meeting scheduled for Friday with a €3.2bn ECB repayment due by August 20th. According to Ekathimerini, a draft of the memorandum says the deal has 35 measures which must be passed immediately with more measures to follow in October. Political pressure, most notably in Germany, is still appearing to play a factor however with Bloomberg reporting that the deal risks being held up by German lawmakers seeking more time to dig through the details and not rush any decision.
Taking a look at the day’s calendar now. Kicking off the European data flow this morning will be the UK where we get various June employment indicators including the unemployment rate and average weekly earnings, before we get industrial production data for the Euro area. Over in the US this afternoon there will be some focus on the June JOLTS job openings report with the hiring and quits rate both of interest while the July monthly budget statement is also due. The Fed’s Dudley speaking this afternoon (1.30pm BST) will also be worth keeping an eye on.
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For the second day in a row, the POBC intervened and lowered the value of the yuan. I have been pointing out to you that there is a massive 9 trillion USA short position. You can approximate the short USA dollar carry trade into 3 categories:
a) short dollars/purchase emerging market assets like Brazil etc
b) short dollars and purchase USA assets or European assets e.g. oil
c) and the biggest: short dollars purchase Chinese yuan/Chinese denominated assets like Shanghai composite.
The latter carry trade has been going on for quite some time and it makes sense. The yuan was undervalued and appreciating while the dollar was declining. The hedge funds used their borrowed dollars and purchased Chinese assets and did quite well. They were not concerned with the rise in the dollar because the yuan was pegged to the dollar. However on Monday that all fell apart as the dollar rose against the yuan. They were already losing due to the plummeting Chinese exchanges and now the double whammy!!
(courtesy zero hedge)
(courtesy zero hedge)
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