Thursday, July 31, 2014

July 31.2014:/No change in gold inventory at the GLD/no change in silver inventory at SLV/Chicago mfg PMI implodes/ the Dow implodes by over 300 points in sympathy with the BES crash and the Argentinian default.

Gold closed down $13.60  at $1281.30 (comex to comex closing time ). Silver was down 18 cents at $20.37

In the access market tonight at 5:15 pm
gold: $1296.00
silver:  $20.60

Today is the final day for options expiry on the OTC contract.  True to form, our bankers again orchestrated a raid to make sure gold stays below $1290.00 and silver below $20.50.  Tomorrow is the jobs report so the crooks may continue to whack.

The Dow plummeted 317 points today in sympathy with the crash in Portugal's second largest bank, BES , (we may have a systemic default here) and in the other major story, the default of sovereign Argentina. This morning, the Chicago manufacturing PMI fell by 8 standard deviations from 62.6 down to 52.6 as the USA is following in the steps of Europe in a free fall.

Silver eagle sales in the USA top 26 million oz for 7 months and thus heading for a total mintage of 44 million oz.  The USA produces 34 million oz and thus they need to import silver just to satisfy the mint.  Silver demand in the USA for silver energy solar panels, radiology, pharmaceuticals and jewelery continue to explode off the charts.

GLD: no change in  gold inventory at the GLD (tonnage still 801.84 tonnes).

SLV : no change in silver  inventory at the SLV .

We will discuss these and other stories 

So without further ado..................

Let's head immediately to see the data has in store for us today.

First:  GOFO rates/

 All  GOFO rates are positive and thus we have no real backwardation. Most of the months moved much closer to the negative needle, with the one year GOFO moving slightly towards the positive. It looks to me like the Indian gold swap with the B. of E is entering the market as leases.

 London good delivery bars are still quite scarce. 

July 31 2014

1 Month Rate:  2 Month Rate   3 Month Rate   6 month rate  1 yr rate

+.056000%        +.078000%         +.09600%         +.15600%    +  .232000%

July 30.2014:

1 Month Rate  2 Month Rate   3 Month Rate  6 month Rate      1 yr rate

+.0800%         +.102000%         +.12200%             +.17600%       +.22200%


Let us now head over to the comex and assess trading over there today,

Here are today's comex results: (options expiry today.


The total gold comex open interest fell today by another whopping 6,569 contracts from 374,417 all the way down to 367,848  with gold down  by  $3.40 yesterday. We are now witnessing extremely low open interest in gold with the low gold values.  Also for the past year, we see continual liquidation of contracts as the front month approaches as players liquidate despite zero cost in rolling into a future month.  It defies common logic.  The non active gold contract month of July is now off the board.  The next big delivery month is August and here the OI fell by 12,287 contracts down to an astonishingly high 8920 contracts.
The next non active delivery month is September and here astonishingly we see that the open interest actually rose to 7308 contracts. We will have to wait and see how this month develops but I doubt we will lose much of these contracts.  If so somebody believes something is going to happen by month's end.
The estimated volume today was fair at 132,167 contractsThe confirmed volume  yesterday was good  at 177,005.

The total silver Comex OI continually players to a different drummer than gold as it rose  by 873 contracts as silver was up by  1 cent yesterday.    The total OI now rests tonight at 159,405 contracts. The silver contracts are in very strong hands and this will continue to bring nightmares to our bankers. The front August contract month saw it's OI fall by 60 contracts down to 237 contracts and that is what will initially stand for delivery.  The next big delivery month is September and here the OI fell slightly by 256 contracts down to 97,808. This month is also extremely high in OI.    The estimated volume today was fair at 34,924.  The confirmed volume  yesterday was better at  35,635 contracts.

July 30.2014   data for the July delivery month.

First day notice for gold at the gold comex

July 31.2014  

Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
5146.093 (HSBC,Scotia)
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz
69,707.410 oz  (HSBC,Scotia)
No of oz served (contracts) today
102  (10,200 oz)
No of oz to be served (notices)
8818  (881,800 oz)
Total monthly oz gold served (contracts) so far this month
102   (10,200 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month

  5146.093 oz

 we had small activity again inside the gold comex and this is extremely unusual before a big active delivery month like August.

 we had  0 dealer deposits and 0 withdrawals from the dealer

Total dealer deposit: nil oz

we had no dealer withdrawals:

dealer withdrawals:  nil oz

We had 2  customer deposit today

i) Into HSBC:  64,007.410 oz
ii) Into Scotia:  5700.000 oz !!!  This is not divisible by kilobar weight of 32.15 and as such this deposit is extremely suspect.  The bars must have weights accompanied by two decimals.  We are seeing too many of these deposits/withdrawals of exact weights and I think you must agree with Eric Sprott and myself that the data from the comex is suspect!!

total customer deposits: 69,707.410 oz

we had 2 customer withdrawal:

i) Out of HSBC;  130.693 oz
ii) Out of Scotia:  5015.400

Total customer withdrawals:  5146.093 oz

Today we had 0   adjustments

Thus tonight, we have the following JPMorgan inventory levels in gold;

JPM  dealer inventory remains  tonight at 288,540.533  oz or 8.974 tonnes

JPM customer inventory remains  tonight at: 1,016,826.403 oz  or  31.627 tonnes

(12 months ago we had a massive amount of kilobars enter the customer at JPMorgan.  It seems that the entire inventory of kilobars is still there)

Today, 0 notices was issued from  JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 102 contracts  of which 7 notices were stopped (received) by JPMorgan dealer and 31  notices stopped by JPMorgan customer account.
The total dealer comex gold  remains  tonight  at  936,483.606 oz or 29.128 tonnes of gold . The total of all comex gold (dealer and customer) rests at 8,716,978.698 oz or 271,13 tonnes

Tonight, we have dealer gold inventory for our  3 major bullion banks (Scotia, HSBC and JPMorgan) with its gold inventory  resting  tonight  at only 23.178 tonnes.

i) Scotia:  303,190.834 oz or 9.43 tonnes
ii) HSBC: 153,495.552 oz or  4.774 tonnes
iii) JPMorgan: 288,540.533 oz or 8.974 tonnes

total: 23.178 tonnes

Brinks dealer account which did have  the lions share of the dealer gold saw its inventory level lower  tonight  to 168,475.552 oz or 5.24 tonnes.  Several months ago they had over 13 tonnes of gold at its registered or dealer account.

Today we  had 102 notices served upon our longs for 10,200  oz of gold.  In order to calculate what will be  standing for delivery in August, I take the number of contracts served so far  this month at 102 x 100 oz  = 44,000 oz, to which I add the  the open interest for the August contract month (8920) - the number of notices served today (102) x 100 oz

Thus:  August initial standings:

102 notices served already x 100 oz  =  10,200 oz  +  ( 8920 OI for August) - 102  (number of notices served today) x 100 oz per contract  =   892,000 oz or 27.744 tonnes of gold.

This is huge especially with a low OI.  When interest is low deliveries should be low. It is very strange to see an extremely low OI with a high number of gold oz willing to stand for delivery. What is e

In Summary:

i) the total dealer inventory of gold settles tonight  at a  level of 29.128 tonnes.

i)  a) JPMorgan's customer inventory rests tonight at  1,016,826.403 (31.627  tonnes)

ii  b)  JPMorgan's dealer account rests tonight at  288,540.533 oz (8.974 tonnes)

iii) the 3 major bullion banks have collectively only 23.178 tonnes of gold left in their dealer account.(JPMorgan, HSBC,Scotia)

and what is totally remarkable is the fact that little gold entered the dealer comex vaults despite December and February  April , June and now August are  very months for the gold calendar . Another oddity is that the only gold that does enter the customer account are kilobars and kilobars are generally of demand from Eastern persuasion.


now let us head over and see what is new with silver:


Jul 31/2014:  July delivery month

  July silver: First day notice for the August contract month

Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory 116,017.24  oz (HSBC,Scotia )  
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory nil
No of oz served (contracts)225 contracts  (1,125,000 oz)
No of oz to be served (notices)12  (60,000 oz )
Total monthly oz silver served (contracts)225 contracts  (1,125,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal  of silver from the Customer inventory this month116,017.24 oz

Today, we  had tiny activity  inside the silver vaults 
 we had 0 dealer deposits and 0  dealer withdrawal.

total dealer deposit: nil oz

total dealer withdrawal:  nil oz

We had 0 customer deposit:

Total customer deposit: nil oz

We had 2 customer withdrawal:

i) Out of HSBC:  30,673.49 oz
ii) Out of Scotia:  85,343.75 oz

Total customer withdrawals: 116017.24  oz

we had 1  adjustments:

i Out of CNT:  1,128,692.24 oz was adjusted out of the customer and this landed into the dealer account of CNT

Registered (dealer) silver   : 60.335 million oz  
total of all silver:                 176.642 million oz

The CME reported that we had a huge 225 notices filed for 1,125,000 oz today. To calculate what will stand for this  active delivery month of August , I take the number of contracts served  for the entire  month at 225  x 5,000 oz per contract  or 1,125,000 ounces  to which I add the OI for August (237) - 225  (the number of notices served today x 5,000 oz  =   1,185,000 oz of silver

Thus initial standings for silver:  225 notices x 5,000 oz per notice =  1,125,000 oz
+ (237- 225) =   1,185,000  oz of silver standing initially for the August silver contract month.  Again, this is extremely high for an off month.


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 shareholders
ii) demand from the bankers who then redeem for gold to send this gold onto China

vs no sellers of GLD paper.

And now the Gold inventory at the GLD:

July 31.2014: no change in inventory/801.84 tonnes
July 30.2014; no change in inventory/801.84 tonnes

July 29.2014: no change in inventory/801.84 tonnes

July 28.2014: no change in inventory/801.84 tonnes

July 25.2014: no change in inventory/801.84

July 24.2014: a lost 3.84 tonnes of gold today/tonnage: 801.84 tonnes

July 23.2014: another gain this time a gain of .76 tonnes/805.68 

July 22.2014: another rise/this time a gain of 1.5 tonnes of gold/tonnage 804.68

 Today, July 31.2014:

 today no change in gold inventory at the GLD  resting tonight at 801.84 tonnes.  


The registered  vaults at the GLD will eventually become a crime scene as real physical gold  departs for eastern shores leaving behind paper obligations to the remaining shareholders.   There is no doubt in my mind that GLD has nowhere near the gold that say they have and this will eventually lead to the default at the LBMA and then onto the comex in a heartbeat  (same banks). 

As a reminder the total comex gold had inventories of around 11 million oz in 2011. Today the total comex gold remains at   8.652 million oz  (269.13 tonnes).

The total dealer comex gold remains at : 936,483.606 oz or 29.128 tonnes.

GLD gold:  801.84 tonnes.

And now for silver:

July 31.2014: no change in inventory


Net Assets
as of 30-Jul-2014
Ounces in Trust
as of 30-Jul-2014
Tonnes in Trust  
as of 30-Jul-2014

July 30.2014: no change


Net Assets
as of 30-Jul-2014
Ounces in Trust
as of 29-Jul-2014
Tonnes in Trust  
as of 29-Jul-2014

July 29.2014:  no change  


Net Assets
as of 28-Jul-2014
Ounces in Trust
as of 28-Jul-2014
Tonnes in Trust  
as of 28-Jul-2014

July 28.2014

no change in silver inventory at the SLV


Net Assets
as of 25-Jul-2014
Ounces in Trust
as of 25-Jul-2014
Tonnes in Trust  
as of 25-Jul-2014

July 25.2014:

we gained 815,000 oz of silver at the SLV


Net Assets
as of 24-Jul-2014
Ounces in Trust
as of 24-Jul-2014
Tonnes in Trust  
as of 24-Jul-2014

July 24.2014:

 no change in silver inventory at the SLV

Net Assets
as of 23-Jul-2014
Ounces in Trust
as of 23-Jul-2014
Tonnes in Trust  
as of 23-Jul-2014

July 23.2014: 


Net Assets
as of 22-Jul-2014
Ounces in Trust
as of 22-Jul-2014
Tonnes in Trust  
as of 22-Jul-2014

Today, July 31.2014/no change in   silver inventory at the SLV

And now for our premiums to NAV for the funds I follow:

Note:  Sprott silver fund now deeply into the positive to NAV

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 5.7% percent to NAV in usa funds and Negative 5.6%  to NAV for Cdn funds. July 31/2014)  

2. Sprott silver fund (PSLV): Premium to NAV rises to positive 3.04% NAV (July 31/2014)  
3. Sprott gold fund (PHYS): premium to NAV falls to negative -0.47% to NAV (July 31. /2014) 
Note: Sprott silver trust back hugely into positive territory at 3.04%. 
Sprott physical gold trust is back in negative territory at  -0.47%.

Central fund of Canada's is still in jail.


And now your overnight gold and silver trading (from Asia /Europe this morning) and physical commentaries:

(courtesy Mark O'Byrne)

Silver Eagle Bullion Coins Reach 26 Million For 2014

Published in Market Update  Precious Metals  on 31 July 2014
By Mark O’Byrne

Today’s AM fix was USD 1,295.00, EUR 966.92 and GBP 767.36 per ounce.
Yesterday’s AM fix was USD 1,297.50, EUR  968.43 and GBP 766.21  per ounce.
Gold fell $3.90 or 0.3% yesterday to $1,296.70/oz and silver climbed $0.02 or 0.1% to $20.62/oz.
Silver for immediate delivery rose 0.5% to $20.81/oz in London. Platinum lost 0.2% and was at $1,481/oz. Palladium was marginally higher at $882/oz and remains near the 13 year nominal high of $889.75/oz.
Gold is flat in London this morning after gold in Singapore remained very close to the $1,295/oz level overnight. Asian trade was limited to a range of $6.50 and only 8,500 contracts were traded on Globex. Futures trading volume declined and was 39% below the average of the last 100 days. Traders appear to be waiting for the non farm payrolls data tomorrow.

Silver in U.S. Dollars - 50, 100, 200  Simple Moving Averages (Thomson Reuters)
A better than expected jobs number is expected after the positive surprise that was the GDP number. Although, many participants questioned the GDP number as the growth in inventories contributed 1.66 percentage points and likely greatly exaggerated the strength of the U.S. economy in the 2nd quarter.
Markets are jittery with European stocks down as tensions over the Ukraine and in the Middle East and the risk of contagion in Portugal and from Argentina’s default weighed.
Premiums for gold bars in India have dropped to new lows due to weak domestic demand. The premium on Wednesday fell to $5-$6 per troy ounce compared with $10 per troy ounce during the last week.

Global Silver Demand 2004-2013 (GFMS)
Silver looks better and better technically and fundamentally and was more robust than gold again yesterday.
Silver has tested support at the 200 day simple moving average at $20.21 and has rebounded higher again.Below that there is support at the 50 and 200 daily moving averages at $20.19/oz and $19.99/oz respectively.
U.S. Mint data regarding bullion coin sales is always an interesting indicator regarding gold and silver store of value demand.
U.S. Mint figures show that American  silver eagles advanced by 260,000 on Tuesday. This increase meant that Silver Eagle sales are now over 26 million for the year. Sales of silver eagles remain at the  second highest in the beautiful coin’s 29-year history.
Silver eagle sales had surpassed 29 million through the first seven months of 2013 and had an all time record year in 2013. Indeed, global silver demand rose 13% in 2013 and yet prices were lower for the year.
The table above shows the breakdown of U.S. Mint bullion products with columns listing the number of bullion coins sold last week, this week so far, last month, the month to date and the year to date.
The stealth phenomenon that is silver stackers or long term store of value buyers of silver coins and bars continues and is seen in the record levels of demand for silver eagles from the U.S. Mint.
Silver stackers are those who are more informed about the fundamentals of the silver market and are concerned regarding systemic and monetary risks. They realise that silver is undervalued versus gold with the gold silver ratio at 62:1. This is particularly the case on a long term historical basis.
The long term historical average gold to silver ratio is 15 to 1 and we expect it to revert to that level in the coming years and see silver over $100 per ounce as a real possibility.
See interview about silver and how it remains the precious metal with the best fundamentals here


Sperandeo outlines 4 major points for us in the market;

(courtesy Sperandeo/Kingworldnews0

Interviewed by KWN, Sperandeo boils everything down to four points

9:02 ET Wednesday, July 30, 2014
Dear Friend of GATA and Gold:
In very few words to King World News tonight market analyst Victor Sperandeo makes the most important points:
1) All government announcements about the economy are lies.
2) The economy is far weaker than the government acknowledges.
3) The gold market is manipulated by central banks.
And 4) investors need gold as insurance against the diasters central banks may cause.
Sperandeo's interview is excerpted at the KWN blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


 Doug Pollitt news letter:

(courtesy Doug Pollitt/GATA)

Doug Pollitt: Brain worms

8:58p ET Wednesday, July 30, 2014
Dear Friend of GATA and Gold:
In his firm's July market letter, Doug Pollitt of Pollitt & Co. in Toronto writes that inflation has disappeared only if certain things aren't counted, that measures of inflation have been terribly distorted by the suppression of interest rates by central banks, and that while interest rate suppression may have gone as far as it can, it has been going on so long that "this climate is all that most investment professionals know. Anything else," Pollitt writes, "would be like landing on Mars."
Pollitt's letter is titled "Brain Worms" and with his generous permission it's posted in PDF format at GATA's Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


(courtesy Hugo Salinas Price/GATA)

Hugo Salinas Price: Welcome to the new dark age

8:32p ET Wednesday, July 30, 2014
Dear Friend of GATA and Gold:
Gold has few friends and so it has gone into hiding on the eve of a new dark age, Hugo Salinas Price writes today. But, he adds, gold and silver will never lose their attraction to people. His commentary is headlined "Welcome to the New Dark Age" and it's posted at 24hGold here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


Egon Von greyerz, Andrew Huszar and Grant Williams of hmmm. fame,  talks about gold with Eric King of Kingworldnews

(courtesy Von Greyerz/ Huszar/Grant Williams/Kingworldnews)

Money creation will resume soon, von Greyerz tells KWN

1:51p ET Thursday, July 31, 2014
Dear Friend of GATA and Gold:
Economies are crumbling even as governments pretend they're improving, incomes are falling, and the European Central Bank and Federal Reserve will be resorting to more money creation soon, gold fund manager Egon von Greyerz tells King World News today:
Also, at KWN, former Fed official Andrew Huszar concurs about the longer-term weakness of the U.S. economy:
And Singapore fund manager Grant Williams sees black swans flying all around some very complacent markets:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


Barrick still has its troubles!!

(courtesy Reuters)

Barrick Gold reports second-quarter loss

July 30 Wed Jul 30, 2014 5:08pm EDT

(Reuters) - Barrick Gold Corp , the world's largest gold miner, reported a net loss in the second quarter on the back of a weaker gold price and lower gold and copper sales volumes.
Barrick reported a net loss of $269 million, or 23 cents per share, in the three months ended June 30, compared to a net loss of $8.56 billion, or $8.55 a share, a year earlier when it recorded a massive impairment on its Pascua-Lama project.

And now important paper stories which will influence the price of gold and silver. 

1. Stocks mostly up for most Asian bourses   with the slightly lower yen values   to 102.87.

Nikkei down 25  points.  or  .26%

3. Europe stocks all in the red /Euro down/USA dollar inde885x up  again at 81.48.  Chinese bourse Shanghai down as  the yuan strengthens  in value  to 6.16 per usa dollar/yuan. carry traders still very nervous.  Yen carry traders are still be unwinding their trades and are experiencing terrific pain and now we have the Chinese shadow banking sector collapsing!!  Home prices falling in half of Chinese cities.  The Chinese disappearance of collateral scandal goes systemic 

3b Japan 10 year yield at .54%/Japanese yen vs usa cross now at 102.87/
3c  Nikkei still above 14,000

3d  oil remains elevated in price ($99.49 WTI/$106.07 Brent)
3e: FOMC results today
3f: Jobs report on Friday
3g .ADP results today
3h: first crack at 2nd quarter GDP 
3i)  terrible Japanese industrial production (see below)

3j Gold at 1296 dollars

4.  USA 10 yr treasury bond at 2.55% early this morning.

5. Details Ransquawk/Bloomberg/Deutche bank/Jim Reid

(courtesy zero hedge/Bloomberg/Deutsche bank/Jim Reid)

Futures Tumble On Espirito Santo Loss, European Deflation, Argentina Default

Tyler Durden's picture

It has been a deja vu session of that day nearly a month ago when the Banco Espirito Santo (BES) problems were first revealed, sending European stocks and US futures, however briefly, plunging. Since then things have only gotten worse for the insolvent Portuguese megabank, and overnight BES, all three of its holdco now bankrupt,reported an epic loss despite which it will not get a bailout but instead must raise capital on its own. The result has been a record drop in both the bonds (down some 20 points earlier) and the stock (despite a shorting ban instituted last night), which crashed as much as 40% before stabilizing at new all time lows around €0.25, in the process wiping out recent investments by such "smart money" as Baupost, Goldman and DE Shaw. The result is a European financial sector that is struggling in the red, while adding to its pain are some large cap names such as Adidas which also tumbled after issuing a profit warning relating to "developments" in Russia. Then there wasEuropean inflation which printed at 0.4%, below the expected 0.5%, and the lowest in pretty much ever, and certainly since the ECB commenced its latest fight with "deflation", which so far is not going well. The European cherry on top was Greece, whose dead cat bounce is now over, after May retail sales crashed 8.5%, after rising 3.8% in April.
Oh, as for now bankrupt Argentina, don't cry for it. Something tells us the brand new BRICS bank will be quick to reach out a helping hand to the insolvent country, unless of course the country purchases the holdout bonds behind the scenes and puts the whole affair to bed (although how that will anger the restructured bondholders, or if it will trigger the RUFO clause is anyone's guess).
Asian equity markets are switching between gains and losses overnight. On the one hand, DM Asian bourses are trading firmer including the SHCOMP and ASX200 while EM indices struggle (HSCEI -0.45%, KOSPI -0.34%). Asian EMFX is trading weaker overall, which is a carryover of the sentiment in LATAM late yesterday. The INR (-0.25%) and MYR (-0.25%) are both weaker on the day. Both the Asian and Australian benchmark IG credit indices are trading unchanged to slightly tighter today, repeating the outperformance of higher grade credit assets over the last 24 hours relative to other risk assets. Asian stocks fall with the Shanghai Composite outperforming and the Sensex underperforming. MSCI Asia Pacific down 0.4% to 148.9. Nikkei 225 down 0.2%, Hang Seng up 0.1%, Kospi down 0.3%, Shanghai Composite up 0.9%, ASX up 0.2%, Sensex down 0.7%. 1 out of 10 sectors rise with financials, health care outperforming and tech, staples underperforming
Stocks in Europe are seen lower across the board, after a number of large-cap stocks reported less than impressive earnings, with the likes of Adidas (-14.05%) also announcing a profit warning, citing developments in Russia/CIS. As a result, consumer discretionary sector underperformed in Europe, with financials also lagging amid the uncertainty surrounding the beleaguered Banco Espirito Santo (-45.25%). In turn, the Portuguese PSI-20 index underperformed its EU peers, down 4.3% last, whereas the DAX is lower by -1.00% after taking out a major 50% Fibonacci from the March lows to June/July highs at 9504.75, with the cash index trading below the 200DMA line. 2 out of 19 Stoxx 600 sectors rise; health care, oil & gas outperform, financial services, banks underperform. 11.3% of Stoxx 600 members gain, 88.5% decline. Eurostoxx 50 -0.9%, FTSE 100 -0.2%, CAC 40 -0.6%, DAX -0.9%, IBEX -1.8%, FTSEMIB -1.5%, SMI -0.6%.
Turning to the day ahead, Euroarea CPI will be a key data point to watch. Consensus is pointing to core inflation of 0.8% y/y and headline inflation of 0.5% y/y which would be unchanged on June’s number. Other European data include German and Italian unemployment. Across the Atlantic, US weekly jobless claims (consensus 300k), the ECI and the Chicago PMI (consensus 63.0) are the key data releases. Finally a number of large caps report earnings today including MasterCard, Time-Warner, ConocoPhillips and Exxon Mobil. If that's not enough, tomorrow brings us the start of August and the latest payroll number which is arguably even more interesting and important given the data and rate move yesterday.
Market Wrap
  • S&P 500 futures down 0.7% to 1951.9
  • Stoxx 600 down 0.9% to 337.4
  • US 10Yr yield down 1bps to 2.55%
  • German 10Yr yield down 1bps to 1.16%
  • MSCI Asia Pacific down 0.4% to 148.9
  • Gold spot down 0.1% to $1295.5/oz
Bulletin Headline Summary from Bloomberg and RanSquawk
  • Stocks are lower across the board in Europe, with consumer discretionary sector underperforming after Adidas announced a profit warning and financials also lagging, after Banco Espirito Santo announced that it is to carry out a capital increase.
  • Lower stocks, month-end and coupon/redemption flows saw Bunds move into positive territory, with PO/GE 10y spread wider by 5bps amid concerns over the Portuguese banking system.
  • Treasuries gain, paring MTD loss, amid declines in European stocks, weakness in commodities; market focus shifting to tomorrow’s U.S. payrolls report for July, est. +231k with unemployment rate holding at 6.1%.
  • Euro-area inflation unexpectedly slowed in July to the weakest in almost five years, underscoring the ECB’s concerns that the economy is too feeble to drive price growth
  • Banco Espirito Santo SA’s stock plunged by the most on record and the bonds slumped after it was ordered to raise capital following a EU3.6b 1H net loss
  • The “edge is coming off” the U.K. housing market and that may start to affect the wider economy by the end of the year, according to Bank of England Deputy Governor Ben Broadbent
  • The U.S. might move to limit derivatives trading and short- term loans with Russian companies if sanctions already imposed fail to sway Putin to end support for rebels in eastern Ukraine
  • With S&P saying Argentina is in default and last-minute plans to remedy the situation falling through, investor focus is turning to whether holders of $29b of bonds will demand immediate repayment
  • Sierra Leone declared a state of emergency as neighboring Liberia ordered the military to enforce a quarantine on some towns in a bid to contain the spread of the worst Ebola outbreak ever
  • Former security chief Zhou Yongkang is facing the same political path as his onetime ally Bo Xilai, which leads to the gates of Qincheng prison, a compound north of Beijing that has confined a who’s who of China’s fallen elite
  • The largest global investment banks face further cost reductions, like the job cuts JPMorgan began this month, after a drop in first-half expenses failed to match a decline in revenue
  • Sovereign yields mixed, with Germany, U.K. and U.S. lower; Greece and Portugal rise. Euro Stoxx Banks slide 2.8%. Asian stocks mixed, with China higher and Japan lower; European equities, U.S. stock futures decline. WTI crude lower, gold and copper little changed
  • Focus turns to another round of US earnings, this time by Exxon,
    MasterCard, Occidental Petroleum and ConocoPhillips, as well as the
    release of the weekly US jobs, Challenger job cuts and Chicago PMI
US Event Calendar
  • 7:30am: Challenger Job Cuts y/y, July (prior -20.2%)
  • 8:30am: Employment Cost Index, 2Q, est. 0.5% (prior 0.3%)
  • 8:30am: Initial Jobless Claims, July 26, est. 300k (284k); Continuing Claims, July 19, est. 2.492m (prior 2.5m)
  • 9:45am: Chicago Purchasing Manager, July, est. 63 (prior 62.6)
  • 9:45am: Bloomberg Consumer Comfort, July 27 Central Banks
  • 11:00am: Fed to buy $1b-$1.25b notes in 2036-2044 sector
Lower stocks in Europe this morning, together with month-end and coupon/redemption flows saw Bunds recover and gradually move into positive territory. At the same time, the release of lower than expected Eurozone CPI estimate which came in at its lowest level since October 2009, further underpinned expectations of particularly low inflation and saw 2y EU inflation swap rates touch on lowest level since February 2009. Also of note, PO/GE 10y spreads widened by 5bps in reaction to Banco Espirito Santo (-45.25%) announcing that it is to carry out a capital increase. In terms of month-end revisions, Barclays Final Pan Euro Agg Month-end Extension +0.12y vs. Prelim. +0.11y (Prev. month 0.09y, 12m Avg. 0.08y) and Barclays Prelim Sterling Agg Month-end Extension +0.04y (Prev. month 0.03y).
Stocks in Europe are seen lower across the board, after a number of large-cap stocks reported less than impressive earnings, with the likes of Adidas (-14.05%) also announcing a profit warning, citing developments in Russia/CIS. As a result, consumer discretionary sector underperformed in Europe, with financials also lagging amid the uncertainty surrounding the beleaguered Banco Espirito Santo (-45.25%). In turn, the Portuguese PSI-20 index underperformed its EU peers, down 4.3% last, whereas the DAX is lower by -1.00% after taking out a major 50% Fibonacci from the March lows to June/July highs at 9504.75, with the cash index trading below the 200DMA line.
Month-end buying by a major European central bank meant that EUR outperform GBP, though both pairs remained in the red as the cautious sentiment dominated the price action in early European trade. At the same time, upside price action by Bunds and USTs prompted unfavourable interest rate differential flows and saw USD/JPY move into negative territory
Gold has come off its European session lows, yet remains in negative territory after being hit on a good US GDP number yesterday, with the precious metal pausing for breath ahead of the NFP tomorrow. WTI has extended losses after breaking below its 100DMA at USD 100.30 yesterday, amid rising Cushing inventories in the US and reports that Ukraine has stopped combat in the east after a plea from the UN’s Ban.
* * *
DB's Jim Reid concludes the overnight recap
The bureau of economic statistics made some pretty sizeable rewrites of recent history yesterday in the US GDP report as well as publishing a better Q2 number (4.0% vs 3.0% expected). Q1 14, Q4 13 and Q3 13 GDP were revised up 0.8%, 0.9% and 0.4% respectively. This report was certainly one for the US economy bulls and it did send a few shudders across global markets yesterday showing the sensitivity there is to higher rates and yields especially given generally poor trading liquidity. However just as markets were getting a little nervous, along came Yellen and co to make a point of adding to the FOMC statement that the Fed still "sees significant underutilization of labor resources". Despite a balanced statement overall with some hawkish elements, a few picked up on this remark as allowing Yellen to remain slow to remove stimulus even as unemployment falls.
Treasury yields moved higher throughout the day but it took the GDP number to really cause rates to back up. The 10yr treasury added 10bp in yield terms shortly after the GDP beat, reaching an intraday high of 2.56%, before the FOMC’s statement provided some brief respite. Indeed, following the FOMC yields initially firmed by around 3bp, but they pared the move into the close and finished near the highs of 2.55%. UST curves bear steepened throughout the day, and this accelerated following the GDP report. A slightly higher than expected Q2 PCE (2.0% vs 1.9%) benefited 10yr breakevens, which added 0.5bp to 2.27%.
There was an interesting reaction from stocks. US equities fell to a low of -0.4% shortly after the GDP print, but recovered all of that loss post-FOMC to be unchanged on the day (S&P500 +0.01%) suggesting that perhaps equities had found the Fed policy statement more dovish than other markets had. Note that the sectoral underperformers yesterday were the high dividend and defensive sectors such as utilities (-1.65%), telcos (-0.6%) and consumer staples (-1.0%). This was offset by cyclicals such as consumer discretionary (+0.55%), financials (+0.44%) and info tech (+0.24%). In the context of the price action in rates and equities, credit seemed to outperform. In Europe, Crossover (246.625bp, -2.5bp) and Main (61.75bp, -0.125bp) closed tighter and CDX IG was basically unchanged. Amid the underperformance of higher yielding assets yesterday, there was further chatter about outflows from US HY. We’ll find out more about outflows later today when the latest weekly outflow numbers are released. At a more micro level, both the SPDR Barclays and iShares iBoxx HY ETFs registered daily outflows yesterday, and both ETFs traded further into negative premium territory against their respective NAVs, according to Bloomberg data. We think the flows out of the US HY should slow down soon unless rates rise. So US HY could have done without yesterday's move.
Back to GDP, it’s worth highlighting that in real terms the US YoY growth number is now still 'only' 2.4% which is not spectacular given the stimulus seen in this cycle. Indeed since the end of 2009 the average YoY growth has been 2% and has struggled to eclipse that rate consistently since. The one question mark over the Q2 2014 release is that inventory build accounted for 40% of the strong number. So will sales and activity justify this over the coming months? Our US economist Joe Lavorgna thinks so. Joe writes that the level of inventories versus demand (i.e., sales) is quite low. In fact, the inventory to sales (I/S) ratio slipped from 3.85 in Q1 to 3.84 in Q2, which is unchanged from year-ago levels. So as ever the US economy is generating much debate.
The backup in US yields and a strengthened USD (dollar index +0.27%) proved to be a tough combination for EM yesterday. Indeed LATAM rates closed between 5-15bp higher on the day and the MSCI EM equity index fell 0.17%. On the currencies side, high yielding currencies all suffered including the MXN (-0.7%), (-0.65%) and ZAR (+0.50%). Further adding to the woes of the EM complex, after the US market close S&P downgraded Argentina to “Selective Default” after the rating agency said that holders of discount bonds did not receive their interest payment. It’s unclear exactly what the next steps are for the Argentine government and its creditors. Economy Minister Axel Kicillof told reporters today in New York that while the government failed to reach a deal with holders of defaulted debt from 2001, many private parties have an interest in resolving the battle. Kicillof also mentioned that it wouldn’t be surprising to see a proposal emerge from a third party, including proposals about waiving the RUFO clause in the debt securities that prohibits the nation from offering a better deal to the holdouts than the one made in debt restructurings (Bloomberg). Also after the US market closed, Banco Espirito Santo reported a 1H14 loss of EUR3.57bn which reflected EUR4.3bn of impairment and provisions. The impairments related to its interest in loans provided to BES Angola, general credit costs, interests in Portugal Telecom and exposure to the Espirito Santo Group. This left BES with a common equity tier 1 ratio of 5% at June 2014, versus a Bank of Portugal mandated minimum of 7%. After saying for a while now that BES has sufficient capital, yesterday the Bank of Portugal said that a capital increase was necessary. The central bank also appointed PwC to form an oversight committee for BES and said that it would suspend some BES officials due to “damaging practices” (Bloomberg).
Asian equity markets are switching between gains and losses overnight. On the one hand, DM Asian bourses are trading firmer including the Nikkei (+0.35%) and ASX200 (+0.17%), while EM indices struggle (HSCEI -0.45%, KOSPI -0.34%). Asian EMFX is trading weaker overall, which is a carryover of the sentiment in LATAM late yesterday. The INR (-0.25%) and MYR (-0.25%) are both weaker on the day. Both the Asian and Australian benchmark IG credit indices are trading unchanged to slightly tighter today, repeating the outperformance of higher grade credit assets over the last 24 hours relative to other risk assets.
Turning to the day ahead, Euroarea CPI will be a key data point to watch. Consensus is pointing to core inflation of 0.8% y/y and headline inflation of 0.5% y/y which would be unchanged on June’s number. Other European data include German and Italian unemployment. Across the Atlantic, US weekly jobless claims (consensus 300k), the ECI and the Chicago PMI (consensus 63.0) are the key data releases. Finally a number of large caps report earnings today including MasterCard, Time-Warner, ConocoPhillips and Exxon Mobil.
If that's not enough, tomorrow brings us the start of August and the latest payroll number which is arguably even more interesting and important given the data and rate move yesterday.


The following is extremely important and why I harp on insolvencies of banks and sovereigns.
It is the fact that there is a huge number of credit default swaps underwritten against these entities. The problems occur when the major underwriters (JPMorgan, Morgan Stanley, Citibank, Bank of America, Goldman Sachs,and Deutsche bank) cannot pay the winners:

(courtesy Dave Kranzler/IRD 

Argentina And Banco Espirito: What About The Derivatives?

Argentina is interesting because of the legal issue surrounding the specific Government bonds on which it might default.  I called Banco Espirito as a likely bankruptcy after the stock exhibited Enron-esque characteristics.  As that one unfolds, it looks like the entire corporate structure above the bank and with the bank itself is engulfed with fraud.
And now we find out that Goldman Sachs plugged its client base with BES bonds and stock:  LINK.  Classic
The more interesting question in both cases has to do with the credit default swap derivatives.   While the default could trigger $29 billion in bondholder claims, Bloomberg ran a story a couple days ago that suggested the default on  this one bond issue could trigger $120 billion in credit default claims:  LINK.
The details are buried in the bottom of the news report.  Since I have not seen anyone mention the $120 billion, I assume that – just like with the footnotes to financials statements – I guess no one read the full article.
However, it’s not the $120 billion in CDS claims that are visible.  The real danger lurks in the “daisy-chain” of hidden counterparty default that could trigger a big meltdown.  Remember AIG/Goldman?  That melt-down – which triggered the big bailout banks – was likely triggered either by the Bear Stearns or Lehman collapse.  The former happened several months before AIG and Goldman.  When Bear collapsed, Bernanke assured us it was isolated and contained.  “Shalom Ben!” – how did the statement work out for you?
The S&P futures are down 15 points right now on the back of the Argentina/BES news.  It’s not because of the news itself.  It’s because of the related skeletons in the closet that are connected to the events that may be poised to jump out…
Better check the bond and derivatives holdings of your favorite bond fund – you know, the bond funds that your genius investment advisor has you invested in because “they have a good yield.”


I also believe that the following is secretly happening behind the scenes between Germany and Russia. Germany agrees to let Russia have sovereignty over Crimea in return for a  nat.gas deal (energy security)and also not allow the Ukraine to become part of Nato. Putin  would allow trade relations with the west unhindered and withdraw support for the rebels.

(courtesy zero hedge)

Russia And Germany Allegedly Working On Secret "Gas For Land" Deal

Tyler Durden's picture

While many were amused by this photo of Putin and Merkel during the world cup final showing Europe's two most important leaders siding side by side, some were more curious by just what the two were scheming:

Thanks to the Independent, we may know the answer, and it is a doozy, because according to some it is nothing shy of a sequel to the Molotov-Ribbentrop pact: allegedly Germany and Russia have been working on a secret plan to broker a peaceful solution to end international tensions over the Ukraine, one which would negotiate to trade Crimea's sovereignty for guarantees on energy security and trade. The Independent reveals that the peace plan, being worked on by both Angela Merkel and Vladimir Putin, "hinges on two main ambitions: stabilising the borders of Ukraine and providing the financially troubled country with a strong economic boost, particularly a new energy agreement ensuring security of gas supplies."
Amusingly, this comes on the day when the WSJ leads with "On Hold: Merkel Gives Putin a Blunt Message. Germany's Backing of Russia Sanctions Marks Breach in Pivotal European Relationship" in which we read that " Angela Merkel spoke to Russian President Vladimir Putin for at least the 30th time since the Ukraine crisis erupted. She had a blunt message, according to people briefed on the phone conversation: Call me if you have progress to report in defusing the conflict. That was July 20. The two leaders haven't spoken since."
They may or may not have spoken since, but it is not because Putin has "no progress to report" - it's because the two leaders have come to a secret agreement which will hardly make Ukraine, or most of Europe, not to mention the UN, happy as it requires that Crimea be permanently handed over to Russia in exchange for Russian gas, which has been cut off for a month now due to non-payment by Kiev.
Here is how the deal came to happen:
Sources close to the secret negotiations claim that the first part of the stabilisation plan requires Russia to withdraw its financial and military support for the various pro-separatist groups operating in eastern Ukraine. As part of any such agreement, the region would be allowed some devolved powers.

At the same time, the Ukrainian President would agree not to apply to join Nato. In return, President Putin would not seek to block or interfere with the Ukraine’s new trade relations with the European Union under a pact signed a few weeks ago.

Second, the Ukraine would be offered a new long-term agreement with Russia’s Gazprom, the giant gas supplier, for future gas supplies and pricing. At present, there is no gas deal in place; Ukraine’s gas supplies are running low and are likely to run out before this winter, which would spell economic and social ruin for the country.

As part of the deal, Russia would compensate Ukraine with a billion-dollar financial package for the loss of the rent it used to pay for stationing its fleets in the Crimea and at the port of Sevastopol on the Black Sea until Crimea voted for independence in March.
To be sure, in the aftermath of the MH-17 shooting, which in light of this revelation would clearly not benefit Russia, negotiations have stalled they are expected to restart once the investigation has taken place. “It is in everyone’s interests to do a deal. Hopefully, talks will be revived if a satisfactory outcome can be reached to investigations now taking place as to the causes of the MH17 catastrophe."
But while Germany can't wait to put the Ukraine conflict behind it and restore normal Russian relations (see Adidas' record plunge earlier today, blamed on the Ukraine conflict) others are far more eager to stir the pot some more: "A spokesman for the Foreign and Commonwealth Office said they had no knowledge of such negotiations taking place. However, the spokesman said he thought it highly unlikely that either the US or UK would agree to recognising Russian control over Crimea. There was no one available at the German embassy’s press office yesterday."
Which, of course, goes back to the fundamental question behind the Eurozone experiment: just who calls the shots. And despite what the UK (and certainly France) believe, that one person was and continues to be Merkel.  And at the end of the day, pragmatic Germany knows that for all the posturing and rhetoric, the biggest loser from a western embargo of Russia (which is now actively shifting its attention to China and now India) would be Germany itself.
[S]trong trade ties between the two countries have also served to strengthen Ms Merkel’s hand and the Russian speaker has emerged as the leading advocate of closer relations between the EU and Russia. “This is Merkel’s deal. She has been dealing direct with President Putin on this. She needs to solve the dispute because it’s in no one’s interest to have tension in the Ukraine or to have Russia out in the cold. No one wants another Cold War,” said one insider close to the negotiations.

Some of Germany’s biggest companies have big operations in Russia, which is now one of Europe’s biggest car markets, while many of its small to medium companies are also expanding into the country. Although Russia now provides EU countries with a third of their gas supplies through pipelines crossing the Ukraine, Germany has its own bilateral gas pipeline direct to Russia making it less vulnerable than other European countries.

However, Russia is still the EU’s third-biggest trading partner with cross-border trade of $460bn (£272bn) last year, and the latest sanctions being introduced by the EU towards Russian individuals and banks will hurt European countries more than any other – particularly Germany, but also the City of London.
Curiously, if there is one entity that could scuttle the deal it is, no surprise there, the US.
Central to the negotiations over any new gas deal with Gazprom is understood to be one of Ukraine’s wealthiest businessmen, the gas broker, Dmitry Firtash. Mr Firtash – who negotiated the first big gas deal between the Ukraine and Russia between 2006 and 2009 –is now living in Vienna fighting extradition charges from the Americans. But he has close relations with the Russian and Ukrainian leaders – he supported Mr Poroschenko – and has been acting as a go-between behind the scenes at the highest levels.
Incidentally, the same Americans which over the past 2 years has been desperate to start a regional war in any one part of the globe in order to break some more windows and boost GDP courtesy of the tried and true "Military Industrial Complex" GDP boost. Which is why if indeed the Ukraine peace process is in the arms of the US, thenperhaps Putin's advisor was spot on when he said that "There is a war coming in Europe." Compliments of the United States?
Finally, for those wondering how much of the Independent's story is a fabrication, here is Germany denying it all:
Which, if Jean-Claude Juncker is any indication, seals it.


Again and again we are seeing countries move away from the USA dollar.  Today Russia and India do swaps to bypass the dollar

(courtesy zero hedge)

Russia And India Begin Negotations To Use National Currencies In Settlements, Bypassing Dollar

Tyler Durden's picture

Over the past 6 months, there has been much talk about the strategic proximity between Russia and China, made even more proximal following the "holy grail" gas deal announced in May which would not have happened on such an accelerated time frame had it not been for US escalation in Ukraine.
And yet little has been said about that other just as crucial for the "new BRIC-centric world order" relationship, that between Russia and India. That is about to change when yesterday the Russian central bank announced that having been increasingly shunned by the west, Russia discussed cooperation with Reserve Bank of India Executive Director Shrikant Padmanabhan. The punchline: India agreed to create a task group to work out a mechanism for using national currencies in settlements. And so another major bilateral arrangement is set up that completely bypasses the dollar.
First Deputy Chairman of the Central Bank of the Russian Federation KV Yudaeva and Executive Director of the Reserve Bank of India G. Padmanabhan at the twentieth meeting of the Subgroup on banking and financial issues of the Russian-Indian intergovernmental commission on trade-economic, scientific-technical and cultural cooperation discussed the current state and prospects of cooperation between banks.

The meeting was attended by representatives of central banks, ministries and agencies, credit organizations in Russia and India.

During the meeting dealt with the problems faced by the branches and subsidiaries of banks in the two countries and ways of addressing these problems.

As a priority area discussed the use of national currencies in mutual settlements. Given the urgency of the issue and the interest of commercial structures of the two countries, the meeting decided to establish a working group to develop a mechanism for the use of national currencies in mutual settlements. It will consist of representatives of banks and, if necessary, the ministries and departments of the two countries to coordinate its activities will be central banks of Russia and India.
What is curious is that now that China has sided firmly with Russia when it comes to geopolitical strategy (not least when it comes to recent development surrounding the downing of flight MH-17, recall "China Blasts "One-Sided Western Rush To Judge Russia" Over MH17"), and thus Russia behind China when it comes to claims by the world's most populous nation in its territorial dispute with Japan, Japan too is scrambling to secure a major ally in Asia, and it too is trying desperately to get on India's good side.
Bloomberg reports that "Japan’s Sasebo naval base this month saw unusual variety in vessel traffic that’s typically dominated by Japanese and U.S. warships. An Indian frigate and destroyer docked en route to joint exercises in the western Pacific."
The INS Shivalik and INS Ranvijay’s appearance at the port near Nagasaki showed Japan’s interest in developing ties with the South Asian nation as Prime Minister Shinzo Abe’s government faces deepening tensions with China. Japan for the third time joined the U.S. and India in the annual “Malabar” drills that usually are held in the Bay of Bengal.

With Abe loosening limits on his nation’s military, the exercises that conclude today showcase Japan’s expanding naval profile as China pushes maritime claims in disputed areas of the East and South China Seas. For newly installed Indian Prime Minister Narendra Modi, Japan’s attention adds to that of China itself, in an opportunity to expand his own country’s sway.

Japan’s involvement in Malabar underscores its interest in helping secure its trade routes to Europe and the Middle East. The Indian Ocean is “arguably the world’s most important trading crossroads,” according to the Henry L. Stimson Center, a foreign policy research group in Washington. It carries about 80 percent of the world’s seaborne oil, mostly headed to China and Japan.


“The Japanese are facing huge political problems in China,” said Kondapalli in a phone interview. “So Japanese companies are now looking to shift to other countries. They’re looking at India.”
So on one hand Japan is rushing to extend a much needed olive branch by the "insolvent western alliance + Japan" to India; on the other Russia is preparing to transact bilterally with India in a way that bypasses the dollar.
Which means that just as Germany has become the fulcrum and most strategic veriable in Europe (more on this shortly) whose future allegiance to Russia or the US may determine the fate of Europe, so suddenly India is now the great Asian wildcard.
Perhaps a very important hint of which way India is headed came moments ago from Reuters, which said that India has raised the issue of U.S. surveillance activities in the South Asian nation with Secretary of State John Kerry, the foreign minister said on Thursday. "Yes, I raised this issue (U.S. snooping) with Secretary John Kerry ... I have also conveyed to him that this act on the part of U.S. authorities is completely unacceptable to us,"Sushma Swaraj said at a joint news conference in New Delhi. In response, Kerry said: "We (the United States) fully respect and understand the feelings expressed by the minister."
Thank you Snowden for helping move the geopolitical tectonic plates that much faster.
Now let the real courting begin.


The USA has harsh words for Israel:

(courtesy zero hedge)

Pentagon Slams Israel's "Unacceptable" Shelling Of UN Shelters As "Totally Indefensible"

Tyler Durden's picture

We already know that all is not well in US-Israeli relations(despite the ongoing funding) and John Kerry is not helping, but this morning's comments from the White House and Pentagon are concerning. As The BBC reports, the US Defense Dept says civilian casualties in Gaza are "too high" and Israel needs to do more to protect civilian life. Then White House spokesman John Earnest added, "the shelling of a UN facility that is housing innocent civilians who are fleeing violence is totally unacceptable and totally indefensible." Time to rethink the $576 mllion tripling of Israeli aid?
Since Israel began its offensive in Gaza on 8 July, 1,400 Palestinians have been killed, most of them civilians, according to the Gaza Health Ministry.

It said 173 people had been killed within the past 24 hours.
"The Israelis need to do more to live up to their very high standards... for protecting civilian life," a Pentagon spokesman said.

The UN has also criticised Israel over the worsening situation in Gaza, saying people there are "facing a precipice".
And Bloomberg adds,
“The shelling of a UN facility that is housing innocent civilians who are fleeing violence is totally unacceptable and totally indefensible,” White House spokesman Josh Earnest says at daily briefing.


Says there’s little doubt about whose artillery was involved, pointing to statements by UN, Israel, even though incident still requires full investigation
*  *  *
Israel says it will not stop its operation in Gaza until all the tunnels - which militants use to infiltrate Israeli territory - have been destroyed. Of course, as we noted previously, this is likely all theatrics as the money and arms are still flowing.


The following is a no go but it does indicate that JPMorgan has some serious problems with the default of Argentina as it has underwritten huge amounts of credit default swaps

(courtesy zero hedge)

Is JPMorgan About To Bailout Argentina?

Tyler Durden's picture

Update: According to Ambito the deal is a no go as Italian bondholders (and likely all others) claim that a private deal with a buyer of holdout bonds would also trigger the RUFO clause, thus making the deal meaningless and forcing Argentina to payout billions more. From Ambito:
Italian bondholders say a private agreement also would trigger the clause RUFO

The representative of a group of debt holders Argentina Italy, Tulio Zembo said that any agreement between private RUFO also would trigger the clause.

"I do not understand the idea of banks because that would trigger the RUFO" Economy Minister said yesterday. Please do not help us because it makes the situation worse," said Zembo in dialogue with Radio La Red

"All that is settlement discussion will have to olvidárselo until January 2015, because you can not argue," he said.

For the representative of Italian bondholders "the drama of a default is when the debtor is kneeling and can not pay, that would be a problem, here's a serious problem but should concentrate all legal guns to go," he said by way of conclusion.
* * *
With Argentine politicians explaining that "Argentina is not in default" and ISDA set to decide if last night's default is an 'official' trigger event for CDS, it appears Kirchner, Kicillof, and their (k)omrades may have found an angel. The initial 'bailout' plan, by which Argentine banks bought the holdouts defaulted debt (then promptly acquiesced to Argentina's old debt-swap agreement), failed last night; but, as WSJ reportsJPMorgan is in discussions to buy the defaulted bonds of Argentina's holdout creditors. While this would not impact the default decision (that is history), it would speed up the exit from default rapidly. Of course, JPM is not doing this out of love for Argentina, we suspect they are on the hook for a few billion CDSand need some cheapest-to-deliver bonds to help them through the settlement process.

It appears most have taken profits or unwound positions in CDS over the last few years but there remains around $20 billion notional outstanding in Argentina CDS

CDS has surged...on expectations of a trigger being called by ISDA

Still, the bonds remain at lofty prices because some investors seem hopeful that Argentina can quickly emerge from default.Many were focusing on a potential private-sector solution. Argentine press has reported this week that private-sector banks are trying to hatch a plan to help Argentina pay off the debt.


J.P. Morgan is in discussions to buy the defaulted bonds of Argentina's holdout creditors, according to a person familiar with the matter.

Buying the bonds is one of many options, and the talks between J.P. Morgan and Argentine bondholders were still fluid, the person familiar said.


"The expectation of a bank deal is supporting bond prices," said Siobhan Morden, head of Latin America strategy at Jefferies LLC. "Butit's difficult to trade these headlines when you're getting whiplashed" by sharp price moves in thin trading. "Most people have adopted their view, taken their positions, and waited to see what the final outcome will be," Ms. Morden said.
*  *  *
We note that a handful of Wall Street banks earlier this year pitched bond sales that would have paved the way for a deal between Argentina and its holdout creditors. Argentine officials didn't approve the proposals then... maybe they will now...


And now your major data points for today:

Portuguese 10 year bond yield:  3.59% up 2 in basis points  from Wednesday night.

Your closing Portuguese 10 year bond yield Thursday night: up 2 in basis points on the day 

Portuguese 10 year bond yield:  3.61% 


Your closing Japanese yield Thursday morning: up 1  in basis points from Wednesday night:

 yield .54%  (Japan imploding)

Japanese 10 year bond yield:  .54% 

And now for your closing Japanese 10 year bond yield from NY/par in   basis points from the morning:

Japanese 10 year bond yield:  .54%


Your opening currency crosses for Thursday morning:

EUR/USA:  1.3386  down .0008
USA/JAPAN YEN  102.87   flat
GBP/USA  1.6883  down .0026
USA/CAN  1.0915 up .0012  

This morning the Euro is a little weaker  trading now well below the 1.34 level at 1.3386.  The yen is flat and trading now well above the all important  102 cross. It closed in Japan flat in basis points at 102.87 yen to the dollar  (dollar flat).  The pound weakened a bit  as it now trades well below the 1.69 level  to 1.6883.  The Canadian dollar is down this morning with its cross at 1.0915 to the USA dollar.

 Early Thursday morning USA 10 year bond yield:  2.55%  flat in basis points  from Wednesday night/   (USA economy not doing so well with this low yield)

USA dollar Index early Thursday morning: 81.48  up 5 cents from Wednesday's close


The NIKKEI:  Thursday morning:  down 25 points  or  0.16%

Trading from Europe and Asia:

1/ Europe, all deeply  in the red . 

2/    Asian bourses mostly in the green / Chinese bourses: Hang Sang green, Shanghai in the green,  Australia in the green:  /Nikkei (Japan) red/India's Sensex in the red. 

Gold early morning trading:  $1296.00

silver:$ 20.68



Your closing Spanish 10 year government bond: Thursday/ down 1 in basis points in yield  from Wednesday night.  

Spanish 10 year bond yield:  2.51% 

 Your  Wednesday closing Italian 10 year bond yield: par in basis points and trading 19 in basis points above Spain.

Italian 10 year bond yield;  2.70% 



Closing currency crosses for Thursday night/USA dollar index/USA 10 yr bond: 

Euro/USA:  1.3386 down .0008
USA/Japan:  102.83 down .040
Great Britain/USA:  1.6882 down .0027
USA/Canada:  1.0899 down .0004

The euro remained constant  in value during this afternoon's  session, and it was down on the day , closing well below  the 1.34 level to 1.3386.  The yen was up during the afternoon session, and it gained 4 basis points on the day closing above  the magical support 102 level to 102.83 (dollar down). A breach below the 102 usually sends the Dow and many bourses southbound as many key on this cross and as well if breached many of the yen carry traders must unwind their trades.  The British pound lowered again during the afternoon session and was down for  the day as it closed at 1.6882. The Canadian dollar was up during the afternoon session, and it was up on the day closing at 1.0899. 

Your closing USA dollar index:

81.46  up 3 cents on the day  

Your closing 10 year USA bond yield up 1 in basis points on

the day.  


USA 10 yr Bond Yield:  2.56%.  


Closing bourses figures for  Thursday: 

i) England FTSE down 43.33 or 0.64%

ii) Paris/CAC down 66.16 or 1.53%

 iii) German DAX: down 186.20 or 1.94%
iv) Spanish ibex down 230.20 or 2.10%

v) Italian bourse (MIB) down 316.73   or 1.52% 

and the Dow down 317.06 points or 1.88 %

Nasdaq up 93.13 or  2.09% 

Oil close:  WTI  98.02/Brent:  105.85


The Big USA stories:

Today's summary of trading from NY:

Turmoil in the markets today.  The Dow retreats by 317 points!!

"Markets In Turmoil" Russell 2000 Plunges Most In Over 2 Years, Dow Down For 2014

Tyler Durden's picture

The deer is back...

Stocks finally snapped and caught down to high-yield credit's warnings. The worst day for the Dow in 6 months, smashing through its 50- and 100-day moving-average. The Russell 2000 was worst on the day to end July down over 6% - its worst month since May 2012. The S&P's had almost its worst day in 6 months. Trannies dropped 3.4% on the week - the worst in 11 months.Stocks closed at the day's lows.

The week

All major US equity indices close lower in July... The Russell 2000's worst month since May 2012

The Year... Dow Red, Russell -3.6%

Was Yellen right after all?

Stocks finally caught down to credit's warnings...

Dow's worst day in 6 months...

Builders are worst but Discretionary and Staples are now red YTD...

Amid all the carnage in stocks, Treasury yields closed +/-1bps (long-end higher in yield, short-end lower)...

The USD was flat...

Commodity markets were clubbed as we suspect EU closing margin calls (and then US margin calls) hit them... WTI dropped below $98!!

Year-to-date, gold and bonds continue to lead, HY lags...

So to sum up - carnage in stocks... USD flat, bonds flat... Oil monkey-hammered and PMs dumped.
Charts: Bloomberg


Early this morning, the national Chicago manufacturing PMI collapses from 62.6 down to 52.6!!

(courtesy zero hedge)

Chicago PMI Collapses To 13-Month Lows, Biggest Miss On Record

Tyler Durden's picture

We warned last month that under the covers Chicago PMI looked a lot weaker than the headlines and this morning's collapse confirms that. Against expectations of a small rise to 63.0, Chicago PMI plunged from 62.6 to 52.6 (13-month lows) for the biggest miss on record. According to the release itself, "A monthly fall of this magnitude has not been seen since October 2008 ." The was an 8 standard-deviation miss from analyst expectations (Joe Lavorgna was on the high side at 63.0). New orders, inventory, production, order backlogs, and prices paid all dropped (but employment rose?). This is the biggest 2-month drop since Lehman (and 2nd biggest since 1980). We await the seasonal adjustment "correction" as MNI get the call from Yellen.

This is the biggest 2-month drop since Lehman (and 2nd biggest since 1980).
The breakdown:
  • Forecast range 60 - 65 from 47 economists surveyed
  • Prices Paid fell compared to last month
  • New Orders fell compared to last month
  • Employment rose compared to last month
  • Inventory fell compared to last month
  • Supplier Deliveries rose compared to last month
  • Production fell compared to last month
  • Order Backlogs fell compared to last month
Of course, very quick damage control was needed and sure enough:
In spite of the sharp decline this month, feedback from purchasing managers was that they saw the  downturn as a lull rather than the start of a new  downward trend. This was especially so given the recent strong performance and the fact that Employment managed to increase further in July.
Cognitive dissonance much? Because at the same time:
Nonetheless, following a strong Q2, this was clearly a poor start to Q3 and as such tempers some of the increased optimism in recent months. Production’s large decline in July left the indicator barely in expansionary territory and at a two year low, although this followed a very strong run with output above 70 in June. New Orders, the most heavily weighted component of the barometer, saw its biggest monthly set back since November 2013. Order Backlogs, which have expanded in every month since last October, fell into contraction in July.
Also, kiss the inventory-driven GDP expansion goodbye:
Growth in inventories eased in July from a seven  month high in June, while Prices Paid fell for the  second consecutive month but remained well above 50.
In conclusion:
Commenting on the MNI Chicago Report, Philip  Uglow, Chief Economist at MNI Indicators said, “The surprise fall in the Chicago Business Barometer in July,  following a strong second quarter, naturally raises questions about the sustainability of the recovery. Some feedback from panellists points to this being a temporary setback, although we’ll need to see the August data to judge to what extent this is a blip“.
Charts: Bloomberg, source: PMI


This week we see a huge rise in initial jobless claims  ( a big miss) and also a huge increase in employment costs which is very inflationary!

(courtesy zero hedge)

Employment Costs Surge Most In 6 Years As Initial Claims Miss

Tyler Durden's picture

Following last week's "seasonal volatility"-driven plunge in claims to new cycle lows, this week saw a 32k rise to 302k, missing expectations for the first time in 4 weeks. However, what is more worrisome for bullish equity market investors is the surge in employment costs. TheEmployment Cost Index jumped 0.7% (beating expectations of a 0.5% rise) - its biggest jump since Sept 2008. This is the biggest variance from expectations in 8 years and suggests Janet Yellen's 'slack' just got a lot tighter. Good news is bad news for bonds and stocks (for now).
Employment costs jump most in 6 years...

As claims miss for first time in 4 weeks...

Charts: Bloomberg


The ever popular, Michael Snyder

the plight of Americans:

(courtesy Michael Snyder)

21 Ways To End The Phrase "Americans Are So Broke..."

Tyler Durden's picture

Did you know that 77 million Americans have unpaid debts that are "in collections" and that Congress is actually thinking about letting post offices offer payday loans?  We live in a country where almost everyone is drowning in debt and where most people are either flat broke or very close to flat broke.  Years ago, "your Mama is so broke" jokes were all the rage, and at the rate we are going they could make a big comeback.  Some of my favorites were "your Mama is so broke she went to McDonald's and put a milkshake on layaway" and "your Mama is so broke your family ate cereal with a fork to save milk".  Unfortunately, the facts that I am about to share with you are not funny at all.  In fact, they are quite sobering.  Yes, things are going fairly well for the elitists that live in the good areas of New York City, Washington D.C. and San Francisco right now, but most of the country is deeply struggling as our economic fundamentals continue to crumble.
Please share these numbers with as many people as you can, because we need people to understand that there has not been an "economic recovery" for most of America.  In fact, in many ways things just continue to get even worse.  The following are 21 ways to end the phrase "Americans are so broke"...
1. Americans are so broke that about a third of them have debt collectors on their heels.  One recent study discovered that more than one out of every three adults in the United States has an unpaid debt that is "in collections".  That is a total of 77 million people.  In other words, the debt collection business in America is absolutely booming.
2. Americans are so broke that Congress is now actually considering allowing post offices to provide payday loans and check cashing services.
3. Americans are so broke that they are keeping their vehicles longer than ever.  The average age of vehicles on America’s roads recently set a new all-time high of 11.4 years.
4. Americans are so broke that car dealers are having to go to extreme lengths to get new customers.  Last year, one out of every four auto loans in the United States was made to someone with subprime credit.
5. Americans are so broke that 52 percent of them cannot even afford the homes that they are living in right now.
6. Americans are so broke that they are falling farther behind on their student loans than ever.  The total amount of student loan debt in the U.S. has now reached a whopping 1.2 trillion dollars, and approximately seven million Americans are in default on their student loans at this point.
7. Young Americans are so broke that half of all college graduates are still relying on their parents financially when they are two years out of school.
8. Young Americans are so broke that only 36 percent of American adults under the age of 35 currently own a home.  That is the lowest level that has ever been recorded.
9. Americans are so broke that many of them can't even afford to shop at Wal-Mart and dollar stores anymore...
Discount stores are slowly dying.

Yesterday, Dollar Tree announced it would buy Family Dollar, a chain that is in the process of closing hundreds of stores and firing workers.

Other discount stores have been struggling as well, writes Heidi Moore at The Guardian. Fashion discounter Loehmann's filed for bankruptcy, while Wal-Mart's sales have declined for the past five quarters.

"There’s just not enough money deployed by American families to keep all the discount chains in business," Moore writes.
10. Americans are so broke that they are running up record levels of debt.  Overall, U.S. households are 11.68 trillion dollars in debt right now.
11. Americans are so broke that the wealth of the "typical American household" has fallen by 36 percent over the past decade.
12. Americans are so broke that one out of every fourpart-time workers in America is living below the poverty line.
13. Americans are so broke that more than 37 million Americans are now being served by food pantries and soup kitchens.
14. Americans are so broke that there are 49 million Americans that are dealing with food insecurity.
15. Americans are so broke that the number of people on food stamps has increased by about 14 million while Obama has been in the White House.  Ten years ago, the number of women in the U.S. that had jobs outnumbered the number of women in the U.S. on food stamps by more than a 2 to 1 margin.  But now the number of women in the U.S. on food stamps actually exceeds the number of women that have jobs.
16. Americans are so broke that the U.S. government has had to spend an astounding 3.7 trillion dollars on welfare programs over the past five years.
17. Americans are so broke that more than 20 percent of all children in the U.S. are living in poverty.
18. Americans are so broke that we have a record number of kids sleeping in the streets.  In fact, we have more than a million public school children that are homeless at this point.
19. Americans are so broke that 76 percent of all Americans are living paycheck to paycheck.
20. Americans are so broke that 26 percent of Americans have absolutely no emergency savings whatsoever.
21. Americans are so broke that approximately two-thirdsof all Americans do not have enough money saved up to cover six months of expenses if an emergency arose.
If things are this bad now, during the so-called "economic recovery", how bad will things get during the next major economic downturn?
Unfortunately, most Americans have been lulled into a false sense of security.  The financial crisis of 2008 seems like ancient history to most of them now, and most people appear to believe that our leaders have "fixed" whatever was wrong the last time.
Of course that is not the case at all.  In fact, our long-term problems have just continued to grow since then.
The truth is that what we are experiencing right now is about as good as things are going to get for the U.S. economy.  When the next crisis arrives, all of the numbers in the list above are going to rapidly get a lot worse.
So enjoy the rest of this "bubble" while you still can.  It certainly will not last for too much longer.


California's drought continues

(courtesy Tom Randall/ the Grid/Bloomberg)

California’s Exceptional Drought Just Keeps Getting Worse

California’s three-year drought just went from bad to dreadful. In the course of the last week, the crimson expanse of “exceptional drought” grew to engulf the northern part of the state. 
The chart above shows the drought's progression as reported in the USDA’s Drought Monitor. Maps are drawn from from the end of July for each year since 2011.
All of California is in "severe drought" (shown in orange), and 82 percent is rated “extreme drought” (in red). The agency’s highest drought rating -- “exceptional drought” (crimson) -- now covers 58 percent of the state, up from 36 percent a week ago. Exceptional drought is marked by crop and pasture loss and water shortages that fall within the top two percentiles of the drought indicators.
The water reserves in California’s topsoil and subsoil are nearly depleted, and 70 percent of the state’s pastures are now rated “very poor to poor.”
Reservoir levels are dropping, and groundwater is being drained from the state as farms and cities pull from difficult-to-replenish underground caches. The state’s 154 reservoirs are at 60 percent of the historical average, or 17.3 million acre feet lower than they should be. That’s more than a year’s supply of water gone missing.
It’s not the worst drought California has ever seen -- in 1977, the state’s water storage was at 41 percent of the historical average -- but conditions are still getting worse.
The Colorado River Basin, which feeds California and six other states, is “the most over-allocated river system in the world,”according to a study of satellite records released last week thatshocked scientists with the magnitude of water loss.
Since 2004, the basin lost nearly 53 million acre feet of freshwater. For comparison, that’s enough to submerge New York city beneath 344 feet of water.
The Colorado River Basin lost nearly 53 million acre feet of freshwater over the past nine years. That's almost double the volume of the largest U.S. reservoir, Nevada’s Lake Mead, shown here. Photographer: U.S. Bureau of Reclamation
The Colorado River Basin lost nearly 53 million acre feet of freshwater over the past nine years. That's almost double the volume of the largest U.S. reservoir, Nevada’s Lake Mead, shown here. Photographer: U.S. Bureau of Reclamation
Well that is all for today
I will see you tomorrow night


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