Friday, August 29, 2014

august 29

Gold closed down $2.90  at $1285.80 (comex to comex closing time ). Silver was up 13 cents at $19.40

In the access market tonight at 5:15 pm
gold: $1287.00
silver:  $19.46

Today is first day notice and also the last day for options on the OTC. 

GLD : a slight loss of .6 tonnes of gold (probably to pay for fees etc)

SLV : no change in silver inventory at the SLV/now 331.528 million oz


Today we have commentaries concerning the Ukraine, Russia, Japan, Germany and the EU,  Italy and the terror of ISIS.

On the physical side of things, we have a great commentary from Koos Jansen on silver as this metal has volume in China exceeding that of the comex.
Also  the Shanghai Silver Exchange has only 3.3 million oz of inventory left having depleted over 29 million oz over one year.  Once depleted where do you think China will go to, in order to feed its burgeoning demand?

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 months basically remained the same. 
Again, they must have found some gold to lease..

 London good delivery bars are still quite scarce. 

August 29 2014

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

+.088000%        +.1020000%         +.1200%         +.1500%    +  .228000%

August 28.2014:

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

+08800%         +.104000%         +.12000%             +.1500%       +.224000%


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

Here are today's comex results: 


The total gold comex open interest rose today by 4627 contracts from 360,935 up to 365,562 with gold up by $6.60 yesterday.The  big delivery month of August is now off the board.  For the month we had 6,281 notices served for 628,100 oz stand for delivery.

The next non active delivery month is September and here  we see that the open interest fell by 298 contracts down to 281.  The next active delivery month is October and generally this is a very poor for deliveries.  The October contract month actually rose by 206 contracts up to 22,409.  Most players who are still willing to tackle the crooked comex rolled to December.   The estimated volume today was poor at 75,855 contracts. The confirmed volume yesterday was also very light at 119,020.  

The total silver Comex OI rose by 952 contracts as silver was up  yesterday to the tune of 14 cents. Tonight the silver OI complex rests  at 159,634 contracts. These silver contracts are in very strong hands and as I have indicated to you on countless occasions, this will continue to bring nightmares to our bankers.   The front August contract month is now off the board. We had a total of 315 notices served upon this month for 1,575,000 oz. The next big delivery month is September. Here the  OI  for September fell  by 8,480 contracts down down to 3,150 with today being first day notice  All of those paper players rolling out of September landed in the December contract (the roll into December equals 8584 contracts). The December silver contract tonight rests at 123,044 contracts for a gain of 8,584 contracts. For the past year we have been witnessing a liquidation of open interest on the front active month immediately prior to first day notice. Somehow they refuse to roll despite the cost of zero.The estimated volume today was fair at 33,446.  The confirmed volume yesterday was very good at 79,903 contracts.

data for the  September delivery month.

initial standings

August 29.2014  

Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
32.15 oz
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz
 289.35 oz Brinks
No of oz served (contracts) today
212 (21,200 oz)
No of oz to be served (notices)
69  (6900 oz)
Total monthly oz gold served (contracts) so far this month
212 (21,200 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month                       

Total accumulative withdrawal of gold from the Customer inventory this month


Today, we had only one transaction and that was withdrawal of 32.15 oz from Manfra .

We also had one adjustment whereby 8,829 oz was adjusted out of the customer at Manfra into the dealer account.

Total Dealer inventory:  1,150,231.307 oz   35.77 tonnes
Total gold inventory (dealer and customer) =  9.927 million oz. (309.26 tonnes)

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 212 contracts  of which 0 notices were stopped (received) by JPMorgan dealer and 0  notices stopped by JPMorgan customer account.

 We had 212 notices served upon our longs for 21,200  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 212 x 100 oz  = 21,200 oz, and then add the difference between the open interest for the front month of September (281) - the number of notices served upon today (212) x 100 oz  = 28,100 oz or .874 tonnes 

Thus:  initial September  standings:

212 notices served already x 100 oz   +  (281 -212) x 100 oz =  28,100 oz  (.874 tonnes)


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


August 29/2014:   

  September silver:  initial standings

Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory 602,090.34  oz Brinks,JPMorgan)
Deposits to the Dealer Inventory 599,707.299 oz (CNT)
Deposits to the Customer Inventory nil
No of oz served (contracts)735 contracts  (3,675,000 oz)
No of oz to be served (notices)2385 contracts (11,925,000)
Total monthly oz silver served (contracts)735 contracts (3,675,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal  of silver from the Customer inventory this month602,090.34 oz

Today, we had one deposit into the dealer account of CNT:

Into CNT; 599,707.299 oz

total deposit dealer: 599,707.299 oz

We had no dealer withdrawals.

We had two customer withdrawals:

i) Out of Brinks:  600,133.740 oz
ii) Out of JPM:  1,956.600 oz

total customer withdrawal:  602,090.34 oz

we had one adjustment:

Out of the CNT vault, 1,943,825.93 oz was withdrawn from the customer account and into the dealer account at CNT

Total dealer inventory:  63.129 million oz
Total of all silver inventory (dealer and customer) =  179.291 million oz.

The CME reported that we had  735 notices filed for 3,675,000 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 735  x 5,000 oz per contract  or 3,565,000 ounces to which I add the difference between the OI for the front month of September (3150) - the number of notices served upon today (735) x 5,000 oz per contract.

Thus initial  standings for silver:  735 notices x 5,000 oz per notice or  3,565,000 oz + (3150 - 765)  or 11,925,000 oz =  15,600,000 oz

It looks like China is still in a holding pattern ready to pounce when needed.
The open interest on silver is highly elevated.  Gold has a low OI with a low gold price.  Silver has a high OI with a low silver price.  Something has got to give!!


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:

August 29.2014/tonnage 795.00 a loss of .6 tonnes  (probably to pay insurance and storage fees)

August 28.2014: a loss from last week of 4.48 tonnes of gold.

August 22.2014: no change in gold inventory/800.08 tonnes
August 21.2014: no gain in inventory/still 800.08 tonnes

August 20.2014: another gain of .89 tonnes/tonnage back to 800.08 

August 19.2014: another gain of 1.5 tonnes/tonnage 799.19 tonnes

August 18.2014: we had a gain of  2.09 tonnes of gold.  Tonnage 797.69
Great news!!

August 15.2014/no change in gold inventory at the GLD/795.60 tonnes

August 14.2014; no change in gold inventory at the GLD/795.60 tonnes
August 13.2014: a slight reduction to pay for fees/795.60 tonnes

august 12.2014: no change in gold inventory/795.86 tonnes

August 11.2014; no change in gold inventory/795.86 tonnes

August 8.2014: another 1.79 tonnes of gold leaves the shores of London heading straight to Shanghai./795.86

August 7.2014: no change in inventory at the GLD/tonnage 797.65 tonnes

August 6.2014: we lost  2.4 tonnes of gold today at the GLF/tonnage 797.65 tonnes.  This gold no doubt left the shores of England to eventually land into Shanghai.  China's appetite for gold is voracious!

 Today, August 29.2014:

 Today a loss  in tonnage of  gold inventory of .6 tonnes ( Inventory:  795.00 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). 

GLD gold:  795.00 tonnes.


And now for silver:

August 29.2014: no change in inventory at the SLV today.( Inventory: 331.528 million oz)


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

August 28.2014: we had a net gain of 1.247 million oz over the past 6 days (inventory 331.528 million oz):


Net Assets
as of 27-Aug-2014
Ounces in Trust
as of 27-Aug-2014
Tonnes in Trust  
as of 27-Aug-2014


August 22.2014: no change in silver inventory/330.281 million oz

August 21/2014: another huge gain in silver at the SLV: a rise of 1.44 million oz


Net Assets
as of 21-Aug-2014
Ounces in Trust
as of 20-Aug-2014
Tonnes in Trust  
as of 20-Aug-2014

August 20.2014:  no change in silver inventory at the SLV (328.841 million oz)


Net Assets
as of 20-Aug-2014
Ounces in Trust
as of 19-Aug-2014

August 19.2014: a monstrous gain of 3.07 million oz in one day: now 328.841 million oz of inventory


Net Assets
as of 18-Aug-2014
Ounces in Trust
as of 18-Aug-2014
Tonnes in Trust  
as of 18-Aug-2014

August 18.2014:  no change in silver inventory


Net Assets
as of 15-Aug-2014
Ounces in Trust
as of 15-Aug-2014
Tonnes in Trust  
as of 15-Aug-2014

August 15.2014:   we gained 1.008 million oz of silver into the vaults at the SLV in London. 


Net Assets
as of 14-Aug-2014
Ounces in Trust
as of 14-Aug-2014
Tonnes in Trust  
as of 14-Aug-2014

Today, August 29.2014/ no change in silver inventory (331.528 million oz).

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 5.0% percent to NAV in usa funds and Negative 4.9%  to NAV for Cdn funds
Percentage of fund in gold 58.9%
Percentage of fund in silver:40.5%
cash .6%

.( August 29/2014)   

2. Sprott silver fund (PSLV): Premium to NAV falls to positive 4.62% NAV (Aug 29/2014)   (has been rising lately)
3. Sprott gold fund (PHYS): premium to NAV risesto negative -0.28% to NAV (Aug 28. /2014) 
Note: Sprott silver trust back hugely into positive territory at 4.62%. 
Sprott physical gold trust is back in negative territory at  -0.28%.

Central fund of Canada's is still in jail.


At 3:30 pm we received the COT report on position levels of our major players.
I doubt the accuracy of the CME figures.

First silver:

Our large specs:

Those large specs that are long in silver added 1868 contracts to their long side
Those large specs that have been short in silver added another huge 3495 contracts to their short side.


Those commercials that have been long in silver pitched 184 contracts from their long side
Those commercials that have been short in silver covered 248 contracts from their short side.

Our small specs;

Those small specs that have been long in silver added 370 contracts to their long side
Those small specs that have been short in silver covered 1193 contracts from their short side.

Conclusion:  commercials go net long slightly so a little bullish.

And now for gold:

Our large specs;

Those large specs that have been long in gold pitched a monstrous 11,824 contracts from their long side  (anticipating major raids at the end of the month due to options expiry?)

Those large specs that have been short in gold increased their short position by a monstrous 12,983 contracts  (also anticipating an end of the month raid)


Those commercials that have been long in gold picked up a huge 5056 contracts offered to them by the specs.

Those commercials that have been short in silver covered a huge 10,058 contracts and he criminal game continues.

Small specs:

Those small specs that have been long in gold added 910 contracts to their long side
And those small specs that have been short in silver added a small 217 contracts to their short side.

The commercials go net long by a huge 15,100 contracts and this will be construed as bullish if you believe the figures.


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

Central Banks Should Give Money Directly To The People” – Gold Bullish CFR Proposal

Published in Market Update  Precious Metals  on 29 August 2014
By Mark O’Byrne

Helicopter Janet?
Last week, a very radical proposal appeared in the pages of the influential ‘Foreign Affairs’ magazine, the publication arm of the equally influential Council on Foreign Relations (CFR) think-tank based in New York.
An article “Print Less but Transfer More - Why Central Banks Should Give Money Directly to the People”, that has been picked up widely in the media argues that given that monetary stimulus measures such as quantitative easing and near zero central bank interest rates have failed to boost economic growth, a new radical monetary approach is needed.
That approach is to print currency and give the cash directly to consumers and households as required so as to remedy insufficient consumer spending and in order to prevent recessions.
The article is authored by Mark Blyth and Eric Lonergan. Blyth, originally from Scotland, is an economist at Brown University in Rhode Island. Lonergan, originally from Ireland, is a fund manager of global macro strategies at M&G Investments in London.
Although ‘Foreign Affairs’ publishes various sides of important debates, policy articles in ‘Foreign Affairs’ have tended to influence US economic and political policy over the years, so the ‘cash transfer proposal’ is worth watching.
Hoped For Benefits Of "Free Cash"
Blyth and Lonergan argue that the slow economic growth and low inflation rates being currently witnessed in Western developed economies call for more extreme government and policy maker approaches so as to get people spending again, thereby stimulating economic growth and encouraging inflation.
To them, deflation is a key threat that the unconventional low interest rates and quantitative easing has not managed to tackle. Therefore in their eyes this needs to be countered by directly making consumers spend more by actually handing over cash to them.
Blyth and Lonergan draw on Ben Bernanke and Milton Friedman to support their cash transfer argument and openly say that it is now “well past time” for policy makers in the US and also in other developed countries to try the helicopter cash drop approach.  

Helicopter Mark?
In 1998, after Japan suffered a lost decade of growth, Ben Bernanke, a then university economist at Princeton, advocated that Japan provide direct cash transfers to consumers in order to encourage them to spend more.
Previously, Milton Friedman had viewed direct money transfers as analogous to dropping cash from helicopters. This would go on to create the famous expression of Helicopter Ben (Bernanke) dropping cash from a helicopter.
Blyth and Lonergan advocate direct cash transfers either to all households equally, or possibly just to the lowest 80% of households. They say that lower income households would use this cash in a variety of ways, either to repay consumer debt, or to spend and consume, or to save. If a certain cash sum, say $1000, was not seen to be effective, households could, in their view, be given more, for example $3000 or $4000.
Blyth and Lonergan say that it’s hard to measure the direct impact on consumer spending of instruments such as lower interest rates, but that the impact of direct cash transfers are more measurable.
In their view, inflation won’t be an issue since central banks can continue inflation targeting.
Real Risks Of “Free Cash”
However, in our view, there are a number of flaws with this proposal.
Direct cash transfers have a danger of putting consumers further into debt. If a cash transfer is not effective, and an even bigger transfer is then handed out by governments, this will create the danger of consumer dependency on the cash transfer mechanism.

Helicopter Mario?
The argument that the level of inflation created by cash transfers can be controlled is untested. Since this direct cash transfer approach has never been used, it is in uncharted territory and could lead to unanticipated inflation. How the measurement of direct cash transfers is more accurate than the measurement of the effect of low interest rates and quantitative easing is unclear.
With economies already facing record money supply growth from expanded central bank balance sheets, new cash transfers flowing into the global economy could lead to an out of control velocity of money and possible hyperinflation. How would this extra liquidity ever be drained from the system again?
This new cash transfer money would also be printed out of thin air, thus diluting the existing money supply and eroding its purchasing power. Since all fiat currency is merely debt anyway, the creation of new money to finance the direct cash transfers would add to the existing debt burden of already struggling nation states.
GoldCore Conclusion
In many austerity hit countries, there are is an increasing tax burden with very high income taxes, sales taxes and many stealth taxes.
Does it make sense for central banks to be printing money that will in many cases be used to pay taxes, stealth taxes or even pay down credit card, loan and even mortgage debt?
This measure will likely further worsen the debt to GDP ratios in many already indebted industrial nations. With interest rates set to rise in the coming months and years, giving free money to consumers may bankrupt already vulnerable states.
Would it not be more prudent to have debt write offs and debt forgiveness at sovereign level so that countries can lower the tax burden on suffering citizens? Rather than compounding the problem by increasing sovereign debt levels through giving out "free" cash to indebted consumers?
There is a real risk that this could end up being another ‘soft bail-out’ for banks as much of the cash would probably end up being used to pay down the huge debts incurred in recent years  and would come full circle to banks in the form of debt repayments and governments in the form of taxes.
The real solution to the global debt crisis is not more debt in the form of “free currency” and increasing sovereign debt. The real solution remains to implement significant debt forgiveness for consumers and debt restructuring for institutions, banks and nations in a modern debt jubilee.
Were such an extreme scenario to be implemented and a further and deliberate debasement of currency, there is a real risk of significant inflation and stagflation. Even hyperinflation in a worst case scenario.
Alan Greenspan’s warning of “fiat money in extremis” becomes more real by the day. This underlines the vital importance of having an allocation to gold in a diversified portfolio.
Gold will maintain its purchasing power in the coming years, as it has always done throughout history.
by Ronan Manly, GoldCore Consultant. Editor Mark O’Byrne of GoldCore
Today’s AM fix was USD 1,285.75, EUR 975.83 and GBP 774.55 per ounce.
Yesterday’s AM fix was USD 1,288.00, EUR 975.54 and GBP 776.28 per ounce.
Gold rose $7.30 or 0.6% to $1,289.30 per ounce and silver rose $0.09 or 0.4% to $19.53 per ounce yesterday. Overnight, gold in Singapore was flat and stayed near the $1,290/oz level prior to ticking lower in London.
Silver in U.S. Dollars - 2 Years (Thomson Reuters)
Silver for immediate delivery advanced 0.2 percent to $19.5525 an ounce. Silver looks set to end six weeks of losses. The gold/silver ratio is at 65.9 ( 1285.00/19.50 ) and near a one year high showing silver remains very good value versus gold. We expect the gold silver ratio to test the 30 level again in the coming years (see chart below).

Gold Silver Ratio - Annually 1995 to 2014  (Thomson Reuters)
Spot platinum was at $1,425.18 an ounce from $1,424.50, heading for the first back-to-back monthly drop since June 2013. Palladium was little changed at $896.90 an ounce and is set for a seventh month of gains as supply and demand impacts the market. Palladium remains near record 13 year nominal highs.
Gold has risen 0.3% this week and a fourth day of advances would be the longest rally since June. If gold closes above $1,282/oz today it will be a higher monthly close for August which will be positive as we had into gold's seasonal sweet spot and gold’s strongest month September.
Gold has bounced from a two-month low of $1,273.14 on August 21 due to the renewed geopolitical tension as the U.S. condemned what they said were incursions by Russia into Ukrainian territory.Gold remains on course to end two weeks of losses, as escalating tension between NATO and Russia and other geopolitical risks lead to safe haven demand.

Gold in U.S. Dollars - 1 Year (Thomson Reuters)
The United States openly accused Russia yesterday of sending combat forces into Ukraine and threatened to tighten economic sanctions, but Washington stopped short of calling Moscow's intensified support for separatist forces an invasion.
Militants fighting the Syrian army have detained 43 U.N. peacekeepers in the Israeli occupied Golan Heights and trapped another 81 in the region, and the world body is working to secure their release, the United Nations said overnight
A truce between Israel and Gaza’s militant Hamas rulers was maintained for a third day yesterday, while President Barack Obama signaled there are no immediate plans to conduct airstrikes against Islamic State havens inside Syria and a strategy for confronting the group outside Iraq hasn’t been set.
Gold's small gains amid unrest in the Middle East and Ukraine have surprised many analysts.

(courtesy Mark OByrne)


Alasdair Macleod...

The wages-fuel-demand fallacy

In recent months talking heads, disappointed with the lack of economic recovery, have turned their attention to wages. If only wages could grow, they say, there would be more demand for goods and services: without wage growth, economies will continue to stagnate.

It amounts to a non-specific call to stimulate aggregate demand by continuing with or even accelerating the expansion of money supply. The thinking is the same as that behind Bernanke's monetary distribution by helicopter. Unfortunately for these wishful-thinkers the disciplines of the markets cannot be bypassed. If you give everyone more money without a balancing increase in the supply of goods, there is no surer way of stimulating price inflation, collapsing a currency's purchasing power and losing all control of interest rates.

The underlying error is to fail to understand that economising individuals make things in order to be able to buy things. That is the order of events, earn it first and spend it second. No amount of monetary shenanigans can change this basic fact. Instead, expanding the quantity of money will always end up devaluing the wealth and earning-power of ordinary people, the same people that are being encouraged to spend, and destroying genuine economic activity in the process.

This is the reason monetary stimulation never works, except for a short period if and when the public are fooled by the process. Businesses – owned and managed by ordinary people - are not fooled by it any more: they are buying in their equity instead of investing in new production because they know that investing in production doesn't earn a return. This is the logical response by businesses to the destruction of their customers' wealth through currency debasement.

Let me sum up currency debasement with an aphorism:
"You print some money to rob the wealth of ordinary people
to give to the banksto lend to business
to make their products
for customers to buy with money devalued by printing."
It is as ridiculous a circular proposition as perpetual motion, yet central banks never seem to question it. Monetary stimulus fails with every credit cycle when the destruction of wealth is exposed by rising prices. But in this credit cycle the deception was so obvious to the general public that it failed from the outset.

The last five years have seen all beliefs in the manageability of aggregate demand comprehensively demolished by experience. The unfortunate result of this failure is that central bankers now see no alternative to maintaining things as they are, because the financial system has become horribly over-geared and probably wouldn't survive the rise in interest rates a genuine economic recovery entails anyway. Price inflation would almost certainly rise well above the 2% target forcing central banks to raise interest rates, throwing bonds and stocks into a severe bear market, and imperilling government finances. The financial system is simply too highly geared to survive a credit-driven recovery.

Japan, which has accelerated monetary debasement of the yen at an unprecedented rate, finds itself in this trap. If anything, the pace of its economic deterioration is increasing. The explanation is simple and confirms the obvious: monetary debasement impoverishes ordinary people. Far from boosting the economy it is rapidly driving us into a global slump.

The solution is not higher wages.


A terrific commentary from Koos Jansen on silver trading at the Shanghai Silver Exchange.
Volumes are now surpassing comex by 15%

As Bill Holter commented to us yesterday, the Shanghai inventory for silver is now down to 103 tonnes or  3.3 million oz.  Two weeks ago we reported that the inventory was a little over 4 million oz.  In one year the inventory has dropped from around 33 million oz to today's level of 3.3 million oz.  With trading volumes greater than the comex and inventory dropping like a stone, where do you think the Shanghai silver Exchange will get it's silver.

Also of note,is that the gold and silver futures exchange begins in earnest late in September.  This will cause tremendous pressure on the crooked comex as the real discovery mechanism will be transferred to Shanghai

a must read...

(courtesy Koos Jansen)

Precious Metals Markets: China vs US

Published: 27-08-2014 21:28
Precious Metals Markets: China vs US
In anticipation to the launch of the Shanghai Gold Exchange international board, that presumably will start shifting gold pricing power from West to East, in this post we'll examine the historical trading volumes of the Shanghai Gold Exchange (SGE), the Shanghai Futures Exchange (SHFE) and the COMEX. By charting the weekly volumes we get a clear view of the size of these exchanges. (In the London Bullion Market most likely the largest volumes are traded, but because this is an OTC market that doesn't disclose much data we can't use it in our West - East comparison.)
From now on I will publish the trading data of all three exchanges after every trading week to closely monitor if the gold market’s center of gravity is moving to Asia.
The largest precious metals futures exchange in the world is the COMEX located in the US. This exchange started trading silver futures in June 1963 and gold futures in December 1974. Futures are a derivative of an underlying asset, in this case precious metals, as they are traded on margin. Through futures traders can take on positions in precious metals but only deposit a fraction, the margin, of the total cash value in advance. This provides leverage; price movement is magnified relative to the margin on deposit. Futures can be used, for example, to hedge or speculate. Historically the COMEX has been the dominant futures exchange in the world and plays a significant role in the pricing of precious metals.
The first steps in the opening of the Chinese precious metals market were made in 2000 with the launch of the Shanghai Huatong Nonferrous Metal Wholesale Marketplace. This was the first time silver could be traded in the Chinese wholesale market, in previous decades the PBOC had the monopoly in gold and silver trade in China. In 2003 the Shanghai Huatong Nonferrous Metal Wholesale Marketplace was renamed as the Shanghai White Platinum & Silver Exchange (WPSE). In the years that followed the PBOC allowed silver to be traded on several other exchanges and among Chinese citizens.
In October 2002 the first Chinese gold exchange opened its doors; the Shanghai Gold Exchange. The SGE was designated as the core of the Chinese physical gold market. The PBOC decided all imported and domestically mined gold was required to be sold first through the SGE, additionally gold bars withdrawn from the SGE vaults were not allowed to return to the SGE vaults before being melted and assayed again. By this single entrance pointthe PBOC can easily monitor the quantity and quality of the gold that enters the Chinese market place and is being added to private reserves. Of course the Chinese gold market didn't liberalize overnight, only in 2007 did the SGE exactly operated as intended.
In its early years the SGE was dwarfed by the COMEX, in the first trading week only 398 Kg's in gold spot contracts were traded, during the same week 476 tonnes in gold futures were traded on the COMEX. But the Chinese were assiduous to develop their precious metals markets in order to become a global player as they were fully aware of gold's importance in the monetary system. The goals of the Chinese government were to stimulate its citizens to accumulate physical gold, developed derivatives to improve the market's infrastructure and the Chinese gold market needed to internationalize as part of the development of the Chinese financial markets and the internationalization of the renminbi. Next to the goal of the PBOC to accumulate gold. Zhou Xiaochuan, governor of the PBOC from 2002 till present, said at the LBMA conference in 2004.
China’s gold market should gradually realize three transformations: from commodity trade to financial product trade, from spot transactions to futures transactions, and from a domestic market to integration with the international market.
From the perspective of the central bank, the development and improvement of the gold market will facilitate the improvement of regulating instruments for monetary policy and macro adjustment system … gold still bears the marked nature of money under the modern financial system.
In the first two years after its inception SGE trading volumes only slightly increased, until the SGE added derivatives to their existing spot products. Au(T+D), which is a gold spot deferred contract (comparable to futures), was launched in September 2004 and Ag(T+D), a silver spot deferred contract, in November 2006. Gold trading volumes instantly increased by the launch of Au(T+D) and other product improvements.
Silver volumes took of in 2009.
Eventually SGE trading volumes in both metals increased significantly, yet remained minuscule compared to the COMEX, that in 2013 on average traded 2,822 tonnes of gold and 43,097 tonnes of silver per week. Compare the COMEX weekly average volumes with the weekly volumes seen in the SGE charts above.
To further improve the infrastructure of the precious metals market (and to become a more serious opponent to western markets) the Chinese government launched gold futures (January 9, 2008) and silver futures (May 10, 2012) on the SHFE. Additionally the SHFE started the Continues Trading Program, or Night Trading, in July 2013 to facilitate trading during hours the financial markets in the US are active.
Though total Chinese gold trading is not even close to the volumes on the COMEX..
..Chinese silver trading, on the other hand, has already transcended COMEX volumes. Sources familiar with the matter said the SHFE has plans to allow foreign traders to participate on their exchange, just like the SGE. 
In 2013 the amount of silver changing hands on the COMEX was 2.2 million tonnes, while on the SHFE the total volume was 2.6 million tonnes, which is 15 % more. On the SGE 215 thousand tonnes of silver were traded in 2013. 
According to multiple sources the difference in silver trading volume between the COMEX and the SHFE was larger than 15 % in 2013, which is false. The next screen shot is from the Silver Institute, World Silver Survey 2014:
The numbers disclosed of the SHFE and SGE are double-counted. Volume and Open Interest on both exchanges are published bilaterally, in contrast to the COMEX that publishes these numbers unilaterally. Meaning: if the volume disclosed by the COMEX is 1,000, than 1,000 contracts changed hands - 1,000 contracts were sold and 1,000 were bought. If the volume disclosed by the SHFE is 1,000, than 500 contracts were sold and 500 were bought.
From the SHFE:
From the SGE:
From the COMEX by email:

To compare SGE & SHFE numbers to COMEX one has to divide the Chinese numbers by 2, only then are all the numbers single-sided. 
The SGE international board will operate in the Shanghai Free Trade Zone (FTZ), which in terms of trade can be seen as a separate country from China mainland. This is how I think the international board will operate: A foreign trader buying 100 Au9999 spot contracts on the SGE international board (SGEIB) will see his SGE gold account being credited by 100 Kg's and his SGE renminbi account being debited by the corresponding cash value. This does not mean he imported gold into the mainland; he became the owner of 100 Kg's of physical gold in the Shanghai FTZ and has the option to ship his metal home (not the mainland) if he wishes. Vice versa, a foreign seller can ship gold into the FTZ, the SGE staff will inspect it and if approved the gold will be moved into the SGE vaults. Again, no gold is imported into the mainland. If this gold is sold the seller’s SGE cash account is credited and his gold account is debited.
Last week the PBOC granted three additional banks a Chinese gold import license. This adds up to 15 commercial banks blessed with a PBOC gold trade license. In random order:
  1. Shenzhen Development Bank / Ping An Bank
  2. Industrial and Commercial Bank of China
  3. Shanghai Pudong Development Bank
  4. Agricultural Bank of China
  5. China Construction Bank
  6. Bank of Communications
  7. China Merchants Bank
  8. China Minsheng Bank
  9. Standard Chartered
  10. Bank of Shanghai
  11. Industrial Bank
  12. Bank of China
  13. Everbright
  14. HSBC
  15. ANZ
While the timing of the issuing of the new trade licenses might suggest the Chinese domestic physical gold market will be opened to the international gold market, this is not the case in my opinion. I still haven’t read any official documents on the SGEIB or new trade rules, but I assume the structure of the Chinese domestic gold market will not be changed; only licensed banks can import gold into the mainland and bullion export remains prohibited. The fact that the SGEIB is set up in a Free Trade Zone tells me it will function separate from the Chinese domestic gold market.
The SGEIB will attract trading activity and promotes the internationalization of the renminbi. It will not be a vehicle for, i.e., Germans to buy gold from Chinese citizens, the PBOC will retain its policy of very little gold export (a few jewelers have an export license). The SGEIB will facilitate off shore gold trading in renminbi, it will not open the Chinese physical gold market to the rest of the world. 
The SGEIB will start by launching three spot contracts, which will facilitate physical gold trading. In terms of volume the spot contracts will not challenge the COMEX, but the SGE has stated derivatives will follow. A trend worth to watch.
Koos Jansen


Early morning trading from Europe/Asia

1. Stocks mostly up on  Asian bourses with the  lower yen values   to 103.96.

Nikkei down 35 points or .23%

3. Europe stocks all in the  green /Euro up/USA dollar index flat at 82.48.  Chinese bourse Shanghai up as  the yen strengthens  in value  to 6.15447 per usa dollar/yuan.(default looming on many bonds) 

3b Japan 10 year yield at .49%/Japanese yen vs usa cross now at 103.96/
3c  Nikkei still above 14,000
3d Euro area confidence levels fall/ECB  worries about European economic perfomance3e tensions between Ukraine and Russia/rebels heighten
3fOil:  WTI  94.95 and Brent: 102.87 

3g Gold at $1286.00 dollars/ Silver: $19.54

4.  USA 10 yr treasury bond at 2.34% early this morning.

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

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

S&P Futures Surge Over 2000, At Record High, On Collapsing Japanese, European Economic Data, Ukraine Escalations

Tyler Durden's picture

Following Wednesday's laughable tape painting close where an algo, supposedly that of Citadel under the usual instructions of the NY Fed, ramped futures just over 2,000 to preserve faith in central planning, yesterday everyone was expecting a comparable rigged move... and got it, only this time milliseconds after the close, when futures moved from solidly in the red, to a fresh record high in seconds on no news - although some speculate that Obama not announcing Syrian air strikes yesterday was somehow the bullish catalyst - and purely on another bout of algo buying whose only purpose was to preserve the overnight momentum. Sure enough, this morning we find that even as bond yields around the world continue to probe 2014 lows, and with the Ruble sinking to fresh record lows as the Ukraine situation has deteriorated to unprecedented lows, so US equity futures have once, driven by the now generic USDJPY spike just after the European open, again soared overnight, well above 2000 and are now at all time highs, driven likely by the ongoing deflationary collapse in Europe where August inflation printed 0.3%, the lowest since 2009 while the unemployment remained close to record high, while the Japanese economic abemination is now fully featured for every Keynesian professor to see, with the latest Japanese data basically continuing the pattern of sheer horror as we reported yesterday.
As a result, with the Fed firmly in tapering mode for now, all hopes are once again firmly pinned on Draghi, and as Bloomberg says the European economic crash is "increasing pressure on the ECB to take action to kindle the bloc’s faltering recovery" even as Germany's finance minister poured cold water overnight on more action out of the ECB, in line with the Reuters headline earlier this week. In short, complete confusion reigns in the Fed's "Mutant, broken market" in which nothing really matters and where a green EOD print is now a matter of urgent national security and policy.
Asian markets are a bit of a mixed bag overnight. The escalation of the geopolitical tension between Russia and Ukraine is certainly being felt by markets. Other than Chinese indices, bourses in Japan, Korea, and most parts of South East Asia are down somewhere around 0.2-0.5%. Chinese stocks are up overnight reversing of yesterday's decline. There wasn't much in the way of specific news flows behind that but there were stories that China ETF has attracted just over US$500m of inflows in August which was the biggest since December 2012 as investors optimism rose on government's stimulus measures. A good set of results from ICBC probably also helped the Financial sector performance overnight. Away from equities, Asian IG and HY credit markets continued to firm up as technicals remain rather one sided in light of thin supply. This may start to change as we gradually exit earnings season in China and HK from next week onwards. In other markets overnight, Treasuries remain well supported with the 10yr holding in at below 2.34%, Gold is up for its fourth consecutive day, and the AUD is seeing some consolidation after a decent streak over the last 3 days. Asian stocks fall with the Shanghai Composite outperforming and the Kospi underperforming. MSCI Asia Pacific down 0.3% to 147.9. Nikkei 225 down 0.2%, Hang Seng up 0%, Kospi down 0.3%, Shanghai Composite up 1%, ASX up 0%, Sensex up 0.3%. 2 out of 10 sectors rise with telcos, energy outperforming and staples, materials underperforming
European shares little changed, down from earlier gains, with the insurance and financial services sectors outperforming and retail, media underperforming. The Italian and Swedish markets are the best-performing larger bourses, Spanish the worst. Euro-area inflation slows to 0.3% as Draghi hints at more ECB stimulus. The euro is little changed against the dollar. Greek 10yr bond yields rise; German yields increase.
It’s a busy day for data over in the US where we will get July personal income and spending (expected at +0.3% and +0.2%), July’s PCE Core and deflator reads (both expected at +0.1% MoM) and the Chicago August PMI (expected to rise to 56.5) and U.Mich August confidence read (expected in at 80).
Bulletin Headline Summary from RanSquawk And Bloomberg
  • EUR/USD rises further from the YTD lows at 1.3153 as the inline Eurozone CPI at 0.3% keeps imminent ECB easing at bay for another month
  • E-Mini S&P rises to record levels ahead of the open as month-end flows dictate equity dominance in the final trading session of the month
  • Ahead of Labor Day on Monday, markets have a slew of data to work their way through, with US Personal Income/Spending, Chicago PMI and Uni. Of Michigan Confidence all due ahead of the early electronic close
  • Long Treasuries lead week’s gains amid rally in EGBs on Russia/Ukraine tensions, ECB stimulus speculation that pushed bund yields below 0.90%.
  • This year’s Treasury market rally has been stronger than every economist surveyed by Bloomberg News predicted; 10Y yields that slid to 2.32% yesterday were lower than the levels projected by all 66 economists surveyed for their Sept. 30 forecasts
  • German bunds are set for an eighth monthly advance, longest run since Jan. 2005
  • Euro-area inflation slowed in August, rising 0.3% vs 0.4% in August, weakest rate since Oct 2009 and region’s unemployment rate remained close to a record, increasing pressure on the ECB to take action to kindle the bloc’s faltering recovery
  • The ECB has run out of ways to help the euro area, putting the burden on governments to spur growth without running excessive deficits, German Finance Minister Wolfgang Schaeuble said
  • ECB Governing Council member Ewald Nowotny suggested the bank may cut its economic forecast when it presents an updated estimate next week
  • Obama indicated the U.S. has no immediate plans to strike Islamic State havens inside Syria; “we don’t have a strategy yet,” he said at the White House yesterday when asked if he would need congressional approval to hit targets in Syria
  • The U.S. and European powers closed ranks with Ukraine in condemning what they said is an upsurge in Russian troop incursions and intensified fighting as the government in Kiev struggles to counter a separatist offensive
  • Finland’s government said its fighter jets were ready to intercept foreign aircraft after Russian planes repeatedly violated the northernmost euro member’s airspace
  • Three days ago, in an English seaside town, Nigel Farage boasted he was Prime Minister Cameron’s worst nightmare; yesterday, one of the Conservative Party’s highest-profile lawmakers announced he was defecting to UKIP
  • Sovereign yields mostly higher. Asian stocks mixed, with Nikkei lower, Shanghai higher, European stocks, U.S. stock futures gain. WTI crude and copper gain, gold lower
US Economic Docket
  • 8:30am: Personal Income, July, est. 0.3% (prior 0.4%)
    • Personal Spending, July, est. 0.2% (prior 0.4%)
    • PCE Deflator m/m, July, est. 0.1% (prior 0.2%)
    • PCE Deflator y/y, July, est. 1.6% (prior 1.6%)
    • PCE Core m/m, July, est. 0.1% (prior 0.1%)
    • PCE Core y/y, July, est. 1.5% (prior 1.5%)
  • 9:00am: ISM Milwaukee, Aug., est. 60 (prior 63.87)
  • 9:45am: Chicago Purchasing Manager, Aug. 56.5 (prior 52.6)
  • 9:55am: UMich Confidence, Aug. final, est. 80 (prior 79.2)
German 10yr yields have climbed back towards 0.9% as markets pull back on bets of outright QE purchases. Today’s CPI Estimate (0.3% vs. Exp. 0.3%) from the Eurozone solidified expectations that the ECB may be content holding off for one more month before embarking on broad-based easing, however the longer-term expectations of easing have kept peripheral bonds bid. Credit Suisse, Commerzbank and BNP Paribas added their names to the ever-growing list of those expecting Draghi to act in order to lift inflation expectations. Ahead of the Wall Street open, the E-Mini S&P has climbed to record levels of 2,003.75 as month-end flows dictate equity dominance in the final trading of August, with a number of desks noting the month-end flows in fixed income now coming to a conclusion in a shorter-session today.
European equities trade tentatively in positive territory (EuroStoxx +0.25%) as markets cover shorts initiated in yesterday’s sharp sell-off. The DAX future is still yet to pull back half of yesterday’s steep decline, as traders remain concerned over the deterioration in relations between Ukraine and Russia. The FTSE-100 underperforms as Tesco (-6.1%) fell to the lowest level in over a decade after issuing a stark profit warning over challenging market conditions, being forced to slash dividends by over 75% - dragging down other UK supermarket names including J Sainsbury (-4.5%) and WM Morrison (-4.3%).
The inline Eurozone CPI data prompted a minor relief rally in EUR/USD and kept the pair comfortably above the YTD lows of 1.3153, with turning to a slew of option expiries at the 1.32 handle (1.14bln rolling off at the 10am NY cut). NZD weakened after August New Zealand ANZ Business Confidence fell for a 6th consecutive month to the lowest level since 2012 (24.4 vs. Prev. 39.7). Elsewhere, despite initially shrugging off largely poor Japanese data, JPY remains steady despite a raft of Japanese data which showed inflation remaining unchanged, a result likely to be welcome by the BoJ ahead of Thursday's rate decision, while household spending, comprising of almost 60% of the economy, plummeted for a 4th consecutive time.
WTI and Brent crude futures trade higher, with WTI on track for the first weekly gain in over one month on short-covering and caution surrounding the south-eastern front in Ukraine. The latest reports suggest the pro-Russian separatists are to open a humanitarian corridor through which the encircled Ukrainian army can leave peacefully. Spot gold trades lower after tripping stops on the way through the 200DMA at USD 1,285.50 well ahead of the COMEX open.
* * *
DB's Jim Reid and team conclude the overnight recap
Markets had a rather weak day yesterday as the ratcheting up of Ukraine-Russia tensions and the continued darkening of the European economic picture outweighed positive data from the US to weigh on assets across the board.
On the Ukraine-Russia situation, Ukraine’s President yesterday cancelled a visit to Turkey citing “Russian troop deployments” in the east of the country and Nato said it had detected a significant increase in Russian arms being supplied to rebels over the past couple of weeks with Nato Brigadier General Niko Tak stating that there had been a, "significant escalation in the level and sophistication of Russia's military interference in Ukraine" (BBC). Later on in the day Nato released satellite images it says shows Russian armed forces in Ukraine and the UN Security Council held an emergency meeting. Russia denied that there were any Russian troops in Ukraine. Yesterday Britain’s ambassador to the UN Sir Mark Lyall Grant said that the conflict in Ukraine would, “no longer exist” without Russia’s direct support for the rebels whilst overnight President Obama accused Russia of being responsible for the violence, stating that fighting was not the result of a local uprising but instead of “deep Russian involvement.” Nato will hold an emergency meeting later today. All of this comes after the Ukrainian army had been making headway against the rebels although the rebels have now opened up a new front in the south of the country (BBC).
European economic data also provided little cause for cheer as Italian and Euro area confidence surveys broadly disappointed already low expectations. Italian business confidence came in at 95.7 vs 99.2 expected (the previous read had been 99.7) whilst Euro area economic, industrial, consumer and services confidence came in at 100.6 (vs 101.5 expected), -5.3 (vs -4.5 expected), -10 (vs -10 expected) and 3.1 (vs 3.5 expected) respectively. Some slightly better reads including the euro area business climate (0.16 vs 0.1 expected), Spanish YoY CPI (-0.5% vs -0.6% expected) and German inflation and unemployment which came in line with expectations at 0.8% YoY and 6.7% respectively did not help to lift the general gloom. The data helped to drive a divergence of performance between core and peripheral government debt as core debt outperformed (German 10Y’s tightened another 3bps and French 10Y’s 1bp) whilst peripheral debt sold off (Italian Spanish and Portuguese 10Y paper widened 5bps, 8bps and 14bps respectively).
Staying on this theme, ECB's Governing Council member Nowotny was on the wires overnight hinting that the ECB may cut its economic forecast at the next meeting. He said he is worried about the Eurozone's economic situation and said it would be a big mistake for banks not to take up TLTRO. He also added that Germany is no longer able to be a locomotive for growth. Overall he seems to be on the same page as Draghi as we continue to build up towards the key policy meeting next Thursday.
As mentioned before most US economic releases yesterday came in above consensus. The US Q2 GDP was revised up to +4.2% annualised QoQ (vs expectation of a slight fall to 3.9%), initial jobless claims fell to 298k and July pending home sales rose +3.3% MoM (vs +0.5% expected). The August Kansas Fed read (3 vs 7 expected) disappointed though. Overall the combination of the Ukraine crisis, weak European economic data, and the strong rally in equities over the past month proved to be a negative mix for assets. In Europe, the Stoxx 600, DAX, and FTSEMIB were -0.66%, -1.12%, and -2.03%, respectively, On the other side of the Atlantic, we saw the S&P500 down -0.17% at the closing bell after having recovered from an intraday decline of nearly half a percent around the open. Credit also struggled with Europe Main and Xover widening out by 2bps and 6bps whilst in the US CDX IG and HY drifted by 1bp and 2bps wider.
Asian markets are once again a bit of a mixed bag overnight. The escalation of the geopolitical tension between Russia and Ukraine is certainly being felt by markets. Other than Chinese indices, bourses in Japan, Korea, and most parts of South East Asia are down somewhere around 0.2-0.4% as we type. Chinese stocks are up by about two-tenths of a percent overnight reversing of yesterday's decline. There wasn't much in the way of specific news flows behind that but there were stories that China ETF has attracted just over US$500m of inflows in August which was the biggest since December 2012 as investors optimism rose on government's stimulus measures. A good set of results from ICBC probably also helped the Financial sector performance overnight. Away from equities, Asian IG and HY credit markets continued to firm up as technicals remain rather one sided in light of thin supply. This may start to change as we gradually exit earnings season in China and HK from next week onwards. In other markets overnight, Treasuries remain well supported with the 10yr holding in at below 2.34%, Gold is up for its fourth consecutive day, and the AUD is seeing some consolidation after a decent streak over the last 3 days
Looking to the day ahead in Europe we have German and Spanish July retail sales. We will also have Italy’s July and Q2 unemployment rate read (expected at +12.3% and +12.5% respectively), final Q2 GDP (expected unchanged) as well as the August inflation read which is expected to show that Italy has slipped into deflation with MoM and YoY reads of -0.1% expected. We will also get Euro area August core CPI which is estimated to be +0.8% YoY. It’s also a busy day for data over in the US where we will get July personal income and spending (expected at +0.3% and +0.2%), July’s PCE Core and deflator reads (both expected at +0.1% MoM) and the Chicago August PMI (expected to rise to 56.5) and U.Mich August confidence read (expected in at 80).


Japan is imploding by the minute:  household spending collapses.  Also Japanese unemployment jumps to a 9 month high:

not very good news for Japan as the yen took it on the chin today falling to 104.09 yen to the dollar

(courtesy zero hedge)

Abegeddon: Household Spending Re-Collapses As Japanese Unemployment Jumps To 9-Month High

Tyler Durden's picture

Just when you thought it couldn't get any worse... In a veritable deluge of data from Japan tonight, there is - simply put - no silver lining. First, Japan's jobless rate unexpectedly jumped to 3.8% - its highest since Nov 2013 (despite the highest job-to-applicant ratio in 22 years). Then, household spending re-collapsed 5.9% for the 4th month in a row(showingh no sign of post-tax-hike-recovery). Industrial Production was up next and dramatically missed expectations with a mere 0.2% rebound after last month's plunge (-0.9% YoY - worst in 13 months), quickly followed by a 0.5% drop in Japanes retail trade MoM (missing hope for a 0.3% gain). That's good news, right? Means moar QQE, right? Wrong! Japanese CPI came hot at 3.4% YoY with energy costs and electronic goods 'hyperinflating' at 8.8% and 9.1% respectively. As Goldman's chief Japan economist warns, "the BOJ doesn’t have another bazooka," adding that "The window for reform may already have been half closed." We're gonna need another arrow, Abe!

Japanese unemployment jumps to highest since Nov 2013...

But the job-to-applicant ratio is at its highest since 1992 (no incentive to work?)

Blowing the idea that "slack" is creating deflation out of the water.
Household spending then collapsed 5.9% YoY... 4th month in a row...
As Bloomberg notes, Inflation-adjusted household income fell 6.2% in July y/y, extending its slide to a 10th month in a row, according to data released today by Japan’s statistics bureau. That is the longest period of declines since at least 2004
Retail Sales dropped and missed again...

  • Credit creation slowed as Loans rose only 1.95% YoY - slowest since March
But don't expect Moar QQE... as inflation is on fire...
  • MNI: JAPAN JULY CPI TVS +11.8% Y/Y VS JUNE +8.0%
But apart from that... what a total disaster... only - we are sure - to be met with some glib comment from the Japanese politicians that the recovery is on track and there are signs of recovery...
*  *  *
Wondering how this ends... here's Bloomberg Briefs Tom Orlik ( @TomOrlik ) discussing the future for Japan with Goldman Sachs' chief Japan economist Naohiko Baba
Why Japan May Catapult From Deflation to Stagflation
A heroic attempt to lift Japan’s economy out of deflation may succeed only in pushing it into stagflation. Goldman Sachs’ chief Japan economist Naohiko Baba tells Bloomberg Economist Tom Orlik why he thinks reviving growth will be tough.
Q: What’s your assessment of Abenomics’ progress so far?
A: Monetary and fiscal stimulus has provided a boost to the markets but the real economic impact is short lived. Structural reform is most important and progress has been limited. Discussion of the Trans-Pacific Partnership has been delayed. There’s been very little progress on labor market reform. We’re seeing higher labor force participation, but that reflects a recovery trend in place from before the start of Abenomics. The impact of reforms has been very limited.
Q: Do you think the Bank of Japan can hit its 2 percent inflation target?
A: I am skeptical. The CPI has already declined from its April peak. The BOJ says it will come down to around 1 percent over the summer then rise again from the second half of the fiscal year. They expect higher wages to make the difference. My view is the CPI will fall to around 0.8 percent to 1 percent and then stay there. I don’t expect the wage channel to work. If you look at the spring wage negotiations this year, despite a big government push, the results were disappointing. In 2015, weaker profits will mean reduced funds for firms to pay higher wages. My guess is that July 2014 wage growth could be the peak.
Q: If inflation goes off track, what will the BOJ do?
A: They will keep their program in place through 2016, make it open ended. They might adjust the composition of purchases, buy more ETFs. It’s difficult for them to increase the size of their JGB purchases. Banks have already sold a large part of their government bond portfolio. Liquidity in the market is low. If they can’t increase the size of their program significantly, the BOJ doesn’t have another bazooka.
Q: How do you assess the impact from April’s tax increase?
A: There was front-loading of purchases ahead of the tax increase and then payback afterward. That’s a temporary impact. The bigger worry is the fall in real income from the tax increase and higher inflation. That’s a longer-lasting impact. Second quarter GDP growth was very weak. If you take out the positive contribution from inventory buildup, real growth was minus 11 percent on a quarter-on-quarter annualized basis. That’s much worse than after the 1997 tax increase.
Q: It seems like Abenomics so far has not been good for households.
A: Real wages are falling 3 percent a year. Real disposable income was down minus 8 percent year on year in the June household survey. It is as if Japan’s economy is heading into stagflation. That’s good for managing debt, bad for quality of life. As households see quality of life fall, it may negatively affect the approval rating f r the Cabinet. That will make it harder to push painful structural reforms. The window for reform may already have been half closed.

Charts: Bloomberg


The ECB did not like this:  the German Finance Minister tells the EU that free money printing is over.  France who is in deep trouble and in need of extending its deficit reduction past 2015 is now dead..

a very important read.

(courtesy zero hedge)

German Finance Minister Tells EU Leaders: Free Money Party's Over

Tyler Durden's picture

Has Germany had enough? Hot on the heels of Mario Draghi's 'demands' that EU leaders undertake "structural reforms" to boost competitiveness and overcome the legacy of Europe's debt crisis, German Finance Minister Wolfgang Schaeuble unleashed perhaps the most worrisome statement tonight for all the free-money-party-goers - the music is about to stop. In an interview with Bloomberg TV, Schaeuble blasted "Europe needs to find ways to foster growth," adding that "the ECB has reached the limit in helping the Euro Area." In a clear shot across the bow of his 'core' cohort, Schaeuble said he "understood" Hollande's demands but shot back that "monetary policy can only buy time."
As WSJ notes, the French are seeking aid...
Growth in France had already ground to a halt in the first quarter, and Paris now says the persistent weakness means it won't be able to meet its deficit reduction target this year.

"We can't deny that certain geopolitical risks are playing a very important role at the moment. There are indicators of an economic slowdown," Mr. Schaeuble said in a joint press conference with Mr. Sapin.


French President Francois Hollande has proposed holding a euro-zone summit to discuss using the flexibility of EU treaties to slow the pace of deficit reduction. Mr. Schaeuble avoided saying whether Germany would approve a more flexible approach for any country in particular.

"Nobody has a lesson to give to anyone else because everyone knows the rules," Mr. Schaeuble said.

Germany has been reluctant to give up on fiscal discipline without seeing results from French promises to make structural changes to the economy in areas like labor law and welfare benefits. Europe last year already granted France a two-year delay to 2015 to bring its deficit within the EU rule of 3% of economic output--a target France is now likely to miss.

Mr. Sapin said the French president's request for a euro-zone meeting is to discuss the currency bloc's problems as a whole, not France's specifically.

"It's in no way a demand for an extension--that I can tell you straight away," Mr. Sapin said.
Which means only one thing - it is a demand for an extension... which perhaps explains Schaeuble's extreme tone this evening (bia Bloomberg):
As he explains:

"Monetary policy can only buy time,’’ Schaeuble said in the interview yesterday.

“Liquidity in markets is not too low, it’s even too high. Therefore I think monetary policy has come to the end of its instruments and therefore what we urgently need is investments, regaining confidence by investors, by markets, by consumers."
"I don't think ECB monetary policy has the instruments to fight deflation, to be quite frank,” Schaeuble said.
Schaeuble said he’s confident that “my French colleagues will do what’s needed in line with the rules that have been agreed again and again.”
"It’s very important that we all know in Europe -- every member state -- that we have to stick to structural reforms and enhance competitiveness, even in Germany."
Yet another nail in the coffin of any large scale sovereign asset purchase scheme...
*  *  *
With pressure from the French on Draghi to do "whatever it takes" again (for real this time) it appears this is as clear a message from Zee Germans that they won't stand for anymore.


As we have pointed out to you on countless occasions, it looks like Italy is in deep trouble.
Today it suffered with its lowest CPI print since 2009 as it enters deflation.  It cannot devalue externally because it has no power over the Euro,  It thus must devalue internally by lowering  the wage rate.  You will recall a month ago that major private suppliers have not been paid in 19 months. This is what happens to your economy when you do stupid things like that:

(courtesy zero hedge)

Italy Back In Deflation With Lowest CPI Print In History; European Inflation Lowest Since 2009

Tyler Durden's picture

Curious why European bond yields tumble to fresh new lows day after day (with the explicit backstop of the ECB of course, which makes fundamental analysis of sovereign solvency an irrelevant matter)? Then look no further than Italy, where as the chart below shows, not only has the economy "filled the gap" of its economy as tracked by its EU-Harmonized CPI, but at an August print of -0.2%, this is the lowest print in history, worse even than the brief -0.1%, flirt with deflation recorded just in the aftermath of the Lehman crash.
But it wasn't only Italy: as Eurostat also reported today, Euroarea inflation also dropped once again, touching 0.3%, down from 0.4% a month ago, the lowest print October 2009.

... driven lower by plunging energy costs:

Finally, concluding the trifecta of terrible data was European unemployment, which remained at 11.5%, just shy of its all time high.

Finally, the worst news: youth unemployment across the Old Continent remains at stratospheric levels, and in fact is rising in several places such as Spain, where it just rose to 53.8% and Ireland, up to 25.1%.

Good luck Mario, surely this time QE will finally work.


Now let us head over and see what is happening with respect to the Ukraine crisis.


Poland blocks the flight of a Russian defense minister:

(courtesy zero hedge)

Poland Blocks Flight Of Russian Defense Minister's Plane

Tyler Durden's picture

The last time Poland 'spoke' it was to accuse Russia of invasion (and the time before that it was to accuse the government of giving the USA blow jobs), but this time actions speak louder than words:
Defense Minister Soigu's plane was forced to U-turn and land back in Bratislava.

As RIA reports,
Poland has refused overflight rights to the plane of Russia’s defense minister, Sergey Shoigu, who was on his way from Slovakia, RIA Novosti’s correspondent reported. The plane has landed in Bratislava.

The minister was returning from the celebrations of the 70th anniversary of the Slovakian national uprising that took place in the town of Bansk√° Bystrica.

However, Poland banned entrance into its airspace for the Tu-154 plane, according to a RIA Novosti correspondent who was on board, citing one of the crewmembers.

The plane had to take a U-turn and landed in Bratislava an hour later.

Negotiations are being held on the matter at the moment.
*  *  *
Retaliation for this?

Ponta is late for the cocktail reception  Russia Has Closed Its Air Space For Romanian Prime Minister's Plane

*  *  *
Or perhaps it is for his EU colleagues...
Despite a long run of initial resistance, Prime Minister Donald Tusk is now giving "serious consideration" to taking the post of European Council President, members of Tusk's inner circle admitted Friday, but leaving ambiguity how the governing party would proceed without what has arguably been the most dominant figure in Polish politics of recent years.



Vladimir Putin comes out swinging today against the west:

(courtesy Putin/zero hege)

Putin Says Everything U.S. Touches Turns Out Like Libya Or Iraq

Tyler Durden's picture

Having been quiet for a few days, comfortable sitting back and watching NATO, Europe, and the US escalate each other's talking points to a frenzy of populist revolt, Russia's Vladimir Putin has come out swinging this morning:
In addition to discussions of The Bolsheviks, agreeing Stalin was a tyrant, and slamming liberal economic models for creating crises, Putin notes his approval rating is high because "he is confident he's right."
Some more fun soundbites:
And perhaps of most note... just as Obama pronounced yesterday that US would not engage militarily:
*  *  *
So - just like the Cold War - military build-up on either side and constant escalation in tensions.


Late in the day, the UK's Prime Minister Cameron proposed shutting out Russia from the USA SWIFT system.  If these clowns do this, then Russia will find other means for payments and this would be a huge nail in the coffin of the uSA as well as escalate the tensions with Moscow:

Kick Russia Out Of SWIFT, UK Demands; But Beware The Retaliation...

Tyler Durden's picture

UK Prime Minister David Cameron came out swinging this morning; not only at ISIS but in calling for European leaders to block Russia from the SWIFT banking transaction system. European leaders have already (via unnamed sources) denied any actual new sanctions will take place (though they will be discussing them at the NATO Summit) but - as we have noted previously - this is yet another unintended consequence-driven nail in the coffin of USD hegemony...

Bloomberg reports that the U.K. Said to Press EU to Block Russia From Banking Network
The U.K. will press European Union leaders to consider blocking Russian access to the SWIFT banking transaction system under an expansion of sanctions over the conflict in Ukraine, a British government official said.

The Society for Worldwide Interbank Financial Telecommunication, known as SWIFT, is one of Russia's main connections to the international financial system. Prime Minister David Cameron's government plans to put the topic on the agenda for a meeting of EU leaders in Brussels Aug. 30, according to the official, who asked not to be named because the discussions are private.
This has consequences...
“Blocking Russia from the SWIFT system would be a very serious escalation in sanctions against Russia and would most certainly result in equally tough retaliatory actions by Russia,” said Chris Weafer, a senior partner at Moscow-based consulting firm Macro Advisory. “An exclusion from SWIFT would not block major trade deals butwould cause problems in cross-border banking and that would disrupt trade flows.”
But then we already knew that...
But while collecting credit card data was to be expected, what is even worse is that the NSA has also secretly planted itself in the nexus of the entire global USD-intermediated financial transactions system courtesy of SWIFT.

The NSA's Tracfin data bank also contained data from the Brussels-based Society for Worldwide Interbank Financial Telecommunication (SWIFT), a network used by thousands of banks to send transaction information securely. SWIFT was named as a "target," according to the documents, which also show that the NSA spied on the organization on several levels, involving, among others, the agency's "tailored access operations" division. One of the ways the agency accessed the data included reading "SWIFT printer traffic from numerous banks," the documents show.

What is curious is that while the NSA and its henchmen, in this case the GCHQ, had no qualms about violating personal privacy at every level, it is only when banks were threatened that someone feel like perhaps a line was crossed:

But even intelligence agency employees are somewhat concerned about spying on the world finance system, according to one document from the UK's intelligence agency GCHQ concerning the legal perspectives on "financial data" and the agency's own cooperations with the NSA in this area.

In other words, America's unsupervised uber spies, when not checking in on their former significant others, spend the bulk of their time tracking who is buying what, where, and with whose money.
Faced with the risk of losing access to the network, Russia’s government has already drafted a bill to create a new Russian system for domestic bank transfers, Deputy Finance Minister Alexey Moiseev said on Aug. 27, according to the Itar-Tass news service.

SWIFT transmitted more than 21 million financial messages a day last month, facilitating payments between more than 10,500 financial institutions and corporations in 215 countries, the organization said on its website.

“There’s no doubt that in the short term restricting Russian usage of SWIFT would be extremely disruptive to Russian financial and commercial activities,” said Richard Reid, a research fellow for finance and regulation at the University of Dundee in Scotland. “However, it may carry a longer-term downside, namely the likelihood that large chunks of Russian international payments flows would move to much less well monitored and measured financial channels and thus be beyond sanctions at any future point.”
Several months ago, when Russia announced the much anticipated "Holy Grail" energy deal with China, some were disappointed that despite this symbolic agreement meant to break the petrodollar's stranglehold on the rest of the world, neither Russia nor China announced payment terms to be in anything but dollars. In doing so they admitted that while both nations are eager to move away from a US Dollar reserve currency, neither is yet able to provide an alternative.

This changed in late June when first Gazprom's CFO announced the gas giant was ready to settle China contracts in Yuan or Rubles, and at the same time the People's Bank of China announced that its Assistant Governor Jin Qi and Russian central bank Deputy Chairman Dmitry Skobelkin held a meeting in which they discussed cooperating on project and trade financing using local currencies. The meeting discussed cooperation in bank card, insurance and financial supervision sectors.

And yet, while both sides declared their operational readiness and eagerness to bypass the dollar entirely, such plans remained purely in the arena of monetary foreplay and the long awaited first shot across the Petrodollar bow was absent.

Until now.

According to Russia's RIA Novosti, citing business daily Kommersant, Gazprom Neft has agreed to export 80,000 tons of oil from Novoportovskoye field in the Arctic; it will accept payment in rubles, and will also deliver oil via the Eastern Siberia-Pacific Ocean pipeline (ESPO), accepting payment in Chinese yuan for the transfers.
*  *  *
As we concluded previously, these short-term 'punishments' borne of ego and bluster merely further 'isolate' the status quo from the inevitable transition...
Still confused? Then read "90% Of Gazprom Clients Have "De-Dollarized", Will Transact In Euro & Renminbi" for just how Gazprom set the stage for the day it finally would push the button to skip the dollar entirely. Which it just did.
In conclusion we will merely say what we have said previously, and it touches on what will be the most remarkable aspect of Obama's legacy, because while the hypocrite "progressive" president who even his own people have accused of being a "brown-faced Clinton" after selling out to Wall Street and totally wrecking US foreign policy abroad, is already the worst president in a century of US history according to public polls, the fitting epitaph will come when the president's policies put an end to dollar hegemony and end the reserve currency status of the dollar once and for all, thereby starting the rapid, and uncontrolled, collapse of the US empire. To wit:
In retrospect it will be very fitting that the crowning legacy of Obama's disastrous reign, both domestically and certainly internationally, will be to force the world's key ascendent superpowers (we certainly don't envision broke, insolvent Europe among them) to drop the Petrodollar and end the reserve status of the US currency.
And once China and Russia show that not only can it be done but thanks to US prodding it has been done, expect other countries to promptly follow the anti-SWIFT axis on their own...
*  *  *
Isolation... indeed.


These guys are scary.  Without a doubt there are cells of these guys in major western cities.

(courtesy zero hedge)

ISIS Sends 2nd Beheading "Message In Blood" Video; Warns Kurds "Huge Mistake Joining Hands With America"

Tyler Durden's picture

Just hours after hours after another video purporting to show the mass execution of up to 250 Syrian soldiers in the desert, The Independent reports ISIS has released a video apparently showing the beheading of a Kurdish man in Iraq as a warning to Kurds fighting the group in the country. The video, entitled "A Message in Blood" ends with the victim beheaded and thefighters warn others will face the same fate should Kurdish leaders choose to continue an alliance with the US.
Image from the latest beheading clip:
While the captives and executors are dressed in similar fashion to those seen in the James Foley execution 10 days ago, it is unclear if the two incidents were carried out by the same people.

The production of the propaganda video also differs - with the beheading shown alongside still images of American and Kurdish officials in an attempt to help convey the executioner's message.

In the six minute video, which has not been independently verified, the prisoners, who are are seen wearing orange boiler suits similar to those worn by prisoners at Guantanamo Bay, confirm that they had been fighting for the Peshmerga, and had been captured by the jihadist group.

The video includes one earlier shot of the Kurdish soldiers, appearing to still be wearing their Peshmerga uniforms, shortly after they were captured. Speaking in Kurdish, one of the prisoners, Hassan Mohammed Hashin, reads out a carefully pre-prepared statement, lambasting the Kurdish leaders: 'You have made a huge mistake by joining hands with America.'
*  *  *
Photojournalist James Foley was repeatedly tortured by his ISIS captors — who even waterboarded him — before he was beheaded, sources told NBC News. As the Washington Post first reported, the Islamic extremists appeared to be deliberately imitating the controversial U.S. "enhanced interrogation technique," which simulates drowning. Waterboarding, which was authorized by President Bush's administration, was banned by President Obama, who denounced it as torture.
*  *  *
The alleged Kurd beheading clip can be found here (via The Daily Mail) - yet oddly enough, like the Foley beheading clip the actual decapitation has been faded to black. One wonder how long until more claims alleging this too video was staged emerge?


England sends out its warning on ISIS:

(courtesy zero hedge)

UK's Cameron Goes Full Scaremonger: "We Will Be Fighting ISIS For Decades"

Tyler Durden's picture

Following his nation's elevated terror threat level, UK Prime Minister David Cameron went full scaremonger:
"We are in the middle of a generational struggle against a poisonous extremist ideology that I believe we will be fighting for years and probably decades."
Warning that "ISIS represents a greater threat than anything before," (even Hitler?) he plans to introduce new laws to "make it easier to take people’s passports away."
We are reminded of Brandon Smith's warnings of government commentary in coming weeks:
...the goal will be to terrify you and those around you into seeking out a more powerful, more centralized government authority to protect your security, to provide cover for the continued planned collapse of American society into third world status, and out of these ashes, the centralization of the political and financial foundations of our world into the hands of an elite few.


And now Rand Paul on USA foreign policy and what it encouraged:

Rand Paul Slams US Interventionists' "Unhinged Foreign Policy" For Abetting The Rise Of ISIS

Tyler Durden's picture

Authored by Dr. Rand Paul, originally posted at The Wall Street Journal,
As the murderous, terrorist Islamic State continues to threaten Iraq, the region and potentially the United States, it is vitally important that we examine how this problem arose. Any actions we take today must be informed by what we've already done in the past, and how effective our actions have been.
Shooting first and asking questions later has never been a good foreign policy. The past year has been a perfect example.
In September President Obama and many in Washington were eager for a U.S. intervention in Syria to assist the rebel groups fighting President Bashar Assad's government. Arguing against military strikes, I wrote that "Bashar Assad is clearly not an American ally. But does his ouster encourage stability in the Middle East, or would his ouster actually encourage instability?"
The administration's goal has been to degrade Assad's power, forcing him to negotiate with the rebels. But degrading Assad's military capacity also degrades his ability to fend off the Islamic State of Iraq and al-Sham. Assad's government recently bombed the self-proclaimed capital of ISIS in Raqqa, Syria.
To interventionists like former Secretary of State Hillary Clinton, we would caution that arming the Islamic rebels in Syria created a haven for the Islamic State. We are lucky Mrs. Clinton didn't get her way and the Obama administration did not bring about regime change in Syria. That new regime might well be ISIS.
This is not to say the U.S. should ally with Assad. But we should recognize how regime change in Syria could have helped and emboldened the Islamic State, and recognize that those now calling for war against ISIS are still calling for arms to factions allied with ISIS in the Syrian civil war. We should realize that the interventionists are calling for Islamic rebels to win in Syria and for the same Islamic rebels to lose in Iraq. While no one in the West supports Assad, replacing him with ISIS would be a disaster.
Our Middle Eastern policy is unhinged, flailing about to see who to act against next, with little thought to the consequences. This is not a foreign policy.
Those who say we should have done more to arm the Syrian rebel groups have it backward. Mrs. Clinton was also eager to shoot first in Syria before asking some important questions. Her successor John Kerry was no better, calling the failure to strike Syria a "Munich moment."
Some now speculate Mr. Kerry and the administration might have to walk back or at least mute their critiques of Assad in the interest of defeating the Islamic State.
A reasonable degree of foresight should be a prerequisite for holding high office. So should basic hindsight. This administration has neither.
But the same is true of hawkish members of my own party. Some said it would be "catastrophic" if we failed to strike Syria. What they were advocating for then—striking down Assad's regime—would have made our current situation even worse, as it would have eliminated the only regional counterweight to the ISIS threat.
Our so-called foreign policy experts are failing us miserably. The Obama administration's feckless veering is making it worse. It seems the only thing both sides of this flawed debate agree on is that "something" must be done. It is the only thing they ever agree on.
But the problem is, we did do something. We aided those who've contributed to the rise of the Islamic State. The CIA delivered arms and other equipment to Syrian rebels, strengthening the side of the ISIS jihadists. Some even traveled to Syria from America to give moral and material support to these rebels even though there had been multiple reports some were allied with al Qaeda.
Patrick Cockburn, Middle East correspondent for the London newspaper, the Independent, recently reported something disturbing about these rebel groups in Syria. In his new book, "The Jihadis Return: ISIS and the New Sunni Uprising," Mr. Cockburn writes that he traveled to southeast Turkey earlier in the year where "a source told me that 'without exception' they all expressed enthusiasm for the 9/11 attacks and hoped the same thing would happen in Europe as well as the U.S." It's safe to say these rebels are probably not friends of the United States.
"If American interests are at stake," I said in September, "then it is incumbent upon those advocating for military action to convince Congress and the American people of that threat. Too often, the debate begins and ends with an assertion that our national interest is at stake without any evidence of that assertion. The burden of proof lies with those who wish to engage in war."
Those wanting a U.S. war in Syria could not clearly show a U.S. national interest then, and they have been proven foolish now. A more realistic foreign policy would recognize that there are evil people and tyrannical regimes in this world, but also that America cannot police or solve every problem across the globe. Only after recognizing the practical limits of our foreign policy can we pursue policies that are in the best interest of the U.S.
The Islamic State represents a threat that should be taken seriously. But we should also recall how recent foreign-policy decisions have helped these extremists so that we don't make the same mistake of potentially aiding our enemies again.

And now for your major data points for today:

Portuguese 10 year bond yield:  3.16% down 1  in basis points  from Thursday night.
(Portugal imploding)

Your closing Portuguese 10 year bond yield Friday night up 6 in basis points on the day 

Portuguese 10 year bond yield:  3.22%  

Your closing Japanese yield  Friday  morning: up 1  in basis point from Thursday night:

 yield .50%  (Japan imploding)

Japanese 10 year bond yield:  .50% 

And now for your closing Japanese 10 year bond yield / par in   basis points from the morning: ( Japanese markets imploding)

Japanese 10 year bond yield:  .50%


Your opening currency crosses for Friday morning:

EUR/USA:  1.3186  up .0006
USA/JAPAN YEN  103.96   up   .270
GBP/USA  1.6591  up .0008
USA/CAN  1.0845 down .0013  

This morning the Euro is up , trading now just below at the 1.32 level at 1.3186.  The yen is down and trading now well above the all important  102 cross. It closed in Japan down 27 in basis points at 103.96 yen to the dollar  (dollar up).  The pound strengthened  a bit, from yesterday  as it now trades just below the 1.66 level  to 1.6591.  The Canadian dollar is up this morning with its cross at 1.0845 to the USA dollar.

 Early Friday morning USA 10 year bond yield:  2.34% up 1  basis point  from Thursday night/   (USA economy not doing so well with this low yield)

USA dollar Index early Friday morning: 82.480  par from Thursday's close


The NIKKEI: Friday morning: down 35 points or .23%

Trading from Europe and Asia:

1/ Europe, all in the green.

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

Gold early morning trading:  $1286.00

silver:$ 19.54



Your closing Spanish 10 year government bond :Friday/ flat in basis points in yield from Thursday night.  

Spanish 10 year bond yield:  2.23%  

 Your  Friday closing Italian 10 year bond yield: par in basis points and trading 21 in basis points above Spain./ominous!!!

Italian 10 year bond yield;  2.44% 



Closing currency crosses for friday night/USA dollar index/USA 10 yr bond:   Europe falling apart this afternoon

Euro/USA:  1.3138 down .0042
USA/Japan:  104.07 up   .370
Great Britain/USA:  1.6567 down .0013
USA/Canada:  1.0871 up  .0013

The euro fell badly in value during this afternoon's  session, and it was  down on the day , closing well below  the 1.32 level to 1.3138.  The yen was also down during the afternoon session, and it lost 37 basis points on the day closing  well above   the magical support 102 level, and now over the 104 barrier at to 104.07 (dollar up).   The British pound fell  during the afternoon session and was also down for the day as it closed at 1.6567. The Canadian dollar was down during the afternoon session, and it was down on the day closing at 1.0871. 

Your closing USA dollar index:

82.74  up 26 cents on the day  

Your closing 10 year USA bond yield up 1  basis point on

the day. 


USA 10 yr Bond Yield:  2.35%.  


Closing bourses figures for  Friday: 

i) England FTSE up 13.95 or 0.20%

ii) Paris/CAC up 15.00 or 0.34%

 iii) German DAX: up 7.61 or 0.08%
iv) Spanish ibex up 6.60 or 0.06%

v) Italian bourse (MIB) up 109.040 or 0.54%  (Italy is now in recession)

and the Dow up 18.88  points or 0.11 %

Nasdaqup 22.58 or  0.50% 

Oil close:  WTI  95.84/Brent: 103.07


The Big USA stories:

Today's summary of trading from NY

(courtesy zero hedge)

"Unrigged" Close Buying-Panic Saves S&P 2,000 For Long Weekend

Tyler Durden's picture

For the 6th week of the last 8, Treasury yields declined with 30Y pressing to 3.05% (and 10Y 2.32%) handles to 15-month lows. US equity markets saw volume crater as the early high-stops were run in the EU session and low-stops run in the US session before the ubiquitous EU close ramp lifted futures to VWAP and S&P cash to 2000.xx where it stayed for the rest of the day in a wholly unrigged way. Trannies ended the week red and Russell the best. The USD Index closed at 13-month highs (up 7 weeks in a row). Despite USD strength, gold and silver rose 0.5% on the week but oil was the big winner +2.4% (testing $96) as copper tumbled 2%. Credit markets closed at their wides (as stocks closed at their highs). Interestingly, once the Sept POMO schedule was released, TSYs sold off on the day to close red (but end 4-7bps lower on the week). VIX closed unch today but the ridiculous late-day panic-buying spree in futures grabbed stocks back above the crucial 2000 level for the S&P. Year-to-date, Treasuries lead +16.75% as the S&P (+8.5%) overtook gold (+6.7%) in the last few days.

Stocks top gold YTD for the first time this year but bonds are winning...

From Cameron's Speech this morning, futures sold off and rebounded...

Driven by VIX...

and GBP!!??

But most (aside from Trannies) remain green on the week...

Even as Treasuries continue to rally (note the weakness into the close though)

As the divergence grows...(just this week)...

And credit's not buying today's buying panic close...

FX markets were quiet today but chatter of large orders this afternoon sent the USD to the highs of the day/week - highest in 13 months

Though Cable surged into the close...

But gold ansd silver cloed green on the week, oil suged and copper purged...

Charts: Bloomberg


And now the CBO proclaims that Obamacare discourages work:

(courtesy CBO/zero hedge)

CBO: Obamacare Discourages Work

Tyler Durden's picture

Remember all those allegations that Obamacare would be an unmitigated disaster for businesses, especially smaller companies? Well, now we have some facts. A week ago we noted that the Philly Fed found that Obamacare was a disaster for business, and now no lessor entity than the Congressional Budget Office (CBO) is out with its latest forecasts, concluding "certain aspects of the Affordable Care Act will tend to reduce labor force participation." 

...the CBO does write, though, is that one of the downward pressures on the labor force is Obamacare. As the report finds:

"Over the next few years, CBO expects that the rate of labor force participation will decline about 1/2 percentage point further... the most important of those factors is the ongoing movement of the baby-boom generation into retirement, but federal tax and spending policies will also tend to lower the participation rate. In particular, certain aspects of the Affordable Care Act will tend to reduce labor force participation, with the largest effect stemming from the subsidies that reduce the cost of purchasing health insurance through the exchanges. Because the subsidies decline with rising income (and increase with falling income) and make some people financially better off, they reduce the incentive for some people to work as much as they would without the subsidies."

We won't rehash the debate here over whether or not it's a good thing for the welfare state to provide so much that people will choose not to work - but it's pretty undeniable at this point that ACA is disincentivizing work for Americans in an era where we're wondering if the decline in labor force participation is the new normal.
*  *  *
While we already noted that 'work is punished' in America, it appears now that with Obamacare, non-work is actually incentivized.


The biggy number for the month:  Personal spending  (which is 70% of GDP) drops big time:

(courtesy zero hedge)

Personal Spending Suffers First Drop Since January As Consumer Income, Outlays Miss

Tyler Durden's picture

Judging by the just released personal income and spending data, consumers are already forecasting a long, harsh winter. With incomes and outlays expected to rise by 0.3% and 0.2% respectively, the July data was a big dud, missing on both expectations, and while income rose by a modest 0.2%, far below the 0.5% in June, it was personal spending which in fact declined by 0.1%, a major drop from the 0.4% increase in the prior month, and the first outright decline in spending since January. As CNBC's Steve Liesman explained the disappointing data: "weather."

The monthly tumble in spending is clearly an indication that either the lovely weather is not priced to perfection, or harsh winter is coming:

The very unexpected drop in outlays was driven by a contraction in spending for both Durable ($9.1) billion and Non-Durable Goods ($3.4) billion.

And while today's income and spending data is bad news for the economy and Q3 GDP, which is about to be slashed by 0.5% by the sellside, likely pushing it into the 2%-range, it is great news for the tapped out US consumer, whose (repeatedly revised) savings rate of 5.7%, up from 5.4% in June, just rose to the highest since 2012.

And now comes the Q3 GDP downgrades as we have predicted...

(courtesy zero hedge)

Here Come The Q3 GDP Downgrades...


An absolute joke:

(courtesy zero hedge)

Chicago PMI Explodes To Biggest Beat In 10 Months, Employment Drops Further

Tyler Durden's picture

Having collapsed to 13-month lows in July - with the biggest miss on record - Chicago's PMI rebounded the way only US macro 'soft-survey' data can. After plunging from 62.6 in June to 52.6 in July, August printed a magnificent 64.3 - its highest since May - showing up this data's noisy nature as entirely useless. From worst miss on record (and 13-month lows) to best beat in 10 months and 5 month highs... brilliant. It would seem ISM has entirely given up on any credibility at all... However, given this exuberance (in production and new orders), the employment sub-index dropped yet again.

"we're gonna need a better seasonal adjustment"

Charts: Bloomberg


University of Michigan consumer confidence rises on nothing but hope:

(courtesy zero hedge)

UMich Consumer Confidence Rises On Surge in "Hope"

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