World stocks hit a new record high on Monday, as U.S. index futures followed Asian stocks on better-than-expected company earnings and strong US jobs data deflected attention from the rising geopolitical tension over North Korea's nuclear program. European stocks traded near session lows while Crude oil prices fall. The Bloomberg Dollar Spot Index was little changed ahead of speeches by the Fed's James Bullard and Neel Kashkari later Monday. Yields on U.S. and German Bunds rose off one-month lows hit at the end of last week, while the yield on China’s 10-year sovereign bonds climbs 3 bps to a two-month high of 3.67%, after Friday’s better-than-expected jobs data brightened investors’ outlook for the U.S. economy. The Dow Jones recorded its eighth consecutive record high on Friday, with MSCI's broadest index of Asia-Pacific shares outside Japan adding 0.5% on Monday. Helping global stocks hit record highs, of the nearly 1000 companies in the MSCI world index that have reported, 67% have beaten expectations, according to Reuters data. Of the MSCI Europe companies having reported, 61% have either met or beat expectations. But focusing on industrial firms – of which many depend on exports, and are sensitive to a stronger euro – the beat ratio is just 37%. Also the U.S. dollar dipped slightly but held on to much of Friday's gains - its biggest daily rise this year - after data showed the United States created more jobs than forecast last month. As a result, the MSCI World index rose above a peak breached late last month, setting a new all-time high of 480.09 on Monday. "The US made the most noise last week ... At the start of the new week, risk sentiment improved in Asia with investors continuing to show a certain degree of risk affinity," DZ Bank strategist Rene Albrecht said. For some analysts, Monday's pull back in the dollar backs some views in markets that Friday's rally may not have legs. The dollar index, which tracks the greenback against a basket of six global peers, inched back 0.2 percent to 93.361. It rallied 0.76 percent on Friday, its biggest one-day gain this year. The dollar slipped 0.2 percent against the euro to $1.1796 per euro, after surging 0.8 percent on Friday. "The most logical view here is the moves on Friday were clearly just a sizeable covering of USD shorts, from what was one of the biggest net short positions held against the USD for many years," Chris Weston, chief market strategist at IG in Melbourne, wrote in a note. For the dollar rally to gain momentum, the market needs to change its interest rate pricing, Weston added. Despite another drain in liquidity by the PBOC overnight. which soaked up another CNY60 billion in net reverse repos, Chinese industrial commodity metal soared, led by aluminum futures while steel rebar surged as much as 6.4% higher, before closing up 3.0% as iron ore closed up 6.5%. #Steel rebar futures in #China closed 6.4% higher; #IronOre closed 3% higher after surging as much as 6.5% intraday pic.twitter.com/xbFTMQY6Ql — YUAN TALKS (@YuanTalks) August 7, 2017 In the overnight FX session, kiwi slod 0.6% against greenback to 0.7368 while the euro rose as much as 0.2% to $1.1814, approaching its highest since early 2015, despite an unexpected drop in German industrial production in June. Output fell 1.1% in June after rising 1.2% in May, far below the estimated 0.2% increase and the first drop in six months. Production was up 2.4 percent from a year earlier. Still, with strong orders pointing to a likely pickup in manufacturing, the report is unlikely to mark a turning point for the German economy. Meanwhile, business confidence is at a record high and the Bundesbank sees growth continuing, even as momentum at the start of the third quarter lagged behind that of France, Italy and Spain for the first time in more than 12 years. The common currency rebounded following a slump against the greenback in the wake of U.S. jobs data on Friday. With EUR-USD parity now long forgotten, the next "big thing" on FX traders' minds is whether and when EUR-GBP parity may be achieved (with some penciling in the end of the year). “I’m maxing on the euro at $1.20 at the moment, and I’m happy for it to be poodling along for a little while until something new and different comes long,” David Bloom, global head of currency strategy at HSBC said in an interview with Bloomberg TV. “It could be tax reform in the U.S.” As Bloomberg writes, "the euro’s continued resilience is a testament to growing investor confidence in the growth story of the European Union amid disappointment over U.S. President Donald Trump’s failure get tax reform and infrastructure spending plans off the ground." Monday’s report from Germany is unlikely to mark a turning point for either the nation’s economy or the wider bloc, which has successfully navigated a series of political challenges while expansion accelerates. Meanwhile, European stocks slumped near session lows after rising 1% on Friday, the most since July 12, thanks to the drop in the Euro. The STOXX Europe 600 Price Index declined 0.3%, led by drop in IT, travel and real-estate shares, offsetting advances for ArcelorMittal, BHP Billiton Plc and Anglo American Plc after iron ore and steel prices climbed. Travel and leisure shares fall 0.6%, tech retreats 0.5%' Basic resources surged 1.1%. Germany’s DAX Index sank 0.2 percent. Earlier, Japan’s Topix index ended at a two-year high, boosted by earnings at Toyota Motor Corp., while benchmarks in Australia, South Korea and Hong Kong also gained. Toyota jumped 2 percent after it beat first-quarter profit estimates and raised its full-year forecast on Friday. Australia's ASX 200 (+0.9%) was led higher by commodity names after an early surge in Chinese Iron Ore futures, and as strong Australian Construction PMI (60.5 vs. Prey. 56.0) further contributed to the sector's positivity. Nikkei 225 (+0.5%) was boosted by JPY weakness. South Korea’s Kospi index gained 0.1 percent. In Hong Kong, the Hang Seng Index rose 0.4 percent. The MSCI Asia-Pacific Index added 0.5 percent to trade near to its highest since December 2007. The Japanese yen decreased 0.1 percent to 110.80 per dollar. Aside from a slight weakening in the Korean won, there was little financial market reaction to the news over the weekend that the U.N. Security Council unanimously imposed new sanctions on North Korea aimed at pressuring Pyongyang to end its nuclear program. Late on Sunday, Donald Trump tweeted that South Korean President Moon Jae-in agreed in a telephone call on Monday to apply maximum pressure and sanctions on North Korea, while China expressed hope that North and South Korea could resume contact soon. Elsewhere, Sir Simon Fraser has warned that Brexit negotiations have not begun well blaming the Government's failure so state clearly its position. The Telegraph reported that the UK is prepared to pay for a Brexit separation bill of as much as €40bln in which it is likely to offer 3 annual payments of €10bn, then finalise the total alongside trade discussions, according to sources. However, later source reports in The Guardian dismissed this as inaccurate speculation. West Texas Crude futures fell away from nine-week highs hit after the strong job data bolstered hopes for growing energy demand, and dropped below $49 a barrel as producers gathered in Abu Dhabi to discuss why some of them are falling behind in pledges to reduce output. Gold fell 0.1 percent to $1,257.80 an ounce, the weakest in a week. Copper declined less than 0.05 percent to $2.88 a pound. In rates, the yield on 10-year Treasuries advanced one basis point to 2.27%. Germany’s 10-year yield climbed one basis point to 0.48%. Britain’s 10-year yield declined less than one basis point to 1.174%. Among the key events this week, OPEC and non-member nations will meet in Abu Dhabi today to discuss supply cut compliance, which fell to 86% in July. It’s a week of industrial data in Europe. U.K. factory output for June is due Thursday. After Monday’s industrial production for Germany, Italy is on Wednesday and France on Friday. Among a number of Fed speakers this week, keep a keen ear out for comments by New York Fed boss Bill Dudley on Thursday. South African President Jacob Zuma faces a no-confidence vote. Dutch Prime Minister Mark Rutte resumes talks to form a coalition government on Wednesday. The Fed’s inflation puzzle means Friday’s CPI data will get close attention. Economists estimate that headline picked up in July to 1.8% from 1.6%, while core stayed at 1.7%. Argentina, Mexico, New Zealand, Peru, the Philippines, Serbia and Zambia set monetary policy. Bulletin Headline Summary Most major currencies nursed some of their post-NFP losses against the greenback, in which EUR/USD attempted to reclaim 1.1800 Brexit Back In Focus With Contradicting Reports Looking ahead, highlights include Fed's Bullard and Kashkari Global Market Snapshot S&P 500 futures up 0.1% to 2,474 STOXX Europe 600 down 0.1% to 382.15 MSCI Asia up 0.5% to 161.18 MSCI Asia ex-Japan up 0.5% to 530.95 Nikkei up 0.5% to 20,055.89 Topix up 0.5% to 1,639.27 Hang Seng Index up 0.5% to 27,690.36 Shanghai Composite up 0.5% to 3,279.46 Sensex down 0.06% to 32,305.24 Australia S&P/ASX 200 up 0.9% to 5,773.56 Kospi up 0.1% to 2,398.75 German 10Y yield rose 0.6 bps to 0.474% Euro up 0.3% to 1.1803 per US$ Italian 10Y yield rose 3.3 bps to 1.73% Spanish 10Y yield fell 0.5 bps to 1.478% Brent Futures down 0.7% to $52.05/bbl Gold spot down 0.08% to $1,257.89 U.S. Dollar Index down 0.2% to 93.37 Top Overnight News North Korea condemned the latest round of United Nations sanctions and reiterated that it wouldn’t negotiate its nuclear deterrence until the U.S. ceases “hostile” policies Theresa May’s office dismissed as speculation a report that the U.K. is prepared to pay a 40 billion-euro ($47 billion) bill to leave the European Union, while leading Brexit supporters pushed back against paying anything at all German industrial production unexpectedly slipped in June as manufacturing and construction caused a temporary blip in the growth spurt of Europe’s largest economy New Chief of Staff Kelly Moves Quickly to Tame Trump’s Tweets Senate Chairman Demanding Answers Ramps Up Trump Russia Probe United Technologies Is Said to Weigh Rockwell Collins Deal Sprint Is Said to Resume Preliminary Talks on T- Mobile Merger BlackRock Real Assets Acquires Magacela Solar Project Bond Berkshire Second Quarter Operating EPS Misses Lowest Estimate Berkshire Filing Shows Further Reduction in Buffett’s IBM Stake Uber Engineer Told Kalanick of Alibi for Downloaded Files Boeing, U.S. Have Deal for Air Force One Planes Russia Abandoned Eros Said in Talks to Sell Content Library to Apple for $1B: ET SoftBank Talks Were Said to Value Uber at $45b: The Information JPMorgan to Announce Warsaw Office Investment in Sept.: Puls Asian equity markets traded mostly higher following Friday's gains on Wall Street and as the region took its first opportunity to react to the better than expected NFP release. ASX 200 (+1.0%) was led higher by commodity names after an early surge in Chinese Iron Ore futures, and as strong Australian Construction PMI (60.5 vs. Prey. 56.0) further contributed to the sector's positivity. Nikkei 225 (+0.6%) was boosted by JPY weakness, Shanghai Comp (+0.2%) was the underperformer despite a substantial liquidity injection by the PBoC, as this still amounted to a daily net outflow of CNY 60bn after expiring prior operations were accounted for. Finally, 10yr JGBs were flat with demand dampened by the upbeat tone in the region and a lack of BoJ Rinban announcement. Shanghai Stock Exchange is to increase scrutiny of M&A, transfer of control deals and other corporate actions that could lead to financial risk in the market. PBoC injected CNY 130b1n in 7-day reverse repos and CNY 120bln in 14-day reverse repos. PBoC set CNY mid-point at 6.7228 (Prey. 6.7132). Chinese FX Reserves (Monthly) (Jul) 3.081T vs. Exp. 3.069T (Prey. 3.057T) China Q2 prelim current account USD 52.9bln vs. Prev. USD 18.4bln Top Asian News Correction May Loom for India Bank Stocks, Hedge Fund Warns China’s Foreign Reserves Rise a Sixth Month on Yuan Strength As Results Loom, Noble Group Won’t Reply to Latest Iceberg Barbs North Korea Condemns Latest UN Nuclear Sanctions, Vows Response SoftBank Profit Tops Estimates Amid Shift Into Deals, Investing European bourses trade rangebound following Friday's NFP volatility, and do maintain their highs. European bourses trade mixed, however marginally so, with Stoxx 600 sector seeing any movement greater than 1%. A large position liquidation in the German bund sparked some morning volatility, in otherwise quiet conditions. The future contract came off session highs, however, did manage to find support at the 163.00 handle. Top European News London Home Rents Fall Again After Almost Decade of Growth Halts U.K. House-Price Growth Slows to Weakest Pace in Four Years U.K. Economy Takes a Hit as Consumer Spending Slumps Further German Industrial Output Unexpectedly Falls First Time This Year Euro Climbs to Fresh Day High as Demand on Crosses Supports Paris Aims to Overtake Frankfurt in Race for Brexit Bank Jobs Taking a Long Shot on Cancer, AstraZeneca Defies the Odds Linde Forms Holding Company for Merger With Praxair: Welt In currencies, the EUR saw some early buying pressure this morning, coinciding with the Bund liquidation, as EUR pairs popped through overnight levels. No fundamental factors sparked the movement, with EUR/CHF seeing the main bullish pressure, yet resistance was found at 1.15 and we now trade at largely pre-announced levels. GBP was unmoved following contradicting reports in UK press over reports on Brexit costs and remains comfortably above 1.30. The Telegraph noted that the UK is prepared to pay EUR 40b1n for Brexit divorce bill, however source reports in the Guardian dismissed this as inaccurate speculation. In commodities, copper prices traded choppy with initial upside seen as Dalian Iron Ore and Rebar futures surged at the open of China metals trade, which was due to reduced stockpiles and firm demand. However, copper then failed to hold onto the gains and retreated amid a cautious risk tone in China. WTI futures failed to test the USD 50.00/bbl level and ran into some resistance around USD 49.60 on Friday, following the latest Baker Hughes Rig Count. Oil does continue to trade in this August; 48.50 — 50.00 range, as we are set to see an OPEC compliance meeting this week. Global demand has seemingly picked up of late however, with China now overtaking the United States as the world's largest importer of crude importing an average 8.55m1n BPD in the first half of 2017, above the 8.12mln BPD. WTI has been softer this morning, down 1.20% as we have broken through 49.00/bbl. Libya's Sharara oil field (largest in the country), is said to face stoppage due to protests, according to press reports. Looking at the day ahead, today starts with Germany’s industrial production figures for June in early morning, followed by UK’s July Halifax house price index and then US’s consumer credit stats for July. Also today we have speeches from the Fed’s Bullard and the Fed’s Kashkari, followed by the OPEC/Non-OPEC joint technical committee meeting in Abu Dhabi. US Event Calendar 3pm: Consumer Credit, est. $15.3b, prior $18.4b 10:45am: Fed’s Bullard Speaks on U.S. Economy in Nashville, TN 1:25pm: Fed’s Kashkari Speaks in Bloomington, MN DB's Jim Reid concludes the overnight wrap In theory we should now be at the start of the real summer lull that will likely last until the Jackson Hole build-up. The event starts on August 24th so we should now get two weeks of calm. If that statement is not enough to encourage a violent bout of volatility then I don't know what will! I'm hoping I'll be still here to report on the lull as my wife was 33 weeks pregnant yesterday and the consultant last week advised delivery at around 36 weeks. However she has some doubts as to whether we'll get that far though and the average pregnancy length for identical twins is 35 weeks and 2 days. So I'm on standby to panic at any moment. I was desperately hoping we could hold on into September (I say we but....) so they would have an extra year before they start school. All the evidence is that autumn children do better at school and sports than summer children. However I now accept that the mother and twin's health is more important than me being proud that my boys are the best at sport in their year by virtue of being the oldest and biggest!! Back to the summer lull. The week post payrolls is normally quiet anyway but this week could be extra so. There's only really one obvious observable candidate to create a little noise this week and that's the US CPI numbers on Friday (PPI on Thursday). Friday's slightly stronger than expected payroll number and hint of stronger wages (more detail below) did have an impact on markets as we'll see below. Inflation data is probably where the market is most sensitive to a surprise at the moment. Our economists expect gasoline prices to cause headline CPI (+0.1% vs. Unch,) to round down, while core CPI inflation (+0.2% vs. +0.1%) should finally snap its streak of four consecutive monthly misses which could be important. Our economists also remind us that as recent Fed statements have emphasized, policymakers will be monitoring near-term inflation trends closely. Hence, an in line print would provide tentative evidence that the recent downshift in core inflation may be behind us. What we also might hear about this week is the 10-year anniversary of BNP Paribas announcing that they were closing down three hedge funds specialising in US mortgages. This happened on August 9th 2007 and was the catalyst for the inter-bank market to fully shut down as no-one trusted anyone anymore which in turn set off a course of events that led to the bank run on Northern Rock just over a month later and the other nasty events culminating in the Lehman default 12 months down the line. It seems like only yesterday. Also in quieter times its fascinating to see that President Macron's approval rating has dipped sharply and as you can see from the graph in today's PDF, its now not much higher than President Trump's in the US. Our DB Europe economist Marc de Muizon published a note on Friday analysing the implications of Macron’s recent drop in popularity. He notes that while it is common for freshly elected presidents to see their popularity fall post-election, Macron's drop is still relatively large and early by historical standards. With the growth momentum in the euro-area and in France picking up, and given his electoral success, Macron now needs to avoid further controversies to ensure his reform agenda can be pushed through to the end. There could be some wider market interest in this story after the summer ends. Onto markets and the week is generally starting on the front foot in Asia with the Nikkei +0.6%, the Hang Seng +0.4% and Kospi +0.4% all higher as we type. The Shanghai Comp is actually slightly lower (-0.2%). There's not been a lot of fresh news flow and sentiment is following the lead from Friday. Indeed Friday was a strong day for global equity markets (especially in Europe) that capped off an otherwise flat week. Over in the US the S&P 500 ticked up +0.2% following the better than expected payrolls data, with financials leading the way with gains of +0.7% on the day. The S&P 500 has now seen 12 successive closes of less than 0.3% in either direction which is a record with daily data going back to 1927. So quite remarkable really. The Dow (+0.3%) also continued to trade to new highs (+1.2% on the week but creeping up fractions every day!). European markets saw even stronger performance on Friday as the STOXX 600 rallied +1% as every sector ended the day in positive territory. The STOXX Banks index was also up +1.2% on the day. Regional indices also posted strong gains, with the DAX (+1.2%), CAC (+1.4%), FTSE (+0.5%) and FTSE MIB (+0.7%) all up on the day. Over in government bond markets the strong payrolls number led to US treasuries selling off across the curve (2Y +1bps; 10Y +4bps). Over in Europe Bunds yields also ticked up at all maturities beyond the 5Y point (10Y +2bps). Gilt yields rose across all maturities (2Y +3bps; 10Y +3bps) to retrace part of the rally that followed the BoE meeting on Thursday, but 10Y Gilt yields were still lower by -4bps on the week. Elsewhere OATs (10Y +3bps) and BTPs (10Y +3bps) were higher across maturities. Turning to FX markets, the US dollar index (+0.8%) rallied following the strong employment report to end the week higher by +0.4%. On the other side of these moves, EUR (-0.8%) and GBP (-0.8%) both posted losses to end the week roughly flat and down -0.8% respectively. Over in commodity markets the energy sector saw oil pick up gains of about +1.0% on Friday, although it ended the week lower by -0.3% due to bigger losses earlier in the week. Precious Metals were lower on Friday with Gold and Silver down -0.7% and -2.0% respectively, while the industrial metals complex saw copper flat while aluminum dropped by -0.5%. Agricultural commodities were fairly mixed on the day as Cotton (+0.4%) and Corn (+0.8%) while other segments were flat (wheat, soybeans, coffee) to lower (sugar -1.2%). Friday was a fairly quiet data day over in Europe and most of the equity rally came after payrolls. The only data points of note were German factory orders which held steady at +1.0% (vs. +0.5% expected) followed by Italian retail sales that ticked up by +0.6% in June (vs. +0.1% mom expected) following no growth the month before. However the key market moving data was over in the US with the July employment report. Payrolls beat expectations at 209k (vs. 180k expected) while June’s number was revised up to 231k (from 222k). The unemployment rate ticked down one-tenth as expected to 4.3%, while monthly average hourly earnings also came in line with expectations at +0.3% mom but the YoY growth rate was a tenth higher than expected at 2.5%. Finally we also got US trade balance data for June where the trade deficit narrowed more than expected to - $43.6b (vs. -$44.5b expected; -$46.5b previous). To the week ahead now. Today starts with Germany’s industrial production figures for June in early morning, followed by UK’s July Halifax house price index and then US’s consumer credit stats for July. Onto Tuesday, Japan’s balance of payments and trade balance figures for June will be out in early morning. Then Germany’s June trade balance, current account, export and import stats are due. France will also report its June trade balance and current account figures. Over in the US, there is the NFIB small business optimism index for July. Turning to Wednesday, China’s CPI and PPI for July will be out in early morning. Later on, Italy’s June industrial production figures and Bank of France’s business sentiment indicator are also due. Over in the US, there is the 2Q nonfarm productivity and unit labour costs data, June wholesale inventories as well as the MBA mortgage applications. For Thursday, the June industrial production and manufacturing production figures for UK and France will be out. Further, June trade balance stats for UK and Italy are also due. Over in the US, we have the July PPI data, the monthly budget statement as well as the initial jobless claims and continuing claims figures. On Friday, the final CPI figures for Germany, France and Italy will be released. Over in the US, CPI stats for July are also due. Onto other events, today starts with speeches from the Fed’s Bullard and the Fed’s Kashkari, followed by the OPEC/Non-OPEC joint technical committee meeting in Abu Dhabi. Then on Thursday, the Fed’s Dudley will speak. Onto Friday, the Fed’s Kaplan and Fed’s Kashkari will also speak. Finally we'll still have earnings season continuing on both sides of the Atlantic but we're now past the peak.
This week for the first time - in the name of "transparency" - the London Bullion Market Association unveiled that as at 31 March, 2017 there were 7,449 tonnes of gold, or 596,000 gold bars, valued at $298 billion sotred in the vaults around London as well as $19 billion in silver. Only the gold hoard at Fort Knox and among Indian households said to account for more than the LBMA's inventory, which clears just over $18 billion in gold daily. Most London gold is stored in the Bank of England, with the rest in private vaults, including those operated by HSBC and JPMorgan, both profiled previously (here and here). The Bank of England holds most of the gold and silver in London, or over 60% of the total gold, and already publishes some details of its holdings. The new LBMA data supposedly also reveals how much private custodians, HSBC, JP Morgan, and ICBC Standard Bank among them, keep in their vaults. The publication of vaulting statistics marks the first step toward the LBMA's promise of greater transparency, which will eventually be enhanced further by trade reporting that is set to also be published later on. respectively. As UBS strategist Joni Teves writes, this addition to the available pool of information helps various market participants, as well as regulators, have a better assessment of market activity in precious metals. For instance, comparing the newly released vaulting statistics with trade flows allows for a better understanding of the movement of metal and the dynamics between investment and physical demand. Combined with other indicators of market length, such as Comex net longs and ETF holdings, it also enables market watchers to have a better gauge of market positioning. The data released so far confirms relatively limited investor participation this year – perhaps as a result of a broad shift toward cryptocurrencies as the new "safe" currency, at least among some age groups. Bank of England (BoE) data, which extends further back to 2011, confirms that investor positions have declined considerably from the peak during the height of the bull-run and that there's room for gold exposures to grow from here. As LBMA data series extends up ahead, we should get an even better picture. All in all, changes in gold holdings as illustrated by LBMA and BoE reinforce a positive stance on gold. Courtesy of UBS, below we present extended observations on what the LBMA data reveal, and the implications for the broader gold market in general, as well as investing in the precious metal in particular. Never 'too much of a good thing' with market data The London Bullion Market Association (LBMA) and the London Precious Metals Clearing Limited (LPMCL) have released data on gold and silver inventories sitting in London vaults (loco London gold and silver), a move that is consistent with wider developments in the industry towards greater transparency. This addition to the available pool of information helps various market participants, as well as regulators, have a better assessment of market activity. Comparing the newly released vaulting statistics with trade flows allows for a better understanding of the movement of metal and the dynamics between investment and physical demand. Combined with other indicators of market length, such as Comex net longs and ETF holdings, it also enables market watchers to have a better gauge of market positioning. The publication of vaulting statistics marks the first step towards more transparency in the industry; trade reporting that is set to also be published later on should further enhance this. Having data on loco London gold and silver trading volumes would allow for better comparisons of trading activity and interest across various regions. As far as market analysis is concerned, there's no such thing as 'too much of a good thing' when it comes to information that provides additional insights. The LBMA and the LPMCL first announced the plan to publish gold and silver vault holdings in May. The data published today represents aggregated data collected from the Bank of England (BoE) and seven other custodians that offer vaulting services, and covers end-period holdings of gold and silver from July 2016 to March 2017. Going forward, this data will be published each month, with a three-month lag. The data includes gold and silver in the form of large bars, kilo bars or coins, but excludes jewellery and other private holdings held in vaults that are not part of the London clearing system. These statistics only include gold and silver that is held physically in London, defined by the LBMA as “held within the environs of the M25”. This metal underpins the daily trading and clearing activities in the London bullion market. London continues to be a key gold trading centre globally, with an average of $18.1bn worth of gold cleared each day in March 2017, according to LBMA net daily clearing statistics. Clearing data is different from turnover data, so until we get LBMA trade reporting statistics, comparing London market activity against that of other regions remains challenging. But to somehow put things into context for now, it probably still helps to note that the average daily turnover of physical gold spot contracts on the Shanghai Gold Exchange is over $1bn, while an average of about $32bn worth of gold futures trade on Comex each day. Estimating investor gold holdings in London One of the recurring questions that gets asked by clients and various market participants is on the level of gold or silver holdings or the level of investor positioning. This has always been very difficult to answer. The market has had to rely on third-party estimates of above-ground holdings, such as those provided by Thomson Reuters GFMS, the World Gold Council or Metals Focus. Other ways that we've tried to address this type of question is to look at Comex net long positions and ETF holdings. Now, with the availability of vaulting statistics, we can add another dimension to the analysis. We can start by saying that 7,449 tonnes or 239.49 moz of gold and 32,078 tonnes or 1,031.32 moz of silver were sitting in London vaults as of end-March. For gold, we can take the analysis further: as the BoE also publishes gold vault holdings data separately, we are able to split out – at least in aggregate – what is held in other vaults. This is not possible for silver as the BoE does not provide silver custodial services. The BoE provides gold custody services primarily to central bank customers to help them get access to London gold market liquidity, although it also holds some gold custody accounts on behalf of certain commercial banks that support central bank access to the liquidity of the London gold market. On the assumption that the BoE custody service primarily caters to central bank customers, it’s probably fair to say that 1) the bulk of BoE gold represents official sector holdings and 2) gold held in other vaults is likely to be more investment-related. To be sure, this is somewhat simplistic in that, as mentioned earlier, the BoE also offers custody accounts to certain commercial banks, while at the same time it is also possible for central banks to hold their gold in non-BoE vaults. To put some context around this, let us consider for illustration's sake that about 80% to 90% of BoE gold holdings are accounted for by the official sector. Let us also consider for simplicity that the vast majority of gold held in commercial vaults represents investor holdings and only a negligible amount comprises official sector gold accounts. These simplistic assumptions would therefore imply that over the past year, an average of about 96.68 to 110.92 moz ($119-139 bn) of investment-related gold was held in London. These inventories would include metal held on behalf of ETFs. Based on our database of gold ETFs, we estimate an average of around 48.78 moz or about $60bn worth of gold was held in London vaults to back ETF shares during the same period. Taking these ETF-related holdings into account would then leave roughly around 47.90 to 62.14 moz or about $60bn to $78bn worth of gold in unallocated and allocated accounts as available pool of liquidity for OTC trading activities. While we now have a starting point with the vaulting statistics, a breakdown of the type of gold holdings remains unavailable. As such, the discussion above and the charts and tables below are presented here to provide some context. Nevertheless, despite these limitations, the data still somehow supports the broad assumption on how loco London gold stocks may be split between official sector and investor holdings. For instance, the data shows that gold held at the BoE appears to be more stable relative to gold held in other London vaults, such that changes in total loco London gold over the past nine months have been driven more by changes in non-BoE gold. Intuitively, it would make sense for investment-related gold holdings to be more volatile relative to official sector holdings. Central banks hold gold as part of their official reserves and also serve monetary purposes, typically having much longer. While we now have a starting point with the vaulting statistics, a breakdown of the type of gold holdings remains unavailable. As such, the discussion above and the charts and tables below are obviously only presented here to provide some context. Nevertheless, despite these limitations, the data still somehow supports the broad assumption on how loco London gold stocks may be split between official sector and investor holdings. For instance, the data shows that gold held at the BoE appears to be more stable relative to gold held in other London vaults, such that changes in total loco London gold over the past nine months have been driven more by changes in non-BoE gold. Intuitively, it would make sense for investment-related gold holdings to be more volatile relative to official sector holdings. Central banks hold gold as part of their official reserves and also serve monetary purposes, typically having much longer time horizons. Matching ETF data against total loco London inventories Gold and silver held in London vaults that back shares in exchange-traded funds (ETFs) are also included in the statistics, regardless of where the ETF is listed. In general, this means that although gold or silver ETF shares may trade on exchanges elsewhere, as long as the metal is held physically in London, these would be considered loco London and form part of the LBMA’s monthly statistics. For instance, the largest gold ETF is listed and trades on the New York Stock Exchange (NYSE), but its designated custodian ultimately holds the underlying metal in its London vaulting facilities. Similarly for silver, the ETF with the largest holdings trades on the NYSE, but some of the metal underpinning the shares is allocated in London. We estimate that as of last week there are around 68.65 moz of gold and about 687.57 moz of silver held in ETFs globally. Our database of gold and silver ETFs suggests that, using average gold and silver prices over the past year, about 48.78 moz of gold worth about $60bn and about 427.67 moz of silver worth about $8bn are likely to be held in London to back ETF shares. This is obviously a rough estimate that’s provided here only for indicative purposes. Looking at changes in ETF holdings vs changes in total vault holdings between July 2016 and the end of the first quarter this year shows that the trend is broadly similar for gold, yet divergent for silver. Considering the period as a whole, the divergence continues for silver with total holdings up by 8% or 79.89moz, but ETFs down 3% or 12.06 moz. For gold, the change in total stocks vs the change in ETFs also diverges when the entire period from July 2016 to March 2017 is taken into account – total loco London gold inventories increased by a modest 2% or 5.34 moz but ETF holdings were down 8% or 3.87 moz. Given the data series is quite short, it is challenging to form any strong conclusions at this juncture. We expect that as the series extends in time we will be able to gather more insights from these flows. Intuitively, divergences in total London gold stocks and ETF holdings could reinforce other indicators that suggest declines in ETF shares do not always reflect net exit from gold or silver exposures. Instead, outflows from ETFs could represent a switch to different forms of exposure such as allocated or unallocated accounts. Tracking gold trade flows vs changes in London stocks Comparing total gold holdings data with UK gold import and export flows confirms a strong link between the two, regardless of whether one is using UK trade data or what may be implied by Swiss Customs statistics. This is intuitive in that net inflows of gold into the UK should understandably translate into a build in holdings, while net outflows would suggest a reduction in overall levels. In addition to UK trade statistics, Swiss data on gold flows from and to the UK is also a useful indicator of how much gold is leaving or entering London vaults. Given Switzerland’s key role in global gold refining, it is an important hub for the movement of metal and essentially acts as an interface between investment demand in Western markets and consumer demand in Asia. Combining Swiss and UK trade data with London vault holdings allows for a more complete picture. Periods of strong physical demand out of key markets such as India and China could attract the movement of large investment bars sitting in London vaults to Switzerland for conversion into kilo bars. These gold kilo bars would subsequently be shipped to physical buyers in Asia and ultimately be converted into jewellery or other investment products to meet consumer demand. Net outflows of gold from the UK should coincide with declines in vault holdings in this case. In fact, this scenario occurred back in 2013: as the Fed's taper tantrum led to a sharp rise in US real rates, gold collapsed by 29% as investors exited gold exposures. In turn, the sharp drop in the gold price made it very attractive for physical buyers, especially in the context of a decade-long bull market. Investor gold positions held in London vaults – whether OTC or ETF-related – were being heavily liquidated. This metal then made its way to Switzerland, was converted into kilo bars, and shipped to Asia to satisfy the surge in demand in China, India as well as other parts of the region. Interestingly, LBMA data shows that in Q3 last year, the opposite occurred – the UK was a net importer of gold and vault holdings increased. This coincided with weak physical demand for most of last year, which was more than offset by a pickup in investment interest. Given strong demand from the investor community, gold still managed to rally 8% in 2016 (and as much as 30% from trough to peak) despite the weak fundamental backdrop. Towards the end of the year, market forces became conducive for gold to once again leave London vaults and be shipped out of the UK. Investors unwound positions in anticipation of the first Fed rate hike, while at the same time, seasonal and regulatory factors in key markets boosted physical demand, allowing buyers in Asia to absorb the liquidation from Western investors. Demand out of China kicked in heading into year-end, in anticipation of the Lunar New Year holidays, while the demonetisation of highvalue banknotes in India led to a knee-jerk spike in demand. So far this year, physical markets have been more stable, while investment demand has been positive yet broadly more subdued. As mentioned earlier, the data tends to reflect this, with changes in loco London gold holdings relatively limited during the first quarter of 2017. A marginal benefit of this link between vault holdings and trade flows is that there is a shorter lag in trade data reporting. This means that trade statistics should help market watchers anticipate changes in loco-London inventories before getting confirmation a couple months later from the LBMA report. Insights on investment activity Looking at the entire data series from July last year to March this year, an observation that's worth noting is the modest 2% increase in total gold holdings equivalent to around 166 tonnes. This change is likely a function of investor liquidations in Q4 2016, as markets anticipated a Fed rate hike, which has since reversed but at a subdued pace. This also coincides with ETF flows – heavy liquidations towards the end of last year have been succeeded by net inflows this year, but volumes lag considerably compared to the same period in 2016. More importantly, according to LBMA data loco London gold holdings during Q1 this year were relatively flat. This coincides well with the broadly limited investor participation in the gold market that we have been highlighting. Many investors are keeping an eye on the gold market and continue to appreciate gold's value as a diversifier in a portfolio, yet few have been actively involved in putting on meaningful, strategic positions. Subdued investor participation has been an important factor holding gold back, in our view, in spite of supportive macro factors. Subdued investor activity has been apparent in speculative positioning data indicated by the CFTC Commitment of Traders Report as well as gold ETF flows. In June, sentiment towards gold understandably came under pressure given the rise in real rates – not just in the US but also in Europe – and the seemingly hawkish shift in tone among central banks (see Gold falls as real rates rise). As of early July, CFTC data showed that gold net longs on Comex had fallen to the lowest levels since January last year. Despite the rebound in gold prices in recent weeks, net speculative positions on Comex have remained very lean. Meanwhile, gold ETFs marked the first month of net outflows in July. Although gold ETF holdings are up on a net basis year-to-date, the increase is much more subdued at only 107 tonnes compared to over 598 tonnes during the same period in 2016. Changes in gold positioning on Comex and ETF holdings coincide with the subdued changes in loco London gold inventories. As mentioned earlier, the data shows a larger increase in silver vault holdings vs gold. Relative speculative positioning between gold and silver on Comex similarly shows a stronger build in investor positions in silver than gold, at least during the first half of the year. Given silver's large industrial demand component, it initially attracted some attention on the back of growth and risk optimism amid the reflation theme. This translated into persistent gains in Comex investor positioning, which reached a fresh all-time high in May. Yet as fiscal stimulus hopes faded and reflation trades were unwound, so did the interest in silver. Comex positioning has since given back about 81% from the highs, mainly driven by a strong increase in gross short positions, which have been reaching record highs in recent weeks. It would be interesting to see Q2 and Q3 data on loco London silver holdings to find out whether OTC positions followed a similar trend. Loco London silver holdings could potentially be relatively more robust than what Comex speculative positions imply. Silver ETF holdings have generally been resilient over the past few years, despite heavy liquidations in gold ETFs, which could mean that silver OTC positions could also show a similar sense of stability. Finding clues on positioning from BoE gold data, for now Given that only limited historical data is available, it is difficult to put total London gold inventories fully into perspective. For instance, we cannot compare current levels versus the amount of gold and silver held during the peak of the bull run nor during the trough reached at the end 2015. However, for gold we can look to BoE vault holdings, which go back to 2011, for some hints. Based on LBMA data, the BoE accounts for the bulk of loco London gold inventories, representing about 68% of the total on average over the period covered. As the LBMA data series extends up ahead, we should be able to have a better idea of how closely linked trends in BoE and non-BoE gold are, and in turn get a better perspective on investor positions. The amount of gold held at the BoE was at a high of 6,250 tonnes or 200.50 moz in February 2013 and fell to a low of 4,693 tonnes or 150.87 moz in March last year. As of end-Q1, levels are about 8% or 12.49 moz higher at 163.36 moz, but still considerably below the highs. As we argued earlier, the BoE's gold holdings likely mainly reflect official sector positions. Some central banks manage their gold reserves more actively than others while there have been a few such as the Bundesbank which have repatriated gold held in various foreign locations over the past few years. These flows are likely also reflected in the BoE's data. Nevertheless, the BoE does hold some gold custody accounts for certain commercial banks. To the extent that non-official sector gold holdings influences these flows, the trends should be broadly similar to changes in loco London gold held in other vaults. The trend in gold holdings would in this case be consistent with our view that exposure to gold has been reduced considerably from the highs during the peak of the bull run. And although investment interest has been revived over the past year and a half, levels of exposure likely remain limited by historical standards. Much leaner positioning is one of the key factors supporting gold this year and suggests that there is ample room for positions to be rebuilt against a backdrop of benign rates, soft dollar and lingering uncertainties.
Authored by Chris Whalen via The Institutional Risk Analyst, “While the US and the UK have been mired in political chaos this year, the EU has enjoyed improved economic conditions and some political windfalls. The question now is whether this good news will inspire long-needed EU and eurozone reforms, or merely fuel complacency – and thus set the stage for another crisis down the road.” Philippe Legrain, Project Syndicate This week The Institutional Risk Analyst takes a look a the recent reports out of the EU regarding a proposal to “freeze” the retail accounts of failing European banks. The original story in Reuters suggests that our friends in Europe actually think that telling the public that they will not have access to their funds, even funds covered by official deposit insurance schemes, is somehow helpful to addressing Europe’s troubled banking system. Investors who think that Europe is close to adopting an effective approach to dealing with failing banks may want to think again. Judging by the reaction to the story by investors and on social media, it appears that the EU has learned nothing about managing public confidence when it comes to the banking sector. In particular, the idea that the banking public – who generally fall well-below the maximum deposit insurance limit – would ever be denied access to cash virtually ensues that deposit runs and wider contagion will occur in Europe next time a depository institution gets into trouble. “The plan, if agreed, would contrast with legislative proposals made by the European Commission in November that aimed to strengthen supervisors' powers to suspend withdrawals,” Reuters reports, “but excluded from the moratorium insured depositors, which under EU rules are those below 100,000 euros ($117,000). While some Wall Street analysts are encouraging investors to jump into EU bank stocks, the fact is that there remains nearly €1 trillion in bad loans within the European banking system. This represents 6.7% of the EU economy, according to a report and action plan considered by EU finance ministers earlier this month. That compares with non-performing loans (NPL) ratios in the US and Japan of 1.7 per cent and 1.6 per cent of gross domestic product, respectively. But the most basic point to make about the proposal for a “temporary” suspension of access to cash is that such moves never work. Moratoria are part of the banking laws in Germany and many other European nations, but they are never used because once invoked the institution is dead for all practical purposes. In Spain, for example, the government had the power to impose a temporary suspension of access to deposits in the case of Banco Popular, but did not do so because it would have killed the franchise. Jochen Sanio, the former president of the German Federal Financial Supervisory Authority (BaFin), commented about banks subject to “temporary” deposit moratoria that “they never come back.” Sanio, who guided Germany through the 2008 financial crisis and forced the clean-up of insolvent state-owned banks, was retired and gagged for the rest of his life for challenging Germany’s corrupt political status quo of covert bailouts. So again, one has to wonder, why any responsible official in Europe would support the plan reported by Reuters. As the US learned the hard way in the 1930s and with the S&L crisis in the 1980s, the lack of a robust national deposit insurance function to protect retail depositors leaves an entire society vulnerable to banks runs and debt deflation. Until the EU is prepared to do “whatever is necessary,” to paraphrase ECB chief Mario Draghi, in order to protect retail bank depositors, the EU will remain far from being a united political economy. Readers of The IRA may recall the comments of German Chancellor Angela Merkel last Fall, when she suggested that the German government would not support Deutsche Bank AG (NYSE:DB) in the event that the institution got into financial trouble. At the time, DB was trading at about $12 per share in New York. We spoke about DB and the ill-considered comments made by US and German officials from Dublin on CNBC on September 30th. At the time, we reminded investors that political officials should never talk about a depository institution while it is still open for business. This is a basic, well-recognized rule that has been followed by prudential regulators around the world for many years. Yet because of the popular political pressures on elected officials such as Merkel, the temptation to engage in absurd hyperbole with respect to big banks is irresistible. We see this latest piece of news out of Europe as further evidence that there is still no political consensus about how to deal with troubled banks. As we learned last year, Merkel could not even make positive public comments about DB for fear of committing political suicide. The more recent bank resolutions in Spain and Italy were made to look like touch measures in public terms, even as the Rome government quietly subsidized the senior creditors of two failed banks in the Veneto. We noted in an earlier comment, “Fade the Great Rotation into Europe,” that the EU pretends to play tough on bank rules while bailing out the senior creditors: “Of note, Italy is being given control over the remaining ‘bad bank’ to wind down as the assets and deposits are conveyed to Intesa SanPaolo. This permits a bailout of senior unsecured creditors. So Italy gets what it wants – continued circumvention of EU bailout rules. If a bank disappears, notes a well-placed EU observer, ‘state aid rules do not apply.’” The Europeans appear to be playing a very dangerous game. On the one hand, EU officials talk publicly about getting tough on insolvent banks and even suspending access to funds for retail depositors. On the other hand, EU governments are continuing to bail out banks and large creditors in a display of cronyism and business as usual. “Under the plan discussed by EU states, pay-outs could be suspended for five working days and the block could be extended to a maximum of 20 days in exceptional circumstances,” Reuters reports. “Existing EU rules allow a two-day suspension of some payouts by failing banks, but the moratorium does not include deposits.” Contrast the EU proposal with standard practice in the US, where the Federal Deposit Insurance Corporation (“FDIC”) begins to market troubled banks before they fail and tries to execute bank closures and sales on a Friday to avoid frightening the public. The branches of the failed bank then open on the following business day as part of a solvent institution without any interruption in customer access to funds. Importantly, all insured depositors, as well as brokered deposits and advances from the Federal Home Loan Banks, are always paid out by the FDIC when the failed bank is closed in order to avoid precipitating runs on other institutions. In Europe, on the other hand, there appear to be a significant number of officials who seriously believe that denying retail bank customers access to funds covered by deposit insurance will not result in financial contagion. If such a proposal is adopted, the sort of bank runs seen in Cyprus and Greece could intensify and spread to the major countries in Europe. Imagine that a large bank failure occurs in Italy next year and Italian officials tell retail customers that they will not have access to any funds for several weeks. As we saw in 2012 in Spain and Cyprus and 2015 in Greece, retail bank runs tend to spill over into other countries and markets, creating a situation where fear takes over from rational behavior. The trouble is, Chancellor Merkel cannot commit Germany to supporting an EU accord to support the banks in the Eurozone without ending her political career. “If capital flight from the peripheral economies gathers pace, it could trigger runs on entire banking systems,” notes the infamous “Plan B” memo prepared for Merkel in 2012. “That would put the ECB—and thus, indirectly, the Bundesbank and Germany—on the hook for deposits worth trillions of euros.” In the dark days of 2012, Merkel’s government prepared for “Plan B” and was essentially ready to allow the weaker nations on the EU’s periphery – including Spain, Greece, Italy and Ireland -- to fail and drop out of euro as Germany withdrew to a core group of nations. Just as the EU still refuses to deal with Greece’s mounting debt, likewise it cannot seem to accept that protecting the small depositors of European banks is the price to be paid for preserving social order and the EU itself. Otmar Issing, former Chief Economist and Member of the Board of the European Central Bank and the German Bundesbank, summarizes the situation: “The euro crisis is not over.”
Otmar Issing, former Chief Economist and Member of the Board of the European Central Bank and the German Bundesbank, brings back the specter of Grexit scenarios, demanding a Euro-sabbatical for Greece. KeepTalkingGreece.com reports that, uin an interview with business news magazine Wirtschaftswoche, Issing warned of a new flare-up of the euro crisis. “The euro crisis is not over yet,” said the economist, one of the architects of the Euro. Issing called on a policy that would include EU treaties allowing the possibility of temporary withdrawal from the monetary union. “States like Greece would do well with a Sabbatical outside the monetary union. However, it should be accompanied by massive aid from other countries and a growth-oriented economic policy. And one would have to make re-entry into the euro zone dependent on fundamental reforms, ” Issing said. Issing no longer relies on the Stability and Growth Pact, a core element of the economic and monetary union. “I would not have considered the dimension of its dismantling by the governments”. Otmar Issing lashed out at the Greek government saying “the government is still in an anti-growth policy.” He also criticized Italy saying “It also did not seize the opportunity. The country has saved tens of billions of interest without using the leeway. ” The Wirtschaftswhoche article has the title “Economist demands Euro-sabbatical for Greece.” I don’t know exactly what institutional role 81-year-old Otmar Issing currently has other than sitting at a dusty desk as president of the Center for Financial Studies (CFS) at the Goethe University in Frankfurt am Main since 2006. He is also Goldman Sachs adviser etc etc etc. He has been calling for Grexit since 2010 saying Euro exit would be good for Greece at least once a year… Leaving the euro might help struggling Greece, German chief economist, euro architect and former European Central Bank (ECB) board member Otmar Issing told CNBC on Tuesday. “The euro is irreversible – but if it is irreversible for every country has become an open question,” Issing told CNBC. Then, Issing told CNBC in September 2015... “For Greece, there are very good arguments that it would do well outside the euro area for some time to come, but it all depends on the Greek government’s reactions” What he does not say it that the “massive aid from other countries” that will accompanie the Euro-Sabbatical or Grexit would be one more bailout. If I remember well, Finance Minister Wolfgang Schaeuble had estimated a total of at least 50 billion euros for a 5-year- euro sabbatical. Schaebule offered Varoufakis & Co a temporary Grexit plan in March 2015, as part of the European lenders blackmail towards Greece. * * * What we learned from Issing’s interview is that we now have a political correct term Euro-Sabbatical that sounds not so scary as Grexit.
Bundesbank paper uses model of eurozone to judge effects of asset purchases
Submitted by Koos Jansen, BullionStar.com Head of the Financial Markets Division of the Dutch central bank, Aerdt Houben, stated in an interview for newspaper Het Financieele Dagblad published in October 2016 that releasing a bar list of the Dutch official gold reserves “would cost hundreds of thousands of euros”. In this post we’ll expose this is virtually impossible - the costs to publish the bar list should be close to zero - and speculate about the far reaching implications of this falsehood. Recap This story started a couple of years ago. As I am Dutch and concerned not only about my own financial wellbeing but of my country as well, I commenced inquiring my national central bank about the whereabouts and safety of our gold reserves in late 2013. One of my first actions was submitting the local equivalent of a Freedom Of Information Act - in Dutch WOB - to De Nederlandsche Bank (DNB) in order to obtain all written communication of the past decades between DNB and the Federal Reserve Bank Of New York (FRBNY). In 2013 I knew a large share of the Dutch gold was stored at the FRBNY, which I deemed to be an unnecessary risk. In a crisis situation, for example, the US government would be able to confiscate Dutch gold stored on American soil. Unfortunately, DNB responded it’s exempt from certain WOB requests under the banking law from 1998, article 3. (I thought the WOB hit a dead end, though recent developments have changed my mind regarding the legitimacy of the rejection. In a forthcoming post more on my WOB from 2013.) Subsequently, on 21 November 2014 DNB shocked the financial world by announcing it had covertly repatriated 123 tonnes of gold from the FRBNY vaults. Did DNB question the trustworthiness of the FRBNY like myself? Most likely, as I see few other reasons for repatriating, next to losing trust in the international monetary system itself. The gold wasn’t sold in the Netherlands, as our gold reserves have remained unchanged at 612 tonnes since 2008. Apparently DNB felt safer having less gold stored at the FRBNY. Note, the FRBNY offers institutional clients to store gold free of charge, yet DNB favored to ship it home. From the FRBNY website: The New York Fed charges account holders a handling fee for gold transactions, including when gold enters or leaves the vault or ownership transfers (moves between compartments), but otherwise does not charge fees for gold storage. In the press release DNB stated repatriating gold “may have a positive effect on public confidence”. Suggesting the Dutch public - or central bank or government - does not have full faith in the FRBNY as a custodian. Exhibit 1. Locations Dutch gold before and after 21 November 2014. My focus on the Dutch gold, in a way partially mine as our official gold reserves are not owned but merely managed by DNB, was sharpened in 2015. On 26 September of that year I visited the Reinvent Money conference in Rotterdam, the Netherlands. One of the speakers was Jacob De Haan from DNB’s Economics and Research Division. In his presentation, De Haan repeatedly emphasized the importance of transparency in central banking. Exhibit 2. Slide by Jacob De Haan DNB, Reinvent Money conference 26 September 2015. Red frame added by Koos Jansen. Through my WOB experience, however, DNB appeared to be not transparent at all. Thereby, if DNB wants to be transparent and boost public confidence, why doesn’t it publish a gold bar list? The publication of this list would provide one of the most important checks on the existence of the Dutch official gold reserves, as the list can then be cross checked with the inventory lists of gold ETFs and alike, possibly exposing multiple titles of ownership on single gold bars. And this act of transparency could be accomplished within minutes by uploading an excel sheet to the DNB website. When I approached De Haan after the conference and asked why DNB doesn't put out a gold bar list, he offered me he would look into it. He gave me his email address and we agreed to stay in touch. Exhibit 3. 26 September 2015 at the Reinvent Money conference. On the left Jacob De Haan, on the right in the orange sweater Koos Jansen. Many months pasted, but after countless emails and phone calls DNB finally notified me it would not publish any gold bar list. So much for transparency! The following is what DNB wrote me on 11 August 2016 as the reason not to publish: …we do not intend to publish a gold bar list. This serves no additional monetary purpose to our aforementioned transparency policy, however it would incur administrative costs. Administrative costs? There hardly could be administrative costs as this list should be readily available in one or more spreadsheets, I reckoned. When confronting DNB with my logic they replied on 15 August 2016: DNB has internal gold bar lists, however the conversion of internal lists to documents for publication would create too many administrative burdens. DNB claims to have “internal lists”, but creating “documents for publication” would create too many administrative burdens. I couldn't believe it. The only way this excuse would hold was if DNB’s internal lists are non-digital, which then need to be either physically copied or manually inserted in spreadsheet software. However, it’s highly unlikely DNB doesn’t have a digital gold bar list in this day and age. Computers have been widely used since the eighties; that's more than thirty years ago. One the first applications that computers supported were spreadsheet programs designed for accounting. Roughly 65 % of the international reserves of the Netherlands are held in gold. Would DNB still keep their precious gold records on pieces of paper? In my professional opinion the Dutch gold must be meticulously recorded in digital documents and thus publishing a bar list should cost nothing. But showing proof will strengthen my perspective. Up till now this post has been more or less a summary of my previous writings. Down below we'll zoom in on this material, and reveal why it's virtually impossible for DNB to gain any administrative burdens for publishing a gold bar list. The Dutch Gold Is Fully Allocated Let us establish the Dutch gold is fully allocated. According to the London Bullion Market Association (LBMA), which sets the global gold wholesale standards, gold held in allocated accounts is [brackets added by Koos Jansen]: Allocated Accounts: These are accounts held by dealers [/custodians] in clients’ names on which are maintained balances of uniquely identifiable bars of metal ‘allocated’ to a specific customer and segregated from other metal held in the vault. The client has full title to this metal with the dealer holding it on the client’s behalf as custodian. Clients’ holdings will be identified in a weight list of bars showing the unique bar number, gross weight, the assay or fineness of each bar and its fine weight. Clearly, allocated accounts contain uniquely identifiable gold bars owned by one specific client. DNB discloses the Dutch official gold reserves position according to the International Monetary Fund’s Balance of Payments and International Investment Position Manual version 6 (BPM6). From DNB [brackets added by Koos Jansen]: De Nederlandsche Bank [DNB] publishes the balance of payments statistics according to the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6) since October 2014. More from DNB: The figures for the Netherlands have been adjusted for the period since 2008. BPM6 forces national authorities to distinguish between gold bullion and unallocated accounts, of which gold bullion can be held in allocated accounts. The German central bank wrote in June 2014 on adopting BPM6 [brackets added by Koos Jansen]: The new rules are binding for the EU member states [which includes the Netherlands] by virtue of a Council regulation amended by the European Commission. With regard to reserve assets, gold transactions and positions will in future be subdivided into  gold bullion, which includes gold bars and allocated gold accounts, and  gold receivables, to which no specific gold holdings are assigned [unallocated accounts]. In the next chart we can see the ratio between gold bullion and unallocated accounts of all the Eurosystem's national central banks. The data has been sourced from the German central bank, as the BundesBank's website has the most user friendly interface. The Netherlands is said to hold 100 % in gold bullion. Exhibit 4. The Eurosystem's official gold reserves. The exact accounting structure of BPM6 on unallocated accounts is beyond the scope of this post. When asked directly, DNB replied all the Dutch official gold is indeed fully allocated. Accordingly, there should be lists from all custodians that show the uniquely identifiable gold bars owned by the Dutch state, as stipulated by LBMA guidelines. Exhibit 5. In red it sates, “I can inform you the Dutch gold is in physical form, ‘gold bullion’ and thus allocated. In the data you can clearly see the Dutch have no gold swaps or receivables, as this would be unallocated.” Jan Nieuwenhuijs and Koos Jansen are one and the same. Displayed above in exhibit 1, the Dutch gold is mainly stored abroad. Since November 2014 the breakdown by location is as follows: 31 % in Amsterdam at DNB headquarters, 31 % in New York at the FRBNY, 20 % in Ottawa at the Bank Of Canada (BOC) and 18 % in London at the Bank Of England (BOE). The BOE And FRBNY Provide Clients A Gold Bar List In Digital Format I've inquired at the BOE if they furnish clients digital gold bar lists that comply with LBMA standards (more specific, with Annex H of the LBMA's Specifications for Good Delivery Bars and Application Procedures for Listing), and if clients are allowed to physically audit their precious metals at the BOE vaults. Brendan Manning of the Public Enquiries Group responded: Exhibit 6. Exhibit 7. We can read the BOE claims to provide clients a digital gold bar list that complies with Annex H of the LBMA’s Specifications for Good Delivery Bars and Application Procedures for Listing, and clients are permitted to inspect their gold at the BOE. When approached with the same questions, the custodian bank in New York replied it couldn't comment on this subject. However, there is a bar list of gold stored at the FRBNY in the public domain. For the Gold Reserve Transparency Act (2011, not enacted) the US Treasury published two gold bar lists. The first list in excel sheet format covers the US official gold stored at Fort Knox, Denver and West-Point, which aggregates to 7,715 tonnes (click to download the list). The second list in PDF format covers the US gold stored at the FRBNY, which accounts for 418 tonnes (click to download the list starting on page 128). Below is a screenshot of the FRBNY list: Exhibit 8. Screenshot of the US gold bar list from the FRBNY. As shown the FRBNY list fully complies with LBMA standards: included is refinery brand, unique serial/melt number, gross weight, fineness, fine weight and year of manufacturing. At the bottom of exhibit 8 we read the original document name is "FRBNY Schedule of Inventory of Gold Held.xlsx". The extension of the document name ".xlsx" means the file was created by Microsoft Excel software, which is the most commonly used spreadsheet application. So, either, the FRBNY keeps its bar lists in excel sheets, or is capable of converting their data to excel format. Kindly remember the US official gold reserves are owned by the US Treasury, not by the FRBNY. We may conclude the FRBNY is able to provides its clients, such as the US Treasury, gold bar lists in electronic format. There should be no problem whatsoever if DNB would ask the FRBNY for the Dutch gold bar list in excel format. The Bank of Canada didn't reply to my inquiries, but it doesn't matter at this point. It should be clear gold custodians keep their books electronically and fully comply with LBMA standards. I did find a hint of how the BOC operates. In 1997 Professor Duncan McDowall and his team investigated all gold dealings by the BOC from 1935 until 1956 to evaluate if some of the gold stored in Ottawa had ever been intertwined with Nazi gold. McDowall's investigation is titled "Due Diligence: A report on the Bank of Canada's handling of foreign gold during World War II". One of the professor's observations with respect to the BOC's historical documents reads [brackets added by Koos Jansen]: Fiduciary obligation is similarly represented in the Bank's [BOC] written dealings with its clients: the entitlement of any client to have a written confirmation of the disposition of the assets they have placed in the care of a bank. A good example of such an obligation in the context of this report would be the regular production of account statements that provided foreign central banks [i.e. DNB] with precise month-end and year-end reckonings of their earmarked gold holdings [allocated accounts] in Ottawa. ... Currency Division's reports on the arrival and departure of gold to and from these accounts therefore provided a meticulous record of foreign clients' dealings with the Bank. Even the BOC's gold books from before the war appeared to be impeccable. I assume the BOC's current custodial gold bookkeeping is as precise and meticulous now as it was then. DNB Is Likely To Maintain A Gold Bar List in Digital Format Which leaves us to speculate if DNB itself, as the fourth custodian, holds a digital bar list of the 190 tonnes stored in Amsterdam. Allow me to share why I think they do. The fact DNB repatriated 123 tonnes in November 2014 from New York, shows they've revived their affinity with gold. Few central banks have brought their gold home in recent years, which clearly makes DNB a physical gold advocate. No matter how you look at it, this can't be denied. While repatriating DNB took the opportunity to upgrade its vault room at the Frederiksplein in Amsterdam, the Netherlands. Have a look at the DNB gold vault shelving system prior to November 2014 in the picture below: Exhibit 11. DNB gold vault prior to November 2014. Now have a look at the new shelving system at the Frederiksplein. This next picture was taken after November 2014: Exhibit 12. DNB gold vault after November 2014. Obviously, DNB made the structures more robust by switching from wooden shelves to what looks to be iron. DNB consulted the BOE for a new shelving system as the BOE has an identical system since many years prior to 2014. Have a look at a photo from the BOE's gold vault below: Exhibit 13. BOE gold vault prior to November 2014. Compressed: DNB repatriated 123 tonnes, worth roughly 22 billion euros, from the FRBNY somewhere in the months prior to November 2014, exposing a deep and renewed affinity with gold. DNB must have received a digital list from New York with the bars transported, as we know the FRBNY keeps its records in an electronic configuration. While repatriating DNB consulted with the BOE for a robust shelving system in order to upgrade the vault room in Amsterdam, which reaffirms DNB's careful attention for the gold they store. Judging from the actions above I dare to say DNB had meticulously, and thus electronically, inventoried the 67 tonnes already stored in Amsterdam before November 2014, or registered this metal when the batch from New York arrived. So very likely all gold stored in Amsterdam is properly recorded in digital format. A summary of the previous three chapters before we continue: All the Dutch official gold reserves are held in allocated accounts and thus there are bar lists available, which comply with LBMA standards, from all custodians. We may conclude all custodians save and distribute their bar lists electronically. Het Financieele Dagblad Meanwhile, I was interviewed by Het Fiancieele Dagblad, the Dutch version of the Financial Times, on 27 September 2016 for a weekend special on gold. In the interview I told two FD journalists about my views on gold and my curious encounters with DNB. The next day one of the journalists wrote me he would interview Aerdt Houben, Head of DNB's Financial Markets Division, for the same gold special and invited me to share what I would ask Houben in his seat. I wrote back I would inquire about the gold bar list and if DNB had ever physically audited all the Dutch gold, among other topics. In Het Financieele Dagblad (FD) from 28 October 2016 the interview with Houben reads: FD: Some people are worried the Dutch gold might be gone. Houben: To a certain degree the people should have trust in us. We are transparent about how much gold we hold and the locations. FD: Are there any reports and bar lists on this, if so: why aren’t those public? Houben: The content of the reports is also being checked by our accountants for our annual report. But the gold bar lists that would costs hundreds of thousands of euros. Because many people would have to check the contents and the many updates that are required. In part Houben said the same as DNB mailed me months before, while specifying the administrative burdens would be several hundreds of thousands of euros. By now we know this is a fallacy. Regarding the “reports” as mentioned in the FD: according to Houben these “reports” (whatever they are) are checked by DNB’s accountants for the annual report and presumably should proof the existence of the Dutch gold. However, in DNB’s annual report 2016 there is no mentioning of such gold related “reports”, or any gold auditing for that matter. What are these “reports”? And in case these are audit reports, why aren't those public? Let’s address the arguments for DNB's excuse in the FD: "because many people would have to check the contents and the many updates that are required" . This is nonsense. For a proper audit, indeed, the bar lists would have to be checked against the physical inventory at the BOE, FRBNY, BOC and DNB. But, if the Dutch gold is audited by now, what additional checks would have to be done for publishing the bar list? Neither are any "updates" required as everything has been allocated since 2008. All DNB's justifications have fallen apart. I asked DNB in November 2016 by email, what exactly are the “reports” mentioned in the FD special, and why can’t DNB publish the gold bar list as provided by the BOE (the one custodian openly stating to provide clients a bar list)? DNB replied [brackets added by Koos Jansen]: Exhibit 14. In the red frame it reads: In response to your messages I can inform you DNB has internal overviews of her gold possessions. These are being checked by external accountants [presumably this means the Dutch gold is audited]. As stated previously, DNB considers publishing a gold bar list to serve no monetary purpose. Thereby, creating a bar list for publication would be costly regarding the different formats delivered by our custodians. This means we will not respect your request for obtaining the gold bar list. I presume DNB tries to communicate the gold has been audited, but how does one audit gold without a gold bar list that complies with LBMA standards? Only when cross checking bars with an inventory list that discloses all physical characteristics of the bars can audits be performed competently. Bar lists that comply with LBMA standards are indispensable for a physical audit. Relying on audit documents ("reports"?) drafted by custodians is forgery. A physical audit has to be executed by a third party (not the owner and not the custodian). Common practise in the gold industry is to count 100 % and weigh 2 % of all bars at least once a year for an audit (source Bureau Veritas). I don't believe it would take DNB any effort to convert the different list formats by its custodians. It's all digital and can be converted into one file within seconds. (Though publishing the bar list in different formats is fine too.) By and by, publishing a gold bar list does serve a monetary purpose as it confirms how much monetary gold as nation truly holds. Without public bar lists countries can more easily create false data. Sadly, in the email dated 5 January 2017 (exhibit 14) DNB told me it won't reply to me anymore with respect to their bar list. haha. DNB paper “gold and secrets". Openness is our new policy. https://t.co/I1lYytYxaDpic.twitter.com/uURSX47WmV — BullionStar (@KoosJansen) October 26, 2016 In the Tweet above it reads in Dutch: Secrets. In the past a central bank was proud of it. Nobody was allowed to know how much gold we had and where it was stored. But the age of central banks cherishing their image of a closed fortress is long gone. Openness is our new policy. Conclusion The question is, who's not telling the truth here? That would be DNB, for sure, and possibly also the BOE and FRBNY. Just to be clear, the amount of gold leased out by DNB is nil. In 2012 the Dutch Minister Of Finance, De Jager, declared in congress DNB had ceased all gold leasing activities by 2008. Exhibit 15. Kamervragen 2012. In red, De Jager states, "No. DNB has notified me it ceased lending gold in 2008." Exhibit 16. Gold bullion vs unallocated accounts for the Netherlands. Since January 2013 the Dutch state holds solely gold bullion. Again, all the Dutch gold is allocated, and yet DNB declared in a newspaper the bar list can't be published because it would cost "hundreds of thousands of euros" - this has appeared to be an embarrassing statement and truly blows DNB's credibility. If DNB doesn't wish to disclose its bar list, for whatever reason, it would have done wise not to comment at all on this issue. But why all the nonsense? Time to speculate. We'll run through a few scenarios: Scenario 1) Publishing a bar list might limit DNB's future flexibility to intervene in financial markets. Currently, DNB hasn't got any gold leased out. But if the bar list would be published, my central bank would be obstructed in future covert leasing activities. Suppose, the gold price spikes in five months from now. DNB, or multiple central banks in concert, decide to lease out monetary gold in order to calm the physical market. When the leases would be undone several years later, surely the bars returned will not be the ones lend out. Following this scenario, when a bar list is published now it would be inaccurate in a few years time; showing bars that are long gone, and can show up on private gold ETF inventory lists. If readers question wether central bankers are capable of 'not telling the truth', consider what DNB's Governor said in an interview early 2012 when asked if he would repatriate any gold from the FRBNY. His answer was firm: "No". However, shortly after, DNB started to prepare repatriating by reinforcing its headquarters. A new security barrier was constructed around the compound. DNB confirmed to me this was done to prevent any trucks from crashing the building. Likely, the Governor 'did not tell the truth' in the interview for strategic reasons. Scenario 2) It's possible the BOE claims to provide its clients gold bar lists and auditing rights, but in reality it doesn't. Meaning, DNB doesn't have a bar list from the BOE that complies with LBMA standards, which forces them to come up with excuses whenever confronted. This scenario could mean custodial gold at the BOE (and FRBNY) has been embezzled. In 2016 economist Guillermo Barba pressured the Banco de México to publish a gold bar list of the Mexican gold stored at the BOE. In February 2017 Banco de México delivered Barba a list, but it didn't satisfy LBMA standards by far. Surely this was done on purpose, because how the list was distributed can never have been how the BOE keeps it. So prior to distribution parts of the list were edited. Barba pressured Banxico once more and received a new list in March 2017 (click here to download the list). But neither did the new list satisfy LBMA standards! The column in the list that reads "serial number", doesn't disclose the serial numbers physically inscribed on the bars, which makes them uniquely identifiable, but shows the BOE's internal numbering. In my opinion Barba was fooled twice by Banxico. Or Banxico was fooled twice by the BOE. In July 2014 the Australian central bank (RBA) published its bar list of gold stored at the BOE due to intense efforts by gold blogger Bullion Baron. But alas, the RBA gold bar list does not disclose unique serial numbers (click here to download). My colleague Ronan Manly tried to obtain a gold bar list from the Irish central bank (CBI); gold stored at the BOE. The CBI's first response was: The record concerned does not exist or cannot be found after all reasonable steps to ascertain its whereabouts have been taken, ... Your request was referred to two divisions within the Central Bank of Ireland, ... Both divisions have confirmed that they do not hold any such records which fall within the scope of this part of your request. Accordingly, this part of your request is refused. Eventually, after the BOE tried to block the request from CBI, Manly was duped with this file. All it really contains is a bar total and the total in fine ounces: Exhibit 17. Central bank of Ireland's gold account at the BOE. As far as I know, there has never been a serial number of a gold bar stored at the BOE released in the public domain. It can be the BOE is routinely deceiving its clients by distributing incomplete bar lists. In the past, the central bank of Austria (OeNB) has failed to audit its gold at the BOE. The Austrian Court of Audit (Der Rechnungshof) wrote in a report in 2015 [brackets added by Koos Jansen]: ... the gold depository contract with the depository in England [BOE] contained deficiencies. With respect to the gold reserves stored abroad, internal auditing measures were lacking. The OeNB had no appropriate concept to perform audits of its gold reserves. … Was the OeNB blocked entrance from BOE vaults in 2015? There is proof FRBNY clients have not been able to audit their gold in New York, at least not in 2007. The German Bundes Rechnungshof released a report in 2012 on the safety of the German gold abroad. Although the report is heavily redacted, on page 10 we read German auditors were not allowed entrance in the FRBNY gold vault to inspect their precious metals, nor were any other clients: A possibility for the owners to physically record the holdings of their gold is not provided in the terms and conditions. According to the FRBNY, it's a long-term practice not to allow the owners to inspect their assets in the interest of a safe working and control process. It has confirmed to the Bundesbank that these conditions for gold custody also apply to all other clients that store gold at the FRBNY. In response to repeated requests from the internal auditors of the Bundesbank, their representatives were given the opportunity to enter the vault system in June 2007 to get an impression of the safety precautions. However, the employees were not given access to the vault compartments, but only to an entrance hall. An examination of gold was therefore not possible. [Four redacted paragraphs follow] Clearly the Germans were blocked from auditing their metal, and for decades all FRBNY clients had suffered the same fate. Not surprisingly, after the developments between the OeNB, BOE, Bundesbank and FRBNY both European central banks decided to repatriate significant shares of their gold stored overseas. And both repatriate over the course of multiple years, which accentuates the friction between the custodians and their clients. Exhibit 18. Why OeNB hasn't repatriated 140 tonnes of gold from the UK within a few months is a mystery. Maybe DNB has experienced the same obstructions in New York as the Germans and hence decided to repatriate. Scenario 3) DNB just doesn't feel like publishing a gold bar list. Who's to say what the truth is? If readers can think of an additional scenario please comment below. My final conclusion is that DNB is lying about its gold bar list, which is worrisome as it shouldn't be necessary, or things behind the scenes are more convoluted and DNB is being lied to by its custodians, which is even more worrisome. In short, producing a bar list that complies with LBMA standards should be child's play. And only proper lists can grant us the safety of all the official gold reserves stored at the BOE and FRBNY. As of March 2017 the BOE and FRBNY stored an aggregated 10,821 tonnes of gold, of which the majority is monetary gold. The Bundesbank, OeNB and DNB all claim their gold is audited by now, but none of them has ever released an audit report. The German central bank wrote me it doesn't publish its audit reports "since Deutsche Bundesbank and its partners have agreed to maintain confidentiality with regard to the audits". More secrecy and central bank collusion, no surprises there. Exhibit 19. Email by BuBa's press division. Until central bankers are fully transparent about their gold dealings we can have but mere distrust in them.
Research counters view that ECB monetary policy has robbed Germans of their savings
In the past few weeks and months we have seen some reports wherein it became clear Germany is actually selling some of its gold on a monthly basis. That’s an interesting phenomenon as it’s weird to see a country secretly repatriating its gold which it starts to sell shortly afterwards. There’s no doubt it must have been easier to start selling when it was still located in the foreign vaults, and just transfer the cash proceeds back to Berlin or the Bundesbank. But okay, the sales are pretty marginal as Germany ‘dumped’ just 120,000 ounces of gold in the past three months. A move from 108.6 million ounces to 108.48 million ounces isn’t the end of the world, and definitely doesn’t indicate the start of a trend. But what did catch our attention (besides obviously the ‘Russian Alliance’ –consisting of Russia, Belarus and Kazakhstan – buying more gold), was the behaviour of Turkey. Not only are the Turks buying more gold at a substantially more aggressive pace than the Russians adding 950,000 ounces of the yellow metal in just three months, the purchases are also much more meaningful when you look at the bigger picture. In just three months, Turkey has increased its gold reserves by in excess of 7% and that’s a really substantial step for a relatively small country. What makes it even more interesting is the fact Turkey was a huge net seller in 2016 as it sold in excess of 3 million ounces of gold between June and December before increasing its position again (at a rather aggressive pace). There’s no real explanation for this, and we would be surprised if the Turkish Central Bank was trying to ‘time the market’. As this wouldn’t explain the substantial sales when the gold price lost its momentum in the second half of last year… As you can see on the previous image, the average weight of the precious metal in the total basket of foreign reserves has also been increasing from January until May (we are still waiting for Turkey to release its June update) has continued to increase in the first few months of the year. The Turkish timing might be pretty good, as gold has now once again bounced off its lows in the lower-1200 region, and has now moved above its 200 day and 50 day moving average, and this usually is a sign of strength. Source: stockcharts.com It now does look like the gold price is ready to attack the $1290-1300 levels again which might be a surprise considering the summer months are traditionally pretty weak for the precious metal. Are we gearing up for a few busy weeks and months? Time will tell! >>> Read our Guide to Gold right now!
В понедельник центральный банк Германии выпустил заявление, в котором предупредил о рисках, связанных с решением ЕЦБ покупать корпоративные облигации. К таким рискам он отнес вероятность убытков, а также то, что предпочтение может быть отдано облигациям крупных компаний, сообщает Dow Jones.
В 10:00 GMT Бундесбанк опубликует свой ежемесячный отчет В 15:30 GMT США проведет аукцион по продаже 3-х и 6-ти месячных облигаций В 23:50 GMT Банк Японии опубликует протокол совещания по вопросам кредитно-денежной политики Информационно-аналитический отдел TeleTradeИсточник: FxTeam
Authored by Don Quijones via WolfStreet.com, But the IMF has suggestions on how to win the War on Cash... In January 2017 the European Commission announced it was exploring the option of imposing upper limits on cash payments, with a view to implementing cross-regional measures as soon as 2018. To give the proposal a veneer of respectability and accountability the Commission launched a public consultation on the issue. Now, the answers are in, but they are not what the Commission was expecting. A staggering 95% of the respondents said they were opposed to a cash ceiling at EU level. Even more emphatic was the answer to the following question: “How would the introduction of restrictions on payments in cash at EU level benefit you, or your business or your organisation (multiple replies are possible)?” In the curious absence of an explicit “not at all” option, 99.18% chose to respond with “no answer.” In other words, less than 1% of the more than 30,000 people consulted could think of a single benefit of the EU unleashing cross-regional cash limits. Granted, 37% of respondents were from Germany and 19% from Austria (56% in total), two countries that have a die-hard love for physical lucre. Even among millennials in Germany, two-thirds say they prefer paying in cash to electronic means, a much higher level than in almost any other advanced economy with the exception of Japan. Another 35% of the survey respondents were from France, a country that is not quite so enamored with cash and whose government has already imposed a maximum cash limit of €1,000. By its very nature the survey almost certainly attracted a disproportionate number of arch-defenders of physical cash. As such, the responses it elicited are unlikely to be a perfect representation of how all Europeans would feel about the EU’s plans to introduce maximum cash limits. Nonetheless, the sheer strength of opposition should (but probably won’t) give the apparatchiks in Brussels pause for thought. Respondents cited a number of objections to EU-wide cash restrictions, chief among them the convenience of using cash and the limited impact the measure would probably have on achieving its “stated” objectives of curbing terrorism, tax evasion, and money laundering. Of course, there are many other reasons to worry about living in a cashless (or “less cash”) society that were not offered as an option in the survey, including the vastly increased power it would give to political and monetary authorities as well as the near-impossibility of ever escaping from the clutches of the banking system or central banks’ monetary experiments. The biggest cited concern for respondents was the threat the cash restrictions would pose to privacy and personal anonymity. A total of 87% of respondents viewed paying with cash as an essential personal freedom. The European Commission would beg to differ. In the small print accompanying the draft legislation it launched in January, it pointed out that privacy and anonymity do not constitute “fundamental” human rights. Be that as it may, many Europeans still clearly have a soft spot for physical money. If the EU authorities push too hard, too fast in their war on cash, they could provoke a popular backlash. In Germany, trust in Europe’s financial institutions is already at a historic low, with only one in three Germans saying they have confidence in the ECB. The longer QE lasts, the more the number shrinks. Bundesbank president Jens Weidmann has already warned that it would be “disastrous” if people started to believe cash would be abolished — an oblique reference to the risk of negative interest rates and the escalating war on cash triggering a run on cash. The IMF has also waded into the debate with a working paper full of sage advice for governments keen on “de-cashing” – as the IMF calls this procedure – their economies against the will of their citizenry (emphasis added): The private-sector-led de-cashing seems preferable to the public-sector-led decashing. The former seems almost entirely benign (e.g., more use of mobile phones to pay for coffee), but still needs policy adaptation. The latter seems more questionable, and people may have valid objections to it. De-cashing of either kind leaves both individuals and states more vulnerable to disruptions, ranging from power outages to hacks to cyberwarfare. In any case, the tempting attempts to impose de-cashing by a decree should be avoided, given the popular personal attachment to cash. A targeted outreach program is needed to alleviate suspicions related to de-cashing; in particular, that by de-cashing the authorities are trying to control all aspects of peoples’ lives, including their use of money, or push personal savings into banks. It basically involves making it easier and cheaper for people to use electronic payment methods while subtly turning the screw on those who would prefer to continue using cash (for perfectly valid reasons, as the IMF itself admits), presumably by making it more difficult and expensive to do so. In many places it’s already happening. But a surprisingly large number of people still appear to have a strong sense of attachment to physical money, particularly in Europe’s most important economy, Germany. And if the survey is any indication, they have little interest in changing those habits.
Authored by Louis Cammarosano via Smaulgld.com, Deutsche Bundesbank gold reserves shrink 45 tons over the past ten years. German Central Bank holdings fall From 3,420.6 tons at the end of Q2 2007 to 3375.6 tons, a drop of 1,446,783 ounces. German gold reserves have decreased 1.3% over ten years. Bring the Gold Home & Sell Some Deutsche Bundesbank, the central bank of Germany, has gained a high profile for its insistence on repatriating a good portion of its gold from vaults at the New York Fed, the Bank of England of London and the Bank of France in Paris. We have been covering the German gold repatriation story since they made their request in 2013 here, here, here and here. The German repatriation requests aimed to rebalance the Deutsche Bundesbank’s gold holdings from nearly 70% held abroad to 50% held within Germany’s borders. The German Central Bank announced earlier this year that it has nearly completed its plan to repatriate its gold. Jens Weidman, President of the Deutsche Bundesbank once famously said: “Indeed, the fact that central banks can create money out of thin air, so to speak, is something that many observers are likely to find surprising and strange, perhaps mystical and dreamlike, too – or even nightmarish.” In this video from the Deutsche Bundesbank, German nationals, Deutsche Bundesbank representatives and Herr Weidman explain the importance of gold to Germany. Given the Deutsche Bundesbank’s statements and the accelerated German gold repatriation schedule, we are surprised to see that the Deutsche Bundesbank has been a steady seller of its gold over the past ten years. German Gold Reserves 2007 – 2017 The Duetsche Bundesbank gold reserves fell 45 tons from June 30 2007 to May 31, 2017. The Central Bank of Germany holds the second largest gold reserves of any central bank. Currently, with the People’s Bank of China halting its gold purchases since October 2016, only the Central Banks of Russia, Kazakhstan and recently Turkey are steady buyers of gold.
An advisor to China's central bank, Sheng Songcheng, said that virtual currencies like bitcoin are assets but do not have the fundamental attributes needed to be a currency that could meet modern economic development needs. Speaking in an interview with financial magazine Yicai, the PBOC advisors said that the adoption of Bitcoin as a national currency by a country "could lead to its economic collapse." Sheng Songcheng, a counselor at the PBoC, dismissed digital currencies like bitcoin as assets that lack the value basis of a legitimate currency. "Bitcoin does not have the fundamental attributes needed to be a currency as it is a string of code generated by complex algorithms, and does not have inherent value... But I do not deny that virtual currencies have technical value and are a type of asset," he said cited by Reuters. Apparently he is unaware that paper currencies - the type preferred by central bankers - is made of either strings of linen and paper or strings of 1s and 0s, and - while also having no inherent value - can be infinitely created out of thin air. Sheng, who was the director-general of the Department of Statistics and Research at the People’s Bank of China, holds a PhD in economics from the Shanghai University of Finance and Economics in the 90s. He is currently the professor of economics and finance at a business school in Shanghai. Sheng warned that the deflationary nature of digital currencies - unlike fiat money there is a hard limit on how much can be reated - would mean that they would not function well as a currency or medium of exchange in modern economies. Expanding on his criticism, Reuters quoted Sheng as stated that "Bitcoin would reach its ceiling of 21 million in 2140. If it is accepted as standard money, that will inevitably lead to deflation and constrain economic growth." Of course, that same feature would assure that consumers' purchasing power does not vaporize every time central bankers make a mistake and unleash hyperinflation. Think of it as the old fiat vs gold-backed currency debate, only in this case it's bitcoin-based. His objection is to be expected: after all no central bank wants to be constrained in how much "money" it can print to stimulate inflation in a world where debt/GDP is 327%; and where China's credit creation dwarfs every other central bank. Recall that in the aftermath of the financial crisis, it was China that served as the dynamo of global "growth" as it doubled its total debt over the past decade, something it would be unable to do if there was a hard ceiling on the amount of currency in circulation. Sheng’s comments come at a time of increased PBOC scrutiny of the country’s bitcoin trading markets starting in January of this year. The regulatory oversight has resulted in a number of significant changes among Chinese bitcoin exchanges including the addition of trading fees, stricter know-your-customer/anti-money laundering norms and the curb of margin or loan-based trading. However, Sheng’s most stinging criticism of digital currencies was centered on their volatility, alleging “fluctuations in their prices can easily reach 10 to 30 percent” he added according to cryptocoinsnews: "If a country accepts one of them as its national currency, the entire national economy could collapse due to currency volatility." Which, however, does not explain why various central banks like the ECB and BOE do hold a favorable outlook on digital currencies. One footnote here is that unlike Bitcoin, the digital currencies envision by central banks would be entirely under their control, in effect simply replacing one form of fiat for another, and better yet, making it digital so there is no place to hide the next time rates go negative. * * * Many governments around the world are still exploring how to regulate and classify bitcoin, whose value surged last month to just shy of $3,000. China has classified it as a "virtual good". Meanwhile, China’s central bank – having opened its digital currency research institute earlier this month – is accelerating its efforts toward launching its own digital currency. As discussed earlier this week, the PBOC completed an early trial of its digital currency on a blockchain late last year. The opinions offered by the former PBoC official are nothing new when pitted with criticisms of decentralized, state-agnostic digital currencies by other central bankers elsewhere. Less than a month ago, German central bank president Jens Wiedmann claimed that instant bank payments would put an end to most citizens’ interest in digital currencies like bitcoin. For separate reasons, less than a month ago, Bundesbank president Jens Wiedmann also claimed that digital currencies will "make the next crisis worse."
S&P futures are little changed following yesterday's rout even as Asian and European markets continued selling; the pound slid on poor factory data, the yen tumbled after the BOJ intervened to stabilize the JGB bond market, precious metals flash crashed early in the session, while the selloff in oil accelerated despite yesterday's massive inventory draw, although at least yesterday's sharp bond tantrum has stabilized. MSCI's gauge of global stocks was at its lowest since late May's record highs and down 0.6% for the week. Global stocks are poised to end the week at six-week lows in the face of oil weakness, a spike in bond yields and anticipation of tighter monetary policy, particularly in the United States. Concerns that the world's central banks are moving closer to unwinding ultra-loose monetary policies have roiled markets and ECB minutes released on Wednesday indicate its policymakers are open to further steps. This sent German government bond yields to 18-month highs, lifted the euro and weighed on stocks. "Once again, bond markets are ruling FX and having an increasing impact on equity markets," strategists at Morgan Stanley, led by Hans Redeker, said, drawing parallels with moves seen in 2013 during the so-called "taper tantrum," when Fed signals about withdrawing liquidity hit markets. The dollar rose against a basket of major currencies and hit a seven-week high against the yen after the Bank of Japan increased its government bond buying, expanding monetary policy when other central banks are moving towards tightening. Despite Thursday's massive DOE inventory draw, oil was unable to sustain gains and Brent dropped to $47.26. S&P futures held steady as investors await the June jobs report and the first official meeting between Donald Trump and Vladimir Putin. S&P futures traded at 2,410 after the cash index dropped to a a six-week low on Thursday, when real estate stocks had their biggest daily drop in 2017. Both Dow Jones and Nasdaq 100 futures are also little changed. Looking at Asia, the yen fell sharply and JGB yields pulled back from five-month highs after the BOJ announced its first unlimited fixed-rate bond purchases since February. As discussed last night, this morning the BoJ offered to buy unlimited fixed-rate purchases for the first time since February to cap the move, offering specifically to buy 10y bonds at 0.110%. While no bids were subsequently tendered, the offer has resulted in yields dropping as low as 0.081%. It’s worth noting that this is the third time that the BoJ has flexed its muscles in controlling the yield curve since introducing the policy in September. The JGB 10s30s re-approaches steepest levels YTD in reaction. Despite the BOJ intervention, Australian sovereign bonds were under heavy selling pressure with the 10-year yield jumping as much as ten basis points to 2.736%; shares in Sydney 1% lower. In China the 7-day repo rate fell seven basis points despite PBOC skipping liquidity operations for eleventh session and draining a whopping CNY 750 billion over the same period; the onshore yuan little was changed. Overnight, China reported that its FX reserves rose for the 5th month in a row, rising another $3bn in June to $3.057TN, however the increase was driven mostly by non-USD currency appreciation. European stocks fell even as the Utilities sector supported risk with Centrica up 4.4% following reported M&A interest. German 10-year Bund yields climbing to an 18-month high as Treasuries also slipped modestly, both rising by 1bp. Italian BTPs underperform due to bond exchange operation increasing duration. The Euro continued its upward move while sterling dropped sharply below 1.29 after U.K. May industrial and construction outputs both dropped, missing an expected increase; core bonds opened steady after yesterday’s sharp technical driven sell-off A quick preview of today's payrolls report courtesy of Deutsche Bank (a detailed breakdown can be found here): Looking ahead to payrolls then, following the low 138k print in May the consensus for June is currently sitting at 178k. Our US economists expect a slightly more meaningful rebound to 210k which would be likely sufficient to keep the unemployment rate steady at 4.3% assuming a slight nudge up in the participation rate. Yesterday’s ADP print (158k vs. 188k expected) was a little less than what the market had expected (and included 33k of downward revisions) however it’s worth noting that the employment components in both of the ISM’s this week have been overall fairly solid (57.2 for the manufacturing sector and 55.8 for the services sector) and also that the ADP hasn’t necessarily been the best predictor of payrolls in recent months. As always also keep an eye on other elements of the report including average hourly earnings (+0.3% mom expected). In Rates, German 10-year yields climbed one basis point to 0.57 percent as of 10:50 a.m. in London after rising 9 basis points on Thursday. The yield on 10-year Treasuries added one basis point to 2.38 percent, after climbing four basis points on Thursday. Yields in the Bloomberg USD Emerging Market Sovereign Bond Index advanced 17 basis points to 4.81 percent this week, the most since the week ending Nov. 18. EM sovereign dollar bonds posted their worst week since November. In commodity markets, Brent crude futures, the international benchmark for oil prices, were trading down 1.2 percent, at $47.55 per barrel. Oil prices are down more than 16 percent this year, muddying the outlook for inflation expectations globally. WTI crude slips below $45 on rising output: West Texas Intermediate tumbled 2.5% to $44.38 a barrel, more than erasing Thursday’s 0.9 percent gain. Oil is down 3.6 percent for the week as a decline in U.S. stockpiles failed to convince investors that global markets are rebalancing. Gold slipped 0.3% to 1,221.62 an ounce. The precious metal is down 1.6 percent for the week, its worst performance since early May. Dalian iron ore erases early loss to trade 1.1% stronger The yen dropped 0.4 percent to 113.70 per dollar, reversing an earlier gain of 0.1 percent. The currency is down 1.1 percent for the week, heading for the biggest drop since the end of April. The Bloomberg Dollar Spot Index rose less than 0.1 percent after dropping 0.3 percent on Thursday. The euro was little changed at $1.1420 after jumping 0.6 percent in the previous session, while the pound slipped 0.4% to $1.2918. The main economic event is the June non-farm payroll data is expected later, there are no major earnings. All eyes will be on the G-20 meeting in Hamburg. Bulletin headline summary from RanSquawk USD-index was contained below 96.00. Precious metals pressured by a flash crash in silver Poor UK Data weighs on GBP Looking ahead, highlights include US and Canadian job reports Market Snapshot S&P 500 futures up 0.05% at 2,409.50 STOXX Europe 600 down 0.2% to 379.54 MXAP down 0.6% to 152.84 MXAPJ down 0.4% to 500.36 Nikkei down 0.3% to 19,929.09 Topix down 0.5% to 1,607.06 Hang Seng Index down 0.5% to 25,340.85 Shanghai Composite up 0.2% to 3,217.96 Sensex up 0.1% to 31,400.50 Australia S&P/ASX 200 down 1% to 5,703.57 Kospi down 0.3% to 2,379.87 German 10Y yield fell 0.2 bps to 0.56% Euro down 0.06% to 1.1416 per US$ Brent Futures down 1.8% to $47.26/bbl WTI Futures down to $44.38/bbl Italian 10Y yield rose 10.7 bps to 1.973% Spanish 10Y yield fell 1.4 bps to 1.664% Gold spot down 0.3% to $1,221.55 U.S. Dollar Index up 0.2% to 95.96 Top Overnight News Chinese President Xi Jinping took a swipe at the U.S. for retreating from globalization, exposing the tensions before a meeting of world leaders divided over everything from trade and climate change to handling North Korea’s provocations Hedge-fund investor Ray Dalio called time on the era of central bank stimulus, saying the global economy is heading toward a new stage where markets won’t get the same level of support from monetary policy makers The BOJ asserted control over the nation’s bond yields, sending borrowing costs lower with its first fixed-rate purchase operation since February after a global debt selloff Wal-Mart Stores sold yen bonds for the first time in seven years, taking advantage of falling fundraising costs and Japanese demand for securities issued by well-known U.S. firms Apple fires back at supplier Imagination in contract disputeEuropean May Industrial Production m/m: Germany 1.2% vs 0.2% est; France 1.9% vs 0.6% est; Spain 1.2% vs 0.5% est. ECB’s Coeure: underlying inflation pressure still weak; fears regarding side of effects of negative rates not justified at present ECB’s Knot: policy decisions will always be dictated by the economic circumstances and not instrument availability U.K. May Industrial Production m/m: -0.1% vs +0.4% est; motor vehicle production -4.4%, most since Feb. 2016 BOJ: announces first unlimited fixed-rate bond purchase operation since February; receives no tendered bids China June FX Reserves rise $3.2b from May to $3.056t; fifth consecutive monthly rise Merkel Girds for G-20 Discord as Trump-Putin Meeting Looms Trump Says Had ’Great Meeting’ With Merkel, Abe, Moon Russians Are Said to Be Suspects in Nuclear Site Hackings Russia ready to weigh any market proposal at July 24 summit China teapot refinery runs fall to lowest in two months: SCI99 Icahn’s Tropicana Purchases Chelsea Hotel in Atlantic City Asia stock markets traded negative across the board amid spill-over selling after global central banks continued strike a hawkish tone. ASX 200 (-1.8%) and Nikkei 225 (-0.3%) were pressured from the open with energy among the laggards after oil prices failed to maintain post-DoE gains, while miners were also spooked following a flash crash in silver, and to a much lesser extent gold, which was speculated to have been caused by a fat finger early in the session. Shanghai Comp. (-0.2%) and Hang Seng (-0.5%) conformed to the downbeat tone after the PBoC refrained from OMOs for the 11th consecutive day which resulted to a net liquidity drain of CNY 250bn for the week and was shortly followed by surges in money market rates, with the CNH overnight HIBOR up by over 70bps and at a 1-month high. 10yr JGBs were supported following the Rinban operation in which the BoJ increased its purchases in the 5yr-10yr by JPY 50bIn and offered to buy an unlimited amount at a fixed yield of 0.11%. This measure was in response to an increase in 10yr yields which initially rose to their highest since February, alongside gains across global yields. However, upside in 10yr JGBs then petered out as the BoJ's fixed rate operation received no bids, considering that market prices were above the BoJ's offer. BoJ offered to buy unlimited amount of 10yr JGBs at yield of 0.110%. Top Asian News Hong Kong Braces for Higher Rates as Currency Losses Quicken World’s Biggest Pension Fund Has Best Performance in Two Years Japanese Yields Retreat After BOJ Offer While Aussie Bonds Slide China Foreign Reserves Rise for a Fifth Month as Yuan Stabilizes Bank Indonesia Sees 2017 Budget Deficit at 2.6% of GDP at Most Citi Is Said to Start Shutting Down Branches in S. Korea: Yonhap EUR bourses have not taken any real direction; trading marginally lower for the session, as Energy names lag following the evening bearish pressure seen in oil markets. A miss from the UK proved to add no real concern in equity markets, as the FTSE shrugged off concerns, possibly trading solitude in the figures potentially delaying the BoE. European fixed income markets have taken small direction from the bid seen in the Asian session, following the BoJ's offer to buy unlimited about of lOy JGBs. The German bund still trades above 0.50%, however, the yield does underperform across the curve; with the global 10 years lagging against the rest of the maturities. Gilts took much of the morning attention, as the poor UK figures resulted support for buying in the UK 10y. BTPs are slipping however, many have touted this to expected ahead of today's exchange tapping the 2.33 to lift front end paper. The 10 years remain in focus due to the aforementioned BoJ comments; with the BTP/Bunds spread now at 1.6bps and BTP/Bonos 1bps cheaper. Top European News German Industry Output Rises for Fifth Month Amid Solid Upswing U.K. Factories, Builders Cut Output, Clouding Growth Outlook U.K. Says Enormously Disappointed at Failure of Cyprus Talks U.K. House Prices Increase at Slowest Pace in Four Years Scale Into Long Positions in Bunds Around 0.62%, Citigroup Says Inflation ‘Shock’ Gives Bank of Russia Food for Thought on Rates Activist Fund Elliott Is Said to Build Stada Stake Amid Bids In currencies, the headline number coming into US jobs data was UK Manufacturing and Industrial Production taking the morning spotlight with the UK missing across the board. The concern is interesting, as the BoE has taken a more hawkish tone of late, leaving focus now on the BoE, if they will continue to indicate that the UK economy is ready for a 25bps move. The NFP report will take the vast focus today, alongside CAD watchers looking out for the Canadian employment figures. Price action across FX markets has followed the usual pre-NFP tone, seeing subdued trade as participants await. EUR has continued to gain and will be likely the main focus into the NFP report, optimism for EUR is clear with United Overseas Bank the latest to follow Deutsche and Morgan Stanley in taking EUR/USD long positions. The CAD recovery has slowed, largely due to the increased oil production out of the US, as 1.3202 behaves as the next key resistance level in USD/CAD. Loony watchers will await the Canadian employment figures, with the BoC very much taking centre court on men's quarter finals day. The headline employment change is expected at 10K and unemployment 6.6%, any drastic change here could potentially hinder the BoCs plans. In commodities, precious metals garnered much of the attention overnight — stemmed by a Silver flash crash, with many accounting this to a fat Finger', a mistake that is seemingly becoming more and more common. Silver fell from 16.140, printing a low of 14.328, however, a huge bounce was evident and the metal trades near pre-crash levels. The silver move weighed on the other precious metals, with Gold and Platinum seeing selling pressure off the back of the overnight fat finger. Oil has continued to reside near session lows through today's trade, as increased output continues to overshadow the DoE report. Production being ramped-up by the USA, alongside rebel problems lowering in Syria and Nigeria a further lmin BPD is being pumped. The increased production from these countries have put a huge dent in the agreed combined 1.8min BPD cut across the OPEC nations and Russia. Looking at the day ahead, this morning in Europe we are due get May industrial production reports from Germany, France and the UK as well as trade data from the latter two countries. Over in the US it’s all about the June employment report due out at 8.30am. It’s also worth keeping an eye on the Fed’s July 2017 monetary policy report due to be delivered to Congress at 11am. This will form the basis for Yellen’s testimony in front of Congress and the Senate next week which is almost always a closely watched event. Finally the other potentially significant event for markets is the G-20 leaders gathering in Hamburg. The gathering kicks off today and continues into the weekend with Merkel, Trump and Putin amongst the leaders attending. US Event Calendar 8:30am: Change in Nonfarm Payrolls, est. 178,000, prior 138,000 Unemployment Rate, est. 4.3%, prior 4.3% Average Hourly Earnings MoM, est. 0.3%, prior 0.2%; YoY, est. 2.6%, prior 2.5% Average Weekly Hours All Employees, est. 34.4, prior 34.4 Labor Force Participation Rate, est. 62.71%, prior 62.7% Underemployment Rate, prior 8.4% DB's Jim Reid concludes the overnight wrap Payrolls Friday comes today at an intriguing time for markets. If you'd chosen these last two weeks to have been on your compulsory time away then you'd be coming back to a very different atmosphere to the one you'd left. It was only last Tuesday morning that we were casually waiting for Draghi to speak in Sintra. Innocent days indeed. Yesterday saw another sharp sell-off in bonds and we again recap the 10 year moves yesterday alongside the moves since the open on Tuesday 27th June - aka Draghi Day. The first number in brackets refers to yesterday’s move while the second number is since the open on Draghi Day. The moves are as follows: Germany (+9.1bps and +31.7bps), US (+4.3bps +22.9bps), France (+9.9bps and +32.0bps), Italy (+10.9bps and +36.9bps), Spain (+10.4bps and +30.1bps) and UK (+5.5bps and +30.5bps). Although the moves in Japan have been far less extreme, this morning 10y JGBs touched a high of 0.103% and crucially edged above 0.10% and what is seen as the upper limit of the BoJ’s target range. By comparison on the start of Draghi Day yields were hovering around 0.049%. However, early this morning the BoJ offered to buy unlimited fixed-rate purchases for the first time since February to cap the move, offering specifically to buy 10y bonds at 0.110%. While no bids were subsequently tendered, the offer has resulted in yields dropping to 0.081% as we go to print. It’s worth noting that this is the third time that the BoJ has flexed its muscles in controlling the yield curve since introducing the policy in September. Putting Japan to one side, there’s no doubt that there has been a significant repricing in the last week and a half across global bond markets. 10y Bunds cleared 0.500% with some ease yesterday before closing at 0.562% and to the highest since January 2016. Unsurprisingly some of the longer duration assets stand out with this rate move. Argentina’s 100y bond issued last month is down over 4pts during the rout. The longest dated Gilt (July 2068 maturity) is off 13pts. The longest dated OAT (May 2066 maturity) is off 9pts and the longest dated BTP (March 2067 maturity) is off 6pts. Looking ahead to payrolls then, following the low 138k print in May the consensus for June is currently sitting at 178k. Our US economists expect a slightly more meaningful rebound to 210k which would be likely sufficient to keep the unemployment rate steady at 4.3% assuming a slight nudge up in the participation rate. Yesterday’s ADP print (158k vs. 188k expected) was a little less than what the market had expected (and included 33k of downward revisions) however it’s worth noting that the employment components in both of the ISM’s this week have been overall fairly solid (57.2 for the manufacturing sector and 55.8 for the services sector) and also that the ADP hasn’t necessarily been the best predictor of payrolls in recent months. As always also keep an eye on other elements of the report including average hourly earnings (+0.3% mom expected). Back to the bond moves yesterday, the initial selloff appeared to be sparked by a weak 30y auction in France which attracted a bid to cover ratio of just 1.53x compared to 1.93x at the previous sale last month. Not long after that we got the ECB minutes which appeared to suggest some debate amongst policy members about removing the reference to the easing bias around QE. While it was subsequently left in, with the minutes also cautioning to the fact that “even small and incremental changes in the communication could be misperceived as signalling a more fundamental change in policy direction”, the discussion did appear to add more fuel to the fire around the normalization debate. The ECB’s Praet also spoke although his comments didn’t seem to garner much interest (mostly referencing the need to adopt a steady hand with policy). The Bundesbank’s Weidmann spoke after the European close however and said that “the continued economic recovery is opening the perspective of a monetary policy normalization” and that “it is decisive that the expansionary monetary policy is ended when it becomes necessary from a price stability perspective”. The BoE’s Ian McCafferty (hawkish) also said that we could see a couple of “modest rate rises” at the BoE over the next couple of years if the economy evolves along the lines of the forecasts put out in May. The end result of another 24-hour bond rout has also been a similarly weak session for equities. The S&P 500 closed -0.94% yesterday after rate-sensitive sectors took a hit and that move means that the index is now down -1.80% from the all-time high recorded intraday back on June 19th. The Dow and Nasdaq also finished -0.74% and -1.00% respectively while the Stoxx 600 closed -0.67% prior to this. European Banks did however rise another +0.65% and have now gained in 7 of the last 9 sessions. Commodities took a breather yesterday with Gold ending -0.15% and WTI Oil rebounding a modest +0.86%. This morning in Asia the Nikkei (-0.14%), Hang Seng (-0.38%), Shanghai Com (-0.24%), Kospi (-0.19%) and ASX (-1.15%) are all in the red while outside of JGBs yields across Asia Pac are also sharply higher. With regards to the remaining data in the US yesterday, the other notable release was the ISM non-manufacturing print for June which came in half a point higher relative to May at 57.4 (vs. 56.5 expected). In the details the new orders component rose 2.8pts to 60.5 while, as noted earlier, the employment component dipped 2pts to 55.8 albeit to a still relatively solid level. The final services PMI also surprised to the upside after being revised up 1.2pts from the initial flash reading to 54.2 which leaves it 0.6pts above the May reading. The rest of the data included a largely in line trade deficit for May ($46.5bn) and a 248k initial jobless claims reading (which was up 4k on the week prior). The latest batch of data has seen the Atlanta Fed revise down their Q2 GDP print to 2.7% (versus the 3.0% estimate a few days prior). Looking at the day ahead, this morning in Europe we are due get May industrial production reports from Germany, France and the UK as well as trade data from the latter two countries. Over in the US this afternoon it’s all about the aforementioned June employment report due out at 1.30pm BST. It’s also worth keeping an eye on the Fed’s July 2017 monetary policy report due to be delivered to Congress. This will form the basis for Yellen’s testimony in front of Congress and the Senate next week which is almost always a closely watched event. Finally the other potentially significant event for markets is the G-20 leaders gathering in Hamburg. The gathering kicks off today and continues into the weekend with Merkel, Trump and Putin amongst the leaders attending. So we’ll see if there are any interesting headlines to emerge from that. It’s worth also noting that the ECB’s Coeure is scheduled to take part in an annual economics forum on Sunday.
S&P futures were little changed at 2,425, ignoring the N.Korea tensions of the past two days which will likely be a major topic in the upcoming G-20 summit, as European stocks fluctuate and Asian markets advance. Crude oil fell, snapping the longest winning streak this year, as Russia said it opposed any proposal to deepen OPEC-led production cuts. Just like Tuesday, it was a session of two halves, with the Yen initially starting the day stronger as military tensions built up in Korean peninsula, and cash Treasuries breaking with a firmer tone as 10-year yield initially fell. Aussie reversed part of Tuesday’s losses despite a drop in Caixin PMI data, and Dalian iron ore 1.6% higher. "North Korea has rattled markets but central bankers are more important," said Kathleen Brooks, research director at City Index in London. "While North Korea’s military ambitions are a background threat for markets, we don’t think that this particular geopolitical event is at the stage yet where it will cause a spike in volatility." However as the session progressed, gold and the Japanese yen gave up early gains, with both the metal and the currency retreating. At the same time, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3 percent, regaining half the losses it saw on Tuesday when North Korea fired a missile into Japanese waters. South Korea's main index rebounded by 0.36 percent and Japan's Nikkei ended up 0.25 percent. Shanghai stocks rose more than 1 percent, despite a drop in the Caixin/Markit services purchasing managers' index (PMI) to 51.6 in June, from 52.8 in May. Of note in China is the continued aggressive tightening behind the scenes, with the People’s Bank of China refraining from offering funds in open-market operations for a ninth day, effectively draining more cash, in the past two weeks than it had injected from June 1 to June 19 amid quarter-end funding demand. The Chinese central bank has pulled 660b yuan since June 20, more than the 540b yuan it had injected from June 1 to June 19. The PBOC said there’s ample liquidity in the banking system, taking into account lenders’ reserve requirement payments and reverse-repo maturities. Sooner or later this latest tightening episode will hit risk assets and commodities, but not just yet. In fact, China’s 7-day repo rate dropped another 5bps to 2.71%, set for the lowest close since April 14. The overnight repo rate falls 14bps to 2.50%, heading for biggest decline in three monthsm while the cost of one-year interest-rate swaps declines 5bps to 3.42%. Meanwhile, the dollar rose as U.S. stock futures and Treasuries traded sideways before the FOMC Minutes release today. The euro dropped and European stocks edged higher amid a slew of services data, and as investors await Thursday’s publication of the latest ECB minutes. The return in risk sentiment helped USDJPY push higher through 113.60, the highest since May 16 as EUR/JPY breaks to another YTD high; EUR/USD briefly spiked lower after ECB’s Coeure says the ECB has not been discussing policy changes. Gilts underperform after hawkish commentary from BOE’s Saunders overnight and duration heavy corporate issuance, short-end leads gilt curve steeper. Crude futures sold off on OPEC production concerns and Russian comments (see below) mid-morning amid heavy volume. European equity markets initially rally from the open, DAX outperforms after Adidas upgrade; gains later fade as oil and gas stocks weigh. The Stoxx Europe 600 Index gained less than 0.1 percent after surging 1.1 percent on Monday. Futures on the S&P 500 Index were little changed. The cash index rose 0.2% Monday in a shortened session before the July 4 holiday. While aside from FX, there were little notable moves, oil futures dropped 1.7 percent in New York, snapping eight straight sessions of gains. Russia wants to continue with the current deal and any further supply curbs would send the wrong message to the market, according to government officials. The U.S. dollar gained, reducing the appeal of commodities denominated in that currency While prices have surged during the past week, oil remains in a bear market after concerns that rising global supply will offset output cuts from OPEC and its partners. Libya and Nigeria, exempt from the OPEC-led curbs, accounted for half of the group’s production boost last month, according to data compiled by Bloomberg. Focus now shifts to the key event on Wednesday, the latest Fed minutes. “The FOMC minutes will be the major macroeconomic highlight as the U.S. returns from the Independence Day break,” Ipek Ozkardeskaya, a market analyst at London Capital Group, wrote in a note. “Lack of details regarding the Fed’s balance sheet policy could further weigh on U.S. yields and the dollar.” “The more interesting aspect of the minutes is going to be what they have to say about the balance sheet, and in particular, if they give any hints about the time frame,” said Stephen Stanley, chief economist at Amherst Pierpont Securities in New York. Should the minutes refer to financial conditions, reiterating comments from Yellen, Fischer and Williams, the market will have to assume that the Fed may be willing to ignore the current inflation undershoot, leaving markets with very little other option than trading closer to the Fed’s own interest rate projections as expressed by the dots, Morgan Stanley strategists say in a note to clients. A shift towards more hawkish language by several major central banks has dominated the past week and left markets unsure of how much longer emergency stimulus in Europe will continue to support global asset prices. For now investors seem to be giving policymakers the benefit of the doubt that the global economy can take any tightening of monetary policy, although the latest data on Wednesday was mixed - strong in Europe and weaker in China. Currency markets were in limbo, the euro trading just over half a cent below last week's 14-month highs against the dollar. The dollar and yen were the main victims of the shift in language last week, but many analysts wonder whether the European Central Bank will be able to rein in money-printing later this year if the euro keeps gaining. "I meet a lot of people while I talk to clients who think the ECB simply won't be able to escape its current policy setting because a stronger currency is too damaging," said Societe Generale strategist Kit Juckes. "The thought the ECB will resist pressure...is still leading many ... to look for cheaper levels to buy euro." As a result, the Bloomberg Dollar Spot Index strengthened 0.2 percent. The British pound was 0.2 percent weaker at $1.2898. The euro also slipped 0.2 percent to &1.1326. In addition to the drop in oil, safe haven gold was also weaker, dropping 0.1% to $1,222.35 an ounce, erasing an earlier gain of 0.5 percent. In rates, the yield on 10-year Treasuries was little changed at 2.35%. U.K. benchmark yields advanced four basis points to 1.28 percent. French and German yields were little changed. Factory orders and Federal Reserve minutes expected later. Bulletin HeadlineSummary from RanSquawk Geopolitical tensions mount amid further missile testing from North Korea. North Korea aims to create an ICBM capable of hitting the US this year EUR sags as ECB's Couere says the ECB has yet to discuss changing policy. Looking ahead, highlights include FOMC minutes and API Crude Inventories. Market Snapshot S&P 500 futures little changed at 2,424.25 STOXX Europe 600 up 0.1% to 382.4 MXAP up 0.2% to 153.96 MXAPJ up 0.3% to 503.49 Nikkei up 0.3% to 20,081.63 Topix up 0.6% to 1,618.63 Hang Seng Index up 0.5% to 25,521.97 Shanghai Composite up 0.8% to 3,207.13 Sensex up 0.03% to 31,218.28 Australia S&P/ASX 200 down 0.4% to 5,763.25 Kospi up 0.3% to 2,388.35 German 10Y yield rose 0.9 bps to 0.484% Euro up 0.04% to 1.1350 per US$ Brent Futures up 0.08% to $49.65/bbl Italian 10Y yield fell 2.2 bps to 1.819% Spanish 10Y yield rose 1.3 bps to 1.538% Gold spot down 0.1% to $1,222.05 U.S. Dollar Index up 0.1% to 96.33 Top Overnight News Fed Minutes May Give Clues on When Balance- Sheet Runoff to Start Kim Jong Un ’firmly determined and committed’ to test ICBM capable of hitting U.S. within this year: KCNA UN Set to Meet on North Korea as U.S. Confirms Rocket Was ICBM; U.S. says North Korean ICBM test represents a new escalation of threat European Jun. Service PMIs: Spain 58.3 vs 56.5 est; Italy 53.6 vs 54.6 est; France 56.9 vs 55.3 est; Germany 54.0 vs 53.7 est; Markit note a further easing in cost inflationary pressures, as input prices rose at the weakest rate since last November ECB’s Coeure: the Governing Council has not been discussing changes in our monetary policy, that may come in the future, but it hasn’t come yet BOE’s Saunders says prepare for rate increases ’at some point’: Guardian Germany sees Saudi-led alliance rejecting Qatar’s crisis response Russia said to oppose any move to deepen OPEC cuts at July talks Trump-Putin Talks Raise Anxiety Ex- Spymaster Will Get Upper Hand Stada Supervisory Board Said to Discuss Replacing CEO Wiedenfels ANZ Said to Narrow Bidders in $3 Billion Sale of Wealth Unit AIA, MetLife Said to Ready Binding Bids for ANZ Wealth Unit: AFR HSBC Said in Talks With U.S. to End Crisis-Era Mortgage Probe Monte Paschi’s Italian Rescue Wins EU Nod After Months of Talks Euro Area Faces Capacity Bottlenecks as Recovery Gathers Pace U.K. Recommends Alexion’s Strensiq for Rare Bone Disorder Elbit Europe Unit Gets $35m Contract for Electro Optic Systems Poland May Pick Lockheed to Supply Mobile Rocket Launcher System General Motors China June Vehicle Sales Rise 4.3% on Year Freeport Indonesia Is Optimistic Will Achieve Win-Win Solution Asia equity markets were mostly higher as the region recovered from the opening losses triggered by heightened tensions in the Korean Peninsula after the recent North Korean missile test. ASX 200 (+0.1 %) and Nikkei 225 (+0.2%) were pressured for the majority of the session amid increased provocation by North Korea, although stocks in Japan returned flat with JPY price action as the main driver. China was initially subdued after Caixin Services PMI printed a 13-month low and as participants in Hong Kong were despondent from yesterday's tech-led selling, in which Tencent dropped over 4% after a state backed paper branded its game as poison and called for tighter regulation. However, stocks in the region were also resilient as the Shanghai Comp. (+0.7%) and Hang Seng (+0.6%) gradually rebounded into positive territory. Finally, 10yr JGBs were subdued as sentiment gradually improved with 10yr JGB futures breaking below last week's lows to test the 150.00 level to the downside. Chinese Caixin Services PMI (Jun) 51.6 vs. Exp. 52.9 (Prey. 52.8); 13-month low. (Newswires) - Caixin Composite PMI (Jun) 51.1 (Prey. 51.5) Top Asia News U.S. Confirms North Korea Missile Was ICBM, Warns of UN Action Singapore July COE First Open Tender: Summary (Table) Alibaba Challenges Google, Amazon With New Echo-Like Device Flipkart, Snapdeal Said to Duel Over $100 Million Valuation Gap UN Set to Meet on North Korea as U.S. Confirms Rocket Was ICBM BHP’s New Chairman to Drive ‘Radical Shift’ at World’s Top Miner Essar Steel Launches Challenge to Stop Insolvency Proceedings Asia Stocks Rebound While Haven-Asset Demand Fades: Markets Wrap Freeport, Indonesia Eye Early Resolution to Grasberg Dispute In European markets, risk appetite has been evident following the European cash equity open, despite Korean Peninsula geopolitical concerns continuing. Materials outperform, as Glencore trades up over 2% in the FTSE. Credit Suisse have noted the recent correlation between the oil names and mining names, as the recent reprieve seen in Oil markets seemingly benefiting the aforementioned mining names.The risk on sentiment has been led by the treasury market, as yields continue to strengthen across the AAA's. Increasingly hawkish commentary from the BoE, most recently BoE's Saunders, has taken its toll on UK paper, with the weakness in Gilts leading to stops being run across the other majors. The lOy Bund is looking towards the 0.50% yield, with the T-note now trading around the 2.30% level. JPY has also seen continued bearish pressure, the noticeable mover in early FX trade, trading past the week's high, now set to test 114.31 (May's high). Top European News Russia Said to Oppose Any Move to Deepen OPEC Cuts at Talks North Korea Says Missile It Fired Today Was An ICBM Yen Reverses Gain as Risk Sentiment Improves, Treasuries Drop Bunds Heavy as Stocks Gain, Bobl Lags; Gilts Hit on Issuance Baidu Snags 50-Plus Partners for its Apollo Driverless Car Qatar’s Antagonists Huddle on Next Steps as Deadline Expires Looking at the day ahead, this morning in Europe the main focus will likely be on the remaining PMIs (services and composite readings). We’ll get final revisions for the Euro area, Germany and France as well as the first look at the data in the periphery and the UK. The other data due to be released this morning is May retail sales figures for the Euro area. Over in the US we’ll get May factory orders data and also final revisions to the May durable and capital goods numbers. This evening we’ll then get the FOMC minutes from the June meeting where it’ll be interesting to see how much of a debate there is around the inflation outlook given some of the Fed speak recently. Along with that, it’ll be interesting to see if there are any further details around balance sheet normalization. Away from the data German Chancellor Merkel is due to meet Chinese President Xi Jinping ahead of the G20 summit later this week. US Event Calendar 10am: Factory Orders, est. -0.5%, prior -0.2%; Durable Goods Orders, est. -1.0%, prior -1.1%Factory Orders Ex Trans, prior 0.1%; Durables Ex Transportation, prior 0.1% Cap Goods Orders Nondef Ex Air, prior -0.2%; Cap Goods Ship Nondef Ex Air, prior -0.2% 2pm: FOMC Meeting Minutes DB's Jim Reid concludes the overnight wrap Happy Boxing Independence Day. I'm sure there will likely still be lower than average volumes today as people take an extended break after yesterday's celebrations. One interesting landmark about today is that it marks exactly 10 years since the last UK rate hike. Interestingly, if you look across the wider G20 then there are only 2 other central banks who can also say that they have gone at least 10 years since last hiking. One is Japan and the other is Saudi Arabia. Those two countries last hiked their benchmark rates in February 2007, so only a few months ahead of the BoE. It’s worth adding that we included individual central banks within the EU (given that it is part of the G20) so the actual sample size was 43 (that also includes individual central banks as part of the ECB). In an otherwise quiet start, central banks are one of the two main themes for markets so far this week. Indeed yesterday we heard from a couple more ECB speakers. The first was board member Peter Praet who, in a speech in Rome, preached for patience at the ECB given that inflation still needs “more time to show through convincingly in the data”. He also said that the ECB needs to be persistent given that the baseline scenario for future inflation "remains crucially contingent on very easy financing conditions which to a large extent depend on the current accommodative policy stance”. Fellow board member Ewald Notowny told an audience that the ECB should “normalize as soon as the economy allows” but that at the same time he “expects a long period of low rates”. The other theme for markets in the last 24 hours is one of a geopolitical nature following confirmation that North Korea had fired an intercontinental ballistic missile yesterday – the first such missile launch of its kind by North Korea. US Secretary of State Rex Tillerson called the move a “new escalation of the threat” last night and that “global action is required to stop a global threat”. Tillerson also said that “any country that hosts North Korean guest workers, provides any economic or military benefits, or fails to fully implement UN Security Council resolutions is aiding and abetting a dangerous regime”. Russia’s Putin and China’s Xi also condemned the move at a meeting in Moscow. The UN Security Council have announced that they will hold an emergency closed session on Wednesday to discuss the latest act while overnight we’ve learned that both the US and South Korea have conducted joint test missile launches of their own. One would have to imagine that this subject will dominate Friday and Saturday’s G20 summit agenda. As a reminder both President Trump and China’s Xi will be attending and it’s not gone unnoticed that tensions between the two leaders has been climbing in past couple of weeks. That North Korea news appeared to be the catalyst which saw markets take a few chips off the table yesterday, albeit on thin volumes. The Stoxx 600 (-0.29%), DAX (-0.31%) and CAC (-0.40%) were all lower while Asia currencies were also weaker for the most part - particularly the South Korean Won (-0.34% and Taiwanese Dollar (-0.29%). Gold (+0.26%) rose for the first time in 6 days and is up another +0.31% this morning, while the Yen (+0.28%) is also a little firmer. Bond markets were pretty subdued with no real standout moves to highlight. The same can be said for WTI Oil which consolidated above $47/bbl despite some reports that Russia is opposing a proposal for a larger cut to production in the OPEC deal at the meeting later this month. This morning in Asia markets have bounced back a bit following a soft start. The Nikkei (+0.07%), Hang Seng (+0.35%), Shanghai Comp (+0.24%) and Kospi (+0.17%) have all edged higher, although the ASX (-0.37%) is a shade lower. The gains in China are coming despite a reasonable decline in the Caixin services PMI to 51.6 in June from 52.8 the month prior. In Japan the Nikkei services PMI rose 0.3pts to 53.3 in June. Moving on. With little in the way of interesting macro data yesterday (the only release being a soft -0.4% mom Euro area PPI reading for May), the more interesting data was the latest ECB CSPP and PSPP data. The former included monthly totals. Firstly the purchases settled last week implied an average daily run rate of €327mn against the average since CSPP started of €364mn. Although June's purchases have dipped a bit the CSPP/PSPP ratio was 13.6% last month, down from 14.7% in May, but still above the average of 11.6% before the overall QE was trimmed in April. Further on this the average monthly run rate since April 2017 (after QE trimmed) has been €7.49bn (assuming 21 business days per month). The equivalent between July 2016 and March 2017 was €7.59bn (assuming 21 business day per month). On the topic of the CSPP, Michal in my team has just published a report “CSPP Update Before the Summer Lull”. This short note provides an update on the latest pace of CSPP purchases, both in absolute terms and relative to the PSPP, and their split into primary and secondary. We show that the recent outperformance of CSPP-eligible bonds over (non-bank) ineligible ones has brought their relative pricing to where it was just before the US elections. We explain why we think the relative CSPP/PSPP trimming should only have a second-order impact on credit spreads. With regards to the PSPP, the latest data for June revealed that the weighted average Bund maturity rose to 5.33 years from a record low 3.99 years in May. In fact that June average maturity is the highest since the changes to parameters came into full effect in February. That data also revealed a bit of deviation from the capital key for Bunds with total purchases €360m below implied levels. The flip side of that saw France (€1.1bn above capital key) and Italy (€0.9bn above capital key) both benefiting from higher purchases. Portugal (€690m below) continues to see the biggest miss relative to capital keys. Pondering on the swing in Bund purchases, our European rates’ strategists noted last month that as German purchases get closer to exhaustion at the front end, the Bundesbank would be somewhat forced to increase purchases at the longer end which may in part reflect the higher average maturity in June. Looking at the day ahead, this morning in Europe the main focus will likely be on the remaining PMIs (services and composite readings). We’ll get final revisions for the Euro area, Germany and France as well as the first look at the data in the periphery and the UK. The other data due to be released this morning is May retail sales figures for the Euro area. Over in the US this afternoon we’ll get May factory orders data and also final revisions to the May durable and capital goods numbers. This evening we’ll then get the FOMC minutes from the June meeting where it’ll be interesting to see how much of a debate there is around the inflation outlook given some of the Fed speak recently. Along with that, it’ll be interesting to see if there are any further details around balance sheet normalization. Away from the data German Chancellor Merkel is due to meet Chinese President Xi Jinping ahead of the G20 summit later this week.
S&P500 futures have started the second half solidly in the green, up 0.3% to 2,429, tracking European markets broadly in the green, while Asian stocks fell slightly and crude oil is little changed. With US markets set to close at 1pm today trading volumes in many markets remain light before Tuesday’s July 4th holiday and as investors await Friday’s report on the American jobs market. Traders will be looking at key upcoming economic data for validation of the hawkish shift from central banks that roiled markets last week. The Asian session opened with the Yen initially strengthens following Prime Minister Abe’s shocking election loss in the Tokyo Assembly elections, but later reversing gains to trade materially weaker at 112.95 last, on speculation Abe will be forced to inject more stimulus to salvage his standing amid a muted reaction to strongest Tankan survey since 2014. Australian 10-year yield rise four basis points; T-note yield two basis points firmer at 2.32%; shares in Tokyo and Sydney steady in narrow ranges. MSCI's broadest index of Asia-Pacific shares outside Japan held steady, staying within a stone's throw of a two-year peak hit last week. Japan's Nikkei ticked up 0.1 percent, helped by the solid Tankan report. In China, the PBOC drained liquidity for ninth day, pulling a net 70 billion yuan; Hong Kong’s Hang Seng and the Shanghai Composite climbed 0.1 percent amid concerns the world's second-biggest economy could be slowing down. In Hong Kong financial shares benefited from the launch on Monday of the "Bond Connect" scheme linking China's $9 trillion bond market with overseas investors. Industrial metals rose across the board after the Chinese Caixin Mfg PMI rebounded back into expansion territory, rising to 50.4 in June from 49.6 in May, and beating estimates. Dalian iron ore 2.3% higher: the benchmark iron ore contract climbed on Friday for its best one-week gain since November and is up almost 22% from its $53.36 June 13 low, which by definition places it in a bull market. China’s bond connect program with Hong Kong will give offshore investors another way to access the mainland’s $10 trillion debt market. European stocks started the new quarter with solid gains, rising for the first time in five days as oil and metal gains spurred energy companies and miners. Bank stocks rallied, supported by an FT report of a secret Brexit plan for financial services, sending the Stoxx Europe 600 Index solidly in the green, up 0.7% to 382.03, after suffering its biggest monthly loss in a year in June on worries over tightening monetary conditions. France's CAC 40 index rose 0.8 percent, Spain's IBEX 0.9 percent and Italy's FTSE MIB 1 percent. Britain's main FTSE 100 index added 0.3 percent. European economic data showed a modest retreat with most final Eurozone PMIs backing off slightly from recent flash reading (except for Germany which printed at 59.6, above the 59.3 exp.). Final Eurozone Manufacturing PMI was at 57.4 in June (Flash: 57.3, May Final: 57.0), with a notable observation that Greece returned to expansion while job creation stayed close to May’s survey record. While the final PMIs disappointed modestly from the preliminary prints, this is how Eurozone's various mfg sentiment surveys close the month of June: Austria, 60.7: 76-month high Germany, 59.6: 74-month high Netherlands, 58.6: 74-month high Ireland, 56.0: 23-month high Italy, 55.2: 2-month high France, 54.8: 2-month high Spain, 54.7: 2-month low Greece, 50.5: 37-month high Meanwhile, unemployment in Italy rose to 11.3% in May, higher than the expectation of an unchanged 11.2% April print. Crude was modestly in the green, climbing for an eighth day running, the longest winning streak this year extending gains after Baker Hughes data on Friday showed the number of active U.S. rigs falling for the first time in 24 weeks. WTI has climbed 8% in the past 8 days. Hedge fund wagers on lower prices in the week through June 27 increased at a slower pace than the two previous weeks, according to data from the Commodity Futures Trading Commission, suggesting the bearish sentiment may be about to turn. Prices surged last week while WTI and Brent still posted a monthly loss in June on concerns over rising global supply; Libyan production has climbed to more than 1m b/d for 1st time in 4 years. “Given the recent upward momentum, it wouldn’t be surprising to see oil fairly close to some sort of downward correction,” says Ric Spooner, a market analyst at CMC Markets in Sydney. “Libya is probably close to its peak production. Nevertheless, the fact its output reached these levels faster than some had anticipated is a negative for the overall supply situation.” Elsewhere, wheat jumped to a two-year high on the Chicago Board of Trade as agriculture markets soared on an expanding drought in the U.S. and disappointing data on sowed acreage. Gold slipped 0.5 percent to $1,235.89 an ounce. The yen fell 0.4 percent to 112.87 per dollar, after erasing an earlier advance of as much as 0.4 percent. The Bloomberg Dollar Spot Index rose 0.3 percent after dropping 1 percent last week and touching the lowest level since October. The euro, which hit 14-month highs against the dollar last week after European Central Bank President Mario Draghi hinted at tweaks to the bank's bond-buying stimulus program, fell 0.3 percent to $1.1394. The pound finally fell 0.4% to $1.2973 after an eight-day rally... ... following weaker than expected June PMI data (54.3, vs Exp. 56.3, Last 56.3). The yield on 10-year Treasuries rose one basis point to 2.31 percent, adding to a 16-basis point surge last week, the steepest since March. U.K. 10-year yields added two basis points to 1.27 percent. While French and German 10-year yields fell one basis point, the hawkish sentiment hardly looks exhausted, with 0.50% on the 10Y Bund looking increasingly likely. Later today, investors can look forward to ISM data and Wards vehicle sales data later on Monday. Market Snapshot S&P 500 futures up 0.3% to 2,429.00 STOXX Europe 600 up 0.7% to 382.14 MXAP down 0.2% to 154.32 MXAPJ down 0.09% to 504.51 Nikkei up 0.1% to 20,055.80 Topix up 0.2% to 1,614.41 Hang Seng Index up 0.08% to 25,784.17 Shanghai Composite up 0.1% to 3,195.91 Sensex up 0.8% to 31,173.55 Australia S&P/ASX 200 down 0.7% to 5,684.49 Kospi up 0.1% to 2,394.48 German 10Y yield fell 0.4 bps to 0.462% Euro down 0.3% to 1.1387 per US$ Italian 10Y yield rose 0.6 bps to 1.865% Spanish 10Y yield fell 4.6 bps to 1.493% Brent Futures up 0.3% to $48.91/bbl Gold spot down 0.5% to $1,236.08 U.S. Dollar Index up 0.3% to 95.95 Top Overnight News ECB’s Mersch says patience needed as upturn in inflation not yet self-sustained, don’t need 2% inflation to adjust policy; Weidmann says council agrees expansive policy needed, will normalize once inflation justifies it European June Manufacturing PMIs: Spain 54.7 vs 55.6 est; Italy 55.2 vs 55.3 est; France 54.8 vs 55.0 est; Germany 59.6 vs 59.3 est; U.K. 54.3 vs 56.3 est. FT: a City of London delegation will negotiate a secret plan for a free-trade deal on financial services based on the concept of "mutual access" according to people familiar U.S. Navy sends a guided- missile destroyer near disputed Triton Island China June Caixin manufacturing PMI 50.4 vs 49.6 previously Japan PM Abe’s LDP suffers a surprise defeat in Tokyo assembly election Abe adviser Nakahara says BOJ needs fresh face as Kuroda out of ideas Goldman Said to Review Commodities After Worst Start in a Decade Trump’s Rural Broadband Goal Won’t Be Easy. It Will Be Costly Qatar to Respond to Saudi-Led Bloc Demands as Trump Works Phones Kindred Sells Nursing Unit to BlueMountain-Led JV for $700m Autoliv Enters LiDAR Commercialization Deal with Velodyne Rakuten, Lifull Team Up With Homeaway on Home Sharing in Japan CN Resumes Service Near Chicago After Derailment, Crude Leak Delek Drilling Says Tamar Reserve 13% Bigger Than Pvs Estimate EU’s Vestager Says Received No U.S. Reaction to Google Fine HuntsmanClariant May Sell Units for M&A Cash, FuW Cites Next CEO VTG Aktiengesellschaft to Buy CIT’s Nacco Unit for About EUR780m Jakks Pacific Files Up to 5.24m- Share Offer for Holder Meisheng Facebook Wins Dismissal of Privacy Suit Over Internet Tracking Facebook’s Small Print Might Be Antitrust’s Next Big Target Tesla CEO Says Model 3 Passes All Regulatory Requirements Asian markets traded mixed following an indecisive close last Friday on Wall St. where US indices finished their best H1 performance since 2013 in a choppy manner, as energy posted a 7th consecutive gain and tech underperformed. ASX 200 (-0.6%) slipped below 5,700 with utilities and healthcare weighing on the index, while Nikkei 225 (+0.2%) was kept afloat following the mostly better than expected Japanese Tankan data. Shanghai Comp. (Unch.) and Hang Seng (Unch.) failed to benefit from better than expected Caixin Manufacturing PMI data (50.4 vs. Exp. 49.8) and the launch of the bond connect, with participants despondent after the PBoC refrained from liquidity injections for the 7th consecutive session. However, Chinese markets then recovered gradually throughout the session to return flat. Finally, 10yr JGBs were flat alongside an inconclusive risk tone, although mild support was seen after the BoJ's JPY 880b1n Rinban operation. Chinese Caixin Manufacturing PMI moved back into expansion overnight, rising to 50.4 for June, vs. Exp. 49.8 (Prey. 49.6). The Japanese Tankan Large Manufacturers Index also beat expectations for Q2 rising to 17 vs. Exp. 15 (Prey. 12). Tankan Large Manufacturing Outlook (Q2) Q/Q 15 vs. Exp. 14 (Prey. 11) Tankan All Large CAPEX (Q2) Q/Q 8.00% vs. Exp. 7.40% (Prey. 0.60%) Top Asian News Tarnished Abe Plunged Into Crisis After Tokyo Election Loss Xi, Abe Get Phone Calls From Trump as Asian Tensions Rise Idemitsu to Sell Shares, Diluting Founding Family’s Stake Tata Steel 1Q Sales Volume Jumps 28% to 2.75m Tons Toshiba Mulls a Swiss IPO for Landis+Gyr by September European stocks traded in the green in subdued fashion amid cautious trade as we open the second half of the year. Markets have opened in the green; with global equities trading near record highs on bets of improving growth. All ten sectors trade in the green, as Energy is one of the noticeable out performers as a result of oil continuing to extend on gains, now in the green for the eighth consecutive day — longest winning streak of the year.The uncertainty out of Japan, following a crushing defeat of Japanese Prime Minister's Shinzo Abe's party in the Tokyo elections did not weigh on stock markets, however the flight to safety was clear, as initial buying was seen in safe haven assets. The Asian buying was short lived, as last week's hawkish tone continued to weigh on treasuries through the afternoon of Asian trade. lOy paper is struggling, despite some reprieve seen in Bunds and Gilts, the selling pressure is evident with Gilts trading near session lows around 124.96. Top European News BOE Staff Vote in Favor of Strike Action Over Pay, Unite Says U.K. Manufacturing Slowdown Raises Doubts About Economic Outlook Euro-Area Manufacturing Accelerates as Orders Fuel Optimism Nets Rises on Deal Report; Wirecard Leads Payments Peers Higher Poland’s Kaczynski Invokes Nazis as EU Refugee Clash Deepens EU Presidency Clouded by Feud Threatening Host’s Government Thyssenkrupp Rises on HB News; Bankhaus Lampe Expects Tata Deal Looking at Monday's economic data, we’re kicking off in Europe with the final revisions to the June manufacturing PMIs along with a first look at the data for the UK and periphery. Also due out this morning is the Euro area unemployment rate for May. Over in the US we’ll also receive the final manufacturing PMI revision along with the manufacturing ISM for June and May construction spending. Later in the day we’ll also get June vehicle sales data. US Event Calendar 9:45am: Markit US Manufacturing PMI, est. 52.1, prior 52.1 10am: ISM Manufacturing, est. 55.2, prior 54.9; Prices Paid, est. 58.5, prior 60.5; New Orders, prior 59.5; Employment, prior 53.5 10am: Construction Spending MoM, est. 0.25%, prior -1.4% Wards Total Vehicle Sales, est. 16.5m, prior 16.6m Wards Domestic Vehicle Sales, est. 12.9m, prior 12.8m DB's Jim Reid concludes the overnight wrap As I reflected on H1 over the weekend, the highlight at home was welcoming back my wife and Maisie yesterday from "In the Night Garden" live. For those not in the know this is basically hallucinogenic Teletubbies. My wife bought Maisie a huge replica of star character Upsy Daisy (who she also had a meet and greet with) and from the moment she got given her to the moment she went to bed 8 hours later she refused to let her go. She wouldn't eat lunch or dinner without her by her side. She wouldn't walk around in the house or garden without dragging her along (impressive as she's bigger than her) and wouldn't let me change her nappy without Upsy helping and she wouldn't go to bed without her in her cot. It was very sweet but she really wasn't interested in Daddy all day. Good preparation for the teenage years. Bond markets went a bit Upsy Daisy last week and it’s hard to imagine that it was only this time last week that we were saying there wasn't much to get excited about in markets but that there were a couple of events that we should keep an eye on in the week ahead. One of these was the ECB forum in Sintra. Although a big focus, little did we know what that event would unleash in financial markets last week. I suppose one of the big questions is whether the slew of hawkish central bank speak was vaguely co-ordinated or whether there was an element of randomness to it. It felt like the former but these words will be meaningless if the data (growth and inflation) doesn't come through but last week's comments probably indicate that the data bar has been lowered for tightening. Rather than looking for a reason to tighten it feels that we've entered a period where central banks might be looking for a reason not to. So we will perhaps become a little more sensitive to data and as we highlight in the week ahead, today is global PMI/ISM day and a big event in the monthly calendar. The US is off for Independence Day tomorrow so trading might be thin this week especially in the early half. By the end of the week we have another payroll number to look forward to after last month's disappointing 138k print. Before we get there, it’s not been a particularly busy weekend for newsflow but there are a few bits and bobs worth pointing out. The first concerns more chatter out of the ECB. Bundesbank President Jens Weidmann told an audience in Germany that “at the moment we see that the economic situation is rather positive” and that “if this sustainably passes on to inflation rates then monetary policy needs to be more taut, and it’s not about putting full brakes on monetary policy, but to lift one’s foot off the gas a little”. His fellow board member, Yves Mersch, said a day later that recent ECB policy has been successful but it is not yet self-sustained and the ECB needs to continue to have “patience with this policy”. Mersch also indicated that the ECB doesn’t necessarily have to wait for inflation to hit 2% before adjusting policy. The other significant news to report is out of Japan where PM Abe has suffered a landslide defeat in the Tokyo elections with city governor Yuriko Koike’s new party appearing to be headed for a big victory. Koike’s Tomin First party captured 49 of the 127 assembly seats while Abe’s Liberal Democratic Party won just 23 seats (down from its current 57 seats). That total for Abe is less than the previous record low for his party of 38 seats set in 1995 and 2009. With the support of the Komei Party, the Tomin First will easily secure a comfortable majority in the assembly. The FT is reporting that the result could spur Yurkio Koike to mount a similar challenge against Abe in a national election. Abe has called for an extraordinary meeting within his party this morning while reports are suggesting that the result could force Abe to reshuffle his cabinet and, according to Bloomberg, slow down his push to revise Japan’s pacifist constitution. While seemingly a surprise, the Yen is little moved post that result although that may in part reflect an overall upbeat Q2 Tankan survey in Japan this morning. The headline manufacturing index for large manufacturers rose 5pts to +17 (vs. +15 expected) while the outlook index rose 4pts to +15 (vs. +14 expected). Nonmanufacturing readings also rose, as did readings for smaller manufacturers. Meanwhile the Nikkei manufacturing PMI in Japan this morning was revised up 0.4pts to 52.4 (versus 53.1 in May). The Nikkei (+0.13%) and Topix (+0.10%) are a shade higher as we go to print. Meanwhile in China this morning the Caixin manufacturing PMI printed back above 50 again at 50.4 (vs. 49.8 expected) which is a rise of 0.8pts from May. Despite that bourses in China are weaker (Shanghai Comp -0.30%) while the Hang Seng is little changed. It’s worth also highlighting this morning that it is the first day of the China-Hong Kong bond connect which mirror the two stock-connect programmes. Moving on and quickly recapping how markets finished up on Friday. Given the magnitude of the moves for bonds over the week, while weakening a bit more of Friday the moves were relatively subdued all things considered. 10y Bund yields finished 1.4bps higher at 0.465% which means for the week as a whole they were 21.2bps higher. That is the biggest weekly sell-off since December 2015. Gilts were 0.7bps higher on Friday at 1.257% and for the week were 22.6bps higher (weakest since November 2016). OATs were less than 1bp higher on Friday and 20.8bps higher for the week. Meanwhile the periphery finished up to 1.8bps higher on Friday and for the week yields were higher by 11.9bps to 23.9bps. As we know, Treasuries got swept up in the moves too. Yields were another +3.7bps on Friday to close above 2.300% and for the week were 16.1bps higher (most since March 2017). As we’d seen over the week the sell-off for bonds continued to weigh on equity markets in Europe with the Stoxx 600 (-0.34%) ending lower for the fourth consecutive day. For the week the index was down -2.13% which is the fourth down week in succession and the weakest since November last year. It was however a slightly better story across the pond where the S&P 500 edged up +0.15% on Friday to trim its weekly loss to a more modest -0.61%. Further gains across the commodity complex and particularly late in the day for Oil (WTI +2.47% and back above $46/bbl) certainly seemed to help. Friday’s moves for bonds in Europe could probably be put down to the flash June inflation report for the Euro area. As indicated by some of the regional reports, inflation was a little firmer than expected with headline CPI of +1.3% yoy beating estimates for +1.2% (although down from +1.4%) and core CPI of +1.1% yoy beating the consensus estimate for +1.0%. That core reading marked an increase of two-tenths from May. Meanwhile in the US the core PCE deflator for June was confirmed as rising +0.1% mom as expected which puts the annual rate at +1.4% yoy and down one-tenth from May. Elsewhere personal spending nudged up +0.1% mom which matched the consensus although real personal spending (+0.1% mom vs. +0.2% expected) was a modest disappointment. Personal income was up a relatively robust +0.4% mom in May and a tenth more than expected. Away from that the Chicago PMI for June rose to a surprisingly high 65.7 (vs. 58.0 expected) which marked a jump of 6.3pts. That was in fact the higher level since May 2014 which is likely to be a supportive read through for today’s manufacturing data. The other data out on Friday across the pond was the final revision to the June University of Michigan consumer sentiment reading (revised up 0.6pts to 95.1). 1-year ahead inflation expectations were left unchanged at 2.6% however 5-10 year expectations were revised down one-tenth to 2.5%. It’s worth noting that the Atlanta Fed revised down their Q2 GDP forecast by two-tenths to 2.7% on Friday. On to the week ahead now. Today we’re kicking off in Europe with the final revisions to the June manufacturing PMIs along with a first look at the data for the UK and periphery. Also due out this morning is the Euro area unemployment rate for May. Over in the US this afternoon we’ll also receive the final manufacturing PMI revision along with the manufacturing ISM for June and May construction spending. Later this evening we’ll also get June vehicle sales data. Tuesday looks to be quiet with Independence Day in the US. The main attraction is likely the RBA meeting overnight while the only data due out is Euro area PPI. Wednesday looks to be much busier. Overnight in Asia we’ll receive the remaining Caixin PMIs in China and Nikkei PMIs in Japan. In Europe we’ll also get the remaining services and composite PMI revisions as well as retail sales data for the Euro area. In the US on Wednesday data due out includes factory orders for May and the final durable and capital goods orders revisions for May. The FOMC minutes from the June meeting will then be out in the evening. Turning to Thursday, factory orders in Germany is the only release of note in Europe while in the US we’ll get the June ADP print, initial jobless claims, May trade balance, ISM non-manufacturing for June and the final PMI revisions (services and composite). We close out the week in Europe on Friday with industrial production in Germany and trade data and industrial production in France and the UK. In the US on Friday it’s all about the June employment report including nonfarm payrolls. Away from the data, the Fedspeak this week consists of Bullard this morning, Powell on Thursday and Fischer on Friday. The ECB’s Praet and Nowotny speak tomorrow and Weidmann and Nowotny speak on Thursday on the future of the euro. The ECB minutes are also due out on Thursday. Other events to note this week are China President Xi Jinping’s visit to Moscow on Tuesday where he is due to meet Putin. Germany’s Merkel and China’s Xi meet ahead of the G20 summit on Wednesday and the summit itself is on Friday and Saturday. The Fed will also publish its 2017 monetary policy report to Congress on Friday ahead of Yellen’s testimony on July 12th.
Bundesbank chief consistently out of sync with governing council on fighting crisis
Authored by Daniel Lacalle via The Mises Institute, Mario Draghi has again missed an exceptional opportunity to adjust monetary policy. By ignoring the huge risks that are being created from the brutal inflation of financial assets, saying that “there are no signs of a bubble,” the European Central Bank (ECB) remains adamantly focused on creating inflation by decree, denying the effects of technology, demography, and overcapacity. “No signs of bubble”? I’ll show you some of them myself. The percentage of debt of major countries “bought” by the ECB: Germany, 17%, France 14%, Italy 12%, and Spain 16%. In all cases, in 2016 and 2015 the ECB was the largest buyer of said countries’ net emissions. Ask yourself a question: On the day the ECB stops buying, which of you would buy peripheral or European bonds at these prices? Clearly, the first sign of a bubble is the absence of demand in the secondary that offsets the impact of the ECB. It indicates that the current price is simply unacceptable in an open market, even if the recovery is confirmed, especially because rates do not even reflect a minimum real return, being below inflation. European Union high-yield bonds are trading at record-low yields despite the fact that cash generation and debt repayment capacity, according to Moody’s and Fitch, have not improved significantly. European largest stocks (Eurostoxx 50) trade at 20x PE and 8.3x EV/EBITDA despite eight years of flat earnings and downgrades, which have only just recently reversed. Infrastructure deals’ multiples have increased five-fold in three years to an astonishing average of 16-19x EBITDA. Excess liquidity in the euro zone already reaches 1.2 trillion euros. It has multiplied by almost seven since the “stimulus” program was launched. Anything for Inflation There is a problem in the huge amount of assets bought by the ECB, whose balance sheet already exceeds 25% of the European Union’s GDP. At the beginning of the repurchase program, it could be argued that risky assets, especially sovereign bonds, could have been cheap or under-valued because of the risk of break-up of the euro and overall negative sentiment. However, that statement cannot be made today, with bond yields at historic lows and debt levels at historic highs. Monetary policy is a perverse incentive to spend more and add more debt. Of course, what the ECB expects is the arrival of the inflation mantra, that mirage that deficit states yearn for and no consumer has ever wanted. But the search for inflation by decree meets the pitfall of reality. The positive disinflation that technological advances generate adds to the logical change of consumption patterns due to aging of the population and the elephant in the room: The European Union has never had a problem of lack of investment, but of excess spending on dozens of industrial and infrastructure plans that have left behind some positive effects, but — due to excess — greater debt and overcapacity . Now that prices are moderating again with the dilution of the base effect, the opportunity to moderate this unnecessary monetary stimulus is lost. As I explained at CNBC on May 29, the supposed positive effects of the buyback program cannot make us ignore the accumulation of risk in sovereign and corporate bonds and the dangerous impact on the financial sector. Draghi, at Least, Warns The president of the ECB does not stop alerting governments about the importance of reforms to drive growth, lower taxes and reduced imbalances, but no one hears. When Draghi warns banks of their weaknesses, they don’t listen either. When he reminds deficit spending governments that monetary policy has an expiration date, they look the other way. It’s party time . Monetary policy is “like Coca-Cola,” said Jens Weidmann , president of the Bundesbank. A drink that stimulates, but has too much sugar and no real healing qualities. The problem of losing this opportunity to moderate monetary policy is that it is highly unlikely that the necessary measures will be taken to correct excesses when they are no longer a debate of economic analyst, but evident to all citizens. Because then, the central bank will be afraid of a financial market correction, after a bubble inflated by its policies. European governments make a huge mistake thinking that prosperity is going to be generated from debt and not from savings. But they make an even bigger mistake if they think that by perpetuating the imbalances, they will prevent a crisis. At the press conference, Draghi said that “nobody knows when or where the next crisis will come: the only sure thing is that it will come.” What Draghi did not explain is that the artificial creation of money without support, well above real economic growth, is always behind those crises. But that is another problem, that will be dealt with by the next president of the Central Bank, who will offer the “new” solution … Yes, you have guessed it: Cut rates and increase liquidity.
Вчера, 26 июня, Бундесбанк опубликовал ежемесячный отчет, в котором отмечается оживленный рост экономики Германии в первом квартале, а также представил свои прогнозы на 2017, 2018 и 2019 гг. Ожидается, что ВВП Германии в текущем году увеличится на 1,9%, а в 2018 и 2019 годах темпы роста экономики страны замедлятся до 1,7% и 1,6% соответственно. В числе основных факторов экономического роста Бундесбанк называет благоприятную ситуацию на рынке труда, при этом сообщается, что в ближайшее время станет заметен дефицит квалифицированных кадров, что может стать предпосылкой для роста зарплат. Кроме того, в ежемесячном отчете сообщается, что соотношение внешнего долга к ВВП может упасть к 2019 году ниже 60% впервые с 2002 года.
Вчера, 26 июня, Бундесбанк опубликовал ежемесячный отчет, в котором отмечается оживленный рост экономики Германии в первом квартале, а также представил свои прогнозы на 2017, 2018 и 2019 гг. Ожидается, что ВВП Германии в текущем году увеличится на 1,9%, а в 2018 и 2019 годах темпы роста экономики страны замедлятся до 1,7% и 1,6% соответственно. В числе основных факторов экономического роста Бундесбанк называет благоприятную ситуацию на рынке труда, при этом сообщается, что в ближайшее время станет заметен дефицит квалифицированных кадров, что может стать предпосылкой для роста зарплат. Кроме того, в ежемесячном отчете сообщается, что соотношение внешнего долга к ВВП может упасть к 2019 году ниже 60% впервые с 2002 года.
Мир теряет веру в доллар как в самую надежную валюту. Волна недоверия поднялась после того, как Немецкий федеральный банк потребовал репатриации огромного количества золота, хранящегося в Федеральной резервной системе США. Некоторые обеспокоены тем, что национальные вклады других стран не будут в безопасности в США. Да и находятся ли они там вообще? Подробности в репортаже корреспондента RT Гаяне Чичакян. Подписывайтесь на RT Russian - http://www.youtube.com/subscription_center?add_user=rtrussian RT на русском - http://russian.rt.com/ Vkontakte - http://vk.com/rt_russian Facebook - http://www.facebook.com/RTRussian Twitter - http://twitter.com/RT_russian Livejournal - http://rt-russian.livejournal.com/
О GATA и «золотом картеле» Еще в конце ХХ века наиболее въедливые эксперты стали подозревать, что на рынке золота происходит что-то неладное. А именно: даже если жёлтый металл не дешевеет, то цены на него всё равно отстают по темпам роста от динамики цен на многие другие товары мирового рынка. Золото дешевело также на фоне индексов фондовых рынков, цен на недвижимость и т.п. Никаких крупных месторождений золота в это время не было открыто, золотые метеориты на Землю не падали. Заниженные цены на желтый металл больно били по компаниям золотодобывающей промышленности. Представители нескольких компаний этой отрасли решили разобраться в загадке, для чего и создали организацию под названием GATA (Gold Anti-Trust Action). В буквальном переводе - «Действие против Золотого Треста». Как следует из названия, учредители GATA подозревали, что на мировом рынке золота действует группа злоумышленников, объединенных в трест, который манипулирует ценами на золото в сторону их занижения. В своих публикациях GATA чаще использовала термин «золотой картель». Постепенно удалось вычислить основных участников этого картеля. Среди них - Казначейство США, Федеральный резервный банк Нью-Йорка (главный из 12 федеральных банков, составляющих ФРС США), Банк Англии, ряд крупнейших коммерческих и инвестиционных банков США и Западной Европы (здесь особо выделяется «Голдман Сакс» - инвестиционный банк с Уолл-стрит). Это – ядро картеля. Время от времени в поле зрения GATA попадали и другие организации, участвовавшие в операциях картеля. В том числе центральные банки некоторых стран. 1990-е годы были периодом наибольшей активности США на мировых рынках активов. Проще говоря, американцы организовывали приватизации государственных предприятий по всему миру (в том числе в России), а для таких операций нужен был сильный доллар. Финансовые аналитики и спекулянты прекрасно знают простое правило: чем ниже цена на золото, тем крепче доллар. Самый простой и дешевый способ укрепить доллар – «прижать» цену на «желтый металл», который явно и неявно выступает конкурентом этой резервной валюты. Однако чтобы «прижать» цену, надо обеспечить повышенное предложение этого металла на мировом рынке. У тех, кто хотел сыграть на «понижение» золота, взоры обратились к несметным запасам золота, сосредоточенным в подвалах казначейств и центральных банков. Эти запасы лежали там без движения с тех пор, как в 1970-е гг. рухнула Бреттон-Вудская валютно-финансовая система. В новой Ямайской валютно-финансовой системе золото перестало быть деньгами, оно было объявлено одним из биржевых товаров – таким как нефть, пшеница или бананы. Версия о золотых манипуляциях центральных банков Как можно использовать это золото для манипуляций ценами? Первое и главное условие сводится к тому, чтобы полностью засекретить официальные запасы желтого металла и все операции денежных властей с ними. Еще более повысить независимый статус центральных банков, для того чтобы «народные избранники», органы финансового контроля и прочие любопытствующие элементы не совали свои носы в дела этих институтов. Не допускать государственных аудиторов до «золотых закромов». В США, например, Главное контрольное управление (Счётная палата Конгресса) последний раз посещало главное хранилище официального золотого запаса США Форт Ноксболее 60 лет назад. Далее под завесой секретности можно начинать операции с золотом. Однако не продавать его, а передавать разным частным структурам «на время», оформляя эти операции как кредиты или лизинг желтого металла. А вместо золотых слитков оставлять в хранилищах бумажки, которые являются с бухгалтерско-юридической точки зрения «требованиями», «расписками», «сертификатами» и т.п. То есть золото на балансе центрального банка сохраняется, только оно имеет не металлическую, а виртуально-бумажную (или даже электронную) форму. А «народу» это знать не обязательно. Если в эти «золотые аферы» втянуть десяток-другой центральных банков, то каждый год на рынок можно выкидывать не одну сотню тонн драгоценного металла и сбивать на него цену. Эксперты (в том числе эксперты GATA) находили многочисленные подтверждения тому, что все это не вымысел, а результат преступного сговора центральных банков с частными банкирами и спекулянтами. И тут сразу возникают вопросы: кому центральные банки передавали золото? Было ли это золото возвращено назад в сейфы центральных банков? Известны ли эти махинации законодателям? Сколько на сегодняшний день реально осталось физического золота в хранилищах центральных банков (и государственных казначейств)? Отметим, что отдельные попытки разобраться в том, что представляют собой официальные золотые запасы, насколько официальная статистика золота отражает истинное положение дел, кто и как управляет официальным золотым запасом, предпринимались парламентариями, политиками, общественными активистами в разных странах. Например, в США такие попытки регулярно предпринимал член Конгресса США Рон Пол. Регулярные запросы в разные инстанции делала также GATA. Денежные власти предпочитали отмалчиваться. Или же ответы были крайне лаконичными и сводились к тому, что «золотой запас страны находится в неприкосновенности». Такую же позицию занимали на протяжении последних 15 лет (с тех пор, как начались разговоры о «золотом картеле») и международные финансовые организации: Банк международных расчетов (который, кстати, активно занимается операциями с желтым металлом и был заподозрен в участии в «золотом картеле»), Всемирный банк, Международный валютный фонд (1). Утечка информации из МВФ И вот последняя новость в этой области. Речь идет о материале, размещенном на сайте GATA в декабре 2012 года (2). Это полученное одним из экспертов GATA секретное исследование Международного валютного фонда 13-летней давности. Оно касается мирового рынка золота и роли центральных банков в операциях на этом рынке в 1999 году. Поскольку оно секретное, то его автор позволяет себе писать полную правду об операциях центральных банков. «Информация о рынке золота неоднородна», – говорится в исследовании. «Для транзакций характерна высокая степень секретности. Наряду с относительно небольшим количеством открытых торгов на биржах, продажи золота представляют собой приватные внебиржевые сделки, о таких операциях сообщается скупо. … Официальные данные о ссудах в золоте практически отсутствуют». Вот ключевые факты и цифры из этого материала МВФ. В 1999 годуболее 80 центральных банков ссудили 15 процентов официальных золотых запасов рынку (имеется в виду величина непогашенных обязательств по золотым кредитам). В числе центральных банков, предоставлявших ссуды в золоте, были Бундесбанк Германии, Швейцарский национальный банк, Банк Англии, Резервный банк Австралии и центральные банки Австрии, Португалии и Венесуэлы. В исследовании подтверждается, что центральные банки играли на рынке золота на «понижение»: «…высокая степень мобилизации резервов центробанка через кредитные операции в золоте оказала понижающее влияние на наличную цену золота, поскольку перекредитуемое золото обычно связано с продажами золота на наличном рынке». Далее в исследовании МВФ говорится, что «кредитование в золоте заставило центробанки проявлять активность на рынке производных финансовых инструментов золота, где участвуют банки по операциям с драгоценными металлами и производители золота, продавая золото через форвардные сделки и опционы. В свою очередь, банки по операциям с драгоценными металлами приложили все усилия для защиты и укрепления долгосрочных отношений с центральными банками». Вот еще выдержка из документа МВФ: «Доля промышленно развитых стран на всём рынке официального кредитования в золоте выросла с 33 процентов в конце 1995 года до 46 процентов к концу 1998 года, поскольку некоторые центральные банки промышленных стран повысили уровень кредитования; в то же время на рынке появились новые кредиторы, в частности Бундесбанк и Швейцарский национальный банк». А вот комментарий эксперта GATA, разместившего данный материал:«При столь значительном количестве центральных банков, секретно предоставляющих ссуды в золоте тем финансовым организациям, чей основной талант, как можно было видеть в последнее время, состоит в рыночных махинациях, кто станет отрицать, кроме обычных агентов дезинформации, что рынком золота манипулируют именно для того, чтобы не позволить всему миру пользоваться свободными рынками?» 2013 год: ждём новых «золотых» скандалов и «золотых» сенсаций Раскрытия страшной тайны золота ждут уже много лет. Ещё в 2004 году Лондонский банк Ротшильдов заявил о своем выходе из «золотого фиксинга» - процедуры ежедневного определения в узком кругу цены на жёлтый металл в лондонском Сити. Тем самым Ротшильды заявили миру, что они выходят из золотого бизнеса, которым занимались на протяжении двух столетий. Однако это – всего лишь эффектный жест. Из золотого бизнеса они не ушли, а продолжили заниматься им через структуры с другими вывесками. Чувствуя угрозу надвигающегося скандала с разоблачениями «золотого картеля», эти олигархические круги решили своевременно отойти от эпицентра возможного взрыва… Возбуждение общественности и политиков по поводу официальных запасов золота резко обострилось в 2012 году. Выяснилось, что на мировом рынке активно идет торговля фальшивым золотом в виде вольфрамовых позолоченных слитков (хотя специалистам об этом стало известно еще в 2004 году, трубить об этом мошенничестве мировые СМИ начали только в 2012 году). Возникли подозрения, что в подвалах центральных банков и казначейств находятся груды вольфрама. Рон Пол добился проведения выборочной проверки брусков металла в подвалах Форт-Нокс и Федерального резервного банка Нью-Йорка. Германия потребовала от США вернуть золото из своего официального запаса (Бундесбанк), которое хранилось в подвалах ФРБ Нью-Йорка, но встретила глухое сопротивление со стороны казначейства и ФРС США. Кончилось это тем, что председатель Федерального резерва Бен Бернанке заявил, что недавний ураган Сэнди… «уничтожил» немецкое золото. Ничего лучшего он придумать не смог. Все это лишь подкрепило мнение тех, кто давно обвиняет ФРС и другие центральные банки в мошенничестве с золотом. Думаю, что в 2013 г. тема золота центральных банков станет еще более горячей. Например, все с нетерпением ждут обнародования результатов выборочной физической проверки слитков золота из закромов Казначейства США. Власти обещали сообщить об этом в начале 2013 года. От Германии все напряженно ожидают реакции на заявление Бернанке о таинственном исчезновении немецкого золота. Появились вопросы и к Банку международных расчетов (БМР), активно практикующему коммерческие операции с желтым металлом - и собственным, и тем, который центральные банки предоставляют БМР в виде депозитов или кредитов. Отчётность БМР об этих операциях крайне лаконична и не даёт представления о деталях сделок, их контрагентах и конечных бенефициарах. Международный валютный фонд будет продолжать настойчиво требовать от Китая раскрытия истинной информации об официальном золотом запасе. В 2009 г. Народный банк Китая (НБК) сообщил, что его золотые запасы увеличились сразу на 76% и составили 1054 тонны. С тех пор официальные цифры золотого запаса НБК не менялись. Мало кто верит в то, что эти цифры отражают реальное положение дел. Считается, что денежные власти Китая сильно занижают цифры, тайно переводя часть своих несметных валютных резервов в желтый металл. В Конгрессе США ожидается окончательное решение вопроса о том, будет ли ФРС подвергнута серьезному аудиту - впервые за век ее существования. Если такой аудит всё-таки состоится, то полной проверке должны подвергнуться все операции Федерального резерва с золотом. Почти все серьезные эксперты ждут от этой проверки сенсационных разоблачений. (1) Подробнее о манипуляциях «золотого картеля» см.: В.Ю. Катасонов. Золото в экономике и политике России. – М.: Анкил, 2009, с. 57-63. (2) «IMF study in 1999 found 80 central banks lending 15% of official gold reserves». December 9, 2012 (http://www.gata.org/files/IMFGoldLendingFullStudy1999.pdf)