06Mar2015 Pre-Market Commentary: Markets Quiet Awaiting USA Jobs Report

Here is the European Market Open from CNN Money

European markets are mixed today. The DAX is up 0.25% while the CAC 40 gains 0.12%. The FTSE 100 is off 0.20%.

Frontrunning: March 6

5 Things to Watch in February’s Jobs Report (WSJ)

Draghi Declares Victory for Bond-Buying Before It Starts (BBG)

Apple Pay Sign-Ups Get Tougher as Banks Respond to Fraud (WSJ)

As World’s Hottest Economy Unravels, Nigerians Feel the Squeeze (BBG)

EU discontent over French budget deal’s ‘political bazaar’ (Reuters)

Foreign Takeovers See U.S. Losing Tax Revenue (WSJ)

Goldman Shareholders’ Hope for Bigger Payout Dashed by Fed (BBG)

Europe Stocks Headed for 31% Surge This Year Amid QE, Citi Says (BBG)

Dollar revs up for jobs data, euro bonds rally on ECB (Reute …

Overnight Wrap: Euro Plummets As “Priced In”, Futures “Coiled” Ahead Of Payrolls

If yesterday morning, the key macro data was the current , and projected, weakness in China (whose record jump in FX deposits indicates fears about capital outflows are alive and well, and that the highest currency depreciation risk in 2015 is for none other than the Chinese currency), then overnight we got more economic data out of Europe that, at least for now, suggest that the collapse in the Euro is boosting European factory order, with German Industrial Production not only beating expectations, but the prior month being revised from 0.1% to 1.0% – the fifth consecutive increase in production. Spain promptly met that “beat and raise”, when it also reported a better than expected 0.4% (est -0.3%) with December revised higher to 0.0%. All of which was to be expected – as we noted yesterday, the main reason for transitory European strength in a zero-sum world, is the soaring USD and the collapsing, recession-level US factory orders.

The question stands: how much longer will the Fed allow the ECB to export its recession to the US on the back of the soaring dollar, and how much longer will the market be deluded that “decoupling” is still possible despite a dramatic bout of weakness in recent US data. Look for the answer in today’s BLS report, which – if the Fed is getting secound thoughts about its rate hike strategy in just 3 months – has to print well below 200,000 to send a very important message to the market about just how much weaker the US economy is than generally perceived.

Oil climbs to $61 on Mideast supply concerns

LONDON (Reuters) – Brent crude oil rose to around $61 a barrel on Friday as fighting in Libya and Iraq stoked output worries, while traders kept a close eye on Iran nuclear talks that could eventually bring more supply to world markets.

Iran would sell more oil if Western sanctions lifted: Mehr agency

ANKARA (Reuters) – Iran said oil prices would not rise above $60 a barrel until 2016 and that it would increase crude exports if Western sanctions over its nuclear program were lifted, the semi-official Mehr news agency reported on Friday.

Tougher test awaits Deutsche Bank after clearing first Fed check

FRANKFURT (Reuters) – Deutsche Bank AG has passed the first “stress test” set by U.S. regulators but is unlikely to clear the next hurdle as the German bank struggles to tighten compliance fast enough to appease controllers at the Federal Reserve.

Dollar revs up for jobs data, euro bonds rally on ECB

LONDON (Reuters) – The dollar hit a new 11-year high against major currencies on Friday as investors bet the monthly U.S. jobs report would add to the chance of rate hikes, even as the European Central Bank embarks on a 1 trillion euro campaign of bond-buying.

Fed should not be too patient on rate hikes, Williams says

HONOLULU (Reuters) – Federal Reserve policymakers should not wait too long to raise interest rates, a top U.S. central banker said on Thursday, because doing so could mean “drastically” overshooting on inflation and forcing the Fed to hike rates dramatically.

Sturdy U.S. jobs report seen, could keep June rate hike on table

WASHINGTON (Reuters) – U.S. employment likely rose strongly in February with the jobless rate slipping, signs that could encourage the Federal Reserve to consider hiking interest rates in June.

Lord Rothschild Warns Investors: “Geopolitical Situation Most Dangerous Since WWII”

For Lord Rothschild, preserving wealth has “become increasingly difficult,” recently, as he warns, rather ominously, “we are faced with a geopolitical situation as dangerous as any we have faced since World War II.” Furthermore Lord Rothschild summarizes his thoughts briefly, eloquently, and ominously… as he touches on the global debasement of fiat currencies, disappointing growth (in light of massive monetary stimulus), and extreme stock market valuations. As Rothschild Wealth Management noted last year, equities are not well supported by current valuations, while monetary policy is limited by high debt levels and interest rates that are already close to zero… exposing equities to a potentially sharp correction.

Lord Rothschild summarizes his thoughts briefly, eloquently, and ominously…

Our policy has been clearly expressed over the years. Simply put, it is to deliver long-term capital growthwhile preserving shareholders’ capital; the realisation of this policy comes at a time of heightened risk, complexity and uncertainty. The economic and geopolitical environment therefore becomes increasingly difficult to predict.

The world economy grew at a disappointing and uneven rate in 2014 after six years of monetary stimulus and extraordinarily low interest rates.

Stock market valuations however, are near an all-time high with equities benefiting from quantitative easing.

Not surprisingly, the value of paper money has been debased as countries have sought to compete and generate growth by lowering the value of their currencies – the Euro and the Yen depreciated by over 12% against the US Dollar during the course of the year and Sterling b …

Caught On Tape: The Moment Mario Draghi Gets Heckled, “You’re Biased…”

Perhaps echoing two entire nations’ frustration, one reporter loses his cool when Mario Draghi explains how everyone else in Europe gets free money except Greece and Cyprus…

Having explained that The ECB’s Bond-Buying program wil lnot include Greek and Cypriot bonds, “feisty” veteran Greek journalist Aristidis Vikettos unloads on Draghi… “You’re Biased…” he exclaimed, leaving Draghi speechless

As In-Cyprus reports, there was a lot more going on behind the scenes…

Mario Draghi was left speechless on live television when a feisty veteran journalist accused him of bias during really tense moments at a press conference, following the conclusion of the ECB Governing Council meeting in Nicosia.

Aristidis Vikettos, the Athens News Agency correspondent, apparently miffed that mostly foreign media were asking the questions, (including US and European papers as well as journalists based in Frankfurt) launched into a Greek verbal onslaught against Draghi who was left staring, while cameras were rolling.

Being heard into the mic of a reporter sitting next to him and about to ask a question, Vikettos accused the ECB chief of allowing only what he termed ‘his own journalists’ to take the floor.

‘What are we, decorative elements?’ he is reported to have said, before shouting out ‘You’re biased’ and making a furious exit. It seems that a Draghi aide attempted to translate the goings on to the governor, mumbling something about a prot …

Gold Prices And Real Interest Rates

Submitted by Erico Matias Tavares via Sinclair & Co.,

Are gold prices going to US$ 5,000 or US$500 an ounce?

Here’s one important component that you might need to consider in your forecast: the direction of US dollar real interest rates.

Gold tends to perform well in US dollar terms when US real interest rates are trending lower, meaning that the spread between the interest rate and expected inflation is narrowing, and poorly when they are trending higher.

There are several ways to calculate real interest rates; the most insightful attempt to capture investors’ future expectations based on actual market data. The US Treasury makes this easy for us, providing real yields on Treasury Inflation Protected Securities (“TIPS”) on a daily basis for maturities ranging from 5 to 30 years, as shown in the graph below.

Daily Real Interest Rates for Different Maturities: 2 Jan 03 – Today

Chart Of The Day: Recession Dead Ahead?

The chart below showing the annual increase, or rather, decrease in US factory orders which have now declined for 6 months in a row (so one can’t blame either the west coast port strike or the weather) pretty much speaks for itself, and also which way the US “recovery” (whose GDP is about to crash to the 1.2% where the Atlanta Fed is modeling it, or even lower) is headed.

As the St Louis Fed so kindly reminds us, the two previous times US manufacturing orders declined at this rate on an unadjusted (or adjusted) basis, the US economy was already in a recession.

And now, time for consensus to be shocked once again when the Fed yanks the rug from under the feet of the rite-hike-istas.

…

ISIS Set Iraqi Oil Fields On Fire, Stalls Military Advance

Thick black smoke billowing from oil wells northeast of the city of Tikrit is obstructing Shi’ite militiamen and Iraqi soldiers attempts to drive ISIS from the Sunni Muslim city after militants set them on fire. Reuters reports a witness and a military source said Islamic State fighters ignited the fire at the Ajil oil field to shield themselves from attack by Iraqi military helicopters. As we noted previously, the battle for Tikrit is key as it will determine whether and how fast the Iraqi forces can advance further north and attempt to win back Mosul, the biggest city under Islamic State rule.

As Reuters reports,

Islamic State militants have set fire to oil wells northeast of the city of Tikrit to obstruct an assault by Shi’ite militiamen and Iraqi soldiers trying to drive them from the Sunni Muslim city and surrounding towns, a witness said.

The witness and a military source said Islamic State fighters ignited the fire at the Ajil oil field to shield themselves from attack by Iraqi military helicopters.

The offensive is the biggest Iraqi forces have yet mounted …

Mutiny At The BoJ: Board Member Warns Of “Dire Consequences”

There’s trouble in Keynesian paradise.

Earlier this week we noted that economist (and former BOJ member) Yuri Okina has become concerned about the destabilization of the government bond market occasioned by Japan’s move to monetize all of JGB gross issuance. At issue is a lack of liquidity which in turn inhibits price discovery and promotes volatility. We also noted that while this exact same dynamic is unfolding in the US (as shadow banking liquidity dries up), Japan is probably the most vulnerable to violent swings in government bond yields:

What’s especially perturbing about this scenario, is that sapping liquidity from the market has the potential to create enormous volatility (as we saw on October 15 of last year when Treasurys staged a six standard deviation move in the space of a few hours), something the pot committed BOJ simply cannot afford lest the house of cards should come cascading down. In other words, if yields on JGBs become increasingly unwieldy because either traders lose confidence in the central bank’s ability to manage the ponzi or a lack of liquidity triggers excessive volatility (or both), it’s game over or, as BlackRock put it: “…the nightmare scenario would be a spike in JGB rates leading to a fiscal crisis.

We saw evidence of this just one day later when the monthly auction for JGB 10s was weak causing yields to jump. That same day, Abe adviser Etsuro Honda expressed further doubts about the utility of additional easing, saying (basically) that the BOJ should just

Economic Scene: Americans Aren’t Saving Enough for Retirement, but One Change Could Help

The typical remedy is that people should put more money aside in investments. This glosses over a critical driver of unpreparedness: Wall Street is bleeding savers dry.

AbbVie Wins Bidding War for Maker of Cancer Drug, Then Goes on Defensive

Strategically, the $21 billion deal for Pharmacyclics seems to make sense for AbbVie, but at least some analysts said the company had paid too much.