13May2015 Pre-Market Commentary: U.S. Retail Sales Lower Than Expected, PreMarkets Move Fractionally Lower, China’s Woes Still Prevalent

Here is the current market situation from CNN Money

European markets are broadly higher today with shares in France leading the region. The CAC 40 is up 1.30% while Germany’s DAX is up 0.47% and London’s FTSE 100 is up 0.36%.

Macy’s quarterly profit falls 14 percent

(Reuters) – Macy’s Inc reported a 14 percent drop in quarterly profit, hurt by lower foreign tourist spending in the United States, colder-than-usual weather in February and disruptions at West Coast ports.

The Central Problem With Central Banks: They Become The Greater Fools/Bag-Holders

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Those who are confident the central banks can print unlimited money may find there are political and financial consequences to such extremes that cannot be foreseen.

The central problem with central banks is their mandate now includes propping up all asset markets globally. Back in the good old days before the Global Financial Meltdown of 2008-09, central bankers reckoned they could control the “animal spirits” released when the risk-on herd destabilized into a chaotic risk-off stampede.
As former Federal Reserve chairman Alan Greenspan noted in his 2014 Foreign Affairsarticle Why I Didn’t See the Crisis Coming, the models used by central banks and private economists alike presumed the demand for risk-on assets would remain robust even in a downturn:

Almost all market participants were aware of the growing risks, but they also knew that a bubble could keep expanding for years. Financial firms thus feared that should they retrench too soon, they would almost surely lose market share, perhaps irretrievably. In July 2007, the chair and CEO of Citigroup, Charles Prince, expressed that fear in a now-famous remark: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” Financial firms accepted the risk that they would be unable to antici …

Exclusive: China set to delay maiden flight of C919 commercial jet – sources

SINGAPORE (Reuters) – The maiden flight of China’s only homegrown commercial jet, the Comac C919, is behind schedule and delivery could be pushed back as much as two years, sources familiar with the program said, dealing a blow to its push to challenge Airbus and Boeing.

Silver Bullion Buying Outstripping Supply As JP Morgan ($JPM) Buys

Silver Bullion Buying Outstripping Supply on Solar Energy Demand

– Silver one of most undervalued assets in world today
– Fundamentals for silver market very strong
– Total demand for silver outweighed demand by almost 22% last year
– Industrial demand set to surge as solar energy projects are expanded
– Artificially low prices have forced some mines out of business which may lead to a supply crunch
– Smart money including JP Morgan acquiring silver
– Silver to outperform assets including gold

Silver bullion remains one of the most undervalued commodities and store of value assets in the world today and therefore one of the greatest opportunities.

Indeed, we view the opportunity in silver bullion today as very much like that seen in the period from 2003 to 2006. Then, silver traded below $10 per ounce prior to sharp gains during and after the financial crisis which saw silver surge to $20 prior to a sharp correction and then surge to nearly $50 per ounce in April 2011.

Silver in USD – 12 Years – Thomson Reuters

Gold remains under covered in the mainstream media rather than specialist financial media such as Bloomberg, CNBC and the FT. It is very rarely covered in mainstream media and when …

China economy loses more steam in April, further stimulus on the cards

BEIJING (Reuters) – China’s money supply grew at its slowest pace on record and investment growth sank to its lowest in nearly 15 years as April data showed the world’s second-largest economy was still losing momentum despite a concentrated burst of policy easing.

Euro zone economy picks up pace but Germany lags

BRUSSELS (Reuters) – A slowdown in Germany weighed on the euro zone in the first quarter, but the bloc’s economy still grew at its fastest in almost two years as cheap food and fuel boosted spending and a central bank stimulus program kicked in.

Delta Air Lines approves $5 billion buyback plan, hikes dividend

(Reuters) – Delta Air Lines Inc announced a new $5 billion share buyback program and raised its quarterly dividend, aimed at returning more than $6 billion to shareholders through 2017.

Chicago “Junking” Triggers $2.2 Billion Payment, Deepening Financial Crisis

In early March, we discussed the rather deplorable state of Illinois’ public pension plans which, we noted, are underfunded by some 60%. On a statewide basis, making up the deficit would cost around $22,000 per household, which gives you an idea of the cost to taxpayers of the grossly underfunded pension liabilities.

A month later, we pointed out the fact that spreads between Chicago’s muni bonds and USTs had blown out to the tune of 60bps as mayor Rahm Emanuel’s re-election became more assured. We also highlighted a WSJ graphic showing that when it comes to unfunded public worker pension liabilities per person, nobody does it like Chicago.

The situation worsened materially last Friday when the Illinois Supreme Court struck down a pension reform law that aimed at closing the state’s $105 billion hole.

Via The Chicago Tribune:

The …

Frontrunning: May 13

Obama, McConnell missteps undercut trade pact in U.S. Senate (Reuters)

Bears Beware: Rout Puts Investors on Wrong Side of Central Banks (BBG)

U.S. Set to Rip Up UBS Libor Accord, Seek Conviction (BBG)

Greece’s Creditors Said to Seek EU3 Billion in Budget Cuts (BBG)

Amtrak train derails in Philadelphia, killing at least five (Reuters)

Oil glut worsens as OPEC market-share battle just beginning (Reuters)

China Stimulus Aims at Restructuring Trillions in Local-Government Debt (WSJ)

Wisconsin officer will not face charges in killing of biracial teen (Reuters)

Foreign Money Is Pouring Into U.S. Real Estate, and It’s Not Just Houses (

Shell’s Record Adds to the Anger of Those Opposing Arctic Drilling

Environmentalists cited past problems with a drilling rig’s running aground in 2012. But the company said it had revamped its operation and had better contingency plans.

Nissan sees profit gains on vehicle sales growth, cost cuts

YOKOHAMA, Japan (Reuters) – Nissan Motor Co , Japan’s second-biggest automaker, said it expects operating profit to climb 15 percent this financial year, forecasting vehicle sales growth in most regions and promising large cost cuts.

Stock futures rise ahead of retail data

(Reuters) – U.S. stock index futures were higher on Wednesday as a global bond selloff eased and investors waited for a ream of data including U.S. retail sales for April.

Toyota and Nissan Recall 6.5 Million More Vehicles Over Takata Airbags

The recalls included more recent models than the companies had previously said needed fixing.

Banks Rethink Common Sales Tricks

As a court readies for the appeal of a former bond trader who was found guilty of making false statements to clients, Wall Street is watching closely to see where the law draws the line on long-acceptable tactics.

European GDP Growth Trounces America In Q1, Biggest Rise In 4 Years; Greece Back In Recession

While the US economy was crushed by harsh snow in Q1, with its GDP set to be revised to nearly -1.0% (yes, we know the real reason was the collapse in Chinese end demand and the soaring dollar but don’t tell the Fed), Europe must have had a very balmy winter, because as Eurostat reported earlier today, Europe grew (and considering Europe estimates the “benefit” for prostitution and illegal drugs to the economy, we use the term loosely) 0.4% in the first quarter, a 1.6% annualized growth rate, in line with expectations, up from 0.3% last quarter and a year ago, and tied for the highest GDP print in 4 years.

Some other statistics from the WSJ: for the first time since the first half of 2010, all four of the Eurozone’s largest economies recorded growth, and for the first time since the first quarter of 2011, the currency area’s economy grew more rapidly than both the U.S. and the U.K.

Then again this is perhaps the 3rd false dawn for the Eurozone in the past 5 years. Sure enough, the WSJ offers hope:

That combination of faster and more evenly spread growth will feed hopes that 2015 could mark a decisive year for the eurozone in its efforts to recover from its debt crisis, aided by fresh stimulus from the European Central Bank, lower oil prices and signs that bank lending may be set to increase after years of decline.

Then again, this time may not be different:

IEA: Battle for Oil Market Share Just Beginning

A global battle for market share between OPEC and non-OPEC producers that has fed into the biggest slump in the price of oil since the financial crisis is just getting started.

Oil extends gains after U.S. fuel stocks drop

LONDON (Reuters) – Brent crude oil rose above $67 a barrel toward five-month highs on Wednesday after U.S. crude stockpiles fell for a second straight week, suggesting that the world’s biggest oil market is rebalancing.

Return Of Bond Market Stability Pushes Equity Futures Higher

Following yesterday’s turbulent bond trading session, where the volatility after the worst Bid to Cover in a Japanese bond auction since 2009 spread to Europe and sent Bund yields soaring again, in the process “turmoiling” equities, today’s session has been a peaceful slumber barely interrupted by “better than expected” Italian and a German Bund auction, both of which concluded without a hitch, and without the now traditional “technical” failure when selling German paper. Perhaps that was to be expected considering the surge in the closing yield from 0.13% to 0.65%. Not hurting the bid for 10Y US Treasury was yesterday’s report that Japan had bought a whopping $23 billion in US Treasurys in March, the most in 4 years so to all those shorting Tsys – you are now once again fighting the Bank of Japan.

On the economic front we got some poor news out of China, where both industrial production and retail sales mixed (this is bullish because it means more easing may be coming), while in Europe Q1 GDP came in line as expected at 0.4% (up from 0.3%), which is also bullish because it means easing is working. Let’s just ignore the arther substantial drop in Eurozone industrial production in March, which slid 0.3% on expectations of an unchanged print and down from last month’s 1.1%. Just chalk it up to spring weather or something.

The overnight session started with Asian equity markets trading mixed following a tepid Wall Street close, with energy outperforming on the back of gains in crude prices. ASX 200 (+0.4%) after Australia lowered taxes for small businesses in the budget which sparked hopes of a spending spree. Nikkei 225 fluctuated between gains and losses with telecoms underperforming, following a miss on earnings from index heavyweight KDDI (-3%). Chinese markets saw subdued trade with market participants tentative ahead of the release of Chinese industrial production and retail sales data which fell short of expectations (see below).

China’s Economy Not Getting High on Stimulants

China’s economic fortunes are sliding despite government efforts. Beijing seems set to get more aggressive.

Global stocks rise, German yields dip before bond sale

LONDON (Reuters) – European and Asian shares advanced on Wednesday as expectations of further monetary stimulus in China offset another mixed bag of data from some of the world’s major economies.

Justice Department may go back on deal not to prosecute UBS: Bloomberg

(Reuters) – U.S. Justice Department may reverse its agreement not to prosecute Swiss bank UBS Group AG over manipulation of benchmark interest rates, Bloomberg reported, citing a person familiar with the matter.

Eurozone Economy Improved in First Quarter

The gross domestic product of the 19 nations that form the euro currency bloc grew 0.4 percent in the period, but Finland and Greece slid into recession.

Many Investors Still Bullish on Treasury Bonds

Many money managers believe that the recent selloff isn’t sustainable, pointing to two key differences with the events of 2013’s ‘taper tantrum’: tempered economic expectations and more-balanced positioning by investors.

More Vehicles Recalled for Problem Takata Air Bag Inflators

Toyota Motor Corp. is expanding its recalls over problem air bags made by Japanese supplier Takata Corp.

Greece Is Now Just A Political Issue

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

Greece paid off the IMF yesterday with its IMF reserves. Is that a big deal? Whatever you may want to read into this, it’s been obvious for years that Greece needs major debt restructuring if it wants to move forward and have a future as a country -let alone a member of the eurozone-. Instead, the EU/troika anno 2010 decided to bail out German and French and Wall Street banks (I know there’s an overlap)- instead of restructuring the debts they incurred with insane bets on Greece and its EU membership- and put the costs squarely on the shoulders of the Greek population.

This, as I said many times before, was not an economic decision; it was always entirely political. It’s also, by the way, therefore a decision the ECB should have fiercely protested, since it’s independent and a-political and it can’t afford to be dragged into such situations. But the ECB didn’t protest. And ever since the deed was done, Brussels presents it as if it were as unavoidable as Noah building the Ark. It’s not. It’s still just another decision to put banks before people.

And in this case the people have come out on the very short end of a very long stick. That’s what the Greek discussions have been about ever since Syriza was elected, with a substantial majority, to be the government in Athens. And no matter how many times how many people may claim Greece lived above its means for years, it’s obvious that the unemployed and the hungry children and the elderly without health care did not.

The troika says they bailed out the Greek people. The Greek people say only 8-9% of that bailout ever went to them, with the rest going to cover the lo …