French Credit Risk Soars As Macron Bailout Blows-Out Deficit
by Zero Hedge - December 11th, 2018 10:40 am
Courtesy of ZeroHedge. View original post here.
Having bitched and moaned at the utter temerity of the Italians to suggest a growth budget that busts Brussels' mandated deficit limits, the French are about to make Milan's defiance look like child's play.
French Prime Minister Edouard Philippe said the measures announced on Monday by President Emmanuel Macron to appease so-called Yellow Vests protesters will “necessarily” have an impact on the country’s deficit.
“The measures will have consequences in terms of spending and that necessarily implies consequences in terms of deficit and we know it will have an impact on the 2019 deficit.”
Philippe said the government will take measures to avoid accelerating public spending, but for now, it's not looking good.
Specifically, as the EU pressures Italy to retreat from a deficit of 2.4% of GDP next year, the promises Macron unveiled Monday night, from a 100-euro ($114) a month hike in the minimum wage to abolishing a tax on pensions, are expected to cost around EUR 10 billion (or 0.5ppt of GDP), which, as French Budget Minister Gerald Darmanin indicated, will send the 2019 budget to a deficit at 3.4% of GDP.
And that budget-busting populist bailout for Macron has sent French credit risk soaring to its highest since May 2017
Perhaps most notably, as opposed to disgust projected from Brussels when Italy pitched their budget, the European Commission said it will assess the impact of French President Emmanuel Macron’s proposed increase in spending in the spring in its regular process of assessing EU governments’ budgets.
“We have a well-established process in place to monitor and assess member states’ economic situations and fiscal policies. Our position on France is well known and the opinion on the French draft budgetary plan was published recently,” commission spokesman Margaritis Schinas says.
“The fiscal impact of the final budget that emerges from the parliamentary process will be assessed in spring when we publish our economic forecasts,” Schinas tells reporters.
As always, it's one rule for the core, and one for the periphery.
As Bloomberg reports, while investors are starting to look more closely at French spending,…
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The Many Passports Of Huawei CFO Meng Wanzhou
by Zero Hedge - December 11th, 2018 10:26 am
Courtesy of ZeroHedge. View original post here.
Authored by Omid Ghoreishi via The Epoch Times,
In making their case that Huawei CFO Meng Wanzhou who was arrested on fraud charges in Vancouver should be denied bail, the U.S. prosecution said that she has access to “numerous passports and visa documents,” allowing her to flee with more ease.
According to the U.S. Justice Department and the United States Attorney’s Office in the Eastern District of New York, Meng has used seven passports from China and Hong Kong in the last 11 years to enter the United States. The passports include four issued by China, and three issued by Hong Kong.
Both Chinese and Hong Kong passports have a typical validity period of 10 years. Legally, a mainland Chinese citizen cannot hold both a Chinese and Hong Kong passport at the same time.
“[I]t is entirely possible that Meng has additional passports of which the United States government is not aware,” U.S. prosecutor Richard Donoghue wrote in a statement.
According to the Hong Kong-based publication Mingpao, Meng has at least one more Chinese passport that wasn’t listed in the U.S. prosecutors’ list. The publication says that a search into Hong Kong business registry shows records of a Chinese passport belonging to Meng that has a number starting with the letter P, while the Chinese passport numbers listed by U.S. prosecutors all start with the letter G.
Meng Wanzhou, Executive Board Director and CFO of the Chinese technology giant Huawei, attends a session of the VTB Capital Investment Forum “Russia Calling!” in Moscow on Oct. 2, 2014. Meng Wanzhou, deputy chair of Huawei’s board, was arrested in Canada on Dec. 1, 2018 on fraud charges. (Alexander Bibik/Reuters)
Michael Spratt, an Ottawa-based lawyer specializing in criminal law, says that when it comes to bail hearings, if a person has more than one passport, it could add more challenge to make the case that the person is not a flight risk.
“When the person has multiple different travel documents, it could be hard to satisfy the court that all of those documents that would allow travel will be turned over
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“It’s A Horrible Mess”: Disgusted Traders Refuse To Trade The British Pound Any More
by Zero Hedge - December 11th, 2018 10:10 am
Courtesy of ZeroHedge. View original post here.
After yesterday's "peak" Brexit chaos, which slammed cable to a 21 month low…
… currency traders have finally had enough, and are making their disgust public.
While the pound may recover some of its losses in the long run, Ensemble Capital is one fund that will watch from the sidelines, and refuses to trade the currency due to ongoing uncertainty over Brexit, said Damien Loh, chief investment officer at the Singapore-based hedge fund.
"I’m staying out of it – it’s basically like trying to pick a roller coaster as your commuter," says Loh, who oversees an artificial intelligence-driven hedge fund he jointly set up with former JPMorgan Chase & Co. FX option trader, Atsuo Ogaki.
"It’s so headline driven and everyone feels they’re entitled to give their opinion. So do I really want to be open to the vagaries of someone’s trading opinion right now? Not really.”
Others, such as AMP Capital, were even more explicit in their disgust over what has become a headline-driven, algorithmic love/hate fest:
"It’s a mess – in a world of turmoil Brexit has become a bit of comic relief, it’s like a British comedy,” Shane Oliver, head of investment strategy at the $138BN Sydney-based asset fund, told Bloomberg.
"It’s more than two years now since the Brexit vote and most of that time leaders have taken to arguing among themselves."
"I’ll say stay away for now. It’s just too hard to trade the pound. You can’t really trade it on technicals because it’s driven by political announcements that flip and flop."
"What you’d want to see is more certainty about which way this will go. The dust needs to settle before you can make decisions based on fundamentals for the pound."
Alas for Shane, if he is indeed waiting for "certainty" before he resumes trading, he will be waiting a long, long time.
We give the last word to Bill Blain who summarized the mess best: "yesterdays no vote decision, and the likelihood Europe is not going to give us any change to the current agreement, and Derivative Contracts to be settled in 90 days time will need somewhere to settle… and its clear we’re in a horrible mess."
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Trader Says ‘Embrace The Suck’ Of Headline Hell
by Zero Hedge - December 11th, 2018 9:58 am
Courtesy of ZeroHedge. View original post here.
Down 800, up 900… Down 500, up 600… a rumor here, a tweet there, and the algos technically dominating the markets means stocks remain range-bound in headline-hell…
And amid the range-bound nature of markets, volatility has exploded to its highest since 2011…
But, despite the uncertainty, former fund manager and FX trader Richard Breslow tells traders not to give up, "headlines aren't the enemy, embrace them…"
Via Bloomberg,
I read a really useful strategy piece last night. It listed all of the things that have changed since the latter half of November that already have, or potentially could, impact their year-ahead forecasts. And that is something to be lauded. If there is one thing we should have realized by now, it’s that we don’t live in a static world. That’s no reason not to trade, but it does argue against stubbornness.
Traders seem to have forgotten the purpose and use of forecasts. Blame that on forward guidance. In that instance central banks used them to make promises. Ones that were largely, but certainly not always, something they could control. Quantitative easing was meant to be understood as an immutable force.
But a real forecast can’t be divorced from its time and context. It must be constantly updated based on all sorts of criteria. That doesn’t make them wrong or poorly crafted, just alive. And to benefit from them you need to remember flexibility is key to success and should never be confused with fickleness.
Communication is virtually instantaneous and social media plays a big role in molding popular and even professional opinion.
Liquidity and slippage are things to be constantly evaluated.
Geopolitics is back to affecting asset prices in a big way.
And to make matters even more interesting, the jury is out on the global growth outlook. Which for now at least, most are assuming is no longer closely synchronized.
Are we most likely in an extended period of greater volatility? Yes. The world has changed. That’s just life.
The math to deal with position size adjustments given expected…
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Beware A “Crushing Move Higher” As Funds Are Trapped In Massive Short Squeeze
by Zero Hedge - December 11th, 2018 9:03 am
Courtesy of ZeroHedge. View original post here.
Yesterday, when the Dow was more than 400 points and traders were shaken by what appeared to be a market that could not bounce no matter the newsflow, Nomura's Charlie McElligott – who had correctly foreseen last week's market slide – made a contrarian forecast: due to dismal positioning by CTAs and fund, he warned the next move was likely an explosive "blast to the upside."
Less than 24 hours later, and 700 Dow points higher, this prediction has come true, and much more may be coming according to McElligott's latest note.
First, a snapshot of where we currently stand.
As already covered earlier, futures are "smocking" higher this morning following overnight news of a call between Chinese Vice Premier Liu He and US Treasury Sec Mnuchin and Trade Rep Lighthizer to discuss timetables and “road map” on trade talks, followed by a report that China is set to "move on US car tariffs", both of which ramped risk assets and sent spoos above yesterday's higher, triggering stop-losses from dynamic hedgers with and more than 80 handles higher from yesterday's lows.
Adding to the suddenly euphoric mood is the drop in the dollar, which is boosting commodities, emerging markets and inflation expectations, while higher Treasury yields are also forcing a modest rotation into risk, with the Eurodollar curve steepening, a "further indication that the worst of the Rates “stop-outs” are behind us."
Fundamentals are also in the bulls' favor: i) the Fed’s dovish pivot further eases “forward-guidance” while also removing the “policy-error” left-tail scenario as well, ii) US financial conditions have actually EASED via the curve’s recent / power bull-flattening; iii) financial conditions are likely to “ease” even more going-forward with increasingly limited US Dollar upside into 2019 and beyond; iv) the weaker dollar drives a “virtuous” feedback loop of firming Commodities (with US Ags as further catalyst on Chinese resumption of buying as trade-war “olive branch”), in turn boosting the S&P’s largest positive macro factor sensitivity being US (higher) inflation expectations.
But while the newsflow and fundamentals are surely setting up the market for a nice move higher – absent any more executive arrests of course – it is positioning that remains the big wildcard and the key…
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China Arrests Former Canadian Diplomat As Government Fears Reprisal For Huawei CFO
by Zero Hedge - December 11th, 2018 8:44 am
Courtesy of ZeroHedge. View original post here.
Is this one of the "severe" reprisals threatened by Beijing when it summoned Canada's ambassador to Beijing for a meeting over the weekend?
According to Reuters, former Canadian diplomat Michael Kovrig has been detained in China. Kovrig's employer, International Crisis Group, is working to secure his "safe" release.
The reason for Kovrig's detention wasn't immediately clear, and Beijing has refused to comment on his detention. However, Reuters noted that the arrest of Huawei CFO Meng Wanzhou has "stoked fears of reprisals."
It was not immediately clear if the cases were related, but the arrest of Huawei CFO Meng Wanzhou in Vancouver has stoked fears of reprisals against the foreign business community in China.
"International Crisis Group is aware of reports that its North East Asia Senior Adviser, Michael Kovrig, has been detained in China," the think-tank said in a statement.
"We are doing everything possible to secure additional information on Michael’s whereabouts as well as his prompt and safe release," it added.
China’s Foreign Ministry and Ministry of Public Security did not respond immediately to questions faxed earlier about Kovrig’s detention.
The exact reason for the detention was not immediately clear.
The Canadian embassy declined to comment, referring queries to Ottawa.
Kovrig, a Mandarin speaker, has been working for the ICG as an in-house "expert" since February 2017. Prior to that, he served as a diplomat for the Canadian government between 2003 and 2016, with stints in Hong Kong and Beijing.
And while it's possible that the timing of Kovrig's arrest is purely coincidental…the timing is certainly very suspicious.
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Goldilocks? Core PPI Surges Near 7-Year Highs, Headline Weakest In 15 Months
by Zero Hedge - December 11th, 2018 8:38 am
Courtesy of ZeroHedge. View original post here.
After rebounding in October, Final Demand Producer Prices grew slower in November (at 2.5% YoY, and the weakest since August 2017).
However, Core PPI surged to 2.7% YoY – near its highest since September 2011…
Under the hood, Energy prices plunged as food costs jumped…
Final demand services:
Most of the November advance in prices for final demand services can be traced to margins for fuels and lubricants retailing, which jumped 25.9 percent. The indexes for health, beauty, and optical goods retailing; cellular phone and other wireless telecommunications services; airline passenger services; food wholesaling; and truck transportation of freight also moved higher. Conversely, prices for guestroom rental fell 3.5 percent. The indexes for machinery and equipment wholesaling and for portfolio management also declined.
Final demand goods:
Leading the November decrease in the index for final demand goods, gasoline prices dropped 14.0 percent. The indexes for liquefied petroleum gas, electric power, fresh fruits and melons, jet fuel, and primary basic organic chemicals also moved down. Conversely, the index for pharmaceutical preparations rose 1.5 percent. Prices for fresh and dry vegetables and for residential natural gas also increased.
None of this should be a huge shock as the market's inflation expectations have collapsed as oil's price has plunged…
Over to you Jay.
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“In Times Like This, Look For The Nearest Lifeboat And Hang On…”
by Zero Hedge - December 11th, 2018 8:23 am
Courtesy of ZeroHedge. View original post here.
Authored by Jan-Patrick Barnert and Michael Msika via Bloomberg,
Sure, the number one goal of investors is to make money, but in times like this sometimes all you can do is look for the nearest lifeboat and hang on.
Following yesterday’s slump across Europe, hopes of a year-end rally are now pretty much gone, and with unpredictable political drama in the U.K., France and Italy, it has become nearly impossible for investors to guess what the next day will bring.
The Stoxx Europe 600 index has now erased more than two years of gains and reached an important level both technically, as the market is now in oversold territory, and psychologically, as the benchmark traded around that point during most of 2016.
The visibility is so low that Allianz Global Investors, one of Europe’s biggest asset managers, is saying people should just sell the bounces and trim their exposure to stocks. Any positive surprise aside, markets look set to move sideways and near their lows for the rest of the year with defensive sectors in favor. But as this rotation has been going on for a while this year, protecting capital is becoming more difficult.
“The migration out of the most vulnerable cyclical and lower-quality stocks extends and positional risk is becoming more significant,” Kepler strategist Christopher Potts wrote in a note.
So while sticking to stocks with strong balance sheets and resilient earnings might not make investors immune from losses in a feeble market, some of them have held up well most recently.
Looking at individual sectors, telecoms and utilities have been the best-performing industries on the Stoxx Europe 600 over the past three months, offering superior dividend yields. While European equities trade at 4 percent estimated dividend yield on average, telecoms and utilities trade at 5.6 percent and 5.5 percent respectively. Because, while December is often the time of year when investors can just take stock on their performance, risks remain high in this market.
The uncertainties surrounding Brexit are just mounting. By canceling the Parliament vote to go back to Brussels and try to get some final reassurance regarding the Ireland border, Prime
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Crude Oil testing support with fear levels high, after 31% decline
by kimblechartingsolutions - December 11th, 2018 8:07 am
Courtesy of Chris Kimble.
Crude oil has been hit hard of late. The decline has Crude testing 3-year rising support at (1), as fear levels are high at (2) and weekly momentum is currently nearing oversold levels.
Below looks at Crude Oil and its 10-week performance –
Crude Oil has declined over 30% in the past 10-weeks at (1), as it is testing rising support at (2).
Wouldn’t be surprised to see Crude experience a short-term bounce as fear levels are very high and it is testing 3-year rising support.
–
To become a member of Kimble Charting Solutions, click here.
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European Stocks, S&P Futures Surge On Fresh Trade War De-escalation Hopes
by Zero Hedge - December 11th, 2018 7:23 am
Courtesy of ZeroHedge. View original post here.
After several days of precipitous market drops, and following yesterday's dramatic Apple-led intraday rebound, the biggest since February, S&P futures and European stock markets are sharply higher even as Asian shares slipped, as investor sentiment was boosted by fresh prospects of a thaw in the trade war following overnight news that Chinese Vice Premier Liu He discussed a timetable for trade talks with Treasury Secretary Steven Mnuchin, coupled with a report this morning from Bloomberg that China is moving toward cutting its trade-war tariffs on imported U.S.-made cars, a step which had previously been brandished by President Donald Trump as a concession won during trade talks in Argentina.
The big news overnight was a report according to China's Mofcom which said Vice Premier Liu He spoke by phone with US Treasury Secretary Mnuchin and Trade Representative Lighthizer in which both sides exchanged views on implementing consensus reached by their leaders, while they also exchanged views on pushing forward timetable and road map for next stage of trade discussions. The news – taken as a positive sign for trade war de-escalation – sent S&P futures as much as 20 points higher, shrugging off losses in the Asian benchmark and a drop in Japanese equities…
… while Europe's Stoxx 600 was trading at session highs, up over 1.5% as a result of a late catch up with yesterday's S&P rebound, led by THE construction, basic resources, builders and telecom sectors even with today's rebound it was still heading for its worst year since 2008.
European automakers also surged following the Bloomberg report that China is said to be moving on the US auto tariffs reduction that US President Trump has previously tweeted on. The proposal has been submitted for review, however, the decision has not been finalised and still could change.
Yet investors also have an eye on the continuing flap over Canada’s arrest of the chief financial officer of Huawei Technologies Co. And among a plethora of political risks, the U.K. is seeking reassurances from European partners over Brexit and fears linger over the possibility…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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