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INTRA-DAY NEWSLETTER ~ Aug 4 2014
Key Events In The Current Week
Submitted by Tyler Durden on 08/04/2014 08:46
Unlike last week's economic report deluge, this week has virtually no A-grade updates of note, with the key events being Factory Orders (exp. 0.6%), ISM non-mfg (exp. 56.5), Trade balance (Exp. -$44.9 bn), Unit Labor Costs (1.2%) and Wholesale Inventories (0.7%).
The full event breakdown from Goldman:
Monday, August 4
• Events: EU’s Juncker meets Greece’s Samaras.
• United Kingdom | Markit/CIPS UK Construction PMI (Jul): Previous 62.6
• Australia | [MAP 3] Retail Sales MoM (Jun): GS 0.40%, consensus 0.40%, previous -0.50% (4.60% yoy)
• Singapore | [MAP 2] Purchasing Managers Index (Jul): Previous 50.5
• Indonesia | CPI NSA MoM (Jul): Consensus 0.88% (4.48% yoy), previous 0.43% (6.70% yoy)
• Turkey | CPI YoY (Jul): GS 8.60%, consensus 8.90%, previous 9.16% (0.31% mom)
• Also interesting: [DM] US ISM New York; Euro area PPI; Switzerland PMI; Japan Monetary Base; Australia ANZ Job Advertisements; New Zealand ANZ Commodity Price [EM] Indonesia Exports and Imports; PPI in Romania and Turkey; Romania Retail Sales; Brazil Trade Balance; Colombia PPI and Exports.
Tuesday, August 5
• Events: US primary elections in various States.
• United States | ISM Non-Manf. Composite (Jul): GS 56.5, consensus 56.5, previous 56
• United States | Factory Orders (Jun): GS 0.50%, consensus 0.60%, previous -0.50%
• Australia | MP Decision: We expect the Cash Rate Target will remain unchanged at 2.50% (in line with the unanimous view of local economists). With the quarterly Statement on Monetary policy scheduled for later in the week, we caution that it is quite possible that the RBA will defer communicating any major shifts to that far lengthier and more detailed publication.
• Australia | TD Securities Inflation MoM (Jul): Previous 0.00% (3.00% yoy)
• DM | Composite PMI (Jul): US (previous 60.9), Euro area (previous 54), France (F: GS 49.4, previous 49.4), Germany (F: GS 55.9, previous 55.9), Italy (previous 54.2), Spain (previous 55.2); UK (previous 58); Japan (previous 50)
• DM | Services PMI (Jul): US (previous 61), Euro area (F: GS 54.4, previous 54.4), France (F: GS 50.4, previous 50.4), Germany (F: GS 56.6, previous 56.6), Italy (previous 53.9), Spain (previous 54.8), Sweden (previous 54.6), United Kingdom (previous 57.7); Japan (previous 49)
• EM | Composite PMI (Jul): China (previous 52.4), Hong Kong (previous 50.1), India (previous 53.8), Russia (previous 50.1), South Africa (previous 49.5), Brazil (previous 51.4)
• EM | Services PMI (Jul): China (previous 53.1), India (previous 54.4), Russia (consensus 49.5, previous 49.8), Brazil (49.9)
• India | MP Decision: We do not expect any rate change, in line with consensus (RBI Repurchase Rate at 8.00%, with Reverse Repo Rate at 7.00% and Cash Reserve Ratio at 4.00%), but will watch closely the statement’s tone. After the Governor’s dovish tone in the previous June meeting, markets traded with a dovish bias, and are now pricing in 50 bps of rate cuts over the next 12 months. We think that near-term rate cut expectations are overdone at this stage, as the fight against inflation has not yet been won. We think that the RBI will err on the side of caution, and is more likely to hike rates in the last quarter of 2014 in response to a flare-up in inflation, rather than cut rates. We think that the RBI statement at the upcoming meeting is likely to be more hawkish than the last policy statement.
• Philippines | CPI NSA MoM (Jul): Consensus (4.50% yoy), previous 0.40% (4.40% yoy)
• Taiwan | CPI YoY (Jul): Consensus 1.90%, previous 1.64%
• Chile | [MAP 5] Economic Activity YoY (Jun): GS 2.50%, consensus 2.20%, previous 2.30% (0.60%)
• Colombia | CPI MoM (Jul): GS 0.10% (2.80% yoy), consensus 0.13% (2.85% yoy), previous 0.09% (2.79% yoy)
• Also interesting: [DM] Euro area Retail Sales; Australia Trade Balance [EM] Indonesia GDP; Retail Sales in Czech Republic and Hungary; Argentina Vehicle Domestic Sales; Mexico Consumer Confidence.
Wednesday, August 6
• United States | [MAP 2] Trade Balance (Jun): GS -$46.5B, consensus -$45.0B, previous -$44.4B
• Italy | Industrial Production MoM (Jun): Previous -1.20% (-4.90% yoy)
• Italy | GDP WDA QoQ (2Q P): GS 0.30% (0.10%), previous -0.10% (-0.50%)
• Switzerland | CPI YoY (Jul): Previous 0.00% (-0.10% mom)
• United Kingdom | [MAP 3] Manufacturing Production YoY (Jun): GS 2.90% (1.40% mom), previous 3.70% (-1.30% mom)
• Thailand | MP Decision: We expect rates on hold (Benchmark Interest Rate at 2.00%), in line with consensus. With the expected pick-up in sequential growth, upside risks to inflation, and supportive effects of previous monetary easing, we do not think the central bank will cut rates further in 2014. Thus, we expect rates to remain on hold for the rest of the year.
• Czech Republic | [MAP 4] Industrial Output YoY (Jun): GS 6.00%, consensus 8.00%, previous 2.50%
• Hungary | [MAP 4] Industrial Production WDA YoY (Jun P): GS 7.00%, previous 9.60% (-1.00% mom)
• Hungary | Minutes from MP Decision
• Ukraine | CPI MoM (Jul): Previous 1.00% (12.00% yoy)
• Also interesting: [DM] Canada Int'l Merchandise Trade; Retail PMIs in Euro area, France, Germany, Italy; Germany Construction PMI and Factory Orders; UK IP and New Car Registrations; Japan Coincident and Leading Index; New Zealand Wage Inflation and Unemployment [EM] Malaysia Trade Balance; Czech Republic Trade Balance; Romania Wage Statistics; Brazil Commodity Price Index and Vehicle Production and Sales; Mexico Leading Indicators.
Thursday, August 7
• Euro area | MP Decision: We expect no change in policy (Main Refinancing Rate at 0.15%, Deposit Facility Rate at -0.10%).
• Germany | Industrial Production SA MoM (Jun): Previous -1.80% (1.30% yoy)
• Norway | Industrial Production MoM (Jun): Previous -5.90%
• Spain | Industrial Output SA YoY (Jun): Previous 2.50% (-0.70% mom)
• United Kingdom | MP Decision: We expect no change in policy (Bank Rate at 0.50% and Asset Purchase Target at 375B).
• South Africa | [MAP 4] Manufacturing Prod NSA YoY (Jun): Previous -3.70% (-3.30% mom)
• Mexico | CPI MoM (Jul): GS 0.26% (4.05%), previous 0.17% (3.75%)
• Peru | MP Decision: We assess better-than-even odds of a 25bp cut in the Reference Rate to 3.50%. In our view, central bank directors are likely to derive comfort from the recent signs of fading inflationary pressures and could take the opportunity to provide some extra monetary stimulus to the faltering economy.
• Also interesting: [DM] US Jobless Claims and Consumer Credit; Canada Building Permits; Trade Balance in Finland and France; Japan Foreign Buying Stocks/Bonds; Australia Employment Change; New Zealand House Prices [EM] Taiwan Trade Balance; Hungary Trade Balance; Russia Reserve Assets; South Africa Business Confidence; Chile Trade Balance.
Friday, August 8
• United States | Nonfarm Productivity (2Q P): GS 1.60%, consensus 1.40%, previous -3.20%
• United States | Unit Labor Costs (2Q P): GS 0.80%, consensus 1.20%, previous 5.70%
• France | Industrial Production MoM (Jun): Previous -1.70% (-3.70% yoy)
• Japan | MP Decision: We expect the BOJ to keep monetary policy unchanged (Monetary Base Target at ¥270T). We believe the BOJ will remain comparatively bullish, maintaining its assessment that the economy continues to perform broadly in line with its expectations, while possibly adding some wording about downside risks. If economic data for July turns out to be weak, however, we think it will increase the likelihood of the BOJ revising down its economic assessment at the September MPM.
• Australia | Statement on MP (August): Recent communications have signaled a heightened degree of uncertainty about whether financial conditions are easy enough to mitigate headwinds from declining mining capex and restrictive fiscal policy. In our view, this doubt, against the backdrop of a still elevated AUD and risk of a very weak 2Q2014 GDP print, keeps open the prospect of further easing over 2H2014. A key feature will be how the recent repeal of the carbon tax flows through to the RBA’s official inflation forecasts. We expect material downgrades in FY15 at both the headline (-70bp) and underlying levels (-25bp). Markets should also focus on how promptly inflation is expected to approach the top of the target band towards end-2015. On the growth front, we are not expecting large revisions.
• China | [MAP 3] Exports YoY (Jul): GS 6.70%, consensus 6.50%, previous 7.20%
• China | [MAP 3] Imports YoY (Jul): GS -1.00%, consensus 0.00%, previous 5.50%
• Thailand | CPI NSA MoM (Jul): Consensus 0.12% (2.40% yoy), previous -0.10% (2.35% yoy)
• Turkey | Industrial Production MoM (Jun): Previous -1.00% (3.30% mom)
• Brazil | IBGE Inflation IPCA MoM (Jul): GS 0.08% (6.58% yoy), previous 0.40% (6.52% yoy)
• Chile | CPI MoM (Jul): GS 0.10% (4.30% yoy), consensus 0.20%, previous 0.10% (4.30% yoy)
• Mexico | [MAP 4] Gross Fixed Investment (May): GS 1.10%, previous -3.50%
• Also interesting: [DM] US Wholesale Inventories; Canada Unemployment; France Manufacturing Production, Budget Balance; Germany Current Account; Denmark IP; Sweden IP, Services Output and Unemployment; Switzerland Unemployment; UK Construction Output and Trade Balance; Japan CA and Bank Lending; Australia Investment Lending and Home Loans; [EM] China Trade Balance; Peru Trade Balance
Russia Launches Massive Bomber, Warplane Drill On Ukraine Border As Over 400 Ukraine Soldiers Defect
Submitted by Tyler Durden on 08/04/2014 - 09:31
It has been a while since Russia flexed its military "drill" muscles along the Ukraine border as a reminder of just who would win a pissing contest that involves military intervention. Which is probably why earlier today Russia announced new military exercises involving bombers and fighter jets in a show of strength near the border with Ukraine. As Reuters reported, "an air force spokesman was quoted by Interfax news agency as saying more than 100 planes and helicopters would take part in the manoeuvres from Monday until Friday in its central and western districts." Expect some very dramatic footage of Russian Su-34s and Mi-28Ns hitting YouTube later today.
Another Glitch: Espirito Santo Junior Debt Plummets As CDS Trigger May Be Avoided
Submitted by Tyler Durden on 08/04/2014 - 09:12
Fearful of any impact to the Portuguese/European dream, EU commission leaders folded and bailed out Banco Espirito Santo. Bond and CDS traders are scrambling this morning to come to grips with the consequences of BES bail-out/bail-in. The $6.6 billion bailout's burden-sharing has wiped out shareholders and crushed subordinated debt holders (traded down to 16c on the dollar this morning) where "the likelihood of recovery for junior bondholders is minimal,” according to one trader; but leaves senior bond holders (+10pts to 100) and depositors unaffected. However, it is those 'smart' investors who bought insurance in the CDS market that are struggling this morning as the plan to transfer BES assets to a new company, Novo Banco, may constitute a so-called 'succession event' whereby all the contracts associated with CDS move to the new company (and this do not trigger the CDS to pay). CDS spreads ripped 350bps tighter.
ISIS Captures Iraq's Biggest Dam: Baghdad Water Supply In Jeopardy
Submitted by Tyler Durden on 08/03/2014 - 21:00
Islamic State fighters seized control of Iraq's biggest dam, an oilfield and two more towns on Sunday after inflicting their first major defeat on Kurdish forces since sweeping through the region in June. Local officials said militants with the extremist group Islamic State took control of the towns of Zumar and Sinjar near the city of Mosul on Sunday, waging fierce clashes with Kurdish forces. The French news agency AFP quoted a United Nations spokesman saying 200,000 people have fled Sinjar and said there are grave concerns for their safety.
Gold Chart
Gold is still struggling to get anything going. Volume is light and we are seeing no buying pressure so far on Monday. Resistance is 1299-1304 for the remainder of the day and support is 1277-1287. Additional support is 1260-1265. Gold needs to get something going now or we face the potential of losing this support near 1280. We need to see the mini blue moving average at 1294 cross above the green average at 1299 to get something going. At the moment the trend remains down on the short term. We need a close above 1308-1312 for a push towards 1322-1342. A close below 1272 warns of a visit to 1260-1265.
 
Cycles
We are getting close to losing the red cycle to an inversion. The next cycle is due Aug 10th (plus or minus 72 hours). So its not out of the question for us to drop to the 1265 area from here where the next channel line resides. From a rotation standpoint it would be much better if gold were to drop into the blue cycle and form a low there. As it stands at the moment, the trend is still down in gold as we head for the afternoon session.
Silver
Silver has support at 1996-2006 and at 1943-1973. It still looks like silver is wanting to test the lower gold downtrend line just above 2000. Resistance is the 2161-2081 area and then 2116-2133. Resistance for the remainder of the day is 2050-2062.
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