http://www.zerohedge.com/news/2013-10-25/japan-drowns-food-energy-inflation-chinas-liquidity-tinkering-continues-does-shibor-
Submitted by Tyler Durden on 10/25/2013 06:03 -0400
http://www.zerohedge.com/news/2013-10-25/mario-draghis-worst-monetary-zombie-infested-nightmare-just-got-worse-two-charts
Submitted by Tyler Durden on 10/25/2013 08:16 -0400
http://www.zerohedge.com/news/2013-10-25/rumors-spains-housing-market-resurrection-are-greatly-exagerated
Submitted by Tyler Durden on 10/25/2013 07:43 -0400
Japan Drowns In Food, Energy Inflation; China's Liquidity Tinkering Continues As Does SHIBOR Blow Out
- CDS
- China
- Consumer Prices
- Core CPI
- CPI
- Japan
- Monetary Base
- Monetization
- Nikkei
- Reality
- Reuters
- SocGen
- Yen
Nearly one year into the Japan's grandest ever monetization experiment, the "wealth effect" engine is starting to sputter: after soaring into the triple digits due to the BOJ's massive monetary base expansion, the USDJPY has been flatlining at best, and in reality declining, which has also dragged the Nikkei lower dropping nearly 3% overnight and is well off its all time USDJPY defined highs. But aside for the wealth effect for the richest 1%, it is not exactly fair to say that the BOJ has done nothing for the vast majority of the population. Indeed, as the overnight CPI data confirmed, food and energy inflation continues to soar "thanks" to the far weaker yen, even if inflation for non-energy and food items rose by exactly 0.0% in September. Oh, it has done something else too: that most important "inflation", so critical to ultimately success for Abenomics - wages - is not only non-existant, in reality wages continue to decline: Japanese labor compensation has been sliding for nearly one and a half years!
Goldman breaks down last night's inflation numbers:
The national core CPI (excluding fresh foods) was up 0.7% yoy in September. Despite slightly narrowing from +0.8% in August, the figure remained high. The breakdown continues to shows high positive contribution from energy costs, which were up 7.4% yoy (contribution: +0.64 pp), but the figure was slightly lower compared to August (+9.2% yoy; +0.78 pp).Aside from energy costs, foods (excluding fresh foods) turned positive at +0.1% yoy (August: 0.0% yoy) for the first time since July 2012, while prices of clothing/footwear continued to rise steadily (September: +0.7%, August: +0.8%).Cultural/recreational durables (e.g. TV), which has been a significant driver of price decline, rose 0.1% yoy in August for the first time since January 1992, and continued to rise in September, at +0.4%. The September core-core figure (excluding foods and energy) pulled out from the negative territory for the first time since December 2008, at 0.0% (August: -0.1%).
China’s central bank starts system for a loan prime rate, orLPR, today in order to “further promote interest rate liberalization; LPR is 5.71% today...The idea is that sustained increases in consumer prices after 15 years of deflation should lead to a cycle of growth, brisk business expenditures and higher wages. While growth has picked up this year, business investment and wages have not."The core-core CPI is a good sign, but it is a little strange to say things are doing well simply because prices are rising," Economics Minister Akira Amari told reporters."What we need is to ensure that rising wages accompany price gains to ensure healthy economic growth."Similarly, Finance Minister Taro Aso cautioned that it would take more time to escape deflation due to uncertainties including sluggish exports and China's economic outlook.
And therein lies the rub: the higher input costs soar - and thay have soared quite high - the less wages companies can afford to pay, and a result wages have been falling since early 2012, oblivious of what Abe wishes or demands. The only question is how much longer can ordinary Japanese citizens afford to get squeezed between soaring food and energy prices, and flat wages. Even if, one assumes, all said citizens are perfect traders and generate a few thousand pips every day fading Tom Stolper's JPY FX recos.
* * *
Elsewhere, overnight the People’s Bank of China took another step towards interest rate liberalisation – introducing of prime lending rates (LPR) that are based on the reporting from nine commercial banks. SocGen notes that the first reading is 5.71% for 1-year lending, below the current benchmark rate of 6%, which is reasonable given that LPRs are offered to the best corporates. We expect no immediate impact from this change, but introducing LPRs means that the PBoC has pretty much given up the benchmark lending rates as policy rates. Liberalising deposit rates, however, will be a gradual process. The next moves are likely by end-2013, including initiation of CDs and implementation of the deposit insurance scheme as well as the bankruptcy lawfor financial institutions.
Qu Hongbin, chief economist of HSBC in a Bloomberg interview, added the following: PBOC’s decision to start loan prime rate is next important step towards market-based interest rates in China. Smaller commercial banks will be able to use market-based loan prime rate, which is determined by commercial banks, as a reference for pricing of corporate loans, instead of using China’s ’managed’ lending rate, which is determined by PBOC. Loan prime rate extends tenor of market-based benchmark rates to longer maturities from existing short-term Shibor rate.
Whether or not this is merely more lip service by the PBOC to feign reform when in reality nothing has changed - as has been the case with all other recent such "initiatives" will be made clear soon. For now, the market doesn't care about rate liberalization. The only rate it does care about is Shibor, or the various tenors of short-term repo rates, which have continued their surge: one-month Shibor rises 102 bps, most since June 25, to 6.4220%, highest since July 1. Three-month Shibor increases to 4.6910% from 4.6876% yesterday, seventh gain in a row, while the all important 1 Week Shibor rose to 4.891% from 4.60%. For now, all the hopes that the PBOC is just bluffing, have been squashed.
Busy, Lackluster Overnight Session Means More Delayed Taper Talk, More "Getting To Work" For Mr Yellen
Submitted by Tyler Durden on 10/25/2013 - 07:00
It has been a busy overnight session starting off with stronger than expected food and energy inflation in Japan even though the trend is now one of decline while non-food, non-energy and certainly wage inflation is nowhere to be found (leading to a nearly 3% drop in the Nikkei225), another SHIBOR spike in China (leading to a 1.5% drop in the SHCOMP) coupled with the announcement of a new prime lending rate (a form a Chinese LIBOR equivalent which one knows will have a happy ending), even more weaker than expected corporate earnings out of Europe (leading to red markets across Europe), together with a German IFO Business Confidence miss and drop for the first time in 6 months, as well as the latest M3 and loan creation data out of the ECB which showed that Europe remains stuck in a lending vacuum in which banks refuse to give out loans, a UK GDP print which came in line with expectations of 0.8%, where however news that Goldman tentacle Mark Carney is finally starting to flex and is preparing to unleash a loan roll out collateralized by "assets" worse than Gree Feta and oilve oil. Of course, none of the above matters: only thing that drives markets is if AMZN burned enough cash in the quarter to send its stock up by another 10%, and, naturally, if today's Durable Goods data will be horrible enough to guarantee not only a delay of the taper through mid-2014, but potentially lend credence to the SocGen idea that the Yellen-Fed may even announce an increase in QE as recently as next week.
Mario Draghi's Worst Monetary Zombie-Infested Nightmare Just Got Worse... In Two Charts
As frequent readers will recall, one of our favorite series of posts describing the "Walking Dead" monetary zombie-infested continent that is Europe is the one showing the abysmal state Europe's credit creation machinery, operated by none other than the Bank of Italy's, Goldman'sECB's Mario Draghi, finds itself in. As a reminder, it was as recently as September when we found that "Mario Draghi's Nightmare Gets Worse" because "European Loans Declined At Record Rate." To our complete lack of surprise, when a few hours ago the ECB released thelatest monetary and credit creation update for the month of September, it showed... no change. Or rather, while loans to the private sector are at all time record lows, that other metric which Draghi at least has some direct control over (since he obviously can't control the amount of confidence in the system aside from threats of brute force), M3, just had its lowest pace of increase since January 2012.
But here's the kicker: while the US at least has the Fed to step in and forcefully push credit into the private sector void as it has been doing every day since Lehman, in Europe, with the ECB's balance sheet actively declining, the continent is well, on its own to fend against the monetary zombies horde shown below.
SocGen agrees:
The European Central Bank reported that money supply growth (M3) in the euro area decelerated further in September, dropping to an annual rate of 2.1% – the slowest pace of increase since January 2012 – well below the ECB’s 4.5% target. Looking at credit, the picture is once again one of fragmentation. While the French corporate sector proved rather resilient to credit crunch, the total amount of credit to corporates plunged by 4.9%yoy in Italy, 7% in Portugal, and an alarming 19.9% in Spain. Undoubtedly, this weakness in monetary and credit developments will add pressure on the ECB, which could decide to ease financial conditions further. But this will not be sufficient.Our view is that a rate cut would require an additional weakening in either the growth or the inflation outlook.The combination of currency in circulation and overnight deposits (M1) increased by only €6bn in September, after the average €38bn jumps recorded over the July/August time span. On an annual basis, the growth of M1 continued to slow. Indeed, the closely-followed aggregate stood 6.6% above year-ago levels in September, after 6.8% in August and 7.1% in July.On that matter, the ECB recently communicated on the fact that the solid increase in the M1 aggregate seen since the beginning of the year would ultimately foster a recovery in credit – and Investment – even though the overall money supply growth (M3) was decelerating.Yet, it is not clear to us how a movement in overnight deposits would be such as to stimulate investment. What we rather believe is that the flow of credit remains negative, which suggests that the strong recovery in investment everyone expects is unlikely to happen for, at least, six to nine more months.
Not only is it not clear to SocGen, worst of all it is not clear to Mario Draghi, which is why his nightmares will only get worse and worse, as loan creation collapses further, as non-performing loans accumulate, and as Europe's credit-money zombies finally escape their cages and start biting chunks of meat off of (Europe's unemployed) people.
Rumors Of Spain's Housing Market Resurrection Are Greatly Exagerated
- Bad Bank
- Bill Gates
- Commercial Real Estate
- Gross Domestic Product
- Housing Market
- Real estate
- Unemployment
Two days after Spain reported its first positive sequential GDP print (unclear just how adjusted the definition of GDP was to get to this watershed moment after 9 quarters of declines) and a day after it unemployment supposedly dropped more than expected (what was left unsaid is that the Spanish working age population dropped 85,200 in Q3 and -279,000 YoY and that of the 39,500 "jump" in Q3 employed people, virtually all were self-employed or temps while employees on permanent contracts were down by 146,300), the 5 second attention span investing herd is now convinced the housing market in Spain has dropped. This was "formalized" after billionaireBill Gates invested $155 million, also known as pocket change, in Spain's infrastructure group Fomento de Construcciones & Contratas. Surely, if anyone knows how to time housing market turns it is the guy who brought us MS-DOS 3.1.
Unfortunately, the mythical housing bottom may have been just that - mythical - following news that Spain's bad bank (oh yeah - lest we forget, Spain has a wonderful rug under which it can hide all insolvent bank NPLs) failed to attract high enough bids in its first sale of commercial real estate and will cut the size of the portfolio being offered to make it easier to sell, according to Bloomberg which cited three people familiar with the matter.
Bloomberg reports why rumors of the Spanish housing market's resurrection, may have been exagerated:
The bad bank, known as Sareb, received more than 30 offers for the portfolio that were lower than it expected, said one of the people, who declined to be named because the information isn’t public. It will reduce the number of buildings in the package known as Corona to four from seven, the person said. A spokeswoman for Madrid-based Sareb declined to comment.Spain created Sareb last year to absorb 50 billion euros ($69 billion) of real-estate assets from lenders including Bankia group that took aid as part of the nation’s European bailout. Its failure to attract high enough bids may undermine growing optimism in Spain as the stock market has surged 21 percent this year and foreign investors including Microsoft Corp. founder Bill Gates buy into Spanish companies.In August Sareb agreed to sell a majority stake in a group of almost 1,000 homes known as Project Bull to private-equity firm H.I.G. Capital LLC. It also sold loans advanced to Inmobiliaria Colonial SA with a nominal value of 245 million euros to Burlington Loan Management Ltd.
Also known as two greatest fools. So far, all alone.
On the bright side, this only means that the Fed will need to send out some more memos to banks (and hedge funds) warning about lax lending practices, which will remain unread until the next crash, in the meantime the same banks, and hedge funds, will scramble to pick up whatever carry trades are left in the global fungible market - if it means ultimately rushing into whatever dregs the Sareb has to sell to the greater fool, so be it.
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100025913/citi-forecasts-greek-devastation-unstoppable-debt-spirals-in-italy-and-portugal/
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