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Bitcoin Explodes Above $7000.. Then Crashes $600

November 2, 2017 Tyler Durden 0

If you like your volatile cryptocurrency, you can keep your cryptocurrency…

image courtesy of CoinTelegraph

Following a seemingly endless stream of ‘good news’ – Bitcoin futures, Amazon rumors, Fork dividends, multiple nations moving towards adoption – Bitcoin exploded this mornng to a new record high $7354… up 29% for the week.

Then it crashed $650 to $6700…

 

Once again it seems Ether is being sold to fund the Bitcoin buys..


As CoinTelegraph notes,
with Bitcoin’s increasing acceptance by Wall Street financiers and traders, the sky is quite literally the limit for the digital currency. While Bitcoin’s $116 bln market capitalization is large by the cryptocurrency world’s standards, it’s minuscule in comparison to the $639 tln derivatives market. If even the tiniest fraction of those funds were to enter Bitcoin, its value would be inconceivable.

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Bank Of England Hikes Rates By 25bps In 7-2 Vote; First Increase In A Decade; Pound Plunges

November 2, 2017 Tyler Durden 0

Over ten years since the last rate hike by the Bank of England in July 2007 (when incidentally, cable was trading above $2.00), and following years of market expectations of an imminent rate hike that failed to materialize…

…. moments ago the BOE – which had telegraphed the move extensively in recent months despite some dovish misgivings – finally pulled the trigger, and raised rates by 25bps to 0.5% in order to curb the effect of high inflation brought about by the post-Brexit plunge in the pound, squeezing local households and pressuring the UK economy. However, while cable initially spiked higher on the news, it subsequently slumped on the news that the vote was not a unanimous 9-0 decision as some had expected, as would telegraph a normal rate hike cycle, and instead had a decidedly dovish tilt with a far more contested 7-2 vote, with Cunliffe and Ramsden dissenting based on insufficient evidence that domestic costs, particularly wage growth, would pick up in line with central projections.

Here is the BOE assessment:

The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment.  At its meeting ending on 1 November 2017, the MPC voted by a majority of 7-2 to increase Bank Rate by 0.25 percentage points, to 0.5%.  The Committee voted unanimously to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £10 billion.  The Committee also voted unanimously to maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at £435 billion.

Some other key BOE considerations:

  • Growth: GDP grows modestly over the next few years at a pace just above its reduced rate of potential.  Business investment is being affected by uncertainties around Brexit, but it continues to grow at a moderate pace, supported by strong global demand, high rates of profitability, the low cost of capital and limited spare capacity.
  • Consumption: Consumption growth remains sluggish in the near term before rising, in line with household incomes
  • Trade: Net trade is bolstered by the strong global expansion and the past depreciation of sterling. 
  • Inflation: After CPI rose to 3.0% in September, the MPC still expects inflation to peak above 3.0% in October, as the past depreciation of sterling and recent increases in energy prices continue to pass through to consumer prices.   Expects domestic inflationary pressures to gradually pick up as spare capacity is absorbed and wage growth recovers.
  • Wages: The central projection was that whole-economy total pay growth was expected to rise from a little over 2% to 3% in a year’s time, levelling out at around 3.25% in the medium term.
  • Brexit: Uncertainties are weighing on domestic activity, which has slowed even as global growth has risen significantly.  Brexit-related constraints on investment and labour supply appear to be reinforcing the marked slowdown that has been increasingly evident in recent years in the rate at which the economy can grow without generating inflationary pressures.
  • Slack: slack has reduced the degree to which it is appropriate for the MPC to accommodate an extended period of inflation above the target

The outlook:

There remain considerable risks to the outlook, which include the response of households, businesses and financial markets to developments related to the process of EU withdrawal.  The MPC will respond to developments as they occur insofar as they affect the behaviour of households and businesses, and the outlook for inflation.  The Committee will monitor closely the incoming evidence on these and other developments, including the impact of today’s increase in Bank Rate, and stands ready to respond to changes in the economic outlook as they unfold to ensure a sustainable return of inflation to the 2% target.

While the 7-2 vote split was clearly less hawkish than an ideal scenario would suggest, what has spooked traders are the following parts from the statement that appear especially dovish:

  • In the MPC’s central forecast, conditioned on the gently rising path of Bank Rate implied by current market yields, GDP grows modestly over the next few years at a pace just above its reduced rate of potential.
  • In line with the framework set out at the time of the referendum, the MPC now judges it appropriate to tighten modestly the stance of monetary policy in order to return inflation sustainably to the target.
  • Monetary policy continues to provide significant support to jobs and activity in the current exceptional circumstances.  All members agree that any future increases in Bank Rate would be expected to be at a gradual pace and to a limited extent.

In immediate reaction, as shown in the chart above, GBP/USD dropped as much as 1.1% to 1.3098 low as the 7-2 vote risks that Carney adopts a dovish approach at his press conference, as policy makers saw considerable risks stemming from Brexit.  According to Bloomberg, bids at 1.3150-60 filled, with option related protection above 1.3100. One-week risk reversals at 31bps in favor of GBP puts, remain in sideways trading since mid-October.

So is this the start of a more traditional hiking cycle or just a one-off correction from last year’s rate cut? According to the BOE, “all members agree that any future increases in Bank Rate would be expected to be at a gradual pace and to a limited extent.” Incidentally, this is what the market expected just prior to the announcement.

Incidentally, the chart above may be right as BOE policy makers omitted language from previous statements saying that more hikes could be needed than the markets expect. That implies that officials are comfortable with pricing for two more quarter-point increases, roughly one by late next year and another in 2020.

Here is Bloomberg’s take:

That’s a very prudent pace of rate hikes, the one the Bank of England is penciling in. And yet, despite the warning about the “considerable risks” coming from Brexit, it is still a path of tightening ahead. The dropped wording that interest rates may need to rise more than markets expect has markets recalibrating, with bond yields falling and pushing back expectations for a follow-up. It’s not a big reset, though, with a second quarter-point move now fully priced in for September 2018 (compared with August before the decision). That’s what the market expects

And with the overhang of more imminent rate hikes gone, Gilt yields have also tumbled.


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“A Shocking Truth”: Donna Brazille Accuses Clinton Campaign Of “Rigging” Primary

November 2, 2017 Tyler Durden 0

Authored by Donna Brazille, former interim chair of the Democratic National Committee, originally published in Politico.

* * *
“When I was asked to run the Democratic Party after the Russians hacked our emails, I stumbled onto a shocking truth about …

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Greece Plans 30 Billion Euro Debt Swap As It Prepares For The End Of Bailouts

November 2, 2017 Tyler Durden 0

Greece is planning a 30 billion euros debt swap which will convert 20 existing bonds into 5 (or less) new issues in the next few weeks (although the exact timing remains uncertain). The bonds are expected to have similar maturities to the existing notes from 2023-2042.

According to Bloomberg, the Greek government is planning an unprecedented debt swap worth 29.7 billion euros ($34.5 billion) aimed at boosting the liquidity of its paper and easing the sale of new bonds in the future. Under a project that could be launched in mid-November, the government plans to swap 20 bonds issued after a restructuring of Greek debt held by private investors in 2012 with as many as five new fixed-coupon bonds, according to two senior bankers with knowledge of the swap plan. The bank officials requested anonymity as the plan has yet to be made public.

Markets have responded well to the news as Bloomberg reported.

  • Greek 10-Year Yield Drops to Lowest Since July on Debt-Swap Plan

  • Greek 5-yr bond yield drops by 10bps to 4.345%, its lowest level since the nation issued the new note in July.
  • Demand spurred by optimism that the third bailout review will be completed in time; news that government is planning a debt-swap plan is also boosting sentiment

While we struggle to believe that the Greek debt crisis is anywhere near close to being solved, at least the country seems to have been touched by Europe’s recovery.

Furthermore, the European Council announced on 25 September 2017 that Greece’s finances have stabilised and it was closing the excessive debt procedure. It sounded good anyway…

“After many years of severe difficulties, Greece’s finances are in much better shape. Today’s decision is therefore welcome”, said Toomas Tõniste, minister for finance of Estonia, which currently holds the Council presidency.

 

“We are now in the last year of the financial support programme, and progress is being made to enable Greece to again raise money on the financial markets at sustainable rates.” 

 

From a deficit of 15.1% of GDP reached in 2009, Greece’s fiscal balance has steadily improved, turning into a 0.7% of GDP surplus in 2016. Although a small deficit is projected for 2017, the fiscal outlook is expected to improve again thereafter…In the light of this, the Council found that Greece fulfils the conditions for closing the excessive deficit procedure. Greece will now be subject to the preventive arm of the EU’s fiscal rulebook, the Stability and Growth Pact. Monitoring will continue until August 2018 under its macroeconomic adjustment programme.

Meanwhile, the planned debt swap is a step in the Greek government’s preparations for August 2018 when, excuse our cynicism, Greece will essentially look to borrow more money to buffer its debt mountain. Bloomberg comments. 

“The move aims to address the current illiquidity of the Greek bond market,” according to analysts at Pantelakis Securities SA in Athens.

 

It will also “establish a decent yield curve, thus facilitating the country’s return to public debt markets.”

 

The move comes as Greece prepares for life after the end of its current bailout program in August 2018. The debt swap is a step toward the country’s full return to markets required to avoid a new bailout program. The government plans to tap the bond market in 2018 to raise at least 6 billion euros to create an adequate buffer to honor debt obligations, according to a government official…

 

Finance Minister Euclid Tsakalotos said in October that tapping markets soon wouldn’t be aimed at getting fresh money so much as to better manage the country’s debt and make its bonds more attractive. The new bonds, following the swap, are expected to have the same value as the old ones and will have a fixed coupon, one of the people with knowledge of the matter said.

Talking of cynicism, Goldman Sachs role in this transaction remains uncertain.

The challenge for Greece is to be in a sufficiently strong financial position to refinance more than 17 billion euros of debt in 2019 as Bloomberg explains, Greece returned to markets in July for the first time since 2014, raising 3 billion euros through new 5-year bonds. Now, with the swap plan, the government wants to ensure it can tap the market for enough funds to refinance its debt obligations in 2019, which originally amounted to 19 billion euros. The government managed to reduce this number by 1.6 billion euros with the July bond issuance.

While the timing of the debt swap transaction is uncertain, the government is aiming to complete it in time for the return of representatives of the country’s creditors in the last week of this month. No doubt they will be overjoyed by what they find.

There’s just one thing…

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Nickel Price Surging As Hype Escalates During LME Week

November 2, 2017 Tyler Durden 0

It’s LME Week and there’s cause for celebration in metal markets. European mining stocks rose to a 4-year high as the nickel price surged more than 5% intraday to a two-year high and rose by the daily limit in Shanghai trading today. Metals used in electronic vehicles, like lithium, cobalt, copper and nickel, are hot right now and a focal point of discussion at the LME gatherings. As Metal Bulletin noted, the 2017 event has seen record attendance.

The annual LME Dinner week kicked off in a positive note, with record numbers gathering for the exchange’s keynote metals seminar on Monday October 30. “We have over 900 people over the day here…which is a record attendance,” London Metal Exchange chief executive officer (CEO) Matthew Chamberlain said.

Despite relatively high inventories, big miners and metal traders are becoming increasingly bullish on nickel’s prospects. According to Bloomberg

Glencore Plc and Trafigura Group Pte are often at loggerheads, but one thing they agree on: the nickel market will be transformed by the rise of electric cars. Nickel sulphate, a key ingredient in lithium-ion batteries, will see demand increase 50 percent to 3 million metric tons by 2030, Saad Rahim, chief economist at Trafigura, said in an interview. While other battery metals like cobalt and lithium have more than doubled since the start of last year, nickel prices have been subdued because of large inventories.

“When you look structurally, we should start to get bullish now,” Rahim said.

 

“Are you going to be able to meet that demand when the time comes, given underinvestment in the supply side?”

Glencore, which was devastated by the downturn in nickel, is also optimistic, as are some of the analysts, as Bloomberg notes…

(Glencore) told analysts recently that nickel production would need to increase 1.2 million tons by 2030, equal to more than half of current global output, to keep up with demand from the battery industry. Prices are currently more than double what it costs Glencore to mine the metal. It’s a surprising mood change for a market with a disastrous reputation. Nickel was long a thorn for Glencore, which was saddled with unprofitable operations following its takeover of Xstrata. It sold an Australian nickel mine, which Xstrata bought in 2007 for $2.4 billion, for just $19 million in 2015.

 

“The nickel industry’s been a bit of a dog since about 2007,” Oliver Ramsbottom, a partner at McKinsey & Co. in Tokyo, said by phone.

 

The battery industry could revive the fortunes of miners more than a decade after nickel collapsed from a peak of $51,600 a ton in 2007

Despite the hype, Bloomberg cautions that there are still naysayers highlighting elevated inventories and the potential for supply to ramp-up faster than currently expected.

Still, some analysts are skeptical that the bullish scenarios will play out. Electric cars are still a niche industry and nickel oversupply remains a threat, with current stockpiles four times bigger than since the start of 2012.

 

Indonesia has authorized its largest producer to export more nickel ore. The Philippines has also discussed ending a ban on open-pit mining, raising concerns that supply will spike.

 

“For years, the market has completely dismissed the idea that something positive could happen in nickel,” Ingrid Sternby, senior research analyst at Blenheim Capital Management LLP, said in an interview in London. “With the recent announcements about Indonesia and the Philippines, it’s easy to see why the market is still scary enough for people not to want to be involved…

 

“You can see the tightness ahead in the nickel market, but my concern is that we’re going to see a lot of value destroyed along the way,” said Colin Hamilton, managing director for commodities research at BMO Capital Markets Ltd.

 

“If the miners really believe in the EV growth story, the thing to do would be to keep the nickel in the ground until the deficit arrives.”

When assessing the prospects for nickel, it is really two separate markets, nickel alloyed with iron and nickel sulphate used in batteries. Bloomberg expects the latter to progressively trade at a premium to the former.

About half of global nickel production is in the form of ferronickel or nickel pig iron, which is nickel alloyed with iron, making it suitable for stainless steel. Battery makers, instead, use nickel sulphate, produced by dissolving pure nickel metal in sulphuric acid. One hope is that the pricing of nickel pig iron and the high-grade nickel sulphate will diverge in the coming years, improving the fortunes of miners that can produce battery-quality material.

 

The global nickel market is heading for a deficit once above-ground stockpiles of battery-grade metal are consumed, according to Wood Mackenzie. The question for miners is how quickly the premium for top-quality nickel will emerge.

The nickel alloy versus nickel sulphate certainly adds complexity to analysing nickel. However, while the fundamentals for the latter seem very positive, it makes us slightly nervous when record numbers of participants gather at industry jamborees.

Still, politicians and automakers are increasingly counting on a future of electric cars, attracting traders such as Trafigura.

“Will we see a real breakout in next 12 months? That’s hard to see, but beyond that, structurally this looks to be going up,” Rahim said.

 

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China To Send People Who Mock The Country’s National Anthem To Prison

November 2, 2017 Tyler Durden 0

Authored by James Holbrooks via TheAntiMedia.org,

In an effort to “uphold the respect of the people” for the country’s national anthem and “regulate their behavior while singing or playing” it, as the China Daily writes, China’s government is considering stiffening the penalty for mocking the tune. From the state-run outlet on Tuesday:

“People who disrespect China’s national anthem could face up to three years in prison if a draft amendment to the Criminal Law is approved.

 

“Besides a prison sentence, those found guilty could also be put under surveillance or deprived of their political rights, according to the draft, which was submitted on Tuesday to the Standing Committee of the National People’s Congress, the top legislature, for its first reading.”

The National Anthem Law, which was passed by the Standing Committee back in September and went into effect in early October, lays out for Chinese citizens the situations where playing the song, “The March of the Volunteers,” is appropriate.

Some of the situations stated in an October 2 article from China’s Xinhua News Agency are “constitutional oath ceremonies, flag raising ceremonies, major celebrations, awards ceremonies, commemorations, national memorial day events, important diplomatic occasions, major sport events and other suitable occasions.”

The same article says citizens found guilty of mocking the song, including those who “maliciously modify the lyrics [or] play or sing the national anthem in a distorted or disrespectful way,” could be detained for up to 15 days.

Now, however, it seems the Chinese government feels this punishment isn’t severe enough. In addition to the possible three years behind bars, “those found guilty could also be put under surveillance or deprived of their political rights.”

What’s more, the law will apply to the semi-autonomous Chinese territories of Hong Kong and Macau, though the manner in which the penalties would be implemented in these regions remains unclear.

This is significant because, as Anti-Media has reported, there is currently a growing independence movement in Hong Kong, and the local government increasingly bristles at Beijing telling it how to handle its affairs.

In fact, Hong Kong’s defiant streak, as it relates to China’s national anthem, got the territory in a bit of trouble this week, as Reuters reported:

“The Hong Kong Football Association (HKFA) was warned by the Asian Football Confederation (AFC) on Tuesday over the conduct of fans who booed the Chinese national anthem last month.

 

“A small section of supporters jeered during the playing of ‘The March of the Volunteers’ and turned their backs on the Chinese flag ahead of a 2-0 win for the former British colony over Malaysia at Hong Kong Stadium in qualifying for the Asian Cup finals.”

Incidentally, these new, harsher penalties would also apply to citizens disrespecting the Chinese flag. For the central government in Beijing, it all goes back to the “One China” ideology, which purports that all of China, even semi-autonomous regions like Hong Kong, is subject to the mainland’s rule.

Zhang Rongshun, deputy director of the Standing Committee’s legislative affairs commission, says it’s about stopping a problem before it gets out of control:

“In recent years, incidents of disrespecting the national anthem have occurred in Hong Kong, challenging the bottom line of the principle of ‘one country two systems’ and social morality, and triggering rage among Chinese, including most Hong Kong residents. It is urgent and important to apply the national anthem law in Hong Kong to prevent and handle such offences.”

Amnesty International China researcher William Nee told Agence France-Presse (AFP) on Tuesday that Beijing attempting to force semi-autonomous regions to adopt these harsh penalties “would clearly be out of step with international law.”

“Besides being incompatible with the right to freedom of expression to begin with,” he said“extending the law to Hong Kong and Macau is also especially worrying. It could be the first step in chipping away at internationally recognised human rights, using mainland China’s nearly limitless and vague concept of national security.”

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Crude Oil Prices Slipped on Higher US Output

November 2, 2017 Oil N' Gold 0

The front-month WTI crude oil contract retreated, after rising to a 10-month high of US$ 55.22/bbl (just 2 cents shy of 2017-high of US$ 55.24/bbl) earlier in the day. Traders took the EIA inventory data as a reason for profit-taking. The WTI contract …

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Ding Dong Dandong – First Chinese Corporate Default After Party Congress

November 2, 2017 Tyler Durden 0

Just over a week ago we highlighted how China’s financial regulator had instructed companies to delay the reporting of bad corporate news until after the Party Congress. As Bloomberg noted…
China’s securities watchdog has asked some loss-…

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