Jim Sinclair’s Commentary
The latest from John Williams’ www.ShadowStats.com.
- Collapsing First-Quarter 2014 Economic Activity (GDP, GNP and GDI) Fell Below Third-Quarter 2013 Levels
- GDP Activity Fell, Even Before Adjusting for Slowing Inventory Growth
- Quarterly GDP Activity Contracted, Even Before Adjusting for Inflation
- Looming Second-Quarter Economic Contraction Likely to Formalize “Renewed” Recession and to Hit Markets Hard
- Durable Goods Orders Turned Down in Otherwise Stagnant Activity
- Despite Monthly Gain, Existing-Homes Sales Continued in Annual Contraction
- Neither Monthly nor Annual New-Home Sales Gain Was Statistically-Significant
"No. 637: GDP Revision, Durable Goods Orders, New- and Existing-Home Sales"
Gazprom Ready To Drop Dollar, Settle China Contracts In Yuan Or Rubles
Tyler Durden on 06/26/2014 08:08 -0400
A little over a month ago, when Russia announced the much anticipated "Holy Grail" energy deal with China, some were disappointed that despite this symbolic agreement meant to break the petrodollar’s stranglehold on the rest of the world, neither Russia nor China announced payment terms to be in anything but dollars. In doing so they admitted that while both nations are eager to move away from a US Dollar reserve currency, neither is yet able to provide an alternative. This changed rather dramatically overnight when in a little noticed statement, Gazprom’s CFO Andrey Kruglov uttered the magic words (via Bloomberg):
GAZPROM READY TO SETTLE CHINA CONTRACTS IN YUAN OR RUBLES: CFO
In other words just as the US may or may not be preparing to export crude – a step which would weaken the dollar’s reserve status as traditional US oil trading partners will need to find other import customers who pay in non-USD currencies – the world’s two other superpowers are preparing to respond. And once the bilateral trade in Rubles or Renminbi is established, the rest of the energy world will piggyback.
But wait, there’s more. Because only now does Gazprom appear to be unveiling all those "tangents" that were expected to hit the tape in May. Among Kruglov’s other revelations were that Gazprom is in talks on a Hong Kong listing and is weighing the issuance of Yuan bonds. Gazprom is also considering selling bonds in Singapore dollars, the CFO said at briefing in Moscow. Wait, you mean that by alienating and embargoing Russia from western (USD, EUR-denominated) funding markets, it has pushed the country to turn to its pivoting partner, China and thus further cementing the framework for the next Eurasian strategic alliance?
But wait, there’s still more, because it is not just Gazprom. As the PBOC announced overnight, PBOC Assistant Governor Jin Qi and Russian central bank Deputy Chairman Dmitry Skobelkin led a meeting held yesterday and today in Shanghai. The meeting discussed cooperating on project and trade financing using local currencies. The meeting discussed cooperation in bank card, insurance and financial supervision sectors.
In other words, central bankers of China and Russia discussed how to replace the dollar with Rubles and Yuan. From the PBOC:
China Finds $15 Billion of Loans Backed by Fake Gold Trades
By Bloomberg News Jun 26, 2014 8:13 AM MT
China’s chief auditor discovered 94.4 billion yuan ($15.2 billion) of loans backed by falsified gold transactions, adding to signs of possible fraud in commodities financing deals.
Twenty-five bullion processors in China, the biggest producer and consumer of gold, made a combined profit of more than 900 million yuan from the loans, according to a report on the National Audit Office’s website.
Public security authorities are also probing alleged fraud at Qingdao Port, where copper and aluminum stockpiles may have been pledged multiple times as collateral for loans. Steps by the Chinese government to rein in credit by raising borrowing costs in recent years created a surge in commodities financing deals that Goldman Sachs Group Inc. estimates to be worth as much as $160 billion.
“This is the first official confirmation of what many people have suspected for a long time — that gold is widely used in Chinese commodity financing deals,” said Liu Xu, a senior analyst at Capital Futures Co. in Beijing. “Any scaling back by banks of gold-backed financing deals might lead to a short-term reduction in Chinese imports and also spur some sales by companies looking to repay lenders.”
As much as 1,000 metric tons of gold may have been used in lending and leasing deals in China, where commodities including metals and agricultural products are used to get credit amid lending restrictions, according to World Gold Council estimates.
Obama won’t impose anti-Russia sanctions without Europe’s support – media
US President Barack Obama won’t impose new sanctions against Russia if European countries refuse to do so, the source of Bloomberg in the White House said.
Barack Obama understands that if he imposes sanctions without the support of his European partners, the sanctions may hurt the interests of American companies.
"President Obama understands that American companies shouldn’t find themselves in an unfavorable situation," Josh Earnest, White House Assistant to the President, said during a brief talk in Washington.
The US as well as European countries intend to impose sanctions despite the fact that yesterday Russian parliamentarians denied a decree on the use of Russian military forces in Ukraine. The corresponding suggestion was submitted by Russian President Vladimir Putin.
Moscow should take more resolute measures to settle the Ukrainian crisis, President of the European Commission José Manuel Barroso said.
The sanctions that the US and Europe are ready to impose, can affect the Russian energy sector and Russia’s access to the international market.
Gold’s Flow East Seen for 20 Years as Incomes Increase Demand
By Glenys Sim and Jasmine Ng Jun 26, 2014 7:51 AM ET
The global flow of gold from west to east that helped to make China the world’s largest user will probably last for up to two decades as rising incomes spur demand, according to the China Gold Association.
China’s consumption, which increased to a record 1,176.4 metric tons in 2013, is expected to be “more or less the same” this year, Zhang Bingnan, vice-chairman and general secretary at the association, said in an interview inSingapore. China accounted for about 28 percent of global usage last year, according to the London-based World Gold Council.
Purchases in China accelerated last year after a 28 percent price slump, and the country displaced India as the biggest bullion buyer while European consumption shrank. Demand in China will rise about 25 percent in the next four years as an increasing population gets wealthier, the council said in April.
“In the next 10 to 20 years the trend probably won’t change because there is more gold in the west and less of it in the east,” said Zhang, who also addressed an industry conference in the city-state yesterday. “As incomes in the east rise, demand for gold will follow a similar trend and continue in the future whether in China or India or other developing countries, unless there’s some extraordinary event.”
Draghi Says Unlimited Cash Through 2016 Is Rate Signal
By Jeff Black Jun 23, 2014 4:36 AM ET
Mario Draghi indicated that the European Central Bank’s interest rates will probably remain low for at least another 2 1/2 years.
“We have prolonged banks’ access to unlimited liquidity up to the end of 2016. That is a signal,” the ECB president said in an interview published in Dutch newspaper De Telegraaf on June 21, responding to a question on how long rates will stay low. “Our program in support of bank lending to businesses will continue for four years. That shows that interest rates will remain low over a longer period. But thereafter they will increase when the recovery will firm up.”
A year after the euro area exited its longest recession, the Frankfurt-based ECB is still battling too-low inflation and attempting to reboot demand. Draghi introduced an unprecedented range of measures this month including a negative deposit rate and said quantitative easing remains an option if deflation appears.
The recovery “is still weak and unevenly distributed across the euro area,” Draghi said. “Accidents could happen in the global economy that can quickly change the situation.”
Growth in euro-area manufacturing and services slowed for a second month in June, according to purchasing managers indexes published by Markit Economics today. Manufacturing contracted for a second month in France, while expanding for a 12th month in Germany.
Syrian warplanes reportedly strike in Iraq, killing 57 civilians
By Mohammed Tawfeeq, Holly Yan and Chelsea J. Carter, CNN
June 25, 2014 — Updated 1920 GMT (0320 HKT)
Baghdad, Iraq (CNN) — Reports that Syrian warplanes carried out a cross-border attack on Iraqi towns this week is further evidence of the blurring between the two countries’ borders as they face an offensive by Islamic extremists.
At least 57 Iraqi civilians were killed and more than 120 others were wounded by what local officials say were Syrian warplanes that struck several border areas of Anbar province Tuesday.
These border cities are among those under the control of the Islamic State in Iraq and Syria, or ISIS, which seeks to create an Islamic caliphate that encompasses portions of Iraq in Syria.
Reports of the Syrian incursion into Iraq is a reminder that the civil war in Syria and the unrest in Iraq are not isolated, but linked in ways that threaten the security of both.
Sabah Karkhout, head of Iraq’s Anbar provincial council, told CNN that Tuesday’s air attacks struck markets and fuel stations in areas such as Rutba, al-Walid and Al-Qaim.
King Abdullah calls up Saudi armed forces on high preparedness. Egyptian troops ready to fly to kingdom
DEBKAfile Exclusive Report June 26, 2014, 6:49 PM (IDT)
Thursday, June 26, the day before US Secretary of State John Kerry was due in Riyadh, King Abdullah summoned a National Security Council meeting “upon the current security events in the region, especially in Iraq,” and ordered “all necessary measures to protect the kingdom against terrorist threats.” This meant a general call-up of military units for a high level of preparedness.
debkafile’s military sources disclose that Egypt is assembling an expeditionary commando force to fly to Saudi Arabia and bolster its border defenses.
This flurry of Saudi-Egyptian military steps comes in the wake of intelligence gathered by Saudi reconnaissance planes showing Iraqi Al Qaeda-linked Sunni fighters (ISIS) heading for the Saudi border and aiming to seize control of the Iraqi-Saudi crossing at Ar Ar (pop: 200,000).
ISIS and its Sunni allies are still on the march after capturing Iraq’s border crossings with Syria and Jordan earlier this week.
On Wednesday, Kerry warned Mideast nations against taking new military action in Iraq that might heighten sectarian divisions.
By then, he had been overtaken by a rush of events, as debkafile reported this morning.
When the first of the 300 military advisers US President Barack Obama promised the Iraqi government arrived in Baghdad Wednesday, June 25, Iranian and Saudi Arabian arms shipments were already in full flow to opposing sides in embattled Iraq, debkafile’s military sources report.
Kerry warns Mideast nations against military action in Iraq
DEBKAfile June 26, 2014, 6:00 PM (IDT)
BAGHDAD (CBS News/CBSDC/AP) — U.S. Secretary of State John Kerry warned Mideast nations on Wednesday against taking new military action in Iraq that might heighten sectarian divisions, after Syria launched airstrikes across the border and Iran flew surveillance drones over the neighboring country.
The U.S. and a senior Iraqi military official confirmed that Syrian warplanes bombed militants’ positions Tuesday in and near the border crossing in the town of Qaim. The Iraqi official said Iraq’s other neighbors – Jordan, Kuwait, Saudi Arabia and Turkey – were all bolstering flights just inside their airspace to monitor the situation. He spoke on condition of anonymity because he was not authorized to speak to the media.
American officials said the strikes appeared to be the work of Syrian President Bashar Assad’s government. They said the target was the Islamic State of Iraq and Syria (ISIS), a Sunni extremist group that seeks to carve out a purist Islamic enclave across both sides of the Syria-Iraq border. The group is also known as Islamic State of Iraq and the Levan (ISIL).
“We’ve made it clear to everyone in the region that we don’t need anything to take place that might exacerbate sectarian divisions that are already at a heightened level of tension,” Kerry said, speaking at a meeting of diplomats from NATO nations. “It’s already important that nothing take place that contributes to the extremism or could act as a flash point with respects to the sectarian divide.”
Kerry said Baghdad needs to take steps to ensure that Iraq’s military can defend the country without relying on outside forces. The U.S. is sending 300 military advisers.
Barclays pulls bond offering after lawsuit emerges
Barclays pulled a US$1.5bn bond offering on Wednesday after it emerged that the New York attorney general was preparing to sue the UK bank for securities fraud.
It had already amassed more than US$4.5bn in orders for the 10-year subordinated deal, market sources said, when reports of the lawsuit hit trading screens.
"Investors just baulked," one portfolio manager who had been looking at the deal told IFR.
"If something dire does come out the suit, then that could mean that the deal has to be nullified anyway – so it was just better to pull it."
Shares in Barclays traded sharply lower on Thursday morning in London, down some 4 percent in early deals.