Goldman Beats, Profits Surge As Trading Revenues Jump; Average Banker Comp Hits $338,600

via by Tyler Durden on Wed, 18 Jan 2017 13:02:31 GMT

Unlike the other big banks, Goldman's earnings release is a breeze: since the bank has virtually no balance sheet to use as a source of income (or loss), it is all about the income statement. And it was here that for yet another quarter, Goldman surprised to the upside, reporting Q4 Revenues of $8.17BN, higher than the $7.76BN estimated, translating to EPS of $5.08, also above the $4.73 estimate, and nearly 4 times the $1.27 reported a year ago.

Like other banks, Goldman benefited from a big pick-up in trading activity during the period, as investors reset portfolios in anticipation of an interest-rate increase from the US Federal Reserve, and as the election of Donald Trump spurred big bets on stocks that stood to benefit.  Net revenues from the institutional client services division were up 25% from a year earlier to $3.6bn, led by a 78% jump in revenues from the fixed-income, currencies and commodities unit.

“After a challenging first half, the firm performed well for the remainder of the year as the operating environment improved,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “We continued to manage our expenses carefully and we enter the new year with industry leading positions across our businesses, as well as strong capital and liquidity."

Broken down by key operating group, most segments reported numbers that beat expectations with the exception of Equities sales and trading, which came in at $1.59BN, fractionally below the $1.61BN expected.

Other segments performed better in Q4:

• FICC sales & trading revenue was $2.00bn, well above the estimate of $1.59bn
• Investment banking revenue of $1.49bn beating estimates of $1.47bn.
• Investment and Lending, formerly known as prop, reported $1.48bn in revenue, higher than a year ago.
• OVerall trading revenue of $3.60billion was also better than the estiamte $3.28b.

The full breakdown of Goldman's various revenue segments is shown in the chart below:

Other metrics:

• 4Q return on avg. equity 11.4%
• 4Q Basel III common equity Tier 1 ratio 13.1%
• Assets under management $1.38t

 

In a notable variance from the other banks, Goldman's Q4 compensation expenses, while declining from $3.2 billion to $2.45 billion, came in modestly higher than the expected $2.31 billion, as Lloyd Blankfein decided to reward his team for a job well done. Or the team that's left at least: total Goldman staff decreased 7% during 2016, with the firm closing the year with 34,400 workers. As the following chart shows, the average accrued banker compensation rose to $338,576, the highest since Q4 of last year.

These 3 Healthcare Stocks Are Ridiculously Cheap

via Motley Fool Headlines by on Wed, 18 Jan 2017 13:02:00 GMT

Gilead Sciences, Lantheus Holdings, and Mallinckrodt are three healthcare stocks in the bargain bin -- for now.

3 Attractive Income Stocks Whose Dividends Could Double

via Motley Fool Headlines by on Wed, 18 Jan 2017 12:41:00 GMT

Want bigger dividend payouts? These three stocks may soon oblige.

Frontrunning: January 18

via by Tyler Durden on Wed, 18 Jan 2017 12:39:00 GMT

• Business euphoria over Trump gives way to caution, confusion (Reuters)
• Biden Lashes Out at Trump Over Comments on NATO (WSJ)
• Number of House Democrats Skipping Inauguration Grows (WSJ)
• Rising U.S. shale-oil output threatens OPEC’s production pact (MW)
• China urges U.S. to bar Taiwan delegation from Trump inauguration (Reuters)
• IEA Sees Significant Gains in U.S. Shale Oil as Prices Rise (BBG)
• Tom Price to Face Questions on Stock Trades, Obamacare (WSJ)
• Trump commerce nominee Ross to tell senators: 'I am not anti-trade' (Reuters)
• HSBC CEO Says Bankers Generating 20% of London Revenue May Move (BBG)
• FTC Sues Chip Maker Qualcomm (WSJ)
• As caliphate crumbles, Islamic State lashes out in Iraq (Reuters)
• ‘Clinton Cash’ Book Got Most of Its Funding From a Hedge Star (BBG)
• Whistleblower Snowden can apply for Russian passport next year (Reuters)
• How Obama Changed Investing Forever (BBG)
• F-35’s ‘Grotesque Overruns’ Now Past, Says Pentagon Chief (BBG)
• Potentially nasty fight looms over Trump U.S. Supreme Court pick (Reuters)
• Capital curbs push Chinese firms to risky, costly dollar bonds (Reuters)
• Elder ex-president Bush recovering in hospital after breathing problems (Reuters)
• Billionaire Steyer Says There’s ‘No Limit’ on His Spending Against Trump (BBG)
• Trump’s Options for Weakening Dollar Extend Beyond Tweets (BBG)
• This Team Runs Mark Zuckerberg’s Facebook Page (BBG)

 

Overnight Media Digest

WSJ

- President Barack Obama shortened Chelsea Manning's 35-year prison sentence Tuesday, setting a May release for the former Army intelligence analyst convicted of leaking government secrets. http://on.wsj.com/2jvewBH

- As Donald Trump prepares to take the oath of office, a growing share of Americans disapprove of how he has handled his transition to the White House, a new Wall Street Journal/NBC News poll finds. http://on.wsj.com/2jv969N

- The Federal Trade Commission on Tuesday sued Qualcomm Inc alleging the semiconductor company engaged in unlawful tactics to maintain a monopoly on a type of chip used in cellphones. http://on.wsj.com/2jvgIsP

- Theranos failed a second major U.S. regulatory inspection of its laboratory facilities, people familiar with the situation said, a setback the Silicon Valley blood-testing firm hasn't disclosed to investors or patients. http://on.wsj.com/2jvbrkZ

- British American Tobacco agreed to take full control of Reynolds in a $49.4 billion deal that marks renewed interest among international players in the U.S. tobacco market. http://on.wsj.com/2jv7L2T

- Allergan PLC will pay $15 million in fines and admit to disclosure violations during a hostile takeover bid from Valeant Pharmaceuticals International Inc, the Securities and Exchange Commission said Tuesday. http://on.wsj.com/2jvaiKj

- Deutsche Bank completed a $7.2 billion deal to resolve U.S. claims that it misled investors on mortgage securities it sold before the 2008 financial crisis, authorities said. http://on.wsj.com/2jvceCF

- Prime Minister Theresa May said the U.K. intends to leave the EU's single market, outlining a plan for a clear break from the bloc and answering the biggest open question about her vision for Britain's future. http://on.wsj.com/2juYSpM

 

FT

* Environmental group Greenpeace International on Tuesday slammed HSBC Holdings Plc for allegedly funding palm oil companies in Indonesia that it says have destroyed tropical rainforests.

* British engineering group Rolls-Royce Plc's leadership was aware about its ongoing corruption in 2010 but chose not to inform the concerned authorities, according to a court ruling.

* Britain will quit the EU single market when it leaves the European Union, Prime Minister Theresa May said on Tuesday in a decisive speech that set a course for a clean break with the world's largest trading bloc.

* In his first remarks since being chosen as BBC chairman, David Clementi told a parliamentary committee that a 2015 deal with the government will be of "severe financial pressure" during the next five years.

 

Canada

THE GLOBE AND MAIL

** AltaGas Ltd is gearing up for a C$500 million ($382.38 million) propane export project, hoping to breathe new life into a northern British Columbia port that has been hurt by sluggish coal shipments over the past three years. https://tgam.ca/2iPmrIP

** Billionaire investor Wilbur Ross, chosen by U.S. President-elect Donald Trump to reshape U.S. trade policy, has informed Canada that rules of origin and independent dispute tribunals will be central to talks aimed at resetting the North American free-trade agreement. https://tgam.ca/2iPivrs

** The Trudeau government is weeks away from an inaugural round of talks on a free-trade agreement with China as it presses ahead a central objective in its plan to deepen ties with the world's second-largest economy. https://tgam.ca/2iPfg3w

NATIONAL POST

** Canada Mortgage and Housing Corp, the Crown corporation that controls the majority of the mortgage default insurance market in the country, is raising premiums for a third time in the last couple of years and says new regulations are forcing its hand. http://bit.ly/2jJwxts

** Bombardier Inc's new management team has given the head of the Toronto Transit Commission "much greater confidence" that the city's delay-plagued C$1.2 billion ($917.71 million) streetcar order will be completed by 2019 as originally planned, TTC Chief Executive Andy Byford said Tuesday. http://bit.ly/2jJzqu6

** Canadian oil and gas producers happy to see the end of the Obama era are quickly coming to the realization that the imminent Trump presidency could be even more challenging if he moves forward with the adoption of a border adjustment tax. http://bit.ly/2jJqwNb

 

Britain

The Times

British American Tobacco agrees $49 bln deal to take over rival

British American Tobacco Plc has agreed terms of a $49.4 billion recommended offer to take control of Reynolds American Inc, the second-largest seller of cigarettes in the United States. An earlier $47 billion offer to create the world's largest listed tobacco company by turnover was rejected in November as too low. http://bit.ly/2jWHmaB

The Guardian

Rolls-Royce apologises in court after settling bribery case

The engineering giant Rolls-Royce Holdings Plc has apologised after it was found to have paid bribes including a luxury car and millions of pounds' worth of cash to middlemen to secure orders in six countries, including Indonesia, Russia and China. http://bit.ly/2jwo132

Southern rail strikes suspended as two sides agree to TUC talks

A strike by train drivers on Southern rail planned for next week has been suspended and talks announced, raising fresh hopes of a resolution to the long-running dispute. http://bit.ly/2k0l9wG

Apple increases App Store prices by 25 pct following Brexit vote

Apple Inc is raising prices on its UK App Store by almost 25 percent to reflect the sharp depreciation of the pound following a vote in June to leave the European Union. http://bit.ly/2ix0rE8

The Telegraph

Deliveroo to hire hundreds of engineers at London HQ

The British food delivery company Deliveroo plans to hire 300 software and hardware engineers to work at its new London headquarters, trebling its current engineering headcount. http://bit.ly/2jWKxyX

Micro Focus picks HP exec to lead software group after 7 bln stg deal

One of HP Enterprise's most senior executives will take charge of Micro Focus International Plc after the FTSE 100 group completes its 7 billion pounds reverse-takeover of HPE's software business. Micro Focus announced on Tuesday that Chris Hsu will become chief executive of the enlarged group when the deal completes in the third quarter of this year. http://bit.ly/2jWIgEe

Sky News

Fintech giants have Motive to back Summers

A group of leading financial technology executives will this week launch a next-generation vehicle that has identified a business backed by former U.S. Treasury Secretary Larry Summers as its first deal target. Motive Partners, whose founders include Rob Heyvaert, a former executive at the software company FIS, and the ex-Interactive Data Corporation chief executive Stephen Daffron, will be unveiled at the World Economic Forum in Davos. http://bit.ly/2jW0i9A

 

Why Autodesk Inc. Stock Soared 21% in 2016

via Motley Fool Headlines by on Wed, 18 Jan 2017 12:21:00 GMT

Shares bounced between sharp losses and big gains as the company went through a major shift in business models.

Trump Tells Democrats Boycotting Inauguration: "I Hope They Give Me Their Tickets, We Need Seats So Badly"

via by Tyler Durden on Wed, 18 Jan 2017 12:02:10 GMT

In an interview airing this morning on Fox News, President-elect Donald Trump said Democrats shunning his inauguration this Friday should return their tickets. At least 54 House Democrats have pledged they will not attend the event, according to the latest whip list by The Hill. A growing number of Democrats have said they will break with tradition
and skip Trump’s presidential inauguration in three days. 

The number of boycotters has swelled following Trump’s recent feud with John Lewis, who said last week he does not view Trump as a “legitimate president," and said he would not attend Trump’s inauguration, leading the president-elect to accuse him of being “all talk” and “no action” on Twitter. Democrats initially vowed they would not attend Trump’s swearing-in after last year’s bitter presidential campaign.

“As far as other people not going, that’s OK, because we need seats so badly,” Trump said during a Fox News interview scheduled to air Wednesday. “No, what happens to their tickets?” Trump asked host Ainsley Earhardt. "I hope they’re gonna give us their tickets. I hope they give me their tickets.”

A growing number of Democrats have said they will break with tradition and skip Trump’s presidential inauguration in three days. At least 54 House Democrats have pledged they will not attend the event, according to The Hill’s whip list.

Trump on Wednesday mocked Lewis, meanwhile, for saying he had never boycotted an inauguration despite doing so during former President George W. Bush’s in 2001. “He conveniently doesn’t remember. How do you forget if you go to an inauguration? I can tell you when I was at inaugurations and you don’t forget something like that."

Separately, in the same interview, Trump said that he dislikes tweeting and uses Twitter as a defense against media. “Look, I don’t like tweeting,” Trump insisted during the interview. "I have other things I could be doing.”

“But I get very dishonest media, very dishonest press. And it’s my only way that I can counteract. When people make misstatements about me, I’m able to say it and call it out.” Trump additionally promised he would reduce his Twitter activity once the press treats him more respectfully.

“Now if the press were honest, which it’s not, I would absolutely not use Twitter,” he told host Ainsley Earhardt on “Fox & Friends," adding, "I wouldn’t have to.”

Trump has repeatedly used Twitter for savaging opponents ranging from lawmakers to foreign leaders and even celebrities. Critics have voiced concern, however, that the social media platform’s 140-character limit is too simplistic for complex policy issues.

Trump’s tweets, meanwhile, have become the news market moving catalyst du jour, driving not only stock price moves but the entire news cycles.

Yesterday Fox News reported that Trump will use his personal Twitter account instead of the official presidential account once he takes office, according to a report from NBC News' Kelly O'Donnell. Trump explained his reasoning for keeping his personal account in an interview with The Sunday Times.

“@realDonaldTrump I think, I’ll keep it. ... So I’ve got 46 million people right now — that’s a lot, that’s really a lot — but 46 million — including Facebook, Twitter and ya know, Instagram, so when you think that you’re 46 million there, I’d rather just let that build up and just keep it @realDonaldTrump, it’s working — and the tweeting, I thought I’d do less of it, but I’m covered so dishonestly by the press — so dishonestly — that I can put out Twitter — and it’s not 140, it’s now 280 — I can go bing bing bing ... and they put it on and as soon as I tweet it out — this morning on television, Fox — ‘Donald Trump, we have breaking news,’”

Trump created his @realDonaldTrump account in 2009 and has sent more than 34,000 messages on Twitter. He has more than 20 million followers. Obama created the first official presidential Twitter account @POTUS in 2015, but it has only 13.5 million followers, and he sent only 342 tweets as president.

"Everything Is A Partial Reversal Of Yesterday" - Stocks, Dollar Rebound Following Trump Scare

via by Tyler Durden on Wed, 18 Jan 2017 11:39:22 GMT

European shares decline led by a plunge in Pearson shares, S&P futures were modestly in the green as Asian and EM stocks gained. The dollar rebounded against most major currencies after retreating 1.3% on Tuesday to the lowest in a month following Trump's "strong dollar" comments and halted a seven-day drop against the yen.

Asian traders said shares were helped by hopes that the concerns about a stronger dollar expressed by the U.S. President-elect at the weekend, would be beneficial to emerging markets where companies have borrowed heavily in dollars. Asia's MSCI's ex-Japan Asia-Pacific shares index rose 0.3%, just shy of a three-month high hit last Thursday. Energy and cyclical stocks were the chief gainers. Short-covering also helped, especially in China where stocks tumbled more than 4% last week as traders took some money off the table before Trump's inauguration on Friday. European stock markets were fractionally in the red steady after a choppy start, banking shares under pressure as investors chewed over details of the impact of regulatory fines on Deutsche Bank.

"You've seen the banks ease, everything has taken a breather after the strong start in January for stocks," Andy Sullivan, a portfolio manager with GL Asset Management in London told Reuters. "The last few days have been choppier and for the rally to be sustained, we need to see earnings growth start to come through."

The Yen and gold retreated for the first time in eight days. Bonds edged lower before Thursday’s ECB meeting, where few surprises are expected. Oil reversed course after earlier gains, slipping below $52 a barrel.  Sterling, which soared more than 3 percent on Tuesday after Prime Minister Theresa May's Brexit speech, fell back 0.7 percent.

"Everything is just a partial reversal of the price action yesterday," said RBC Capital Markets currency strategist Adam Cole, arguing that the greenback's weakness had been primarily driven by excessive positioning at the end of last year.

Ahead of today's December CPI report in the US, strengthening inflation in the U.K. and eurozone will likely underpin confidence in a growth rebound, however concerns about the policies of Trump and looming elections in Germany and France are among issues clouding the outlook according to Bloomberg. That’s taken the edge off the so-called reflation trade, with strategists starting to rethink bets on returning inflation and a stronger dollar.

“We need to see what the next steps from central banks will be, what policy action will follow the inauguration,” said Peter Schaffrik, the head of European rates strategy at Royal Bank of Canada. “We’ve had a lot of news flow. Markets need to see some concrete action.”

Meanwhile, the MSCI index of global share prices reached its highest since mid-2015 on Friday and, driven by a bounce in expectations for U.S. inflation and growth since Trump's election, is within sight of all-time highs. But worries about the new U.S. president's attitude to trade and politics, with relations with China in focus, have begun to show up more in some asset prices since the start of the year. As a result, with doubts growing about the sustainability of the "Trump trade" - higher stocks and a stronger dollar - investors' favorite safe havens for capital have been in demand.

The Stoxx Europe 600 Index fell 0.2 percent. Pearson Plc plunged 27 percent to the lowest since 2009 after cutting its profit forecast for this year. The MSCI Emerging Markets Index rose 0.3 percent, poised for the highest closing level since Nov. 8. Futures on the S&P 500 added 0.1%. The underlying gauge lost 0.3% on Tuesday. 

The Bloomberg Commodity Index halted a five-day rally, retreating 0.4 percent. West Texas Intermediate crude slumped 1.5 percent to $51.67 a barrel, the most in a week. Gold lost 0.3 percent, snapping a seven-day winning streak that was the longest since November.

In rates, yields on 10-year Treasuries climbed three basis points to 2.36 percent, after falling seven basis points on Tuesday. Gilts yields rose, with the 10-year benchmark trading one basis point higher at 1.32 percent.

Market Snapshot

• S&P 500 futures up 0.1% to 2265
• Stoxx 600 down 0.2% to 362
• FTSE 100 down less than 0.1% to 7219
• DAX down less than 0.1% to 11537
• German 10Yr yield up less than 1bp to 0.32%
• Italian 10Yr yield down less than 1bp to 1.91%
• Spanish 10Yr yield up less than 1bp to 1.39%
• S&P GSCI Index down 0.8% to 397.5
• MSCI Asia Pacific up 0.3% to 140
• Nikkei 225 up 0.4% to 18894
• Hang Seng up 1.1% to 23098
• Shanghai Composite up 0.1% to 3113
• S&P/ASX 200 down 0.4% to 5679
• US 10-yr yield up 2bps to 2.35%
• Dollar Index up 0.24% to 100.57
• WTI Crude futures down 1.5% to $51.70
• Brent Futures down 1.5% to $54.66
• Gold spot down 0.2% to $1,215
• Silver spot down 0.3% to $17.15

Global Headline News

• Trump’s Options for Weakening Dollar Extend Far Beyond Tweeting
• By Ripping NATO, Trump Makes Europe Nervous and Arms Trade Happy
• Bayer-Monsanto Pledge Investment, Jobs After Trump Meeting
• Davos Cocktail Circuit Hums With Trump Optimism After Day One
• Amazon Said to Walk Away From $1 Billion Souq.com Takeover Talks
• Fed’s Williams Sees Gradual Hikes to Keep Economy on Track
• Oil Extends Gains Above $52 as U.S. Crude Supplies Seen Falling

Looking at regional markets, Asia stocks were mostly higher as the region shrugged off the negative lead from Wall Street where the financial sector led stocks lower amid an unwinding of the Trump trade. ASX 200 (-0.4%) was today's laggard after weakness in financials dampened the tone, considering the sector's near 50% index weighting and with the Big 4 banks all firmly lower. Nikkei 225 (+0.4%) was initially negative as JPY strength dampened exporter sentiment, although the index then recovered alongside USD/JPY reclaiming the 113.00 handle while Toshiba shares (+2.9%) outperformed on reports the Co. is mulling spinning off its semiconductor business. In China, Hang Seng (+1.1%) and Shanghai Comp. (+0.1%) were higher after another substantial liquidity operation by the PBoC valued at CNY 460BN, while participants also digested the latest Chinese property prices which showed continued stellar advances, albeit at a slightly softer pace. Of course, the "national team" ias now officially intervening, making sure there is no selloff during Xi's Davos visit. Finally, 10yr JGBs saw mild losses amid the improvement in risk appetite and following a paltry BoJ buying operation valued at JPY 710bIn in government bonds ranging from 5yr-25yr+ maturities.

Top Asia News

• China Home Prices Rose in Fewest Cities in 11 Months Amid Curbs
• Hong Kong Regulator Sues StanChart, UBS Over 2009 Timber IPO
• China Stock Volatility Wanes Amid Speculated State Intervention
• Optimism Reigns in India as CEOs, Consumers Look Beyond China
• Diageo Said to Weigh Raising Stake in India’s United Spirit
• China’s Xi Takes on Trump in Rebuttal Against Protectionism
• Top Four Most Expensive Cities Worldwide in Asia, London Fifth

European markets are trading mixed this morning with the EUROSTOXX 600 trading flat and FTSE 100 trading higher after traders and investors digest yesterday's Brexit speech from PM May. In stock specific news Pearson hit limit down following a 27.5% nosedive after the Co. announced they are scrapping 2018 profit target and dividend. Also of note, HSBC today announced bankers generating 20% of HSBC's London  revenue may move to Paris which will raise some eyebrows after the aforementioned PM speech yesterday. Price action across fixed income markets have been somewhat subdued with the bund 2-10yr curve flattening by around 1bps. Elsewhere, Italy have begun marketing for their Sep'33 EUR dominated bond.

Top European News

• May’s Brexit Hardball Raises Chances of All-or-Nothing EU Deal
• Pound Rescued by May Faces Choppy Waters as Political Risks Loom
• U.K. Employment Steady, Wages Pick Up in Resilient Labor Market
• UBS’s Orcel Says Market Hasn’t Discounted All Negatives Yet
• Trump’s Barbs Aimed at Merkel Seen Aiding Her Election Pitch
• Chip Gear-Maker ASML’s Quarterly Sales Forecast Beat Estimates
• Sweden’s Biggest FX Trader Warns Rate Hike Could Come Quicker
• Pearson Cuts Forecast on Textbook Slump; to Sell Penguin
• Burberry Gives Fresh Boost to Luxury as Sales Beat Estimates
• Maersk Is Most Likely to List Energy Units Separately, CEO Says
• German Jobless Mystery Explained as Refugees Hide in Statistics

In currencies, the Bloomberg Dollar Spot Index added 0.4 percent at 11 a.m. London time, after retreating 1.3 percent on Tuesday to the lowest in a month. The pound dropped 0.8 percent to $1.2311 after surging 3.1% on Tuesday. The euro slipped 0.3 percent to $1.0684 while the Russian ruble gained 0.3 percent. The yen weakened 0.7 percent to 113.35 per dollar, after soaring 3.9 percent over the previous seven days. FX markets have been range bound this morning, with the USD rebounding but showing no signs of resuming its uptrend, but current levels still look corrective as yet. The US 10yr looks to have found a near term base at 2.30%, and this looks to have placed a bid in USD/JPY in the mid 112.00's, but stock market risk continues to unnerve the market, prompting ongoing caution just yet despite the overwhelming yield differentials with signal a buy. EUR/USD looks to be finding plenty of selling interest on spikes above 1.0700, but the pullbacks are extremely shallow as the ECB meeting ahead still carries modest risk on any mention of tapering. USD/CHF is still hovering above parity as a result, but recoveries here are lacking in any traction to suggest further consolidation (or another setback) in the near term. For GBP, it looks as though the post PM speech honeymoon is over, as talk of City job losses to the continent have taken the shine off GBP. The domestic jobs report showed another healthy earnings rise of 2.7%, while the unemployment rate stays at 4.8%.

In commodites, moves have been largely muted, but for the erratic moves seen on Oil prices, though price action all inside established ranges, to suggest traders looking for sizeable orders either way. Focus on the USD keeps Gold supported for now, with equity markets also showing vulnerability ahead of the presidential inauguration at the end of the week to add a safe have bid under the yellow metal. The Bloomberg Commodity Index halted a five-day rally, retreating 0.4 percent. West Texas Intermediate crude slumped 1.5 percent to $51.67 a barrel, the most in a week. Gold lost 0.3 percent, snapping a seven-day winning streak that was the longest since November. Iron ore futures slid 0.6 percent on the Dalian Commodities Exchange, also ending a seven-day stretch of gains. Zinc led industrial metals higher in London, climbing as much as 1.7 percent for the first daily advance this week. S&P Global raised 2017 price assumptions for zinc, copper and iron ore.

Looking at today’s calendar, in the US the headline release is the December inflation report where market expectations are currently sitting at +0.3% mom for the headline and +0.2% mom for the core. Industrial and manufacturing production prints for last month will also be released, followed shortly after by the NAHB housing market index reading for this month. Away from the data, the most notable Fedspeak today will likely be Fed Chair Yellen when she speaks at 3pm ET in a discussion at the Commonwealth Club where she is expected to give an economic assessment. The Fed’s Kaplan will also speak at 9am ET and the Fed’s Kashkari at 4pm GMT. Away from that we’ll also get comments from the ECB’s Nouy while the EU’s Tusk is due to speak at European Parliament. Finally the US corporate reporting calendar today is headlined by Goldman Sachs and Citigroup, who both report prior to or at the US open.

* * *

US Event Calendar

• 7am: MBA Mortgage Applications, Jan. 13 (prior 5.8%)
• 8:30am: CPI MoM, Dec., est. 0.3% (prior 0.2%)
• 8:30am: Real Avg Weekly Earnings YoY, Dec., (prior 0.5%)
• 8:55am: Redbook weekly sales
• 9am: Fed’s Kaplan Speaks in Dallas
• 9:15am: Industrial Production MoM, Dec., est. 0.6% (prior -0.4%)
• 10am: NAHB Housing Market Index, Jan., est. 69 (prior 70)
• 11am: Fed’s Kashkari Speaks on Economy in Minneapolis
• 3pm: Fed’s Yellen Speaks in San Francisco
• 4pm: Total Net TIC Flows, Nov. (prior $18.8b)
• 4:30pm: API weekly oil inventories

DB's Jim Reid concludes the overnight wrap

Given that Brexit discussions are all the rage again at the moment and that the Alps have become a regular holiday destination for me and the family, one wonders what the future holds for travelling to and from the continent. However it appears that perhaps Bronte may have given us residential status. Over the weekend I picked the family up from France after travelling through Europe on business in early January and after a 10 hour drive arrived at pet passport control in Calais only for the officers to refuse to let Bronte through immigration. It was a big shock but apparently her passport hadn't been stamped properly when issued. She's now been over the border several times and this hadn't been picked up until now. After many frantic phone calls we eventually found a back street late night vet open a few miles drive away and they allowed us to get a fast tracked French passport for her after the requisite checks. So Bronte is now effectively a dual citizen without having to sing (or bark) "Le Marseillaise".

While I didn't hear any mention of animal migration rights in UK PM May's hotly anticipated Brexit speech yesterday it was a fairly upbeat attempt at balancing a harder Brexit than the market would like with a commitment to being an open global player. It was a great speech in theory but a lot depends on the goodwill of EU member states for her to get her wishes of a comprehensive free trade agreement in goods and services with the continent. Even with such goodwill, it seems optimistic that this could get done within two years. So this may be a big challenge but there was enough flexibility and openness to the world in the speech and enough fear beforehand for it to be well received by markets. In fact GBPUSD (+3.05%) ended up eclipsing any of the huge daily gains made in 2008 and in fact had the best day since 1993 after closing last night at $1.241, although it has retraced about -0.60% this morning. A decent contributor to yesterday’s surge was the comments from President elect Trump to the WSJ on concerns over a strong dollar. 

Meanwhile, in addition to Trump’s comments, yesterday at the World Economic Forum in Davos, Anthony Scaramucci – who is a member of Trump’s transition team – added further weight to the argument by saying that “we have to be careful about a rising dollar”. The USD index finished last night down -0.86% and is now actually down -3.40% from the 2017 high mark already. Coming back to the Trump interview for a second, another comment from the President-elect which appeared to gain some traction was his one calling a so called border tax “too complicated”. The reaction in US equity markets following all this seemed to imply that there are growing doubts about what policies Trump might actually follow through on. With Treasuries continuing to unwind after the 10y yield fell 7.1bps yesterday to close at 2.326% and the lowest since November, it was financials that were most under pressure yesterday with the S&P 500 financials index tumbling -2.28% for its worst day since June last year. Amazingly that was despite another strong set of bank earnings yesterday with Morgan Stanley the latest to beat market expectations at the profit line after posting the biggest Q4 profit since the financial crisis. The S&P 500 and Dow both ended -0.30% while prior to this in Europe the Stoxx 600 had closed -0.15%. The FTSE 100 (-1.46%) was the standout underperformer though and clearly weighed down by that huge rally for Sterling.

This morning in Asia bourses have generally bounced back from a soft start. There’s been gains for the Hang Seng (+1.19%), Shanghai Comp (+0.45%) and the Nikkei (+0.60%), while the Kospi is little changed. Currencies in the region are generally stronger while rates markets are also fairly mixed. There’s also been some data out of China this morning with the December house price series. It showed that new home prices, excluding government subsidized housing, rose in 46 of the 70 main cities last month which compares to 55 in November, suggesting a cooling down in the market.

Staying with China, it was interesting to hear from China President Xi Jinping yesterday when he made his debut at the annual Davos shindig. While refraining from mentioning Trump by name, Xi said that “countries should view their own interest in the broader context and refrain from pursuing their own interests at the expense of others”. He also warned that “no one will emerge as a winner from a trade war” and referred to the Paris agreement as being a “hard-won achievement” and one that “all signatories should stick to”.

Moving on. The most notable data for us over the course of yesterday was the ECB’s bank lending survey. The survey reported that credit standards for loans to enterprises in the Euro area tightened in Q4 2016 for the first time in three years. While current conditions have tightened, the recent rally in European bank equities does indicate that a slowdown in lending may still be avoided and this was reflected in the survey with expectations of lending standards easing over Q1 2017. We published a Credit Bites report on this survey yesterday where you’ll find some more detail.

Away from that we also got the latest inflation numbers out of the UK. Headline consumer prices in December were reported as rising more than expected during the month (+0.5% mom vs. +0.3% expected) and helped to push the YoY rate up to +1.6% from +1.2%. The core also rose to +1.6% yoy from +1.4% and is now at the highest level since August 2014. Headline retail prices also rose a bit more than expected (+0.6% mom vs. +0.4% expected) although PPI output prices did miss (+0.1% mom vs. +0.4% expected). Meanwhile in Germany the January ZEW survey revealed that expectations rose 2.8pts during the month to 16.6 although that was slightly less than what the consensus estimate was pegged at (18.4 expected). In contrast, the current situation component surged to 77.3 (vs. 65.0 expected) from 63.5 and is at the highest level since 2011. Across the pond the NY Fed’s manufacturing survey weakened 1.1pts to 6.5 this month.

Before we look at the day ahead, there was also some interesting Fedspeak to mention yesterday. NY Fed President Dudley probably didn’t help the Dollar sell-off by saying that “the risk that the Fed will snuff out the expansion anytime soon seems quite low because inflation is simply not a problem”. He also said that “the economy is not growing much above its sustainable long-term pace”. Meanwhile the usually dovish Fed Governor Lael Brainard sounded a bit more hawkish by saying that “if fiscal policy changes lead to a more rapid elimination of slack, policy adjustment would, all else being equal, likely be more rapid than otherwise”.

Looking at today’s calendar, this morning in Europe we’re kicking off in Germany where the final CPI revisions for December will be made. We then turn to the UK where the November and December employment stats will be released, before we then get the final December inflation data revisions for the Euro area. This afternoon in the US the headline release is likely to also be the December inflation report where market expectations are currently sitting at +0.3% mom for the headline and +0.2% mom for the core. Industrial and manufacturing production prints for last month will also be released, followed shortly after by the NAHB housing market index reading for this month. Away from the data, the most notable Fedspeak today will likely be Fed Chair Yellen when she speaks at 8pm GMT in a discussion at the Commonwealth Club where she is expected to give an economic assessment. The Fed’s Kaplan will also speak at 2pm GMT and the Fed’s Kashkari at 4pm GMT. Away from that we’ll also get comments from the ECB’s Nouy while the EU’s Tusk is due to speak at European Parliament. Finally the US corporate reporting calendar today is headlined by Goldman Sachs and Citigroup, who both report prior to or at the US open.

Stop Losing Your Stuff With These 6 Simple Tricks

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People who constantly lose stuff live in a constant cycle of frustration, lost time, and wasted money. Time that could be otherwise productive is dedicated to frantically seeking misplaced items. Money that could be saved or invested is instead used to replace missing items. It's a frustrating and...

Best Money Tips: Avoid These Common Tax Season Scams

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Obama Commutes Remaining Prison Sentence Of Chelsea Manning

via by Tyler Durden on Wed, 18 Jan 2017 10:25:21 GMT

Following urges by Edward Snowden and Julian Assange (who offered his own extradition in exchange), President Obama has largely commuted the remaining prison sentence of Chelsea Manning, the army intelligence analyst convicted of an enormous 2010 leak that revealed American military and diplomatic activities across the world, disrupted the administration, and made WikiLeaks, the recipient of those disclosures, famous.

Manning will be released in May 2017 according to the White House. The move is part of a final push of pardons and commutations in the closing days of the administration, and Obama has now shortened the sentences of more federal inmates than any other president, bringing the total to 1,385 as of today.

Previously both Julian Assange and Edward Snowden who leaked his cache of documents detailing U.S. intelligence efforts around the same time as Manning’s crime, advocated for her clemency. "Mr. President, if you grant only one act of clemency as you exit the White House, please: free Chelsea Manning," Snowden tweeted. "You alone can save her life."

Manning was arrested in 2010 after leaking 700,000 military files and diplomatic cables to Wikileaks, and her sentence exceeded that received by other individuals recently convicted of releasing classified material. She has twice attempted to commit suicide while incarcerated, and went on a hunger strike in an effort to get the Army to allow her to undertake gender reassignment surgery.

As The New York Times reports,  the decision by Obama rescued Manning from an uncertain future as a transgender woman incarcerated at the male military prison at Fort Leavenworth, Kan.

She has been jailed for nearly seven years, and her 35-year sentence was by far the longest punishment ever imposed in the United States for a leak conviction.

 

Now, under the terms of Mr. Obama’s commutation announced by the White House on Tuesday, Ms. Manning is set to be freed in five months, on May 17 of this year, rather than in 2045.

 

The commutation also relieved the Department of Defense of the difficult responsibility of her incarceration as she pushes for treatment for her gender dysphoria — including sex reassignment surgery — that the military has no experience providing.

As The New York Times describes,   Manning was still known as Bradley Manning when she deployed with her unit to Iraq in late 2009. There, she worked as a low-level intelligence analyst helping her unit assess insurgent activity in the area it was patrolling, a role that gave her access to a classified computer network.  

She copied hundreds of thousands of military incident logs from the Afghanistan and Iraq wars, which, among other things, exposed abuses of detainees by Iraqi military officers working with American forces and showed that civilian deaths in the Iraq war were likely much higher than official estimates.

 

The files she copied also included about 250,000 diplomatic cables from American embassies around the world showing sensitive deals and conversations, dossiers detailing intelligence assessments of Guantánamo detainees held without trial, and a video of an American helicopter attack in Baghdad in two Reuters journalists were killed, among others.

 

She decided to make all these files public, as she wrote at the time, in the hope that they would incite “worldwide discussion, debates, and reforms.” WikiLeaks’ disclosed them — working with traditional news organizations including The New York Times — bringing notoriety to the group and its founder, Julian Assange.

 

The disclosures set off a frantic scramble as Obama administration officials sought to minimize any potential harm, including getting to safety some foreigners in dangerous countries who were identified as having helped American troops or diplomats. Prosecutors, however, presented no evidence that anyone was killed because of the leaks.

In her commutation application, Ms. Manning said she had not imagined that she would be sentenced to the “extreme” term of 35 years, a term for which there was “no historical precedent.” (There have only been a handful of leak cases, and most sentence are in the range of one to three years.)

“I take full and complete responsibility for my decision to disclose these materials to the public,” she wrote.

 

“I have never made any excuses for what I did. I pleaded guilty without the protection of a plea agreement because I believed the military justice system would understand my motivation for the disclosure and sentence me fairly. I was wrong.”

The US Constitution allows a president to pardon "offenses against the United States" and commute -- either shorten or end -- federal sentences. Obama has so far granted 148 pardons since taking office in 2009 -- fewer than his predecessors, who also served two terms, George W. Bush (189) and Bill Clinton (396). But he has surpassed any other president in the number of granted, commutations, 1,385, more than the total number given by the past 12 presidents combined.

The White House is expected to announce another round of clemency grants on Thursday, officials said. Most of Obama’s clemency grants have gone to relatively unknown individuals but Tuesday’s batch contained some who are famous, as is typical for presidents in their final days.

 

But if Chelsea Manning gets a reprieve, shouldn't Snowden as well?

Last week, Press secretary Josh Earnest said there are differences between her case and that of former National Security Agency contractor Edward Snowden, who is facing espionage charges for leaking classified information on controversial surveillance programs. “Chelsea Manning is somebody who went through the military criminal justice process, was exposed to due process, was found guilty, was sentenced for her crimes, and she acknowledged wrongdoing,” the spokesman told reporters Friday.

“Mr. Snowden fled into the arms of an adversary, and has sought refuge in a country that most recently made a concerted effort to undermine confidence in our democracy,” he said of the former contractor, who is living in Russia.

To be sure, Obama sang a different tune in 2011, when he said Manning, then known as Bradley, "broke the law" and deserved punishment.

Earnest on Tuesday all but ruled out a pardon for Snowden, saying he has not filed the proper paperwork with the Justice Department. While a formal petition is not legally required, Obama has typically only considered clemency for those who have applied.

Obama’s move could have consequences for the founder of WikiLeaks, Julian Assange, whose organization published material leaked by both Manning and Snowden. “If Obama grants Manning clemency Assange will agree to US extradition despite clear unconstitutionality of DoJ case,” WikiLeaks tweeted last week.

But the Justice Department does not plan to bring charges against Assange for publishing classified information, according to The Washington Post.

* * *

As The Hill points out, the president’s decision is sure to roil the debate about weighty issues such as intelligence leaks and criminal justice reform.

The move comes at a time when WikiLeaks is in the crosshairs of the Obama administration and lawmakers in both parties for its role in spreading emails allegedly hacked by Russia in an effort to undermine the 2016 elections.

“We ought not treat a traitor like a martyr,” said Sen. Tom Cotton (R-Ark.) The administration official insisted that “the cases are entirely different.” 

 

The official said WikiLeaks’ activity “continues to concern the president but that is wholly separate from the decision the president made to commute the sentence of Chelsea Manning.” 

 

Chase Strangio, an American Civil Liberties Union attorney representing Manning, said he was “relieved and thankful” for the president’s decision. He called the 35-year sentence unfair, arguing it contributed to his client’s poor mental health. “This move could quite literally save Chelsea’s life, and we are all better off knowing that Chelsea Manning will walk out of prison a free woman,” said Strangio.

 

Senate Majority Whip John Cornyn (R-Texas) said he doesn’t agree with Obama’s decision to release Manning early. “I think on the larger issue of criminal justice reform, the president is really undermining our political capital by granting clemency at an unprecedented rate,” Cornyn said. “People say, well why should we change the sentencing rules in criminal justice reform if the president can just do it with a flick of his pen?”

While it’s the president’s right to commute sentences, Cornyn said, it’s not a wise move. Sweeping legislation to overhaul the nation’s sentencing laws never received a vote in Obama’s second term, despite enjoying support from him and lawmakers in both political parties.

Instead, Obama has relied on his 2014 clemency initiative to advance his goal of shortening sentences for non-violent offenders he views as unjust.

The president has mostly doled out commutations and pardons to people convicted of drug crimes who received lengthy mandatory minimum sentences under requirements that have since been scaled back by Congress.

* * *

Today Obama also pardoned former Marine General James Cartwright, who was convicted of making false statements to federal investigators as they probed whether he leaked details of a cyberattack on Iran’s nuclear program. He pleaded guilty in October, and prosecutors have requested a two-year prison sentence.

So the question now is... Will Julian Assange agree to extradition?

If Obama grants Manning clemency Assange will agree to US extradition despite clear unconstitutionality of DoJ case https://t.co/MZU30SlfGK

— WikiLeaks (@wikileaks) January 12, 2017

For now, the only statement from Wikileaks was the following:

VICTORY: Obama commutes Chelsea Manning sentence from 35 years to 7. Release date now May 17. Background: https://t.co/HndsbVbRer

— WikiLeaks (@wikileaks) January 17, 2017

Meanwhile, Edward Snowden, who surely was at least a bit hopeful to be named on today's commutations list, had some words of encouragement for Manning:

In five more months, you will be free. Thank you for what you did for everyone, Chelsea. Stay strong a while longer! https://t.co/PaLvJDvDbl

— Edward Snowden (@Snowden) January 17, 2017

He concluded by thanking Obama.

Let it be said here in earnest, with good heart: Thanks, Obama. https://t.co/IeumTasRNN

— Edward Snowden (@Snowden) January 17, 2017